Bitcoin: The future of global commerce or ideal drug money? - WLOX.com - The News for South Mississippi

Bitcoin: The future of global commerce or ideal drug money?

Updated:
(Source: CNN) (Source: CNN)
(Source: WTOC) (Source: WTOC)
(Source: J. Sebe Dale IV) (Source: J. Sebe Dale IV)
(Source: J. Sebe Dale IV) (Source: J. Sebe Dale IV)

(RNN) - Bitcoin, an internet currency that exists independent of banks and countries, was thrust into the mainstream a few weeks ago when Gawker published a story about SilkRoad, a website that sells hard drugs and accepts nothing but Bitcoin in payment.

Much like Amazon, SilkRoad offers a broad array of items for sale and buyers and sellers are ranked by the quality of their products and transactions. But instead of books, MP3s and video games, SilkRoad offers drugs ranging from prescription pills like Adderall, to marijuana and black tar heroin.

But to access the site, you'll need to download TOR; an Internet engine that few people have heard of and even fewer have the technical expertise to configure.

Since SilkRoad's start in February, the site has never taken credit card or PayPal - it only accepts the untraceable online currency called Bitcoins.

One Bitcoin is worth somewhere in the neighborhood of $10 to $12, and the prices fluctuate rapidly, but most customers seem happy to pay a premium for the convenience and privacy of the transactions. The currency rate fluctuates - just like the value of a U.S. dollar.

The world of Bitcoin payment may seem a little hard to figure out, but those surfing the SilkRoad seem to have no problem picking up on it.

Some have said that there are scammers on SilkRoad, but most customers seem pleased by the products they receive.

"Three hits and one of my friends (urinated in) his pants. I'm pretty sure it's good," said one customer.

However, Bitcoins aren't only used for illegal drug purchasing through sites like SilkRoad, they can also be used to purchase a variety of items on the Web.

The birth of a currency

Bitcoin is the brainchild of a mysterious cyber guru called Satoshi Nakamoto, who may or may not be an actual person. In a 2009 paper, Satoshi described a "peer-to-peer version of electronic cash" that would allow individuals to send payment directly to each other without going through a financial institution.

The author claimed that timestamps, mathematical functions and other wonders of computer science could allow individuals anywhere in the world to simulate a face-to-face exchange of cash for goods or service. It would eliminate the need for a "trusted third party" – such as a broker, a bank or a government - and the inevitable complications and expenses.

Zachary Lewis, a video game developer from Huntsville, AL, said it was a quick, simple process to download the software enabling him to take Bitcoin in payment for his services.

Bitcoin is something entirely different from any means of exchange that has existed before, he said.

"Thinking of Bitcoins as an alternative to cash is like thinking of euros as an alternative to cash," he said. "Yes, it only exists digitally, but it isn't another form of the dollar like PayPal and credit cards are."

It's a hedge against identity theft in internet commerce, he added.

"The security in place is very strong," he said. "It is much harder for someone to steal your identity, since each user has an encrypted, public-private key pair for each transaction, specific to that transaction."

Not an 'outlaw currency'

Proponents say Bitcoin has multiple advantages over traditional currency.

It is hard to create – so counterfeiting is unlikely if not impossible. It is decentralized and not backed by any commodity, such as gold, whose price could fluctuate. There will not be more than 21 million units at any time, no new units would ever be created, which gives the currency more stability than national currencies.

Before the Gawker story went viral, Bitcoin existed for about two years in near anonymity, developing a foothold in the community of computer geeks, online merchants, libertarians, anarchists, Reiki masters and yes, online drug dealers, who accepted it as payment.

Because of its association with Silk Road, Bitcoin acquired a cachet as an outlaw currency that enables shady dealings.

Some Bitcoin enthusiasts were outraged. Others shrugged, saying anarchy was kind of the whole idea.

One self-described libertarian merchant pointed out that any kind of money can be used for bad things.

"I would ask those that allege Bitcoin is only an outlaw currency how they feel about U.S. dollars being used to buy drugs, murder, child prostitutes and more all over the world every day," said  Michael Boyd, who owns and operates BitVapes.com, a website that sells e-cigarettes and accepts Bitcoin. 

"Less than 1/2 of 1 percent of Bitcoin users have ever used the 'Silk Road' website," Boyd said via email. "The vast majority of Bitcoin vendors like myself pay our taxes and use Bitcoins to buy everyday, legal items."

Boyd says Bitcoin allows his company to exist because PayPal has been shutting down the accounts of many U.S. merchants who sell e-cigarettes.

"The problem you face with monopolized payment systems, PayPal and credit card companies can shut you down whenever they want," he said. "If they don't like what you are selling due to political pressure, they will not allow you to conduct business."

Authorities want Bitcoin regulated

A few United States senators don't like the fact that the currency can't be regulated and want to see Bitcoin outlawed.

Chuck Schumer (D-New York) and Joe Manchin (D-West Virginia) wrote a letter to U.S. Attorney General Eric Holder in July calling Bitcoin "an untraceable peer-to-peer currency," and "an online method of money laundering."

But keeping governments from being able to regulate the currency is exactly what its creators had in mind. Because it is peer-to-peer, no authority can crack down on middlemen to stop the flow of currency from one source to another.

Jerry Brito of George Mason University, in an interview with reason.tv, painted an example that would keep governments from controlling funds to troublemaking institutions.

"If the U.S. wants to block money from going to Wikileaks, for example, they can go to PayPal, Visa, Mastercards of the world, put pressure on them. With Bitcoin, there is nobody in the middle. You can't go after them there."

He said Bitcoin serves a real need in a global society that values freedom, and something will always fill that need. Some means of exchanging value for value will emerge, he said, that will circumvent authority and control.

"Whether Bitcoin succeeds is neither here nor there," he said. "If not Bitcoin, it's going to be something else that doesn't have a central intermediary that can either print money or be shut down."

 Copyright 2011 Raycom News Network. All rights reserved.

Powered by WorldNow

208 DeBuys Road
Biloxi, MS 39531
(228) 896-1313

FCC Public File
EEO Report
Closed Captioning

All content © Copyright 2000 - 2014 Worldnow and WLOX. All Rights Reserved.
For more information on this site, please read our Privacy Policy and Terms of Service.