BitCoins: an unpolicable p2p e-currency?

Paul Raven @ 16-05-2011

I’ve got a whole bunch of stuff that needs to get done over the next few days, so blogging here will perforce be of the drive-by link-drop variety for a few days or so. Today’s nugget of interest is BitCoin, a peer-to-peer electronic currency which, according to the folk behind the LAUNCH Conference at least, is “the most dangerous project [they’ve] ever seen”. Why so? Well…

Bitcoins are virtual coins in the form of a file that is stored on your device. These coins can be sent to and from users three ways:

1. Direct with peer-to-peer software downloaded at bitcoin.org
2. Via an escrow service like ClearCoin
3. Via a bitcoin currency exchange

Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership.

The benefits of a currency like this:

a) Your coins can’t be frozen (like a Paypal account can be)
b) Your coins can’t be tracked
c) Your coins can’t be taxed
d) Transaction costs are extremely low (sorry credit card companies)

It’s a “technotarian”political statement, apparently… not to mention a grenade in the nation-state punchbowl. Here’s a cuddly and very contemporary-looking promo video:

Given the global discontent with banking and finance right now, BitCoins could look very attractive to a lot of people. Unsurprisingly, no “normal” financial system will let you buy them, and as the LAUNCH folks point out, legislation against them is inevitable. But would legislation be enough to stop them if enough people started bartering real-world goods and services for them? [Tip o’ the hat to Adam Rothstein]

Be Sociable, Share!

5 Responses to “BitCoins: an unpolicable p2p e-currency?”

  1. Babylon says:

    They’ve been skyrocketing in both price and popularity lately. They went from approx $1 per bitcoin a few months ago to roughly $6 per bitcoin now.

  2. Babylon says:

    They’re also not that hard to get, there’s currently a site where you can buy them with paypal.

  3. Robert Koslover says:

    Hmmm. Although bitcoins are intrinsically worthless, so are *all* other fiat currencies. Thus, one should not casually laugh at/dismiss this new concept just for that reason alone. The next question, then, is whether bitcoins will actually survive/thrive in the marketplace, spread widely, and ultimately compete with and/or replace other fiat currencies? Alternatively, might they fail ultimately to even match the achievement of Pokemon cards in terms of perceived value and/or popularity? Who knows? For now, buyer beware!

  4. Wintermute says:

    What I believe will make or break Bitcoins is security. There have been claims made by proponents that Bitcoins are unhackable, but that is not empirical proof, any system needs to be out and stress tested for a while. They need to become popular enough that Russian botnet gangs start taking massive interest in breaking the system for profit.

    For small-scale transactions where you don’t mind if fifty bucks on your keychain-drive goes up in smoke accidentally in the laundry or your laptop gets a Cointrojan drills a backdoor into your harddrive vault and heists your $100 fortune away, for that scope I think Bitcoins will be used if easier. However given that bitcoins decentralizes fund security responsibility, I don’t envision people skipping around with their car or mortgage payments in the pocket waiting to be misplaced or stolen. Because Bitcoin fortunes de facto cannot be insured, and will not be reimbursed automatically along with a grovelling VISA robo-apology. Unless VISA starts using Bitcoins, in some gonzo alternate monetary universe, thus “Destroying the enemy by making the enemy my friend,” as Lincoln aptly put it.

  5. Khannea Suntzu says:

    Bitcoins will go through the following stages (a) lingering a while, some people talk about it, people dismiss it, some people advocate it, and then (b) goverments all over each other to close it off, then they’ll fall and then they’ll try and outlaw it. This will be ineffective, and then they’ll tax it. I’ll have a bitcoin button on my site? Then, for instance, piss-angry Tax authories slap me with a for taxes I might have made I made in bitcoin. In essence they’ll start throwing around arbitrary high ‘income tax assessments’ IF you openly use Bitcoin. Sort as a penalty. (3) Criminals will use it. It will be a terror funding tool. It will facilitate criminal syndicates. There will be parallel systems. All these will interchange. And then finally, maybe ten years from now or so this will lead to considerable international economic disruption, kinda like in snowcrash, and BOOM someone will produce a card that holds a non-falsifiable reserve of bitcoin. Make a copy, fine, the first who spends it owns it, later copies will be invalidated. Once that happens – Bitcoin will have something you can hold in your hand with value (much like a store credit 16 digit for your mobile phone worth 100E) states will *panic*. Actually – looking at this I am sure this will work. Yes. This is real.