3 Facinating Facts About Bitcoin You Need To Know
BY Will Yakowicz
Why Bitcoin could become 'the currency of social revolution' and the FBI wants criminals to use Bitcoin.
Right now, everything about Bitcoin is news: Bitcoin millionaires. Bitcoin-funded drug kingpins. Bitcoin ATMs. This week the news focused on a San Francisco man who is opening a Bitcoin pawn shop, and another California man who launched a site advertising jobs that pay in Bitcoin.
But there are plenty of aspects of the Bitcoin saga that haven't yet received breathless headlines. Earlier this week in a private dining room at the upscale Manhattan restaurant A Voce, Bitcoin enthusiasts held a roundtable conversation about the cryptocurrency's fine points, its possibilities, and its future.
Jeremy Allaire, the founder of online video platform Brightcove who also started Bitcoin payment-processing company Circle Internet Financial, hosted the dinner. In his remarks he stated his belief that Bitcoin will become a global currency once it matures. "Closed platforms controlled by one company have never succeeded with getting significant Internet scale," he said. Things that have achieved dramatic scale have open platforms with open standards and open-source technology that anyone can adopt, like Bitcoin."
But there are many changes coming Bitcoin's way. Allaire said developers are working on the next version of the digital currency, which will have a better user experience. As the Bitcoin five years from now will look nothing like the current one, Allaire compared today's version to the first Web browser. "We are at the Mosaic stage of Bitcoin," he says.
Below are three facts about the cryptocurrency that is snatching the world's attention, imagination, and economy.
1. Bitcoin can be stored in your brain.
Barry Silbert, the founder of online financial exchange SecondMarket, created the Bitcoin Investment Trust, which currently has a net asset value of $61.4 million. He says Bitcoin is the ultimate global currency, one that you can bring to any country without paying fees. "I have something called the Brainwallet. It's mind-blowing. You hold Bitcoin in your head," Silbert said. "You have a string of words, letters, and symbols that unlock the Bitcoin in the network, [which] you can access from any computer in the world." Although the digital currency isn't literally in your head, the access mechanism (a 12-word phrase) to a private key (which opens your Bitcoin wallet) is known only to you.
2. News helped save Bitcoin.
Chris Daniels, a partner at law firm Paul Hastings, said the flood of media coverage of Bitcoin may have saved it from getting shut down by authorities. "Back in January and February, a number of operators in the Bitcoin world were close to receiving cease-and-desist letters from the state banking departments. But the arc of positive reinforcement in the news over the last 10 months has moved Bitcoin from the position of the companies getting shut down to a position where the federal government and state banking departments are encouraging innovation," Daniels said. "When we talked to the financial conduct authority in the U.K. and the Hong Kong Monetary Authority, everyone is interested in Bitcoin, everyone is going to regulate Bitcoin in one way or the other." He says that regulation of Bitcoin, similar to consumer bank protection, will be "key to its survival."
3. The DEA and FBI want crooks to use Bitcoin.
Although the FBI shut down Silk Road, the illicit drug marketplace that only accepted Bitcoin, the digital currency's public ledger helped authorities track down a handful of drug dealers. "The vast majority of law enforcement I've talked to told me they would rather see criminals use Bitcoins to cash. It's a permanent record," Silbert said.
"The forensic and data analytics available and applied to Bitcoin is really useful for identifying the movement of money," Allaire said. "In a cash economy, or in an environment where you have opaque financial institutions, you can only look at records if you subpoena those institutions. It's a dramatically [less transparent] environment for law enforcement compared with Bitcoin. Global digital currency with a global transparent ledger is actually going to be a huge assistant to law enforcement to monitor criminal activity."
. . . And a Prediction
Twitter and Facebook helped birth Arab Spring uprisings in countries like Tunisia, Egypt, Libya, and Syria by giving citizens a measure of control over media. Alliare believes Bitcoin will have a similar effect.
"Bitcoin will become the currency of social revolution," he said. "Global digital currency that puts this kind of financial control in the hands of individuals--to the same degree social media did for communication--will lead to civil strife and it will not be pretty. I think you will see battles between nation-state sovereigns and individuals because of Bitcoin."
WILL YAKOWICZ is a reporter at Inc. magazine. He has covered business, crime, and politics at Patch.com, and his work has been published in Tablet Magazine and The Brooklyn Paper. He lives in Brooklyn, New York. @WillYakowicz