To cut through some of the confusion surrounding bitcoin, we need to separate it into two components. On the one hand, you have bitcoin-the-token, a snippet of code that represents ownership of a digital concept – sort of like a virtual IOU. On the other hand, you have bitcoin-the-protocol, a distributed network that maintains a ledger of balances of bitcoin-the-token. Both are referred to as “bitcoin.”
The system enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway. It is created and held electronically. Bitcoins aren’t printed, like dollars or euros – they’re produced by computers all around the world, using free software.
It was the first example of what we today call cryptocurrencies, a growing asset class that shares some characteristics of traditional currencies, with verification based on cryptography.
A pseudonymous software developer going by the name of Satoshi Nakamoto proposed bitcoin in 2008, as an electronic payment system based on mathematical proof. The idea was to produce a means of exchange, independent of any central authority, that could be transferred electronically in a secure, verifiable and immutable way. To this day, no-one knows who Satoshi Nakamoto really is.
In what ways is it different from traditional currencies?
Bitcoin can be used to pay for things electronically, if both parties are willing. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally.
But it differs from fiat digital currencies in several important ways:
Bitcoin’s most important characteristic is that it is decentralized. No single institution controls the bitcoin network. It is maintained by a group of volunteer coders, and run by an open network of dedicated computers spread around the world. This attracts individuals and groups that are uncomfortable with the control that banks or government institutions have over their money.
Bitcoin solves the “double spending problem” of electronic currencies (in which digital assets can easily be copied and re-used) through an ingenious combination of cryptography and economic incentives. In electronic fiat currencies, this function is fulfilled by banks, which gives them control over the traditional system. With bitcoin, the integrity of the transactions is maintained by a distributed and open network, owned by no-one.
Fiat currencies (dollars, euros, yen, etc.) have an unlimited supply – central banks can issue as many as they want, and can attempt to manipulate a currency’s value relative to others. Holders of the currency (and especially citizens with little alternative) bear the cost.
With bitcoin, on the other hand, the supply is tightly controlled by the underlying algorithm. A small number of new bitcoins trickle out every hour, and will continue to do so at a diminishing rate until a maximum of 21 million has been reached. This makes bitcoin more attractive as an asset – in theory, if demand grows and the supply remains the same, the value will increase.
While senders of traditional electronic payments are usually identified (for verification purposes, and to comply with anti-money laundering and other legislation), users of bitcoin in theory operate in semi-anonymity. Since there is no central “validator,” users do not need to identify themselves when sending bitcoin to another user. When a transaction request is submitted, the protocol checks all previous transactions to confirm that the sender has the necessary bitcoin as well as the authority to send them. The system does not need to know his or her identity.
In practice, each user is identified by the address of his or her wallet. Transactions can, with some effort, be tracked this way. Also, law enforcement has developed methods to identify users if necessary. Furthermore, most exchanges are required by law to perform identity checks on their customers before they are allowed to buy or sell bitcoin, facilitating another way that bitcoin usage can be tracked. Since the network is transparent, the progress of a particular transaction is visible to all.
This makes bitcoin not an ideal currency for criminals, terrorists or money-launderers.
Bitcoin transactions cannot be reversed, unlike electronic fiat transactions.
This is because there is no central “adjudicator” that can say “ok, return the money.” If a transaction is recorded on the network, and if more than an hour has passed, it is impossible to modify.
While this may disquiet some, it does mean that any transaction on the bitcoin network cannot be tampered with.
The smallest unit of a bitcoin is called a satoshi. It is one hundred millionth of a bitcoin (0.00000001) – at today’s prices, about one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.
Why Use Bitcoin
Bitcoin was originally created as an alternative, decentralized payment method. Unlike international bank transfers at the time, it was low-cost and almost instantaneous. An added benefit for merchants (less so for users) was that it was irreversible, removing the threat of expensive charge-backs.
However, the improvement in domestic payment methods and the rapid development of alternative (non-cryptocurrency) forms of international transfers has reduced bitcoin’s advantage in this area, especially given its increasing fees and frequent network bottlenecks.
Furthermore, the increasing oversight and regulation to prevent money laundering and illegal transactions have restricted the cryptocurrency’s use for privacy reasons.
In some parts of the world, bitcoin is still a more efficient and cheaper way to transfer money across borders, and several remittance startups make use of this feature. Bitcoin’s cost and speed advantages, though, are being eroded as traditional channels improve (and the network’s fees continue to increase), and liquidity remains a problem in many countries.
Also, a number of large and small retailers accept the cryptocurrency as a form of payment, although reports suggest that demand for this function is not high.
And many individuals feel more comfortable holding a part of their wealth in securely-stored bitcoin, where a central authority cannot block access or take a cut.
Recently bitcoin seems to have assumed the role of investment asset, as traders, institutional investors and small savers have woken up to the potential gains from price appreciation.
According to some sources, bitcoin is increasingly being used for money laundering. But we know that you wouldn’t do that. And anyway, bitcoin is not, as is commonly believed, a good vehicle for money laundering, extorsion or terrorism financing, since it is both traceable and transparent – as a spate of recent arrests can attest.
How can i buy bitcoin?
You’ve learned the basics about bitcoin, you’re excited about the potential and now you want to buy some*. But how?
(*Please, never invest more than you can afford to lose – cryptocurrencies are volatile and the price could go down as well as up.)
Bitcoin can be bought on exchanges, or directly from other people via marketplaces.
You can pay for them in a variety of ways, ranging from hard cash to credit and debit cards to wire transfers, or even with other cryptocurrencies, depending on who you are buying them from and where you live.
1-Setup a Wallet
The first step is to set up a wallet to store your bitcoin – you will need one, whatever your preferred method of purchase. This could be an online wallet (either part of an exchange platform, or via an independent provider), a desktop wallet, a mobile wallet or an offline one (such as a hardware device or a paper wallet).
Even within these categories of wallets there is a wide variety of services to choose from, so do some research before deciding on which version best suits your needs.
You can find more information on some of the wallets out there, as well as tips on how to use them, here and here.
The most important part of any wallet is keeping your keys (a string of characters) and/or passwords safe. If you lose them, you lose access to the bitcoin stored there.
2-Open account at exchange
Cryptocurrency exchanges will buy and sell bitcoin on your behalf. There are hundreds currently operating, with varying degrees of liquidity and security, and new ones continue to emerge while others end up closing down. As with wallets, it is advisable to do some research before choosing – you may be lucky enough to have several reputable exchanges to choose from, or your access may be limited to one or two, depending on your geographical area.
The largest bitcoin exchange in the world at the moment in terms of US$ volume is Bitfinex, although it is mainly aimed at spot traders. Other high-volume exchanges are Coinbase,Binance, Bitstamp and Poloniex, but for small amounts, most reputable exchanges should work well. (Note: at time of writing, the surge of interest in bitcoin trading is placing strain on most retail buy and sell operations, so a degree of patience and caution is recommended.)
With the clampdown on know-your-client (KYC) and anti-money-laundering (AML) regulation, many exchanges now require verified identification for account setup. This will usually include a photo of your official ID, and sometimes also a proof of address.
Most exchanges accept payment via bank transfer or credit card, and some are willing to work with Paypal transfers. And most exchanges charge fees (which generally include the fees for using the bitcoin network).
Each exchange has a different procedure for both setup and transaction, and should give you sufficient detail to be able to execute the purchase. If not, consider changing the service provider.
Once the exchange has received payment, it will purchase the corresponding amount of bitcoin on your behalf, and deposit them in an automatically generated wallet on the exchange. This can take minutes, or sometimes hours due to network bottlenecks. If you wish (recommended), you can then move the funds to your off-exchange wallet.
BUYING WITH CASH
3- Choose a Purchase Method
Platforms such as Local Bitcoins will help you to find individuals near you who are willing to exchange bitcoin for cash.
How to sell Bitcoin?
These days virtually all the methods available to buy bitcoin also offer the option to sell.
The exception is bitcoin ATMs – some do allow you to exchange bitcoin for cash, but not all. Coinatmradar will guide you to bitcoin ATMs in your area.
All exchanges allow you to sell as well as buy. What type of exchange you choose to sell your bitcoin will depend on what type of holder you are: small investor, institutional holder or trader?
Some platforms such as GDAX and Gemini are aimed more at large orders from institutional investors and traders.
Retail clients can sell bitcoin at exchanges such as Coinbase, Kraken, Bitstamp, Poloniex, etc. Each exchange has a different interface, and some offer related services such as secure storage. Some require verified identification for all trades, while others are more relaxed if small amounts are involved.
(Of course, don’t forget to declare any profit you make on the sale to your relevant tax authority!)
You can, if you wish, exchange your bitcoin for other cryptoassets rather than for cash. Some exchanges such as ShapeShift focus on this service, allowing you to swap between bitcoin and ether, litecoin, XRP, dash and several others.
Another alternative is the direct sale. You can register as a seller on platforms such as LocalBitcoins, BitQuick, Bittylicious and BitBargain, and interested parties will contact you if they like your price. Transactions are usually done via deposits or wires to your bank account, after which you are expected to transfer the agreed amount of bitcoin to the specified address.
Or, you can sell directly to friends and family once they have a bitcoin wallet set up. Just send the bitcoin, collect the cash or mobile payment, and have a celebratory drink together. (Note: it is generally not a good idea to meet up with strangers to exchange bitcoin for cash in person. Be safe.)
(Note: specific businesses mentioned here are not the only options available, and should not be taken as a recommendation.)
How to store your bitcoin?
Before owning any bitcoin, you need somewhere to store them. That place is called a “wallet.” Rather than actually holding your bitcoin, it holds the private key that allows you to access your bitcoin address (which is also your public key). If the wallet software is well designed, it will look as if your bitcoins are actually there, which makes using bitcoin more convenient and intuitive. Actually, a wallet usually holds several private keys, and many bitcoin investors have several wallets.
Wallets can either live on your computer and/or mobile device, on a physical storage gadget, or even on a piece of paper. Here we’ll briefly look at the different types.
Electronic wallets can be downloaded software, or hosted in the cloud. The former is simply a formatted file that lives on your computer or device, that facilitates transactions. Hosted (cloud-based) wallets tend to have a more user-friendly interface, but you will be trusting a third party with your private keys.
Installing a wallet directly on your computer gives you the security that you control your keys. Most have relatively easy configuration, and are free. The disadvantage is that they do require more maintenance in the form of backups. If your computer gets stolen or corrupted and your private keys are not also stored elsewhere, you lose your bitcoin.
They also require greater security precautions. If your computer is hacked and the thief gets a hold of your wallet or your private keys, he also gets hold of your bitcoin.
The original software wallet is the Bitcoin Core protocol, the program that runs the bitcoin network. You can download this here (it doesn’t mean that you have to become a fully operational node), but you’d also have to download the ledger of all transactions since the dawn of bitcoin time (2009). As you can guess, this takes up a lot of memory – at time of writing, over 145GB.
Most wallets in use today are “light” wallets, or SPV (Simplified Payment Verification) wallets, which do not download the entire ledger but sync to the real thing. Electrum is a well-known SPV desktop bitcoin wallet that also offers “cold storage” (a totally offline option for additional security). Exodus can track multiple assets with a sophisticated user interface. Some (such as Jaxx) can hold a wide range of digital assets, and some (such as Copay) offer the possibility of shared accounts.
Online (or cloud-based) wallets offer increased convenience – you can generally access your bitcoin from any device if you have the right passwords. All are easy to set up, come with desktop and mobile apps which make it easy to spend and receive bitcoin, and most are free.
The disadvantage is the lower security. With your private keys stored in the cloud, you have to trust the host’s security measures, and that it won’t disappear with your money, or close down and deny you access.
Some leading online wallets are attached to exchanges (such as Coinbase and Blockchain). Some offer additional security features such as offline storage (Coinbase and Xapo).
Mobile wallets are available as apps for your smartphone, especially useful if you want to pay for something in bitcoin in a shop, or if you want to buy, sell or send while on the move. All of the online wallets and most of the desktop ones mentioned above have mobile versions, while others – such as Abra, Airbitz and Bread – were created with mobile in mind.
Hardware wallets are small devices that occasionally connect to the web to enact bitcoin transactions. They are extremely secure, as they are generally offline and therefore not hackable. They can be stolen or lost, however, along with the bitcoins that belong to the stored private keys. Some large investors keep their hardware wallets in secure locations such as bank vaults. Trezor, Keepkey and Ledger and Case are notable examples.
Perhaps the simplest of all the wallets, these are pieces of paper on which the private and public keys of a bitcoin address are printed. Ideal for the long-term storage of bitcoin (away from fire and water, obviously), or for the giving of bitcoin as a gift, these wallets are more secure in that they’re not connected to a network. They are, however, easier to lose.
With services such as WalletGenerator, you can easily create a new address and print the wallet on your printer. Fold, seal and you’re set. Send some bitcoin to that address, and then store it safely or give it away. (See our tutorial on paper wallets here.)
Are bitcoin wallets safe?
That depends on the version and format you have chosen, and how you use them.
The safest option is a hardware wallet which you keep offline, in a secure place. That way there is no risk that your account can be hacked, your keys stolen and your bitcoin whisked away. But, if you lose the wallet, your bitcoin are gone, unless you have created a clone and/or kept reliable backups of the keys.
The least secure option is an online wallet, since the keys are held by a third party. It also happens to be the easiest to set up and use, presenting you with an all-too-familiar choice: convenience vs safety.
Many serious bitcoin investors use a hybrid approach: they hold a core, long-term amount of bitcoin offline, while having a “spending balance” for liquidity in a mobile account. Your choice will depend on your bitcoin strategy, and your willingness to get “technical.”
Whatever option you go for, please be careful. Back up everything, and only tell your nearest and dearest where your backups are stored.
For more information on how to buy bitcoin, see here. And for some examples of what you can spend it on, see here.
(Note: specific businesses mentioned here are not the only options available, and should not be taken as a recommendation.)
How Do Bitcoin Transactions Work?
If I want to send some of my bitcoin to you, I publish my intention and the nodes scan the entire bitcoin network to validate that I 1) have the bitcoin that I want to send, and 2) haven’t already sent it to someone else. Once that information is confirmed, my transaction gets included in a “block” which gets attached to the previous block – hence the term “blockchain.” Transactions can’t be undone or tampered with, because it would mean re-doing all the blocks that came after.
Is Bitcoin legal?
As the market capitalization of the cryptocurrency market shoots up, through price movements and a surge in new tokens, regulators around the world are stepping up the debate on oversight into the use and trading of digital assets.
This affects all cryptocurrencies, but especially bitcoin, given its market leadership and integration into the global startup ecosystem.
Very few countries have gone as far as to declare bitcoin illegal. That does not, however, mean that bitcoin is “legal tender” – so far, only Japan has gone as far as to give bitcoin that designation. However, just because something isn’t legal tender, does not mean that it cannot be used for payment – it just means that there are no protections for either the consumer or the merchant, and that its use as payment is completely discretionary.
Other jurisdictions are still mulling what steps to take. The approaches vary: some smaller nations such as Zimbabwe have few qualms about making brash pronouncements casting doubts on bitcoin’s legality. Larger institutions, such as the European Commission, recognize the need for dialogue and deliberation, while the European Central Bank (ECB) believes that cryptocurrencies are not yet mature enough for regulation (although with bitcoin almost 10 years old, one is left wondering when we will know it has reached sufficient maturity). In the United States, the issue is complicated further by the fractured regulatory map – who would do the legislating, the federal government or individual states?
A related question in other countries, to which there is not yet a clear answer, is: should central banks keep an eye cryptocurrencies, or financial regulators? In some countries they are one and the same thing, but in most developed nations, they are separate institutions with distinct remits.
Another divisive issue is: should bitcoin be regulated on a national or international basis? France is pushing for the G20 (an international forum for governments and central banks) to discuss establishing parameters at the upcoming summit in April 2018.
A further distinction needs to be made between regulation of the cryptocurrency itself (is it a commodity or a currency, is it legal tender?) and cryptocurrency businesses (are they money transmitters, do they need licenses?). In a few countries the considerations are tied together – in most others, they have been dealt with separately.
Below is a brief summary of pronouncements made by certain countries. This list is updated monthly.
Last updated: 5 July 2018
In October 2017, the Australian Senate began debating a bill that would apply anti-money laundering statutes to the country’s cryptocurrency exchanges, as well as mandate criminal charges for exchanges that operate without a license.
That same month, the tax authorities removed the “double taxation” of bitcoin, which was a result of a decision in 2014 to treat the cryptocurrency as a “bartered good” rather than a currency or asset.
As of the end of 2017, cryptocurrency exchanges have to register with the country’s financial intelligence agency Austrac, and comply with customer verification and record preservation requirements.
Further moves are unlikely for now, however, as officials from the central bank recently said that regulation is not needed for the use of cryptocurrencies as payment.
In spite of a strong bitcoin ecosystem, Argentina has not yet drawn up regulations for the cryptocurrency, although the central bank has issued official warnings of the risks involved.
In 2015, Bangladesh expressly declared that using cryptocurrencies was a “punishable offence.”
In 2014, the central bank of Bolivia officially banned the use of any currency or tokens not issued by the government.
Canada was one of the first countries to draw up what could be considered “bitcoin legislation,” with the passage of Bill C-31 in 2014, which designated “virtual currency businesses” as “money service businesses,” compelling them to comply with anti-money laundering and know-your-client requirements.
The government has specified that bitcoin is not legal tender, and the country’s tax authority has deemed bitcoin transactions taxable, depending on the type of activity.
While China has not banned bitcoin (and insists it has no plans to do so), it has cracked down on bitcoin exchanges – all major bitcoin exchanges in the country, including OKCoin, Huobi, BTC China, and ViaBTC, suspended order book trading of digital assets against the yuan in 2017.
It also appears to be withdrawing preferential treatment (tax deductions and cheap electricity) for bitcoin miners.
In 2014, the National Assembly of Ecuador banned bitcoin and decentralized digital currencies while establishing guidelines for the creation of a new, state-run currency.
In January 2018, the Grand Mufti of Egypt declared that cryptocurrency trading was forbidden under Islamic religious law due to the risk associated with the activity. While this is not legally binding, it does count as a high-level legal opinion.
The European Union is taking a cautious approach to cryptocurrency regulation, with several initiatives underway to involve sector participants in the drafting of supportive rules. The focus appears to be on learning before regulating, while boosting innovation and taking into account the needs of the ecosystem.
The European Central Bank (ECB), however, is pushing for tighter control over movements of digital currencies as part of a broader crackdown on money laundering, while recognizing the jurisdictional complexities in regulating an asset with no boundaries. In late in 2017, an ECB official stated that the institution did not see bitcoin as a threat, and president Mario Draghi recently confirmed that, in the eyes of the ECB, bitcoin was not “mature enough” for regulation.
In April 2018, the parliament’s members voted by a large majority to support a December 2017 agreement with the European Council for measures aimed, in part, to prevent the use of cryptocurrencies in money laundering and terrorism financing.
The G20 – comprised of the world’s 20 largest economies – recently turned its attention to cryptocurrencies in general, and committed to drafting recommendations on the first steps towards regulation by July 2018.
The Indian central bank has issued a couple of official warnings on bitcoin, and at the end of 2017 the country’s finance minister clarified in an interview that bitcoin is not legal tender. The government does not yet have any regulations that cover cryptocurrencies, although it is looking at recommendations.
The central bank, however, has barred Indian financial institutions from working with cryptocurrency exchanges and other related services (a ban recently upheld by the country’s Supreme Court).
In April 2018, Iran’s central bank and one of its principal market regulators said that financial businesses should not deal in bitcoin or other cryptocurrencies. Furthermore, CoinDesk recently reported on government censorship of cryptocurrency exchange websites operating in the country.
Japan was the first country to expressly declare bitcoin “legal tender,” passing a law in early 2017 that also brought bitcoin exchanges under anti-money laundering and know-your-customer rules (although license applications have temporarily been suspended as the regulators deal with a hack on the Coincheck exchange in early 2018).
Recently the Financial Servivces Agency has been cracking down on exchanges, suspending two, issuing improvement orders to several and mandating better security measures in five others. It has also established a cryptocurrency exchange industry study group which aims to examine institutional issues regarding bitcoin and other assets.
According to reports, the National Bank of Kazakhstan recently hinted at plans to ban cryptocurrency trading and mining, although as yet no strict regulations have been passed.
The central bank of Kyrgyzstan declared in 2014 that using cryptocurrencies for transactions was against the law.
Malaysia’s Securities Commission is working together with the country’s central bank on a cryptocurrency regulation framework.
The European island recently passed a series of blockchain-friendly laws, including one that details the registration requirements of cryptocurrency exchanges.
In 2014, Mexico’s central bank issued a statement blocking banks from dealing in virtual currencies. The following year, the finance ministry clarified that, although bitcoin was not “legal tender,” it could be used as payment and therefore was subject to the same anti-money laundering restrictions as cash and precious metals.
At the end of 2017, Mexico’s national legislature approved a bill that would bring local bitcoin exchanges under the oversight of the central bank.
Towards the end of 2017, Morocco’s foreign exchange authority declared that the use of cryptocurrencies within the country violated foreign exchange regulations and would be met with penalties.
Namibia is one of the few countries to have expressly declared that purchases with bitcoin are “illegal.”
While Nigerian banks are prohibited from handling virtual currencies, the central bank is working on a white paper which will draft its official stance on use of cryptocurrencies as a payment method.
In April 2018, Pakistan’s central bank issued a statement barring financial companies in the country from working with cryptocurrency firms.
Draft cryptocurrency legislation from the State Duma’s financial regulator is expected in mid-2018. The focus appears to be on protecting citizens from scams, while allowing individuals and businesses to work legally with cryptocurrencies.
The efforts of the State Duma have been bolstered by a mandate from Putin himself, issued in October 2017, urging development of a “single payment space” within the Eurasian Economic Union (an alliance of countries including Armenia, Belarus and others), increased scrutiny of token sales, as well as licensing of bitcoin mining operations.
The Monetary Authority of Singapore is reportedly examining at whether new rules are needed to protect cryptocurrency investors, and while it is not likely to ban cryptocurrency trading, it is looking at imposing anti-money laundering and terrorism financing rules on exchanges.
The central bank is also working on a regulatory framework for bitcoin payments, and has issued warnings on bitcoin investments.
In 2017, the South Africa Reserve Bank implemented a “sandbox approach,” testing draft bitcoin and cryptocurrency regulation with a selected handful of startups.
In early 2018, South Korea banned anonymous virtual currency accounts. And in an effort to curb cryptocurrency speculation, the authorities are working on increased oversight of exchanges (which could include a licensing scheme), although the governor of the Financial Supervisory Service has said the government will support “normal” cryptocurrency trading.
In an interesting shift in strategy, a recent report in the South Korean press indicated that the country’s financial authorities are in talks with similar agencies in Japan and China over joint oversight of cryptocurrency investment.
In April 2018, the Fair Trade Commission ordered 12 of the country’s cryptocurrency exchanges to revise their user agreements.
After allegedly declaring bitcoin illegal, the Bank of Thailand issued a backtracking statement in 2014, clarifying that it is not legal tender (but not technically illegal), and warning of the risks.
In March 2018, the government’s executive branch provisionally passed two royal decree drafts, establishing formal rules to protect cryptocurrency investors (as well as setting KYC requirements), and setting a tax on their capital gains. The drafts have yet to receive final cabinet approval.
United States of America
The U.S. is plagued by a fragmented regulatory system, with legislators at both the state and the federal level responsible for layered jurisdictions and a complex separation of powers.
Some states are more advanced than others in cryptocurrency oversight. New York, for instance, unveiled the controversial BitLicense in 2015, granting bitcoin businesses the official go-ahead to operate in the state (many startups pulled out of the state altogether rather than comply with the expensive requirements). In mid-2017, Washington passed a bill that applied money transmitter laws to bitcoin exchanges.
New Hampshire requires bitcoin sellers to get a money transmitter license and post a $100,000 bond. In Texas, the state securities commission is monitoring (and, on occasion, shutting down) bitcoin-related investment opportunities. And California is in bitcoin regulation limbo after freezing progresson Bill 1326 which – while criticized for issues such as overly broad definitions – was seen as less oppressive than New York’s BitLicense.
At the federal level, the Securities and Exchange Commission’s focus has been on the use of blockchain assets as securities, such as whether or not certain bitcoin investment funds should be sold to the public, and whether or not a certain offering is fraud.
The Commodities Futures Trading Commission (CFTC) has a bigger potential footprint in bitcoin regulation, given its designation of the cryptocurrency as a “commodity.” While it has yet to draw up comprehensive bitcoin regulations, its recent efforts have focused on monitoring the nascent futures market. It has also filed charges in several bitcoin-related schemes, which underlines its intent to exercise jurisdiction over cryptocurrencies whenever it suspects there may be fraud.
The Uniform Law Commission, a non-profit association that aims to bring clarity and cohesion to state legislation, has drafted the Uniform Regulation of Virtual Currency Business Act, which several states are contemplating introducing in upcoming legislative sessions. The Act aims to spell out which virtual currency activities are money transmission businesses, and what type of license they would require. Critics fear it too closely resembles the New York BitLicense.
Britain’s Financial Conduct Authority (FCA) sees bitcoin as a “commodity,” and therefore does plan to regulate it. It has hinted, however, that it will step in to oversee bitcoin-related derivatives. This lack of consumer protection has been behind recent FCA warnings on the risks inherent in cryptocurrencies.
The government of Ukraine has created a working group composed of regulators from various branches to draft cryptocurrency regulation proposals, including the determination of which agencies will have oversight and access. Also, a bill already before the legislature would bring cryptocurrency exchanges under the jurisdiction of the central bank.
Late in 2017, a senior official from Zimbabwe’s central bank stated that bitcoin was not “actually legal.”While the extent to which it can and cannot be used is not yet clear, the central bank is apparently undertaking research to determine the risks.
Who is Satoshi Nakamoto?
While we may not know who he (or she) was, we
know what he did. Satoshi Nakamoto was the inventor of the bitcoin
protocol, publishing a paper via the Cryptography Mailing List in November 2008.
He then released the first version of the bitcoin software
client in 2009, and participated with others on the project via mailing lists,
until he finally began to fade from the community toward the end of 2010.
Nakamoto worked with people on the open-source team, but took
care never to reveal anything personal about himself, and the last anyone heard
from him was in the spring of 2011, when he said that he had “moved on to other
But he was Japanese, right?
Best not to judge a book by its cover. Or in fact, maybe we
“Satoshi” means “clear thinking, quick witted; wise”. “Naka” can
mean “medium, inside, or relationship”. “Moto” can mean “origin”, or
Those things would all apply to the person who founded a
movement by designing a clever algorithm. The problem, of course, is that each
word has multiple possible meanings.
We can’t know for sure whether he was Japanese or not. In fact,
it’s rather presumptuous to assume that he was actually a ‘he’.
We’re just using that as a figure of speech, but allowing for
the fact that this could have been a pseudonym, ‘he’ could have been a ‘she’,
or even a ‘they’.
Does anyone know
who Nakamoto was?
No, but the detective techniques that people
use when guessing are sometimes even more intriguing than the answer. The New
Yorker’s Joshua Davis believed that Satoshi Nakamoto was Michael
Clear, a graduate cryptography student at Dublin’s Trinity
He arrived at this conclusion by analyzing 80,000 words of
Nakamoto’s online writings, and searching for linguistic clues. He also
suspected Finnish economic sociologist and former games developer Vili
Both have denied being bitcoin’s inventor. Michael Clear publicly denied being Satoshi at the 2013 Web Summit.
Adam Penenberg at FastCompany disputed
that claim, arguing instead that Nakamoto may actually have been three people: Neal
King, Vladimir Oksman, and Charles
Bry. He figured this out by typing unique phrases from
Nakamoto’s bitcoin paper into Google, to see if they were used anywhere else.
One of them, “computationally impractical to
reverse,” turned up in a patent application made by these three for updating
and distributing encryption keys. The bitcoin.org domain name originally used by Satoshi
to publish the paper had been registered three days after the patent
application was filed.
It was registered in Finland, and one of the patent authors had traveled
there six months before the domain was registered. All of them deny it. Michael
Clear also publicly denied being Satoshi at the 2013 Web Summit.
In any case, when bitcoin.org was registered on August 18th 2008, the
registrant actually used a Japanese anonymous registration service, and hosted
it using a Japanese ISP. The registration for the site was only transferred to
Finland on May 18th 2011, which weakens the Finland theory somewhat.
Others think that it was Martii
Malmi, a developer living in Finland who has been involved with
bitcoin since the beginning, and developed its user interface.
A finger has also been pointed at Jed
McCaleb, a lover of Japanese culture and resident of Japan, who
created troubled bitcoin exchange Mt. Gox and co-founded decentralized payment
systems Ripple and later Stellar.
Another theory suggests that computer
scientists Donal O’Mahony and Michael
Peirce are Satoshi, based on a paper that they authored concerning digital
payments, along with Hitesh Tewari, based on a book that they published together. O’Mahony and Tewari also studied at Trinity College, where
Michael Clear was a student.
Israeli scholars Dorit
Ron and Adi Shamir of the
Weizmann Institute retracted allegations made in a paper suggesting a link
between Satoshi and Silk Road, the black market web site that was taken down by
the FBI in October 2013. They had suggested a link between an address allegedly
owned by Satoshi, and the site. Security researcher Dustin D. Trammell
owned the address, and disputed claims that he was Satoshi.
In May 2013, Internet pioneer Ted Nelson threw
another hat into the ring: Japanese mathematician Professor
Shinichi Mochizuki, although he admits that the evidence
is circumstantial at best.
In February 2014, Newsweek’s Leah McGrath Goodman claimed to have tracked down the real Satoshi Nakamoto. Dorian S Nakamoto has since denied he knows anything about bitcoin, eventually hiring a lawyer and releasing an official statement to that effect.
Hal Finney, Michael Weber, Wei
Dai and several other developers were among those who are
periodically named in media reports and online discussions as potential
Satoshis. A group of forensic linguistics experts from Aston
University believe the real creator of bitcoin is Nick
Szabo, based upon analysis
of the Bitcoin White Paper.
a comedian and a writer, also suggests that BitGold creator Szabo was
the most likely candidate to be Satoshi in his book, “Bitcoin: The Future of Money”. His detailed analysis involved the linguistics of
Satoshi’s writing, judging the level of technical skill in C++ and even Satoshi’s likely birthday.
In Nathaniel Popper’s book, ‘Digitial Gold‘,
released in May 2015, Popper reveals that in a rare encounter at an event Szabo
again denied that he was Satoshi.
Then in early
December 2015, reports by Wired and Gizmodo tentatively claimed
to have identified Nakamoto as Australian entrepreneur Craig
S Wright. WIRED cited “an anonymous
source close to Wright” who provided a cache of emails, transcripts and other
documents that point to Wright’s role in the creation of bitcoin. Gizmodo cited a cache of documents sourced from someone claiming
to have hacked Wright’s business email account, as well as efforts to interview
individuals close to him. The idea that the Wright-Satoshi connection is
nothing but a hoax has been floated by observers, though the compelling nature of the evidence
published will no doubt fuel speculation for some time to come.
For the most part, all of these potential Satoshi’s have
insisted they are not Nakamoto.
So what do we know about him?
One thing we know, based on interviews with people that
were involved with him at an early stage in the development of bitcoin, is that
he thought the system out very thoroughly.
His coding wasn’t conventional, according to
core developer Jeff Garzik, in that he didn’t
apply the same rigorous testing that you would expect from a classic software
How rich is he?
An analysis by Sergio Lerner, an authority on
bitcoin and cryptography, suggests that Satoshi mined many of the early blocks
in the bitcoin network, and that he had built up a fortune of around 1 million
unspent bitcoins. That hoard would be worth $1bn at November 2013’s exchange
rate of $1,000.
What is he doing now?
No one knows what Satoshi is up to, but one of the last emails
he sent to a software developer, dated April 23 2011, said “I’ve moved on to
other things. It’s in good hands with Gavin and everyone.”
Did he work for the government?
There are rumors, of course. People have interpreted his name as
meaning “central intelligence”, but people will see whatever they want to see.
Such is the nature of conspiracy theories.
The obvious question would be why one of the three-letter
agencies would be interested in creating a cryptocurrency that would
subsequently be used as an anonymous trading mechanism, causing senators and
the FBI alike to wring their hands about potential terrorism and other criminal
endeavours. No doubt conspiracy theorists will have their views on that, too.
Perhaps it doesn’t matter. Core developer Jeff Garzik puts it
succinctly. “Satoshi published an open-source system for the purpose that you
didn’t have to know who he was, and trust who he was, or care about his
knowledge,” he points out. Open-source code makes it impossible to hide
secrets. “The source code spoke for itself.”
Moreover, it was smart to use a pseudonym, he
argues, because it forced people to focus on the technology itself rather than
on the personality behind it. At the end of the day, bitcoin
is now far bigger than Satoshi Nakamoto.
Understanding Bitcoin Price Charts
Whether you already own bitcoin or plan to get
some, sooner or later you’ll want to know how much the cryptocoins are worth
when converted to your currency of choice.
Later, you may want to know whether to hang onto your coins or
to sell them – hopefully making a little profit in the process. However,
analyzing price charts and understanding trading terms from the financial world
can be rather daunting, especially for the beginner.
This guide serves as a useful primer of the basics.
Methods for predicting price
Forecasting price movements of anything traded at an exchange is
a risky probabilities game – nobody is right all the time. Many traders have
lost lots of money, if not their life savings, into such attempts.
The two main approaches to predicting price
development are called fundamental analysis and technical
analysis. While fundamental
analysis examines the underlying forces of an economy, a company or a security,
technical analysis attempts to forecast the direction of prices based on past
market data, primarily historical prices and volumes found on price charts.
Where to find bitcoin price
To perform technical analysis on bitcoin price
and volume history, you’ll need bitcoin price charts that display data in a
more readable manner than just plain number tables. Good places to start are
the charts on Vinvestindia Bitcoin