The Bitcoin Market Potential Index conceptualizes and ranks the potential utility of bitcoin across 178 countries to show where the cryptocurrency has the greatest relative potential for adoption. The index utilizes a data set with 40 variables from the following areas: technology penetration, international remittances, inflation, informal economy, financial repression, financial crises (historical), and bitcoin penetration. Standardized and re-scaled country level data both indicate that Argentina and Sub-Saharan Africa are the country and region, respectively, where bitcoin has the greatest potential for adoption. It is argued that regulation could have an important effect on bitcoin adoption but that it should be excluded as an index variable for now due to insufficient data and uncertainty over its short-term directional impact and longer-term consequences.
I will address eight common claims about bitcoin: 1. Physical bitcoins exist; 2. The founder of bitcoin is a person called Satoshi Nakamoto; 3. Bitcoin is mainly used for criminal activity; 4. A lack of security plagues bitcoin; 5. Mining is a waste of energy; 6. Bitcoin too small today to be an important economic force; 7. Bitcoin is currently too volatile to be viable; 8. Bitcoin is just another currency. For additional details beyond "Bitcoin Myths and Facts," I have another paper/slidedeck called "Cryptofinance" that goes deeper into the mechanics of cryptocurrencies. It is available at http://ssrn.com/abstract=2438299 .
The anonymity of Bitcoin prevents analysis of its users. We collect Google Trends data to examine determinants of interest in Bitcoin. Based on anecdotal evidence regarding Bitcoin users, we construct proxies for four possible clientele: computer programming enthusiasts, speculative investors, Libertarians and criminals. Computer programming and illegal activity search terms are positively correlated with Bitcoin interest, while Libertarian and investment terms are not.
Joshua R. Hendrickson, Thomas L. Hogan, William J. Luther
The recent proliferation of bitcoin has been a boon for users but might pose problems for governments. Indeed, some governments have already taken steps to ban or discourage the use of bitcoin. In a model with endogenous matching and random consumption preferences, we find multiple monetary equilibria including one in which bitcoin coexists with official currency. We then identify the conditions under which government transactions policy might deter the use of bitcoin. We show that such a policy becomes more difficult if some users strictly prefer bitcoin because they can avoid other users holding the official currency in the matching process. ( JEL C78, E41, E42, E50)
This Note discusses the relationship of Bitcoins, a cyber-currency, to the Bank Secrecy Act and discusses money laundering and tax evasion. This Note highlights the use and potentially problematic implications of Bitcoins in commerce and discusses their current regulation by the government, both within the United States and internationally, to guard against these threats. This Note addresses the regulation of Bitcoin exchanges, the exchanges' vulnerability to cyber-attacks, and the value of trust to the users of Bitcoin exchanges. This Note concludes that well known exchanges that operate both within and outside the United States generally self-regulate in order to gain the trust of their users despite the cyber-attacks on exchanges in the past. This Note also addresses the tax-reporting implications of foreign Bitcoin exchanges, looking by analogy at attempts to gain information from known tax havens.This Note argues that, given the applicability of the BSA to Bitcoin exchanges, the Bitcoin system poses serious questions relating to money laundering and tax reporting, mostly with regard to the less trustworthy exchanges known for their illegal activity. Some Bitcoin exchanges and e-wallets may also have the potential to become the next tax havens. Many exchanges voluntarily implement measures amounting to self-regulation in attempts to appear more trustworthy to wary consumers or in attempts to avoid criminal or civil sanctions. Whether this self-regulation is sufficient to achieve the goals of preventing money laundering and other criminal activity is debatable. Exchanges that have no need to appear trustworthy, however, still pose the same risks of money laundering and other illegal activity contemplated by the FBI. Moreover, ways exist in which criminals can work around the current regulatory scheme to achieve criminal goals; in that respect, the current regulatory scheme is ineffective to prevent the targeted criminal activity. This Note recommends a supplemental regulatory scheme that would target the areas that current regulation fails to address in combating money laundering, tax evasion, and other criminal activity.
Sarah Meiklejohn, Marjori Pomarole, Grant Jordan, Kirill Levchenko · 7 authors
Bitcoin is a purely online virtual currency, unbacked by either physical commodities or sovereign obligation; instead, it relies on a combination of cryptographic protection and a peer-to-peer protocol for witnessing settlements. Consequently, Bitcoin has the unintuitive property that while the ownership of money is implicitly anonymous, its flow is globally visible. In this paper we explore this unique characteristic further, using heuristic clustering to group Bitcoin wallets based on evidence of shared authority, and then using re-identification attacks (i.e., empirical purchasing of goods and services) to classify the operators of those clusters. From this analysis, we characterize longitudinal changes in the Bitcoin market, the stresses these changes are placing on the system, and the challenges for those seeking to use Bitcoin for criminal or fraudulent purposes at scale.
Many want to know what bitcoin is and how it works. But bitcoin is as complex as it is controversial, and relatively few have the technical background to understand it. In this paper, I offer an accessible on-ramp for understanding bitcoin in the form of a model. My model reveals both what bitcoin is and how it works. More specifically, it reveals that bitcoin is a fictional substance in a massively coauthored story on a network that automates and distributes jobs normally entrusted to centralized publishing institutions. My model therefore falsifies a popular view according to which each bitcoin is a chunk of code.
We provide a first systematic account of opportunities and limitations of anti-money laundering (AML) in Bitcoin, a decentralized cryptographic currency proliferating on the Internet. Our starting point is the observation that Bitcoin attracts criminal activity as many say it is an anonymous transaction system. While this claim does not stand up to scrutiny, several services offering increased transaction anonymization have emerged in the Bitcoin ecosystem - such as Bitcoin Fog, BitLaundry, and the Send Shared functionality of Blockchain.info. Some of these services routinely handle the equivalent of 6-digit dollar amounts. In a series of experiments, we use reverse-engineering methods to understand the mode of operation and try to trace anonymized transactions back to our probe accounts. While Bitcoin Fog and Blockchain.info successfully anonymize our test transactions, we can link the input and output transactions of BitLaundry. Against the backdrop of these findings, it appears unlikely that a Know-Your-Customer principle can be enforced in the Bitcoin system. Hence, we sketch alternative AML strategies accounting for imperfect knowledge of true identities but exploiting public information in the transaction graph, and discuss the implications for Bitcoin as a decentralized currency.
This article examines the use of Bitcoin in money remittance markets as a specific illustration of wider emerging regulatory issues relating to the use of cryptocurrencies. While there are many conceivable benefits of using Bitcoin for remittances, there are also many risks for users of these remittance services. This article adopts a user perspective to look at what the major concerns are and what existing protections may be available to persons using cryptocurrencies under New Zealand law through the example of using Bitcoin for remittance purposes. The article then summarises approaches taken by other jurisdictions before suggesting a specific regulatory approach to cryptocurrencies that New Zealand should consider adopting.
This Comment examines the potentially destabilizing effects of emerging digital currencies on the international foreign currency exchange market. Specifically, it examines "Bitcoin," a decentralized, partially anonymous, and largely unregulated digital currency that has become particularly popular in the last few years. This Comment argues that the International Monetary Fund, the institution responsible for coordinating the stability of foreign exchange rates, is ill-equipped to handle the widespread use of digital currencies in the foreign currency exchange market It highlights the inability of the Fund to intervene in the event of a speculative attack on a currency by Bitcoin users. This Comment concludes by suggesting two interpretations of the Fund's incorporating document, the Articles of Agreement, that would allow it to intervene in the event of such an attack.
Sarah Meiklejohn, Marjori Pomarole, Grant Jordan, Kirill Levchenko · 7 authors
Bitcoin is a decentralized virtual currency whose usage has skyrocketed since its introduction in January 2009. Like cash, the ownership of bitcoins is anonymous, as participants transact bitcoins using pseudonyms rather than persistent real-world identities. In this article, we examine the limitations of Bitcoin anonymity and discover that the ability to cluster pseudonyms according to heuristics about shared ownership allows us to identify (i.e., associate with a real-world entity or user) a significant and active slice of the Bitcoin economy. Along the way, we explain a lot about how Bitcoin works.
Central to Bitcoin is its independence from any institution or government, allowing anyone to engage in a direct transaction at a low cost. So, what exactly is it, and how does it work?
Abstract : We perform a comprehensive measurement analysis of Silk Road, an anonymous, international online marketplace that operates as a Tor hidden service and uses Bitcoin as its exchange currency. We gather and analyze data over eight months between the end of 2011 and 2012, including daily crawls of the marketplace for nearly six months in 2012. We obtain a detailed picture of the type of goods being sold on Silk Road, and of the revenues made both by sellers and Silk Road operators. Through examining over 24,400 separate items sold on the site, we show that Silk Road is overwhelmingly used as a market for controlled substances and narcotics, and that most items sold are available for less than three weeks. The majority of sellers disappears within roughly three months of their arrival, but a core of 112 sellers has been present throughout our measurement interval. We evaluate the total revenue made by all sellers, from public listings, to slightly over USD 1.2 million per month; this corresponds to about USD 92,000 per month in commissions for the Silk Road operators. We further show that the marketplace has been operating steadily, with daily sales and number of sellers overall increasing over our measurement interval. We discuss economic and policy implications of our analysis and results including ethical considerations for future research in this area.
This paper presents an analysis of the money laundering risks of two virtual currencies, the Linden dollar, the in-world currency of the interactive online environment Second Life, and Bitcoin, an experimental virtual currency that allows for the transfer of value through peer-to-peer software. The paper will demonstrate that although these virtual currencies have money laundering utility, they are currently unsuitable for laundering on a large scale. The paper also considers whether either of these virtual currencies fall under the scope of the Money Laundering Regulations 2007 and draws on similarities with online gambling to suggest a method of incorporating the Linden dollar and Bitcoin within the anti-money laundering framework.
Since the 1980s, the conflation of political violence and the cocaine boom have devastated rural Colombia, fueling the displacement of some 4 million campesinos—mainly by paramilitary groups. Colombia's northwest region surrounding the Gulf of Urabá has been an unruly epicenter for this mass of dispossessed humanity. Established by narcotraffickers and agrarian elites, paramilitary groups simultaneously act as drug-trafficking private militias and counterinsurgent battalions, and they use land appropriation and agribusiness as conduits for money laundering and illicit profit. When paramilitaries assaulted Urabá in the 1990s, thousands of campesinos fled their homes and, to this day, await government restitution of their lands. Other peasants, however, have collectively mobilized and peacefully seized back portions of their stolen farms from the armed groups. The Afro-Colombian campesinos of the Curvaradó River, for instance, have established “humanitarian zones” and “biodiversity zones” as a way of protecting themselves and inching back onto their occupied farms. Few places in Colombia exhibit all these tendencies—forced displacement, campesino militancy, and violent forms of accumulation and rule—in such abundance as Urabá. Urabá, however, is not simply a tale of political disorder. My research argues that the region's combustible mix of narco-driven economies of violence, peasant struggles, and deeply contested forms of governance have converged into a deadly form of frontier state formation. “Frontier” is not meant in any originary sense; I deploy it critically to conjure the spatial production of places like Urabá in Colombia's historical geopolitical imaginaries as “stateless” and “savage” zones of irreconcilable alterity (Serje 2005). While all the region's social actors are implicated in producing the norms and forms of everyday governance in this frontier zone—despite evident imbalances in power relations—the violent incoherencies of this process stem from the political alignments and misalignments of the multiple, overlapping territorialities being produced. Dominant narratives in Colombia claim the root of the problem afflicting places such as Urabá is the historical and ongoing “absence of the state”. Paramilitary commanders explicitly couch their activities as the “creation of a state in its absence”, while local residents regularly lament their “abandonment” by the state. With this in mind, my research asks, how is “the state” produced in a region where it supposedly does not exist? In other words, how does the abstraction of the state gain its everyday socio-spatial dimensionality—materially and symbolically—through the confluence of paramilitary networks, economies of violence, and peasant struggles? And how do campesinos’ territorial assertions challenge Urabá's ensembles of organized violence, accumulation, and rule? Struggles over the state in Colombia are being expressed and conducted as territorial struggles; the various actors discussed in my research—whether peasants, narco-paramilitaries, insurgents, landowners, or government agents—are all in the “business” of producing territory (Brenner and Elden 2009). Indeed, the interconnected dynamics of frontier governance, narco-fueled economies of violence, and peasant resistance have made territory itself not only an object of political contestation, but also a collective springboard for peasants’ reclamation of stolen lands. Even by conventional conceptions of the state, Urabá has hardly ever been “stateless”. In fact, the efficiency with which paramilitaries seized the region in the late 1990s was in part due to existing structures of government. Municipalities had recently gained new political, administrative, and fiscal power under the decentralization reforms of the 1991 Constitution, which was widely seen as a peace offering of political inclusion to guerrillas. But it was the paramilitaries who harnessed municipal structures, becoming the local handmaidens of the decentralization process (Ballvé 2012a). Following practices pioneered by rebel forces, paramilitaries not only infiltrated Juntas de Acción Comunal (Community Action Boards)—the country's most subsidiary form of local governance—they also established Juntas where these did not exist. Commanders began implementing agribusiness projects on displaced people's lands through a complex circuitry of local institutions, narco-capital, NGOs, politicians, government grants, international aid, and private firms.1 The favored form adopted by these paramilitary-backed agribusinesses is a type of corporate-peasant contract farming dubbed “strategic alliances” that the government and aid agencies have sometimes negligently helped fund. Under Washington's antidrug and counterinsurgency program known as Plan Colombia, USAID supports “strategic alliances” with its “alternative development” programs in addition to municipally oriented decentralization projects aimed at “local development” and “institution building”. Taking advantage of the strategic alliance structure, paramilitaries engaged in widespread “land laundering” by divvying up vast swaths of land and parceling them out to front men and sham “peasant cooperatives” (Ballvé 2012b). Discourses of local, green, participatory, and multicultural grassroots development with their attendant institutional forms and practices became utterly instrumental to how the land grab was executed and laundered in practice. Paramilitaries churned up the old spatialities of production and governance while consolidating new ones that proved well aligned with government imperatives of counterinsurgency and export agribusiness. In short, paramilitary activities are not anathema to projects of liberal governance, usually associated with tropes of the “rule of law” and “institution-building”; they are deeply tied to initiatives aimed at producing governable spaces and subjects, expanding trade, and attracting capital. The ongoing social, spatial, and historical production of the state as a “realized abstraction” (Lefebvre 1991) in Urabá emerges from these intersecting and contradictory forces operating at multiple scales—from campesino mobilization and armed left vanguards, to narco-capitalist agribusiness and global geopolitics. Through the situated struggles of these intersections, distinct territorialities align and, fatefully, collide. After the violent displacements of the late 1990s, the peasants of the Curvaradó River began trickling back to portions of their lands, establishing small “humanitarian zones” and “biodiversity zones”. Despite constitutionally protected status as collectively titled Afro-Colombian property, most of the land remains controlled by paramilitaries. Nonetheless, the campesinos have slowly expanded the zones, incrementally encroaching onto their farms and forests. Marked by subsistence and mixed agro-ecological practices, the motley landscapes of the reclaimed lands stand in stark contrast to the grid-patterned plantations surrounding them. Under siege by Urabá's violent regimes of accumulation and rule, the Curvaradó's campesinos have articulated “global” discourses of humanitarianism, environmental conservation, and ethnic rights with localized political cultures in defense of their collective property, which they insistently call “territory”. While the discourses help peasants gain a modicum of protection through transnational advocacy networks, the state remains a central node of their political demands in so far as it is constantly hailed as the principle arbiter—and violator—of their rights. Despite being embedded in state-centric contemporary liberal praxis, the ethical-political registers of these discourses are being repurposed by peasants in ways that exceed liberal pretensions. Humanitarianism, environmental conservation, and ethnic rights have become springboards toward more inventive and affirmative political horizons that insist on the mutually constitutive integrity of life, land, and livelihood—in shorthand, a politics of vitalism. Territory, as they conceive and enact it, is the centerpiece of this political project. By trying to turn the tide against paramilitary dominion through the production of territory, Curvaradó's politics of vitalism is a lived critique of the necropolitical “spaces of death” surrounding them (Taussig 1984; Mbembe 2003). Indeed, when asked to define what “territory” means, they simply respond, “Territorio es vida” (“Territory is life”). This project emerged from 4 years in Colombia as a researcher and investigative journalist covering similar issues. Before that, I worked for 5 years as an editor and writer for the NACLA Report on the Americas, an independent left-wing journal on Latin American affairs based in New York City. It was at NACLA that my interests in research, writing, and politics first converged professionally; and it was with this same hope of convergence that I returned to academia in 2009. I am deeply honored and grateful to have received this generous award. It has already helped me organize a panel at the 2012 Latin American Studies Association conference. With perspectives from anthropology, geography, journalism, and literary criticism, we discussed the theoretical, methodological, and narrative challenges posed by the recent explosion of Latin America's drug wars. The award is also helping finance travel for interviews with jailed paramilitary commanders. Thank you, Antipode. A heartfelt thanks also to my advisors and fellow graduate students at Berkeley for their camaraderie and their imprint on this project.
Internet and digital technologies have been discussed recently by Addiction contributors in relation to the delivery of efficient computer-delivered brief interventions [1,2], online methodologies for recruiting and surveying illicit drug users [3] and the internet's role in facilitating the spread of information and sale of emerging drugs such as mephedrone [4] and synthetic cannabinoids [5]. Here, I introduce readers to a novel use of the internet in the drugs field. The anonymous online drug market-place Silk Road was first revealed in June 2011 [6]. Silk Road is accessible only to people who are using Tor anonymizing software [7]. Tor uses encryption to make it impossible for anyone to trace IP addresses (the electronic code assigned to each computer on the internet). The front page of Silk Road looks a great deal like the front page of eBay. Goods and services for sale are categorized and all manner of drugs are available under the following categories: ecstasy, cannabis, dissociatives, psychedelics, opioids, stimulants, benzodiazepines and other. Sellers receive ratings from buyers and comments about the quality of their products, how fast they ship and the level of professionalism and discretion of the transaction. Trust in sellers is built on reputation. Silk Road traders use the anonymous currency Bitcoin [8]. This decentralized international currency operates through peer-to-peer technologies. At the time of writing (October 2011), Silk Road is still online and continuing to expand. Facilitated by a combination of the internet and encryption technologies, buying and selling illegal products is now possible and may increase dramatically in the future. What may stop an exponential increase in the use of anonymous online drug market-places is the hurdle of delivery. At the end of the transaction, the physical product still needs to be sent to the buyer. Sending products between countries allows law enforcement the opportunity to intercept packages and potentially attempt to arrest the would-be importer. Sending products within the same country may make arrest less likely. There are also numerous barriers to entry for people who might want to use Silk Road. Installing and using Tor, buying and using Bitcoins in a secure way and taking the risk of fraud or arrest upon delivery may deter the majority of would-be users. Nevertheless, for the minority who master these concerns and are willing to take the risk, Silk Road has revolutionized how the internet can be used to source drugs. After all, buying drugs in the real world also involves considerable risk. For some, the online equivalent may prove more convenient and secure than arranging a standard deal. There are many unanswered questions about Silk Road. The extent to which law enforcement can stop and disband a site such as this is yet to be seen. The extent to which drug users will use this new technology is also unknown. Needless to say, if anonymous online drug markets do end up expanding into mainstream drug markets, they will pose a real challenge to existing drug laws and policies. We should definitely watch this space. None.
In 1601, Elizabeth I and her government devalued the Irish coin from nine ounces fine to three ounces fine of silver in order to finance the high cost of the Nine Years War in Ireland. 1 This unilateral move by the English government, combined with the failure to remove the old sterling from circulation, caused catastrophic problems throughout Ireland. 2 In addition to rapid inflation in common foodstuffs, the people in Ireland would only accept the new coin at its reduced intrinsic value rather than face value. 3 Further, merchants refused to accept the devalued coin in commercial transactions leading to a shortage of vital goods from England. 4