Keeping Your Bitcoin and other Cryptocurrency Taxes Current

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Taxes, everything Cryptocurrencies like Bitcoin and Ethereum stand against. A centralized tax on a deregulated currency sounds oxymoronic to the ears. Despite this, I get asked about the new taxes the United States Internal Revenue Service recently announced and can understand the confusion. The truth is that tax and cryptocurrency are nothing new and the IRS has had a Frequently Asked Questions about cryptocurrency since 2014. Since these are relatively new laws, it is much less complicated than to backtrack and find what rules are current.

The Federal government recognizes virtual currency as property and is treated as such. As far your own Bitcoin spending and crypto-based taxable responsibilities are concerned, the IRS expects you to treat it as any other domestic property exchanged for goods or services, and or, sold for loss or profit. Before you get ready to file your tax returns as normal, there are some critical distinctions that the IRS has made about reporting investment income activity the selling of virtual currency in regards to this 2014 IRS Notice.

In general, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability. This notice addresses only the U.S. federal tax consequences of transactions in, or transactions that use, convertible virtual currency, and the term “virtual currency” as used in Section 4 refers only to convertible virtual currency. No inference should be drawn with respect to virtual currencies not described in this notice.

The IRS expects you to keep accurate investing records. So if you are one of the thousands of people who joined the cryptocurrency community within the past three years, Uncle Sam expects you to amend your previous year’s return for the last three years, or from two years to the date of final payment on that year’s tax liability.  To do this, just file Form 1040X, Amended Tax Return, along with the corrected or additional documents you did not originally file with your return. If you think that this may be a big bother over nothing, maybe I should remind you of this.

Most people are finally asking questions about virtual currency tax liabilities because of the profits made from the recent swelling of Bitcoin and Ethereuem market caps. The Federal Government knows that these markets are stabilizing at these historic highs, giving early investors ample opportunity to convert those extremely high returns to U.S. Dollars. As Fortune reported, Through an Investigation and federal summons and ugly lawsuits with the exchange Coinbase, the IRS found out that less 1,000 people were actually following through on their crypto-tax responsibilities.

IRS agent David Utzke reveals additional information about how the agency is conducting the investigation. Specifically, Utzke explains he ran a computer analysis against the IRS’s repository of hundreds of millions of tax records, and found fewer than a thousand people filed a Form 8949 to account for a “property description likely related to bitcoin.

Fortune.com – Jeff John Roberts -” Only 802 People Told the IRS About Bitcoin”

Mar 19, 2017
Regardless of the outcome of the IRS’s probe into Coinbase or other cryptocurrency exchanges, the intent of government seems to point at more transparency in cryptocurrency transactions as well as building cases against tax evaders and money launderers. In one sense, these actions may lead to a more trusted outlook on bitcoin from tradition investors as the eventual death of the historic bull market looms, but that remains to be seen. While we wait for the outcome of the battle for centralized control over deregulated markets, the best we can do is keep accurate records and stayed informed. Coinbase offers its users a tool to help comply with IRS reporting regulations by exporting all transactions. The exhange also goes so far to give taxpayers the link to to the above-sourced notice from 2014, in this article. So one can logicly assume that these laws are current.
It breaks down to this. If you pay someone in virtual currency or receive income based on a convertible virtual currency, meaning trades like a currency on an exchange like, Coinbase, Kraken, etc. you should report the item accordingly as a capital gain or loss on a form Schedule D, or in the case of income from non-employee compensation, Forms and Associated Taxes for Independent Contractors.  Many Independent and Third-Party Contractors are adapting virtual currencies to either pay for labor or allow customers to tip for services or to pay for in-app purchases. I feel these, tax laws will be necessary to know for both small business owners and freelance contract labor as I am of the personal opinion that tradition brick and mortar retailers will have to adopt these virtual currencies to curve the overall decline in physical sales lost to online transactions.
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2016 Filing Status And Income

As with most investment income, profits from selling or converting virtual currency or stock held less than a year are considered short-term and typically taxed at the taxpayer’s Ordinary Tax Rate *see above.  In the Case of Long-Term holdings, or more than one-year, The levy on the sell-for-profit of cryptocurrency is  10% to 15%, unless the filer is classified a High-Income Taxpayer, then the tax becomes 25% to 28%

Please remember that this is not investment or tax advice. You should check with your own tax professional in regards to converting between other virtual currencies or the Treasury Department and IRS, who understand that taxpayers may have questions. The appropriate contact information for an IRS opinion on this topic is, Notice.Comments@irscounsel.treas.gov. Taxpayers should include “Notice 2014-21” in the subject line. OR alternatively:

Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2014-21)

Room 5203 P.O. Box 7604

Ben Franklin Station Washington, D.C. 20044

Thank you for reading, I plan to follow this up with another installment soon, soon please follow this blog and leave your questions in the comments section below. If you feel like this has helped you and you would like to support this blog.

Bitcoin: 1Q5v1vUT9YXMB9aWz85HfYrpBeGywH3bxk.

Ethereum: 0x13cF24A3636568Bd0f15CFDdDEaE3D8d6261aeb2

Follow me on Twitter.  @a_m_faulkner

and check our cryptocurrency discussion group on facebook.

Happy Mining, Good Luck Trading Everyone.  

-AMF 

 

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Ether Euphoria fades as I am Cutoff by Coinbase! Drats!

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coinbaseWhat could be worse than your current speculative cryptocurrency investment suddenly seeing the micro-bubble pop out from underneath it? How about your wallet and exchange suddenly changing policies and forcing you to update your bank and identification information through a live webcam. That is apparently what has just happened to be as  Ethereum has fallen from the massive rally on Thursday that saw the price soar as high as $50 early Friday morning. When the price suddenly fell later into the pre-dawn hours, the exchange stopped allowing me to do my regular traded between Bitcoin and Ether and promoted me with the now

When the price suddenly fell later into the pre-dawn hours, the exchange stopped allowing me to do my regular traded between Bitcoin and Ether and promoted me with the now notorious update screen!

I will keep you updated on the events to come but remember that this is an example of why we not to give your personal information to centralized exchange!

 

Is It The Right Time To Invest In Bitcoin?

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Q:  Is it the right time to invest in Bitcoin?

Close up 3D illustration of paneled golden Bitcoins

 A: 1.4 billion invested in 2016. Thinks investment will slow down this year. Will be worth millions each or nothing. But thinks it is here to stay.

Commentary: Is buying anything at its peak ever the right time to buy? This is the test of the truly disciplined investor. A key reason Bitcoin saw so much interest in 2016 is global economic uncertainty throughout the past decade and the global proliferation of the blockchain through the efforts of individual activist investors and entrepreneurs.

If by attempting to chase the ensuing record-breaking market-cap rally in 2017 you believe that by “now” being “the right time” is due to a break out in mainstream acceptance in bitcoin then the question is a fair one. The answer attempts to give confidence in the current sentiment that bitcoin investments will continue to grow more lucrative despite the “slow down” the author is probably inferring to sourced here by CB Insights.

Now is Definitely A Historic Moment That Requires Examing

The author of this bullish thesis chooses to interrupt the data optimistically as Blockchain backed technologies and Bitcoin startups have thus been able to penetrate the moat surrounding the financial technology industry.This is in fact, true, in 2016 investing among those startups did increase %5 from $524 million to $550 million, with Blockchain backing new ventures on the Australian Stock Exchange, and a breakthrough innovation in providing the transaction ledger for the NYSE traded company Overstock.

But despite these innovations, nobody is exactly sure why the rate of startup investing has slowed from the previous boom felt in 2013. Before 2013 there was virtually no interest backing these ventures alone from the first entrepreneurs like Roger Ver. With the public aware of gaining attention through the U.S. government’s seizure of millions of dollars in Bitcoin from the dark web marketplace “The Silk Road,” global investing in Blockchain and Bitcoin boomed to $93M that year and exponentially swelled nearly four times in 2014 to $357M. It was then when Bitcoin saw its historical high that we have only recently begun to recover from the pursuing sell-offs. This is why 2013 in my opinion, is a key factor in understanding the dynamics of investing in today’s cryptocurrency market.

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Blockchain and Bitcoin Investing Startup Plateau  and Inflection Point

Despite 2013 and 2017 seeing the market capital and price of Bitcoin expand exponentially due to comparable interest and organic growth, it seems that 2017 will now break the trend as the price of Bitcoin battles to maintain its recent returns this year.  Although Bitcoin and cryptocurrency have found wider usage because of this decade’s global economic turmoil, we are venturing into uncharted waters.

What I mean is that while the price of Bitcoin continues to soar in a post-Trump presidency as it did in late 2013, global investing increased in 2014 to help the cryptocurrency gain acceptance. Unfortunately, it wasn’t enough to maintain the historical high, and the price dramatically fell off. But even in 2015, at a time that Bitcoin’s price went virtually sideways for the year, global startup investing managed to increase around one-third.

The positive trend in growth has already shown signs of reversing when you consider that last year Individual investment opportunities were down from 161 in 2015 to 132 in 2016.Keeping this in mind, it is hard to be optimistic about 2017’s projected startup investing when you consider that most of last year’s $550M was funded during the first two-quarters of 2016. Last years %5 bump only indicates that a recession of venture capital within the niche market while global investors seek to shelter from economic strife.

This could be seen as a reliable indicator of a broader market slowing down because of more competition among the industry. The more options that have become available in the fin-tech marketplace may stabilize the price of services rendered. Another possible explanation for the slowdown could be that people are investing in bitcoin itself rather than the start-ups or even that consolidation has begun to occur within the industry. No matter the reason for the lack of startup funding, the bitcoin community has reaped the benefits of an alternative investment in an uncertain global environment.histoicbit

Key macroeconomic events have driven interest in bitcoin past the concept and novelty stage and attempt to place it in the mainstream. From European economic isolationist to the Asian Subcontinent and Greater Eastern economies faltering on debt and inflation, Bitcoin has continued to draw investors to the table despite the current lack of venture capital heat. It will take a comprehensive look at local bitcoin economies in places with a dense population, like India where there are millions of potential user that may supply the catalyst to push this inflection of technological funding into new rounds of financing. The growing acceptance of cryptocurrency still provides ground-zero growth opportunities like the increasing need for a cashless solution for the population of India or the citizens of state-controlled economies like China only further complicates the question of timing when it comes to investing in the crypto market-place.

Ultimately, it isn’t a question of is now a “make or break” moment for bitcoin and Investors are not in much risk of missing of continued growth and high returns, it is in my opinion still a “wait and see” opportunity. That may not sound like much fun for the moment, but it gives a chance to better understand all the moving pieces to questions you have asked. In my next update, we look at the differences between Blockchain and Bitcoin along with potential competitors and complimentary cryptocurrencies and digital ledger systems. I hope to illustrate the while we wait to see if the Bitcoin does become more valuable as the demand increases, we can profit from other cryptocurrencies. This will help lay the path to better understand the security features of blockchain and bitcoin. Eventually, my goal is to educate you to the point of understanding the various ways in investing in cryptocurrency, whether it is trading Bitcoin understanding the cost associated with mining.

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Google AI Can Create Its Own Crpyto

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Recently it was discovered that the artificial intelligence experts of The Google’s Brain project were able to create A.I. that is capable of developing its own secure secret language or cryptography.

The accomplishment is leaving some with more questions than answers currently available.

It seems that nobody at Google has any idea how this extra layer of encryption actually works, not even the A.I.

In an experiment, the A.I. networks were created, two were instructed to communicate securely with each other using a shared secret key, while the third was assigned the task of intercepting and decrypting those communications.

The result, the two communicating networks were able to develop their own crypto layer that the third network was unsuccessful at cracking.

Importantly, the AIs were not told how to encrypt stuff, or what crypto techniques to use: they were just given a loss function (a failure condition), and then they got on with it. In Eve’s case, the loss function was very simple: the distance, measured in correct and incorrect bits, between Alice’s original input plaintext and its guess. For Alice and Bob the loss function was a bit more complex: if Bob’s guess (again measured in bits) was too far from the original input plaintext, it was a loss; for Alice, if Eve’s guesses are better than random guessing, it’s a loss. And thus an adversarial generative network (GAN) was create

via Google AI invents its own cryptographic algorithm; no one knows how it works | Ars Technica UK

Bitcoin $1000 – Third Time Is A Charm

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If you have been following cryptocurrency this month then no doubt you have been keeping a close eye on the price of Bitcoin($BTC). For a third time, the electronic currency has a market price of over $1000.

 

Some had guessed that this occurrence would happen last night but the rally was delayed and waited until early today break past this crucial resistance.

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12 hours chart via coindesk

Will this current rally hold or will Bitcoin be made to collect more solid support before these recent gains can be looked at as a win for the community of bitcoin enthusiast and investors?

Beware of Crypto-MLMs and High Return Investments on Social Media

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via Beware of Crypto-MLMs and High Return Investments on Social Media – Bitcoin News

Unfortunately, the world of cryptocurrency has seen a bunch of people running scammy ‘investments’ preying on people’s lack of knowledge. Over the past couple of years, shady organizations such as Onecoin, MMM Global and others have brought a slew of shady characters operating get-rich-quick schemes and Multi-Level Marketing scams. It’s good to know how to spot these types of sketchy operations and refrain from participating.

Also Read: How Sustainable Will Bitcoin Be After the Apocalypse?

Beware of So-Called Online Investments

Beware of Crypto-MLMs and High Return Investments on Social MediaBitcoin.com has done extensive reporting on the likes of the so-called digital currency Onecoin. We’ve also covered a few other MLM operations that use virtual currencies and have uncovered many red flags associated with these businesses and their employees. Besides Onecoin, there is a vast amount of other scams that people should be aware of so they can better protect themselves and their legitimate investments.

Social media has a broad array of groups that pay particular attention to the cryptocurrency landscape. However, when following these groups on Facebook, Google Plus and many others, there is a ton of scammers preying on visitors. They offer unheard-of returns on investments for those wanting to join their ‘club’ as well as promises that will never materialize. Here are some promises from people offering ‘investment opportunities’ within crypto-groups on social media:

31 days online, 30 days paying. 0.3% hourly forever, 7.5% daily forever, 60% weekly forever. 0.001 BTC minimum, and automatic withdrawals.

OMG! Just signed up.. $4 bonus… with potential income of $100 a week or less.. Completing simple tasks, no investment, totally free… just sign up.

New Doubler Investment Site!!! 0 running days, 200% hourly for 50 hours, 240% after one day, 355% after two days, 470% after three days, 585% after four days, 600% after five days, Min deposit:$1, we accept bitcoin.

Beware of Crypto-MLMs and High Return Investments on Social Media
There is a lot of shady investment opportunities on Facebook, Google Plus, Linkedin, Twitter and more.

‘Scam Artists: the Evil Cousins of Genuine Entrepreneurs’

Many of these types of investment scams ask for people to send a minimum of bitcoin so they can expect a bigger payout in the future. Furthermore, a lot of these shady organizations run under a Multi-Level-Marketing (MLM) business model. MLMs consist of people who are selling in a pyramid or referral type of marketing system. The business model requires recruiting more people to fund the entire network and has always been a controversial business plan. Companies can often be seen operating in this manner using bitcoin within their operations and accrue revenue from direct sales and downline distribution. And yes, there are legal MLM structures in many markets that run legitimate business operations and should not be considered Ponzi schemes.

However, a large portion of MLMs associated with Bitcoin (if not all) are shady operations, so buyers and potential registrants should beware. Scams in relation to Bitcoin mean the community must continuously be on top of its game to expose such operations. Austrian economist Jeffrey Tucker believes scams are a form of flattery and a bullish sign for the digital currency. Tucker explains this rationale in 2015 stating:

Let’s ask a deeper question: why are scam artists so attracted to Bitcoin? The answer is actually flattering. Scam artists are the evil cousins of genuine entrepreneurs. They are alert to new opportunities. They are attracted to ventures that are popular among the smart set. They are profoundly aware of what people imagine to be the next big thing. Their interest in Bitcoin, then, is actually a bullish sign. I would be more worried about this market if scam artists were not interested in it.  

If it’s Too Good to Be True, It Probably Is

A lot of online resources and consumer reports may help distinguish whether or not an ‘investment operation’ is a scam. It’s safe to assume that most of the MLMs and significantly ‘high investment’ return opportunities associated with Bitcoin are not legitimate operations. Most of these scam artists and fake investments are pretty easy to spot, and people should be very cautious when approached by individuals soliciting money on the internet. If the investment sounds too good to be true with wild promises of daily payouts, or you need to recruit hundreds of people to earn income, then it’s probably not in your best interest.

What do you think about MLMs, doubler investments, and scam artists using Bitcoin in the backdrop? Let us know in the comments below.


Images via Shutterstock, Pixabay and various Facebook groups.


Whether you’re a beginner or a long-time bitcoin player, there’s always something interesting going on in the bitcoin.com Forums. We are proud free speech advocates, and no matter what your opinion on bitcoin we guarantee it’ll be seen and heard here. We don’t censor.

Sydney Stock Exchange Confirms Public Blockchain Platform for Instant Settlements – CCN: Financial Bitcoin & Cryptocurrency News

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The Sydney Stock Exchange is pressing ahead with a new blockchain settlement system that will position itself as a low-cost alternative to the current clearing and settlement system delivered by the Australian Securities Exchange (ASX).

via Sydney Stock Exchange Confirms Public Blockchain Platform for Instant Settlements – CCN: Financial Bitcoin & Cryptocurrency News

How John McAfee Global Technologies Intends To Challenge The Cloud

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John McAfee Global Technologies From Las Vegas

At Def Con 24, I was given a chance to spend about an hour talking with the proposed CEO of MGT Capital Investments(NYSEMKT:MGT) outside of the Bally’s Poker Room. Joined by CTO Eric “Eijah” Anderson halfway through our interview, we discussed several important issues that I am simultaneously preparing to publish. It has been a month since I interviewed McAfee and Anderson but I have waited to release my interviews due to the controversy some believe have muddied the credibility of this company. Without specifically mentioning any of the detials, I will just share this tweet that I feel captures the spirit better than anything I could write.

https://twitter.com/ihazcandy/status/773876821267849217

Unfortunately even my editors at another site have decided to believe libelous claims from an avid troll, that I am on the payroll of MGT or one of its insiders. I feel that like others, they seem to be committed to their bias against McAfee and continue to judge this new company unfairly. On the other hand, by analyzing what John has been saying about the industry and not MGT,  objective and free minded people may already understand the potential growth that his insight could bring. No matter how you feel about John McAfee, it is hard to deny the truth in his sentiment regarding the industry he helped to create.

John McAfee: Well when I started out people were saying ‘well virus aren’t a problem you’re insane’. Today I see the entire cybersecurity industry is operating on an outdated paradigm that is let’s find after the hacker gets in, let’s find the traces…”

As bold as the statement McAfee makes, it seems that the methods we use to secure our information are indeed outdated and is driving an increased demand for better cybersecurity. It is not hard to find indicators to support this idea.

At a time when global cybersecurity sales are expected to rise to $1 trillion by 2021, research is now showing that the problem of cyber-crime will cost companies $2 trillion by 2019. This reflects a widening gap between the efficiency of the solutions and the resourcefulness of the criminals.

In the United States, CNBC reported that the problem has become a drain on the infrastructure to the point that law enforcement agencies and hospitals have given in to ransomware demands for payment. There has also been a rise in reports that indicate that this type “pay or beware” strong-arming cost about 2,500 victims around $24 million in damages last year.

This year that number has already dramatically increased 500%. Recent data is also indicating that at the end of March 2016, Americans had paid over $209 million in order to regain access to their critical information. What I find most concerning about these figures is that those damages are limited to only the complaints reported to the FBI meaning that the actual costs of these crimes could be significantly more expensive.

What this shows that security professionals are as in the dark as law enforcement when it comes to protecting sensitive data. The problem is rooted in the lack of a solution that stops these intrusions while they occur

JM: But by then it’s too late…He’s already in…

So obviously the paradigm doesn’t work.”

What Is Wrong With the State of Cybersecurity Today?

With a shift from Personal Computers to mobile devices, many hardware vendors have also moved to a cloud-based product offering secured by third-party cybersecurity vendors. With so many trusted names to protect the customer’s data, I believe if the paradigm is broken, then supporting data will be represented in the market. I feel the story of FireEye(NASDAQ:FEYE) and former McAfee CEO Bill DeWalt illustrates a great example of what John goes on to say is wrong with the current state of the cybersecurity industry.

Intel(NASDAQ:INTC) acquired McAfee’s former company after his departure in a $7.7 billion sale spearheaded by Bill DeWalt. Intel Security intended to embed features into its chipsets but now must consider selling its underfunded interest in cybersecurity under the McAfee brand. DeWalt would go on to leave to leave McAfee as a surge in venture capital funding poured into an industry and take the CEO role at the emerging FireEye venture in 2012. Under his leadership, their products took a proactive approach to developing anti-malware firewalls that brought a surge of interest in the company’s stock shortly after its IPO in early 2014.

FEYE Chart

FEYE data by YCharts

With a flurry of new technologies to market interest from investors was on the rise yet the result of these new approaches was that from 2013 to 2015, the costs of cybercrime on businesses had quadrupled. In early 2014 FireEye had shed about 81% of its stock market value from its high of $13 billion and in the case of Bill DeWalt, he was recently replaced as CEO.

Eventually, the buzzword fueled hype had lost its effect on investors as the money pouring into the industry failed to produce tangible results. The Ponemon Institute released research that goes on to explain that the average cost of a data breach rose 23% in the last two years to $3.79 million. Like many other tech firms at the time, once these companies went from private ventures to public markets, investor confidence dropped as it became apparent that the current methods of information and network security were failing to keep up with enterprising criminals.

I feel that key players like Intel are discovering that they may have over-compartmentalized themselves as the disruptive effect of mobile technology shifts the focus of their business development. This tricky situation leaves Intel in a position to either increase spending by expanding the security operating expenses to competitive levels or sell the McAfee assets in order to focus on the company’s proposed move away from the PC market to a cloud-focused enterprise. Intel has released a manifesto that issued a proclamation that “The cloud is the most important trend shaping the future of the smart, connected world – and thus Intel’s future.

As some companies may consider moving out of the crowded market, some have opted to consolidate. Investors have seen these effects manifest itself in the form of a more competitive industry and competitive acquisitions from established entities like Symantec(NASDAQ:SYMC) and its recent Blue Coat purchase.

Symantec who owns the popular Norton brand is paying $4.65 billion for the reported revenue of $598.3 million last year. All this for a company that decided to cash-in instead going through an IPO after it was acquired by Bain Capital last year for $2.4 billion. While Blue Coast has ceased to be a profitable business, those fundamentals did not stop it Symantec from paying a premium at x8 sales, after being turned away by FireEye earlier this year.

The Contrarian Case: Pillars of Disruptive Growth

It comes down to the concept of analyzing data of real-time user activity within a network, Gartner Research calls this, “Visibility”. It has become what Gartner refers to as its first pillar that describes the methods of analyzing a cloud-based security service as a means of both proactive security and a method to monetize the data being collected. Intel best summarizes Visibility with, “The many “things” that make up the PC Client business and the Internet of Things are made much more valuable by their connection to the cloud

What if, instead of storing and sharing all of that user information, the company focused on developing real-world solutions to evolving problems? I believe that John McAfee’s re-entry is a calculated move to do just that. When you consider that on May 9th, 2016, MGT put out a press release marking his re-entry to the industry, weeks after Intel announced its new cloud-focused strategy.

JM:“…I spent 3 years finding the best products and that were in development out there and waiting for them to be ready and making both arrangements and relationships with the key people in this companies so that as for when they all matured they can use them.

Much like the investors funding the MGT reverse merger, McAfee is making a contrarian play on marketing the technology he has cultivated.

 His security model of reducing risk by removing the needless connectivity of personal information through the cloud may grab the attention of those enterprises looking for an alternative. If MGT can offer a competitive solution to those organizations who are reluctant to move their most valuable information to the cloud the company’s recent acquisitions may prove to be a viable alternative platform to the cloud.

Although bearish investors may feel McAfee could be leading shareholders into the cybersecurity abyss of diminished returns, there is room for growth in the industry. With a potential market of over 85% of large enterprises switching to a cloud-based access solution, MGT is offering a packaged decentralized network structure to challenge the cloud’s projected dominance. The Ponemon institute finds that 87% of the data stored on the cloud is out of their company’s control. As more digital threats become newsworthy, businesses have shown that are uncomfortable keeping their most secure information outside of their control.

The recent acquisitions of Sentinel from Cyberdonix for 150,000 restricted shares of MGT stock, the company may find itself able to breach the moat of the global managed security services market that is projected to reach nearly $30 billion by 2020. I believe that MGT recognizes this potential market and is in a position to offer them on-site control of their data with a competitive advantage in some niche marketplaces. While the industry is extremely crowded, there is market research to support room for an alternative solution to cloud computing. If MGT’s offering can serve as an analog for Gartner’s four pillar approach as a Cloud Security Access Broker, then Sentinel MGT may prove to be wise acquisition for an initial product offering

For McAfee to expose shareholders to the growth projected in the industry, MGT will have to offer solutions to rival the likes of Symantec and FireEye. The real answer to the question of legitimacy for this venture will come from analyzing how well its technology can directly compete with hardware vendors like Cisco(NASDAQ:CSCO) and other established firewall providers as a real-time threat detection solution.

JM: For example, Sentinel… It doesn’t look for the damages that was done, and say “Ah-Ha! We have a problem.” It knows this within a matter for a second the first time a hacker attempts to approach the system.”

As lucrative as an opportunity this may seem, there is no guarantee that by purchasing a Next Generation Intrusion Protection Device like Sentinel, MGT can find customers who trust the minimalist approach. In order to provide the sales volume to ramp initial revenues, this product will have to offer is a new standard in real-time threat detection.

McAfee would go on to explain how he believes this has been achieved.

JM: A hacker doesn’t come in and dig up a bomb, he has to spend a lot searching.. First getting into the network…

Then it has to find where the thing I’m looking for is…

But we notice in the first few seconds his first approach

Our little box, it’s a passive box just watching, it uses a combination of heuristics and artificial intelligence and we notice instantly that this is an anomaly and there’s a packet or an intrusion here, right at that second that this shouldn’t be happening.

It then notifies our server, our server then does analysis…

All this happens in a matter of seconds.

At that point, you can take action which is close down that port and firewall or take remedial action which fixes the problem that let the hacker in.

Now isn’t that better than to wait for the hacker to come in and find the signs and say Aha there’s a piece of malware but good god that is months after he first came in…

It is a game changer it will change the entire face of cybersecurity in the way that companies address and reacts to intrusion.”

John McAfee, proposed CEO MGT 8/5/2016 Bally’s Poker Room, Las Vegas at Defcon 24

Sentinel and the Projected Growth of Enterprise Security

I expect that interest in Sentinel will grow in relation to the traditional IDS and IPS devices that have contributed to the slow response in threat-detection. With a low bar already set, all MGT may have to do is provide an actual solution to the problematic approach of analyzing data after the fact. According to FireEye, the median number of days that attackers are present on a victim’s network before being detected is 229. For this key reason, I feel that MGT has proven itself to be a legitimate contrarian play based on substantial market research that indicates Sentinel’s unique opportunity.

As the global enterprise governance, risk and compliance market continues to grow from to $11.5 billion by 2019, there will likely be customers reluctant to trust their information to devices that have underperformed. Where companies like Cisco and Microsoft offer IPS/IDS solutions, Sentinel was designed to be ideally suited for smaller areas compared to the standard 19-inch rack configuration that other vendors implement. Standard IPS and IDS solutions have several drawbacks other than their size. As McAfee explained, Sentinel acts as a passive box, meaning that it is on the other side of the firewall where the  traditional IPS and IDS counterparts are located. This allows for Sentinel to reduce the risk of bottle-necking the network traffic. When a typical IPS/IDS solution has a malfunction or gets hacked, the entire network access point is compromised. I believe this to be an advantage over cloud solutions because of the obvious vulnerability of all data being transferred through one access point.

According to MGT’, Sentinel’s first production run is expected in Q4 2016 and gives investors exposure to the 13.2% CAGR projected for the market. The trend in information security spending indicates that by 2020, 60% of enterprise security budgets will be allocated for this type of rapid detection and response system and within two years 80% of these endpoint protection platforms will include similar A.I. and heuristic analysis similar to MGT. This may help the new company find some initial footing in the very rocky landscape that has become the cybersecurity industry. For now I will leave you with John’s proclamation to change the industry by bringing real-time results to problems that sometimes take years to understand.

In light of S.A. refusing to believe the simple truth, I am just citizen journalist using my free speech and free will to voice my opinion, I have decided to publish independently for now. I hope this rough notes will help you with your own due diligence. My research and writing is only made possible through your support. Thank you for taking the time to visit my personal website. Please use paypal to help support this blog.

Update: Demonsaw 3.0.5 Goes Live

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A new release for community has hit the demonsaw.com downloads section.

Here are the latest updates since 3.0 went was launched at DEFCON 24:

[3.0.2]
* queue unauthorized packets then emoty queue once re-authenticated with xfr router
* transfer routers should not be overwritten when refreshing with msg router (keep in memory and replace only). msg router sends back all xfr routers to clients (not just success ones)
* transfer service unauthorized will drop transfer request (to restart). Re-queue and/or don’t restart, just re-group & handshake? Add to post-auth queue and then process upon successful re-connect?
* restart of client should NOT restart transfer routers (allow transfers to continue)
* turn yellow if you have 0 xfr routers
* use transfer router as long as not error status
* max/min transfer routers that are used in transfer? (1 – 8)
* transfer router open fail should abort? Or.. use TTL and fail when we run out of retries?
* right click download, Stop doesn’t appear cross rows (if yes/no)
* fix browse sort crash bug
* wrap all service/acceptor handlers in exception handling
* TwoFish crashes on linux??? (Just use AES for session?)
* 5 sec progress update change from green to blue
* removed early socket close function calls (should fix router crashes)
* return 501 if router uses non AES for session
* router socket->close() – let destructor do it
* porn’s weird file parse issue – i think an exception is thrown tbh
* Only allow folder browsing if folder size > 0
* alpha 1 sets button at 255 alpha?
* auto rejoin client to router if going from 0 -> 1 or 1 -> 0 shares
* minus button remove all (download, upload, etc.)

[3.0.3]
* Stack crash was occurring on Linux due to 4K worker thread stacks
* Increased stack size to 256K
* Added twofish algorithm back
* tooltip for dock widget
* Added tooltips back
* Updated retry to 1 sec (100 ms was DDOSing the router?)
* retry is set to 0-1 sec now…
* Add retries to services & acceptors
* Remove unnecessary error messages
* Unable to write needs to eventually time out?
* retry should be 8
* bring over random retry code from message acceptor to clients (0 – 1000)
* tunnel sockets to 1

[3.0.4]
* Restart ignores previous queued events
* unable to write still doesn’t timeout – it does, just takes 1 min
* playing while downloading corrupted file, resume fixed?
* 1 tunneled socket

[3.0.5]
* 1 thread for message routers
* Display “Upgrade Now” message in chat when incompatible router found