April 16, 2014
Bitcoin Answers and Questions
Posted by Usha Rodrigues

You may remember Greg Shill blogged about Mr. Gox--at that time I just had some vague, "Mt. Gox-bad-virtual-currency-shady" bitcoin association in my head. Since then, I've heard 2 student presentations on Bitcoin , and I thought I'd pass along what I have learned. Dear reader, I will presume that you, like me, really don't know anything about it. It may well be that in this matter, like so many, I am wrong.

Both presentations started out with this video (It's less than 2 minutes, just go ahead and watch it): 

Ok, what struck you?  Was it the miners?  How bizarre is that?  Bitcoin crowdsources its processing of individual transactions to "miners," who earn bitcoins for their trouble.  And bitcoin has a built-in limit.  From bitcoin.org:

Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.

Here is another video that shows a large scale bitcoin miner.  This one is longer, and a little local-news cheesy:

 

 I'm now much more interested in bitcoin.  Here are some random thoughts:

  • I love the "stick it to the man" "down with the banks" angle.  No user fees!  Fight the power!
  • Much to say about the auto-limiting feature.  Supposedly it's built into the code.  But clearly bitcoins have been hacked before.  Who's to say the 21 million ceiling is a unhackable? 
  • What if it can't be hacked? What does it mean to have a currency that can't be devalued by a government in need of quick cash?  Sounds pretty cool.
  • How important is anonymity in purchasing?  Is it just a drugs and porn thing, or for more mainstream industries?
  • What role does/should law have here?

Update: Urksa Velikonja in the comments linked to a great article giving more info about mining.  Have miners created securities?  Sounds like a great fact pattern...

Also, on the hacking front, here's a link to a chronology of bitcoin hacking incidents.  The idea of hackers making off with my virtual wallet has me rocking me back and forth humming and holding my hands over my ears.  I don't think I could do more than dabble in the world of virtual currency.

 

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