Bitcoins are an online currency with no ties to a government or central bank. Since their inception in 2009, it has become a medium for all kinds of black market activities online. Here’s what you need to know about the not-so-legal side of Bitcoins.
“Most people are awaiting Virtual Reality; I’m awaiting virtuous reality,” said Eli Khamarov – but with the introduction of bitcoins in 2009, Eli will have to keep waiting. Bitcoins are an online currency, a virtual commodity with no ties to a government or central bank. Bitcoins are quickly rising as the currency of the online black market. Here’s what you should know about the not-so legal side of bitcoins.
The Bitcoin Currency is Decentralized: Big brother doesn’t know much, if anything, about purchases made with bitcoins – instead, security is in the hands of the people using bitcoins. There are no taxes, no chance of an account being frozen, and rampant opportunity for the currency to be used for things like prostitution, purchasing weapons, gambling, buying stolen art, and more.
The Silk Road: The Silk Road, aka the Amazon of illegal drugs, only allows transactions with bitcoins. At one point, the Silk Road drew the line at selling products harmful to others like firearms, stolen credit card numbers and more, but as the site grew things changed for the worse and in January 2012 guns were found for sale on the site. In 2012, studies estimated the Silk Road was doing $2 million dollars a month in drug sales – all transactions completed with bitcoins. But don’t try typing in Silk Road to your address bar, the site is accessible through a TOR network of computers that makes your visit anonymous. Silk Road may be the most pervasive illegal selling site out there, but it’s certainly not the only one.
Hacks and Speculation: Since 2011, there have been six major cases of hacks to bitcoin exchanges. In June 2011, hackers targeted accounts totaling nearly $9 million dollars US currency at the Mt. Gox online bitcoin exchange. Also, experts suggest the bitcoin currency can be gamed by speculators as more people adopt the currency. The value of bitcoins is always fluctuating, making them as risky as stocks, if not worse. Rates have fluctuated from $2.51 USD per bitcoin after a hack in 2011 to $33.00 per bitcoin around June of 2012.
Currently there are about 6.5 million bitcoins in existence, worth about $71 million US dollars. As the currency grows, it’s no guess the online illegal market, hacking, and financial scheming will as well.