I don’t think of
America as the ultimate country. This country has enormous deficiencies. I think of America the way Europeans who left
Europe for America thought of Europe. I am a Netizen who thinks of the
Internet as quite literally a country. And the Bitcoin is a huge step in that direction.
The Bitcoin is the global currency whose creation no government participated in. The Bitcoin has no known creator, and it has no regulators. It is all mathematical, and hence perhaps superior.
I don't think of the
Bitcoin as that which will kill the national currencies. May the national currencies live long and give us much joy and pride. But the Bitcoin is the monetary union the world so badly needs. In that sense the Bitcoin is superior to the Euro. With the Bitcoin the national currencies need not go away.
I think of the 2008
Great Recession as a wasted opportunity. The big crisis was an opportunity to reshape the American and the global economy. But that reshaping did not happen. The global financial landscape was not fundamentally remade. But the Bitcoin gives me hope. The Bitcoin I believe will bring about an integration of the global economy over time. It is building trust where trust never existed and never might. Why should complete strangers trust complete strangers? Except it happens all the time. The dollar only has value because we all trust it has value. And we don't all exactly know each other.
Wikileaks, Kim Dot Com and Snowden all get celebrated in many tech circles. Which means the oldest democracy that has long defined what the state's relationship to the individual should be is itself being challenged by the tech diehards. Diplomats should have been tweeting and blogging this entire time. People should be able to watch new movies online, most would happily pay. It is not okay to spy on your own citizens.
If the Internet will move money as easily and as universally as it has been moving information - words, images, video clips - then you can bet a brave new
world economy is about to take shape. If everyone on earth had wireless broadband, and everyone had a smartphone to make use of it, and if money could be moved around like the Bitcoin will make possible, poverty will leave the planet like a bad demon. That is how magical I think the promise is.
In a truly global economy, countries - and not just America - will beg for immigration, quite literally beg, like today economies try to outdo each other to bring in financial investments. It will be mind over matter on the scale of hundreds of millions of brains.
Regulating the Bitcoin at this early stage would be a funny thing. You have to understand what it is you are regulating before you can regulate it and not smother it. Hands off would be my plain recommendation.
Tech entrepreneurs are not benevolent dictators who should be given unchallenged power, no way. What tech entrepreneurs do is give The Individual enhanced powers, and magic happens when those newly empowered individuals go and do things together. They see light and they jump the gun.
Most of the so far reported mischief has not happened at the core of the Bitcoin process but along the sidelines. If you lost your Bitcoin "key" or it got stolen, that is a legitimate concern, but that hardly invalidates the basic Bitcoin mechanism. Bitcoin transfers can be used for money laundering, drug deals, and every other nefarious activity imaginable, but since Bitcoin transfers are 100% traceable, the governments that run the world have themselves to blame if the policing is not tight. Most of the iffy zones fall in domains between national governments. It is called not having a
world government. It is called not having a global rule of law between nations like there is within nations.
It is magical that the Bitcoin actually allows for national currencies. As in, if you can not manage a currency union, that is fine too, you can just use the Bitcoin and conduct global transactions.
These are early innings. It might be a few years before we get a better grasp of the full implications of this new thing. Right now various social agents are like blind men trying to figure out the elephant. Ecommerce was less mysterious, but legislators kept their hands off ecommerce for the longest time. That courtesy has to be extended to the Bitcoin.
The Bitcoin is the power of innovation taking the lead. It did not come out through some majority vote, or street action. But it stands to fundamentally upend the political process. The Bitcoin gives political fundraising a whole new meaning.
We have cheap enough smartphones. The only missing link in the chain is globally universal wireless broadband. Where are the Google balloons when you need them?
Why Bitcoin Matters
Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014....... Bitcoin at its most fundamental level is a breakthrough in computer science – one that builds on 20 years of research into cryptographic currency, and 40 years of research in cryptography, by thousands of researchers around the world. ..... the question of how to establish trust between otherwise unrelated parties over an untrusted network like the Internet. .... Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate. ..... digital signatures, digital contracts, digital keys (to physical locks, or to online lockers), digital ownership of physical assets such as cars and houses, digital stocks and bonds … and digital money. ...... All these are exchanged through a distributed network of trust that does not require or rely upon a central intermediary like a bank or broker. .... in a way where only the owner of an asset can send it, only the intended recipient can receive it, the asset can only exist in one place at a time, and everyone can validate transactions and ownership of all assets anytime they want. ..... Bitcoin is an Internet-wide distributed ledger. You buy into the ledger by purchasing one of a fixed number of slots, either with cash or by selling a product and service for Bitcoin. You sell out of the ledger by trading your Bitcoin to someone else who wants to buy into the ledger. Anyone in the world can buy into or sell out of the ledger any time they want – with no approval needed, and with no or very low fees. The Bitcoin “coins” themselves are simply slots in the ledger, analogous in some ways to seats on a stock exchange, except much more broadly applicable to real world transactions. ..... The Bitcoin ledger is a new kind of payment system. Anyone in the world can pay anyone else in the world any amount of value of Bitcoin by simply transferring ownership of the corresponding slot in the ledger. Put value in, transfer it, the recipient gets value out, no authorization required, and in many cases, no fees. ..... Bitcoin is the first Internetwide payment system where transactions either happen with no fees or very low fees (down to fractions of pennies). Existing payment systems charge fees of about 2 to 3 percent – and that’s in the developed world. In lots of other places, there either are no modern payment systems or the rates are significantly higher. ...... a way to exchange money or assets between parties with no pre-existing trust .... It’s not as much that the Bitcoin currency has some arbitrary value and then people are trading with it; it’s more that people can trade with Bitcoin (anywhere, everywhere, with no fraud and no or very low fees) and as a result it has value. ...... new technology is not worth much until it’s worth a lot .... Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage. .... Remember, it used to be technically challenging to even get on the Internet. Now it’s not. ..... Any consumer or merchant can trade in and out of Bitcoin and other currencies any time they want. ..... Another challenge merchants have with payments is accepting international payments. If you are wondering why your favorite product or service isn’t available in your country, the answer is often payments ..... eliminates the risk of credit card fraud ..... the receiver of a payment does not get any information from the sender that can be used to steal money from the sender in the future .... Credit card fraud is such a big deal for merchants, credit card processors and banks that online fraud detection systems are hair-trigger wired to stop transactions that look even slightly suspicious, whether or not they are actually fraudulent. As a result, many online merchants are forced to turn away 5 to 10 percent of incoming orders that they could take without fear if the customers were paying with Bitcoin, where such fraud would not be possible. Since these are orders that were coming in already, they are inherently the highest margin orders a merchant can get, and so being able to take them will drastically increase many merchants’ profit margins. ...... with Bitcoin, the huge hack that recently stole 70 million consumers’ credit card information from the Target department store chain would not have been possible ....... you are happy because there is no way for hackers to steal any of your personal information; and organized crime is unhappy ..... every transaction in the Bitcoin network is tracked and logged forever in the Bitcoin blockchain, or permanent record, available for all to see. As a result, Bitcoin is considerably easier for law enforcement to trace than cash, gold or diamonds. ..... Bitcoin shares this network effect property with the telephone system, the web, and popular Internet services like eBay and Facebook. ..... (1) consumers who pay with Bitcoin, (2) merchants who accept Bitcoin, (3) “miners” who run the computers that process and validate all the transactions and enable the distributed trust network to exist, and (4) developers and entrepreneurs who are building new products and services with and on top of Bitcoin. ..... many thousands of programmers are using Bitcoin as a building block for a kaleidoscope of new product and service ideas that were not possible before .... One immediately obvious and enormous area for Bitcoin-based innovation is international remittance. Every day, hundreds of millions of low-income people go to work in hard jobs in foreign countries to make money to send back to their families in their home countries – over $400 billion in total annually, according to the World Bank. Every day, banks and payment companies extract mind-boggling fees, up to 10 percent and sometimes even higher, to send this money. ...... Switching to Bitcoin, which charges no or very low fees, for these remittance payments will therefore raise the quality of life of migrant workers and their families significantly. In fact, it is hard to think of any one thing that would have a faster and more positive effect on so many people in the world’s poorest countries. ...... Bitcoin generally can be a powerful force to bring a much larger number of people around the world into the modern economic system. Only about 20 countries around the world have what we would consider to be fully modern banking and payment systems; the other roughly 175 have a long way to go. As a result, many people in many countries are excluded from products and services that we in the West take for granted. Even Netflix, a completely virtual service, is only available in about 40 countries ..... Bitcoin, as a global payment system anyone can use from anywhere at any time, can be a powerful catalyst to extend the benefits of the modern economic system to virtually everyone on the planet. ...... even here in the United States, a long-recognized problem is the extremely high fees that the “unbanked” — people without conventional bank accounts – pay for even basic financial services. Bitcoin can be used to go straight at that problem, by making it easy to offer extremely low-fee services to people outside of the traditional financial system. ...... A third fascinating use case for Bitcoin is micropayments, or ultrasmall payments. ..... Bitcoins have the nifty property of infinite divisibility: currently down to eight decimal places after the dot, but more in the future. So you can specify an arbitrarily small amount of money, like a thousandth of a penny, and send it to anyone in the world for free or near-free. ...... with Bitcoin, there is an economically viable way to charge arbitrarily small amounts of money per article, or per section, or per hour, or per video play, or per archive access, or per news alert ....... fight spam. Future email systems and social networks could refuse to accept incoming messages unless they were accompanied with tiny amounts of Bitcoin – tiny enough to not matter to the sender, but large enough to deter spammers, who today can send uncounted billions of spam messages for free with impunity ..... a fourth interesting use case is public payments ..... Think about the implications for protest movements. Today protesters want to get on TV so people learn about their cause. Tomorrow they’ll want to get on TV because that’s how they’ll raise money, by literally holding up signs that let people anywhere in the world who sympathize with them send them money on the spot. Bitcoin is a financial technology dream come true for even the most hardened anticapitalist political organizer. ...... in 1999, the legendary economist Milton Friedman said: “One thing that’s missing but will soon be developed is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B without A knowing B or B knowing A – the way I can take a $20 bill and hand it over to you, and you may get that without knowing who I am.” ..... almost no country’s regulatory framework for banking and payments anticipated a technology like Bitcoin. ..... Far from a mere libertarian fairy tale or a simple Silicon Valley exercise in hype, Bitcoin offers a sweeping vista of opportunity to reimagine how the financial system can and should work in the Internet era
On the Matter of Why Bitcoin Matters
Bitcoin is the first practical, large-scale mechanism to deal with the problem of decentralizing trust—no parties need know each other nor trust each other for transactions to complete successfully, verifiably, and irrevocably. ..... Bitcoin has a remarkable set of interlocking mechanisms that make it exceedingly hard for any individual or group to accumulate enough power to distort the public block chain, a sequence in which one set of transactions builds upon the next. ..... (Bitcoin’s worldwide computational output is currently nearing 200 petaflops, or 4,000 times the combined capacity of the top 500 supercomputers in the world. ........ these transactions can be proven to have been created by a party who possesses a private key; no other party can create such a proof. (The key can be stolen, thus changing ownership, but that stands outside of Bitcoin’s reliability.) One of the fundamental current software architects of Bitcoin, Mike Hearn, explained to me how such transactions could be used to validate identities for discussion forums and for passports. ...... Transactions with higher fees attached are committed more quickly. As the rate of transactions has increased, the fee has seemingly become more important, as no-fee and low-fee transactions can linger for longer periods without being built into a block and made permanent and thus useful for consummating a deal. This is an ongoing concern ....... Bitcoin is somewhat illiquid and highly volatile, and the fees for moving Bitcoins in and out of legal tender, like dollars, can be in the several percentage point range. It’s not always easy or possible to convert from Bitcoin to cash, and the volatility means the potential loss (or gain) of dollars before the exchange closes. ...... Bitcoin miners receive an award of 25 coins each time they succeed at a computational problem that allows them to add a permanent link to the chain. That’s $25,000 every eight minutes or so right now at the current exchange rate. However, the reward drops in half every four years or so. In mid-2016, it will drop to 12.5 coins. The total number coins that will ever be made is fixed. ....... The system gives up these coins, diluting the pool of money at a fixed rate, to miners, which represents a kind of hidden fee, like issuing new shares in a company and giving them to employees. The speculation and volatility currently hides the effects of coin creation as a dilution. ........ As the production of coins drops, mining fees are expected to pick up the slack. While they will almost certainly not raise to the current scale used in credit-card transactions, they will likely be non-trivial to keep miners rich in incentives to operate their computer gear (which is currently hard to keep profitable because of the rapid increase in computational power across the network) ...... transactions are irreversible after a short period of time and cannot be counterfeited. The system doesn’t prevent theft or misuse. ..... The seller can’t be defrauded. The buyer can. ...... Because a Bitcoin transaction can’t be reversed, it means that the party transferring value has no recourse within the Bitcoin system to reverse or dispute a transaction. ...... Bitcoin doesn’t eliminate fraudulent transactions; it only eliminates counterfeit payments. This can, of course, save many tens or hundreds of billions of dollars a year globally and translate to more efficiency in commerce. But removing the intermediary also removes recourse outside of courts, and the cost and nature of that can’t be determined. ............. When a transaction occurs over the Internet, the odds of recovering one’s Bitcoins when a seller fails to meet his or her obligations is the same as if you’d sent a wad of bills in an envelope through the mail. ....... It also glosses over theft. Because Bitcoin relies entirely on the private retention of secrets (private keys that prove ownership of given Bitcoins), a stolen Bitcoin is only traceable within the system to a certain extent, and thefts of millions and tens of millions of dollars have already occurred. Because committed transactions are irreversible, stolen Bitcoins are valuable and nealry laundered. .......... Companies will have to deal with fraud under the laws of the government under which they operate. If a firm processes a $10m order paid for with Bitcoins, and then it is determined the Bitcoins were stolen—what happens then? ...... fraud ... It’s perfectly possible; it just doesn’t happen at the payment level. It happens a “layer up” in the societal compact in which commerce occurs. ...... With Bitcoin, we already have hard cash and credit cards that can be used for digital transactions, and we can transfer money as bits. Bitcoin is a replacement or supplement for an existing creaky and somewhat broken system that nonetheless works. ...... there are proposals for fully untraceable alternative currencies. Zerocoin, initially a proposal for inserting such capability inside Bitcoin, will launch as a freestanding currency. Using zero-knowledge proofs, people will be able to push coins into Zerocoin’s blockchain and take coins out later without any mathematical ability for outside parties to connect the transactions. It’s a laundering service, without any negativity meant. It breaks the chain of knowledge. ....... the current existence of mobile payments, such as M-Pesa, which provide Bitcoin-like benefits in an existing ecosystem. Bitcoin has to beat mobile payments for ubiquity, ease, and control in such markets. ...... Bitcoin shows a path for massively more secure, reliable, and sensible ways to store value and move it around. As a currency, I have little faith that it will become a replacement for dollars, euros, or renminbi. As a model for a future payment and transaction system, I believe it’s already shown its value.
Bitcoin under pressure
ALL currencies involve some measure of consensual hallucination, but Bitcoin, a virtual monetary system, involves more than most. It is a peer-to-peer currency with no central bank, based on digital tokens with no intrinsic value. Rather than relying on confidence in a central authority, it depends instead on a distributed system of trust, based on a transaction ledger which is cryptographically verified and jointly maintained by the currency’s users. ...... Bitcoin’s mathematically elegant design ensures that the money supply can increase only at a fixed rate that slows over time and then stops altogether. .... Bitcoin began in 2008, at the height of the financial crisis, with a paper published under the pseudonym Satoshi Nakamoto. The technical design outlined in the paper was implemented in open-source software the following year. It came to widespread prominence in 2012 and has been in the headlines ever since. ...... Silk Road, an online forum where illicit goods and services are traded for Bitcoin, was shut down by America’s Federal Bureau of Investigation in October but has since reopened. The Bitcoin price has fluctuated wildly, hitting $230 in April 2013, falling below $70 in July, and then exceeding $600 in November ...... The system is now straining at the seams. Its computational underpinnings have collectively reached 100 times the performance of the world’s top 500 supercomputers combined: more than 50,000 petaflops. Bitcoin’s success has revealed three weaknesses in particular. It is not as secure and anonymous as it seems; the “mining” system that both increases the Bitcoin supply and ensures the integrity of the currency has led to an unsustainable computational arms-race; and the distributed-ledger system is becoming unwieldy. ...... Bitcoin uses a technique called public-key cryptography, which relies on creating an interlocking pair of encryption keys: a public key that can be freely distributed, and a private one that must be kept secret at all costs. The public key is treated as an address to which value may be sent, akin to an account number. Each transaction involves the paying party signing over a portion or all of the value in one of these addresses by using his private key to perform an operation, called “signing”, on the contents of the transfer, which includes the recipient’s address. Anyone can use the sender’s public key to verify that the sender’s private key signed the transaction. All transactions are appended to a public ledger, called the block chain. ...... About every 10 minutes, one lucky miner who has generated the next block is granted the 25-Bitcoin reward, and the new block is appended to the chain. The process then starts again. ...... The Bitcoin system is designed to cope with the fact that improvements in computer hardware make it cheaper and faster to perform the mathematical operations, known as hashes, involved in mining. Every 2,016 blocks, or roughly every two weeks, the system calculates how long it would take for blocks to be created at precisely 10-minute intervals, and resets a difficulty factor in the calculation accordingly. As equipment gets faster, in short, mining gets harder. But faster equipment is constantly coming online, reducing the potential rewards for other miners unless they, too, buy more kit. Miners have formed groups that pool processing power and parcel out the ensuing rewards. Once done with ordinary computers, mining shifted to graphics-processing units, which can perform some calculations more efficiently. Miners then moved on to flexible chips that can be configured for particular tasks, called field-programmable gate arrays. In the past year, bespoke chips called ASICs (application-specific integrated circuits) have appeared on the scene. ...... Hashing capacity has increased so rapidly in 2013 that the practice of hijacking thousands of PCs and using them for mining is no longer worth the effort. The average time between blocks has fallen to between five and eight minutes. ...... with this new generation of ASICs, mining will have approached a point where only those with access to free or cheap electricity will continue operations, and even they will produce a relatively marginal return on investment, rather than the huge multiples (when exchanged into traditional currency) possible even earlier this year. ...... as part of Bitcoin’s design, the reward for mining a block halves every 210,000 blocks, or roughly every four years. Sometime in 2017, at the current rate, it will drop to 12.5 Bitcoins. ..... To head off this problem, a market-based mechanism is in the works which will raise the current voluntary fees paid by users (around five cents per transaction) in return for verification ...... Every participant in the system must keep a copy of the block chain, which now exceeds 11 gigabytes in size and continues to grow steadily. This alone deters casual use. Bitcoin’s designer proposed a method of pruning the chain to include only unspent amounts, but it has not been implemented. ..... As the rate of transactions increases, squeezing all financial activity into the preset size limit for each block has started to become problematic. The protocol may need to be tweaked to allow more transactions per block, among other changes. A further problem relates to the volunteer machines, or nodes, that allow Bitcoin to function. These nodes relay transactions and transmit updates to the block chain. But, says Matthew Green, a security researcher at Johns Hopkins University, the ecosystem provides no compensation for maintaining these nodes—only for mining. The rising cost of operating nodes could jeopardise Bitcoin’s ability to scale. ...... Perhaps Bitcoin, like the internet, will smoothly evolve from a quirky experiment to a trusted utility. But it could also go the way of Napster, the trailblazing music-sharing system that pioneered a new category, but was superseded by superior implementations that overcame its technical and commercial flaws.
Bitcoin - Wikipedia
When paying with bitcoin, there will be no exchange of digital notes or tokens between buyer and seller. Instead, the buyer requests an update to a public transaction log, the blockchain. This master list of all transactions shows who owns what bitcoins currently and in the past and is maintained by a decentralized network that verifies and timestamps payments. The operators of this network, known as "miners", are rewarded with transaction fees and newly minted bitcoins. ..... the United States is currently considered to be Bitcoin friendly compared to other governments
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The Bitcoin believers
will one day become a ubiquitous form of payment ..... a new “Bitcoin economy” ..... Mohan is quickly becoming a catalyser of the New York Bitcoin community. He is organiser of a regular “meet-up” group which aims to connect the Bitcoin-curious ...... Mohan wants to get rich, and he wants to wreck government as we know it, too. Through Bitcoin, a currency outside the purview of banks and government control, Mohan sees “a chance to build a financial business with no regulation. Government is coercion and force. You don’t fight coercion with coercion, you just ignore it. Bitcoin allows you to ignore it.” ..... billionaire PayPal founder Peter Thiel, which aims to build a floating city in international waters where “the next generation of pioneers can peacefully test new ideas for government” ...... the extraordinarily persistent Republican presidential candidate Ron Paul, that even war can be eradicated, if only governments were denied the ability to finance deficits through printing money ..... “Would you rather buy a diamond or a blood diamond?” he asks rhetorically. “Obviously a diamond. So, would you rather use a Bitcoin or a dollar? When I gave someone $5 in Bitcoin, I didn’t kill any children in Iraq.” ..... an increasing majority of the people interested in Bitcoin are only “libertarianish”, despairing of government rather than opposed to it. And they are hardly just in the US. ..... Around the world, a generation is growing up whose intellectual framework was forged in an economic conflagration which destroyed the reputations of government, finance and central banks alike. The only heroes in this landscape are the hoodie-wearing tech entrepreneurs with their billion-dollar businesses. ...... At Mohan’s meet-up, it is not politics that is at the fore, but entrepreneurship. There are more than 30 people in the room. Five are women. Probably no more than three are over 35. Many are software developers, sniffing around for an interesting project and preferably a lucrative one. ..... no central bank certifies a “promise to pay the bearer on demand” the sum of anything in particular; no Treasury has declared it “legal tender for all debts, public and private” ..... The price for a single Bitcoin, less than $14 at the start of the year, spiked to $266 before crashing. It now hovers at about $110. ..... Bitcoin was created four years ago by an unknown computer scientist with the pseudonym Satoshi Nakamoto, who conceived it as an alternative to government-controlled currencies and a means to transfer money quickly, cheaply and anonymously outside the slow, expensive and highly regulated international banking system. Transactions are recorded in the “blockchain”, a massive block of code stored across a peer-to-peer network of computers. These computers are called miners because their owners are rewarded for their service with occasional payment in new Bitcoins. The total number of coins will never be allowed to exceed 21 million. ...... An average $30m of Bitcoin transactions are recorded every day..... In recent weeks, high-profile venture capital outfits, such as Thiel’s Founders Fund and Fred Wilson’s Union Square Ventures, have plunked down just-in-case bets on new Bitcoin payments businesses, reinforcing the headlines. Angel investors and business incubators are nurturing new Bitcoin ideas around the world. The financial establishment doesn’t know if the currency is friend or foe: money transfer businesses Western Union and MoneyGram are said to be looking at the feasibility of accepting Bitcoin, but there are suspicions that banks are using concerns about money laundering as an excuse to shut down the accounts of businesses that could become rivals. ..... Charlie Shrem .. at just 23, might be one of the youngest “Bitcoin millionaires”, having amassed his stash long before the latest price surge, and set up one of the first Bitcoin payments-processing companies, BitInstant. His habit of wearing a ring engraved with the codes to his Bitcoin wallet has gained him plenty of adoring press, which he is milking to promote the club ...... the entire stock of Bitcoin: $70bn, or $3,000-plus per “coin”, even if it is used for just 1 per cent of the transactions in the $7tn black market. ..... “Even if there are only 10 people in the club,” he says, “you want to have 100 people outside. Bitcoin has that built in. Scarcity means value.” ..... Rossi’s idea that Bitcoin fans should gather regularly in Union Square to trade in the style of the early brokers who founded the New York Stock Exchange under a buttonwood tree in 1792 ..... He has “never seen anything grow this fast, except bacteria when I studied biology”. .... Bitcoin is a decentralised, black market economy where you can buy drugs online and avoid tax and that undermines so much power. Anyone who tries to deny Bitcoin is revolutionary is living in fantasy,” he says ..... Harrison is one of the organisers of the London Bitcoin meet-ups, regular get-togethers in a Paddington pub that have grown from five people to 50 – tech fans, the curious and, lately, he says, quite a few “suits” from financial industries. ...... has visited Bitcoin communities around the world, including in Israel, Athens and Cyprus ..... Citing rules designed to prevent money laundering and terrorist financing, the US federal government has seized bank accounts belonging to Mt Gox, the largest Bitcoin exchange, and other exchanges. The Bitcoin Foundation no longer expects Mark Karpeles, Mt Gox chief executive, to travel to the US from Japan for its board meetings. ..... Panama has the potential to become a Bitcoin hub in the way that Gibraltar became the jurisdiction of choice for online poker sites when the US acted to drive out internet gaming. ..... “There is absolutely no world in which the large Bitcoin exchanges won’t be regulated. It’s just not going to happen. Mt Gox is clearing $1bn a month. Someone is going to want to know who gets that money.” ..... the illicit and the licit Bitcoin economies can coexist, just as dollars can be used for fair purchases or foul. .... When Preet Bharara, US attorney for the southern district of New York, unveiled charges against the creators of a virtual currency called Liberty Reserve last month, he proposed an update to an old law enforcement adage – “follow the virtual money” ... distributed currencies – including Bitcoin, but also half-a-dozen others including Litecoin, Namecoin and now a new rival called Ripple. With distributed currencies, transactions are processed and recorded across a network of users’ computers and balances are stored on a user’s hard drive rather than in a seizable bank account. .... Entrepreneurs see in distributed currencies an opportunity to shake up the global payments business and land a few blows on the duopoly of Visa and MasterCard. Transferring money across a peer-to-peer computer network costs a fraction of what those giant money movers charge. .....Government officials have been careful not to damn virtual currencies outright, for fear of squashing innovation that could benefit commerce and consumers. Instead, they are homing in on the exchange businesses which swap real money into virtual currency, and insisting that these impose the same money-laundering checks as banks. It is a tension Bharara acknowledges. “The internet is an amazing gift,” he says, “but it also has an ugly underbelly.” ....... Bitcoin aims to make storing and transferring money cheaper, simpler and anonymous. Your stash of Bitcoins is held, not in a bank account, but in a piece of software called a digital wallet on your laptop or smartphone. To pay for something in Bitcoin, or to transfer money to another person, you send a code from your wallet to theirs. Behind the scenes, every Bitcoin ever created, and every Bitcoin transfer made, is recorded in a huge string of code called the blockchain, stored on a network of computers known as miners. These are so called because, in return for completing workmanlike computational tasks, their owners get Bitcoins credited to their accounts.
