Sunday, April 3, 2011

Bitcoin: A step towards a new anonymous currency

For the last week and a half, I've been playing around with an exciting new form of digital currency called Bitcoin. The idea of Bitcoin is very simple: to create a distributed, peer to peer based, digital currency that cannot be controlled by a government and is completely anonymous and untracable. So far, Bitcoin has acheived this goal in spades.

While you might think that working in anonymous digital currency would be incredibly complex, Bitcoin makes it very easy. When you want to receive a payment via Bitcoin, you generate a unique Bitcoint address. The address isn't tied to you in any real way and is completely anonymous to the person paying you. For example, for this post, I generated a new Bitcoin address in case anyone wants to make a donation to me (yeah, I know, selfish pandering). That address is 17NLM4KhYpiTjTjwhWQ9TbmyQ8d12knYSu. As you can see, nothing in this address provides any personally identifiable information and, likewise, whoever pays me will use a similarly anonymous address thereby abstracting us from each other and making our transactions completely untraceable - even by the people doing business with each other!

Bitcoins can be paid to anyone who accepts them and that includes many businesses and service people around the world. But you can also transfer your Bitcoins into whatever real world currency you use in the non-digital world and buy things from anyone even if they don't accept Bitcoin. You can even pay Bitcoins to your Paypal or bank account and have access to the cash almost immediately (except with bank account which take a few days processing time).

All that sounds pretty incredible, doesn't it? It is! But one of the most interesting things about Bitcoin is that it allows users to perform financial transactions in an untracable and anonymous way. Additionally, since it's not linked to any 'real world' fiat currencies (think the US dollar, controlled by the Federal Reserve as an example), it can't be easily manipulated, controlled, or seized. Additionally, Bitcoin transactions and funds are protected using strong encryption so it's pretty much immune to being hacked and stolen, unlike their counterparts held in banks.

Lastly, and perhaps most interesting of all, Bitcoin is a commodity and there are several exchanges that actively buy, sell, and track Bitcoin. In much the same way a stock might ebb and flow in value, Bitcoin value flucuates from day to day as well. For example, today a Bitcoin is worth $0.77 USD which may go up or go down tomorrow. Many people purchase Bitcoins as investments, betting that they will go up in value at which time they can sell them and make a profit, similar to the way a stock trader holds and monitors their favorite stocks hoping to make money when they sell.

I'm quite excited about the opportunity Bitcoin offers for those of us who want to explore alternative currencies or distance ourselves from state control of our monetary system. Without control, it can't be manipulated and arbitratily contracted or expanded. Without control, it provides a way for citizens and not the government to control their currency in any way they choose to.

Without control, there is true freedom.

To find out more about Bitcoin, visit the Bitcoin website at www.bitcoin.org. If you do not want to download the software to your PC, use the online Bitcoin wallet at www.mybitcoin.org

2 comments:

Blogger said...

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Blogger said...

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