Bitcoin Declared "Legitimate" at US Senate Committee, Value Climbs, Actual Use Remains Small

By Bixyl Shuftan

A few days ago, a US Senate committee held a hearing about Bitcoin, the noted virtual currency. The meeting was held following the closing of the Silk Road Website due to illegal activity in which users were required to pay with Bitcoins, and 3.6 million dollars worth of the money were confiscated through encryption keys found in confiscated computer equipment. Various representatives, as well as submitted reports were heard. Among the opening remarks was one by committee chair Senator Thomas Carper, "Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us."

Among the reports heard by the committee was a letter released by the FBI, which stated that they recognized virtual currency as offering "legitimate financial services." The value of Bitcoin, which had plummeted to about $110 US dollars following the Silk Road closure and recovered to $200 by late October, quickly soared to $900, then dropping to just over $700. While it was agreed the rise was driven by speculation, the endorsement of the currency was also seen as a factor, "regulatory interest in Bitcon … traditionally has a positive effect on the price."

While the virtual currency has been turning a few heads, not everyone is impressed. Currently, there are only just over 70,000 transactions using Bitcoin a day. While more than the 47,000 per day in June 2012, and 64,000 in April 2013, as Hamlet Au of New World Notes put it, "There are probably more people using Linden dollars in Second Life then there are people using Bitcoin in the entire world." And this is "years after the hype wave over Second Life has long since died down" while Bitcoin is still clearly in it's.

It was the US government taking an interest in virtual currency that some feel was one of the reasons for Linden Lab suddenly banning third party Linden exchange services in May, a decision that was reversed weeks later. The Podex Exchange allows Second Life residents to purchase Lindens with Bitcoin.

Sources, BBC News, Bloomberg, Daily Dot, New World Notes


Bixyl Shuftan

Virtual Cash Makes Real-Life News with Bitcoin Crash

By Bixyl Shuftan


Last month, the US Department of the Treasury issued "guidelines" aimed at virtual currencies. While the Linden dollar will be affected by the Government's interest, another virtual currency with a larger distribution and volume was also targeted: the bitcoin.

Wikipedia defines the Bitcoin, abbreviated to BTC sometimes, as "an online commodity that is based on an open-source, peer-to-peer encryption protocol … creation and transfer is accomplished on an Internet-based network and is not managed by any central authority." Bitcoins are created through "miners" that automatically add new amounts by "adding codes to a decentralized log, which is updated and archived periodically." They're transferred electronically, either via computer, or through handheld devices like smartphones.

Computer geeks are sometimes drawn to it due to it's online nature. But as banks are not necessary in the exchange, and it is not created by governments, some people are attracted to it due to the lack of involvement by larger institutions. It's also gotten some skeptics because of the lack of involvement by larger institutions, and concerns that drug traffickers and other criminals use it as an easy way to sell illegal goods.

Bitcoin went through what some are calling a "bubble" recently when it's value jumped from about $90 in late March to a high of $260 on the morning of Wednesday April 10th. Then the value crashed, plummeting to around $130 in six hours. It regained some of it's lost value the following day, rising to $160. As of the writing of this article, bitcoincharts.com listed the value as $99.00.


The crash was linked to an unknown bitcoin owner who up and gave away $13,000 in bitcoins via the Reddit social website. But there have been other problems. There have been attempts by hackers to break into computers and make it mine bitcoins for the hijacker. News of this did cause a drop in the value of Bitcoins on April 4, but the price surge continued again. There was also an account hacking in which $12,800 worth of Bitcoin was stolen.


The crash has caused some to feel Bitcoins, or any other unregulated currency, is just too risky. But others are still trading them. Even as all this was going on, people in the US Treasury Department had already taken notice. In March, the Department of Treasury's FinCEN issued it's guidelines, defining Bitcoin as a "de-centralized virtual currency" with "no central repository and no single administrator, and … persons may obtain by their own computing or manufacturing effort." Like Linden Labs, Bitcoin miners in the United States will have to file anti-money laundering reports with the Treasury Department, in addition to registering with them. There is a "blurred definition" however between users of Bitcoin and "administrators." Could a miner be considered just a user as long as the Bitcoins created weren't traded for US dollars or other real-life money?

Already having caught the interest of the US Government, with the news of hacking attacks and the market volatility, bitcoin is highly likely to face additional scrutiny from both American and European authorities. It's laissez-faire days of being free from big business and government may soon be coming to a close.

For information on what a bitcion cost, check this April 14th article at techcrunch.com.

Second image from salon.com

Sources: Wikipeda, BBC News, CNN, verge.com, Modern Payment Systems

Bixyl Shuftan