Bitcoins – Here Today Gone Tomorrow?

Bitcoins have been around for a few years but they have only been making headlines that I have noticed for about 9 months or so. I suppose what has made people sit up and notice is the staggering increase in the value of this essentially virtual currency. As they have gained so much in value this year many people wish (like me) that they had bought some a year or more ago, other people are quite suspicious that this could just be a temporary bubble that will inevitably pop spectacularly. Whatever your own thoughts it seems to have pushed most people, who don’t yet hold a bitcoin account into 3 camps: The first is the suspicious – why should I risk buying something that only exists in the internet world of 1’s and 0’s? The second is the curious, how can I make them work for me or get my hands on/or earn them from the countless ‘Opportunity to Make Money’ companies and mining schemes sprouting up all over the Internet? And of course finally the last group, who want to get their hands on as many of these things as they can through illicit means.

Bitcoins

As of today’s date a single bitcoin is currently trading at $936; which is up massively from around $20 of just a year ago. This is despite it not being regarded as legal tender by any central bank in any country in the world and following a few setbacks including the operators of two exchanges for the bitcoin being arrested in the US and charged with money laundering because they were engaged in a scheme to sell more than $1m in bitcoins to users of online illicit drug marketplace the Silk Road, which was shut down last year after its alleged owner was arrested.

Of course where ever there’s money to be made, there are people who want to get at it illegally, especially a currency with such a trajectory of growth as bitcoins. Only this month some adverts on Yahoo’s homepage were infected with malware specifically designed to mine bitcoins. Yahoo confirmed that for a four-day period in January, malware was served out in ads on its homepage. Experts estimate that as many as two million European users could have been hit. Was your computer one of them?

Security firm Light Cyber said the malware was intended to create a huge network of Bitcoin mining machines. “The malware writers put a lot of effort into making it as efficient as possible to utilise the computing power in the best way,” Bitcoin mining malware is designed to steal computing power to make it easier for criminals to accumulate the virtual currency with little effort on their part, as generating bitcoins is “basically a guessing game with numbers, so the first one to guess the right number gets 25 bitcoins and if you have a large volume of computers guessing in a co-ordinated way then you have a more efficient way of making money,” he added. Other than a computer running slower, victims will be unaware that their machine is being used in what has become known as a bitnet.

What do you think of Bitcoins, do you know how they work, or did you even know what they where before I wrote this?

Bitcoins – How They Work
Imagine there’s a room that anyone can access. The room has security cameras that anyone can view, and every second of recorded footage is available online forever. That room is also filled with indestructible wallets made of transparent plastic, so everyone can see which coins are in which wallet. And oh yeah – these wallets can never, ever leave that room.

Each person has a key that can open their own wallet; so let’s say I want to buy a new X-box and you want to sell one to me. First, you tell me which wallet is yours. Then, I go into the room with a mask on. Anyone in the world can see me on the security cameras, but not my face. Next, I unlock my wallet, take some coins out put them into your locked wallet, then I leave the room. Now, everyone in the world knows that your wallet has coins that were previously in my wallet. This is the unique case with every single transaction, everyone knows the history of every single coin.

So how did it all start? Who got the first coins? Imagine there’s also a robot in the room that runs lotteries. Every so often, this robot randomly chooses a wallet in the room, and puts 50 coins into it. When it first started, there weren’t many wallets in that room, since nobody knew about it. Back then, it was quite easy to win the lottery. However, today, as you can imagine there are millions of wallets in that room, so your odds aren’t very good.

I suppose someone could make their own fake coins? No, because everyone has records of every single coin in that room, and they know when the robot hands new coins out. If a fraudster were to put fake coins into his own wallet, everyone would know that those coins were never handed out by the robot, and wouldn’t accept them.

So now the big question – Who made that robot?! Well it was supposedly a super genius Japanese man named Satoshi Nakamoto, but nobody knows for certain. Since the security camera footage is available from 2009, we can see that the robot was putting coins into a wallet since day one. We assume it’s Satoshi, but they say nobody really knows for sure.


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