The Baffling Bitcoin: A Ripple of Excitement and Unease Together

69329295_xlBitcoin has become almost a bona fide currency for the dark web now. But this is a half-truth. Dark web is one of the main reasons why today one Bitcoin equals nearly eighteen thousand dollars. Wind back three years ago; it was low. Five or six years ago? Considerably low. Eight years ago? It was only 39 cents! This tidal surge in value is awfully baffling!
In eight years the value jumps just over many thousand times. Looks absurd, but, it’s the reality. And there was a rock-solid support of the dark web behind it.
The anonymous Dark Web, which is only available through the TOR browser, was the game changer. In 2014 alone, the daily sales volume in six dark net markets rose to USD 6,500,000. And that too after the FBI had banned ‘Silk Road’.
When FBI stopped ‘Silk Road’ in 2013, they found an astonishing report. Between 2011 and 2013, ‘Silk Road’, the DE-facto ‘E-Bay of Drug Sales in Dark Net’, had made 1.2 billion dollars. In those two years, they would mainly depend on drug sales. The exchange currency was Bitcoin. So the price of Bitcoin also skyrocketed in last two-three years. A value of about 39 cents to over USD 18,000 in just eight years is really startling but the increasing drug demand justifies it. Since it mainly handles illegal drug sales, a tidal wave of disbelief also sticks around it. The experts feel it’s fluppy. This downiness is the biggest disadvantage.
Whether this bubble bursts or not, it indicates another major trend in human behaviour. We’re now relying more and more on machine-code rather than other human-operated institutions like banks backed by the government. For the upcoming generation and digitally transformed people, the old custom of ‘currency-changing-hands’ seems to be hackneyed. So, Bitcoin or any other crypto-currency is trending.
The most mysterious part of bitcoin is its failure to be present physically. But, this act of avoiding visionary-capture is often associated with any digital currency. People often ask, what does bitcoin look like? Does it really have a physical shape like any currency note or coin? We see images of Bitcoins around us – in print, on the web, photographs in newspapers. Actually, they are all info-graphics representing a conception.
A bitcoin is a digital token and crypto-currency. Hence, it must not have a physical blessing. You can send one bitcoin to another user electronically only. A bitcoin can be divided out into eight decimal places – 0.00000001 bitcoins. That is the smallest fraction and referred to as one Satoshi. It is believed that Satoshi Nakamoto was the anonymous founder-creator of Bitcoin. Although for many years there has not been any trace of Satoshi. He has just gone up in a puff of smoke.
But his white paper on bitcoin is still available on the bitcoins official website. You can download and read it. In his seminal white paper on bitcoins, in the beginning, Satoshi wrote a historical paragraph in his ‘Abstract’. It defines the abstraction and physicality, both, at the same time with the usage of the few words such as ‘timestamps’, ‘peer-to-peer’, ‘electronic cash’, and ‘hash-based proof-of-work’.
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.
We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.
To resist double-spending Satoshi uses the concept of peer-to-peer computer networks. At present nearly ten thousand computers maintain these peer-to-peer networks. And the longest chain supports the whole system in a unique way so that hackers wouldn’t penetrate the system. This is controlled by advanced mathematics. And for that reason, sometimes it seems confusing for the general people. Bitcoin is the digital token or crypto-currency and at the same time, it’s the name of the payment network. This network stores and moves this mysterious currency. Consider a traditional payment network like Mastercard and Visa. They are usually run by a single company or any person.
The conception of bitcoins is totally different. The whole system is decentralized. It’s run by a huge network of computers around the world. As Satoshi wrote in his white paper, the record of transactions are constantly updated by the networks of thousands of computers and it’s called blockchain.
There is no doubt that there is a criminal connection. Silk Road was there too. Although it was blocked, new names came up — sprouting like newly grown buds. Criminals have enough reasons to use it. Anybody can open a bitcoin address and start sending bitcoins. No central authority is there. There is no institution like Reserve Bank of India that could monitor the transactions. The tidal surge in Bitcoins value is directly associated with the drug dealers who began taking payments in Bitcoins in the Dark Web.
Very recently, when the computers were taken over by ransomware, the hackers also took payments in Bitcoins. But, it cannot be said that bitcoins are only used by criminals. Rather a small part of it. Then what about the regular currency? Recent Panama papers and Paradise Papers leaks have shown us the scourge of black money. After all, criminals are there everywhere.
Now, the question is, can any government shut down this bitcoins networks? The answer is a ‘Big No’! If US government shuts it down, it will keep operating from another country. This is because it’s a huge network of computers spread over the whole world and the number of connected computers is around 10,000. This number-game cannot be solved by guessing. If every nation agrees, which is impossible, it goes underground.
As Satoshi mentioned in his white paper, behind bitcoins operates the highly advanced conception of mathematics. So it’s not easy ti create bitcoins on your own. As a user, you can’t add more bitcoins to your account. Even developers who maintain the database of all bitcoins transactions – the blockchain, cannot do that. The discrepancy would be noticed and ignored by others. It’s programmed that way.
At the same time, experts feel people are buying them because of the hype comparing it to Tulip Mania and the dot-com crash. Can there be a catastrophic fall in price? It’s unlikely to pose a great threat to the global economy. The amount of money tied up during the time of dot-com bubble was bigger.