On February 25th, 2014 the Bitcoin exchange in Tokyo, Japan, Mt Gox collapsed. Bitcoin is a form of digital currency that has been in use since 2009. Bitcoins are used to pay for regular purchases of goods and services, in place of cash. Bitcoins are paid for with real money, such as dollars, euros, etc. Bitcoin value had gone as high as $1,151 in December 2013 before falling to $418.78 after the Mt Gox exchange crashed.
Mt Gox reported that as much as $390 million dollars worth of the virtual currency may have been stolen. Since Bitcoin was an unlicensed and unregulated currency, authorities are not certain what to do. Meanwhile, Bitcoin investors have lost thousands, if not millions of real dollars.
Bitcoin is the brain child of Satoshi Nakamto who created the virtual currency in 2008. However, it's been said that the Bitcoin was created anonymously, because no one has actually met Satoshi Nakamoto. Nakamoto stopped communicating in 2011, but not before releasing a detailed self regulating concept, and the code for the crypto-currency.
Nakamoto's concept was to establish an organized, non government regulated currency without ties to a central banking authority. It's like Paypal or a credit card, except that no one has to use their name or their social security number. Its use is peer to peer.
Bitcoins can be bought or they can be obtained though a process called bitcoin mining. To get bitcoins, one must program their computer with a particular algorithm. Your computer must run the algorithm until it comes up with the right computation, before anyone else in the world does. If you are fortunate enough to do that, you win a block of 25 new bitcoins. This is a very simplified description of bitcoin mining, because the process of coming up with the right computation can take an inordinate amount computing power and possibly the use of more than one computer.
On Feruray 10, 2014, Mt Gox announced that "a bug in the Bitcoin software makes it possible for someone to use the Bitcoin Network to alter transaction details to make it seem like the sending of coins to a bitcoin wallet happened when it actually didn't." Thus the present state of affairs.
On February 26th, 2014, authorities in the US began calling for a ban on the Bitcoin, citing it as "encouraging illicit activity," and "highly unstable and disruptive to the economy." Because the use of Bitcoin is a peer to peer interaction, it can be used for illegal activities. However, at this time any restriction or ban of use of the Bitcoin will only come through the enactment of new legislation.
What is interesting about all of this, at least to me, is that since the late 1960s, the US has been moving toward a cashless society. Money has become increasingly more virtual, or digitized as we move on into the 21st century. Clearly, the Bitcoin experiment may not prove to be a success going forward, but it may have laid the ground work for the next step in evolution monetary and banking transactions. Undoubtedly more rules, regulations, and oversight will be needed to make the next crypto-currency work.
No comments:
Post a Comment