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Thursday 9 June 2011

Bitcoin: inside the encrypted, peer-to-peer digital currency


arstechnica.com

Bitcoin—a pseudonymous cryptographic currency designed by an enigmatic, freedom-loving hacker, and currently used by the geek underground to buy and sell everything from servers to cellphone jammers. No, this isn't a cyberpunk artifact from Snow Crash or Neuromancer; it's a real currency currently valued several times higher than the US dollar, the British pound, and the Euro.

Bitcoin is a virtual currency, designed to allow people to buy and sell without centralized control by banks or governments, and it allows for pseudonymous transactions which aren't tied to a real identity. In keeping with the hacker ethos, Bitcoin has no need to trust any central authority; every aspect of the currency is confirmed and secured through the use of strong cryptography.

Over the last few months, Bitcoin's value has risen by an order of magnitude as the sagas of Wikileaks and Anonymous (among others) have highlighted the limits of a financial system which relies on centralized intermediaries. With a current estimated market capitalization of about $100 million, Bitcoin has recently graduated from a theoretical techno-anarchic project patronized by libertarians and hackers to a full-fledged currency prompting comment from technologists and economists. At the time of this writing, one Bitcoin (BTC) is worth about US$15.

So how does Bitcoin work? Is it really secure? And is it here to stay—or just another digital currency fad? Glad you asked. [...]

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