Bitcoins are an innovative form of digital currency. Although the system as a whole may seem a brilliant invention in the age-oriented technology today, there are many weaknesses and inherent flaws that mar the surface of idealistic Bitcoin system. Both cyber criminals and unscrupulous government officials concerned are causing snags that can slow or bitcoins even bring the whole system down.
A Bitcoin is a digital currency that can be used with individuals or companies participating worldwide. Transfer bitcoins from one user to another requires no transaction fees or credit card charges. That made bitcoins a popular option with some small companies seeking a cheap way to process transactions.
The value of Bitcoins changes over time, and your bitcoins may have a different value on different exchanges. The largest Bitcoin exchange Mt. Gox Bitcoin is, which began trading less than $ 14 in 2013 and reached a peak of more than $ 10 before falling to $ 455, and finally stabilize around $ 00 .
Bitcoins are "mined" by computer systems to perform complex calculations. The process of mining bitcoins becomes more difficult over time, so that the system is set to finally reach a maximum of 21 million bitcoins around the year 2140.
The weaknesses of the system
You can access your bitcoins with your private key. There is no way to recover a lost key. Coins are not linked to your name or personal identity in any way. If you lose your key, you have essentially lost an equal amount of money. You can not go to a bank and ask them to replace the $ 100 bill you dropped, so you can not ask for help to a loss of Bitcoin key.
Your bitcoins are stored in a virtual wallet that can be stored either on your computer or in a cloud. If you store your bitcoins in a cloud, they are susceptible to hackers online that can access the server that is holding your virtual money. If you store bitcoins on your computer, you can lose a virus or your own actions if you delete them wrong.
The attraction for criminals
The Bitcoin system has become very popular for criminals because of the fact that these virtual rooms are not linked to personal information. Users can exchange bitcoins with each other without the trade names, email addresses or other information. It is very difficult to trace back to someone bitcoins. Buyers and sellers who are engaged in illicit activities are sure to see the appeal of this type of system.
Software Problems
The Bitcoin system is far from infallible and recent discoveries have only highlighted how easily a major fault can sneak. It was recently revealed that hackers have exploited a loophole in the program known as the malleability. This allowed a double payment for one transaction. Over 744,000 bitcoins are currently missing due to theft of malleability. This represents about 6 percent of all bitcoins currently affected. Lost bitcoins are worth about $ 350 million at current stock price.
This is not the only mistake that afflict the Bitcoin system. Another bug gave hackers access to bitcoins that should have been stored safely in a "cold" off-line portfolio. These secure cold portfolios were accessible inadvertently by a leak in a warm portfolio. The flaw allowed hackers to steal bitcoins cold portfolio for two years.
Allegations of money
launderingIn addition to the flaws in the Bitcoin system, the company is facing legal weaknesses that make the system sensitive to crimes such as money laundering . The Director General of exchange bitcoin BitInstant, Charlie Shrem, is accused of conspiracy to commit money laundering and operating an unlicensed money transmitting business. He would have sold more than $ 1 million bitcoins to drug traffickers on an underground site known as the Silk Road.
The CEO is not the only person to succumb to the lure of money laundering by Bitcoin. Two men in Florida, unknowingly sold hundreds of dollars in bitcoins to plainclothes police in a few months. The men were arrested in February 2014 and accused of operating a money services business and money laundering without license.
Buy bitcoins is a long process if you are working online because you have to wait to secure transfers to treat. Therefore underground exchanges have become so popular, allowing anyone who bitcoins to sell them for money. Now that plainclothes police got involved in such transactions, the Bitcoin system can find that one of its doors last to operate illegally slammed closed.
The regulation Question
Bitcoins are currently unregulated. This causes problems both for the government and for users. If bitcoins are lost or stolen, there is virtually no mechanism for users to recover their losses. Although bitcoins are available as a form of monetary exchange, they are not a safe alternative to a bank. If you store all your money in bitcoins, you could lose in an instant. While the federal government covers money held in banks, they offer such protection or guarantees for virtual currency bitcoins.
The government is concerned about the unregulated market for bitcoins because it is difficult to implement appropriate taxation. Companies using bitcoins as a major form of payment can not file taxes accurately, or not at all.
Although bitcoins seem poised on the brink of success or failure, and can go either way, they certainly won 't the only invention of their gender. Virtual currency is a popular concept that will only grow as more companies are turning to virtual storefronts stores and online activities. For this reason, the government is eager to act now and to put in place regulations that will keep both bitcoin virtual currencies and future running smoothly.
Bitcoin is the edge of a dangerous precipice and can quickly fall from grace, according to how companies manage recent hacking issues. Consumers who have invested in this type of currency would do well to exercise extreme caution in their relationships.
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