Bitcoin – A New World Currency? (Pt.2) ToT#003

Written by on September 11, 2017

Last week in part one, we covered the technical side of bitcoin; all about where bitcoin came from, how transactions work, and some on security. If you haven’t listened to that episode, you can check it out at That episode ran a little long, so we decided to split it into two parts. This week we’ll be covering some of the more interesting topics on bitcoin; some of the impacts it has had on society, and some of the major controversies that have occurred.

  1. 1. Interesting Bitcoin Characteristics (Some positive, some negative.)
    1. Almost free trading/exchange to anywhere in the world (for now).
      1. There is a limited amount of space that can be utilized in a block. Transaction fees may be added to a transaction by the sender as an incentive for a miner to include their transaction. This is completely optional. Right now, most of the mining rewards come from the minting of new coins. Keeping transaction fees low. Once all 21 million coins have been minted, the transaction fees will probably start to creep up because people will start to include higher fees to ensure that their transaction will be completed. It may end up being an auction to compete for block space.
    2. Unregulated
      1. Bitcoin is unregulated. No individual or governing power can control it. This is starting to become a cause for concern for governments and central banks because Bitcoin wallets cannot be linked to an individual directly. Therefore, taxation, income tracking, and transaction monitoring cannot be accomplished.
    3. Cannot be affected by any one country’s government or economy.
      1. Since Bitcoin is controlled by a worldwide network of individuals, there are no links to the price of Bitcoin, and the current state of the economy for any one country. If one economy crashes, the price of Bitcoin may not reflect this.
    4. Potential for money laundering.
      1. Since Bitcoin wallets cannot be directly linked to an individual, there is a concern that it may be a means to launder dirty money. Though you can track where every Bitcoin is sent through the Blockchain, it makes it very difficult to pinpoint the actual individual that has committed the offense.
    5. Anonymous transactions, thus is sometimes used for illegal activity. Combined with the dark web, it may be a cause for concern.
      1. Bitcoin is attractive to those who wish to remain anonymous for various transactions. Bitcoin have been used to pay for various illegal products/services. Purchases such as drugs, human trafficking, and assassinations have been ordered with the use of Bitcoin.
    6. Uninsured
      1. When you make a purchase with a credit or debit card, that purchase is insured so that in the case of identity fraud, you may recoup stolen funds. With Bitcoin, there is no protection. If the private key is compromised, and someone steals the Bitcoin associated with that wallet, the funds are lost.
    7. Value is highly susceptible to investors emotion.
      1. Similar to a publicly traded stock,the price of Bitcoin is highly susceptible to investors emotions. If there is bad news, the value of Bitcoin is likely to drop, likewise, good news helps boost the value. This is expected to stabilize somewhat as more people continue to join the Bitcoin community.
    8. “Whales” can somewhat control market value.
      1. When trading on a Bitcoin exchange, you will notice that someone will randomly place an order for a massive amount of Bitcoin. Some of these orders are well over 100 coins in a single transaction. These are known as “whales”. What may happen is when the price reaches the value of the massive order, the price may reverse or temporarily hold at that price. This is due to the difficulty of filling such an order. There has to be enough volume (people willing to buy Bitcoin at that price) to successfully fill the order. If unsuccessful, the price may reverse for a downtrend for a little while before attempting to break the price wall again. This could be a cause for concern to traders.
  2. Major events in Bitcoin’s history
    1. Silk Road takedown
      1. What was Silk Road
        1. Silk road was an online black market that was used to purchase illegal drugs, hitmen, counterfeit currencies and other various illegal activities. It was accessible through the tor anonymizing network (dark web) and sales were completed using bitcoin since bitcoin cannot be traced to individual people if the proper anonymization steps are taken.
      2. How was it taken down?
        1. Several federal agencies infiltrated silk road by taking out individual sellers, building intel on it the entire time. During this operation, authorities eventually were able to identify and arrest a silk road administrator Curtis Clark Green. This made Silk Road creator Ross Ulbricht (Dread Pirate Roberts) uneasy and he unknowingly hired an undercover agent to murder Green. Authorities faked his death by sending various photos of Green to Dread Pirate Roberts. Eventually authorities intercepted an order for fake ID’s that Dread Pirate Roberts had placed and they were able to discern his location and arrest him. They charged him with conspiracy drug and money laundering charges. He also faces a grand jury indictment for conspiracy to commit murder. The criminal complaint stated that Silk Road had an estimated 1.2 billion dollars in revenue during its 2.5 year existence.
      3. What happened to the confiscated bitcoin?
        1. The government seized an estimated $3.5 to 4 million in bitcoins in the silk road takedown. They were auctioned off in small batches at a steep discount.
    2. Mt. Gox
      1. What was Mt Gox
        1. Mt Gox was the largest bitcoin exchange at the time. Based out of Tokyo, it handled 70% of all Bitcoin transactions worldwide. Mt Gox was originally created as a trading platform for the trading card game Magic: The Gathering. Jed McCaleb launched “Magic: The Gathering Online Exchange ( in late 2006. He quickly decided that it wasn’t worth it and recycled the domain a few times before using it as a bitcoin exchange in 2010. McCaleb sold the exchange to developer Mark Karpelès in 2011 stating that he didn’t have the time to develop Mt. GOX to it’s full potential.
      2. What happened to it?
        1. In february 2014 Mt. Gox announced that exchange had been hacked and 850,000 bitcoin valued at more than $450 million dollars had been stolen. They suspended trading and no withdrawals were permitted from the exchange.   Over the next few months Mt Gox filed for bankruptcy protection and requested that asked that the Tokyo court allow the company to be liquidated. In August 2015, Mark Karpelès was arrested for fraud and embezzlement of $2.6 million through the exchange in an event unrelated to the hack.
      3. What happened to the market after it went bankrupt.
        1. The value of bitcoin declined by 36% during this time.
    3. BTC-E
      1. What was BTC-E?
        1. Launched in July 2011, BTC-E was a grew to be a popular exchange after the fall of Mt. Gox. Despite it’s popularity, little was known about the exchange. It was suspected that it operated out of somewhere in in Europe as the domain was registered in London. Until recently, no one knew who operated BTC-E.
      2. What happened to BTC-E?
        1. In July 2017 BTC-E stated an “unplanned maintenance”, that the exchange would be down for 5-10 days, and blocked people from accessing the exchange. A few days later a notice was posted on the landing page for that the domain had be seized by several federal agencies within the US Government. Authorities arrested Alexander Vinnik while vacationing in Greece on 21 counts including laundering stolen funds from bitcoin exchange Mt. Gox as well as computer hacking and drug trafficking. Former Mt. Gox Ceo Mark Karpelès released tweets showing the seizure notice on the BTC-E landing page and stating that Alexander Vinnik is the alleged “Mt Gox Bitcoin thief”. This case is currently in progress and many of the details are still in question of what is actually going on. BTC-E has stated that Alexander Vinnik was never the operator or employee of BTC-E and would be back up and running within a month under a different brand name. They have also stated that they would be returning 55% of investors funds and the other 45% would be available in coins.
      3. What are the investors reactions?
        1. There has been a public outcry from BTC-E investors on social media over funds that were seized from them by the US government while they have done nothing illegal, and whether the US has jurisdiction to seize an overseas domain. Many of the investors are located in countries outside of the US, and believe that the US has no right to seize their funds. The US claims that they do in fact have jurisdiction as many of the transactions were completed with US based entities.
    4. Bitcoin ATM
      1. In October 2013, the first “Robocoin” Bitcoin ATM was launched in a coffee shop in Vancouver, Canada. Robocoin has since discontinued operations, but since then, several Bitcoin ATM’s have started showing up around the world. Currently, in the US there are more than 800 Bitcoin ATM’s the enable the purchase and withdrawal of Bitcoin. Unfortunately, there are many complaints that the transaction fees are too high. Fees are approximately 16% for ATM use while online transaction fees generally run about 7.5%.

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Reader's opinions
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