Digital CurrencyThe Cyber World Economy

Cryptocurrency

• More accurately called “virtual currency”, cryptocurrency is based on the cryptography of exchange of digital tokens backed by verification of digital signatures.

• “Miners” are those who validate, monitor, and keep track of all transactions done using certain types of cryptocurrencies.

• How does the currency have any value?

Simplified Representation of the Process of using Digital Currency

More Complicated Representation of the Process of using Digital Currency

Advantages of Using Digital Currency• As a decentralized currency, most forms of digital currency are free

from government interference and manipulation.

• Transaction costs are much lower than with conventional currencies, due to many forms being accepted world wide.

• The more computing power you have, the more money you will make.

Disadvantages of Using Digital Currency

• The stability of these currencies is highly unstable. The price constantly fluctuates.

• There are constant attempts at stealing other people’s virtual wallets. Even the people that are supposed to monitor and validate these transactions are often not trustworthy. Here is a case where government involvement could prove beneficial.

• Still not widely accepted as an established currency. It is hard to think of a currency that is not directly backed up by a gold standard.

• Because a person can remain anonymous during these transactions, it has been the main form of currency for criminal activities.

The Silk Road

As part of the Deep Web, the Silk Road was an online marketplace where users could buy most anything they wanted, namely exotic drugs.

The site was taken down in 2013 by the FBI and its founder Ross Ulricht was arrested and now faces felony charges

User BringsApples:

“And for those who aren't aware, this kind of thing has been going on for decades (if not longer). GCHQ and the NSA exchanging data on each others citizens to circumvent the laws (supposedly a contract between a government and its citizens). Largely this has been for industrial espionage purposes to, *not* to protect the interests of the nation.”

Many similar sites have been created. They too have been shut down. Millions of dollars are being traded over these sites, all thanks to digital currency.

Is it accepted?

Many large companies like Amazon, The Pirate Bay, Target, Sears, Overstock.com, Newegg and Apple’s App Store accept Bitcoin, the largest and most used digital currency.

Many countries accept Bitcoin as a currency and exchange their flat currencies for it. They look beyond its dubious history relating to The Silk Road.

“For real business purposes, though, you'd be bonkers to accept bitcoins.

I do "real business" with people in bitcoins, including several overseas contractors. For instance, a woman in Karachi, Pakistan does graphic design for my company. Transferring dollars, and converting them to rupees, is expensive, and a time consuming hassle. Transferring bitcoins just takes a few seconds, and the transaction cost is a few pennies. She would be bonkers to not accept bitcoins.”

ShanghaiBill in response to houstonbofh

The Future of Digital CurrencyFor this type of currency to become really accepted and used globally by the average consumer, it needs to become more secure. I am hinting at third party involvement ensuring fair play (namely country governments). However, this would destroy one of the main reasons for having a digital currency.

Flat money is much more reliable and I think people will stick with what they know best. I am no economist, but it needs to be a more stable currency for it to really “mature”.

Those with the ability to create incredibly powerful mining computers are those who will get more of the currency. Rich=richer essentially.

msobkow on SlashDot writes

“This sounds like paper-tracked barter, with a delayed payment on half of the deal. Which is kind of the key problem that money was intended to solve -- money can be traded for *anything*, not just what the issuer has that is of value. This ends up being a throwback to the days of "store scrip", only even more limited. An interesting experiment, but ultimately futile and pointless.”

• http://www.cnbc.com/id/101849169#.

• http://www.forbes.com/sites/investopedia/2013/08/01/how-bitcoin-works/

• http://news.slashdot.org/story/14/07/19/1254258/new-digital-currency-bases-value-on-reputation

• http://www.theguardian.com/technology/2014/mar/08/bitcoin-bite-dust-digital-currency-endure

• http://venturebeat.com/2013/10/18/bitcoins-road-from-perdition-what-will-hurt-and-help-the-controversial-digital-currency/

• http://www.voanews.com/content/digital-currency-bitcoin-creating-interest-and-controversy/1811511.html

• http://en.wikipedia.org/wiki/Digital_currency

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