BANKS
ARE MISUSING THE MONEY MONOPOLY THEY HAVE, USING MONEY FOR POLITICAL PURPOSES
Via stratrisk
With all its other problems, the
euro is also getting unexpected — and “underground” — competition from a
new virtual currency.
It’s called the bitcoin, and
in case you haven’t heard, it is the most ambitious (and to-date, successful)
attempt to create a new online currency, generated by the calculations of
thousands of computers. Some say it amounts to a kind of anarchic money.
This week, as the euro crisis has
reached CYPRUS, the bitcoin (BTC) marked a record high on the largest online
exchange, bitcoin.de. The exchange rate has approached 50 EUR, more than
doubling the value of the virtual currency within four weeks.
The latest run on bitcoins was
caused by reports of a bitcoin fund being launched by MALTA-based hedge fund
called Exante. The Bitcoin Fund has an initial minimum subscription of $100,000
and a 0.5% upfront subscription fee. Current assets under management in the
Bitcoin Fund are $3.2 million.
“Investors
demand is rising quickly,” says Oliver Flaskämper, who drives bitcoin.de:
“Many investors realize that the present market cap of around $520 million
leaves a lot of room.”
INCREASING NUMBER OF PLACES ACCEPT THE ALTERNATIVE CURRENCY
EUROPEANS alone have more than 5
trillion euros in their wallet files and accounts. Everyone can use bitcoins as
long as they have a wallet app installed on a PC or a smartphone.
What makes bitcoins particularly
attractive is that users can use them for payment at an increasing number of
places. Over 2,000 companies and organizations now accept the alternative currency,
including pizza delivery outfits, but also gambling sites of dubious repute.
It has also been said that bitcoins
are used in drug transactions. Unlike credit cards or online payment services
like Paypal, bitcoin transactions are essentially anonymous which has aroused
the suspicions of bankers and politicians alike. Bitcoin fans argue that cash
was and remains the primary means of paying for drugs– and that nobody has
aired the idea that cash should be abolished.
The history of the bitcoin has so
far been marked by ups and downs. The virtual currency was introduced in 2009
by Japanese programmer Satoshi Nakamoto, who wanted to create counterfeit-proof
money for the web. It now appears however that the name is a pseudonym, and
that nobody really knows who is behind the bitcoin idea.
BITCOIN SYSTEM BEARS RESEMBLANCE TO THE GOLD STANDARD
Hype developed around the
crypto-currency relatively quickly. In 2011 the first speculation bubble – that
had driven the exchange rate to $30 – burst. Then came a hacker attack on the
major bitcoin exchanges. Users lost virtual coins worth several hundred
thousand euros and confidence – and prices – collapsed.
Despite fluctuations, bitcoins
remain an extremely interesting concept. They are created by highly complex
calculations running on thousands of computers. Approximately every 10 minutes,
25 new bitcoins are created. The algorithm takes into account that at some
point a maximum number of virtual coins will be reached – ostensibly around
2140, and from 2033 on no large quantities of new bitcoins will be made.
In that sense the bitcoin system
bears resemblance to the gold standard. Unlike euros or dollars the amount of
bitcoins cannot be increased at will. The virtual coins are interesting for
investors betting on the inflation of paper money..
Bitcoins might even presage a whole
new era. “Money is being re-invented,” Thorsten Polleit, chief economist at
Degussa Bank, believes. He sees a future where different kinds of money will be
competing with each other. “The banks are misusing the money monopoly they
have, using money for political purposes. In the long run that will lead to
devaluation” – and the demand for private mediums of exchange will increase, he
says.
BITCOIN, THE NEW ALTERNATIVE?
BITCOIN, LA NUEVA MONEDA ALTERNATIVA?
En Argentina, donde la población tiene que hacer frente aconstricciones económicas "home made" impuestas por las autoridades locales, BITCOIN, una moneda alternativa en línea está experimentando una popularidad creciente.
El nuevo sistema de pago está descentralizada en una red peer-to-peer - al igual que el sistema de descargas BITORRENT. Los argentinos están luchando actualmente con alta inflación, la moneda extranjera - las soluciones para frenar la inflación, es difícil de conseguir en estos días.
Así los
argentinos empresariales han comenzado a utilizar BITCOIN con el fin de enviar
dinero fuera del país, obtener dólares o euros. Todas las
transacciones son anónimas. Las autoridades no tienen ninguna posibilidad de
controlar esas transacciones.
BITCOIN, THE
NEW ALTERNATIVE CURRENCY ?
Argentina, where the population has to cope with “home made” economic
constrictions imposed by local authorities, BITCOIN, an alternative online
currency is experiencing increasing popularity.
The new payment system is decentralized in a peer-to-peer network – just
like the download system BITORRENT. Argentineans are currently struggling with
high inflation, foreign currency - the solutions to curb in inflation, is hard
to get these days. Thus entrepreneurial Argentineans have started to use
BITCOIN in order to get money out of the country or purchase Dollars or Euros.
All transactions are anonymous. Authorities have no chance to control such
transactions.
BITCOINS, THE ONLINE-ONLY CURRENCY.
Created in 2009 by a mysterious
programmer named Satoshi Nakamoto, bitcoins behave a lot like any currency.
Their value is determined by demand, and they can be used to buy stuff. Bitcoin
transactions are encrypted and handled by a decentralized global network of
tens of thousands of personal computers. Merchants around the world accept the
currency, from a bakery in San Francisco to a dentist in Finland. Individuals
who own bitcoins and wish to exchange them for physical currencies like euros
or dollars can use exchange sites such as localbitcoins.com, a Finland-based
site founded by Jeremias Kangas. “I believe that bitcoin is, or will be in the
future, a very effective tool for individuals who want to avoid sanctions,
currency restrictions, and high inflation in countries such as Iran,” Kangas
wrote in an e-mail.
THE ADVANTAGE FOR COUNTRIES WITH RESTRICTIVE FOREIGN CURRENCY POLICIES IS THAT BITCOINS CAN BE SWAPPED FOR DOLLARS THAT CAN THEN BE KEPT OUTSIDE THE COUNTRY.
Another plus: Regulators can’t easily track the
transactions, since bitcoins aren’t issued from a central server. Bitcoin users
can conduct business on virtual private networks, which hide customers’
identities.
Many entrepreneurs and visionaries wish the culture of using digital money will spread all over the world, because it does not have any dependency on anything like politics.
Many entrepreneurs and visionaries wish the culture of using digital money will spread all over the world, because it does not have any dependency on anything like politics.
HOW IT WORKS
The project was started in 2009 by
an enigmatic programmer known as Satoshi Nakamoto. He always communicated
electronically, never answered personal questions, and disappeared from online
forums in December. The conspiracy-minded speculate that Nakamoto was actually
a group of people, or a government cryptographer, or a pseudonym for Gavin
Andresen, the Amherst (Mass.) programmer who took over the project after
Nakamoto vanished.
Digital transactions
normally require a trusted intermediary such as PayPal to credit and debit
accounts properly and prevent cheating.
With BITCOINS, "there is no middleman, says Andresen or," more
accurately, there's a distributed middleman. Individual transactions are
encrypted, logged by a decentralized network running on thousands of home
computers, and recorded in a public ledger. The system works similarly to
peer-to-peer music-sharing networks in that files are shared among swarms of
users, rather than downloaded from a central server.
Suppose you're in the market for
alpaca socks, one of the few consumer items you can buy with BITCOINS. Step
one: Get some BTC—that's the symbol—at a currency exchange site such as Mt.Gox.
Then download a desktop app from bitcoin.org, which will store your lucre (some
use an online service such as Instawallet.org instead) and connect you to the
decentralized BITCOIN network. Next, find the alpaca farms BITCOIN address, a
string of characters also known as a public key. Click the send coins
button.
THE BITCOIN NETWORK HAS
HANDLED AS MANY AS 87 QUADRILLION CALCULATIONS PER SECOND, 35 TIMES MORE THAN
THE TOP SUPERCOMPUTER.
The purchase is unconfirmed until a
miner certifies it. Miners are power users who crunch numbers on behalf of the
network, and some have racks of computers dedicated to the task. They're called
miners because, just as gold miners increase the supply of gold, they create
new BITCOINS, at an algorithmically controlled rate. The greater their
computing power, the more they generate for themselves. Once a miner's computer
has processed a transaction, the alpaca farm gets BITCOINS and you get socks.
It's complex but fast: The BITCOIN network has handled as many as 87
quadrillion calculations per second, 35 times more than the top supercomputer.
BITCOIN, ONLY FOR
“MATURE” COUNTRIES?
BITCOINS have all the advantages of
cash—free to use, very hard to trace—as well as its disadvantages. That digital
wallet is a file on a hard drive or online, and if it's lost or stolen there's
no recourse. The currency is backed only by the faith and credit of its
participants and outside the scope of any banker, politician, or the Federal
Reserve. To a certain breed of libertarian nerd who grew up on cyberpunk, it's
the Digital Rapture.
BITCOIN also resonates with those
who have something to hide. "Any anarchist cyberscheme like BITCOIN will
rapidly attract the Four Horsemen of the Infocalypse: Mafia, drug dealers,
terrorists, and child pornography," says author and futurist Bruce
Sterling. The hacker group LulzSec, which has claimed credit for breaking into
websites at Sony (SNE)
and the U.S. Senate, says a donor recently sent in $7,000 worth of BITCOINS.
Senators Charles Schumer (D-N.Y.) and Joe Manchin (D-W.Va.) urged federal law
enforcement to shut down Silk Road, an online catalog for drugs, and
spotlighted BITCOIN'S role as the only method of payment for these illegal
purchases. Among the legit merchandise you can buy with BITCOIN: organic
gardening services, a BITCOIN merit badge from NerdMeritBadge.com, and a
smattering of tech products.
BITCOIN: WILL THE ONLINE
CURRENCY INFLUENCE GEOPOLITICS AND STRATEGIES?
Merit badges and gardening are not
the stuff revolutions are made of, but BITCOIN'S ascent has created a virtuous cycle:
As early adopters see the value of their stakes rise, they have an incentive to
entice new users and merchants. The number of people on the BITCOIN network at
any given moment has climbed from tens of thousands to hundreds of thousands
since the start of the year, says Andresen. There are dedicated BITCOIN
currency exchanges, escrow accounts, and smartphone apps. In the planning
stages are options exchanges, cash registers, and high-frequency trading
programs.
IF THERE'S ONE INDUSTRY
THAT TAKES THE MOST CREAM OFF THE TOP AND PROVIDES THE LEAST VALUE, ITS FINANCE!
Mark Suppes, a Web developer (who
freelances for Bloomberg LP, parent of this magazine), bought a used ATM on
EBay (EBAY)
for about $400. In a Brooklyn warehouse, he's reprogramming it to accept
BITCOIN transfers from a smartphone and dispense U.S. dollars. Suppes is
motivated by self-interest—"I own enough BITCOINS that I'll be set if this
works out," he says—and a desire to stick it to what he considers economic
parasites. "If there's one industry that takes the most cream off the top
and provides the least value, its finance," he says.
Bankers needn't worry at this point.
The most common reason to hold BITCOINS is as a speculative investment.
"Any given day, it can move 20, 30, 40, even 50 percent," says Adam
Cohen, a developer at startup Seatgeek who wrote a critical post about BITCOIN
on the Q&A site Quora. "That's scary. I wouldn't want to have a lot of
my wealth tied up in it right now." Sterling calls BITCOINS "a cousin
project to WikiLeaks." For a glimpse of its future, he says, "find
the half-dozen zealots who were core activists of WikiLeaks and ask them how their
plan for massive planetary liberation has been going."
The skeptics are why Andresen
evangelizes. After his last haircut, he persuaded his barber to accept payment
in BITCOIN. "I had to promise I would buy it back from him if it dropped
in value," he says. "I insured his downside risk."
The bottom line: BITCOINS, a two-year-old virtual currency, have exploded in
value since December as tech-minded speculators snap them up.
and who own the fastest computer centers? the big banks... so who can mine most bitcoins? ... that's right.
ReplyDeleteyou are right! good point,....vicious circle !
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