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before I start here's a primer on Bitcoin

 

https://www.youtube.com/watch?v=Um63OQz3bjo

 

If you can't spare the minute and a half to watch the video (and to add more info to the video)

 

Bitcoin is

 

1) digital currency and can be compared to gold

 

2) like gold, bitcoin is mined via a computer program, and there is a certain number of bitcoin produced every 10 minutes right now it's at 25 bitcoin every 10 minutes. In 4 years it will be half that number, and every four years the number of bitcoins produced will be halved.

 

3) There is a known, immutable supply of bitcoins (again similar to gold, the total amount is finite). There are only 21 million bitcoins that can be mined. After that number is reached, you cannot create more bitcoins to add to the supply.

 

4) bitcoins are stored locally (meaning saved onto your device), bitcoins aren't stored in a central server. Which means that no external power (like a bank or a government) that can freeze your Bitcoin account. This is like storing gold bars under your bed.

 

5) Bitcoin is a totally fiat currency, very much like the dollar. It isn't backed by anything, and the only value it has is the value that people give to it (again like the dollar).

 

6) there is no central authority that controls bitcoin. There is no bitcoin central bank, there is no entity to shut down if you want bitcoin gone. It operates peer to peer much like bit torrent clients.

 

7) bitcoin guarantees total safety and security. It relies on clever cryptographic algorithms to keep transactions safe, and the entire network works together to ensure the integrity of the currency. Basically every bitcoin miner takes a vote to determine if a transaction is legitimate or not. The cryptography has been reviewed by the world's best cryptographers and they have verified that it indeed does what it says it does, in terms of guaranteeing safety.

 

Now here's the advantages that I can see:

 

1) Bitcoin is the first and only currency that I know of that is inflation proof. Because you can't create more bitcoins, the value can't be manipulated in that way which means that whatever the final value of bitcoin is, that's it (it might vary on a limited range depending on trading patterns). Politicians can't make bogus decisions to affect the value of your money, which is what is happening now. They can k*ll themselves all they want but they won't be able to affect the value of your money. And if you think about the actual money value you've lost due to rising inflation, you've probably already lost a lot.

 

2)Bitcoin is universal and is not tied to any country or government. You can use it anywhere, and not have to lose money in arbitrage due to the differing values of each currency.

 

3) I can transfer it instantly to anyone, anywhere, at anytime, without paying any sort of transaction fees (or paying a very very minimal amount as compared to the norm), and they will accept my money as if I handed it over to them myself. Now what this means on a macro scale especially for the philippines is staggering. right now there are millions of pesos transferred by OFWs to their families in the Philippines. But a huge portion of that money doesn't get transferred all the way since that portion gets chewed up by the money transfer companies in the form of fees (and transferred back to their richer countries of origin), now imagine if that whole amount gets transferred directly to the people here?

 

4) it is valuable as f*ck. When I first heard of Bitcoin in 2012, the value was 20 USD to 1 Bitcoin. NOW, the average value of bitcoin (across the different exchanges) is 750 USD to 1 bitcoin. So 1 Bitcoin is roughly around 30k Pesos. and it will only rise in value given the nature of the currency. They're projecting that bitcoin will eventually reach a value of 1500 USD.

 

----

 

this is all very exciting, especially since this is groundbreaking. Bitcoin basically democratizes money. It puts the control of money back to the person who actually owns it, and away from the bankers and the governments in the world. What this means, is that it will eventually level the playing field in terms of money.

 

but bitcoin is not without its faults, right now trading in bitcoin is almost like a gamble. The value fluctuates very wildly, I've read of accounts of the bitcoin market experience a crash of 400 dollars and then rebound back by another couple of hundred in a matter of minutes (which is scary if you have money in bitcoin), plus there's the high possibility of the big banks buying up large amounts of bitcoin and dumping it all back in a pump and dump scheme to crash the market. Also bitcoin is not the only currency of its kind out there, there are 100 other crypto currencies in existence and are being actively traded, each of them hold different value, but I find it hard to see which one will come out on top as each one affects the other.

 

This is fascinating to me, because right now we're seeing things change in finance, in the same way that the mp3 changed the music industry. We're right at the cusp of something big, whether that something big will be good or bad in the long run remains to be seen, but these are exciting times.

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How does one go about purchasing bitcoins? You mentioned that the value of bitcoins can fluctuate in the course of a few minutes. What causes the value to fluctuate? How different is this from stocks and bonds? If there's no regulatory body that oversees bitcoin transactions, isn't this a dangerous thing to be getting into? Is bitcoin technology susceptible to fraud?

 

How does one go about purchasing stuff using bitcoins? Are there merchants which accept bitcoins? Until today, I've never even heard of the term bitcoin.

 

 

 

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How does one go about purchasing bitcoins? You mentioned that the value of bitcoins can fluctuate in the course of a few minutes. What causes the value to fluctuate? How different is this from stocks and bonds? If there's no regulatory body that oversees bitcoin transactions, isn't this a dangerous thing to be getting into? Is bitcoin technology susceptible to fraud?

 

How does one go about purchasing stuff using bitcoins? Are there merchants which accept bitcoins? Until today, I've never even heard of the term bitcoin.

 

 

to acquire bitcoins you can either download a bitcoin miner and use your computer to mine it (something that is discouraged unless you have a room full of computers), or you can purchase bitcoins from an exchange such as coinbase.com, or the easiest way is to sell something in exchange for bitcoins. There's a local bitcoin exchange buybitcoin.ph that launched last year I believe.

 

Bitcoin value is dictated by fiat the more people who think it's valuable the higher the value gets, and the fluctuations are caused by trading on the numerous exchanges. So for example one entity buys a huge number of bitcoins, that causes the overall supply to lessen on the open market and raises the value of bitcoin. If one entity on the other hand dumps a large amount of bitcoin on the open market the value crashes. The fluctuations are wild because in relation to other money markets, bitcoin is only a $10B market, any major trade would cause it to swing wildly, as compared to USD which is in the trillions, it would take a really huge transaction to affect a large enough swing. The analogy they bring up when explaining the wild fluctuations is that bitcoin is still a small boat, so a large enough financial wave can cause it to change direction, the USD is Titanic, it would take a really big wave to move it even an inch. But if you follow the bitcoin trend over its existence the range of the value swings have gotten narrower and narrower as more and more people are now buying into bitcoin.

 

It's neither stock or bond, it's actual currency similar to the dollar.

 

there's no CENTRAL regulatory body, the main regulatory body is the bitcoin network itself that works together to verify each transaction using bitcoin. Think of it as an election done every 10 minutes, every one must agree on the transaction for it be passed off as legit. The verification process is done by the bitcoin miners during the mining process, which makes mining more and more difficult as time passes.

 

It's dangerous now but I'm thinking it will stabilize after a couple of years, given the trend.

 

Bitcoin isn't (as far as I know) susceptible to fraud.the technology is open source, anyone can download the code and look into each and every transaction. Each transaction is transparent, everyone can see where each and every bitcoin has been since it was first mined. And each transaction is verified by multiple entities. Bitcoin cannot be duplicated and counterfeited, each coin is unique and cannot be copied. You can however steal bitcoins from the exchanges, and this has happened before and has caused some of the crashes.

 

if you have bitcoin wallet you just basically transfer coins over the internet. It's as simple as sending an email.

 

there are currently over 21,000 merchants (mostly online) that accept bitcoin. But the trend is rapidly changing, I've been reading about Bitcoin ATMs popping up in the real world. And Lloyd's of London has now a special insurance to insure the bitcoins in your wallet. I've also been reading about services that accept bitcoin, from taxi drivers, to escort services.

 

This is huge bro, it's like watching the birth of the internet all over again.

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I think I heard before some dude threw away his hard drive containing a large stash of bitcoin now valued in the millions of dollars. Poor dude.

 

 

yeah I read about that.

 

he was one of the early miners, and with a brainfart he decided to buy a new hard drive and threw away his old one

 

I think the total value of his bitcoin wallet was somewhere around 9M USD, and there were reports that there groups of people with metal detectors trawling garbage dumps in the UK (where it happened) looking for his hard-drive.

 

there was this other kid, who was down on his luck, posted on reddit.com asking what he should do, apparently he was strapped for cash and couldn't pay his student loans and was behind on his rent etc. etc., so he consulted reddit and told them that he had some bitcoins. When they asked how many bitcoins he had, he said 917 bitcoins. His bitcoin wallet made him a millionaire, and turned his life around literally.

 

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my biggest regret about this, is that I didn't take Bitcoin seriously when I learned about in 2012. Some guy told me about this but I was hesitant to put my money into something that I thought was Monopoly money lol. Now that I'm reading all about this in the news, man I could never have been more wrong.

 

Now, I'm looking at other crypto currencies to gamble on.

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yeah I read about that.

 

he was one of the early miners, and with a brainfart he decided to buy a new hard drive and threw away his old one

 

I think the total value of his bitcoin wallet was somewhere around 9M USD, and there were reports that there groups of people with metal detectors trawling garbage dumps in the UK (where it happened) looking for his hard-drive.

 

there was this other kid, who was down on his luck, posted on reddit.com asking what he should do, apparently he was strapped for cash and couldn't pay his student loans and was behind on his rent etc. etc., so he consulted reddit and told them that he had some bitcoins. When they asked how many bitcoins he had, he said 917 bitcoins. His bitcoin wallet made him a millionaire, and turned his life around literally.

 

----

 

my biggest regret about this, is that I didn't take Bitcoin seriously when I learned about in 2012. Some guy told me about this but I was hesitant to put my money into something that I thought was Monopoly money lol. Now that I'm reading all about this in the news, man I could never have been more wrong.

 

Now, I'm looking at other crypto currencies to gamble on.

 

So if the amount of bitcoins that can be mined is limited, does this mean that the world market just lost X number of bitcoins because it's now in the dumps somewhere, with the likely scenario that the hard drive is now corrupted and all its data lost?

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yeah I read about that.he was one of the early miners, and with a brainfart he decided to buy a new hard drive and threw away his old oneI think the total value of his bitcoin wallet was somewhere around 9M USD, and there were reports that there groups of people with metal detectors trawling garbage dumps in the UK (where it happened) looking for his hard-drive.there was this other kid, who was down on his luck, posted on reddit.com asking what he should do, apparently he was strapped for cash and couldn't pay his student loans and was behind on his rent etc. etc., so he consulted reddit and told them that he had some bitcoins. When they asked how many bitcoins he had, he said 917 bitcoins. His bitcoin wallet made him a millionaire, and turned his life around literally.----my biggest regret about this, is that I didn't take Bitcoin seriously when I learned about in 2012. Some guy told me about this but I was hesitant to put my money into something that I thought was Monopoly money lol. Now that I'm reading all about this in the news, man I could never have been more wrong. Now, I'm looking at other crypto currencies to gamble on.

 

But that's exactly what it is... a gamble.... and sometimes gambles pay off big time, sometimes... :D Hindsight is 20/20

 

So if the amount of bitcoins that can be mined is limited, does this mean that the world market just lost X number of bitcoins because it's now in the dumps somewhere, with the likely scenario that the hard drive is now corrupted and all its data lost?

 

That's correct.

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so you can't buy anything with it, like a car, right? and the only way a person with this bitcoin can get money from it is if someone buys it?

 

i dunno, man. it's not something tangible that i can put in my hands on and value. it might look like stocks but it isn't because you're not investing on the fortunes of a company but something that doesn't even exist in three dimensions. it's also not like buying art because you can't look at them to appreciate them and you can't be sure that their value will actually appreciate in the future because, well, it's not really real. and since they're just made of 1s and 0s, sooner or later some hacker would be able to wreak havoc on the whole concept.

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so you can't buy anything with it, like a car, right? and the only way a person with this bitcoin can get money from it is if someone buys it?

 

i dunno, man. it's not something tangible that i can put in my hands on and value. it might look like stocks but it isn't because you're not investing on the fortunes of a company but something that doesn't even exist in three dimensions. it's also not like buying art because you can't look at them to appreciate them and you can't be sure that their value will actually appreciate in the future because, well, it's not really real. and since they're just made of 1s and 0s, sooner or later some hacker would be able to wreak havoc on the whole concept.

 

There are small / underground economies that accept bitcoins. The most popular one until recently is the illegal drugs shop Silk Road. Now THAT was massive. The only reason you can't buy a car from a name brand shop is because they don't accept it. I'd venture that you might be able to get a second hand car though.

 

Bitcoins are an extreme form of fiat currency. In a way, it's the purest form of value due to demand. There's really nothing else to it except demand. Never heard of World of Warcraft gold trading? Sure it's just game money, but whole enterprises built themselves around farming game gold to be sold to WoW players. I'm not saying Bitcoins are the future, and that they're here to stay, but to dismiss it because it's just 1's and 0's is ignore the reality that it's "real" in the sense that you can profit from it. The only reason it's "trusted" somewhat is that it's an extremely clever tech that makes it nearly impossible to hack if your purpose is to forge it.

 

But yes, it's open to attack as much as a weakly designed currency is open to being forged. And yes, Bitcoin has a weakness. The weakness going (more) public recently caused it's value to drop. This drop is really big as literally millions of fortunes depend on its value. Some might say it's time to buy, lol. We'll see how the bitcoin adjusts to this. No it's not about forging or stealing the bitcoin, but there's a way to mess it up such that it may lead to some... confusion.

Edited by swynd
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This sounds a bit complicated. Like a computer game app that kids play. Only this is for real. Since it's border less and international in character and there's no government regulators like the SEC which oversees the operations and transactions of the players, there is always the possibility of fraud. I mean if governments can unleash worms such as stuxnet to undermine/sabotage economies, what's to prevent a hacker from infecting the open source code? And what happens if you have millions of bitcoins on your hard drive, but for some reason, the hard drive is corrupted? Can you back up your transactions on another hard drive? I suspect you can't. Otherwise you can become a victim of theft if someone manages to back up your transactions on their portable hard-drives. Still, one could literally k*ll the owner of a hard drive containing millions of bitcoins and steal the victim's hard drive.

 

This is basically a pure economic model of supply and demand with laissez-faire or non-government intervention thrown in for good measure. It's as if the developers of this bitcoins technology were inspired to introduce the concept by engaging in some form of games app which they eventually decided they could apply to the real world.

 

Many questions need to be asked regarding this interesting but complicated technology.

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so you can't buy anything with it, like a car, right? and the only way a person with this bitcoin can get money from it is if someone buys it?

 

i dunno, man. it's not something tangible that i can put in my hands on and value. it might look like stocks but it isn't because you're not investing on the fortunes of a company but something that doesn't even exist in three dimensions. it's also not like buying art because you can't look at them to appreciate them and you can't be sure that their value will actually appreciate in the future because, well, it's not really real. and since they're just made of 1s and 0s, sooner or later some hacker would be able to wreak havoc on the whole concept.

 

well you actually can buy a car with it, just exchange your bitcoins for pesos and then go buy your car with that, that's the easiest way

 

but yes there are car dealerships that accept bitcoin

 

Tesla (TSLA)- Not only that, but regular brick-and-mortar stores are accepting Bitcoins too. A Lamborghini dealership in Newport Beach, Calif. blogged they accepted Bitcoin in the recent purchase of a Tesla, made for $103,000. The company also wrote they quickly picked up their second customer using Bitcoin. As the digital currency expands and becomes more better defined by regulators, expect this list of companies that support Bitcoin to be longer and longer.

 

Read more: http://www.nasdaq.com/article/what-companies-accept-bitcoin-cm323438#ixzz2tpGvNXzV

 

it's very real currency, and the fact that the number of businesses and establishments are accepting it only makes it more real.

 

there are pubs in the UK that will sell you drinks for bitcoin.

 

it's as real as the dollar, in that it's also not backed by anything like the dollar (the dollar hasn't been backed by gold for decades now). and that the value of the dollar is largely dependent on the belief that it has value.

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There are small / underground economies that accept bitcoins. The most popular one until recently is the illegal drugs shop Silk Road. Now THAT was massive. The only reason you can't buy a car from a name brand shop is because they don't accept it. I'd venture that you might be able to get a second hand car though.

 

yep silk road and the Darknet was my first encounter with Bitcoin. SR going down had a huge effect on bitcoin, and when it was raided and Ross Ulbricht was arrested many speculated that Bitcoin would die. But here we are months later and bitcoin is still rolling along.

 

 

But yes, it's open to attack as much as a weakly designed currency is open to being forged. And yes, Bitcoin has a weakness. The weakness going (more) public recently caused it's value to drop. This drop is really big as literally millions of fortunes depend on its value. Some might say it's time to buy, lol. We'll see how the bitcoin adjusts to this. No it's not about forging or stealing the bitcoin, but there's a way to mess it up such that it may lead to some... confusion.

 

I beg to disagree.

 

Going public only made bitcoin stronger, if you trace back the trend when Bitcoin was used as almost an exclusive currency on SR, the value was somewhere around 20. Now that it's going mainstream the value is now more than 40 times what it was. That's huge, and as more people start trading in it and using it for transactions it's only going to get stronger AND more stable. The adoption rate for bitcoin is almost like that of email when it first came out, or mp3's, and there's nowhere to go but up.

 

The REAL weakness of bitcoin is not in the bitcoin technology itself, but in the exchanges. The huge swings and instability are caused by bitcoin exchanges that have weak security protocols and weak systems that prevent the currency from being traded properly. Right now, one of the major bitcoin exchanges Mt. Gox is under fire for exposing a flaw in their security and has stopped withdrawals from their exchange which caused a huge uproar in the market, since they f#&ked up everything for everyone. Bitcoin in itself is almost flawless in its execution.

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This sounds a bit complicated. Like a computer game app that kids play. Only this is for real. Since it's border less and international in character and there's no government regulators like the SEC which oversees the operations and transactions of the players, there is always the possibility of fraud.

 

To me that's the beauty of bitcoin, that it's not centralized and no one has total control over it. Governments can't artificially inflate it as we've seen in the dollar, and banks can't embargo and freeze your assets. Your money belongs to you. period. It's amazing.

 

the possibility of fraud is virtually nil.

 

you can't duplicate a bitcoin. Its complex cryptography and algorithms prevents a bitcoin from being counterfeited, plus each and every transaction is transparent, and is verified constantly by the network itself. It's virtually impossible to do.

 

I mean if governments can unleash worms such as stuxnet to undermine/sabotage economies, what's to prevent a hacker from infecting the open source code?

 

They've tried I believe, and they couldn't do it. Hacking the code would result in the same thing, there's no central server to hack, and everything is transparent and available to view by anyone at anytime.

 

Governments and banks are very concerned about this, but hacking it is out of the question. They're trying to bring it down by other means though. When Silk Road was busted, Silk Road 2 came out just a few months later and it too was brought down. The thing is the bitcoin that was earned by Silk Road 2 was suddenly missing, and we're talking about thousands of coins. People are speculating that the government took the coins and are amassing a huge amount to dump back in the market to crash the value. We'll see.

 

And what happens if you have millions of bitcoins on your hard drive, but for some reason, the hard drive is corrupted?

The same thing that happens to the money in your wallet if it suddenly catches fire.

 

Can you back up your transactions on another hard drive? I suspect you can't.

yes you can

 

you can back it up on multiple devices, protect it with as many passwords as you want. You can even back it up on a piece of paper. write down the PIN code to a separate wallet on a piece of paper, and lock it down in a safe or a safety deposit box.

 

Otherwise you can become a victim of theft if someone manages to back up your transactions on their portable hard-drives.

Still, one could literally k*ll the owner of a hard drive containing millions of bitcoins and steal the victim's hard drive.

 

These things can happen with traditional currency too.

 

someone can rob my bank, or steal my wallet, or they can k*ll me and have access to my home safe. it's the same thing basically. Personal security doesn't factor in the stability of bitcoin, since it requires the same level of prudence and common sense to keep your bitcoins safe, as with your traditional currency.

 

This is basically a pure economic model of supply and demand with laissez-faire or non-government intervention thrown in for good measure. It's as if the developers of this bitcoins technology were inspired to introduce the concept by engaging in some form of games app which they eventually decided they could apply to the real world.

 

Many questions need to be asked regarding this interesting but complicated technology.

 

true

 

though I can't say what motivated the creators of the technology specifically (even the story of how bitcoin was invented by Satoshi Nakamoto is fascinating) I can see the beauty of this technology.

 

Taking away the power from the powers that be, giving it back to the people, that's amazing, especially in finance. This is the exact same feeling that the world had when mp3's came out, the music industry was rattled, the public was excited but cautious, and not everyone bought into it, but when it gathered steam, it totally changed the way we experienced music, and turned the industry on its head. Same thing with email, and online shopping. when online shopping and banking first came out, everyone was like "f#&k that, that s@%t's not safe" but fast forward to today, everyone's doing it.

 

Cryptocurrency is here to stay IMO, and more and more people are starting to recognize it.

 

you can now pay the IRS in bitcoin and the IRS is now studying how to tax income derived from bitcoin. and as I stated Lloyds of London (the world's oldest insurer) is now underwriting insurance for your Bitcoin wallet. These are legitimate organizations recognizing cryptocurrency as a valid form of payment at par to traditional currencies. That's a sign that bitcoin is getting to the mainstream, and is definitely not just Monopoly money anymore.

 

Whether it's bitcoin or some other cryptocoin, the technology is out there, de-centralized money is here to stay. You can't put that genie back in the bottle. What happens next should be exciting.

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To me that's the beauty of bitcoin, that it's not centralized and no one has total control over it. Governments can't artificially inflate it as we've seen in the dollar, and banks can't embargo and freeze your assets. Your money belongs to you. period. It's amazing.

 

the possibility of fraud is virtually nil.

 

you can't duplicate a bitcoin. Its complex cryptography and algorithms prevents a bitcoin from being counterfeited, plus each and every transaction is transparent, and is verified constantly by the network itself. It's virtually impossible to do.

 

 

 

They've tried I believe, and they couldn't do it. Hacking the code would result in the same thing, there's no central server to hack, and everything is transparent and available to view by anyone at anytime.

 

Governments and banks are very concerned about this, but hacking it is out of the question. They're trying to bring it down by other means though. When Silk Road was busted, Silk Road 2 came out just a few months later and it too was brought down. The thing is the bitcoin that was earned by Silk Road 2 was suddenly missing, and we're talking about thousands of coins. People are speculating that the government took the coins and are amassing a huge amount to dump back in the market to crash the value. We'll see.

 

 

The same thing that happens to the money in your wallet if it suddenly catches fire.

 

 

yes you can

 

you can back it up on multiple devices, protect it with as many passwords as you want. You can even back it up on a piece of paper. write down the PIN code to a separate wallet on a piece of paper, and lock it down in a safe or a safety deposit box.

 

 

 

These things can happen with traditional currency too.

 

someone can rob my bank, or steal my wallet, or they can k*ll me and have access to my home safe. it's the same thing basically. Personal security doesn't factor in the stability of bitcoin, since it requires the same level of prudence and common sense to keep your bitcoins safe, as with your traditional currency.

 

 

 

true

 

though I can't say what motivated the creators of the technology specifically (even the story of how bitcoin was invented by Satoshi Nakamoto is fascinating) I can see the beauty of this technology.

 

Taking away the power from the powers that be, giving it back to the people, that's amazing, especially in finance. This is the exact same feeling that the world had when mp3's came out, the music industry was rattled, the public was excited but cautious, and not everyone bought into it, but when it gathered steam, it totally changed the way we experienced music, and turned the industry on its head. Same thing with email, and online shopping. when online shopping and banking first came out, everyone was like "f#&k that, that s@%t's not safe" but fast forward to today, everyone's doing it.

 

Cryptocurrency is here to stay IMO, and more and more people are starting to recognize it.

 

you can now pay the IRS in bitcoin and the IRS is now studying how to tax income derived from bitcoin. and as I stated Lloyds of London (the world's oldest insurer) is now underwriting insurance for your Bitcoin wallet. These are legitimate organizations recognizing cryptocurrency as a valid form of payment at par to traditional currencies. That's a sign that bitcoin is getting to the mainstream, and is definitely not just Monopoly money anymore.

 

Whether it's bitcoin or some other cryptocoin, the technology is out there, de-centralized money is here to stay. You can't put that genie back in the bottle. What happens next should be exciting.

What do you suppose will happen to the banking industry world-wide if bitcoin becomes the preferred mode of currency sometime down the line? Since banks and governments can't regulate it, and can't put liens on your bitcoins, what will happen to off-shore banking havens and Swiss bank accounts? Will the adoption of bitcoin technology spell the doom for these banking entities? And what about the mainstream banking system itself? How will this be affected if bitcoin technology becomes a success?

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To me that's the beauty of bitcoin, that it's not centralized and no one has total control over it. Governments can't artificially inflate it as we've seen in the dollar, and banks can't embargo and freeze your assets. Your money belongs to you. period. It's amazing.

Governments and banks can control the price of bitcoins by buying up huge amounts then dumping these on the market, bringing down the value of the bitcoins.

 

Just another point of clarification. Are bitcoins supposed to replace the current monetary system we have in place today all around the world? Or are bitcoins merely going to complement regular currency? I would hazard a guess that those who will be most likely to use bitcoins are those involved in underworld activities such as money laundering, the drug trade, ill gotten wealth, etc.

 

Any activity wherein governments could potentially freeze/sequester/confiscate currencies would best be served by using the bitcoin technology.

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What do you suppose will happen to the banking industry world-wide if bitcoin becomes the preferred mode of currency sometime down the line? Since banks and governments can't regulate it, and can't put liens on your bitcoins, what will happen to off-shore banking havens and Swiss bank accounts? Will the adoption of bitcoin technology spell the doom for these banking entities? And what about the mainstream banking system itself? How will this be affected if bitcoin technology becomes a success?

 

they will have to adapt or die much like what happened in the music industry. there will be some small banks that will accept an initial loss but take advantage of the situation and win in the end.

 

Banks I imagine will come up with different services, maybe some that we won't recognize, because with Bitcoin, you are your own bank.

 

if they're smart and realize what bitcoin is, they can adapt early and modify their model.

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Unfortunately bitcoin values are dropping and central banks around the world are clamping down on it.

 

the current crash isn't because of the Bitcoin technology, it's largely due to Mt. Gox tanking, and given the volume that goes through that exchange it screws things up for everyone.

 

not all central banks are opposed or are clamping down on bitcoin, china, russia, iceland (i think), and some others are warning against the use of bitcoin but haven't really done any steps to stop it. france wants to regulate it via law and licensing, croatia has accepted it as a mainstream currency, and so on. So even some central banks are taking a wait and see attitude given the momentum that bitcoin has.

 

it's really very interesting times

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Governments and banks can control the price of bitcoins by buying up huge amounts then dumping these on the market, bringing down the value of the bitcoins.

 

not really, it would take a singular entity a whole lot of money, literally ship loads of it

 

to effect a massive crash via pump and dump, you'd have to buy 5-10% of all bitcoin currently in existence, at currently 11 million bitcoins mined, that's a lot of bitcoin to buy.

 

everytime you buy bitcoin you'd be driving the price up, and if you were going for 5-10%, you'd be paying almost $100M easy for the last few bitcoins to reach that 5-10%, that's a lot of printed money.

 

in fact they might resort to their time-tested tactic of printing up more just to make up that amount. And the economic effect of that would be staggering.

 

Just another point of clarification. Are bitcoins supposed to replace the current monetary system we have in place today all around the world? Or are bitcoins merely going to complement regular currency? I would hazard a guess that those who will be most likely to use bitcoins are those involved in underworld activities such as money laundering, the drug trade, ill gotten wealth, etc.

 

I'd like to see bitcoin or another cryptocurrency reach that level, who knows really if it will replace or co-exist with traditional currencies, only time will tell, but bitcoin and cryptocurrency is here to stay.

 

well I can see how shady people can use bitcoin for illegal activity, but it's too much of a generalization to say that only those who are doing shady stuff would be dealing in bitcoin, especially now that there are over 21000 legit businesses operating with bitcoin.

 

Also, printed paper money has and will still be used for nefarious activity. Money is money, period. What you use it for isn't the money's fault. It's like fire, you can use it to cook you a meal or heat your house, but you can also burn other people's houses with it, now it's not fire's fault that it can be used destructively.

 

-----

 

now is bitcoin complicated, of course. Despite all I've read, I still don't really understand half of it, it's sophiticated and complex, but the main benefit is undeniable.

 

I would rather have a decentralized currency, than one where banks have direct control over the value of my money, have the power to print it out of thin air, and then lend it to me at interest and expect me to slave away and repay that fake debt they created when they printed it out of nothing.

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What are the advantages of Bitcoin?

 

Payment freedom - It is possible to send and receive any amount of money instantly anywhere in the world at any time. No bank holidays. No borders. No imposed limits. Bitcoin allows its users to be in full control of their money.

 

Very low fees - Bitcoin payments are currently processed with either no fees or extremely small fees. Users may include fees with transactions to receive priority processing, which results in faster confirmation of transactions by the network. Additionally, merchant processors exist to assist merchants in processing transactions, converting bitcoins to fiat currency and depositing funds directly into merchants' bank accounts daily. As these services are based on Bitcoin, they can be offered for much lower fees than with PayPal or credit card networks.

 

Fewer risks for merchants - Bitcoin transactions are secure, irreversible, and do not contain customers’ sensitive or personal information. This protects merchants from losses caused by fraud or fraudulent chargebacks, and there is no need for PCI compliance. Merchants can easily expand to new markets where either credit cards are not available or fraud rates are unacceptably high. The net results are lower fees, larger markets, and fewer administrative costs.

 

Security and control - Bitcoin users are in full control of their transactions; it is impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin payments can be made without personal information tied to the transaction. This offers strong protection against identity theft. Bitcoin users can also protect their money with backup and encryption.

 

Transparent and neutral - All information concerning the Bitcoin money supply itself is readily available on the block chain for anybody to verify and use in real-time. No individual or organization can control or manipulate the Bitcoin protocol because it is cryptographically secure. This allows the core of Bitcoin to be trusted for being completely neutral, transparent and predictable.

 

 

What are the disadvantages of Bitcoin?

 

Degree of acceptance - Many people are still unaware of Bitcoin. Every day, more businesses accept bitcoins because they want the advantages of doing so, but the list remains small and still needs to grow in order to benefit from network effects.

 

Volatility - The total value of bitcoins in circulation and the number of businesses using Bitcoin are still very small compared to what they could be. Therefore, relatively small events, trades, or business activities can significantly affect the price. In theory, this volatility will decrease as Bitcoin markets and the technology matures. Never before has the world seen a start-up currency, so it is truly difficult (and exciting) to imagine how it will play out.

 

Ongoing development - Bitcoin software is still in beta with many incomplete features in active development. New tools, features, and services are being developed to make Bitcoin more secure and accessible to the masses. Some of these are still not ready for everyone. Most Bitcoin businesses are new and still offer no insurance. In general, Bitcoin is still in the process of maturing.

 

https://bitcoin.org/en/faq#what-are-the-advantages-of-bitcoin

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What are the advantages of Bitcoin?

 

Payment freedom - It is possible to send and receive any amount of money instantly anywhere in the world at any time. No bank holidays. No borders. No imposed limits. Bitcoin allows its users to be in full control of their money.

 

Very low fees - Bitcoin payments are currently processed with either no fees or extremely small fees. Users may include fees with transactions to receive priority processing, which results in faster confirmation of transactions by the network. Additionally, merchant processors exist to assist merchants in processing transactions, converting bitcoins to fiat currency and depositing funds directly into merchants' bank accounts daily. As these services are based on Bitcoin, they can be offered for much lower fees than with PayPal or credit card networks.

 

Fewer risks for merchants - Bitcoin transactions are secure, irreversible, and do not contain customers’ sensitive or personal information. This protects merchants from losses caused by fraud or fraudulent chargebacks, and there is no need for PCI compliance. Merchants can easily expand to new markets where either credit cards are not available or fraud rates are unacceptably high. The net results are lower fees, larger markets, and fewer administrative costs.

 

Security and control - Bitcoin users are in full control of their transactions; it is impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin payments can be made without personal information tied to the transaction. This offers strong protection against identity theft. Bitcoin users can also protect their money with backup and encryption.

 

Transparent and neutral - All information concerning the Bitcoin money supply itself is readily available on the block chain for anybody to verify and use in real-time. No individual or organization can control or manipulate the Bitcoin protocol because it is cryptographically secure. This allows the core of Bitcoin to be trusted for being completely neutral, transparent and predictable.

 

 

What are the disadvantages of Bitcoin?

 

Degree of acceptance - Many people are still unaware of Bitcoin. Every day, more businesses accept bitcoins because they want the advantages of doing so, but the list remains small and still needs to grow in order to benefit from network effects.

 

Volatility - The total value of bitcoins in circulation and the number of businesses using Bitcoin are still very small compared to what they could be. Therefore, relatively small events, trades, or business activities can significantly affect the price. In theory, this volatility will decrease as Bitcoin markets and the technology matures. Never before has the world seen a start-up currency, so it is truly difficult (and exciting) to imagine how it will play out.

 

Ongoing development - Bitcoin software is still in beta with many incomplete features in active development. New tools, features, and services are being developed to make Bitcoin more secure and accessible to the masses. Some of these are still not ready for everyone. Most Bitcoin businesses are new and still offer no insurance. In general, Bitcoin is still in the process of maturing.

 

https://bitcoin.org/en/faq#what-are-the-advantages-of-bitcoin

Very interesting article. Although I doubt if any of our honorable senators and congressmen will have the brain power to enact legislation that would help ensure that bitcoin technology isn't abused by would-be criminals wanting to take advantage of a technology than many people still don't understand.

 

Would you know of any local company that accepts bitcoins at this time as payment?

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well here's the thing

 

bitcoin like traditional paper money can used and abused by anyone.

 

criminals can use bitcoin to launder their money, that's true

 

but

 

criminals can also use traditional paper currency to launder their money too, with the exact same ease that they would have when doing it with bitcoin.

 

it's exactly the same thing

 

like I said, what it's going to be used for isn't the point. It can be used for anything, in the same way that regular paper money can be used for anything.

 

so I don't see the point of regulating bitcoin for fear of people abusing it. If you regulate it, it would defeat the purpose.

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well here's the thing

 

bitcoin like traditional paper money can used and abused by anyone.

 

criminals can use bitcoin to launder their money, that's true

 

but

 

criminals can also use traditional paper currency to launder their money too, with the exact same ease that they would have when doing it with bitcoin.

 

it's exactly the same thing

 

like I said, what it's going to be used for isn't the point. It can be used for anything, in the same way that regular paper money can be used for anything.

 

so I don't see the point of regulating bitcoin for fear of people abusing it. If you regulate it, it would defeat the purpose.

Many American criminals have stashed away huge sums into Swiss bank accounts to prevent the US government from touching/freezing these funds. Lately, I understand, the US government has enacted new laws requiring Swiss banks to disclose the names of Americans who have accounts in their banks.

 

Given the powerful clout of the US government, the Swiss banks have no choice but to comply. So now, even Swiss bank accounts aren't a completely safe haven for American criminals.

 

Will the US government be able put a lien/freeze accounts of Americans who own bitcoins? If not, then this will be very attractive to US criminals.

 

 

 

 

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http://money.cnn.com/2014/02/19/technology/security/bitcoin-black-market/index.html

 

 

 

 

Silk Road heist could doom Bitcoin black markets

 

The heart of the issue is that Bitcoin -- by design -- doesn't work well with shady middlemen. Anyone with access to your digital wallet can empty it forever. And all transactions are irreversible.

 

That's why it's not smart to fork over bitcoins to an underground website like Silk Road, which stands between buyers and sellers and holds on to money during a deal.

 

"When you introduce a third party holding on to people's funds, it's absolutely antithetical to the idea of Bitcoin," said Evan Rose, CEO of Bitcoin ATM maker Genesis. "You're giving someone cash over the Internet that you'll never be able to get back."

 

Silk Road's new administrators said hackers exploited a Bitcoin glitch to steal funds. But in the days since the attack, it's become painfully clear that the Bitcoin system isn't to blame. Only two scenarios exist, says Andreas Antonopoulos an engineer at Bitcoin wallet service Blockchain: Silk Road's leaders were fooled into emptying all their accounts willingly, or they simply swindled their customers themselves.

 

Related: Bitcoin regulation coming this year

 

Those who currently use bitcoins to buy drugs, weapons or hire assassins also have something else to worry about. All transactions leave a permanent record that's traceable to specific wallets. Even though Bitcoins are technically anonymous, if they ever pull that money out in their name at a legitimate Bitcoin bank or exchange, law enforcement has a direct connection to a real identity.

 

That's why Weaver says bitcoins are essentially "prosecution futures."

 

Bitcoin tracing experts are already cropping up -- and they're teaming up with law enforcement too. Sarah Meiklejohn is a computer scientist and graduate student at the University of California in San Diego, where she explores how people are spending their bitcoins.

 

She said people spending bitcoins in black markets don't realize "every bitcoin is by nature a marked bill." And it's not as forgiving as actual cash. If police catch you buying something illegal in person, you get criminal charges for that single act. Bitcoin's permanent, public ledger gives prosecutors a much longer memory.

 

"if you get caught buying drugs with bitcoins and they look at your transaction history, you get caught on every transaction you've ever made," she said. "It's much more serious." http://i.cdn.turner.com/money/images/bug.gif

 

NEW YORK (CNNMoney)

 

 

The jig may be up for online drug bazaars that accept bitcoins.

Black markets on the Deep Web offer everything: money laundering and a one-stop-shop for illegal drugs and guns. But a recent series of heists, busts and fraud have shown why these bazaars can't be trusted. In October, the FBI shut down Silk Road, the biggest online black market, seizing $3.5 million of bitcoins in the process. In November, a similar site called Sheep Marketplace was labeled a scam after it lost $6 million in users' bitcoins in an alleged hack. And last week, administrators of a revived Silk Road claimed cyber attackers sucked out all the bitcoins it held in escrow -- valued at $2.7 million.

 

This latest episode "may mark the death knell for the dark markets," according to Nicholas Weaver, a security researcher at the International Computer Science Institute.

 

"Between busts, scam-markets, and now mass theft, it is a task that they clearly are incapable of doing," Weaver said.

 

 

 

 

 

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http://news.yahoo.com/inside-great-bitcoin-heist-104500305--politics.html;_ylt=A0SO8xiOngxTPV4AwZlXNyoA;_ylu=X3oDMTExMzRwNWZ0BHNlYwNzcgRwb3MDMgRjb2xvA2dxMQR2dGlkA1VJQzFfMQ--

 

 

 

 

 

Inside the Great Bitcoin Heist

By Michael Daly February 18, 2014 5:45 AM The Daily Beast 0 shares Inside the Great Bitcoin Heist

Two major bitcoin heists worth millions of dollars have struck in the cyber world beyond the reach of Google into what is known as the “deep web.”This vast realm of cyberspace comprises some 90 percent of the internet and allows users to travel and communicate in an untraceable anonymity that even the NSA has difficulty compromising. Users are accorded freedom from big menaces such as censorship and political oppression, as well smaller ones such as privacy-invading marketers.

 

But there are also those who take advantage of the freedom to sell drugs, steal— or maybe both in the case of these two big heists. One of the heists may have exceeded the $6 million Lufthansa heist of Goodfellas fame in 1978, by as much as eight-fold in actual dollars, still double when adjusted for inflation.

 

They both, however, follow the aftermath of Operation Marco Polo, in which the FBI shut down the deep web rug bazaar Silk Road and arrested its alleged founder, Ross Ulbricht, in October. Users who then went to the site were greeted by the words:

 

‘THIS HIDDEN SITE HAS BEEN SEIZED”

 

When the FBI arrested Ulbricht in a San Francisco Public library, an agent managed to snatch his laptop from him before the could snap it shut and trigger its password protections. Ulbricht—who goes by the online alias “Dread Pirate Robert” or just “DPR”—denies all charges against him, despite allegedly having 173,991 bit coins in his “wallet.” That was added to 29,655 bitcoins the FBI seized when it shut down Silk Road. The total came to 173.991, estimated to be worth some $34.6 million at the time, but rising to over $175 million at the height of the bitcoin roller coaster.

 

In the aftermath of the Silk Road takedown, an online character known as MettaDPR popped up in the deep web, and seems to have perpetrated a small theft scam that preceded the big heists soon to come.

 

“Metta,” which is the Pali word for “goodwill”, was melded with DPR to befit the administrator of a new market place called Project Black Flag in the immediate aftermath of the Silk Road takedown.

 

But the moniker turned ironic just three weeks later, when the new pirate of the deep web posted an announcement that he was shutting down and taking his customers’ money with him.

 

“Well mates, I am saddened to say goodbye. When I created P: BF, my intent was pure and I wanted to help the community. Several days ago I begin implementing code changes to freeze funds and dump them to myself. I was unable to cope with the stress and constant demand, so I panicked. I am sorry for my actions, but with the funds I gathered from the site, I will be able to keep myself from being homeless for the next several months. I will always remember those that made this possible.”

 

As a departing gesture, MettaDPR said he would leave up a forum for people to curse him for taking down Black Flag itself and making off with what is estimated to be a few thousand dollars in bitcoins.

 

“I take no offense at truth,” he wrote. “I understand the depth of my failure.”

 

The more charitable commenters wondered if MettaDPR was just a bumbler who had panicked after getting in over his head. Others figured it was just a scam from the outset. One poster named Pablo offered a 50 bitcoin reward for “real info” identifying the MettaDPR.

 

“Friend in Mexico want to talk to Metta,” Pablo wrote.

 

That may well have been some online role playing, but lest you think no actual danger lurks in the deep web, consider that the charges against Ulbricht include multiple murder conspiracies.

 

Those who wanted to take advantage of deep web anonymity to buy illegal drugs, as well other items such as firearms and forged drivers licenses, could still go to Sheep Marketplace, which had been founded earlier in 2013.

 

Then, in late November, Sheep Marketplace announced that it had been looted of all its bitcoins, including the ones customers had lodged with the site pending the completion of deals:

 

“We are sorry to say, but we were robbed on Saturday 11/21/2013 by vendor EBOOK101. This vendor found bug in system and stole 5400 BTC—your money, our provisions, all was stolen. We were trying to resolve this problem, but we were not successful.”

 

This came just as the value of a bitcoin was spiking up past $1,000, which would put the theft reported by the Sheep Marketplace administrators at more than $5.4 million. The website Blockchain, which records the movement of bitcoins, recently indicated that the 39,918 bitcoins received by Sheep Marketplace had subsequently just vanished, leaving a balance of just 0.01 bitcoins.

 

That would put the actual theft in excess of more than $40 million, whereas the Lufthansa heist was under $22 million n present dollars.

 

A website called sheepmarketplacescam.com sprang up and noted that in the days before the crime a number of vendors who were apparently close to the Sheep Marketplace administrators suddenly began offering much bigger loads of drugs at discount prices and demanding that the money be paid upfront. The suggestion was that it was not a robbery but a scam, a repeat of MettaDPR’s hustle on a huge scale.

 

In the meantime, a revived Silk Road, or at least a good facsimile, materialized. Users were greeted with an altered version of the notice the FBI had posted, the words “BEEN SEIZED” now replaced.

 

“THIS HIDDEN SITE HAS RISEN AGAIN.”

 

What seems to have been a new Dread Pirate Robert, DPR2, greeted users with a “welcome back to Freedom” note. The site was back in business, with a page offering a menu of illegal drugs in categories ranging from “opiods” to “cannabis” to “stimulants.”

 

Then, last week, a site administrator calling himself Defcon announced in a lengthy post that the new Silk Road had been hacked and cleaned out of the 4,4474 bitcoins worth $2.7 million.

 

“I am sweating as I write this,” Defcon’s post began.

 

He went on, “I must utter words all too familiar to this scarred community: We have been hacked.”

 

He quickly added, “Nobody is in danger, no information has been leaked, and server access was never obtained by the attacker. Our initial investigations indicate that a vendor exploited a recently discovered vulnerability in the bitcoin protocol known as ‘transaction malleability’ to repeatedly withdraw coins from our system until it was completely empty.”

 

In other words, the money was gone. He went on to say that “this attack hit us at the worst possible time,” just when the site had placed all available bitcoins in accessible “hot storage” to cover projected orders.

 

“In retrospect this was incredibly foolish, and I take full responsibility for this decision,” Defcon said. “I have failed you as a leader, and am completely devastated by today’s discoveries.”

 

He seemed to be either sincere or a pretty good scamster when he lamented, “It is a crushing blow. I cannot find the words to express how deeply I want this movement to be safe from the very threats I just watched materialize during my watch.”

 

He beseeched the thieves, “Whoever you are, you still have a chance to act in the interest of helping this community. Keep a percentage, return the rest. Don’t walk away with your fellow freedom fighters’ coins.”

 

As if this were Occupy Deep Web, he continued, “It takes an entire community committing to integrity—and though this crushing blow will not stop us, it sure is a testament to how greedy some bastards truly are. Being a part of this movement might be the most defining thing you do with your entire life. Don’t trade that for greed, comrades.”

 

One could almost forget Silk Road is a bazaar for drug dealers as Defcon said, “The only way to reverse a community’s greed is through generosity. Our true character is revealed during trying times.”

 

He even offered, “If this financial hardship places you at risk of physical harm, contact me directly and I will do my best to help you with my remaining personal funds.”

 

He then announced new security measures and financial procedures with a spirit we could have only wished the big banks had shown after the near collapse of the economy:

 

“We do not want to be a centralized point of failure, but we also do not want to lead our buyers into dangerous waters.”

 

He added, "From this point forward DO NOT trust markets with centralized escrow. Use multi-signature transactions whenever possible, with trusted third parties as escrow providers.”

 

The message took an ironic twist when Defcon offered reassurances that in raiding the site the crooks had not compromised user anonymity so as to leave dealers and buyers open to being identified by law enforcement. Silk Road users would otherwise face being busted as a result of being robbed.

 

“This was not a worst-case scenario: nobody will be getting arrested from this,” Defcon said. “Financial loss is terrible, but will not put all of us behind bars.”

 

In another twist, the site that pledges “anonymous market” at the upper left of its merchandise listings was posting info that could help track down the thieves.

 

“I’ve included transaction logs at the bottom of this message. Review the vendor’s dishonest actions and use whatever means you deem necessary to bring this person to justice,” Defcon wrote. "More details will emerge as we continue to investigate. Given the right flavor of influence from our community, we can only hope that he will decide to return the coins with integrity as opposed to hiding like a coward.”

 

Defcon closed by saying, “The details we have on the hacker are below. Stop at nothing to bring this person to your own definition of justice.”

 

The info rundown was headed “Attacker Intel as of 2014-02-13 18:00:00 UTC” and was preceded with the message, “We normally do not doxx anyone, and hold user information sacred…”

 

Doxx meaning to reveal someone’s actual identify.

 

“…But this is an extreme situation affecting our entire community, and all three users who have exploited this vulnerability are very much at risk until they approach us directly to assist with any information.”

 

The main attacker, “responsible for 95% of theft,” was “suspected French” and supposedly used six vendor accounts “to order from each other, to find and exploit the vulnerability aggressively.” The usernames were narco93,ketama, riccola, germancoke, napolicoke, and smokinglife.

 

“Finding Attacker 1 is top priority,” the posting advised.

 

The other two attackers were together responsible for only about 5 percent of the thefts, though both seem to know the major suspected thief.

 

Among some of the more suspicious denizens of the deep web are mutterings that maybe the revival of Silk Road is just one big scam; that Defcon is just a con.

 

Meanwhile, the U.S. government finds itself with 173,000 bitcoins, or by one reckoning 1.5 percent of all bitcoins.

 

In one ultimate twist to the tale, access to the deep web was developed via the U.S. Navy Research Laboratory, and conceived as an “onion router,” meaning a system that adds successive layers of encryption to an online identity as it randomly caroms around a volunteer network of relays. The result was The Onion Router, or TOR, which then became Tor.

 

As it so happens, the Tor Project is subsidized by the U.S. government, Sweden and private donations. The software is available to everyone for free—not so much as a bitcoin.

 

 

 

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