The Bitcoin Triples Again

The online currency has minted off-line millionaires. But for how long?

The world's fastest-gaining currency has tripled in price again. Last week, SmartMoney reported that the Bitcoin had exploded from an exchange rate near zero to more than $10 in about a year, making it one of the top-returning assets of any kind. On Wednesday the currency topped $30.

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If returns like those seem otherworldly, perhaps its because Bitcoin is a world unto itself. To recap, it's is a purely online currency with no intrinsic value; its worth is based solely on the willingness of holders and merchants to accept it in trade. In that respect, it's not so different from fiat currencies like the dollar or Euro, but whereas governments back such money, Bitcoins lack central control.

In another way, the appeal of the Bitcoin echoes the appeal of gold. Instead of a central bank, a computer algorithm dictates their supply. Today there are six million Bitcoins, a number that will grow at a steadily slowing rate until it approaches 21 million, but no more. As with gold, some see such limited supply as built-in protection against inflation that could result from runaway government budget deficits. Gold, of course, has been a store of value for thousands of years and has at least some industrial use, whereas Bitcoins are brand new and exist only on the Internet.

For some early adopters, Bitcoins have turned from a hobby into a windfall. MtGox.com, the main exchange for users swapping Bitcoins for dollars and other currencies, charges buyers and sellers a fee of 0.65% for its brokerage service. (The name stands for Magic the Gathering Online Exchange, but the Bitcoin dabbler who bought the domain didn't bother to change it.) As recently as a few months ago, the site generated just pennies a day in income. By Wednesday it was making more than $40,000 a day.

Mt. Gox, needless to say, is not a regulated exchange, so its pricing and liquidity data aren't subject to any review or verification. Mt. Gox didn't respond to an email request for comment. The site offers no customer service phone number.

Click here for the Currency Center.

The largest Bitcoin account holder -- who is, of course, anonymous -- has 297,000 units of the start-up currency, according to Donald Norman, a spokesman for the The Bitcoin Consultancy, which offers advisory services for institutions interested in Bitcoin transactions. At $31 per Bitcoin, that's equivalent to $9.2 million.

Bitcoins are accepted by a limited number of merchants for services, such as website design, and some goods, such as music and clothes. The anonymous nature of the currency has also led to brazen use by drug dealers, including ones who hawk their merchandise on Silk Road, a website than can only be reached through a network that cloaks the identity of its owner. Lawmakers are not amused. "The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins," wrote Sens. Charles Schumer of New York and Joe Manchin of West Virginia this week in a letter to the U.S. Attorney General and the Drug Enforcement Agency.

Cash, Bitcoin advocates are quick to point out, is also an anonymous payment system used to buy drugs, and Norman says the focus on drugs is sensationalistic and misguided. "It would be sad if the growth of Bitcoin was stunted because of this criminal byproduct," he says. "Bitcoin is going to change the world in the same way the Internet did and make societies freer."

It's not clear that U.S. law enforcement agencies could regulate Bitcoins if they wanted to. The currency runs on software similar to the file-sharing software used to download music and movies, technology the entertainment industry has been trying unsuccessfully to quash for years. There's no headquarters, main server or central bank to visit, just a network of thousands of users. It's also not clear whether U.S. regulators would have jurisdiction over a global, virtual currency. Last week, a spokesman for the F.B.I. said he was unaware of Bitcoins and would check into the Bureau's position on them. Subsequent calls for comment have not been returned.

Readers tempted to bet on the Bitcoin should resist, not least because it's unclear whether it will have any enduring worth. Beyond what fans say are the currency's design advantages, its chief appeal at the moment is surely that it's soaring in value. As of now, today is the first day in more than a week that the currency didn't hit a new high. And when the gains stall, the fall that follows may be as breathtaking as the rise.

China's online population hits 450 million

BEIJING – China's number of Internet users — already the world's largest — rose to 450 million this year, more than a third of the country's population, a senior official said Thursday.

Official statistics show that the number of users, as of the end of November, is an increase of 20.3 percent compared to last year, Wang Chen, head of China's State Council Information Office, told a news conference. China's population is more than 1.3 billion.

China's boom in Internet usage has come with the growth of an equally extensive policing system, from technical filters that block sites based on certain words to human monitors who scan bulletin boards and micro-blogging posts for political dissent.

Wang said a yearlong government campaign to crack down on pornography, violence and other harmful material accessed on the Internet has resulted in the shutdown of more than 60,000 websites. In addition, government censors deleted 350 million entries of pornographic content, including text, images, and video clips, he said.

Chinese authorities investigated nearly 2,200 criminal cases, and courts handed down sentences in 1,164 cases, he said. More than 1,300 people were punished by the courts, while 58 people were given more than five years of prison time.

Wang said government censors have "made the Internet environment much cleaner than before."

And he warned China had no intention of ending its Internet crackdown: "Our campaign has not come to a stop. This will be a long battle."

Much of China's online growth has come as more people access the Internet through their mobile phones using popular services that support video and other Web products. A report earlier this year by the China Internet Network Information Center said about 277 million people get online with their phones.

The Internet's popularity poses challenges to the Communist government, which is used to exercising tight control over information. In addition to policing porn, Beijing runs an extensive system of Web monitoring and censorship to block information deemed politically subversive dubbed "the Great Firewall."

Skype adding Wi-Fi, 3G video calling to iPhone app Skype releasing new iPhone app that allows video calls over Wi-Fi, AT&T's 3G network

Skype adding Wi-Fi, 3G video calling to iPhone app
Skype releasing new iPhone app that allows video calls over Wi-Fi, AT&T's 3G network

SAN FRANCISCO (AP) -- A new version of the free iPhone app for Skype SA will let users make and receive video calls.

Users of the Internet calling and messaging service will be able to use both Wi-Fi and AT&T Inc.'s 3G cellular network. FaceTime software, which comes with iPhones, works only with Wi-Fi.

The app, which is being released Thursday through Apple Inc.'s iTunes Store, will let iPhone 4 and iPhone 3GS users make free video calls to other Skype users who are using the app or have access to the feature using Skype on their computer or other video phone.

Those with the latest iPod Touch will be able to make video calls over Wi-Fi. The app allows the iPad and previous-generation iPod Touch to receive video calls, too, Skype said.

Skype's software offers free services such as voice or video calls to other Skype users.

Users pay to do things such as make calls from a PC to a landline or cell phone.

In the first half of 2010, video calls made up 40 percent of all minutes spent using Skype's free calling services, the company said.

The iPhone 4, which was released in June, was the first iPhone to include a front-facing camera for video chat. It includes FaceTime, which enables users to make video calls to others who have the iPhone 4, the latest iPod Touch or a Mac computer. So far, however, FaceTime doesn't work over the cellular network and doesn't allow calls to Windows-based computers.

Skype, which is based in Luxembourg, is not the first third-party app for the iPhone to allow free video calling over AT&T's cellular network. Apps such as Fring and Tango offer the capability as well, although neither has as many users as Skype.

The updated app comes about a week after Skype suffered a major service outage that lasted 24 hours and cut off service for millions of users. On average, 124 million people use Skype each month, though the total number of registered users is more than four times that.

In a Wednesday post on the company's blog, Skype's chief information officer, Lars Rabbe, said the problem was caused by a bug in a version of Skype's software for computers running Microsoft Corp.'s Windows operating system.

China to go after Internet phone services China plans to go after Internet phone services in move to protect state-owned telecoms

China to go after Internet phone services
China plans to go after Internet phone services in move to protect state-owned telecoms

BEIJING (AP) -- China is going after Internet phone services such as Skype in a move to protect the country's state-owned telephone companies, causing alarm among consumers who rely on cheap Internet calls.

A notice by the Ministry of Industry and Information Technology on its website this month says it's working to fight "illegal Internet phone services" but doesn't specify any actions.

Experts say companies like Skype operate in a legal gray area and that the notice is a warning to them not to grow too big or to challenge the state-owned telecoms.

China, which on Thursday announced its number of Internet users rose to 450 million this year, also has a strong interest in exercising tight control over information, and Skype has been a popular tool with activists and others who want to share information relatively freely.

The ministry's move, however, also has business in mind. China has said only state-owned telecoms China Telecom and China Unicom have the right to offer Internet phone services for calls that link telephones and computers.

But few do. The country's major telecoms have been offering Internet phone services only on a trial basis in four cities, according to Kan Kaili, a director of China VoIP & Digital Telecom Inc., a company that has offered Internet phone services. That leaves the market to the hundreds of small-scale companies have sprung up.

"This notice is actually protecting the telecoms' traditional voice services," said Kan, who is also a professor at the Beijing University of Post and Telecommunications. It's "obviously a wrong thing, absolutely wrong."

The ministry's move is a warning to Skype and similar companies not to expand too much in China, said Wang Yuquan, chief consultant for research firm Frost and Sullivan in Beijing.

"If the ministry hadn't made this announcement, I think Skype would have offered its services in a very large scale. Now, with the announcement, it can't," he said.

Skype did not immediately respond to a request for comment. Telephones at the ministry rang unanswered Thursday evening.

China's number of Internet phone users is not known, but a commentary in the Beijing News on Thursday estimated it at 15 million.

Pew study hints at what Web users will pay for Pew study hints at what Web users will pay for; music, software top the list

Pew study hints at what Web users will pay for

Pew study hints at what Web users will pay for; music, software top the list

NEW YORK (AP) -- The Web may seem like the land of something for nothing. Free video. Free news. Even free tools such as word processing and spreadsheets.

But almost two-thirds of adult Internet users in the U.S. have paid for access to at least one of these intangible items online, according to a new survey from the Pew Internet and American Life Project.

Whether people will pay for different types of material on the Web is among the most pressing questions facing media companies in the 21st century.

As people shift their attention to the Internet from more traditional ways of enjoying media, the companies that provide everything from movies to mystery novels want to make sure they can still get paid for what they do. The big TV networks want viewers to pay for full access to episodes of their favorite shows. Newspaper companies want readers to pay for news. Book publishers want higher prices for digital editions of new releases.

The new figures from Pew suggest paying for content online is at least not a completely foreign idea for most people.

About a third of respondents said they have paid for digital music. Same for software.

Behind that came mobile apps for cell phones or tablet computers at 21 percent. Then digital games at 19 percent and newspaper, magazine or journal articles at 18 percent.

The survey found that among people who paid for content, the typical user spent about $10 a month. However, there are some extremely high-end users, such that the average among those who have paid for content is about $47 a month. That includes subscriptions and individual files downloaded or accessed.

The survey of 755 Internet users in the U.S. was conducted Oct. 28-Nov. 1 and has a margin of sampling error of plus or minus 4 percentage points.