Crypto-currencies, such as the now-huge Bitcoin, are beginning to be used by an expanding ecosphere of both people and businesses for a whole host of reasons.
As of 2016, no Government has announced the regulation and official use of any form of digital currency, but the users of these unregulated digital payment mediums continue to grow, with notable users being Microsoft, Paypal, Dell, CeX and several airlines accepting the currency as payment. The first mainstream UK bank to state their intentions to accept Bitcoin was Barclays, announcing in August of 2015 that they plan to allow the use of the coin, primarily for donations to charity organisations. As of writing this article, the exchange rate of this digital currency lies at £401 ($577) to 1 Bitcoin, resulting in this form of currency holding a very high value. To highlight the massive value of this coin as a result of its growth, the currency was first listed in 2009 at £0.70 ($1) to 1,309 bitcoins.
Despite the high-profile names adding bitcoin acceptance to their payment methods, the currency remains infamous for its criminal dealings. The now-closed darkweb site ‘Silk Road’ was one of the major reasons, with Bitcoin being used for purchasing everything from fake passports to illegal drugs and firearms. Notable instances include the arrest of two US citizens in 2014 for money-laundering using the Bitcoin system, and the Internet Watch Foundation declaring a list of 30 websites that allow payment for child pornography exclusively using crypto-currency. In addition, many of the most well-known forms of Ransomware, such as CryptoLocker, accept the ransom payment only via Bitcoin.
All of this begs the question – why do criminals like to use the currency? Primarily, the answer lies in the decentralised nature of the coin. While there are no guarantees of anonymity (in fact, all transactions from every account worldwide are stored on every user’s machine) with transactions between addresses publically available, anonymity comes from the lack of any meaningful relation between the person/machine and the address. In theory these could be mapped on a large scale, but the lack of registration or documents means this is far more difficult than regular currencies. Building on this, the lack of a financial organisation regulating and monitoring the currencies means more unethical transactions can take place without the relevant authorities being warned, or the transactions themselves flagging in any way.
Despite this, there are several reasons why businesses and individuals should take up the use of this branch of digital currency. Security is a key focus of this currency, with financial loss through theft or manipulation of an online transaction far less likely due to the end-to-end encryption used than the online transaction of standard currency. One of the key reasons that many use this form of financial payment comes from the lack of overhead costs, with no bank or financial institutions charging for transactions made. A second key reason is the potential of the currency to continue to rise in value. Although this involves a fair amount of speculation, the potential benefits are huge.
For the most part, digital currencies are relatively secure. If a house was broken into or a wallet stolen on the street, then physical currency would be lost. Digital currencies cannot be physically taken unless the ‘key’ for each coin is printed or kept on external hardware – although many criminals would not know to take this information. More likely methods of the currency being stolen are through malware created to seek out Bitcoin ‘wallets’ or through scams designed to take the coins without payment. The currency is mostly secure, but due to its decentralised nature, there is no financial body that will provide compensation for lost bitcoins. In addition to this, the creators of bitcoin state that stealing a user’s coin by guessing its key (through brute force) would require more work than ‘mining’ a new coin (this is the method used to slowly distribute the currency). It should be noted that, despite its flaws, Bitcoin is claimed (and has so far proven) to be far more secure than any financial currency so far.
The real question is not if digital currencies will become more mainstream, but when.