In “Neptune’s Brood” a sci-fi novel by Charles Stross, set in AD 7000, Homo sapiens are extinct, and all the characters are androids. In that part of the galaxy, interstellar money is entirely cryptocurrency which goes by the name of “bitcoin”. If so, is that an indication that cryptocurrencies will reign in future?
Bitcoin is the most disruptive invention since the internet. I believe, cryptocurrencies like bitcoins could be the future of our global economic system. It would be like having our bank in our mobile phones. We wouldn’t need banks and third-parties, we would be able to send money around the world without worrying about governments, exchange rates and other problems inherent in our current financial world. Many today want to escape a banking system that they feel is dishonest and inherently unfair. Bitcoins could well be the answer.
Cryptocurrencies are recent in origin. Bitcoin was the first cryptocurrency. It was invented in 2009, by a mysterious person or a bunch of persons making use of the name Satoshi Nakamoto. It was released as an open-source software which could be sent from user-to-user on the peer-to-peer Bitcoin network without the need for go-betweens.
In 2010, the first known business transaction using bitcoin occurred when programmer Laszlo Hanyecz bought two Papa John’s pizzas for 10,000 bitcoin. After early testing of transactions, the first significant users of bitcoin were dark-net markets, such as Silk Road.
Jordan Kelley, the founder of Robocoin, launched the first bitcoin ATM in the United States on February 20, 2014. The kiosk installed in Austin, Texas is similar to bank ATMs. A cafe in London installed the country’s first Bitcoin ATM which takes the money and dispenses Bitcoin which is then used to buy cakes and coffees. A Boston-based online restaurant “Foodler”, accepts payments in bitcoins, and is doing about $15,000 in Bitcoin food orders per month.
Bitcoins get created or are “mined” by cracking outrageously complicated mathematical equations, requiring immense computing power as a reward for a process known as mining.
Cryptocurrencies adopt different approaches when it comes to managing supply, but many of the popular ones, including Bitcoin and Ethereum, are “mined” only up to a fixed number. For example, just twenty-one million Bitcoins can ever be mined; nearly seventeen million have been so far.
Cryptocurrency users send funds anywhere in the world like emails between wallet addresses on the blockchain without any transaction fees. Imagine two users, Ram and Sunil. If Ram wants to send one Bitcoin to Sunil, he must know the address of Sunil’s Bitcoin wallet. Ram then uses his private key to securely sign a transaction containing Sunil’s wallet address and the amount to be transferred. Ram then sends the signed transaction to the Bitcoin network, where it is confirmed across the blockchain by “miners” and recorded into a transaction “block.” Once this occurs, the transaction is complete. Anytime a transaction takes place; it is recorded forever in a public ledger known as the “blockchain,” which ensures no duplicate transactions are permitted.
The majority of the people purchase Bitcoins on external exchanges with conventional currencies, such as dollars or euros, or with plastic money. The exchange rates against the dollar for Bitcoin oscillate wildly. For example, the price of a single Bitcoin was just a few U.S. dollars in 2012, but it spiked to more than $19,000 in December 2017, thereby making Bitcoin a big speculative asset.
FBI owns the single largest Bitcoin wallet on the internet. After the FBI brought down the darknet market Silk Road, it started seizing bitcoins belonging to the Dread Pirate Roberts - the operator of the darknet marketplace, an American man by the real name of Ross Ulbricht. The FBI now controls more than 144,000 bitcoins that reside at a bitcoin address which are worth close to $100 million.
Cryptocurrencies by facilitating a digital and anonymous payment mechanism have eased the way for the growth of ‘darknet’ marketplaces in which illegal goods and services are traded.
It has also created significant regulatory challenges, including the use of cryptocurrencies in black markets of drugs, hacks and thefts, illicit pornography, even murder-for-hire, including it’s potential to fund terrorism, launder money, and avoid capital controls.
It’s been noticed that illegal activity accounts for a substantial proportion of the users and trading activity in bitcoin. For example, approximately one-quarter of all users (25%) and close to one-half of bitcoin transactions (44%) are associated with illegal activity.
The estimated 24 million bitcoin market participants that use bitcoin primarily for unlawful purposes as on April 2017, annually conduct around 36 million transactions, with a value of about $72 billion, and collectively hold approximately $8 billion worth of bitcoin.
The cryptocurrencies could be used to finance terrorism if it is not counteracted effectively. Mikko Hypponen, the chief research officer for anti-virus vendor F-Secure, based in Helsinki, Finland, cautions that the Islamic State, better known as ISIS or ISIL, could get funded, to some extent by bitcoins. “ISIS also operates sites in the deep Web - Tor hidden services - that are appealing for donations for the Islamic State in bitcoins.” In 2016, an Islamic State-associated Darknet site called Isdarat, accessible through The Onion Router (Tor) browser, was discovered to have sought bitcoin donations from supporters.
In June 2015, a US court convicted Shukri Amin, a 17-year-old from Virginia, for providing monetary support to IS. Amin was accused of assisting Islamic State supporters by encouraging people to donate bitcoins to the group through social media platforms. In 2014, reports of Islamic State fighters in Raqqa, Syria using bitcoins for international transactions and for making small or domestic purchases in money transfer offices surfaced. In December 2017, a woman was arrested in New York for procuring $62,000 in bitcoin to send to Islamic State.
Although Bitcoin makes it possible to exchange money without anyone knowing who is sending or receiving it, it’s possible to track how the cash flows through blockchain as well as other transactions, once someone understands the bitcoin address of the person he is paying.
This is because all the transactions are recorded on the blockchain. That may be the reason why bitcoin is becoming less popular with criminals as law enforcement units are getting better at tracking large amounts of the currency linked to criminal activity.
Besides, tracking illicit digital transaction has become easy today with “Chainalysis” cryptocurrency investigation software which helps law enforcement and financial institutions identify and stop bad actors who are using cryptocurrencies for illegal activity such as fraud, extortion, and money laundering. The software enables police to track the delivery points of ransom payments and identify criminals withdrawing their illegally procured funds at an exchange.
Three researchers at the University of Luxembourg have disclosed that they have identified techniques that can be readily used to verify the identity of anonymous Bitcoin users for between 11 percent and 60 percent of all Bitcoin transactions. Deanonymising a Bitcoin user means linking their nom de plume - which serves as a public key - to the IP address from which they trade bitcoins. To achieve this, the researchers have informed that they only require $2,000 worth of equipment.
The researchers also say they can defeat users who endeavour to disappear behind firewalls or network address translation. The researchers say they can also unmask up to 60 per cent of Bitcoin users who employ the Tor anonymising network to mask their IP address. The deanonymizing method opens up new ways for law enforcement agencies to tie transactions to an IP address, and perhaps back to the identity of a criminal.
Beyond cryptocurrencies, there are numerous other forms of digital payments such as Liberty Reserve, E-gold, and WebMoney. Liberty Reserve, in
particular, was accused of laundering more than $6 billion for several years, according to federal prosecutors.
Known as the PayPal for criminals,” with no personal account details required, Liberty Reserve facilitated a broad range of criminal activities across the Darknet, including “credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and near- narcotics trafficking.”
It is also believed to have played the central part, in stealing $45 million from thousands of ATMs in 24 countries in December 2012 and February 2013.
Though Liberty Reserve, like Silk Road, was ultimately brought down by the FBI and its founder arrested, many competitors have burgeoned out in its place.
The competitors promise not just pseudonymity but also completely untraceable anonymity. One such new currency, Darkcoin, has been created specifically to confuse users’ purchases by combining any single transaction with those of other users so that payments cannot be linked to any particular individual.
The popularity of Darkcoin is increasing rapidly, and its value has spiralled up from seventy-five cents a coin to almost $7 shortly after its introduction. Another tool, Darkwallet, created by an organisation referring to itself as unSYSTEM, is known to enable “hyper-anonymised” transactions.
Finally, like the bitcoins in the financial world, humans don’t need intermediaries to establish a spiritual connection with inner divine selves. We all can find our way through.
Further, taking the analogy of Metcalfe’s law, if 1000 persons using bitcoins grow to 100000 and if they convert to ten billion. That will decentralise banking systems entirely in the world and bring transparency.
Quite similarly, if 1,000 people practising meditation were to increase exponentially to 10 billion people, it would create a new world re-wiring the consciousness of the world as a whole....