Bitcoin – decentralized internet currency

I learned today about [Bitcoin](, a digital currency created in 2009 by Satoshi Nakamoto. The name refers both to the open source software he designed to make use of the currency and to the peer-to-peer network formed by running that software.
Bitcoin eschews central authorities and issuers, using a distributed database spread across nodes of a peer-to-peer network to track transactions. Bitcoin uses digital signatures and proof-of-work to provide basic security functions, such as ensuring that bitcoins can be spent only once per owner and only by the person who owns them.
Bitcoins, often abbreviated as BTC, can be saved on a personal computer in the form of a wallet file or kept with a third party wallet service, and in either case bitcoins can be sent over the Internet to anyone with a Bitcoin address. The peer-to-peer topology and lack of central administration are features that make it infeasible for any authority (governmental or otherwise) to manipulate the quantity of bitcoins in circulation, thereby mitigating inflation.[1]The currency vs USD has fluctuated, moving from < 1$ to as high as $30, and back to around $18. As of June 2011, there are just over 6.5 million bitcoins in existence.[3] This figure is algorithmically determined as described in Nakamoto's whitepaper. Because by definition, the only spendable Bitcoins in existence are those represented in the block chain database passed around on the peer to peer network, the number is not only easy to determine, but can be quickly determined with precision by all participants. There are hundreds of merchants accepting the currency for payments. Wikileaks, the Free Software Foundation, Freenet, Pioneer One, and several others already accept donations in Bitcoin. The Electronic Frontier Foundation did for a while but it is no longer doing it because of lack of legal precedent about new currency systems, and also to avoid the perception that they in any way endorse or support the Bitcoin project. Gavin Andresen, one of the 'core developers', is explicitly advising people "not to make heavy investments in Bitcoins", as it is "kind of like a high risk investment". As of May 2011, no publicly traded retailer accepts the currency for payment. The US Government is getting anxious, with Sen. Charles Schumer calling Bitcoin >an online form of money laundering.

You can cash real money into Bitcoin at Mt. Gox, which seems to be in Tokoyo. There also appears to be hoarding of Bitcoins, with some 6.5M bitcoins in circulation. The total that can ever be in circulation using the system is 21M coins. Someone seems to be sitting on 30K of them, worth about $6M in present value.

And it is risky, like real banks. On 19 June 2011, Bitcoin prices against the USD remained high despite a security breach of the Mt. Gox Bitcoin Exchange which caused the leaking of usernames, emails and MD5 hashed passwords of over 60,000 users into the public domain. The price of a Bitcoin briefly dropped to $0.01 in the Mt. Gox exchange (but remained unaffected on other exchanges). Within minutes the price then rebounded to over $15 before Mt. Gox shut down their exchange . Mt.Gox reports that the site was compromised when someone who performs audits on the Mt.Gox systems with database read-only access had their computer compromised, while user community points out known Cross-site request forgery attacks and possible SQL Injection attacks as possible reason for the break in. Following the incident, Mt.Gox halted all Bitcoin transactions, which allowed other markets like TradeHill and Bitomat take over most of the exchange volume and traffic. Mt. Gox also proposes to roll back transactions within Mt. Gox to a point before the theft.


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