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FAQs
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What are the pricing plans for electronic signature applications like Echosign? What alternatives are most suitable for a small
Echosign starts out great, with free, or $15/month for a Pro account. But every time I consider upgrading, I back out because the pricing gets steeply higher per user. To just add a second user means going from paying $15/month for one user to paying $480/year in advance (non-refundable, $20/month per user) or $60/month ($30/user). It is crazy, I actually end up paying 4 times as much just to add a second user, even though there is just a marginal benefit.Echosign definitely must feel there is a network effect to having more users, and greedily tries to capture all of that benefit for themselves. Pricing per user actually increases as you move to larger plans. Per user rates go from $15/month, to $30/month, to $40/month, to $50/month.. -----Delving into this a bit more, it seems like signNow is much like Echosign, but has a better pricing plan for two or more users. It is $25/user for the first two users, and declines to $10/user for 5 users. For 6 users, however, it jumps to $42/user, eventually declining again to $10/user, but adding API access. The plans provide a 20% discount for paying a year in advance.Their technology does not seem to be in any way less advanced than the alternatives. I sent a document with the service, and it seemed to well. Some nice features included recognizing data fields in existing pdf documents, integration with Highrise, Dropbox, and some other services. I didn't notice anything missing compared to echosign.----signNow does not offer a month-to-month option. Users must pay $180/year ($15/month) for the standard service (even though it says $19.99/month on the website)..
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What are some most powerful weapon in DC universe?
‘Top Ten-wise,’ here’s my personal ranking (based-upon other fan’s lists, as well) the most powerful weapons in DC:| #10 |The Bracelets of Submission\ Debut \ All-Star Comics Vol. 1 #8Indestructible and (according to some), enchanted, the Bracelets of Submission are one of the Amazonian’s greatest weapons. They wield the tremendous power of absorbing and reflecting virtually any energy from the physical or cosmic to the divine. Since it’s conception, however, they have been given an upgrade: The Amazonian’s true powers are concealed by them, blocking their full potential.Wonder Woman is most well-known to use the Bracelets, even going so far as to get Hephaestus’ blessing upon them. They now summon any weapon from the his forge (all the Olympian’s weapons are stored/built there), at the will of WW.The current owners are the Amazonians.| #9 |The Rock of Eternity\ Debut \ Whiz Comics #1I personally find the Rock of Eternity to be sorely underrated within the DC Universe; Not only does it imprison the greatest of supernatural threats such as the Tree Faces of Evil and the Seven Deadly Sins, it is also the very source for Earth’s magic- a magical battery, if you will. The Rock itself is impenetrable and impervious (thanks to it comprising of rock from both Heaven and Hell) unless granted entry by the Guardian of it. Lastly, the place itself contains thousands of mystical artifacts from throughout history.*While not weaponized currently, the Rock certainly has the potential to be due to it’s power and durability (also considering the fact that it contains some of the most dangerous supernatural forces within the Multiverse).The current ‘owner,’ or Guardian, is Shazam/Captain Marvel.| #8 |Nth Metal\ Debut \ Flash Comics Vol. 1 #1The ancient Ninth Metal of DC, Nth is a anti-gravity metallic element. It is unique in how it is symbiotic: It eternally bonds to the user and grants them everything from flight, superhuman power-amplification, reincarnation, healing, regeneration, to even energy-absorption and more.The most notable owners are Hawkman and Hawkgirl.| #7 |The Spear of Destiny\ Debut \ Weird War Tales Vol. 1 #50Based-upon the mythical Holy Lance, the Spear of Destiny was the spear used to pierce the side of Jesus the Christ during the Passion (the Crucifixion). Due to Jesus’ divine blood having covered the spearhead, the Spear became a divine super-weapon with tremendous supernatural potential of resurrection, soul-control and much-more.It is one of the few things known to be able to ‘kill’ and/or harm the Spectre.The owners have varied throughout history (previously it was Adolf Hitler) and it’s current whereabouts are left a mystery.| #6 |The Mobius Chair\ Debut \ New Gods Vol. 1 #1The Mobius Chair was a New Genesis device created by Metron. The device was meant as a archive of-sorts for the entire history of the Multiverse… It gathers and collects all of the history that it experiences and stores it for whomever sits upon it to access. In other-words, it can potentially grant omniscience. In-order to experience all of history, the device was vested with the ability to transverse time-and-space. Of the other abilities it grants to the user, the chair has a vital defense system and life-support.The last owner was the Batman, whom has since stepped down from it.| #5 |The Lantern Power Rings\ Debut \ All-American Comics Vol. 1 #16The Power Rings of the Lantern Corps can be underrated, just as they are overrated: They are extremely powerful devices that are able to draw-in and manipulate the Electromagnetic Emotional Spectrum, the emotional forces of the universe as well as abstract concepts such as Life/Death. With the rings, the wielder can harness each emotion to potentially create virtually omnipotent constructs.The current owners are each Lantern Corp member.| #4 |Mother & Father Boxes\ Debut \ Forever People Vol. 1 #1The Mother & Father Boxes are New Genesis technology comprising of Element X. They are meant as suentient super-computers, but turned-out to be far-more. They grant the user vast abilities of Boom-tubes, technological evolution and transformation, space manipulation, reincarnation, regeneration, healing, energy manipulation, bonding with the user, mind manipulation, etc.The most notable owners are Cyborg and those of New Genesis.| #3 |The Miracle Machine\ Debut \ Adventure Comics Vol. 1 #367The ultra-powerful weaponized-device from the future, the Miracle Machine is capable of one of the greatest and most dangerous feats: Turning mere thought to reality. While it was briefly used, having been a gift from the Guardians of the Universe, it was soon locked-away over how unstable it managed to become (any-one thought was vulnerable and could become reality).The current owners are the Legion of Superheroes.| #2 |Anti-Life Equation\ Debut \ Forever People Vol. 1 #5Notably discovered by Darkseid, the Anti-Life Equation was the most unique weapon in DC. While most weapons are physical, this one is- mental, a abstract formula. When properly learned and wielded, it can expose anyone to permanently lose all their willpower and desire to live as they realize that ‘there’s really no point’…There are several that currently ‘own,’ wield the Anti-Life Equation.| #1 |Element X\ Debut \ Dark Nights: Metal Vol. 1 #6The legendary Tenth Metal, Element X is a metallic element of the purest-form. By simply imagining whatever you will, Element X transforms into it. The element was used in the Forge to create each universe in existence. Besides creation, the element also grants superior power-amplification and cosmic awareness of the history of the cosmos.The current owner is the Over-Monitor.| Honorable Mentions |Zeus’ ArmorKhaji DaThe Life EquationTridents of Neptune & PoseidonThanks to Isaac Heredia and Thejas K.R. for the suggestions!
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How do I make a PVT Ltd company in India?
How to register a company (Pvt. Ltd.)Pre-requisites1. Have paid-up capital of INR 1,00,0002. Have minimum of 2 directors/board members and two shareholders3. Have maximum of 50 members only4.Cannot publicly sell shares. Can only invite people to buy shares by issuing aprospectusStep1: Acquire DIN (Director Identification Number)DIN is a unique identification number for an existing director or a person intending tobecome a director of a company. As per a recent amendment to the Companies Act 1956, DIN has become mandatory for all the directors. DIN is unique and specific to an individual, therefore only one DIN is allotted per individual even if the individual serves as director at multiple companies. No fee is charged for issuing DIN. This process takes approximately 3 to 5 working days.Supporting documents required (soft-copies):1.Photograph2.Proof of identity3.Proof of residenceRegister on MCA website for login ID and password(create an account)I.File eForm DIN-11.Download eForm DIN-12.Fill the form3.Attach necessary documents4.Sign using digital signature5.“Check Form”6.Upload eForm7.Pay fees by credit card, debitcard, internet banking or cash/cheque at designated banks (State Bank of India, Punjab National Bank, Indian Bank, ICICI Bank, HDFC Bank) using the pre-filed challan that will be generated8.Note the Service Request Number (SRN) for later enquiries9.Check acknowledgement by email or through MCA portalII.Intimate approved DIN To your Company (within 30 days from date of approval)a.Download Form DIN-2 and printStep 2: Acquire Digital Signature Certificate(DSC):At least one of the directors should have a valid Digital Signature Certificate issued by the signNowing Authorities (CA) and approved by the Ministry of Corporate Affairs. The Information Technology Act,2000 provides for use of Digital Signatures on the documents submitted in electronic forms, in order to ensure the security and authenticity of the documents filed electronically. Every document prescribed under the Companies Act, 1956, is required to be filed with the digital signature of the managing director or director or manager or secretary of the company. Therefore at least one of directors must have a digital signature. Any person may make an application to the signNowing Authority for the issue ofa Digital Signature in such form as may be prescribed by the Central Government. Digital Signatures are typically issued with one year validity and two year validity. The issuance cost varies depending on the CA. Digital Signatures can be obtained within an hour.One can acquire his/her Digital Signature certificates from these government listed agencies like TCS, IDBRT, MTNL, SAFESCRYPT, NIC, nCODE Solutions etc.Step 3: Apply for the company to be registeredThis is the final major step in a registration of your company which includes incorporating company name, Registering the office address or notice of situation of office and notice for appointment of company directors, manager and secretary. And also regarding the take and pay for their qualification shares.Prerequisite for Virtual eFiling1.Install the following prerequisite software:Windows 2000 / Windows XP / Windows Vista / Windows 7 –Operating SystemInternet Explorere v6.0 and above, Google Chrome, Mozilla FirefoxsignNow from version 7.5 to version 10.1.4Java Runtime Environment (JRE –latest version freely downloadable fromwww.sun.com)2.Get yourself registered at the portal (www.mca.gov.in)3.Obtains a Director Identification Number (DIN).4.Obtain a Digital Signature Certificate (DSC).5.Broadband Internet connectivity or higher.6.A scanner (above 200 DPI) for converting the attachments in the PDF format.Steps:I.Fill Form-1A for obtaining the name for the company-onlineFor obtaining name for your new company, An application in Form-1A needs to be filed with the Registrar of Companies (ROC) of the state in which the Registered Office of the proposed Company is to be situated to ascertain the availability of a name along with an official service fee of Rs.500. You also have to provide the following information in the form.• Name of the proposed company (Minimum 4 alternative names, maximum 6).Indicate the order of preference. Ensure that the company name is in accordance to the guidelines of the MCA, and also ensure the name is unique and does not resemble the name of any existing company in India. The company name must end with the words ‘Private Limited’ or ‘PVT Ltd’. In order to have specific key words in the name such as corporation, International, Hindustan, Industries, India etc., the proposed company should satisfy a minimum authorized capital criteria.• Location of registered office of the proposed company• Main Objectives of the business of the company• Names and addresses of the directors• Proposed Authorized Share Capital of the Company• DIN & DSCSubmit duly filled form to the Registrar along with fee of Rs. 500.The Registrar shall intimate, within two to three days, whether the proposed name is available or not. If the preferred name is not available apply for a fresh name on the same application. The name made available by the Registrar shall be valid for a period of six months. In case, if the company is not incorporated within this validity period, an application may be made for renewal of name by paying additional fees. Otherwise the name approval process has to be repeated by submitting new application after payment of requisite fees.In about 10 days, the ROC will inform you about approval or objections. If there are any objections then ROC will suggest you with some available names and let you choose among them. If your company name is approved then you will receive a formal letter regarding the confirmation of the same. Keep the same which will be required during registration process of the proposed company.II.Prepare documentsAfter obtaining name approval from the ROC the following documents must beprepared to incorporate the company• Memorandum of Association (MOA) The Memorandum of Association is a document that sets out the constitution of the company. It contains, among-st others, the objectives and the scope of activity of the company and also describes the relationship of the company with the outside world.• Articles of Association (AOA) The Articles of Association contains the rules and regulations of the company for the management of its internal affairs. While the Memorandum specifies the objectives and purposes for which the Company has been formed, the Articles lay down the rules and regulations for achieving those objectives and purposes. It also states the authorized share capital of the proposed company and the names of its first / permanent directors. Professional help is to be sought in the drafting of the MOA and AOA, as it contains the governing policies, rules and by-laws of the proposed venture. The draft must be carefully vetted by the promoters before printing and stamping.The MOA and AOA must be signed by at least two subscribers in his own hand, along with father’s name, occupation, address and the number of shares subscribed for and witnessed by at least one person. Then the MOA and AOA are required to be stamped & filed with the ROC. A stamp duty is required to be paid on the MOA and on the AOA. The stamp duty depends on the authorized share capital and varies between states. Details of applicable stamp duty can be obtained from here. eStamping facility is now available via MCA’s portal. The document preparation process may take five to seven days.• Form 1 –providing details of promoters of the company• Form 18 –providing details of address of the registered office of the company• Form 32 –providing details of Directors, managers and secretaries of the companyIII.Submission of DocumentsSubmit the following documents to the ROC with the filing fee and the registration fee:• The stamped and signed Memorandum and Articles of Association (3 copies).• Form-1, 18 & 32 in duplicate.• Any agreement referred to in the Memorandum & Articles.• Any agreement proposed to be entered into withany individual for appointment as Managing or whole time Director.• Declaration of Compliance by an advocate or company secretary or chartered accountant or director, manager or secretary of the company• Name availability letter issued by the ROC.• Power of Attorney authorizing a person, on behalf of subscribers, any documents and papers filed for registration. The power of attorney should be given on Non-Judicial stamp paper of appropriate value and shall be submitted to the Registrar.After submitting these forms, once the application has been approved by MCA, you will receive a confirmation email regarding the application for incorporation of a new company, and the status of the form will get changed to Approved.IV.Payment of Registration FeesThe fees payable to the Registrar at the time of registration of a new company varies according to the authorized capital of a company proposed to be registered. Payment for the Registration and Filing Fee must be made by Demand Draft/Banker’s Cheque if it exceeds Rs.1000/.V.Obtaining Certificate of IncorporationThe ROC will issue a Certificate of Incorporation after careful review of documents submitted. Section 34(1) cast an obligation on the Registrar to issue a Certificate of Incorporation, normally within 7 days of the receipt of documents.A Private Limited Company can start its business immediately on receiving the Certificate of Incorporation.Check these documents before submission of a company:1.DIN of all those directors of a proposed company.2.DSC –Digital Signature Certificate3.Original copy of the formal letter issued by ROC regarding availability of Company name.4.Form-1 for incorporation of a company.5.Form-18 for situation or address of the proposed company.6.Form-32 for particulars of proposed directors, managers and secretary.Formalities to be followed while incorporation of a company:1.Obtain a TAN card2.Obtain a Permanent account number (PAN) from income tax dept. India3.If required: Documents obeying shop and establishment acts.4.If required: For foreign trade, Registration documents of import export code from Director General of foreign trade.5.If required: Registration documents of Software technologies Parks of India (STPI).6.If required: RBI approval for foreign companies investing in India and FIPB approval.7.Both Indian and foreign directors need to have valid Digital Signature Certificates from authorized agencies.For any further clarifications, please visithttp://www.mca.gov.in/MCA21/Regi...Thanks & Regards,Stay4u.
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How do I establish a private limited company?
A private limited company is the most common form of business entity in India. It is easy to maintain and raise funds, offers limited liability to its members, offer flexibility, easy bank loan accessibility.Read Advantages of Private Limited Company. Following are the steps involved in the registration of private limited company Basic requirementThere must be at least 2 members in the companyThe company shall be made for legal business and must not harm the society. The company object should not be illegal.In case, if the registrar issue the certificate of incorporation to such business entity , then certificate will be void and registration will be itself cancelled by the Central Government and appropriate proceeding will take place against the entity and the Registrar.Read in detail Pre-Requisites for Registration of Private Limited Company Step 1: Obtaining Director Identification Number (DIN) & Digital SignatureThe First step isObtaining Director Identification Number (DIN) for the proposed Directors in the CompanyObtaining Digital Signature for one of the Directors of Company.After this, application for name of Private Limited Company must be applied. Step 2: Applying for the nameThe promoters should propose one or more suitable name for the name of company as it offers the flexibility and choice to registrar to select the name in case some names are identical or similar to registered business entities or trademarkThe name should not be similar or identical to any registered company or trademark.The name should not be one prohibited under the ‘Emblems and names Act, 1950’.The name of company must have suffix “Private limited Company “.After submission of name, registrar will review and approve one of the name .It usually takes 3 to 5 working days to approve the name for company .Read tips for Choosing the right name for your company registration for easy approval of name by ROC.Step 3: Filing for Incorporation/Establishing of Private Limited CompanyAfter the name approval, promoters should submit the application, prescribed fees and below said following documents to the registrar.Articles of Association, if anyMemorandum of AssociationDeclaration from DirectorsAffidavits of the DirectorsA declaration stating that the requirements of the Act and the rules framed there under have been compiled with. This declaration is required to be signed by an advocate of the or Supreme Court or an attorney or a pleader having the right to appear before or a High Court or a Chartered Accountant in whole time practice in India who is engaged in the formation of a company, or by a person named in the Articles as a Director, Manager or Secretary of the Company.Besides the aforementioned documents, the company must provide relevant information regarding of its registered office within 15 days of registration or during filing of incorporation documents.Step 4: Subscribing to the Private Limited CompanyAs per the Companies Act 2013, a subscriber must sign their names and must be subscribed to the shares of the company incorporated. It means each subscriber must have at least one share of the company. Each subscriber should sign the memorandum in presence of at least one witness and must clearly state the following:AddressPersonal DescriptionOccupationNo of shares subscribedNature of shares etc.Likewise both (Article and Memorandum of association) must be duly signed and stamped.Step 5: Certificate of IncorporationAfter filing the above-mentioned documents and payment of necessary fees, the certificate for incorporation would be issued by the Registrar of Companies. Upon Incorporation, the company becomes a legal person separate from its members.The process to register a private limited is complex and time-consuming. Our team at LegalRaasta can help startups and Entrepreneurs Register Private Limited Company in 14-15 days @ 13,999/- only (inclusive of government fee) saving 40% compared to typical CA/CS
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What are the important sections of cyber laws in India?
The Government of India enacted its Information Technology Act 2000 with the objectives stating officially as: “to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as "electronic commerce", which involve the use of alternatives to paper-based methods of communication and storage of information, to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the Indian Evidence Act, 1872, the Bankers' Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto.The Act essentially deals with the following issues: Legal Recognition of Electronic Documents Legal Recognition of Digital Signatures Offenses and Contraventions Justice Dispensation Systems for cyber crimes.CYBER CRIME- Cyber Crime is not defined officially in IT Act or in any other legislation. In fact, it cannot be too. Offence or crime has been dealt with elaborately listing various acts and the punishments for each, under the Indian Penal Code, 1860 and related legislations. Hence, the concept of cyber crime, is just a "combination of crime and computer". Cybercrime means any illegal behavior directed by means of electronic operations that targets the security of computer systems and the data processed by them. Furthermore any illegal behavior committed by means of, or in relation to, a computer system or network, including such crimes as illegal possession and offering or distributing information by means of a computer system or network. Any contract for the sale or conveyance of immovable property or any interest in such property; Any such class of documents or transactions as may be notified by the Central Here are some of the sections of the IT Act 2000 which are related to cyber crimes: Section 43 - Penalty and Compensation for damage to computer, computer system, If any person without permission of the owner or any other person who is in-charge of a computer, computer system or computer network – (a) accesses or secures access to such computer, computer system or computer network or computer resource (b) downloads, copies or extracts any data, computer data, computer database or information from such computer, computer system or computer network including information or data held or stored in any removable storage medium; (c) introduces or causes to be introduced any computer contaminant or computer virus into any computer, computer system or computer network- (d) damages or causes to be damaged any computer, computer system or computer network, data, computer database, or any other programmes residing in such computer, computer system or computer network-3. (e) disrupts or causes disruption of any computer, computer system, or computer network; (f) denies or causes the denial of access to any person authorised to access any computer, computer system or computer network by any means (h) charges the services availed of by a person to the account of another person by tampering with or manipulating any computer of a computer, computer system or computer network- (g) provides any assistance to any person to facilitate access to a computer, computer system or computer network in contravention of the provisions of this Act, rules or regulations made there under, (h) charges the services availed of by a person to the account of another person by tampering with or manipulating any computer, computer system, or computer network, (i) destroys, deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, (j) Steals, conceals, destroys or alters or causes any person to steal, conceal, destroy or alter any computer source code used for a computer resource with an intention to cause damage, he shall be liable to pay damages by way of compensation to the person so affected. Section 43A - Compensation for failure to protect data Where a body corporate, possessing, dealing or handling any sensitive personal data or information in a computer resource which it owns, controls or operates, is negligent in implementing and maintaining reasonable security practices and procedures and thereby causes wrongful loss or wrongful gain to any person, such body corporate shall be liable to pay damages by way of compensation, not exceeding five crore rupees, to the person so affected. Section 65 - Tampering with Computer Source Documents If any person knowingly or intentionally conceals, destroys code or alters or causes another to conceal, destroy code or alter any computer, computer programme, computer system, or computer network, he shall be punishable with imprisonment up to three years, or with fine up to two lakh rupees, or with both. Section 66 - Computer Related Offences If any person, dishonestly, or fraudulently, does any act referred to in section 43, he shall be punishable with imprisonment for a term which may extend to two three years or with fine which may extend to five lakh rupees or with both. Section 66A - Punishment for sending offensive messages through communication service Any person who sends, by means of a computer resource or a communication device, (a) any information that is grossly offensive or has menacing character; (b) any information which he knows to be false, but for the purpose of causing annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred, or ill will, persistently makes by making use of such computer resource or a communication device, (c) any electronic mail or electronic mail message for the purpose of causing annoyance or inconvenience or to deceive or to mislead the addressee or recipient about the origin of such messages shall be punishable with imprisonment for a term which may extend to three years and with fine. Section 66B - Punishment for dishonestly receiving stolen computer resource or communication device. Whoever dishonestly receives or retains any stolen computer resource or communication device knowing or having reason to believe the same to be stolen computer resource or communication device,4. shall be punished with imprisonment of either description for a term which may extend to three years or with fine which may extend to rupees one lakh or with both. Section 66C - Punishment for identity theft Whoever, fraudulently or dishonestly make use of the electronic signature, password or any other unique identification feature of any other person, shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to fine which may extend to rupees one lakh. Section 66D - Punishment for cheating by personation by using computer resource Whoever, by means of any communication device or computer resource cheats by personating; shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to fine which may extend to one lakh rupees. Section 66E - Punishment for violation of privacy Whoever, intentionally or knowingly captures, publishes or transmits the image of a private area of any person without his or her consent, under circumstances violating the privacy of that person, Explanation - For the purposes of this section: (a) “transmit” means to electronically send a visual image with the intent that it be viewed by a person or persons; (b) “capture”, with respect to an image, means to videotape, photograph, film or record by any means; (c) “private area” means the naked or undergarment clad genitals, pubic area, buttocks or female breast; (d) “publishes” means reproduction in the printed or electronic form and making it available for public; (e) “under circumstances violating privacy” means circumstances in which a person can have a reasonable expectation that-- (i) he or she could disrobe in privacy, without being concerned that an image of his private area was being captured; or (ii) any part of his or her private area would not be visible to the public, regardless of whether that person is in a public or private place. shall be punished with imprisonment which may extend to three years or with fine not exceeding two lakh rupees, or with both. Section-66F Cyber Terrorism Whoever,- with intent to threaten the unity, integrity, security or sovereignty of India or to strike terror in the people or any section of the people by – (i) denying or cause the denial of access to any person authorized to access computer resource; or (ii) attempting to penetrate or access a computer resource without authorisation or exceeding authorized access; or (iii) introducing or causing to introduce any Computer Contaminant and by means of such conduct causes or is likely to cause death or injuries to persons or damage to or destruction of property or disrupts or knowing that it is likely to cause damage or disruption of supplies or services essential to the life of the community or adversely affect the critical information infrastructure specified under section 70, Whoever commits or conspires to commit cyber terrorism shall be punishable with imprisonment which may extend to imprisonment for life. Section 67 - Punishment for publishing or transmitting obscene material in electronic form Whoever publishes or transmits or causes to be published in the electronic form, any material which is lascivious or appeals to the prurient interest or if its effect is such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it, shall be punished on first conviction with imprisonment of either description for a term which5. may extend to two three years and with fine which may extend to five lakh rupees and in the event of a second or subsequent conviction with imprisonment of either description for a term which may extend to five years and also with fine which may extend to ten lakh rupees. Section 67A - Punishment for publishing or transmitting of material containing sexually explicit act, etc. in electronic form Whoever publishes or transmits or causes to be published or transmitted in the electronic form any material which contains sexually explicit act or conduct shall be punished on first conviction with imprisonment of either description for a term which may extend to five years and with fine which may extend to ten lakh rupees and in the event of second or subsequent conviction with imprisonment of either description for a term which may extend to seven years and also with fine which may extend to ten lakh rupees. Section 67B - Punishment for publishing or transmitting of material depicting children in sexually explicit act, etc. in electronic form Whoever:- (a) publishes or transmits or causes to be published or transmitted material in any electronic form which depicts children engaged in sexually explicit act or conduct or (b) creates text or digital images, collects, seeks, browses, downloads, advertises, promotes, exchanges or distributes material in any electronic form depicting children in obscene or indecent or sexually explicit manner or (c) cultivates, entices or induces children to online relationship with one or more children for and on sexually explicit act or in a manner that may offend a reasonable adult on the computer resource or (d) facilitates abusing children online or (e) records in any electronic form own abuse or that of others pertaining to sexually explicit act with children, shall be punished on first conviction with imprisonment of either description for a term which may extend to five years and with a fine which may extend to ten lakh rupees and in the event of second or subsequent conviction with imprisonment of either description for a term which may extend to seven years and also with fine which may extend to ten lakh rupees: Section 69 - Powers to issue directions for interception or monitoring or decryption of any information through any computer resource.- (1) Where the central Government or a State Government or any of its officer specially authorized by the Central Government or the State Government, as the case may be, in this behalf may, if is satisfied that it is necessary or expedient to do in the interest of the sovereignty or integrity of India, defence of India, security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognizable offence relating to above or for investigation of any offence, it may, subject to the provisions of sub-section (2), for reasons to be recorded in writing, by order, direct any agency of the appropriate Government to intercept, monitor or decrypt or cause to be intercepted or monitored or decrypted any information transmitted received or stored through any computer resource. (2) The Procedure and safeguards subject to which such interception or monitoring or decryption may be carried out, shall be such as may be prescribed. (3) The subscriber or intermediary or any person in charge of the computer resource shall, when called upon by any agency which has been directed under sub section (1), extend all facilities and technical assistance to -6. (a) provide access to or secure access to the computer resource generating, transmitting, receiving or storing such information; or (b) intercept or monitor or decrypt the information, as the case may be; or (c) provide information stored in computer resource. (4) The subscriber or intermediary or any person who fails to assist the agency referred to in sub-section (3) shall be punished with an imprisonment for a term which may extend to seven years and shall also be liable to fine. Section 69A - Power to issue directions for blocking for public access of any information through any computer resource (1) Where the Central Government or any of its officer specially authorized by it in this behalf is satisfied that it is necessary or expedient so to do in the interest of sovereignty and integrity of India, defense of India, security of the State, friendly relations with foreign states or public order or for preventing incitement to the commission of any cognizable offence relating to above, it may subject to the provisions of sub-sections (2) for reasons to be recorded in writing, by order direct any agency of the Government or intermediary to block access by the public or cause to be blocked for access by public any information generated, transmitted, received, stored or hosted in any computer resource. (2) The procedure and safeguards subject to which such blocking for access by the public may be carried out shall be such as may be prescribed. (3) The intermediary who fails to comply with the direction issued under sub-section (1) shall be punished with an imprisonment for a term which may extend to seven years and also be liable to fine. Section 69B. Power to authorize to monitor and collect traffic data or information through any computer resource for Cyber Security (1) The Central Government may, to enhance Cyber Security and for identification, analysis and prevention of any intrusion or spread of computer contaminant in the country, by notification in the official Gazette, authorize any agency of the Government to monitor and collect traffic data or information generated, transmitted, received or stored in any computer resource. (2) The Intermediary or any person in-charge of the Computer resource shall when called upon by the agency which has been authorized under sub-section (1), provide technical assistance and extend all facilities to such agency to enable online access or to secure and provide online access to the computer resource generating, transmitting, receiving or storing such traffic data or information. (3) The procedure and safeguards for monitoring and collecting traffic data or information, shall be such as may be prescribed. (4) Any intermediary who intentionally or knowingly contravenes the provisions of subsection (2) shall be punished with an imprisonment for a term which may extend to three years and shall also be liable to fine. Section 71. Penalty for misrepresentation Whoever makes any misrepresentation to, or suppresses any material fact from, the Controller or the signNowing Authority for obtaining any license or Electronic Signature Certificate, as the case may be, shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.7. Section 72 - BsignNow of confidentiality and privacy Any person who, in pursuant of any of the powers conferred under this Act, rules or regulations made there under, has secured access to any electronic record, book, register, correspondence, information, document or other material without the consent of the person concerned discloses such electronic record, book, register, correspondence, information, document or other material to any other person shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both. These are the IPC Section codes : Section 499. Defamation Whoever, by words either spoken or intended to be read, or by signs or by visible representations, makes or publishes any imputation concerning any person intending to harm, or knowing or having reason to believe that such imputation will harm, the reputation of such person, is said, except in the cases hereinafter expected, to defame that person. It may amount to defamation to impute anything to a deceased person, if the imputation would harm the reputation of that person if living, and is intended to be hurtful to the feelings of his family or other near relatives. First Exception.—Imputation of truth which public good requires to be made or published Second Exception.—Public conduct of public servants Third Exception.—Conduct of any person touching any public question Fourth Exception.—Publication of reports of proceedings of Courts Fifth Exception.-Merits of case decided in Court or conduct of witnesses and others concerned. Sixth Exception.—Merits of public performance Seventh Exception.—Censure passed in good faith by person having lawful authority over another. Eighth Exception.—Accusation preferred in good faith to authorised person. Ninth Exception.—Imputation made in good faith by person for protection of his or other’s interests Tenth Exception.—Caution intended for good of person to whom conveyed or for public good Section 500. Punishment for defamation Whoever defames another shall be punished with simple imprisonment for a term which may extend to two years, or with fine, or with both.8. CLASSIFICATION OF OFFENCE Para I Punishment—Simple imprisonment for 2 years, or fine, or both—Non-cognizable—Bailable—Triable by Court of Session—Compoundable by the person defamed. Para II Punishment—Simple imprisonment for 2 years, or fine, or both—Non-cognizable—Bailable—Triable by Magistrate of the first class—Compoundable by the person defamed with the permission of the court Section 420 Cheating and dishonestly inducing delivery of property Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.CLASSIFICATION OF OFFENCE Punishment—Imprisonment for 7 years and fine—Cognizable—Non-bailable—Triable by Magistrate of the first class—Compoundable by the person cheated with the permission of the court. Section 383. Extortion Whoever intentionally puts any person in fear of any injury to that person, or to any other, and thereby dishonestly induces the person so put in fear to deliver to any property or valuable security, or anything signed or sealed which may be converted into a valuable security, commits “extortion”. Example; (a) A threatens to publish a defamatory libel concerning Z unless Z give him money. He thus induces Z to give him money. A has committed extortion. (b) A threatens Z that he will keep Z’s child in wrongful confinement, unless Z will sign and deliver to A promissory note binding Z to pay certain monies to A. Z signs and delivers the note. A has committed extortion. (c) A threatens to send club-men to plough up Z’s field unless Z will sign and deliver to B bond binding Z under a penalty to deliver certain produce to B, and thereby induces Z to sing and deliver the bond. A has committed extortion. (d) A, by putting Z in fear of grievous hurt, dishonestly induces Z to sign or affix his seal to a blank paper and deliver it to A. Z signs and delivers the paper to A. Here, as the paper so signed may be converted into a valuable security. A has committed extortion. Section 384. Punishment for extortion Whoever commits extortion shall be punished with imprisonment of either description for a term which may extend to three years, or with fine or with both.9. CLASSIFICATION OF OFFENCE Punishment—Imprisonment for 3 years, or fine, or both—Cognizable—Non-bailable—Triable by any Magistrate—Non-compoundable.Section 463. Forgery Whoever makes any false documents or false electronic record or part of a document or electronic record, with intent to cause damage or injury], to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with intent to commit fraud or that fraud may be committed, commits forgery.Section 465. Punishment for forgery Whoever commits forgery shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both.CLASSIFICATION OF OFFENCE Punishment—Punishment for forgery of such document—Cognizable—Bailable—Triable by Magistrate of the first class—Non-compoundable. Section 503. Criminal intimidation Whoever threatens another with any injury to his person, reputation or property, or to the person or reputation of any one in whom that person is interested, with intent to cause alarm to that person, or to cause that person to do any act which he is not legally bound to do, or to omit to do any act which that person is legally entitled to do, as the means of avoiding the execution of such threat, commits criminal intimidation. Explanation A threat to injure the reputation of any deceased person in whom the person threatened is interested, is within this section. Illustration A, for the purpose of inducing B to desist from prosecuting a civil suit, threatens to burn B’s house. A is guilty of criminal intimidation. The following are the live cases : Section 43 Related Case: Mphasis BPO Fraud: 2005 In December 2004, four call centre employees, working at an outsourcing facility operated by MphasiS in India, obtained PIN codes from four customers of MphasiS’ client, Citi Group. These employees were not authorized to obtain the PINs. In association with others, the call centre employees opened new accounts at Indian banks using false identities. Within two months, they used the PINs and account information gleaned during their employment at MphasiS to transfer money from the bank accounts of CitiGroup customers to the new accounts at Indian banks.10. By April 2005, the Indian police had tipped off to the scam by a U.S. bank, and quickly identified the individuals involved in the scam. Arrests were made when those individuals attempted to withdraw cash from the falsified accounts, $426,000 was stolen; the amount recovered was $230,000. Verdict: Court held that Section 43(a) was applicable here due to the nature of unauthorized access involved to commit transactions. Section 65 Related Case: Syed Asifuddin and Ors. Vs. The State of Andhra Pradesh In this case, Tata Indicom employees were arrested for manipulation of the electronic 32- bit number (ESN) programmed into cell phones theft were exclusively franchised to Reliance Infocomm. Verdict: Court held that tampering with source code invokes Section 65 of the Information Technology Act.Section 66 Related Case: Kumar v/s Whiteley In this case the accused gained unauthorized access to the Joint Academic Network (JANET) and deleted, added files and changed the passwords to deny access to the authorized users. Investigations had revealed that Kumar was logging on to the BSNL broadband Internet connection as if he was the authorized genuine user and ‘made alteration in the computer database pertaining to broadband Internet user accounts’ of the subscribers. The CBI had registered a cyber crime case against Kumar and carried out investigations on the basis of a complaint by the Press Information Bureau, Chennai, which detected the unauthorised use of broadband Internet. The complaint also stated that the subscribers had incurred a loss of Rs 38,248 due to Kumar’s wrongful act. He used to ‘hack’ sites from Bangalore, Chennai and other cities too, they said. Verdict: The Additional Chief Metropolitan Magistrate, Egmore, Chennai, sentenced N G Arun Kumar, the techie from Bangalore to undergo a rigorous imprisonment for one year with a fine of Rs 5,000 under section 420 IPC (cheating) and Section 66 of IT Act (Computer related Offence). section 66 A Relevant Case #1: Fake profile of President posted by imposter On September 9, 2010, the imposter made a fake profile in the name of the Hon’ble President Pratibha Devi Patil. A complaint was made from Additional Controller, President Household, President Secretariat regarding the four fake profiles created in the name of Hon’ble President on social networking website, Facebook. The said complaint stated that president house has nothing to do with the facebook and the fake profile is misleading the general public. The First Information Report Under Sections 469 IPC and 66A Information Technology Act, 2000 was registered based on the said complaint at the police station, Economic Offences Wing, the elite wing of Delhi Police which specializes in investigating economic crimes including cyber offences. Relevant Case #2: Bomb Hoax mail In 2009, a 15-year-old Bangalore teenager was arrested by the cyber crime investigation cell (CCIC) of the city crime branch for allegedly sending a hoax e-mail to a private news channel. In the e-mail, he claimed to have planted five bombs in Mumbai, challenging the police to find them before it was too late. At around 1p.m. on May 25, the news channel received an e-mail that read: “I have planted five bombs in Mumbai; you have two hours to find it.” The police, who were alerted immediately, traced the Internet Protocol (IP) address to Vijay Nagar in Bangalore. The Internet service provider for the account was BSNL, said officials. section 66 C Relevant Cases: security number was exposed by Matt Lauer on NBC’s Today Show. Davis’ identity was used to obtain a $500 cash advance loan. University of Pennsylvania faked his own death, complete with a forged obituary in his local paper. Nine months later, Li attempted to obtain a new driver’s license with the intention of applying for new credit cards eventually.Section 66C: Punishment for identity theft Imprisonment upto three years and Fine upto Rs. 1 Lakhs.Section 66D: Punishment for cheating by personation by using computer resourceSection 66E: Punishment for violation of privacy Imprisonment upto three years and/or Fine upto Rs. 2 LakhsSection 66F: Punishment for cyber terrorism May extend to Life imprisonment -do- Non bailable.Section 67: Publishing obscene information in electronic form FirstConviction: Imprisonment upto three years and Fine upto Rs. 5 LakhsSecond or subsequent Conviction : Imprisonment upto five years and Fine upto Rs. 10 Lakhs -do- Bailable in case of first conviction only. Second or subsequent conviction shall be non bailableSection 67A: Punishment for publishing or transmitting of material containing sexually explicit act, etc. in electronic form First Conviction:Imprisonment upto Five years and Fine upto Rs. 10 LakhsSecond or subsequent Conviction : Imprisonment upto Seven years and Fine upto Rs. 10 Lakhs -do- Non-bailable in both first and second conviction.Section 67B: Punishment for publishing or transmitting of material depicting children in sexually explicit act, etc. in electronic form.Section 67C (2): Deliberate Failure by the intermediary to preserve and retain information as specified by the Central Government.Section 68 (2): Deliberate Failure to comply with the order/direction of controller.Section 69 (4): Failure to extend facilities to decrypt information to govt. notified agencySection 69A (3): Punishment for failure by the intermediary to comply with the order of the notified agency to block websites etc.Section 69B (4): Deliberate failure by the intermediary to provide the notified agency with the technical assistance or online access to the computer resource.Section 70: Unauthorized access to protected system directly or indirectly affects the facility of Critical Information Infrastructure.Section 72A: Punishment for Disclosure of information in bsignNow of lawful contract Indian Arms Act 1959 Imprisonment upto three years and Fine .Bailable Imprisonment for a term not exceeding two years or to a fine not exceeding one lakh rupees or to both Imprisonment for a term which may extend to seven years and fine Imprisonment for a term which may extend to three years and fine Imprisonment up to 10 years and fine Cognizable Non bailable Imprisonment for a term upto three years or to a fine upto Rs. 5 Lakhs or to both.Chapter V – Offences and Penalties Sec.25 – Punishment for certain offencesSec.26 – Secret contraventionsSec.27 – Punishment for using arms, etc. Non cognizable -do- Cognizable Non bailable Non Cognizable BailableSec.28 – Punishment for use and possession of firearms or imitation firearms in certain casesSec.29 – Punishment for knowingly purchasing arms, etc., from unlicensed person or for delivering arms, etc., to person not entitled to possess the sameSec.30 – Punishment for contravention of licence or ruleSec.31 – Punishment for subsequent offencesSec.32 – Power to confiscateSec.33 – Offence by companies NDPS ACT On 8th September, 2011, the Government introduced the NDPS (Amendment) Bill, 2011 in the Lok Sabha. The Bill was referred to the Parliamentary Standing Committee on Finance on 13th September, 2011 for further consideration. The Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985 is the central law on control, regulation and prohibition of narcotic and psychotropic drugs in India. The Act was last amended in 2001, to rationalize punishment and adopt a sentencing structure based on the quantity of drugs involved. The stringent penal structure and rigid implementation of the NDPS Act created many problems including non-availability of opioid medication and lack of access to drug dependence treatment. The Bill seeks to amend a number of provisions of the NDPS Act including:•Modification of the definitions of ‘small’ and ‘commercial’ quantity to include the entire amount of drugs involved and not only the pure drug content [Section 2(xxiiia) and Section 2(viia)]•Standardisation of punishment for consumption of drugs to a maximum of 6 months or fine [Section 27]•Transfer of power to regulate “poppy straw concentrate” from the State to the Central Government [Sections 9 and 10]•Widening provisions for forfeiture of illegally acquired property, wherein any property of a person who is alleged to be involved in illicit traffic whose source cannot be proved is termed as ‘illegally acquired property’ and liable to be seized [Sections 68-B, 68H and 68-O]•Addition of the term ‘management’ to provisions on treatment for drug dependence [Section 71] Concerns over the Bill The proposed quantity definitions would have far signNowing implications on sentencing for NDPS offences and may expose low-level drug offenders, including people who use drugs to stringent punishment. Despite standardisation of punishment for consumption of drugs, the policy of criminalisation of drug use remains unchanged. The overbroad scope of the forfeiture provision makes it susceptible to misuse and subject to constitutional challenges. Further still, the Bill fails to address key issues and contradictions that have arisen such as, death penalty for repeat offenders, immunity for treatment seeking, regulation of treatment centres, support for harm reduction measures and access to opioid medicines. Read more. The Lawyers Collective expressed these and other concerns to the Standing Committee on Finance through written and oral submissions on the NDPS (Amendment) Bill, 2011 My request to all the people is to be safe and to be alert and not involve in wrong activities.
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What is the procedure for conversion of partnership to llp?
People used to go for Partnership before. But as LLP was introduced under LLP act 2008, people started taking much more interest in it. It has many advantages over Partnership firms. Few of the advantages are as follows:To set up the company, the cost is low as compared to partnership firms.The personal assets are safe in LLP and are exposed to anyone.As we all know, company require audit but there no audit in case of LLPs.The process of changing the Partnership into LLP is quite is easy. Following are the steps which you need to follow.DPIN and DSC will be required as these are very important while converting your partnership into LLP.You should select a name which will be sent for the approval. One more thing, the company name should end with LLP.After name approval, you need to file LLP form 2, LLP form 3 and LLP form 17. Some of the documents which will be required while these forms are as follows:Address proof of registered office,Approval by regulatory authority,Details of partnership (including details of partners and directors)Consent of all the partners,Copy of the latest income tax return (can be acknowledgment),No Objection certificate from tax authorities,List of creditors and their consent, andList of certified liabilities and assets.After assembling all these documents, the form should be submitted to the registrar with the fees. Verification will be done and after few days if there wont be any issue in documents, you will be issued a certificate from government office.To make your efforts hassle free, you can get this conversion with the help of experts. I got my Private Limited Company registration with the help of experts at LegaRaasta. Their service was appreciable. So you can go with them!
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Is it possible that sometime in the future, all money in all countries become one electronic currency like Bitcoin for all world
New technologies—supported by advances in encryption and network computing—are driving transformational change in the global economy, including in how goods, services and assets are exchanged. An important development in this process has been the emergence of virtual currencies (VCs). VC schemes are private sector systems that, in many cases, facilitate peer-to-peer exchange bypassing traditional central clearinghouses.VCs and their associated technologies (notably distributed ledgers based on blockchains) are rapidly evolving, and the future landscape is difficult to predict. VCs offer many potential benefits, including greater speed and efficiency in making payments and transfers—particularly across borders––and ultimately promoting financial inclusion. The distributed ledger technology underlying some VC schemes—an innovative decentralized means of keeping track of transactions in a large network––offers potential benefits that go far beyond VCs themselves. At the same time, VCs pose considerable risks as potential vehicles for money laundering, terrorist financing, tax evasion and fraud. While risks to the conduct of monetary policy seem less likely to arise at this stage given the very small scale of VCs, risks to financial stability may eventually emerge as the new technologies become more widely used.A lot of people do not know there are so many ways to earn cryptocurrencies by investing legitimately in platforms like www.coastminers.tech where they can get double of their investment in 7 days without losing them(thank me later).The development of effective regulatory responses to VCs is still at an early stage. VCs are difficult to regulate as they cut across the responsibilities of different agencies at the national level, and operate on a global scale. Many are opaque and operate outside of the conventional financial system, making it difficult to monitor their operations. Regulators have begun to address these challenges, with a variety of approaches across countries. Responses have included clarifying the applicability of existing legislation to VCs, issuing warnings to consumers, imposing licensing requirements on certain VC market participants, prohibiting financial institutions from dealing in VCs, completely banning the use of VCs, and prosecuting violators.These approaches represent an initial policy response to the challenges that VCs pose, but further development is needed. In particular, national authorities will need to calibrate regulation in a manner that appropriately addresses the risks without stifling innovation. More could be done at the international level to facilitate the process of developing and refining policies at the national level. International bodies are playing an important role in identifying and discussing the risks posed by VCs and possible regulatory responses, and they should continue to do so. As experience is gained, international standards and best practices could be considered to provide guidance on the most appropriate regulatory responses in different fields, thereby promoting harmonization across jurisdictions. Such standards could also set out frameworks for cross-country cooperation and coordination in areas such as information sharing and the investigation and prosecution of cross-border offenses.VIRTUAL CURRENCIES AND BEYOND 6 INTERNATIONAL MONETARY FUND INTRODUCTION A. Overview 1. New technologies are driving transformational changes in the global economy, including in how goods, services, and assets are exchanged. The development of monies and a variety of payments systems throughout history have helped make exchange more efficient and secure. The rapid spread of Internet-based commerce and mobile technology––supported by advances in encryption and network computing––has driven the development of several innovative technologies. Companies such as Uber and Airbnb have developed radical new business models. Secure online payments systems (for example, PayPal) and mobile payments and transfer solutions (for example, M-Pesa) are changing the ways in which payments for goods and services are made. 2. An important development in this process of transformation has been the emergence of virtual currencies (VCs). VCs, in principle, question the paradigm of state-supported fiat currencies and the dominant role that central banks and conventional financial institutions have played in the operation of the financial system.VCs are issued without the involvement or backing of a state. Some VC schemes make use of “distributed ledger” technologies that provide complete and secure transaction records without using a central registry. These technologies therefore allow for direct peer-to-peer transactions and eliminate the need for central clearinghouses. It is therefore not surprising that private sector interest in these new technologies has been growing, and that attention from regulators and policymakers has not been far behind. 3. VCs and their underlying distributed ledger technologies have the potential to generate benefits. VC schemes and distributed ledger technologies can strengthen financial efficiency by facilitating peer-to-peer exchange while reducing transaction times and costs, especially across borders.In the longer term, these technologies have the potential to deepen financial inclusion by offering secure and lower-cost payments options. Beyond payments systems, distributed ledger technologies have implications for a wide range of markets and financial market infrastructures as a fast, accurate and secure record keeping system, including for stock exchanges, central securities depositories, securities settlement systems or trade repositories. Technological and regulatory progress will be needed to realize these potential benefits. 4. However, these technologies also pose risks. VCs can be misused as vehicles for money laundering, terrorist financing, and tax evasion, and other forms of illicit activity. While risks to the conduct of monetary policy seem less likely to arise, risks to financial stability may eventually emerge as the new technologies come into more wide-spread use.Although the growing use of distributed ledger technologies outside of the context of VCs pose far fewer risks, it may over time pose a serious challenge to parts of the business model of the established financial system. VCs and distributed ledger technologies will thus continue to attract the attention of policymakers and regulators at both the national and international levels. VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 7 5. Any policy response to VCs will need to strike an appropriate balance between forcefully addressing risks and abuses while avoiding overregulation that could stifle innovation. The initial focus should be on the most pressing concerns related to VCs—including financial integrity, consumer/investor protection, and tax evasion—while leaving less immediate risks (for example, financial stability, monetary policy) to a later stage.VCs combine many different properties of electronic payment systems, currencies, and commodities that span the responsibilities of several types of regulators at the national level. VCs operate in a virtual world that signNowes across borders, increasing potential risks and creating opportunities for regulatory arbitrage. Effective policy coordination will therefore be required at the national and international levels. 6. This paper discusses the potential benefits and risks posed by VCs and how financial regulators could approach them. The paper begins by explaining what VCs are, and how they work. It then examines key features and related developments in distributed ledger technologies underlying decentralized VCs, along with their potential use for financial development and financial inclusion. The paper subsequently discusses the policy and regulatory implications of VCs generally and concludes with a brief discussion of areas for future analysis.7. As a starting point, it is important to note that the VC landscape is still new and rapidly changing. It is therefore not possible to fully predict the future direction and importance of these evolving technologies or to identify specific longer-term policy responses. The paper is therefore intended as a first step and a platform for further research and analysis. Many of the questions it raises are left for future discussion. B. What are Virtual Currencies? 8. VCs are digital representations of value, issued by private developers and denominated in their own unit of account.2 VCs can be obtained, stored, accessed, and transacted electronically, and can be used for a variety of purposes, as long as the transacting parties agree to use them. The concept of VCs covers a wider array of “currencies,” ranging from simple IOUs of issuers (such as Internet or mobile coupons and airline miles), VCs backed by assets such as gold,3 and “cryptocurrencies” such as Bitcoin.9. As digital representations of value, VCs fall within the broader category of digital currencies (Figure 1). However, they differ from other digital currencies, such as e-money, which is a digital payment mechanism for (and denominated in) fiat currency. VCs, on the other hand, are not denominated in fiat currency and have their own unit of account. 2 Given the fast evolving nature of the industry, a universal definition has yet to emerge and could quickly change as the VC ecosystem continues to transform. 3 This type of VCs is backed by the combination of existing tangible assets or national currencies and the creditworthiness of the issuer. VIRTUAL CURRENCIES AND BEYOND 8 INTERNATIONAL MONETARY FUND Figure 1. Taxonomy of Virtual Currencies10. VC schemes comprise two key elements: (i) the digital representation of value or “currency” that can be transferred between parties; and (ii) the underlying payment and settlement mechanisms, including the distributed ledger system (see the section on distributed ledgers and Box 2).11. VC schemes have different levels of convertibility to real-world goods, services, national currencies, or other VCs. Non-convertible VCs (or closed schemes) operate exclusively within a self-contained virtual environment. Under these systems, the exchange of VCs with fiat currency (or other VCs) or its use in payments for goods and services outside of the virtual domain is signNowly restricted. In contrast, convertible VCs (or open schemes) allow for the exchange of the VC with fiat currency (or other VCs) and for payments for goods and services in the real economy.4 The level of contact between convertible VCs and the real economy is much greater than is the case in closed schemes.512. VC schemes can operate through a centralized, decentralized, or hybrid model. The operation of VC schemes includes three components: (i) the issuance and redeemability of the VC; (ii) mechanisms to implement and enforce internal rules on the use and circulation of the currency; and (iii) the payment and settlement process. Each area of operation may be managed by a trusted central (and private) party or in a decentralized manner among participants. Hybrid schemes also 4 An additional distinction is sometimes made between unidirectional flow and bidirectional flow of convertibility, with the former referring to VCs that can be obtained in exchange for fiat currency (or other VCs), but cannot be converted back to fiat currency (or other VCs)—the flow of convertibility being unidirectional (for example, Nintendo Points, some frequent-flyer programs air miles)—and the latter—where the flow of convertibility is bidirectional (for example, Bitcoin, Linden Dollar). See ECB (2012). 5 It should be noted that convertible VCs may be subject to illiquid markets, limiting their de facto convertibility. (continued) VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 9 exist, where some functions are performed by a central authority, while others are distributed among market participants.613. Decentralized VC schemes use techniques from cryptography for their operations— hence the “cryptocurrency” moniker: In decentralized systems, there is no central party (for example, a central bank) administering the system or issuing VCs. Rather, the central party is replaced by a framework of internal protocols that govern the operation of the system and allow the verification of transactions to be performed by the system participants themselves. As payments and transactions are made through the system, these participants (often referred to as “miners”) are rewarded in newly minted “currency” for performing the payment processing function (referred to as “mining”). This approach serves two purposes: it introduces newly minted VCs into the system and enables the decentralized operation of the VC scheme. In contrast to fiat currency, a cryptocurrency does not represent a liability on anyone. These systems may allow for the issuance of a limited or unlimited number of currency units. Under most such systems (including Bitcoin), there is currently a limit on the number of currency units that may ultimately be issued. However, new systems are emerging that do not include such limits. Most cryptocurrencies are “pseudo-anonymous”—while cryptocurrency transactions are publicly recorded, users are known only by their VC “addresses,” which cannot be traced back to users’ real-world identity. As such, cryptocurrency transactions are more transparent than cash but more anonymous than other forms of online payment. Cryptocurrencies challenge the standard concept of fiat currencies. The value of existing fiat currencies is backed by the creditworthiness of the central bank and the government. Centrally issued VCs rely on the backing of the private issuer’s credibility while the value of privately issued currencies (see Box 1 and the next section) have historically been supported by the private issuer’s credibility and commodity reserves. In contrast, the value of cryptocurrencies does not have any backing from any source. They derive value solely from the expectation that others would also value and use them. 14. VCs can be obtained in a variety of ways. Convertible VCs can typically be purchased or exchanged with fiat currency or other VCs, through a VC exchange, through a trade platform,7 or directly with another VC holder. They can also be obtained in payment for goods or services.As noted above, decentralized VCs can be obtained by participating in the transaction validation 6 For example, Ripple. 7 Trade platforms provide a forum where buyers and sellers can offer and bid for VCs (akin to a market place). (continued) VIRTUAL CURRENCIES AND BEYOND 10 INTERNATIONAL MONETARY FUND process (for example, “mining”). VCs are typically stored in a “VC wallet,” either directly through a VC wallet software application or through an intermediary—a VC wallet service provider.8 15. Ancillary service providers have entered the market. Payment facilitators operate as intermediaries between consumers and merchants/retailers, converting VC payments into fiat currency and bearing the exchange rate risk of the transaction. In the case of cryptocurrencies, some service providers offer additional anonymizing services that further obfuscate the traceability of transactions.ARE VIRTUAL CURRENCIES MONEY? 16. Several questions arise when considering the role of VCs as money. 9 Do they satisfy the legal definition of money and fulfill all the economic roles of money (store of value, medium of exchange, and unit of account)? How do they compare to other privately-issued monies that existed historically? If they become more widely used, could (or should) these privately-issued currencies substitute for national currencies? 8 VC wallets are used by VC holders to hold and transact in VCs. Cryptocurrencies are stored in digital wallet software associated with cryptographic keys: (i) “public keys,” which are used to encrypt data and function akin to an account number; and (ii) “private keys”, which are needed for decryption and which function akin to a password to access the cryptocurrencies or a signature to authenticate transactions.Where no intermediary is involved (for example, VC wallet service provider), the loss of a private key will in effect result in the loss of the VCs held in the VC wallet, as the owner of the wallet cannot access its content. VC wallets can be held online (“hot storage”) or offline (“cold storage”). The latter is considered to afford greater protection against hacking and theft. 9 “Money” could have different meanings depending on the context. VCs are comparable to banknotes, coins, and other liabilities of the issuer—the central bank in a modern monetary system. These are also called high-powered money, central bank liability, base money, or outside money. In contrast, money supply includes base money and liabilities (denominated in the national currency) created by banks and bank-like financial institutions (such as deposits and some money market fund shares—called inside money).Even in a system where the central bank has a monopoly right to issue base money, the bulk of the money supply could be provided in a decentralized manner by multiple financial institutions. These financial institutions could be regulated or unregulated (such as shadow banks and as in the “free banking” regime (Gorton, 1985). On the other hand, there is currently no known financial institution that provides inside money in VCs, and the VC monetary system consists only of high-powered money.VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 11 A. Perspectives from Theory and History 17. Theory and history offer some guide-posts for considering these questions (Box 1): Theory. High inflation in the 1970s after the end of the Bretton Woods System renewed skepticism in some quarters over granting central banks monopoly power to issue nonconvertible fiat currency.10 Friedman and Schwartz (1986) and Fischer (1986) reject Hayek’s proposal to denationalize money (1976). Other researchers, however, continue to contemplate laissez-faire monetary regimes, and there has also been extensive theoretical work on the feasibility and optimality of privately issued money under monopoly or competition.11 History.VCs are not the first example of currencies privately issued in a decentralized manner. While VCs are of course very different from national currencies, monetary systems and the legal concept of money have evolved substantially over time and will continue to change in the future. VCs should thus not be judged solely based on their current characteristics or on how they compare to current monetary regimes. 18. A detailed comparison of the characteristics of VCs with existing and historical currencies sheds further light on these issues (Table 1). For the sake of specificity, Bitcoin is used as a representative example of a VC and compared to a home currency, a foreign currency, and a commodity asset based on current arrangements.Moreover, for a historical perspective, the table also includes key features of a commodity (gold bullion), a commodity currency (gold/silver coins), and a fiat currency convertible into gold and other commodities (the gold standard). The experiences during the U.S. Greenback era are also included, when the government-issued nonconvertible fiat currency “Greenbacks” and private banks were allowed to issue notes as currency. The monetary policy discussion in the policy challenges section assesses whether VCs could provide desirable monetary systems or not. 10 Convertibility in this section refers to convertibility of fiat currencies to commodity reserves and international reserves, in the context of the gold standard or the Bretton Woods System, in contrast with the convertibility of VCs into national currencies as discussed in the earlier section.11 See, for example, King (1983), White (1984), Taub (1985), Selgin (1988), and Selgin and White (1994). VIRTUAL CURRENCIES AND BEYOND 12 INTERNATIONAL MONETARY FUND Box 1. Public and Private Provision of Money: History and Theory Both history and economic theory broadly seem to support a monetary regime with public provision of currency over a competitive private system. The historical track record of containing inflation is mixed across both private and public systems. However, public systems appear to function better when there is a systemic liquidity shortage at the time of a financial crisis and the need arises for a lender-of-last-resort (LOLR). Resilience against inflation There are examples where currency was provided by multiple private banks without high inflation.In fact, many central banks in major advanced economies were first established as private banks, and their currencies did not have legal tender or monopoly status (Box Table). Also, notes issued by (multiple) national banks during the U.S. Greenback era did not have legal tender status but were traded at par with government issued notes (Calomiris, 1988). Box Table. The Origins of Central Bank Powers Country Date founded Monopoly over note issue Notes made legal tender State ownership France 1800 1848 1878 1945 Germany 1875 1875 1909 1948 Japan 1882 1884 1885 NA Italy 1893 1893 1893 NA United Kingdom (England) 1694 1844 1833 1946 United States 1913 1913 1933 NA Canada 1934 1935 1935 1938 Source: Redish (1993).But systems were needed to curb the tendency to print too much money. During the U.S. Greenback era, when convertibility was temporarily suspended to finance the Civil War, note-issuing private banks were subject to various regulations. Their notes were printed by the government and backed 111 percent by government bonds held on deposit at the Treasury (reserve requirement), making them indirect obligations of the government. The aggregate amount of nationally chartered banks’ notes was capped though the limit was later abolished. Moreover, their value was supported by the expectation to resume convertibility when the war was over (Calomiris, 1988). Without these systems, privately-provided nonconvertible fiat money often ended up being supplied in excess. Redish (1993) shows an example of nonconvertible notes with legal tender status issued by a French private bank in the late 18th century. Privately provided notes in late- 19th century Japan led to inflation when their supply ballooned after banks suspended convertibility to gold.The inflation performance of public moneys has been mixed. Before the collapse of the Bretton Woods System, international monetary regimes were largely anchored by gold and/or pegs to the pound Sterling and U.S. dollar standard (Bordo, 1981, and Redish, 1993) that were successful in anchoring inflation. Excess inflation happened even under commodity currency regimes (coins) for seignorage revenue. Medieval European monarchs—who had a monopoly right to mint coins or charge a fee for running a mint—often debased the currency by raising the unit of account value of a coin at the mint and reducing the precious metal content per coin. In a contemporary context, macro policy mismanagement has often led to high inflation and hyperinflation, as observed in many emerging and developing economies. Among major advanced economies, high inflation occurred in the 1970s following the end of the Bretton Woods System.VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 13 These experiences underpinned substantial discussions on tying central banks’ hands again by returning to a rules-based framework including the gold standard (Friedman and Schwartz, 1986). Lender-of-last-resort Theory suggests that the private provision of money is not optimal when an economy may face system-wide liquidity shortages. The efficiency of competitive market equilibrium has been a key rationale cited by supporters of private provision of money (White, 1984, and Selgin, 1988). However, competitive equilibrium may not be optimal when the market is incomplete, or there is asymmetric information that could cause moral hazard (Mas-Colell, Winston, and Green, 1995). Such imperfections are typical in financial markets. Markets are also incomplete in the sense that not every risk is insurable among individuals, and everyone in the system could be hit by a large, negative, systemic shock. Many researchers have thus argued that public provision of money could improve economic welfare.Weiss (1980) shows the welfare-improving role of central bank money and active monetary policy as these facilitate inter-temporal smoothing in an overlapping generations framework. Diamond and Dybvig (1983) and Bryant (1980) show the effectiveness of public liquidity and deposit insurance in managing bank runs. Private provision of liquidity becomes insufficient and leads to a crisis without public outside money if a systemic shock hits the system, and contagion risks are imminent (Allen and Gale, 2000, Freixas, Parigi, Rochet, 2000, Holmstrom and Tirole, 1998, Tirole, 2008).1 History also seems to suggest that central banks in major economies often emerged in response to the need for a creditworthy institution to be the LOLR and manage bank runs (Goodhart, 1988, Redish, 1993, Gorton and Huang, 2006).In early history, large private banks acted as LOLR, but the need to handle bank runs more systematically eventually made them central banks or led to the establishment of new central banks. In the U.S., J.P Morgan pledged large sums of his own money and convinced other New York bankers to do the same to shore up the banking system in the 1907 financial crisis. The experience eventually led to the establishment of the Federal Reserve Board in 1913. As of late 18th century, the Bank of England (BOE) was a private bank, serving as the government’s banker. The BOE notes gained legal tender status and monopoly issuance power, as the bank had strong credibility to be able to provide liquidity for other banks in distress. Similar development is also observed with other major central banks (Box Table).The global financial crisis provided a further reminder of the need for a credible LOLR. ___________________ 1/ The welfare implication may become less clear when the moral hazard costs from LOLR are incorporated in the analyses. VIRTUAL CURRENCIES AND BEYOND 14 INTERNATIONAL MONETARY FUND Table 1. Characteristics of Currencies: A Comparison Feature Bitcoin USD (home currency) Euro (foreign currency) Commodity (bullion) Commodity currency (coin) Gold standard U.S. Greenback Era (1861–78) Economic demand factors Intrinsic value None None None Yes Yes None None Claim to issuers? No Yes Yes No No Yes Yes Legal tender No Yes No (in the U.S.) na na Mixed Yes (no) to public note (private) Used as a medium of exchange Small, but rising especially in online retail Yes Limited (in the U.S.) possibly more for cross-border trade Yes Yes Yes Yes Used as unit of account No Yes No (in the U.S.) Yes Yes Yes Yes (all notes shared “dollar” unit) Used as store of value Yes, subject to very high exchange rate risk and sudden confidence shock Yes, subject to inflation risk Yes, subject to foreign exchange risk Yes, subject to commodity price risk/cycle.Yes, subject to dilution of quality (inflation/devaluati on) Yes, subject to devaluation risk Yes, subject to inflation risk Supply structures Monopoly/decentr alized Decentralized Monopoly Monopoly Decentralized Mixed Mixed Decentralized Supply source Private Public Foreign public Private/public mining Mixed Mixed Public and private Supply quantity Inflexible Flexible Flexible Inflexible Inflexible Inflexible Flexible Supply rule Computer program Rule-based (inflation target) Rule-based (inflation target) Opportunity cost for mining Tied to commodity in bullion Tied to commodity by reserve ratio Private note subject to reserve requirement.Supply rule change (by issuers) possible? Yes with agreement of majority miners Yes Yes No Quality of minted coins can be diluted. Reserve ratio can be changed and economized No for private banks. Cost of production High (electricity consumption for computation) Low Low Very high (mining) Medium Low Low VIRTUAL CURRENCIES AND BEYOND INTERNATIONAL MONETARY FUND 15 Table 1. Characteristics of Currencies: A Comparison, cntd. Feature Bitcoin USD (home currency) Euro (foreign currency) Commodity (bullion) Commodity currency (coin) Gold standard US Greenback Era (1861-78) Macro-financial stability risks Risk of hyperinflation due to over-supply? No for individual VCs Possible (with policy mismanagement) ... Limited Possible (by diluting coin quality) Possible (by ending convertibility) Possible (if losing credibility to resume convertibility) Risk of long-term hyperdeflation High Low … High High High Low Base money quantity changes to temporary shocks? No (limited even with rule changes) Yes No (to US money demand shocks) No No Somewhat (by changing reserve ratio subject to total holding of gold) Yes Can the issuer be lender of last resort with outside money?
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What is a good annotation of the Bitcoin white paper?
[BAD EARLY DRAFT - This is being continually revised and updated, with important edits from - I hope - you. If I use your suggestion, I will credit you (unless you prefer otherwise). I especially welcome help from developers, cyrptographers, cypherpunks and other writers. I have not coded since high school.]With your help, the best annotation of the Bitcoin white paper will be below - co-built by you, me and other Quorans working together.Our annotation will be the most informative, most plain English and most entertaining annotation of the Bitcoin white paper.Here we go.Bitcoin: A Peer-to-Peer Electronic Cash SystemPeer-to-peer means you and me and indirectly hints at no centralized entity.Electronic cash system means a way to move money (cash) over the internet. Think PayPal instead of paper dollar bills.Bitcoin is 9 years old and is barely used as electronic cash right now.People HODL (stick their Bitcoin under a virtual mattress), use Bitcoin as a capital flight conduit (from e.g. Venezuelan Bolivar to BTC to USD, Swiss Francs, gold, etc.)As inception, Bitcoin was not intended to be digital gold but maybe it’s destined to be that.This is changing as big exchanges like Coinbase (investor) add SegWit and Lightning.Satoshi Nakamoto satoshin@gmx.com http://www.bitcoin.orgSatoshi Nakamoto is a pseudonym. We still don’t know who wrote the paper. Though the NSA might. How the NSA identified Satoshi Nakamoto – CryptoMuse – MediumAbstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.The phrases “purely peer-to-peer”, “sent directly” and “without going through a financial institution” strongly suggests the author’s anti-centralization DNA.Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.Now we get at one of the foundational things the paper and the Bitcoin code solves. Bitcoin is a digital asset that I can give you, but if I do that, I can’t give it to someone else because the Bitcoin blockchain code does not permit it.We propose a solution to the double-spending problem using a peer-to-peer network.Bitcoin removes central points of failure.The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.Immutable. No one can change the Bitcoin transaction that happened. At all.The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power.Satoshi didn’t foresee the mining pool oligopoly that permeates Bitcoin and most Proof of Work cryptocurrencies today.As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers.What does controlled by nodes mean? Many people run nodes but only a few mining pools mine almost all the Bitcoin.This is also known as the 51% attack. But you just need one more node than 50% (e.g., 50% + 1) so it is more accurately a majority attack.The network itself requires minimal structure.Because?Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.As Alex Seewald notes in the comments below, Satoshi is probably referring to best effort delivery. Best-effort delivery - WikipediaWho is doing the broadcasting?Like everything else in Bitcoin, you as a runner of full nodes are free to come and go as you please. That’s why many Bitcoin maximalists argue Bitcoin Core is not centralized.However, others disagree.Quantifying Decentralization – news.earn.com1. IntroductionCommerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments.I think Satoshi is anti-bank, anti-PayPal and anti-Western Union. This is one reason why.While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model.A key facet of Bitcoin is that it is trustless. You don’t have to trust JP Morgan.Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes.Unlike Bitcoin.The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non- reversible services.Debit cards payments are hard to reverse. Cash payments are even harder to reverse. Especially when either is combined with an “All Sales Final” condition.With the possibility of reversal, the need for trust spreads.Yes and many Americans prefer trusting American Express’ customer service over some random merchant on the internet that might rip you off.Merchants must be wary of their customers, hassling them for more information than they would otherwise need.BItcoin is just reallocating the risk from merchants back to consumers. It’s kind of anti-consumer tbh.A certain percentage of fraud is accepted as unavoidable.Yes, just like how so many of my friends have lost some crypto stolen or lost. Seems unavoidable!These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.He should have said much earlier, “Unlike physical currency…”What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.Proof of work.Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.Decentralized escrow? Are buyers to trust a third party centralized escrow service over American Express? As a buyer, I’m not doing that.In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions.Making it easier to follow the money i mean Bitcoin.The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.Bitcoin relies (trust?) the majority of full node runners to be honest. Here’s hoping mob rule, centralized mining or mass hysteria never takes over.2. TransactionsWe define an electronic coin as a chain of digital signatures.Very unexpected IMO. How is this anything like a normal coin? It is a ledger ledger of all the transactions relating to one asset, which isn’t even totally fungible with others. It seems we can literally give you the coin from Satoshi’s genesis block or another coin that we all know was mined today by F2Pool or whatever.Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin.Moving the digital signatures off the main chain is a bit scary to some folks - that’s why some dislike SegWit - which does that.A payee can verify the signatures to verify the chain of ownership.Who the heck wants to do an electronic title search every time they spend $100 of Bitcoin? This makes sense for big purchases like real estate and collectibles but not for small or even medium sized purchases.I’m not sure how pragmatic Satoshi was. He built great tech. He was not as great at guessing use cases and what unmet, urgent need Bitocin actually meets.Transaction[Would love it if someone can please help me and copy paste in the diagrams.]Owner 0's SignatureOwner 1's Private KeyTransactionOwner 1's SignatureOwner 2's Private KeyTransactionOwner 2's SignatureOwner 1's Public KeyOwner 2's Public KeyOwner 3's Public KeyHashHashHashThe problem of course is the payee can't verify that one of the owners did not double-spend the coin.Satoshi focuses a lot on double spending.A common solution is to introduce a trusted central authority, or mint, that checks every transaction for double spending.Mints and the entity that checks for double spending can be two different entities, no? In the analog world, the US government prints money. Maybe a private third party company like a PayPal checks for double spending among its users and customers.After each transaction, the coin must be returned to the mint to issue a new coin, and only coins issued directly from the mint are trusted not to be double-spent.This is bad if you believe, like Ray Dalio, government should increase the money supply (issue new coins) when no one’s spending, everyone’s HODLing and the token economy is shrinking. And you should decrease money suply (burn coins) if there is high or hyperinflation.The problem with this solution is that the fate of the entire money system depends on the company running the mint, with every transaction having to go through them, just like a bank.Broadly speaking, we have not really gotten away from that in Bitcoin. We just replaced banks with centralized mining chip makers, mining pools, developers, maintainers, client implementations, exchanges, wallets, owners, etc.We need a way for the payee to know that the previous owners did not sign any earlier transactions.This seems like a total pain. No wonder Hashcash didn’t work.For our purposes, the earliest transaction is the one that counts, so we don't care about later attempts to double-spend.What are the implications of this, if any?The only way to confirm the absence of a transaction is to be aware of all transactions.Awful.In the mint based model, the mint was aware of all transactions and decided which arrived first.To accomplish this without a trusted party, transactions must be publicly announced [1], and we need a system for participants to agree on a single history of the order in which they were received.The payee needs proof that at the time of each transaction, the majority of nodes agreed it was the first received.3. Timestamp ServerThe solution we propose begins with a timestamp server.A timestamp server works by taking a hash of a block of items to be timestamped and widely publishing the hash, such as in a newspaper or Usenet post [2-5].Hmmm…The timestamp proves that the data must have existed at the time, obviously, in order to get into the hash.Each timestamp includes the previous timestamp in its hash, forming a chain, with each additional timestamp reinforcing the ones before it.Owner 3's Private KeyHashHashBlock2BlockItemItem...ItemItem...VerifyVerifySignSign4. Proof-of-WorkTo implement a distributed timestamp server on a peer-to-peer basis, we will need to use a proof- of-work system similar to Adam Back's Hashcash [6], rather than newspaper or Usenet posts.Adam is the relatively (compared to unctuous CTO Greg Maxwell) cypherpunk and CEO of the controversial Blockstream, funded in part by Tencent in China.The proof-of-work involves scanning for a value that when hashed, such as with SHA-256, the hash begins with a number of zero bits.The average work required is exponential in the number of zero bits required and can be verified by executing a single hash.For our timestamp network, we implement the proof-of-work by incrementing a nonce in the block until a value is found that gives the block's hash the required zero bits.[Can someone help translate all this into plain English?]Once the CPU effort has been expended to make it satisfy the proof-of-work, the block cannot be changed without redoing the work.Immutable.As later blocks are chained after it, the work to change the block would include redoing all the blocks after it.The proof-of-work also solves the problem of determining representation in majority decision making.If the majority were based on one-IP-address-one-vote, it could be subverted by anyone able to allocate many IPs.Wonder what Satoshi thought of Proof of Stake at the time he wrote the white paper in 2008.Proof-of-work is essentially one-CPU-one-vote.Does hash rate matter more than full nodes?The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it.Some developers like Gavin Andressen IIRC tweeted that the real Bitcoin is the one with the longest chain, and that might be Bitcoin Cash.If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains.This is why small blockers want to ensure that blocksizes per second remain small - or become even smaller - so that many people - not just miners - can run full nodes and keep miners honest and reduce the risk of miners colluding and engaging a majority attack.To modify a past block, an attacker would have to redo the proof-of-work of the block and all blocks after it and then catch up with and surpass the work of the honest nodes.It would appear that Bitcoin is only immutable to the extent that most of the CPU power is controlled by honest nodes.We will show later that the probability of a slower attacker catching up diminishes exponentially as subsequent blocks are added.Arguably Bitcoin becomes harder to attack as blocks grow.To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they're generated too fast, the difficulty increases.5. NetworkThe steps to run the network are as follows:1) New transactions are broadcast to all nodes.2) Each node collects new transactions into a block.3) Each node works on finding a difficult proof-of-work for its block.4) When a node finds a proof-of-work, it broadcasts the block to all nodes.5) Nodes accept the block only if all transactions in it are valid and not already spent.6) Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash.Nodes always consider the longest chain to be the correct one and will keep working on extending it. If two nodes broadcast different versions of the next block simultaneously, some nodes may receive one or the other first. In that case, they work on the first one they received, but save the other branch in case it becomes longer. The tie will be broken when the next proof- of-work is found and one branch becomes longer; the nodes that were working on the other branch will then switch to the longer one.3BlockBlockPrev HashNoncePrev HashNonceTxTx...TxTx...New transaction broadcasts do not necessarily need to signNow all nodes. As long as they signNow many nodes, they will get into a block before long. Block broadcasts are also tolerant of dropped messages. If a node does not receive a block, it will request it when it receives the next block and realizes it missed one.6. IncentiveBy convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of the block containing the transaction. Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.The incentive may help encourage nodes to stay honest. If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.7. Reclaiming Disk SpaceOnce the latest transaction in a coin is buried under enough blocks, the spent transactions before it can be discarded to save disk space. To facilitate this without breaking the block's hash, transactions are hashed in a Merkle Tree [7][2][5], with only the root included in the block's hash. Old blocks can then be compacted by stubbing off branches of the tree. The interior hashes do not need to be stored.BlockBlock Header (Block Hash)Prev HashNonceRoot HashHash01Hash23Hash0Hash1Hash2Hash3Tx0Tx1Tx2Tx3BlockBlock Header (Block Hash)Prev HashNonceRoot HashHash01Hash23Hash2Hash3Tx3Transactions Hashed in a Merkle Tree After Pruning Tx0-2 from the BlockA block header with no transactions would be about 80 bytes. If we suppose blocks are generated every 10 minutes, 80 bytes * 6 * 24 * 365 = 4.2MB per year. With computer systems typically selling with 2GB of RAM as of 2008, and Moore's Law predicting current growth of 1.2GB per year, storage should not be a problem even if the block headers must be kept in memory.48. Simplified Payment VerificationIt is possible to verify payments without running a full network node. A user only needs to keep a copy of the block headers of the longest proof-of-work chain, which he can get by querying network nodes until he's convinced he has the longest chain, and obtain the Merkle branch linking the transaction to the block it's timestamped in. He can't check the transaction for himself, but by linking it to a place in the chain, he can see that a network node has accepted it, and blocks added after it further confirm the network has accepted it.Longest Proof-of-Work ChainBlock HeaderBlock HeaderBlock HeaderPrev HashNoncePrev HashNoncePrev HashNonceMerkle RootMerkle RootMerkle RootHash01 Hash23Merkle Branch for Tx3Hash2 Hash3Tx3As such, the verification is reliable as long as honest nodes control the network, but is more vulnerable if the network is overpowered by an attacker. While network nodes can verify transactions for themselves, the simplified method can be fooled by an attacker's fabricated transactions for as long as the attacker can continue to overpower the network. One strategy to protect against this would be to accept alerts from network nodes when they detect an invalid block, prompting the user's software to download the full block and alerted transactions to confirm the inconsistency. Businesses that receive frequent payments will probably still want to run their own nodes for more independent security and quicker verification.9. Combining and Splitting ValueAlthough it would be possible to handle coins individually, it would be unwieldy to make a separate transaction for every cent in a transfer. To allow value to be split and combined, transactions contain multiple inputs and outputs. Normally there will be either a single input from a larger previous transaction or multiple inputs combining smaller amounts, and at most two outputs: one for the payment, and one returning the change, if any, back to the sender.It should be noted that fan-out, where a transaction depends on several transactions, and those transactions depend on many more, is not a problem here. There is never the need to extract a complete standalone copy of a transaction's history.5TransactionInOutIn......10. PrivacyThe traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the "tape", is made public, but without telling who the parties were.Traditional Privacy ModelTransactionsNew Privacy ModelIdentities TransactionsAs an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner. Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner.11. CalculationsWe consider the scenario of an attacker trying to generate an alternate chain faster than the honest chain. Even if this is accomplished, it does not throw the system open to arbitrary changes, such as creating value out of thin air or taking money that never belonged to the attacker. Nodes are not going to accept an invalid transaction as payment, and honest nodes will never accept a block containing them. An attacker can only try to change one of his own transactions to take back money he recently spent.The race between the honest chain and an attacker chain can be characterized as a Binomial Random Walk. The success event is the honest chain being extended by one block, increasing its lead by +1, and the failure event is the attacker's chain being extended by one block, reducing the gap by -1.The probability of an attacker catching up from a given deficit is analogous to a Gambler's Ruin problem. Suppose a gambler with unlimited credit starts at a deficit and plays potentially an infinite number of trials to try to signNow breakeven. We can calculate the probability he ever signNowes breakeven, or that an attacker ever catches up with the honest chain, as follows [8]:p = probability an honest node finds the next block q = probability the attacker finds the next block qz = probability the attacker will ever catch up from z blocks behindIdentitiesTrusted Third PartyPublicq ={ 1 if p≤q} z q/pz if pq6CounterpartyPublicGiven our assumption that p > q, the probability drops exponentially as the number of blocks the attacker has to catch up with increases. With the odds against him, if he doesn't make a lucky lunge forward early on, his chances become vanishingly small as he falls further behind.We now consider how long the recipient of a new transaction needs to wait before being sufficiently certain the sender can't change the transaction. We assume the sender is an attacker who wants to make the recipient believe he paid him for a while, then switch it to pay back to himself after some time has passed. The receiver will be alerted when that happens, but the sender hopes it will be too late.The receiver generates a new key pair and gives the public key to the sender shortly before signing. This prevents the sender from preparing a chain of blocks ahead of time by working on it continuously until he is lucky enough to get far enough ahead, then executing the transaction at that moment. Once the transaction is sent, the dishonest sender starts working in secret on a parallel chain containing an alternate version of his transaction.The recipient waits until the transaction has been added to a block and z blocks have been linked after it. He doesn't know the exact amount of progress the attacker has made, but assuming the honest blocks took the average expected time per block, the attacker's potential progress will be a Poisson distribution with expected value:=z q pTo get the probability the attacker could still catch up now, we multiply the Poisson density for each amount of progress he could have made by the probability he could catch up from that point:∞ ke−{q/pz−k ifk≤z} ∑k=0 k!⋅ 1 ifkzRearranging to avoid summing the infinite tail of the distribution...z ke− z−k 1−∑k=0 k! 1−q/p Converting to C code... #include
double AttackerSuccessProbability(double q, int z) { double p = 1.0 - q; double lambda = z * (q / p); double sum = 1.0; int i, k; for (k = 0; k <= z; k++) { double poisson = exp(-lambda); for (i = 1; i <= k; i++) poisson *= lambda / i; sum -= poisson * (1 - pow(q / p, z - k)); }return sum; }7Running some results, we can see the probability drop off exponentially with z. q=0.1 z=0 P=1.0000000 z=1 P=0.2045873 z=2 P=0.0509779 z=3 P=0.0131722 z=4 P=0.0034552 z=5 P=0.0009137 z=6 P=0.0002428 z=7 P=0.0000647 z=8 P=0.0000173 z=9 P=0.0000046 z=10 P=0.0000012 q=0.3 z=0 P=1.0000000 z=5 P=0.1773523 z=10 P=0.0416605 z=15 P=0.0101008 z=20 P=0.0024804 z=25 P=0.0006132 z=30 P=0.0001522 z=35 P=0.0000379 z=40 P=0.0000095 z=45 P=0.0000024 z=50 P=0.0000006 Solving for P less than 0.1%... P < 0.001 q=0.10 z=5 q=0.15 z=8 q=0.20 z=11 q=0.25 z=15 q=0.30 z=24 q=0.35 z=41 q=0.40 z=89 q=0.45 z=340 12. ConclusionWe have proposed a system for electronic transactions without relying on trust. We started with the usual framework of coins made from digital signatures, which provides strong control of ownership, but is incomplete without a way to prevent double-spending. To solve this, we proposed a peer-to-peer network using proof-of-work to record a public history of transactions that quickly becomes computationally impractical for an attacker to change if honest nodes control a majority of CPU power.Do coins have a majority of CPU power?The network is robust in its unstructured simplicity. Nodes work all at once with little coordination. They do not need to be identified, since messages are not routed to any particular place and only need to be delivered on a best effort basis. Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof of what happened while they were gone. They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them.Any needed rules and incentives can be enforced with this consensus mechanism.The controversial UASF (User Activated Soft Fork) push for SegWit was arguably an example of consensus and honest folk running full nodes forcing the Bitcoin community (miners) to make SegWit an option for users, merchants, exchanges, etc. and pave the way for SegWit adoption.8References[1] W. Dai, "b-money," http://www.weidai.com/bmoney.txt, 1998.[2] H. Massias, X.S. Avila, and J.-J. Quisquater, "Design of a secure timestamping service with minimal trust requirements," In 20th Symposium on Information Theory in the Benelux, May 1999.[3] S. Haber, W.S. Stornetta, "How to time-stamp a digital document," In Journal of Cryptology, vol 3, no 2, pages 99-111, 1991.[4] D. Bayer, S. Haber, W.S. Stornetta, "Improving the efficiency and reliability of digital time-stamping," In Sequences II: Methods in Communication, Security and Computer Science, pages 329-334, 1993.[5] S. Haber, W.S. Stornetta, "Secure names for bit-strings," In Proceedings of the 4th ACM Conference on Computer and Communications Security, pages 28-35, April 1997.[6] A. Back, "Hashcash - a denial of service counter-measure," http://www.hashcash.org/papers/h..., 2002.[7] R.C. Merkle, "Protocols for public key cryptosystems," In Proc. 1980 Symposium on Security and Privacy, IEEE Computer Society, pages 122-133, April 1980.[8] W. Feller, "An introduction to probability theory and its applications," 1957.9
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