The Avanti Group prcode81345782170 TAG Bitcoin is a digital currency based on some fancy cryptography that is designed to facilitate anonymous transfers, and resist regulation by government. A Bitcoin is essentially a claim on a string of numbers (that take the place of a physical coin) that can be bought and sold. There are exchanges that will convert between bitcoin and other currencies, and even some merchants who will take bitcoin in cash. The idea of an anonymous digital currency itself is not new. David Chaum proposed the concept of electronic cash and developed a scheme in the 1980's. Chaum’s currency proposals never did really get off the ground, but his keynote address at the first World Wide Web conference had a major impact on the development of the Web. Bitcoin itself is largely based on hashcash, a ‘proof of work’ scheme proposed by Adam Back in the 1990's as a way to stop spam. The idea behind hashcash was to increase the cost of sending email to the point that spam became uneconomic by requiring each sender to perform a quantity of computational make-work.

1. http://americablog.com/2013/05/bitcoin-bubble-bursting.html
Bitcoin is a digital currency based on some fancy cryptography that is designed to facilitate
anonymous transfers, and resist regulation by government. A Bitcoin is essentially a claim on
a string of numbers (that take the place of a physical coin) that can be bought and sold.
There are exchanges that will convert between bitcoin and other currencies, and even some
merchants who will take bitcoin in cash.
The idea of an anonymous digital currency itself is not new. David Chaum proposed the
concept of electronic cash and developed a scheme in the 1980′s. Chaum’s currency
proposals never did really get off the ground, but his keynote address at the first World
Wide Web conference had a major impact on the development of the Web. Bitcoin itself is
largely based on hashcash, a ‘proof of work’ scheme proposed by Adam Back in the 1990′s
as a way to stop spam. The idea behind hashcash was to increase the cost of sending email
to the point that spam became uneconomic by requiring each sender to perform a quantity
of computational make-work.

2. Before the rise of Bitcoin in 2009, the most successful scheme of this kind was E-
Gold, which operated from 1996 until it was shut down by the Secret Service in 2007. E-
Gold tapped into the libertarian ideology of anonymous cash, but their technology fell far
short of the rhetoric. E-Gold wasn’t really anonymous, and wasn’t even located outside
US jurisdiction. The company was registered in St. Nevis and Kitts, the datacenter was
located in Florida. The idea that E-Gold somehow operated outside the scope of US
regulation was a spectacular example of self-delusion by their management.
E-Gold wasn’t an anonymous currency as such, it was an exchange that allowed
customers to transfer ownership of gold between them. Which was sufficient to allow its
use as a means of avoiding government controls on money transfers. When the system
was shut down, some of the largest complaints came from Iran, where citizens had been
using it to evade US sanctions, and were left unable to access the money in their
accounts.

3. The E-Gold episode had two curious aspects. One is that the exchange was permitted to
operate for so long, when it was obvious that it was operating illegally. In my work
stopping Internet frauds, I would meet Secret Service, FBI and Postal Inspectorate officers
on a regular basis, and the conversation would almost always turn to the ongoing mystery
of why the scheme was allowed to keep running.,,The authorities did not act until their
hand was forced by the collapse of ‘Solid Investment,’ a Ponzi scheme that had made
extensive use of E-Gold to conceal money movements.
Another mystery is the sentences that the perpetrators received. Instead of 10 years in
jail and a $500,000 fine, the CEO received 300 hours community service, six months home
detention and a $200 fine. It is difficult to imagine that one of two things didn’t happen.
Either the organizers of the exchange coughed up some very valuable information as part
of their plea bargain, or the cooperation with the authorities had begun long before the
exchange was finally shut down.
Many people in my field suspected that E-Gold was allowed to operate because the Fed
preferred to have the money laundering activity happening in a flawed exchange, than
see the rise of a genuinely anonymous electronic cash system. If so, the concern was
justified. The rise of Bitcoin came hard on the heels of the collapse of E-Gold, and
Bitcoin’s promise of anonymity is backed by some real cryptography.

4. If I had had the good sense to ignore the libertarian ideology surrounding the launch of
Bitcoin, I might have bought a thousand bucks worth when the coins were fetching $0.02
each. Such a stake would be ‘worth’ $6.25 million today. Who knows what Bitcoin might
be worth tomorrow? The answer could be $250 or it could be $0.00. Nobody knows
because Bitcoin is a currency without any intrinsic value.
Unlike a government minted currency, you can’t use Bitcoin to pay taxes or pay fees for
government services. Unlike bank issued scrip, there is no promise to redeem Bitcoin in
gold or specie. This lack of intrinsic value had initially led me to dismiss Bitcoin as broken.
But I now understand that it is the real genius of the scheme, as it allows the value of
Bitcoin to soar as long as there are more punters eager to throw money into the expanding
bubble. In effect Bitcoin replaces both the E-Gold system and the Solid Investment Ponzi
scheme in one stroke. The Bitcoin bubble is even better than a Ponzi scheme or a mere
stock bubble as there is no expectation against which theperformance of Bitcoin need to
be measured. The ‘value’ of Bitcoin will increase for as long as there is more demand to
buy than to sell. As long as the value of Bitcoin appears to be increasing in value (or at the
least not losing value), Bitcoin users are encouraged to keep part of their funds in Bitcoin.
Another factor that encourages Bitcoiners to keep their money in the system is the sheer
difficulty of transferring money in and out.

5. This is largely due to US government actions that have shut down many of the ingress
and egress portals in the Bitcoin ecology. Barclays Bank in the UK and the Dwolla money
transfer service have already closed the accounts of Mt Gox, the largest Bitcoin
exchange. The lowest cost means I could find of transferring $1,000 into MtGox from the
US would cost me at least $50, possibly more (the sites are not exactly transparent about
fees). Allowing for another 5% overhead to transfer money out, Bitcoin is an expensive
way to move money. If Alice offers to pay $20,000 in BitCoin to Bob for his crack
cocaine, the actual value of the Bitcoins themselves does not matter very much to either
party as long as Bob is reasonably confident that it won’t drop too much before he can
redeem his coins for cash. Traditional money laundering techniques such as buying and
selling valuable goods can easily eat up more than half of the amount transferred.
BitCoin does not need to be perfect to gain users, it just needs to be a little more
efficient than existing options. As far as the use of Bitcoin as an exchange medium is
concerned, the nominal price of the coin does not matter except to the extent that the
current price of about $125 makes it impossible to use BitCoins to buy a hamburger. But
not to worry, the Bitcoiners insist, we can make change! What they don’t mention is that
once change is added into the system, the cryptographic proofs of anonymity that the
system purports to offer become faith based.

6. You can watch Bitcoin transactions in real time at blockchain.info. Some of the
transactions are quite high value. In the last hour (as of this writing) there were ten
trades over $50,000, one of which was for $669,999.05. Just what is the economic
activity that is driving all these trades? Given the cost and inconvenience of transferring
money into and out of the BitCoin system, one might be tempted to presume that much
if not most of the economic activity is criminal. Many of the customers left with money
stranded in E-Gold accounts lived in Iran. Last year the administration ratcheted up
sanctions against Iran to an unprecedented level, attempting to sever Iran’s connections
to the international banking system. These sanctions have limited effect on the
government, which can make alternative arrangements, but the private sector is left to
fend for itself.
READ MORE ARTICLES:
http://theavantigroupcherryzurc.wordpress.com/
http://www.slideshare.net/scarlettbeckett/the-avanti-group-trykking