Well Fargo and Commonwealth Bank of Australia claim to have successfully conducted a trade of cotton on a distributed ledger. However, it remains unclear what ledger was used.

If the blockchain and/or Ethereum were used, or better yet, if they used T0, then this is interesting. If not, then it's not since there's no other blockchain based system secure enough for a transaction such as this without additional governing fail safes.

It could be another IBM/Walmart scenario where it sounds good as a headline, but underneath the covers, there's just a database that each party has access to.

Regardless, this is press for bitcoin and that's never a bad thing, especially when it's not claiming the death and destruction of the digital currency.

This wouldn't be the first trade on the blockchain even if they are doing the settlement on the network. Overstocks T0 platform pulled that off a while back in 2015. It would be the first international one however.

R3 nor Corda appeared to be involved, in fact it was specifically stated that they were not, which would have instantly negated any blockchain credibility, so for now, we'll consider this plausible. However if this was simply done in a controlled private environment, it seriously lacks credibility due to the nature of possible security.

That may not be the case, according to Reuters, several block-chain applications were utilized. It's quite possible the transaction was recorded on the actual blockchain (bitcoin) which would certainly make this historic and something to admire because that would certainly make this official and believable.

This is a model that would be useful, even if the banks used their own software to conduct the trade, so long as the record was finalized and recorded on the public blockchain as a digital asset record, this would be acceptable and impressive.

For now, however, these are just words with nothing to back up the claim ... it may just be another smoke-and-mirrors effort like IBM's ... but it does sound impressive.

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Wally World to the rescue! No, not really. However, if you read of the latest headlines, it sounds like an amazing new thing has been achieved with Walmart and IBM bringing food safety to the Blockchain. It almost sounds like world hunger is on the brink of being resolved.

No let's slap ourselves back to reality. It's not happening, its not going to happen. 

The Real Reality 

Walmart has invested 25 million dollars into building a food tracking system in IBM's cloud on Hyper-ledgers (Linux foundation) distributed ledger technology. Which means it's going to be a database in a cloud IBM has control over and Walmart has even further control over. This means it'll be subject to fraudulent activity just as it is today and won't be secure. Luckily, nobody is likely to spend a great deal of time trying to hack into this. 

It won't be securing anything on the blockchain itself (bitcoins ledger) as currently planned and won't do much of anything that a regular database can't do so it brings up the argument of why on earth would they build this anyway?

Furthermore, this is all neat and well but who's going to be monitoring the food in Walmart stores where most of the problems are in the first place? Many have seen this first hand as food is mistreated, frozen items are thawed and re-frozen after being left on store shelves for long periods of time, and boxes of non-perishable foods are taped backed together and placed back on shelves. 

Seems like that 25 million (which is nothing to Walmart) could be better spent on better policies internally and if you were going to put any record like the one they suggest on a blockchain, it should be on bitcoin's blockchain with possible internal workflow occurring on Ethereum, essentially let Ethereum operate as a sidechain, then store the master record on the Blockchain (bitcoin). 

Accurate Headlines

What the headline should have read was "Wamart invests 25 million to build workflow database in IBM cloud".  Yes, it does sound lame, that's why they tapped into the blockchain buzzword. Even more humorously apparent are all of the titles suddenly appearing at IBM with "blockchain" in them considering a couple years ago, they laughed at the technology.

Perhaps the biggest joke here is the use of "immutability" by IBM in one statement, something they clearly cannot do with a private database in their cloud.

So no. IBM and Walmart are NOT putting anything on the blockchain, and they are not putting anything on any blockchain. They are "planning" to possibly put some records in a database in their cloud. 

Fortunately, these records aren't very secure or accurate today, so it won't matter when they're not secure after this is stored by IBM either. No loss really except for the 25 million that could really be put to much better use.

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R3 CEV, a conglomeration of a bunch of banks funding a startup company to build a private distributed ledgers, made some statements about their Corda platform that deserve a healthy helping of "we told you so" moreover than any other statement they've made to date. These statements coming after they imply a release of heir source code for Corda.

R3's chief engineer, James Carlyle,  said this to Rueters:

"We want other banks and other parties to innovate with products that sit on top of the platform, but we don't want everyone to create their own platform, because we'll end up with lots of islands that can't talk to each other, ... If we have one platform with lots of products on top, then we get something that's more like the internet, where we still get innovation but we can still communicate with each other."

Yes, he actually made this statement. If this doesn't win the "No Shit, Sherlock" of 2016, I can't imagine what could top it. It's followed up by the CEO saying that "the power of this technology lies in its network effect" which comes in a close second. Also odd coming from R3, who promotes the opposite of any network affect in their push for privatization of the ledgers they are working on.

The virtual currency and blockchain industry has been saying, and doing, this for years. These guys just now figured this out? You've got to be kidding me.

That's not what they've done. What they've done is do the exact opposite all the while others were telling them the exact same thing that they are now telling everyone else. The blockchain exists now for this, being the bitcoin network, and "one platform with lots of products on top, then we get something that's more like the internet, where we still get innovation but we can still communicate with each other." is exactly the idea. That's why bitcoin is not only a means of asset value or digital asset ownership, it's also the fuel of the blockchain.

We've been trying to tell these guys that if everyone creates "their own platform, ... we'll end up with lots of islands that can't talk to each other" since they jumped on the bandwagon earlier this year. Did it really take that long to sink in?

Likely not. Like other efforts, the idea here is to make money, and this may have well been planned all along. However, it's still a private system where only it's participants are going to be supporting the network and they have stated that those participants will only be those who are approved. So you end up with a weak network that lacks sufficient security and ends up with paper contracts being the enforcement of which is as worthless as what is in place today.

We'd love to be interested enough to say something positive about this, however, so far R3 has been the largest supporter of going backwards with technology. Perhaps the source code will reveal something innovative, but if they just offer what they've been talking about, then it's a step backwards and they've taken blockchain technology out of their offering and regardless of what they do, it won't be very secure.

It's possible, but is anyone going to hold their breath?

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You gotta love the haters. Actually you don't, I just felt compelled to say something like that instead of a more accurate and more inappropriate statement. In a recent Huffington Post piece, two economists with mile long titles bash bitcoin, project its "current state" as dismal, all while spewing words of doom, destruction, and on the brink of epic implosion. Sadly, in the opinion piece titled "Virtual Frenzies: Bitcoin and the Block Chain", the only actual recent data backing this tub of accusations turned out to be the calendar date listed at the beginning of the tale.

Despite the doom and gloom from these men, bitcoin has been tracking upward even hitting over $620 for a period of time over the last few days with continued ongoing momentum. Anyone ever notice that it seems to always do this when people preach the end?

These two individuals are (drum-roll please):

Stephen G. Cecchetti

Kermet Schoenholtz

Now when one has a title so long it can barely fit on a business card I assume one expects ones words to be taken seriously. Who was it that said "those who can do, do; those who can't do, teach"? Actually I don't think that was the exact quote, but I digress.

I do wonder how these guys greet each other at a gathering. Especially the Schoenholtz title. Just read that out loud and imagine spitting that out every time someone asks you what you do?

Mine's easy:

Masters of The Universe

I never was big on titles, but the second I read each of them I was pretty sure of what I was about to read. More "bitcoin is dead" type banter that everyone in the traditional financial system continues to desperately force feed consumers.

The view of virtual currency by this group of traditional financial institutions and "fintech" firms has gone from: Bitcoin is the devil to Bitcoin is the devil, but we're stealing the technology. Bank of America and R3-CEV (group of banks) are among those who went a step further and filed patents on this technology when they have no clue how to implement in the real world. 

Schoenholtz and Cecchetti (SaC), who we'll just call SaC from this point further to save space and trying to remember how the hell to spell their names basically state that bitcoin isn't used and any use is fading away. More exactly precisely:

Bitcoin has prompted many people to expect a revolution in the means by which we make and settle everyday payments. Our view is that Bitcoin and other “virtual currency schemes“ (VCS) lack critical features of money, so their use is likely to remain very limited.

I crossed out the silly VCS that SaC tried to ignite as if it were a common acronym. They made it up. I'll make one up too, let's call this "virtual currency relief" (VCR) as in relief from the infestation of corruption, greed, and manipulation of regulations worldwide within the traditional financial landscape.  Besides, VCR is a dead acronym defining a magnetic tape once used to watch home movies long before BluRay existed, its available for use. 

They claim digital currency lacks critical features of money and the explanation of this statement may be rather interesting considering many of the features of fiat currency are not good such as government backing. Government backing isn't government backing, it's government control and government manipulation of value. Governments print up a new pallet of paper money on demand and whenever the hell they feel like it. The days of "backed by gold" or anything else are long gone. 

Fiat currency, such as the United States dollar, is not backed by any asset whatsoever other than its governments declaration of its existence. It wasn't always this way. In the United States for example for nearly 200 years the dollar was backed and exchangeable for gold. Only in recent history has the dollar become physically worth nothing more than the paper its printed on. Which humorously makes some bills and coins worth more as materials than they are as currency. The $5 gold coin for example is worth approximately $100 as gold metal. It's worth $5 and only $5 as legal tender.

In contrast, the technology used to record Bitcoin ownership and transactions — the block chain — has potentially broad applications in supporting payments in any currency

Well duh. Potential? Are these guys get stuck in yesterday a few years back? This already is true and in use today, right now, millions daily served. I understand these gentlemen teach economics and not technology or Fintech, but if they would direct them selves to Circle for iMessage, BitPay, Shift, Coinbase, Wirex, or any number of other instruments and merchant tools for which to do this easily. 

I myself am paid 100% in virtual currency and rarely ever hold any fiat currency. True, a few years back this wasn't the easiest thing to do. Fast forward to 2016, this is nothing.

The block chain can be thought of as an ever-growing public ledger of transactions that is encrypted and distributed over a network of computers. 

It can be, but only if you want to think inaccurately and incompletely.

Even as the Bitcoin frenzy subsides, the block chain has attracted attention from bank and nonbank intermediaries looking for ways to economize on payments costs. Only extensive experimentation will determine whether there are large benefits.

What bitcoin frenzy? Individuals like these two have declare bitcoin dead well over 100 times, hardly what I would call a frenzy in their brains. However, they are correct in that bitcoin has doubled in usage every year and for the last three years running it has also double in value. Looking for ways to "economize on payments costs" may sound great at cocktail parties as a tagline but lets cut the bullshit and look at this for exactly what it is. Banks don't want to be left behind like they were before (both with credit cards and the internet) and they don't want to be obsolete. Apparently nearly a decade of global worldwide testing in production isn't enough "extensive experimentation". Despite people saving millions daily, they have doubts.

Well I'm with them on this one, and especially after the next line they write "Again, however, we are somewhat skeptical." Again, I agree.

That is because banks are building their own software and taking out the blockchain technology and calling it blockchain-like to use among themselves and only themselves without any support for security or privacy and furthermore creating a virtual currency that they control and can produce. Yeah, where do I sign up for that one? I'm guessing the extensive testing and experimentation will take a few centuries and still not be adequate. Essentially they are going to start from the beginning with outdated technology

Of course, they couldn't just shut up there and leave the article on an actual believable point where I was beginning to think professors of things knew what the hell they were talking about. The continued with:

Today’s wholesale payments systems are so efficient that it is hard to see how or why one would make the costly and time-consuming effort to replace them. And the apparently high costs of retail transfers at least partly reflect factors that the block chain technology is unlikely to address.

Wow. Believe it or not, this is exactly what they said, it's been copied word-for-word. First lets quickly discredit the latter statement, every time I send my brother money overseas, it costs roughly 30 cents. I save approximately $16 per send instead of using Western Union or MoneyGram and perhaps someone somewhere is getting charged but its not me and its not my brother.

Now on to the so-called efficiency of today's wholesale payment systems.

In any given example you have consumer A wanting to pay merchant B with payment instrument C for good or service D. How simple this concept is and once was. A to B with C for D to A for C.

The problem is that C was originally always cash once money infected the world and the C became checks which became credit cards and then debit cards happened and nobody was paying attention when PayPal slithered in followed by Skrill, Stripe, Square, and too many more to name.

Now days you have gateways, platforms that service gateways, and gateway application gateways along with service API gateways which sit between or combined with e-commerce gateways and between the service gateways are the application gateways and the merchant processors (acquiring bank) who ask the networks (Visa) to authorize the transaction by giving  the amount, data from the card and/or consumer input, which the network in turn validates against the card account and/or consumer bank account, or credit account, balance to authorize the transaction and obtain an authorization from the consumers account. The network then feeds this information back to the processor who communicate this to gateway(s) which let the end user, merchant, or machine, know that the charge is authorized.

This is an authorization, not a settlement, and the merchant who thinks payment has been made really doesn't have a payment yet. The merchant has a promise from the bank through the network, via the processor, through the gateway, to the merchant, that since the consumer promised to pay, the bank promises to honor that payment.

However, they really don't mean that. They are all full of shit.

The merchant account is the bank that handles the merchants transaction and is either represented by a processor or also is the payment processor. The payment network (Visa) connects the merchant bank with the consumer bank to have a chat during the process and later clear everything up. However, the merchant account (the acquiring bank) and payment processor are not the end merchant account, the end account is the actual merchant account that's not a merchant account but a business bank account and the processors interaction with the business account doesn't even happen yet.

At this point there's just an authorization which after fulfillment became a charge, but there's still along way to go yet.

Later that day ....

The processor conducts a settlement process which asks the consumer bank to make the payment to the merchant account as a batch clearing process. Once the merchant account then has the funds, they really don't have the funds either, that takes another three days or so. However, most merchant accounts at this point will then run another process that credits the business account of the merchant with the funds promised from the consumer account as per the transaction through all of the above. Generally this happens within 1 or 2 days and then the merchant has a credit, but still not a payment. It looks like a payment, feels like a payment, and smells like a payment, but its not a payment. 

No a payment doesn't really occur for another 6 months to a year. 

Chargeback Hell

No payment is really in the Vendors account because at any given time that consumer can tell their bank the payment is fraudulent or "unauthorized" then their bank complains to the merchant account and payment processor who alerts the gateway to bitch at the merchant who freezes other funds and services while the processor freezes funds and tells the business account to give back the money and rips it out of the account. Generally this is held for a few days until the merchant passes the money on to the consumer bank and no matter what the merchant does, if it wasn't in-person, it's going back. Even in person it stands a chance to go back.

The Vendor who just lost the funds, also lost the goods they sold and are about to lose more money as well. The person who's typically least at fault pays for everyone else's incompetents while the one most responsible for the entire thing, the consumer, loses nothing (possibly even ends up with free goods or services). Everyone else? They get rewarded!

There's charge-back fee involved and that can end up being more the more than the initial percentage of the sale. 

All because the consumer made a phone call.

Not only is this process exceedingly inefficient, it doesn't work. Settlement takes forever because the parties involved don't trust each other and have to trust 3rd parties who they don't trust and are not trusted by either and all of this is governed by paper contracts of which any legal action taken to enforce these contracts are going to bring relief so far after the point relief is would be helpful it's not going to matter anymore. To add insult to injury, the merchants account or gateway can and does end up locking up ALL of the merchants funds, sometimes thousands of dollars or more for the period of days, weeks, months, or even half a year or longer and there's not a damn thing the hard working Vendor can do about it but suffer, scale back, go bankrupt, or all together dissolve the business.

Think this kind of thing does go on daily? It's millions upon millions of dollars. Just think back and remember an odd charge on your statement. Almost everyone has been a victim at one point or another of fraudulent charges on the consumer or merchant side of things.

What made Bitcoin seem so attractive? Partly, we suspect, it is simple enthusiasm for the new and unexplored. Even today, Bitcoin lacks a single definition. 

That;s because bitcoin is both a form of payment and a commodity beyond value. It means different things to different uses. Someone buying something online from Purse (where the discounts for bitcoin purchases are 30% and higher) considers it money at that point in time. Overstocks T0 platform uses it to settle trades and in that respect its a pure commodity as blockchain fuel. Bitcoin is a fuel and a form of money. It's simply that simple. For the longest time the bitcoin foundation has had this simple statement in what bitcoin is:

-an innovative payment network and a new kind of money.

Allow me to put an end to your suspicious. See all that crap above? It ends that chaos. That's one, another is it gives us another option to store wealth outside of a traditional bank which is certainly not safe or a mattress which may be a little bit safer depending on the circumstance, but not safe either. It speeds up the entire process exponentially. You see everyone thinks about the consumer-to-merchant transaction being the "speed". It's not. When you make a payment via credit card, the business you made the purchase from doesn't magically have money in their account. That takes anywhere from 24 hours to 3 days or more because all of the crap in between has to take place.

Let take a look at a bitcoin payment. Customer A send business B a payment. The payment itself is recognized instantly (when 1st broadcast, the transaction is known immediately, it is then the decision of individuals and/or merchant on how many confirmation they expect before they consider the transaction irreversible). The transaction is fully settled within 1 hour or less. Sometimes as little as 12 minutes. This is a process that takes several days with traditional systems.

That's it. Nothing further is required. No more fees (only a few cents to begin with). No charge-backs possible (for consumer protection, there are plenty of escrow services, check out Purse to see this in action). No bullshit.


Of course, just when the article seemed to head in unbiased directions this happened:

....in some it is severely restricted or treated as a commodity subject to capital gains taxation. As a result, Bitcoin accounts for less than 70 thousand daily transactions globally (see here), compared to more than 250 million daily noncash transactions in the European Union and more than 500 million in the United States.

Then they come out with the fangs and begin the bitcoin bash. Take anything positive I said about these two and toss is out, then get some boots because it's getting pretty deep. The first issue is their comparison to a commodity as if this is a bad thing. The taxation breaks on long-term gains in the US are significant and the short-term are the same as any taxable income, however in some cases lower than regular income tax. Do these guys simply prefer to have less money? Sure seems opposite of what an economist would like to see. Any chance Mark Karpeles was one of their students?

The other thing they fail to mention is that bitcoin capitol gains, at least in the United States, are not subject to capitol gains tax until the gains are realized. This means so long as bitcoin is in your electronic wallet, it's not taxable. Secondly when it is used by converting it into fiat currency that is taxable, or spending it on goods or services. Even then, only the portion of the bitcoin that is realized as a capitol gain is subject to taxation as such.

For example. If you buy $80 USD worth of bitcoin and buy a $20 hat. If the bitcoin is still worth $80 then there is no taxable capitol gain. However if tomorrow the bitcoin is worth $96 then the capitol gain on that amount of bitcoin is 20%. If you buy a $20 hat, then 20% of that $20 is considered a capitol gain and taxable as such which equates to $4.

Rate BTC 


What we have to go back and point out is that the data they are basing all of this on is old. Years aged. The claim of 70,000 transaction was back in 2013. The actual number today is well over 250,000. On September 10th the transaction (confirmed transaction) peaked at 274,486.00. That means the adoption, if measured by bitcoin usage and transactions has pretty much doubled every year. Since 2014 after the crash, bitcoins price has done that as too.

The piece remarks on bitcoin's volatility of which everyone is aware, however, they fail to acknowledge that bitcoin has been extremely stable over the last two years. It's stable to the point of being annoying to day traders. They also fail to acknowledge that for the last three years bitcoin has outperformed the US Dollar and Gold. They also state this:

"...one of our colleagues, David Yermack, who teaches a course on Bitcoin at NYU Stern, argues compellingly that the surge in government attention makes digital currencies poor devices for concealing criminal activity." and this "...despite its mathematical complexity, experts find lingering privacy concerns with Bitcoin: according to one simulation, about 40 percent of Bitcoin users can be identified by tracking their transactions in the public block chain ledger."

Not everyone using the blockchain is trying to conceal what they are doing on it. When I book travel on Expedia, I could care less who knows I spent bitcoin on a hotel room. If I used a credit card that information would be readily available and easier to obtain. They fail to mention how difficult tracking those transaction and pinning them to an identity is, nor do they mention that they can only assume the identity, not fully or accurately identify the actual person. It's not easy and it's not accurate unless there's an entity involved where the specific identity is available.

If You First Fail, Try and Fail Again

They go on to discuss clearing public-utility-like clearing houses and doubting any ability for blockchain technology to help make those cheaper and this is an area of which I am no expert, thus I will not comment. They may be very accurate here, however as far as trade settlements in general, I think its a known fact this needs improvement and this is exactly what Overstocks T0 platform which settles on bitcoins blockchain is for.

Then it's on to admitting the retail space of sending and receiving money stands some room for improvement but counter with the economical impact of removing the "3rd party" of which bitcoins blockchain does. They state the 1.5 billion in revenues plus other revenues, that would be lost by these "3rd-parties" and how that could be a negative thing. Additionally they point out the fact that being able to identify the transactions owners is not available with the blockchain.

Not to point out the obvious, but they say this after previously stating how "easy" it is to identify people on the blockchain so which is it? You can't say it's easy to identify everybody in one paragraph and then turn around and say its not possible in another paragraph and expect anyone to believe either claim. Stating claims to support a given point or argument have no validity when contradicted and thats exactly what we appear to have here.

As far as the 1.5 billion lost by the 3rd-parties, who cares. That may sound tragic and sad, but what about the millions, if not billions, of funds overly scrutinized by these same entities that cause financial loss and other damages to millions innocent people? Companies like Western Union, Square, Paypal, and many others frequently lock transactions and freeze funds for a variety of reasons and generally few of them are warranted. Paypal has been known to hold funds for 6 months and more and Square does this almost automatically for 90 days. Sending money through Western Union or MoneyGram for any hint of routine or amount exceeding regulated thresholds subjects the remitting party and/or the beneficiary to copious amounts of invasive questioning comparable to a route canal without the laughing gas followed by a request to gargle with alcohol.

I wonder if these guy ever used Windows Vista? Anyone remember bed of nails? If a service or product sucks. The consumer need not continue it's usage or purchase and this is not a bad thing. Nobody liked Windows Vista because it was comparable to eating glass sandwich and chasing it down with a cup of hot sand.  Microsoft rapidly did away with Vista and most likely wished they owned a time machine to erase it from existence. They certainly didn't issue a memo saying everyone needs to continue to suffer along with it because they may not meet their quarterly projections otherwise.

No, 3rd-parties have every opportunity to reshape their business models into useful and helpful products and services. There is no bail-out just because they are going to lose money. Additionally the finance world is going to fight this technology kicking and screaming, with the exception of their own creations, and even if they do lose market share it's unlikely mass-adoption globally is going to happen overnight, so I am more then sure there is adequate notice of a potential disruption and they can get their collective resume's together over the next several years. Not to mention your talking predominately about financial institutions and banks. Bank that make billions of dollars doing next to nothing and when they fuck up, guess who gets the bill? The consumer and the tax payer.

Just look the fiasco that was the United States 2008 bail-out. Case in point.

There is little merit to the point they try to make on this one, it's thinking like that is just plain harmful to innovation.

Award Worthy Article or Weak Banter?

In the end, the entire article is not a total waste of life and they do present some informative insight worth crawling through, but its overwhelmingly overshadowed by stale data, a complete lack of vision, and an blatant predictability that points to the obvious fact that these two are not fans of bitcoin and highly skeptical of block-chain technology. There's nothing wrong with constructive criticism, that's good for everyone and very useful even when those being criticized don't like it, however, when criticism is heavily saturated in negative personal opinions and contradictive statements and backed by nothing more than cherry-picked data of no recent relevance, it's difficult to take seriously.

Same can be said for this article you're reading now, there is no offer of a fancy title that requires an extra-large business card or an uber-tiny font. There's more than likely a grammatical mistake or two, improperly formed sentences, and possibly even a spelling error. Coupled with the choice of colorful language and opinionated views peppered throughout, there's certainly nothing to lend any true credibility and will certainly not be well received by some. However, what is does offer ... is the truth.

Many of these "economists" don't want to hear about the truth. They don't want to know about those suffering without funds because they've been frozen, or the invasion of privacy forced on an innocent person sending money home to their family, they don't want to know about how the so-called "working" system is raped beyond the any ability to stop crime, or that its the very organizations they praise in their articles that contribute help contribute to the money-laundering they claim to be assisting government agencies stop? No they don't want to know about any of that shit.  They want to pretend that none of it exists and that the motives are certainly not fueled by greed and fear of legal action rather than any sense of assisting anyone with anything.

Economy This 

Here's a dose of reality and truth. The truth is that whereas an "economist" sounds like a mystic profession in the gut of the financial heartbeat, it's more a study of people and what they do with money. More elegantly self-described as a "practitioner in the social science discipline of economics".

Not to impugn the fine work of these two academic gifts but what happens when you're watching all the wrong people when shit happens?

The aforementioned article obviously.

Sure, bitcoin has had its share of fraudulent activity, but it's hardly why every person involved today got involved to begin with and it certainly is not why the entire industry exists today. However, sure, it absolutely has had its share of this activity and its safe to assume, just like every other currency and payment method on earth, it will never be 100% crime free. Nothing likely ever will be.

The only difference between this industry and the tradition financial fabric is that at least this industry doesn't try to deny it, point the finger at everyone else, do just enough to not get in trouble, and pass the blame to anyone else other than themselves. This industry learns from its mistakes because that's how science works. You cannot succeed without failures and this industry has had its share of heartaches. Only by learning from these experiences and moving forward does it continue to grow.

Besides there's a flaw in their assessment of this current financial system of so-near-perfection they can't fathom how or why anything should be altered from its current state of being. The reason why everything they said doesn't exactly hold water and two words that offer concrete evidence proving their system is very far from perfect and despised by millions globally ...

bitcoin exists.

HOUSTON, TX - Once again, Backpage is the subject of questionable law enforcement practices attempting to push the visibility of criminal activity out of their view instead of utilizing a tool to prevent crime and maybe actually catch criminals.

Today Backpage CEO Carl Ferrer was arrested in Houston, TX for conspiracy and pimping a minor after its headquarters in Dallas was raided.

Now before I dive into this pile. I do not, nor does this platform, or any person or entity affiliated with dinbits.com, condone any form of human trafficking for any reason whatsoever. It is a horrific practice and if the claims being made by authorities are true, then the Backpage CEO and possibly others involved (if any) are most certainly going to be behind bars for a very long time and it will prove to be deserved.

That said, it's unlikely that is going to happen because it is unlikely that Carl Ferrer was personally involved in the trafficking of human beings as the Attorney General of Texas and California state.

What They're Saying

Here's a few things being splattered all over the news media in regards to this raid and arrest followed by a sniff of reality. Believe it or not, the mainstream media, thus far, have been fairly kind to bitcoin (by omission).  Bitcoin became the primary source of payment in 2015 after an Illinois Sheriff harassed credit card companies into dropping Backpage. The platform has since been able to enable credit card purchasing for some portions of its service.

1. Attorney General Paxton

"Making money off the backs of innocent human beings by allowing them to be exploited for modern-day slavery is not acceptable in Texas,” Attorney General Paxton

Allowing? Who's allowing what here? Is this not the responsibility of law enforcement and the government we have put in place to not-allow this activity?

“I intend to use every resource my office has to make sure those who profit from the exploitation and trafficking of persons are held accountable to the fullest extent of the law"

How about you use every resource your office has to prevent this activity in the first place? If you know where it's being solicited why not use this tool to catch criminals and prevent crime instead of dispersing those engaged in the activity to other formats to the point you're blind.

Profit from the exploitation? Are you going after Apple's CEO? The CEO of Taco Bell? How about Ford, T-Mobile, and Coca-Cola? Pretty much every business in the United States can potentially profit from this. Do you think for one second that Apple's CEO is under some delusion that the iPhone is anti-criminal-activity proof and never used for illegal purposes?

Last time I saw an arrest where they actually caught human traffickers the actual criminals committing the actual crime were driving a white Ford van. Does this mean Ford's CEO is next on the arrest list?

First of all, prior to entry of the Adult section on Backpage where users can post ads ranging from a massage to posting employment opportunities such as a bartender, there's a big fat disclaimer and terms of use that must be agreed to prior to doing anything. This, in its form, is a legally binding contract between the service provider and the user posting the material.

I certainly don't see anything like that when I order a burrito from Taco Bell or visit the morons at the Apple store. Seems to me as if there is more of an effort here to prevent the activity than any other business that may or may not receive funds from the activity.

The fact is that Backpage screens and removes nearly 1 million posted ads per month that are suspected of human trafficking or other illicit activity. They report hundreds of ads to the National Center for Missing & Exploited Children each month as well.

Are we to believe that Backpage intentionally provided authorities with evidence of criminal activity that they themselves were directly involved with? I've met some really stupid criminals in my time and there are entire series on television dedicated to the topic. However, never once have I seen any of them voluntarily report their criminal activity to the authorities. This would mean that Carl Ferrar would be possibly the dumbest criminal on planet earth.

It's like with Western Union posting a Money Laundering section on their website and then reporting the activity to Financial Crimes Enforcement Network fully disclosing their involvement in great detail or UPS offering a Drug Smuggling section with a coupon for first time offenders then calling up the United Nations Office on Drugs and Crime and saying "hey guys, guess what we just did in 4 different countries under your nose".

2. LA Times

The LA Times had this to offer.

prosecutors contend that nearly all of Backpage’s global income derived from its “adult” sections, with ads posted and paid for by users. The ads typically feature nearly nude photos and offer a menu of sex explained in coded language, prosecutors allege

Adult sections are illegal? Did the CEO invent this coded language? Is it a derivative of Na'vi by chance? When users, who have the freedom of speech mind you, post encoded anything, you can pretty much conclude that as an indication that they are aware of the fact that they're illicit advertisement is not welcome on the platform.

Are the prosecutors just being cool and this was leaked as proof for the defense to use? What's the point of this evidence since this only helps the defense because what they fail to mention is that the user posts the ad. Backpage doesn't post, nor is is liable for, any of the content of the posted ad.

Section 230 of the Communications Decency Act of 1996 states that. "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.".

If Backpage is successfully prosecuted, free speech may no longer be consider an allowed activity in the United States and just about every single website on earth with a forum would have to be shutdown or risk being subject to arrest for the words written by another person.

Amazon.com and eBay would no longer be able to function, Facebook would be a thing of the past, and Twitter would likely be charged with every terrorist attack. That or a human with knowledge of every language and every form of language encoding, including those not thought up yet would have to review every single word ever written on these platforms.

Say goodbye to Google as well. It returns content from just about every site on earth and posts content on its platform. Are they getting raided next Thursday?

"Backpage describes itself as the second-largest online classified advertising service in the country... " - LA Times

Really? Because on their website they describe themselves as exactly this:

"backpage.com is an interactive computer service that enables access by multiple users and should not be treated as the publisher or speaker of any information provided by another information content provider."

3. Carol Robles-Roman of Legal Momentum
"They're like the McDonalds of trafficking. They make it so easy." - Carol Robles-Roman
Wouldn't that be the "Subway of trafficking"? Craiglist discontinued their Adult section.

How easy is it you ask? It's impossible. Despite our efforts to try and order some human trafficking on Backpage, it just wasn't possible. Give it a try for yourself. First of all there wasn't much apparent in form and what was there that might possibly be something (a total guess, there's nothing that says human trafficking anywhere) required calling another number or sending an email to a 3rd party. I also didn't see any way to pay for anything other than passage to post content.

There sure as hell wasn't a $1 menu.

To be honest it's not only impossible, even the activity of posting an advertisement in this adult section is a bitch. You cannot pay with any form of traditional method of payment, you have to pay with bitcoin, you have to agree your not doing anything illegal, your ad is subject to review, and if the ad is suspected of illicit activity, it's yanked at your own expense. Since you have to pay with bitcoin you have to obtain bitcoin, which means if you don't want your identity known you have to pay double the amount of money by using something like a gift card. You cannot purchase bitcoin from backpage so you have to go somewhere else and then come back.

Of all of the classified ad online websites, it is most likely the most difficult place to post a classified ad. It is not "so easy" in comparison. For those familiar with bitcoin already then it might be easier, but still nothing nearly as easy as Craigslist or any number of the other plazzillion classified ad websites.

Roman also states that a successful prosecution of Backpage.com will help eliminate human trafficking from the internet. Can this woman possibly be this naive? That is the exact opposite of what it would do. What is will actually do is take a conglomeration of activity that may lead to the arrest of the actual criminals committing these crimes and drive them to other places on the internet where its not so easily detected.

This doesn't help the situation, it makes it worse. Not to mention you punish thousand of innocent people in the process just so that you have a shiny new line item on a resume to brag about.

4. Attorney General Kamala Harris

“Raking in millions of dollars from the trafficking and exploitation of vulnerable victims is outrageous, despicable and illegal,” 

I don't think anyone on earth outside of those involved in such criminal activity would disagree with this statement. However, this is not what Backpage did according to statements made by them over the years..

“Backpage and its executives purposefully and unlawfully designed Backpage to be the world’s top online brothel.”
Let's take a look at Backpage's design. Here it is:


Now lets take a look at other online classified ad websites.




The worlds greatest gift to design, I am not, but I do have a two eyeballs and what I see here are four examples of the same damn thing. There is absolutely nothing that is specially designed, formatted, presented, or described that would be any kind of indication that this platform was designed to accomplish the status of "worlds top online brothel".

To me it looks as if they just copied Craigslist and ended up with allot of traffic.

Court documents state the 99% of Backpage revenue come from prostitution and human trafficking being present in the adult section.

Let s take a look at that claim. Here's the Backpage ad distribution as of 10/06/2016.

This is an excerpt of the Houston version of Backpage where Ferrer was arrested. We have a breakdown of 4,495 local ads, 15,932 automotive, 10,319 job offers, 2,655 dating ads, 129 in community, 12,758 in rentals, 3,815 in trade, 1.526 in real estate, and 4,866 service related ads for a grand total of 56,575 ads total.

If that's only 1% then the that means there should be something like 5,657,500 ads in the adult section. There's about 6.5 million people in the Houston so that's almost an ad per person. In 2014 there were 837 arrests in the United States according one FBI report.

Human Trafficking Arrests
Commercial sex 
Inv servitude
Commercial sex 
Inv servitude
Commercial sex 
Inv servitude
Commercial sex 
Inv servitude
Commercial sex 
Inv. servitude
Commercial sex 
Involuntary servitude
Commercial sex acts
Involuntary servitude
Commercial sex acts
Involuntary servitude
Commercial sex acts
Involuntary servitude
Commercial sex acts
Involuntary servitude

So if there's 5.6 million potential offenses in Texas alone with road-map (Backpage) directly to preventing the crime, then either these numbers are a tad askew, or law enforcement just flat out sucks. Note that the majority of the arrests occurred in Texas and 0 were reported in California so who sucks less is rather apparent.

The point is, there's not that many, in fact there are currently 120 escort ads of which the questionable content is posted. The claim that 99% of the profits are being generated from this activity seems to be a bit unrealistic at best. Even if 99% come from the adult section, simple jobs posting such as that of a bartender in a gentlemen's club qualifies as this revenue.

Guilty or Not Guilty?

It may very well be that Carl Ferrer is guilty of conspiracy and/or human trafficking and if he is then he will be prosecuted to the fullest extent of the law. It's going to be difficult however, to prove that Backpage as an organization is guilty of anything when so many attempts to prevent the activity are regularly practiced by the company.

Here's the problem with all of this. This investigation took three years. In three years all authorities have been able to uncover is circumstantial evidence at best. In the court documents it states that they uncovered an email where Ferrer expresses concern over sexual sounding usernames and the possibility of having their credit card merchant services terminated as a result.  This is a valid concern of any business owner, especially one that has been through the scrutiny that Backpage has been. 

Furthermore, how is Backpage suppose to know if any activity as a result of an ad posted by another party who's content directly resulted in illicit activity? This would be required to fit the accusation of their knowledge of these acts. It took authorities in two states and likely millions of dollars in resources to figure this out themselves and there was no evidence presented of anyone being "caught in the act", only circumstantial evidence based on what other people said and by them acting undercover in a manner in which Backpage has no visibility. 

This is not to defend any actions of anyone, just to point out that a service provider can only do their best to try and prevent illicit use of their service. They are not the police and cannot launch investigations that would invade others privacy in an attempt to try and catch criminals in the act of committing crimes themselves.

Backpage accepts a fee for providing an open forum for anyone to post anything they wish to post in the form of a classified ad. It does not solicit, advertise, or create the content and is not affiliated with the content provider in any way. 

Authorities appear to be making an attempt to change federal law and reduce freedoms that are currently a right in the United States.

Be There a Dart Behind the Scenes?

Let us not forget the man who started this mess, Thomas J. Dart. Last year Sheriff Dart allegedly abused his power and harassed credit card companies into dropping Backpage and banning the platform by threatening to start an investigation into the matter. He had absolutely no jurisdiction or authority to do so, but that didn't stop him from making the threats instead of doing police work and trying to apprehend criminals committing crimes.

Dart is no stranger to this type of harassment either, in 2009 he pressured Craiglist and file a lawsuit against them as well.

In both cases, Section 230 of the Communications Decency Act prevailed in that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider" under which the following condition must be applicable.

  1. The defendant must be a "provider or user" of an "interactive computer service."
  2. The cause of action asserted by the plaintiff must treat the defendant as the "publisher or speaker" of the harmful information at issue.
  3. The information must be "provided by another information content provider," i.e., the defendant must not be the "information content provider" of the harmful information at issue.

Not to mention the violations of the 4th and 5th amendment. This is federal law and one that Dart repeatedly seems to ignore and then appears butt-hurt when he gets bitch-slapped by the Supreme Court. Just last week the Supreme Court denied his request to lift the restraining order he has been under in regards to Backpage. It's hard to imagine Dart didn't have his hand in the California/Texas case somewhere.

Dart doesn't take to kindly to federal law at all. He seems to make a practice of violating it and getting away with it. In fact. since January, 2015, Dart has been directly named as a defendant in 448 separate federal lawsuits, most having to do with the violation of someones civil rights. (yeah, shocker there) 

In any case, there is no evidence of Dart's involvement this time.

Bee Hive Politics

Authorities seem to have taken a bee hive approach to law enforcement instead of a law enforcement approach to law enforcement. They have allowed themselves to believe that if they kill the queen, the hive will die. The truth is it's more like scratching a raging case of scabies, they might take out a few of them, but they'll spread them everywhere and in a manner that makes them much more difficult to get rid of. 

Then they gloat about it in the news media and make damaging accusations against a company, its employees, shareholders, and executives attaching them to one of the worst crimes imaginable. 

If they're right, then they are certainly to be commended. If there are wrong, then they need to face charges themselves and I don't think they realize how many innocent lives they are damaging with their actions.

Anyone with Backpage ads may want to switch to Craiglist, Allinonezone, ClassifiedAds, or one of the many other online ad services in the meantime. This is not to agree with any of this, but to make sure your business isn't affected in the event Backpage can no longer operate. 

Since yesterday, the number of ads posted in the Houston area went from 56,575 to 9,934.
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