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Business and Finance

Bitcoin, Ripples, and Reality

Many people don't value a currency operating outside the traditional financial system. Photo: Zach Copley/flickr
Back in July 2011 we blogged about Bitcoin, the world’s first digitalized, crypto-currency. At the time, many thought Bitcoin a flash in the pan, attracting attention simply because it was still relatively new and exciting – but imagined interest would soon wear off. After three years however, Bitcoin doesn’t show signs of slowing down. Our last post touched upon Bitcoin’s use for undertaking illicit activities and the lack of institutional involvement. I’m going to revisit these themes and also discuss Ripple – the next currency you’ve never heard of.

Due to the increased anonymity associated with transactions undertaken using Bitcoin, there has been a fear that illegal acts are being made a lot easier, and a lot safer to conduct. A recent article for PCPro claimed that Bitcoin “is now the currency of choice for the discerning cybercriminal.” This image problem has not been helped by articles associating bitcoins with Silk Road, an online ‘underground’ marketplace (accessible only via Tor) where all kinds of illicit goods may be purchased – weaponry, forgeries and drugs – and where the digital currency is the only accepted method of payment. This undoubtedly sullies Bitcoin’s reputation, and to a disproportionate degree: The Internet itself has facilitated commerce, and necessarily the crime which accompanies any marketplace. But security agencies can be just as resourceful as criminals, developing network analysis techniques based on statistical methodologies to detect suspicious transaction flows. Rather than a destructive force, the appearance of Bitcoin and its use for ‘bad’ as well as ‘good’ is simply another reiteration of the cat-and-mouse game played out every day between criminals and the law.