Bitcoin: Madness or Innovation?
Bitcoin is a digital currency which uses a special security technology called Blockchain and allows the users to remain anonymous. There remain major security issues regarding Bitcoin and digital currency which must be resolved before it can be considered safe. Despite all the fanfare I think there is some need for Sober Second Thought.
Once you look under the hood of Bitcoin you realize that there is an expiry date given the maximum limit of 21 million bitcoins that are “mined” in an increasingly expensive process presently done in massive mainframes the size of football fields. It is also true that the infamous website known as the Silk Road, which trafficked all sorts of illegal goods such as drugs and guns, used Bitcoin as the main currency. Criminals like bitcoin due to its unregulated and anonymous nature. Police computers systems in the United States were hacked and held for ransom to be paid in bitcoin. The same method of payment is currently being used for identify theft, or in this case online identity ransom. Due to its digital nature and other attributes, Bitcoin has made ransom delivery seamless and untraceable and payments can be made without an in-person meeting. Bitcoin transactions are also irreversible, so victims are unable to reclaim stolen money. Witnesses that appeared before Canadian Senate committee meetings on this subject raised the issue of serious abuses and fraud which involved Bitcoin.
There is a libertarian spin in the promotion of bitcoin buffered by the claims that Bitcoin “proved” two things. The first is the idea of a working digital currency; bitcoin was not the first nor will it be the last. The second aspect where bitcoin claims success is the Blockchain technology; “experts” claim that this is a secure way of preventing hacking. However, there have been recent accounts, noted in a New York Times article titles “For Ransom, Bitcoin Replaces the Bag of Bills”, where hackers stole $16.5 million US dollars’ worth of bitcoins. “Honest” users of the bitcoin currency may in their hearts have found a way to cut the state out of their financial affairs, but the fact is that they are really acting as camouflage for a tremendous amount of illegal activities.
On Digital Currency, the Senate Committee on Bank, Trade and Commerce has officially recommended a light touch for regulation; which was done to prevent studying bills S-217 (for increasing women on boards) and S-202 (for lowering credit card acceptance fees). The greatest challenge to digital currency is the same challenge with all online banking; security. If you are gambler, Bitcoin may be for you.