Bitcoin was created by the pseudonymous developer, Satoshi Nakamoto, on January 3, 2009. Nakamoto announced Bitcoin’s concept to the world in the white paper, "Bitcoin: A Peer-to-Peer Electronic Cash System." Nakamoto aimed to correct the "double-spending problem" between buyers and sellers. Through Nakamoto's system of chronologically recording transactions with timestamps to provide computational proof, buyers and sellers are protected from each other. [1]
A Bitcoin is defined as a chain of digital signatures. Each owner transfers the coin to the next by digitally signing the hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. [1]
Much like a digital riddle, “Bitcoin miners” solve computational puzzles to generate new Bitcoins,
which is closely coupled with the verification of previous transactions. Moreover, the Bitcoin algorithm makes sure that new coins will be minted at a fixed rate. Specifically, the larger the community and the total computational resource devoted to coin generation, the more difficult the computational puzzle becomes. Ultimately, there will be approximately 21 million Bitcoins in circulation, which is projected to be reached in the year 2025. [2]
Since Bitcoin transactions are made anonymously, the currency has a natural appeal for criminals. Bitcoin has been used as a medium of exchange for drug trafficking, making financial contributions to causes and projects of interest, and used for money laundering. Currencies can be converted into Bitcoin cheaply and quickly through exchanges like Mt. Gox. Once converted, these new funds are stored in a virtual wallet and can be dispersed through IP randomizers, like Tor, which further obscure any facts that would lead to the owner’s identity.
[1] Nakamoto, 2009
[2] Barber et al., 2012
[1] Nakamoto, 2009
[2] Barber et al., 2012
No comments:
Post a Comment