Photograph by Chris Ratcliffe/Bloomberg

After starting as a hobby among computer geeks, Bitcoin is going mainstream.

Techies are trumpeting a so-called virtual currency called Bitcoin that they say could revolutionize global trade. Financial wonks are shouting from various corners of Wall Street about the regulatory pitfalls and the volatility, highlighted by a tumble in valuation that brought Bitcoin to the world’s attention.

Meanwhile, many of us don’t understand what a Bitcoin is, despite all the coverage. Bloomberg.com attempts to answer your questions, and we promise not to use the term “virtual currency” again here.

What is Bitcoin?

It’s like the U.S. dollar, the euro or the Mexican peso — except that it’s not controlled by any country; you can’t hold one; and you can’t buy many things with it right now. Some tech-savvy companies are starting to accept payments in Bitcoin, most notably WordPress, which makes blogging tools.

While some enthusiasts have issued bills and coins that serve as physical proxies for the currency, Bitcoin was designed to be purely digital. You can’t go to an ATM and take out a Bitcoin, or put one in a cash register. Bitcoins live in online wallets, which are accessed via a computer. It’s more like an MP3 than a CD.

I’ve heard they can be used to buy drugs and other illegal items. How does that work? (Asking for a friend.)

Bitcoin transactions are not easily traceable. That means holders can trade them or use them to purchase things online anonymously. As a result, Bitcoin is becoming a popular vehicle for laundering money and buying illicit items on the Internet. Iranians have used bitcoins to get around financial restrictions imposed by the U.S., and there’s a thriving online market where drugs are traded online.

Who created Bitcoin?

The identity of those responsible for inventing Bitcoin remains a mystery. A programmer or group of programmers going by the name of Satoshi Nakamoto published the original specifications for it. Bitcoin has been around since 2009, but it started as an obscure project that computer hobbyists experimented with.

How do you find Bitcoins?

In theory, anyone with a computer could “mine” Bitcoins through an automated mathematical process. You can unlock more of them if you discover a hidden series of letters and numbers that matches up with the Bitcoin securtity keys specified by Nakamoto.

Programmers have written software, which can run in the background on PCs, to rapidly check possible combinations of letters and numbers one by one in the hopes of stumbling on an unclaimed Bitcoin. If you’re planning to get rich by running the program in the background on your MacBook, don’t bet on it. All of the easy ones have been mined. Now, high-powered computer systems are needed. Serious miners have multiple computers running to team up on the task, and there’s even a computer virus going around that turns victims’ PCs into digital slave laborers.

The format, where it becomes more difficult and expensive in terms of computing power to discover Bitcoins over time, was designed to keep the currency’s growth rate — or inflation — steady and predictable. Currently, there are just over 11 million Bitcoins in existence, and the instructions cap the total number at 21 million to be unearthed by the year 2140.

What is a Bitcoin worth?

Bitcoins now have a market value of about $1.04 billion based on supply and exchange rates, according to Bitcoincharts.

There’s no control over how people value it against their own currencies. That, and a recent self-feeding cycle of public curiosity, explains how the value of Bitcoin in dollar terms has soared to more than $200 from mere cents at its inception. In the past week, the value has since slumped from as high as $266 to as low as $84, according to Tokyo-based Mt. Gox, the largest Bitcoin exchange.

Why is it so volatile?

It stems mainly from the lack of liquidity and a central monetary authority to make sure supply and demand are balanced. That, plus the absence of any large exchanges where buyers and sellers can find each other, makes Bitcoins vulnerable to manipulation and speculation.

Where do I buy some?

There are several upstart websites that act as bitcoin exchanges, such as BTC-e and Tradehill. Mt. Gox has been halting trading periodically since April 11 citing difficulties with serving the high trading demand and cyber attacks on its system. The temporary closure also happened to come shortly after a drop in Bitcoin’s value. Maybe the finance folks have a point.

–By Reed Stevenson

Original post is Explaining Bitcoin Without Buzzwords by Tech Deals.

Photograph by Edmond Lococo/Bloomberg

The entryway to PaPa’s office is covered in graffiti.

PaPa, the Chinese smartphone app that allows users to tweak photos like Instagram and send voice messages that sound like a robot or hip-hop star, has seen its user-base surge as celebrities use the program to interact with their fans.

Li Bingbing, who stars as Ada Wong, a gun-wielding femme fatale in the movie “Resident Evil: Retribution,” urged her millions of followers to lead a “healthy lifestyle” and do something every day for the environment, in a recent post.

Actor Zhao Yuheng recently sang the song “Me” in a tribute to the late Hong Kong musician Leslie Cheung on the anniversary of his death. Zhao distributed his a capella version of the song via PaPa to thousands of devotees.

PaPa, which means a loud snapping noise, like a firecracker, had 10 million downloads from iPhone and Android users within its first five months and the company released an English-language version, Wave, on Apple’s iTunes on March 10.

PaPa founder Xu Chaojun and a four-member team developed the app in one month working out of a fifth-floor office in Beijing’s 798 Art Zone. The building, which is reclaimed from the grounds of a 1950s era factory, is splattered with Chinese and English graffiti and bikes and electric scooters line the halls.

Xu projects his app may register 50 million users this year and 200 million within three years. That would be faster than Instagram, which reached 100 million users in February, almost two and a half years after its launch.

That may sound optimistic but PaPa is closely integrated with Sina’s Weibo Microblog – one of the most popular Twitter-style Chinese services that has more than 500 million accounts. The relationship helps drive users to Xu’s app.

That has in turn helped raise capital. Xu has garnered over $10 million in seed money from firms including Innovation Works and Sequoia Capital.

But intimacy may be the biggest key to the app’s success. While personal assistants can ghost write a blog entry, fans feel a more direct connection when they hear a celebrity’s voice, according to Xu.

“You go to a Chinese restaurant and it’s very noisy, you go to an American restaurant and it’s very quiet,” said Xu. “We live in a crowded environment so we are used to noise, we like noise, we like to use our voices.”

–To contact Bloomberg News staff for this story: Edmond Lococo in Beijing at elococo@bloomberg.net

Original post is PaPa Aims to Make a Big Noise in the World of Apps by Tech Deals.

Photographer: Balint Porneczi/Bloomberg

The logo for SFR, a mobile-phone unit of Vivendi SA, sits on a giant display screen at one of the company’s stores in Paris, France.

In its unlikely transformation from a regional water utility into Europe’s biggest telecom and media conglomerate, Vivendi has ridden a lot of corporate trends. It may be on the verge of adding another to the list: the spinoff. Vivendi is considering getting rid of its biggest unit, French mobile provider SFR, according to people familiar with the situation. That would let it focus on faster-growing media businesses like Canal Plus, its pay-TV arm, and Universal Music Group (home to the likes of Lady Gaga and Justin Bieber).

If this all sounds familiar to Vivendi-watchers, that’s because it is. A year ago, the company started exploring a break-up, with telecom assets (increasingly out of fashion as smartphone penetration plateaus) on one side, and zippier media properties on the other. After boardroom infighting that led to the ouster of then-Chief Executive Officer Jean-Bernard Levy, the plan was shelved in favor of seeking buyers for assets like GVT, a Brazilian broadband provider, and Activision Blizzard, which publishes blockbuster video games like “Call of Duty.”

Problem is, Vivendi hasn’t managed to find a taker for either at a price it’s willing to accept, so it’s back to square one. Splitting off SFR has obvious appeal. Vivendi could load the slow-growing but reasonably profitable phone group with most of its debt, leaving the media side almost debt-free. And doing so would put an end to a corporate structure that investors have always found a bit odd. But given last year’s misfires, they shouldn’t expect any immediate change.

Original post is Vivendi Goes Back to Future With SFR Spinoff Plan by Tech Deals.

Courtesy Jemstep

Jemstep provides algorithm-driven advice on how to save for retirement.

Simon Roy prefers computers to professional money managers because machines don’t work on commission.

The dark truth about the financial services industry is that brokers such as those found at a big bank branch or a strip mall often receive a cut from mutual fund managers when they make a sale. Brokers tend to lean toward the funds offering higher commissions, regardless of their performance. And that bias can result in a bad buy for the average Joe investor.

Jemstep aims to remove the bias with its money-management website, which lets retail investors import their retirement-account data and get automated advice, said Roy, the startup’s president. Jemstep offers free advice on asset allocation and will charge a flat monthly fee, starting at $18 per month, based on the size of the user’s retirement portfolio in exchange for suggestions about specific funds to buy and sell. Because Jemstep doesn’t play the fund-commission game, the Los Altos, California-based startup typically recommends inexpensive index funds, instead of the pricier mutual funds that brokers seem to love.

“The incentive structure under which brokers operate is designed to serve the interests of institutions, not the interest of investors,” said Roy, 51, in an interview. “Our advice is objective and untainted by any third-party influence.”

Jemstep began offering its automated portfolio manager to the public in January as a free service and has built up its membership to about 2,000 users, including employees at Google and EBay. For those managing less than $25,000 in retirement assets, the service will remain free. The price to manage larger portfolios can be as high as $70 per month, including portfolio analysis, tracking and rebalancing advice.

Backed by $10.5 million in private funding, Jemstep is among a growing class of startups aiming to tear down the traditional brokerage world by providing cheaper advice and more transparency. SigFig offers weekly suggestions for saving money and improving investment performance. FutureAdvisor, backed by Sequoia Capital, says it can help consumers save as much as 80 percent on fees by optimizing their portfolios.

Jemstep was founded in 2008 by Michael Blumenthal, a former stockbroker who is now the company’s co-chief executive officer. Jemstep has 20 employees split between the U.S. and Johannesburg, where Blumenthal is based.

The startup developed its recommendations by working with Windham Capital Management, a Boston-based firm with about $1 billion invested in stocks. The portfolio manager makes general suggestions, such as how much to allocate to international equities or when to lower exposure to U.S. stocks. The next step involves telling customers exactly which funds to dump and which to purchase.

“We’re trying to help people take action,” said Roy, referring to consumers’ tendencies to do nothing rather than seek out costly advice.

Considering Wall Street’s reputation lately, trusting a startup with our financial futures doesn’t sound so crazy.

Original post is Why You Should Consider Taking Financial Advice From a Computer by Tech Deals.

Photograph by Scott Halleran/Getty Images

Tiger Woods plays a bunker shot during the WGC-Cadillac Championship last week in Doral, Florida.

As if there weren’t enough sources of celebrity gossips, Trace Sports, whose TV shows cover the private lives of stars from golf legend Tiger Woods to hoops wizard LeBron James, has its eyes on the U.S. even as it’s working on a new reality series where women compete to marry a European soccer player.

The Paris-based channel is already beamed into 30 million homes in 90 countries and soon TV watchers in the Land of the Free will satisfy their thirst for items on the hottest rugby players, athletes not yet married and what’s going on behind the scenes during the National Basketball Association’s trip to Milan.

The 18-month-old pay-TV channel, which aims to do for sports what E! Entertainment did for Hollywood, is part of a portfolio of channels owned by parent TRACE, which includes pop music station Trace Urban and Latin-inspired music channel Trace Tropical, where Shakira can be found shaking her hips.

In a TV market where competition for sports rights is soaring, and companies like BT Group, the U.K.’s former monopoly phone provider, are paying hundreds of millions of pounds to show English Premier League soccer matches, Trace Sports plays a complementary role, Laurent Dumeau, the CEO of Trace Sports, said at a gathering of European cable TV executives last week in London.

“With sports rights increasing so quickly, this is a way we can monetize them more rapidly,” said Dumeau, who’s also the former chief financial officer for NBC Universal in France.

Trace Sports has a deal with ESPN to send a production crew to the X Games in Tignes, France, this year for behind-the-scenes looks at nightlife, parties and how the stars are unwinding after a day of extreme sports.

Clearly, TMZ faces stiff competition.

Original post is Tiger Woods Behave! Trace Sports TV Aims Its Lens at U.S. Shores by Tech Deals.

And by “internationally,” they mostly mean Asia. SoftBank Capital is the venture arm of Softbank Corp., the Japanese company that agreed last year to buy  a controlling stake in Sprint Nextel Corp. The fund is also backed by Alibaba Group, the largest online business-to-business company in China, and Yahoo! Japan.

Often when U.S. startups go international for the first time, they expand somewhere in Europe because the culture and business practices most resemble those of the U.S., said Matt Krna, a principal at SoftBank Capital. But the European market has slowed down as U.S. startups face increasing competition from Asia.

“A lot more companies are looking to Asia first as their international expansion plan,” Krna said in an interview. “We have the connections to make that happen.”

Global expansion is becoming a bigger priority for startups, Krna said.

“Companies are looking at that a lot more early on in their maturation than they did 10 years ago,” he said.

SoftBank Capital’s new fund is its largest for growth-stage companies, Krna said. He expects the fund will end up supporting about 13 portfolio companies.

Original post is SoftBank Capital Raises $250M Fund to Help Startups Expand to Asia by Tech Deals.

Courtesy Fingerprint Cards

Fingerprint-authentication sensors are expected to show up in mobile phones this year.

Mobile phones will soon know your touch.

Fingerprint Cards, a Swedish biometric-security company, said a Japanese electronics maker plans to introduce mobile phones with fingerprint sensors in the third quarter of this year. The technology, which identifies a person’s unique fingerprint when placed on a reader, can be used to prevent unauthorized access to a device.

Japanese phone makers placed a total of three orders for Fingerprint’s components in the fourth quarter of last year. One of those purchases was for at least a million phones, my colleague Niklas Magnusson reported. The demand from Japan has prompted Fingerprint Cards to open a sales and support office in Tokyo. The news sent the company’s stock soaring to its highest level in more than five years.

For Japan’s electronics makers, the big bet on biometrics could be an attempt to differentiate their phones from the myriad other black rectangles on the market. Those companies could use some help. Kyocera, Panasonic, Sharp and Sony are among the nation’s largest phone makers, yet none of them has captured enough global market share to rank among the top five mobile or smartphone manufacturers, according to research firm IDC. Fingerprint Cards declined to name its customers in a press release last month.

But the Japanese companies may have some competition from the world’s second-largest smartphone maker. In August, Apple agreed to pay about $350 million for AuthenTec, which has its own fingerprint authentication and encryption technology. The Cupertino, California-based company has also filed patents of its own for biometric technology. Silicon Valley-based SecuGen and Validity Sensors are showing off their fingerprint tools this week at the 2013 International Consumer Electronics Show in Las Vegas.

As we cram ever more sensitive information into our smartphones, stronger security should be a welcome addition. But let’s make sure that, like with the passcode lock on today’s smartphones, there is some way to get around these biometric walls in case of emergencies, or when I accidentally mangle my thumb in the car door.

Original post is Mobile Phones With Fingerprint ID Coming This Year by Tech Deals.

Photograph by Andrey Rudakov/Bloomberg

Esther Dyson is still excited about the possibilities with collecting data, and health devices that can give real-time feedback.

Angel investor Esther Dyson continues to spread her wings. The former technology analyst found success as an early backer of photo-sharing service Flickr and bookmarking site Delicious, both of which sold to Yahoo. She’s on the boards of high-profile sites such as online note-taking service Evernote, local groups creator Meetup and Russian search engine Yandex NV. And she has her sights set on opportunities beyond Earth: Dyson is involved with Golden Spike, which is planning missions to the moon.

So what is she investing in now and why? I caught up with Dyson on Dec. 21 and asked.

Q: Where do you see opportunities right now?

A: A lot more in health. One of my investments is Omada Health, which is a combination of online and offline. It’s a theme, to use the technology to help humans to communicate just like Meetup. Omada helps to treat diabetics, to deliver a curriculum of diet and exercise, with a counselor, in therapy groups of 10 people. It’s doing very well in pilot studies, and it’s made a huge difference. And it leverages people in a nice way. A lot of people who go through this end up being healthier and end up being counselors themselves. I made the investment some time in this past year, and then I re-upped this summer.

Q: Where do you see opportunities for next year, in geographies and sectors?

A: In the end, I don’t invest in geographies and sectors, I invest in individual companies. Where does one look? I am still very excited about all the possibilities of collecting data. If you look at health, sleep is becoming a big issue. Timing of physical activity. Timing of administering drugs, how you tie doses of drugs to minimize their toxicity. There are a lot of interesting things that are going to become more apparent as we get more data about usage of drugs, how your own behavior affects your health. With new devices and sensors, you get a lot more real-time feedback. The big challenge is not just giving people information, but motivating behavior change.

Q: Last year, you were talking about a “venture bubble.” What’s happening now?

A: Right now, there’s definitely a startup bubble. It’s too many startups, all of whom have good ideas, many of which are redundant. All these kids are trying to do a startup, but they can’t scale it: They can’t find the CFO, they can’t build a team. The challenge isn’t doing a startup, the challenge is going and scaling a company. It’s the team, and the whole company that matters, it’s not simply one 24-year-old Harvard kid.

Q: Does it make your work harder?

A: Yes. Getting ideas presented to you is not that interesting. What’s interesting is finding and developing a team. It makes it harder, there’s a lot more fluff. They take money, and disappear after a while.

Q: What’s the outlook for initial public offerings and mergers and acquisitions right now?

A: It’s not that great. It’s definitely more M&A, because you have a lot of interesting products that are not companies. There’s also a lot more attention to business-to-business companies, as opposed to business-to-consumer. It’s about not more efficient video-sharing between people, but about logistics.

Q: You invest in startups in Russia. Lately, there seems to be a surge in anti-American sentiment there. Does that affect you at all?

A: There is some anti-American sentiment in some parts of the government. In the tech community, it’s not there. What the Russian government should be doing is explaining it’s not about selling startups to rich foreigners, but creating services that make life better. This year, I invested in VitaPortal , which is a health site.

Q: Any other countries you invested in this year?

A: Nomanini, in Cape Town, South Africa. It’s sort of like “Avon ladies,” but for cell-phone airtime. If you know the market in a lot of emerging countries, they sell a code on scratch cards, and it’s very ineffective: The cards get lost, they stay in inventory. What Nomanini does is give people little printers that print out paper (with the airtime code). The users are often van drivers, or they have little kiosks.

Q: You are involved with a number of space startups, and you’ve trained for potentially going into space. Are you making any new investments in this area?

A: I am not making new investments, but I am very active. I am on the board of XCOR Aerospace, and I am an investor in Space Adventures. That’s fun, and when we do suborbital flights, I’ll be on one of them. And I am also involved with Golden Spike, which just announced its plans to take someone to the moon by the end of the decade – I am an investor, and I am on their board.

Original post is Angel Investor Esther Dyson Increases Dosage in Health Startups by Tech Deals.

Photograph by Dado Galdieri/Bloomberg

Latin America is expected to be a major growth area for investments, according to a new study.

Startups and investors are going global in a big way next year, according to a study released today.

About two-thirds of chief executives from venture-backed U.S. companies expect to expand activity abroad in 2013, according to a survey by the National Venture Capital Association. Another 15 percent say they’ll maintain the same level of activity.

Most VCs surveyed expect to see increased U.S. investment in Latin America and less in Western Europe next year, the study found. Forty percent of investors said China would be home to a higher level of funding, followed by India at 37 percent.

Many of the 600 business professionals who participated in the poll were less confident in the prospects for the U.S. market next year. Forty-nine percent of CEOs and 42 percent of VCs said they expect the U.S. economy to improve next year, a decrease among both groups from last year’s study.

Mark Heesen, president of the NVCA, attributed much of the skepticism to concern about the fiscal cliff of $600 billion in tax increases and spending cuts that would come into effect in January without an agreement between Congress and President Barack Obama.

“The potential for growth is palpable, with positive forecasts for startup jobs, technology innovation and global activity,” Heesen said in a statement. “But to realize this promise we must get on the right track in Washington, and quickly.”

Original post is Venture Capitalists Expect to Bring Their ‘Dinero’ to Latin America by Tech Deals.

Photograph by Balint Porneczi/Bloomberg

As part of Wikipedia's revised fundraising efforts, gone are the awkwardly placed photos of co-founder Jimmy Wales.

Wikipedia’s leaders have a new tactic for finding donors: Appeal to those who rely on the site most.

For Wikipedia’s current campaign, not every visitor to the world’s largest crowdsourced encyclopedia is being greeted with a plea for donations. The 16-day effort is only targeting eight of the nations where Wikipedia has the biggest user base, said Sue Gardner, chief executive officer of the Wikimedia Foundation, which manages website’s finances. People in those countries tend to give more, she said.

Later, Wikipedia will run shorter experiments in other countries to determine the most effective campaigns. Eventually, the organization may ask for donations year-round,  Gardner said in an interview yesterday at Bloomberg’s New York headquarters.

The targeted fundraising program is a departure from the website’s strategy last year, when everyone in the world who visited a Wikipedia entry during the 42-day fundraising period was shown a photo of co-founder Jimmy Wales pleading for donations. After the awkward placement of Wales’s headshot on the page became the butt of some bloggers’ jokes, Wikipedia has dropped the photo and uses yellow-highlighted text to stand out.

“This year, the information is up front and center, and everyone can see that we’re a nonprofit,” Gardner said. “It’s being annoying for dollars.”

The campaign, which started late last month and will pick up again in a couple weeks after a break, is taking place in the U.S., U.K., Canada, Australia, New Zealand, Germany, France and Switzerland. People in these countries should be used to nonprofits soliciting for donations around the holidays.

Some of the money raised will go toward developing Wikipedia’s footprint in the Middle East and Brazil, Gardner said. During the 12-month period ending in June, the Wikimedia Foundation reported revenue of $34.8 million, helped by the ability to accept donations in about 80 currencies thanks to a new payment processor, according to a financial report. The organization forecasts revenue to increase 32 percent to $46 million by the end of its next fiscal year.

Gardner is pushing to do fundraising throughout the year, not just near the end. She said the change would help increase the stability and predictability of the organization’s revenue — and keep traditional advertising off the site.

“We’re never going to take advertising 100 percent off the table, but we firmly aspire not to do it,” Gardner said. “The beauty of our model is it aligns with our readers.”

Original post is Wikipedia Edits Fundraising Strategy by Tech Deals.