Recent occurrences involving Bitcoin have caused a stir across the media and political spectrum worldwide. Criminal activities such as money laundering have been linked to the technology, spreading scepticism and concern about national security. But is Bitcoin really as “dirty” as many think it is?
Simply put, Bitcoin is virtual money or ‘the currency of the internet’. As with anything new, the concept is difficult to grasp. At first, you may think it refers to the coins you earn in various games. In actual fact, it’s distributed, worldwide, decentralised digital money.
Unlike traditional currencies, bitcoins are issued and managed without any central authority. Since no government, company, or bank has regulatory power over Bitcoin, this unique payment system is far more resistant to economic instability, inflation and corrupt banks. As such, you can transact freely and essentially be your own bank.
But how does virtual currency translate to “real” currency?
Whereas direct debit goes from person to person through a bank, bitcoins go through an online system where fees are significantly lower, can be used in any country, and there’s no chance of your account being frozen.
However, my attempt at using Bitcoin compels me to think the process is a little complex – simply because ‘money’ and ‘bank’ cannot be separated at this stage.
Bitcoins need to be purchased using the money you have stored in your bank account. And if your business accepts bitcoins, you have to trade it for the money that you’ll eventually store back into your bank account – unless of course you never again need to purchase anything from a physical store or even an online store that doesn’t accept bitcoins.
Making it even more difficult, banks and online payment systems haven’t really been eager to jump on board with the technology because it would decrease their profits.
On a bitcoin forum, I read that one way to trade money for bitcoins is by registering on Virtual World Exchange (VirWoX), then purchasing SSL using your credit card or PayPal, and finally trading your SLL for bitcoins.
In a world where we constantly seek convenience – so much that spending a few minutes transferring money from one bank account to another from the same institution feels like slavery – this process doesn’t make our lazy lives any easier.
On another website LocalBitcoins.com you can buy and sell bitcoins with little friction as it accepts all payment methods, and can cater your bitcoin trade to suit your location.
If you’re still a little sceptical, you can try to earn bitcoins through sites like Bitbucks.com where you have to complete promotional offers like surveys, trials, and sweepstakes. A bigger list of sites that provide samples and offers can be found here at WikiTrade.
Now let’s move on to the negative hype around the technology. A recent bill passed by the US House of Representatives states that “bitcoins and other forms of peer-to-peer digital currency are a potential means for criminal, terrorist or other illegal organizations and individuals to illegally launder and transfer money.”
This is a response to news reports indicating that bitcoins may have been used to help finance the escape and activity of fugitives.
Because Bitcoin is completely unregulated, there may be greater scope for conducting illegal activities. However, the argument for stopping the use of bitcoins altogether is invalid.
First of all, Bitcoin verifies transactions with the same encryption used in military and government applications.
On Bitcoin Foundation’s website, it says “Cryptography is the key to Bitcoin’s success. It’s the reason that no one can double spend, counterfeit or steal Bitcoins.”
“If Bitcoin is to be a viable money for both current users and future adopters, we need to maintain, improve and legally protect the integrity of the protocol.”
Secondly, ignoring the benefits of a technology to stop potential crime doesn’t quite make sense.
If such is right, then the Internet ought to be abolished because much of what was deemed “physical” crime has become “cyber-crime”. Fraud, for instance, was previously carried out using the “physical” methods seen in the film Catch Me If You Can starring Leonardo DiCaprio – signing fake checks, forging signatures, etc. The internet merely affords people the ability to commit crimes that already existed on a new platform.
And how about social media? People have organised riots and other violent crimes using Facebook and Twitter. Does that mean we should ban social media altogether?
Bitcoin, then, does not invite new crime. Like many other technologies, even ATMs, it may open up new methods of committing them. And let’s not forget, not everyone is a criminal. Those who are will find a way to get what they want.
It’s interesting that the idea of stopping the production of weapons – which are designed to harm if not kill – is hardly a fleeting thought. Yet a technology with enormous potential to help businesses deliver stable revenue and consumers worldwide to spend on their own terms, and both groups to not suffer the impacts of inflation and other economic changes, is considered a serious national threat.
Is this really about stopping crime or is it about maintaining profits and authority?
Bitcoin startups in the US and Australia are constantly being tackled head on by heavyweights in the legal and financial industries. One such startup, as mentioned in the previous section, is US company MT.GOX. The US government seized more than 5 million dollars from the company after a judge ruled there was probable cause that MT.GOX transmitted money without a license.
Australian startup Coinjar – which provides a business with a virtual wallet for Bitcoin transactions – publicly stated that Commonwealth Bank suspended outgoing payments on its business account and worse, closed the co-founders’ personal accounts with no warning.
In response to “public misunderstandings, misinterpretations and misrepresentations” of the technology, a foundation was established – the Bitcoin Foundation. They have three main objectives: standardising, protecting and promoting Bitcoin. As such, their mission statement is “freeing people to transact on their own terms.”
In a blog post they say that cryptographic money is a “reaction to three separate epochal developments largely emanating from the developed economies: 1) centralized and oppressive monetary authority; 2) a dominant and complicit legacy banking system; and 3) the eradication of financial privacy.”
The potential for Bitcoin, they believe, is “tremendous” – opening opportunities for entrepreneurs and providing citizens of countries large and small greater purchasing power.
While we cannot predict exactly what the future holds (who knew Facebook and Twitter would emerge from the internet?), we cannot overlook the possibilities offered by what has been termed “democratic money”.
Besides, innovation is sexy. When it works. So give it a chance.
What do you think?
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