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Who is Satoshi Nakamoto?

Who is Satoshi Nakamoto, the creator of Bitcoin? The creator of Bitcoin never revealed his real identity and simply left his invention to the world. Satoshi created the first Bitcoin implementation and remained active in the development for a few years before choosing to leave the project. Meanwhile, a strong community of developers, miners, users and supporters have spontaneously emerged to continue the project. Can bitcoins become worthless? Yes. There are thousands of currencies in the fiat currency graveyard as a result of hyperinflation such as the German Mark, United States gold and silver certificates, Argentine Peso and more recently the  Zimbabwe Dollar. Unlike a physical currency like gold Bitcoin is a completely virtual currency. While Bitcoin was designed to be censorship-resistant to enable it to continue existing if there were to be some type of technological problem of significant severity then it is possible Bitcoin could be destroyed and then all bitcoins would cease to exist and become worthless. Being an open-source project allows anyone to contribute software code so those with value stored in bitcoins have a strong financial incentive in making sure Bitcoin continues to exist. For example, there has been only one major security incident and it was fixed in August 2010. While there have been no major security incidents since that does not preclude the possibility that there could be others. There was an unanticipated ‘hard fork’ on 12 March 2013 which was quickly resolved with minimal impact on Bitcoin users. But the longer Bitcoin exists without a major security incident or other unanticipated software bugs then the more likely market participants will gain greater confidence in Bitcoin. Being a completely virtual currency Bitcoin is particularly well suited for use on the Internet or with mobile devices and unlike other fiat currencies and payment systems like Paypal or credit cards. As a payment tool, bitcoins are like gold because bitcoins are no-one’s liability and Bitcoin transactions are not subject to counterparty risk like traditional banks engaged in fractional reserve banking. Thus, using Bitcoin protects merchants and users from bank failures, Cyprus-style problems, empowers Bitcoin users to have exclusive control of their funds and because Bitcoin balances are stored in an extremely large decentralized distributed computer network they cannot be fraudulently altered by anybody. Why do people trust Bitcoin? Bitcoin is open-source software which means that everyone has access to all of the source code all of the time. The rules of the system are embedded into the source code and the participants all impose those rules on each other simultaneously. To change the system would require everyone to switch to a new version of the software that used different rules, and because Bitcoin users are spread across the world it is outside the power of any single jurisdictional authority to mandate such a change. Cryptography is well established and a fundamental technology used in online banking. But unlike fiat currency with central banks and online banking with heavily peer reviewed cryptographic ciphers Bitcoin has been able to construct a currency and payment network that removes the need to trust a central authority. Consequently, many people trust Bitcoin because it requires absolutely no trust at all. Bitcoin is an anonymous currency? Bitcoin is a censorship-resistant technology. However, it is not anonymous but pseudo-anonymous. The use of Bitcoin leaves extensive and permanent public records for each transaction. All transactions can be traced since their origin and IP addresses are permanently logged by organizations listening on the network. All of these informations can easily be accessed by competitors, law enforcement or anyone else. However, there are a few technically difficult and costly methods that enable users to interact with Bitcoin in very private ways. The Federal Bureau of Investigation concluded on page two of the report Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity that ‘The FBI assesses with low confidence, based on current user and vendor acceptance, that malicious actors will exploit Bitcoin to launder money’. Transactions are difficult to conceal from best practices in network data analysis, data mining and forensic accounting techniques. In most transaction, personal information must be revealed to receive the goods or services from an order. This makes keeping full anonymity with Bitcoin transactions very difficult or impossible.


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