Online Cash Bitcoin Could Challenge Governments, Banks
Online Cash Bitcoin Could Challenge Governments, Banks
By Jerry Brito on April 16, 2011
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The Bitcoin digital currency also works a lot like cash in
that it's anonymous. When you go to a flea market and pay cash for an
old Commodore 64, there's no record of the transaction. You don't have
to know the seller's name, and the seller doesn't need to know yours.
Digital currencies by contrast rely on accounts, and have to collect at
least some information about you. Because Bitcoin employs no such
accounts and instead relies on public key cryptography, there's no way to know, just looking at the database of transfers, who sent money to whom.
A Revolutionary Concept
Bitcoin is potentially revolutionary for several reasons. For one
thing, artificial currency inflation is impossible. In most countries, a
central bank controls the money supply, and sometimes (such as during
the recent economic crisis) it may decide to inject more money into an
economy. A central bank does this essentially by printing more money.
More cash in the system, however, means that the cash you already hold
will be worth less.
By contrast, because Bitcoin has no central authority, no one can
decide to increase the money supply. The rate of new bitcoins introduced
to the system is based on a public algorithm and therefore perfectly
predictable.
More revolutionary perhaps is that because no intermediaries are
needed for Bitcoin transactions, governments will have no intermediaries
to regulate. And Bitcoin's anonymity makes it difficult for governments
to go after end users directly.
In his new book, Kingpin, Kevin
Poulsen describes how hackers and fraudsters relied on e-gold for their
transactions. While centrally run, the e-gold company didn't require
identification to open an account, making the currency somewhat
anonymous. That was, until the FBI and Secret Service raided e-gold's
Florida offices and the company began to cooperate with investigators.
Transaction information handed over by e-gold led to several arrests,
and eventually the e-gold currency was itself shut down after executives
were charged with money laundering.
Consider the same scenario with Bitcoin. Because Bitcoin is an
open-source project, and because the database exists only in the
distributed peer-to-peer network created by its users, there is no
Bitcoin company to raid, subpoena or shut down. Even if the Bitcoin.org
site were taken offline and the Sourceforge project
removed, the currency would be unaffected. Like BitTorrent, taking down
any of the individual computers that make up the peer-to-peer system
would have little effect on the rest of the network. And because the
currency is truly anonymous, there are no identities to trace.
The Implications of Bitcoin
Like any new technology, an anonymous and distributed virtual currency has good uses and bad.
The bad, of course, is that bitcoin could facilitate illegal
activities, including the sale of pirated or counterfeit goods, stolen
credit card numbers and passwords--even child pornography. And in
perhaps a grayer area, bitcoin might allow consenting adults in the U.S.
who want to place bets at legal UK gambling sites to do so without
worrying about restrictions on payment processors.
The good, though, turns out to be really good. Law-abiding citizens
can carry on their affairs without anyone snooping on them or telling
them what they can and can't do. Want to contribute to WikiLeaks or some
other politically unpopular organization? No problem. Live under a
repressive regime and want to buy a repressed book or movie? Here's how.
No wonder the Electronic Frontier Foundation calls Bitcoin “a censorship-resistant digital currency.”
Still in its infancy, the value of the Bitcoin economy is currently
estimated to be only $5 million, but it's growing. Exchanges where you
can swap dollars for bitcoins and vice versa are up and running, and the number of vendors that accept bitcoins for payment continues to expand. If it catches on, Bitcoin might pose a threat not just to governments, but to payment processors as well.
And it's a story that's just getting started.
Read more: http://techland.time.com/2011/04/16/online-cash-bitcoin-could...
But more to the point, they have no actual intrinsic value. Whatever worth they have is based on speculation. This makes the "currency" extremely volatile and makes pricing on products really difficult. Now, I'm not talking about half a cent here and there. We're looking at several dollars here.
But more to the point, they're exclusionary. On your own with your average computer, bitcoins are actually quite difficult to make and will only be getting more difficult as time goes on. People who got in early are making out with the most of them and ensuring that should anyone want to get in that it will be almost impossible to unless you shell out actual money for them.
But what are you getting? Data packets that can be created out of thin air with literally nothing to back them. And even though they might be "unhackable", what's to stop another error from creating literally millions of bitcoins as one did recently?
Of course, the whole thing could work out, but even now governments are looking to crack down on bitcoins which would really put a damper on the whole thing.
The BitCoin concept itself looks like a great way to operate free of private central banking and I am not surprised to see so many old-style central bankers and their pet congresscritters angry and upset that We The People might actually break free of the bankers' enslavement. Nor, given the abuses by the aforesaid central bankers and their pet congresscritters, am I surprised to see how quickly BitCoin has become popular.
But....
After being shown a BitCoin mining server by the folks at PC Gamerz, I am puzzled. As I joked with them, they are tying up $5000 worth of computer for $10 worth of (a piece of) a BitCoin. I am not sure that even covers the increase in the electric bill here in Hawaii, and with the short life-span of computer equipment sold here in the USA, the attrition on those GPU cards must be factored in.
Here is my problem.
The BitCoin mining software uses a LOT of computer power for what we are told is a simple peer-to-peer cash system. Peer-to-peer file sharing does not require that kind of raw compute power. Neither does the level of digital signing the peer-to-peer cash system claims to use. There is a huge amount of computer power being expended on other unknown tasks. Some articles on just how BitCoins are awarded speak of "sol...
The BitCoin concept itself looks like a great way to operate free of private central banking and I am not surprised to see so many old-style central bankers and their pet congresscritters angry and upset that We The People might actually break free of the bankers' enslavement. Nor, given the abuses by the aforesaid central bankers and their pet congresscritters, am I surprised to see how quickly BitCoin has become popular.
But....
After being shown a BitCoin mining server by the folks at PC Gamerz, I am puzzled. As I joked with them, they are tying up $5000 worth of computer for $10 worth of (a piece of) a BitCoin. I am not sure that even covers the increase in the electric bill here in Hawaii, and with the short life-span of computer equipment sold here in the USA, the attrition on those GPU cards must be factored in.
Here is my problem.
The BitCoin mining software uses a LOT of computer power for what we are told is a simple peer-to-peer cash system. Peer-to-peer file sharing does not require that kind of raw compute power. Neither does the level of digital signing the peer-to-peer cash system claims to use. There is a huge amount of computer power being expended on other unknown tasks. Some articles on just how BitCoins are awarded speak of "solving blocks", and therein lies my concern. As a part of the mining for BitCoins, a huge amount of computer power is being spent on cryptographic processing of these blocks, and nobody really knows for certain what is inside those blocks.
I am concerned that the BitCoin miner, along with passing BitCoins hither and yon, is actually a vast distributed code key-breaker, as I cannot think of anything else requiring that kind of computer power (as NSA's rumored expenditure on exaflop computers suggests). With enough raw computer power chained together in a few million BitCoin users, brute-force breaking of the keys of asymmetric encryption becomes achievable, even convenient. Great if the perps are reading Iran's government communications or congressional "Sexting" messages, but not so great if the target is banks, SSH transactions, https, utilities, your corporate server, and secured emails.
Modern computer crime has become very sophisticated, and cyber-criminals (and the NSA) would not hesitate to exploit a popular new peer-to-peer cash system to create a vast distributed key-breaking system.