Bitcoin is a technological tour de force.
Bill Gates, Co-founder of Microsoft
Everyone talks about cryptocurrency. However, people do not really understand it. How could one describe the principles of its functioning without complex explanations? A cryptocurrency is a digital currency that works only and only on the Global Web. Its uniqueness includes the decentralized structure of currency sources. There is no bank that would release Bitcoin or Lightcoin. All the operational network members with Bitcoins have equal privileges. The currency is not controlled by anybody; the worldwide network of uncountable computers supports its emission.
The most famous cryptocurrency is Bitcoin, created in 2009 by Satoshi Nakamoto, one of the greatest puzzles in the modern age. Nobody really knows who Satoshi Nakamoto is; the name may be an alias for a group of people. The disclosure of the Bitcoin's creators can surely make up an adventure novel. However, it is better to tell how it all works.
So, Bitcoin, like any hard currency, has a ‘change’. The “copper coins” of Bitcoin are equal to 1x10-8 Bitcoins, and they are called satoshi. However, the mysterious creator prefers to use the word cent. In any case, satoshi is the minimum transmitted value inside the Bitcoin's network.
The electronic payment between the two parties takes place without intermediaries and is irreversible. There is no mechanism for chargeback fee on confirmed Bitcoin transaction. No one can block funds except for the owner of the private key. Nevertheless, it is possible to invite moderator and implement “reversible transactions”.
Bitcoins exist only in a special database called blockchain. All information about digital accounts is stored there. At the same time, complete confidentiality is ensured. This is the essence of Bitcoin. It is possible to buy almost anything with Bitcoins: clothes, accessories, and even apartments. They can be used to pay for services, or be converted into traditional currency. In short, Bitcoins are gradually acquiring all features of the “real” money.
The birth of new Bitcoins is quite worthy of the Matrix. The process of earning new Bitcoins is denoted by a special term called “mining”. It supports the Bitcoin network with a high level of protection from the attacks. In 2009, a programmable calculator was enough for this captivating business. Today it requires expensive equipment.
A historic moment arrived in November 2013, when Bitcoin exceeded the value of gold. The number of “coins” of Bitcoins was equal to 14 000 000 worldwide.
However, every few years the algorithm of mining is changing. Unfortunately, due to this limitation, the productivity of the system is artificially reducing by half. When will the process of mining be finally completed? The last Bitcoin is expected to be minted in 2140.
The success of Bitcoin led to attempts to create new cryptocurrencies frequently called “altcoins” or “alternative coins”. It seemed like an era of cryptocurrencies would come soon. But then the troubles started.
There were professional financiers who cast first doubts about Bitcoin’s miracle qualities. When it comes to Bitcoin, the famous billionaire Warren Buffett clarified that in comparison with stocks, bonds or real estate, buying Bitcoin is not an investment.
“You're just hoping the next guy pays more. And you only feel you'll find the next guy to pay more if he thinks he's going to find someone that's going to pay more,” he noticed with sarcasm. The old merchant expressed a profound idea.
From ancient times, the Golden Calf was a Stout God. It recognized gold, silver, fertile land, large ships, and beautiful buildings. The Golden Calf demanded mate-rial security, but Bitcoin is unable to provide it.
At the ancient Sumer times, money itself was a value because money was sheaves of wheat. At the Gold standard times, the currency did not need the gentleman’s word of the government. The US dollar is secured by the twelve nuclear aircraft carriers. What can the cryptocurrency offer as a firm commitment?
Satoshi Nakamoto conceived Bitcoin as “money for the poor”, but something went wrong. Bitcoins are used by criminals as a favourite means of payment. The reputation of the coin, glorifying democracy and human freedoms, was just trampled down. Is Bitcoin really on the dark side of power? We can try to track into this issue.
Cryptocurrency is used in transactions of online “black markets” such as Silk Road. The service was offering piracy software and stolen items. The founder of Silk Road Ross William Ulbricht aka Dread Pirate Roberts accepted everyone just to make illegal profits. In October 2013, the Dread pirate was arrested. For all the tricks, the rip-off champion was sentenced to two life imprisonments.
Unfortunately, the Silk Road had many followers – anonymous marketplaces such as Evolution, Sheep Marketplace, Agora, and Darkleaks. These pretentious names shield the dens of scammers, who want to use Bitcoins for their shady businesses. Some of the resources have been smashed by the police already.
Unfortunately, the new resources are emerging every day. Soon the builders of the so-called “pyramid schemes” became interested in cryptocurrencies. The cheats from the American Bitcoin Savings and Chinese MyCoin swindled thousands of customers.
The High Yield Investment Program should be mentioned among the other “pyramids”. These fabulous trickeries are now gaining more and more popularity. Anonymous benefactors usually set up a website offering an “investment program” which promises very high returns, such as 1% per day (sic!) undisclosing the location and other details of the investment. Anyone who has a wallet with popular cryptocurrencies can try to play a “Russian roulette”. The play with a predictable result, of course.
The creators of viruses began the hunt for cryptocurrencies. The ransomware or viruses-extortionists infect the victim’s computer, quickly encrypts all files, and then requires a ransom in Bitcoins for providing the decryption key.
It is necessary to clarify the old truth: the Crime is eternal. The appearance of cryptocurrencies cannot change the situation in principle. Traditional coins are stained with terror, blood, and drugs. However, no one suggests to ban dollar or euro because it is the currency of the criminal world. There is more politics than meaning in these statements.
Money does not smell, even if they were born in the shadow of the Golden Calf.
TEXT: MEHDI ALI
PHOTO: PRESS MATERIALS