Bitcoin: Digital Fool’s Gold?

[eridani]

http://inthesetimes.com/article/17859/bitcoin-the-rush-for-digital-fools-gold

But as Nathaniel Popper makes clear in Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money, a chronicle of the Bitcoin insurgency, the virtual currency has a long way to go before it upends the old monetary order.

Ever since Nakamoto introduced the concept of a secure digital currency, Bitcoins have been catnip to libertarian ideologues and utopian anarchists. Because it’s accessed via a completely private key, Bitcoin is not only (in theory) a quantum leap forward in the security of digital money exchanges; it is also (in theory) a private medium of exchange, out of reach of meddling government regulators who have termed digital currencies the “Wild West of finance.”

Small wonder one of the earliest adopters of the currency was the online exchange for illicit drugs and other illegal entertainments, Silk Road. According to the FBI, the service was, at its peak, logging more than 7,000 daily transactions and earning more than $20,000 in daily commissions for its creator and operator, Ross Ulbricht. The Silk Road saga ended badly for Ulbricht, however, when American federal agents tracked him down. In February, he was convicted of seven charges, including money laundering and narcotics trafficking.

Over the course of Silk Road’s rise, Ulbricht had descended from his perch as a slacker-entrepreneur presiding over transgressive digital commerce into a Michael Corleone-grade study in paranoid sociopathy. By the time of his arrest, Ulbricht had allegedly put out six contracts to kill people associated with Silk Road. One was a vendor who attempted to blackmail Ulbright; another, a recently arrested Silk Road collaborator whom Ulbricht feared would divulge information about users. No actual murders seem to have occurred, but Ulbricht’s wan handling of these virtual killings is nonetheless chilling; a seized computer diary entry concerning one of them simply reads: “got word that blackmailer was executed / created file upload script / started to fix problem with bond refunds over 3 months old.”

Likewise, the central exchange for Bitcoins, the online clearinghouse known as Mt. Gox, came to an inglorious end last year. The site’s Japan-based proprietor, a French national named Mark Karpeles, managed to have all the site’s reserves stolen out from under him before going bankrupt, with tens of thousands of clients losing Bitcoin accounts valued at more than $400 million.