| Tuesday July 29th 2014

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Bitcoin explained by the Economist


bitcoinsLet me get this straight. A clever programmer/mathematician has, effectively, created a peer-to-peer, decentralized, self-policing, self-regulating, tamper-proof digital currency based on open source software?

This reads like something out of a science fiction novel. The idea has always been around, but to figure out a workable implementation… I’m impressed. What are the repercussions of having this new currency competing against the older centralized models? I think we can assume it’ll inherit a lot of black market activity, so it will become widely used. I don’t see how it can even be shut down.

Bitcoin, the world’s “first decentralised digital currency”, was devised in 2009 by programmer Satoshi Nakomoto (thought not to be his—or her—real name). Unlike other virtual monies—like Second Life’s Linden dollars, for instance—it does not have a central clearing house run by a single company or organisation. Nor is it pegged to any real-world currency, which it resembles in that it can be used to purchase real-world goods and services, not just virtual ones. However, rather than rely on a central monetary authority to monitor, verify and approve transactions, and manage the money supply, Bitcoin is underwritten by a peer-to-peer network akin to file-sharing services like BitTorrent.


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