Sunday, June 12, 2011
All Watched Over by Machines of Loving Grace
All three parts of this recent BBC documentary by Adam Curtis are available for free viewing on YouTube. It's worth a look.
The series deals primarily with questions of technology and freedom and weaves together a wonderfully researched and thought out narrative of our history with machines. The influences of a huge range of ideas and theories are considered, from Charles Darwin to Alan Greenspan. I found the parts dealing with international finance to be the most interesting.
Wednesday, June 8, 2011
BitCoin taking some heat
After mainstream news sources recently published a few articles regarding Bitcoin and the TOR project, these little-understood services have been getting a lot of attention.
Most of this began, by my estimation, with a post at Gawker.com. The article focuses most of its attention on the fact that Bitcoins are used as the principal currency of the online drug trade. This sensationalistic tidbit completely overshadowed the real story, here. Rather than consider the implications of an untraceable, digital currency that exists independently of any government or bank, online media outlets kept writing the easy story about "The Amazon.com of illegal drugs," and "Silk Road: the website with every drug imaginable for sale."
As a result of this sensationalism and oversimplification, strong reactions have been seen among individuals with no understanding of BitCoin or Tor. Among them, two U.S. senators.
According to a Reuters Report, Senators Charles Schumer and Joe Manchin are pressing officials within the DEA to take action against Silk Road by attacking BitCoin. As they wrote in their letter:
“The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins. After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days."
Silk Road is a very small part of a host of issues they're unknowingly tackling here. Our senators don't have a solid understanding of BitCoin or Tor, but I won't fault them for that. Most people aren't even aware they exist. I think that'll change in the coming months, though.
Most of this began, by my estimation, with a post at Gawker.com. The article focuses most of its attention on the fact that Bitcoins are used as the principal currency of the online drug trade. This sensationalistic tidbit completely overshadowed the real story, here. Rather than consider the implications of an untraceable, digital currency that exists independently of any government or bank, online media outlets kept writing the easy story about "The Amazon.com of illegal drugs," and "Silk Road: the website with every drug imaginable for sale."
As a result of this sensationalism and oversimplification, strong reactions have been seen among individuals with no understanding of BitCoin or Tor. Among them, two U.S. senators.
According to a Reuters Report, Senators Charles Schumer and Joe Manchin are pressing officials within the DEA to take action against Silk Road by attacking BitCoin. As they wrote in their letter:
“The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins. After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days."
Silk Road is a very small part of a host of issues they're unknowingly tackling here. Our senators don't have a solid understanding of BitCoin or Tor, but I won't fault them for that. Most people aren't even aware they exist. I think that'll change in the coming months, though.
Thursday, June 2, 2011
I'm calling it: this is what the death of state-backed currencies and central banks will look like.
BitCoin is an atom bomb poised to explode over the financial sector. It challenges everything we think we know about the way currency works and by the looks of it, it is unstoppable.
Created in 2009 by Japanese cryptographer Satoshi Nakamoto, BitCoins are a new form of digital currency known as a "cryptocurrency." Rather than being printed by a central bank or backed up by something like gold or silver, they are generated by computational power as the result of solving complex hash functions. Anyone running BitCoin "mining" software on their computer can generate BitCoins for themselves, free. Once generated or traded, they are stored on your personal computer in the form of a wallet file, or kept with a third-party wallet service. They can be sent by anyone with a Bitcoin address to anyone with a BitCoin address and the transactions are completely untraceable. They can be traded for dollars at exchanges, such as Mt. Gox. One BitCoin is currently trading for roughly $20.
It sounds completely mad, but here's why it works:
A large amount of computational power is required to generate a single BitCoin. In order to run the functions that "make" BitCoins, your computer must spend a long time doing some very hard decryption. The rate at which BitCoins are generated is also fixed, meaning that as more people decide to run mining software, the calculations required to generate a BitCoin also become more difficult. Because the process is distributed across a peer-to-peer network (similar to BitTorrent), no matter how many people decide to start generating BitCoins or how powerful their computers might come to be, the rate at which new BitCoins enter into circulation is fixed. Also as a result of peer-to-peer distribution, in order for anyone to stop it they'd have to to take down the Internet itself. In short, the rate at which Bitcoins are created is determined by cryptographic and computational principals rather than the misguided judgement of a Federal Reserve Cheif or banker. Currently, there are 6.2 million BitCoins in existence. This number will double by 2012, with the total number topping out at 21 million around 2033.
I first heard about BitCoins around six months ago. I thought it was a brilliant concept, but I was wary of investing any of the little cash I've got into the whole thing. As it turns out, if I'd bought 200 dollars worth of BitCoins back then, they'd be worth about $12,000 today. An $1,800 computer set up for optimized mining would have paid for itself roughly 25 times over in the past six months if it had been left on 22 hours a day.
While replacing the almighty dollar is a lofty goal, lord knows I'd love to see Goldman Sachs squirm.
Bitcoin's creators have said that they are going to revolutionize finance in the same way that the web has already revolutionize publishing. As a journalist, that analogy tickles me.
Created in 2009 by Japanese cryptographer Satoshi Nakamoto, BitCoins are a new form of digital currency known as a "cryptocurrency." Rather than being printed by a central bank or backed up by something like gold or silver, they are generated by computational power as the result of solving complex hash functions. Anyone running BitCoin "mining" software on their computer can generate BitCoins for themselves, free. Once generated or traded, they are stored on your personal computer in the form of a wallet file, or kept with a third-party wallet service. They can be sent by anyone with a Bitcoin address to anyone with a BitCoin address and the transactions are completely untraceable. They can be traded for dollars at exchanges, such as Mt. Gox. One BitCoin is currently trading for roughly $20.
It sounds completely mad, but here's why it works:
A large amount of computational power is required to generate a single BitCoin. In order to run the functions that "make" BitCoins, your computer must spend a long time doing some very hard decryption. The rate at which BitCoins are generated is also fixed, meaning that as more people decide to run mining software, the calculations required to generate a BitCoin also become more difficult. Because the process is distributed across a peer-to-peer network (similar to BitTorrent), no matter how many people decide to start generating BitCoins or how powerful their computers might come to be, the rate at which new BitCoins enter into circulation is fixed. Also as a result of peer-to-peer distribution, in order for anyone to stop it they'd have to to take down the Internet itself. In short, the rate at which Bitcoins are created is determined by cryptographic and computational principals rather than the misguided judgement of a Federal Reserve Cheif or banker. Currently, there are 6.2 million BitCoins in existence. This number will double by 2012, with the total number topping out at 21 million around 2033.
I first heard about BitCoins around six months ago. I thought it was a brilliant concept, but I was wary of investing any of the little cash I've got into the whole thing. As it turns out, if I'd bought 200 dollars worth of BitCoins back then, they'd be worth about $12,000 today. An $1,800 computer set up for optimized mining would have paid for itself roughly 25 times over in the past six months if it had been left on 22 hours a day.
While replacing the almighty dollar is a lofty goal, lord knows I'd love to see Goldman Sachs squirm.
Bitcoin's creators have said that they are going to revolutionize finance in the same way that the web has already revolutionize publishing. As a journalist, that analogy tickles me.
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