In December 2010, Bank of America, MasterCard, Paypal, Visa Europe, and other financial institutions began blocking transactions intended for WikiLeaks. Bitcoin is, seemingly, the Internet’s response. A decentralized, secure, worldwide, open-source initiative, Bitcoin is P2P digital currency that removes a central authority:
Created in 2009 by Satoshi Nakamoto (and other developers), Bitcoin functions on the principle that removing fatcat middlemen makes banking transactions more efficient, untraceable, and secure. A bitcoin itself, the unit of currency, is a number associated with a Bitcoin Address. You can accept bitcoins in exchange for goods or services, trade them for conventional currency, create a new block as a miner, or join a mining pool. Economic rules are enforced collectively by the community. In Nakamoto’s original paper on the subject, he described doing away with the third party by publicly distributing the “block chain,” or ledger. Miners, also known as users who run a special program, form a network to collectively maintain the block chain, thereby generating new currency. Data from transactions would be broadcast over the network and become compiled into cryptographic puzzles, which miners compete to solve. The first miner to solve it would win 50 new bitcoins, and that data would be added to the “block chain.” The puzzles become increasingly difficult as the number of miners and amount of production increases. The block size would halve every 210,000 blocks, from 50 to 25, 25 to 12.5, etc, the total limit of the currency being 21 million, with a projected attainment date of 2140.
However, slow adoption in mainstream circles may make this more of a it from becoming a paradigm shift in the world of finance. Bitcoin developers and promoters themselves state that “a currency has value by it being widely used” (We Use Coins). That said, ~100,000 users participate in bitcoin networks, and OpPaypal has pushed for increased participation and support of cryptocurrency. Several online and offline stores accept Bitcoin as an alternative form of payment, and some donation sites accept it as well. I’m not holding my breath, but it’s an interesting venture, and one that has the potential to undermine centralized—and censoring—banking systems.
This work by V. Manivannan is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.
Based on a work at vyshalimanivannan.wordpress.com.