Currency of the future? Many push for it. (via bitcoin)
Cryptocurrencies have been on the rise as of late and it was only inevitable that emerging businesses are starting to embrace the digital currency as a form of payment alongside traditional currencies. For those unaware as to what cryptocurrencies are, they are a form of digital currency that incorporates cryptography used in a ‘proof of work’ environment, which is used to both create and manage the currency. This form of currency is decentralized (no banking institution intermediary) and function through a P2P (Peer-to-Peer) platform. Most cryptocurrencies are based off Bitcoin, which was the first to come to fruition back in 2009 with Litecoin, Namecoin and PPcoin coming to the market soon after with more looming on the horizon. There are literally thousands of businesses that have adopted the digital currency as a form of payment next to global currencies, such as the US dollar, over the last few years, which have raised a few eyebrows at federal agencies.
Transactions using Bitcoins is done through P2P servers known as Bitcoin miners. The servers communicate with one another when transactions take place, which are then ‘written down’ in a digital ledger that automatically updates itself periodically and archives the information. When those servers update themselves, they produce a limited amount of newly minted Bitcoins that are then ‘halved’ every four years until the number digitally minted reaches zero. This makes the coins a scarcity that in turn gives them value as well as not being subjected to inflation (after all have been produced). Unlike traditional currencies, cryptocurrencies were designed with anonymity in mind and were created without the restrictions of being frozen or seized due to nefarious practices. It’s because of these factors that federal regulators have raised an eyebrow of concern towards digital monetary transactions using cryptocurrencies. In May of this year (2013) the world’s largest Bitcoin exchange, MT. Gox, had their accounts seized by the Department of Homeland Security as it had failed to register with Financial Crimes Enforcement Network after a hacker took control of an auditors account and transferred a large sum of coins to himself. This action caused Bitcoins to drop in value to the equivalent of one cent on the Mt. Gox exchange (the price went back to normal after a few minutes). Mt. Gox has subsequently registered with FinCEN and is currently back in operation. In June, the DEA (Drug Enforcement Agency) arrested their first Bitcoin drug dealer from South Carolina who used the underground marketplace ‘Silk Road’. The accused made $800 US (or about 11 Bitcoins at the time) buying and selling drugs such as Adderall and Dexedrine through the site which gives anonymity when transacting using Bitcoin and Tor. He was caught by arranging a deal with another Silk Road member and giving his actual address for the exchange. This was the first case in history where a federal entity seized a form of virtual currency.
Advocates of digital currency have called for regulation to ease the concerns of some government entities as well as those in the private sector, hoping that the digital currency will have legitimacy and therefore promote monetary growth for those emerging businesses. Only time will tell if cryptocurrency will achieve the status of conventional monetary global currencies in the near future.
What is bitcoin video, after this link.
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