Bitcoin is hard to shove into some kind of product category that we know well. “Virtual currency,” as it is often called, is not officially recognized as a means of payment anywhere on the planet. This is not an asset designed to generate income, like bonds or shares, known to most investors. Its value in dollars varies widely and can change even for one minute. It can be a cheap way of transferring money, but so far most people do not have confidence in the absolute reliability of the Bitcoin network so that it can be used by everyone and everywhere.
Even lawyers Bitcoin warn everyone that the system has not yet reached maturity. Patrick Murck, general representative of the Bitcoin Foundation, a non-profit organization that “promotes the development of the Bitcoin ecosystem,” said at the Senate hearings last week: “For the most part, the currency remains experimental, and this is a high-risk environment for consumers and investors to date.”
And yet, in the bitcoin attention, and not only because speculators are making a lot of money on it. Bitcoin embodies elegant and destructive technology. It uses the peering file access, the same innovation that spawned the early music services such as Napster and Kazaa. These companies are the pioneers in the beginning sometimes transgress the laws (of copyright), but their experience led to the digital transformation of the music business.
Bitcoin utilizes this technology to reinvent money again. In essence, it creates a “decentralized virtual currency, which uses a distributed consensus for conducting transactions,” as concluded in a recent report the FED researcher.
Frank Weld, Senior Economist at the Federal Reserve Bank in Chicago, wrote in a report on Bitcoin: “he is a remarkable conceptual and technical achievement, which can be used by existing financial institutions (they can issue their own analogues of bitcoin) or even Governments themselves. “the Bitcoin network capabilities for remittance and low interest of many corporate clients of a law firm Proskauer, although none of them until it does not. So says Jeffrey Neuberger, Director of the firm Proskauer.
“This technology is still at an early stage,” adds Neuberger. “But it could be revolutionary.” in short, in the world of money and finance in the Bitcoin, or similar technology, it has a great chance to change the future.
This made the hearing last week in the National Security Committee of the Senate of the United States such intriguing. In the hearings were analyses potential risks, threats and promises, which bear virtual currencies “such as the Bitcoin.
Whether the policy is understood, what is Bitcoin? Sen. Tom Tom Carper, Democrat of Delaware and Chairman of the Committee, admits he is not sure that he understood its meaning: “virtual currencies, primarily the Bitcoin, captured the imagination of some, spooked by others and to confused everyone else like me.
The attempt by the Senators understand what is Bitcoin is just one of the first steps in a long process. On one side of this process are those who are interested in the simplicity and anonymity of transactions cryptocurrency, and on the other is the Government trying to control everyone and everything.
As speculators and those who seek to protect their financial privacy, found a lot of interesting things in the anonymity of digital currency. She also asked those who wanted to launder illegal earnings, and this has spurred the Government to retaliate. Bitcoin also took the Silk Road Web site, which the Government closed in October. According to Jennifer Kalveri, Director of the Agency’s financial crimes, it was “the biggest market for illegal drugs and contraband in the Internet. According to her, “the requirement to pay the Manager gave the possibility of bitcoins Silk Road and its sellers to avoid detection and to launder hundreds of millions of dollars.”
Virtual currency, however, is not a full guarantee from government surveillance. “We are improving, but crime is improving,” said Raman Mizli hearing, IO Assistant Prosecutor General of United States. Private bitcoin transactions are encrypted, but in large quantities they can be statistically compared to law enforcement databases. And similar models will analyze this data, some experts believe.
While users reserved the Bitcoin system encryption, anonymity systems vulnerable at a time when digital currency is exchanged for ordinary dollars. Federal and state laws require companies who change dollars for bitcoin, fit the laws. But when normal bitcoin currency takes place where American rules do not apply, “an opportunity to launder money,” said Mr Nejberger, of Proskauer.
Securities Commission (SEC), for its part, warned investors about the dangers of fraud using bitcoin and similar virtual currencies. An example would be Shjevers, a resident of Texas Trendon who ran a Ponzi scheme with promises of enormous wealth to all who give him his bitcoin. “Scammers read news editorials as well as all other people,” says Laurie Shock, Director of the SEC to educate investors. “The Bitcoin sounds attractive and new, but, in the end, if you propose to invest it with the promise of unlimited income is unclear from where everything comes down to an old-fashioned Ponzi scheme.”
The SEC is also investigating and offer Cameron and Tyler Uinkelvossov (investors, more famous for their participation in Facebook), to establish a legitimate bitcoin-Creative Commons They are going to open an open exchange traded fund (ETF), which will follow the price Bitcoin. If this ETF will ever be approved, it is unlikely that a Fund, based on the highly volatile currency, will be the main position in the conservative portfolio investors. But for portfolio and long-term investors, it makes sense to invest quite a small proportion of the asset portfolio.
Meanwhile, the rise of the value of virtual currencies generates impressive history, such as this: the student from Oslo Christopher Koch told the BBC that he bought the $26 bitcoin four years ago, and soon forgot about it. When Christopher recently unearthed his long forgotten digital wallet bought them coins already cost $850.000.
Despite all the cost growth, Bitcoin still has enormous potential.
After all, a robust, decentralized, distributed digital currency for many thinkers is simply the Holy Grail. So, Milton Friedman, a Nobel Laureate and a luminary of libertarian thought, back in 1999 year predicted her appearance. According to his prediction, the Internet will create a Wednesday for all of breakthrough innovation, including in the financial field. Markets will prosper in cyberspace, freeing people from the sweltering tutorship paternalistic and inefficient Governments. But he also mentioned that one ingredient for this is missing. Friedman called it “a reliable electronic cash.”
Such a currency, he said, “will provide an opportunity to reliably transmit media from A to B without having to (A) and (B) knew each other — just as I can take $20 Bill and give it to you. And you answer, not even knowing who I am.
“the Bitcoin like nothing else, fully consistent with the long-standing vision of Nobel laureate.
He said that, of course, such a currency could create new problems, because any technology you can find negative side. “Bandits and those who engaged in illegal business, guests will appreciate its advantages.”
according to him, “it is necessary to perceive just as the price of progress.