Global, private and untraceable, it’s the monetary system of choice for libertarians, geeks, businesspeople and, apparently, drug kingpins. Earlier this week, two senators sent a letter to the US Attorney General, copied to the Drugs Enforcement Agency, alerting them to the existence of an underground website called Silk Road. Like a lawless eBay, Silk Road users can, according to the senators, “freely purchase and sell illegal drugs . . . from cocaine and heroin, to ecstasy and marijuana”. For this they are using the digital currency Bitcoin.
Created in 2009 by an anonymous Japanese computer science student using the pseudonym Satoshi Nakamoto, Bitcoin was initially adopted by hackers as a means of bartering services. Now it is fast becoming the unofficial currency of the web.
Anyone can buy virtual “coins” at a variety of online exchanges, using major global currency – but they aren’t just used for drugs. The list of legitimate businesses that accept Bitcoin is growing all the time, from legal services to landscape gardening, video game retailers to makers of alpaca socks. With one Bitcoin currently traded at around £9.22, the value of the whole Bitcoin economy is estimated at around £32.6m and growing fast.
Unlike traditional national currencies, Bitcoin has no central issuing authority. In theory, the “coins” can be created, or “mined” by anyone, but they require a powerful computer and a lot of time to generate. Their supply is controlled using a series of complex mathematical algorithms built into the software.
What makes Bitcoin so appealing to its advocates, is that unlike other online methods of payment, such as credit cards or Paypal, transactions made using the currency are virtually untraceable, almost like a digital version of cash. As well as appealing to criminals, the anonymity Bitcoin offers is becoming increasingly attractive to ordinary people who object to the vast amount of personal information that is routinely collected by online retailers for marketing purposes.
An odd alliance of libertarians, geeks, businesspeople and drug kingpins hail Bitcoin as the future of the internet – global, private and immune from national economic crises and the whims of reckless bankers. Its critics in the political sphere fear that it could give rise to an online Wild West of gambling, prostitution and global bazaars for contraband.
Previously dismissed as a nerdy curiosity, the untaxable Bitcoin may soon be due for a crackdown.