Bitcoin is a “cryptocurrency” invented in 2009. It is an alternative to hard currency that exists only in the form of computer data stored in digital “wallets” that can be exchanged for goods and services (i.e. transferred to someone else’s wallet) with any party that accepts it as a form of payment.
Bitcoin has gained significant traction and acceptance in the last few years, and given rise to hundreds of competitors, collectively known as “altcoin”. Bitcoin is now legal in most countries, with these exceptions: Ecuador, Bangladesh, Bolivia & Kyrgyzstan.
Cryptocurrency has the advantages of anonymity, speed, and de-centralized control. It is very attractive to criminals as a great new way to launder money and avoid prosecution.
The value of a Bitcoin fluctuates and many have speculated in the currency, most notably the Winkelvoss twins, who have by far the largest hoard, and who recently filed S.E.C. papers to create an Exchange Traded Fund in Bitcoin, with an initial offering of $100 million. The S.E.C denied the offering, giving Bitcoin and the Winkelvii a major headache. They said they thought it was too susceptible to fraud because of the unregulated nature of Bitcoin.
The value of a Bitcoin today is $1820, up from $75 less than four years ago. Gains in the value of Bitcoin holdings are taxed in the U.S. like any other Capital Gain.
The huge “ransomware” attacks experienced in over 150 countries this week, in which victims had all the files on their computers encrypted by attackers, relied on Bitcoin for payment. The hospitals, utilities, government offices, and all kinds of other industries that were victimized could not use their computer systems until they paid a ransom in Bitcoin.
Some people think the only reason Bitcoin has any value at all is its use in criminal activity. From the link:
If we could flip a switch and eliminate all illegal uses of Bitcoin, there would be nothing left of the cybercurrency.
It may be possible to eventually track down the source of the attacks by following the money, as some tracing of transactions is possible, but it seems unlikely that this will result in the prosecution or even identification of particular individuals.
This week’s ransomware code had three hard-coded bitcoin wallets specified that would receive payments. An up-to-the minute record of Bitcoin transactions in the three accounts can be found on Twitter by following @actual_ransom. So far, not all that much has been paid into these accounts – less than $85,000 as of this morning. It’s not yet clear whether anyone who has paid the ransom has gotten their files back.
The Guardian had a nice explanation of the whole phenomenon this week, so to learn some more background, check it out.
The GOML summary: Bitcoin is a great innovation for criminals and Winkelvii.