Saturday, May 28, 2011

Bitcoin - Anonymous, Peer-to-Peer Virtual Cash

There have been many attempts to establish a popular virtual currency system over the years.  Bitcoin is a recent one which seems to be gathering a lot of steam.  While digital currency and electronic payments are common, a replacement for real-world cash-like transactions has remained elusive and no standard has really caught on. 

Bitcoin meets many of the requirements of "e-cash" - it is secure, anonymous and completely decentralized and traded through a peer-to-peer network.  It is easy to use and allows private transactions between individuals.  Bitcoin is also most governments' worst nightmare - it is possible to conduct payments without any external trackable record - there is nothng to tax!

Bitcoin was developed by Satoshi Nakamoto in 2009, the realization of a paper he wrote, Bitcoin: A Peer-to-Peer Electronic Cash System.  It is also the name of an open-source client application which allows the exchange, storage and generation of Bitcoins, and is available for Windows, Mac and Linux platforms.
  Here's an introductory video on how Bitcoin works:

Bitcoin adoption is growing, and more outlets are accepting payment via Bitcoin.  While early adopters included black market industries including drug and gun sales, there are a growing number of legitimate  products and services which can be purchased with Bitcoins, from web designers to homemade jewelry.  Non-profits such as the Free Software Foundation and the Electronic Frontier Foundation accept donations via Bitcoin.  Sites such as, Mt. Gox and Bitcoin Market show the growing variety of businesses and individuals trading in Bitcoins.

It seems like Bitcoin has the framework and technology to scale to a large system - no it just needs the critical mass of adoption to be reached.  Interest in the digital currency is skyrocketing as is evident from the major hockey stick action at Google Trends:

What makes Bitcoin so interesting, so powerful, and possibly so disruptive that governments are likely to regulate it out of existence?  There are several key points - with current technology and knowledge, the encryption system used ensures that Bitcoins cannot be tracked, taxed, or seized.  These are key elements of control for governments over their economies, and having a popular peer-to-peer payment system could break government control on currency and economies and threaten the tax income that they depend on.  The genie is out of the bottle - the question is can even the united fears of all the world's authorities put it back in?

More information at:

Launch Blog - "The Most Dangerous Project We've Ever Seen":

Getting started with your e-wallet is here:

1 comment:

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