Satoshi Nakamoto a genius-geek is the inventor of Bitcoin. He created it entirely out of code. It would have all the main features that good money has. It would be divisible, portable, durable, uniform in quality, and scarce. He chose the model of open source code: everyone could see exactly how it is made. It would live on a ledger in the Internet cloud, and the ledger would keep strict controls on creation of new units and the ownership of existing units.
There was just one problem: His newly created Bitcoin had no value whatsoever. Nakamoto knew that if it were ever to have value, the programmers couldn’t impart it. It had to come from the market itself. The proposed product appeared in January 2008 on the market. One could think of this as an act of secession, a final declaration of no confidence in the existing monetary system.
For the next eight months, it was nothing but a curiosity. A techy’s dream that never could reach beyond the dark part of the Internet, only for the circle of similar genius-geeks. But in October 2009, something amazing happened. Bitcoin obtained a price on the market. It began to trade at about 2/10 of a penny. In other words, one U.S. cent would get you 5 Bitcoins. But now four years later “Bitcoin” is the decentralized virtual currency that approximates cash on the Internet.
Gold has been a reliable store of value throughout its history, because you can’t simply “print” more of it, while digital files do not usually have this limitation. You can create an infinite amount of copies of your digital files and photos. And U.S. dollars, too! However, bitcoin’s creators took this “limitation” into account. They made their virtual currency a deflationary one. They programmed new bitcoin creation to slow down over time – slowly but surely – until it basically stops. Which should make each remaining bitcoin more valuable… as they chase an increasing amount of goods, the virtual currency gains wider acceptance. If this is true that a computer program limits the supply of bitcoin, it is also true the supply of bitcoin-like successors is as expandable as the universe itself.
There are at least 60 types of digital currencies/payment systems. The largest of them are Bitcoin followed by Litecoin, Peercoin, Namecoin and Quarkcoin. Money is just a placeholder,” wrote Bill Bonner. “It has no value in itself. It just signals your position relative to everyone else… It doesn’t really matter what you use as money. But some things work better than others.”
There is one store of value not in the headlines today – and that would be aforementioned gold. It has a little bit more “street cred” as money, yet everyone seems to be yelling out over the bitcoin today. For some real money, however it still is better to stick with the real thing.
But what is liked about bitcoin is the same thing the central bankers don’t like about it. They can’t control it. So, they can’t use it to steal from people. And they can’t use it to bail out their friends – support zombies – or finance meaningless wars. Nor can they use bitcoin to cover their deficits or to manipulate the economy. Why can’t the feds put their enormous computing power to work to mining bitcoin? That way, if bitcoin becomes the coin of the realm, they could still control it – with a huge reserve of their own? Are they too busy spying on people? Are they too unintelligent to see the potential? Or is it the double security that is implemented in the system?
“Bitcoin is twice protected with SHA256 (SHA256), twice chopped and twisted together as a hash of bits and bites. The fiat monetary system is protected just by one single SHA256 hash, like most of all other security’s of everything in the world. When a hacker breaks in SHA256 that will let collapse the global banking system, and the rest of the Internet, before a dual SHA256 protection comes into trouble. That is not to say that bitcoin will survive as the Internet goes down, but the rest of the world does have a bigger problem when the single SHA256 is cracked. Authorities are simply played out. Bitcoin must be the thorn in their fur.
When the Internet goes down, the banks are cake. Once a single SHA256 is cracked banks too are gone, but bitcoin is still one magnitude more secure because of its double SHA256 security.
Bitcoin is the anonymous alternative currency, and the best way to collect money. Payment remains anonymous and doesn’t have to go through some online clearinghouse that would create a digital paper trail. May bitcoin have become a boon for criminal enterprises, including money laundering? What used to be an expensive, painful process – involving dummy corporations, cycle after cycle of money movement, and a significant overhead cost – is now as simple as buying up bitcoins. That’s not even touching on illegal enterprises such as drug trafficking over the Internet. The anonymity – and un-traceability – of bitcoins makes them an obvious choice for criminals.
On the other hand, that very anonymity is what makes bitcoins so important too. It allows anyone to spend their money as they see fit – including as an example, citizens can fund the opposition of oppressive regimes. As the Bitcoin Foundation’s general counsel told the Senate Subcommittee on Homeland Security: “Bitcoin can facilitate private and anonymous transactions, which are resistant to oversight and control.”
That knife cuts both ways. It makes it easier for criminals to do immoral deeds, but it also protects innocent people who, in another example, wish to bypass local corruption. Not to mention, this digital currency already provides an important financial backbone to states with failed currencies, where in many cases, the digital currency is proving more popular than the “official” one.
From its inception, Bitcoin has been associated with privacy, even anonymity, because you don’t have to provide a Social Security number, bank account, or other identifying details in order to transact in Bitcoin. But that doesn’t mean your use of Bitcoin is a big secret. In fact, every Bitcoin transaction ever is recorded publicly on something called the ‘block chain’. This public log prevents fraudulent activity such as people spending the same Bitcoins twice. And while it’s difficult to trace these public transactions back to the real identities of users, it is apparently not impossible. “Researchers from the University of California, San Diego and George Mason University recently created a map of the Bitcoin economy that could be used by law enforcement to track the flow of Bitcoins from criminal sources to legitimate companies such as Bit-stamp and other exchange services.”
As Bitcoin developer Jeff Garzik has said, “Attempting major illicit transactions with Bitcoin, given existing statistical analysis techniques deployed in the field by law enforcement, is pretty damned dumb.”
“The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce,” a Justice Department official told the Senate. Bitcoin may “hold long-term promise,” said Ben Bernanke. “If properly regulated,” added an unnamed official. Publicly, the feds are playing it cool with bitcoin. Privately, they must be sweating.
Bitcoin is arguably the most disruptive monetary technology yet invented. It could be the biggest financial story since gold. Nonetheless Bitcoin will probably bite the dust sometime in the future. That’s the trouble with new technology. There’s always newer technology – and maybe a better bitcoin. But anyhow: “The death of the dollar is coming, and it will probably be China that pulls the trigger.”
Be convinced gold’s current correction is the setup for a second big surge — and, ultimately, a true gold mania of historic proportions. And don’t worry. Be happy. If you still has kept your gold. When the money system goes down, gold goes up. Ergo, sometime in the future you’ll be able to sell your gold for more than $1,221 an ounce.
The FT writes: “China has taken a tough line against Bitcoin, ruling that it is a virtual product, not a currency, and barring the country’s financial institutions from doing any kind of business in it.
Surging Chinese demand has been one of the main drivers of Bitcoin’s 5000 per cent appreciation this year. The notice from Chinese financial regulators, published on Thursday, is the first official policy ruling from Beijing about the virtual currency.”
The era of bondholder bailouts is ending and that of depositor bail-ins is coming. Preparations have been or are being put in place by the international monetary and financial authorities for bail-ins. The majority of the public are unaware of these developments, the risks and the ramifications. It is now the case that in the event of bank failure, your deposits could be confiscated. Let’s be crystal clear: The EU, UK, the U.S., Canada, Australia and New Zealand all have plans for bail-ins in the event of banks and other large financial institutions getting into difficulty.
Manipulation of precious metals pricing:
European regulators investigate whether banks cheat even in the setting of prices for precious metals. The tests are aimed at a handful of European financial institutions, including the Deutsche bank.
Karen Hudes World Bank Whistleblower…
The rise of Bitcoin likely is the result of manipulations by a complot of banksters to steal the world’s wealth from us people – every citizen is ripped off. Even our spiritual leaders who act oppositely to what they supposed to be. The Vatican is laundering money from the government sponsored drug cartels. Presidents that wanted to stop this were assassinated like JFK and Lincoln. One hundred years ago it was President Wilson who sold the US people out to this group of elite that own or control 43.000 companies. They also bought the media to hide and cover up the truth.
Syria is the latest example; actors are hired to play for dead people presented worldwide on TV-screens, to get Syria’s Bashar al–Assad on his knees by implicating him of these war crimes, for the purpose to build a gas pipeline through Syria on behalf of the west.
Mrs Karen Hudes a 20 years veteran at the World Bank, who became whistle-blower, alarms the world about the on-going corruption and lies committed by our leaders, in a frank interview with Greg Hunter.
PEOPLE WAKE UP and do your homework as Karin explains.
Previously published in December 2013