Bitcoin and Cryptocurrency: Advantages and Disadvantages Written By: Dr. Jason J.

Campbell Youtube Video Link:

http://www.youtube.com/watch?v=GczG02xLTwI&feature=channel_video_title
Abstract Having lost confidence in centralized banking after the global financial collapse of 2008, internet users have sought an increasingly decentralized means of currency exchange. Cryptocurrency is an encrypted digital currency, which can be used to purchase goods and/or services. Cryptocurrency is typically shared over a peer-to-peer system, which means the exchange of digital cryptocurrency occurs between individuals, rather than from an individual to a banking institution, thereby eliminating centralized banking or the need for brokers. Bitcoin is the latest instantiation of digital cryptocurrency. There is, however, a seedier side to both bitcoin and digital cryptocurrency. This brief investigation will analyze the potential advantages and disadvantages of p2p digital cryptocurrency. What is bitcoin? Bitcoin is a form of digital cryptocurrency. As a form of decentralized digital currency, bitcoin is not associated with any banking institution, any nation, or any centralized source of origin. Bitcoins are described as, "digital coins you can send through the internet." 1 Advantages of Using Bitcoins: It has been alleged that bitcoin has seen a 200,000% gain within the last year. Giancarlos Daniele writes, "one year ago today a bitcoin was worth $.005USD. Yesterday, the value of a bitcoin peaked at $10.50USD representing a 200,000% gain." 2 Currently, i.e., as of June 16, 2011 a bitcoin is value at $18.60001USD. Quite obviously, then, individuals who initially invested in bitcoin have made a considerable profit, which is not to suggest however the longevity of bitcoin as the standard digital cryptocurrency. [USD fluctuations can be tracked here] There are a number of key advantages to using bitcoins as a means of virtual currency. One of the benefits of participating in the exchange of bitcoins for products, services, or charitable donations is the accessibility of the open-source code. Similar to a banking ledger, all p2p bitcoin transactions are stored in publicly accessible open source codes, which allows authorities to track organizations or individuals that are participating in black-market transactions, financed by bitcoin digital currencies. A complete record of all bitcoin transactions is stored at http://blockexplorer.com/, which seemingly legitimizes the bitcoin transaction system by continuously tracking bitcoin exchanges. Individuals are able to search for bitcoin transactions for a particular recipient by entering the recipient's public-key. Searching www.blockexplorer.com using a recipient's public key. i.e., the recipient's address, will result in all transactions for that particular address. However, individuals interested in using bitcoin for illegal transactions, would simply cycle through and change their public keys. Thus, each new transaction would conceivably have a new address, i.e., a new public key. Unfortunately, however, for law enforcement officials, this presents another layer of difficulty in attempting to link the public key to an IP address and thereby the individual.
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http://www.weusecoins.com/ http://bitcoinproject.wordpress.com/author/gdan11/

Furthermore, individuals can conceal their identity by using the Tor Network. For individuals seeking to mask their identity this is arguably the greatest selling point of bitcoin technology. Decentralization is another advantage in using bitcoins as a form of digital cryptocurrency. Since bitcoins are not issued from a centralized banking institution, and since Bitcoins are not associated with national currencies, the accumulations of Bitcoins on the network is secured by the decentralized nature of P2P networking, effectively securing the wealth of Bitcoins amassed across the P2P network. Unlike traditional centralized banking institutions, it is impossible to "freeze" an "account". As a form of digital cryptocurrency, Bitcoins have effectively eliminated both centralized banking institutions and the need for "traditional banking accounts". Exchanges of Bitcoins for goods services and or charitable donations are said to comply with the Financial Crimes Enforcement Network of the United States Department of Treasury. Jeff Garzik of www.bitcoin.org, said in an interview with reason.tv, "we are actually working with the government to register bitcoin exchanges as MSbs or money service businesses, to make sure the long arm of the government can indeed reach bitcoin." 3 Preserving the anonymity of those exchanging Bitcoins across the P2P network reflects the similar anonymity in cash exchanges. For example, when I purchase a carton of milk at my local grocery store there is no need to disclose my identity and personal information. I can exchange currency for a product without having to reveal my identity. Similarly, bitcoin digital cryptocurrency exchanges preserve the anonymity of user exchanges without requiring that one's identity be directly tied to the exchange of Bitcoins. Disadvantages of Using Bitcoins: Like all currency, bitcoin can be exploited for criminal use. Bitcoin can be laundered and used to subsidize black-market enterprises. It is well-known that bitcoin has been used in the purchase of illegal drugs on Silk Road, where anonymity safeguards the identity of both buyer and seller. Bitcoin is also the preferred donation option for the notorious hacking group LulzSec. In fact, LulzSec openly displays its bitcoin public key on its donation page. 4 LulzSec took ownership of the infamous Sony Corporation hack, which left ps3 users without access for over a month and compromised the security of millions. Infamously, LulzSec hacked the CIA public main page on June 15, 2011. They tweeted, "Tango down-CIA.gov-for the Lulz". Recognizing that criminal enterprises require huge subsidization of capital, creating a secure and completely anonymous system of bitcoin exchange can severely hamper government agencies in their attempts to identify criminals. LulzSec claimed the following: we recently broke into Sonypictures.com and compromised over 1 million users personal information, including passwords, e-mail addresses, home addresses, dates of birth, and all Sony opt in data associated with their accounts. Among other things, we also compromised all admin details of Sony pictures (including passwords) along with 75,000 "music codes" and 3.5 million "music coupons". Due to a lack of resources on our part (The Lulz boat needs additional funding!) We aren't able to fully copy all of this information, however we have samples for you in our files to prove its own authenticity. In theory we could have taken every last bit of information, but what it would have taken several more weeks, (emphasis added). 5
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http://www.youtube.com/watch?v=jYiWHNkZIes 7:17. 176LRX4WRWD5LWDMbhr94ptb2MW9varCZP 5 http://lulzsecurity.com/releases/sownage_PRETENTIOUS%20PRESS%20STATEMENT.txt

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One should take note of the claim, "Due to a lack of resources on our part (The Lulz boat needs additional funding!)". Bitcoin is their source of funding. Granted, it should be clearly noted that in-and-of-itself bitcoin is a perfectly viable means of digital cryptocurrency exchange. I am in no sense suggesting that there is anything inherently devious with either cryptocurrency in general or bitcoin specifically. It is however interesting to note that many within the criminal underworld resort to bitcoin and digital cryptocurrency exchange as their preferred means socialization, selling illicit goods and services, and eliciting donations for illegal and/or malicious activities. Recently,
The user known as "allinvain" is a long-time contributor to the Bitcoin forums. He says he's been mining Bitcoins for over a year, and had amassed a fortune of 25,000 BTC. This was a modest sum a few months ago, when Bitcoins were worth pennies, but over the last two months the value of a Bitcoin skyrocketed to around $20, which means 25,000 BTC would have been worth half a million dollars. "I remember watching the price like a hawk," he wrote. And then disaster struck. "I just woke up to see a very large chunk of my bitcoin balance gone," he wrote. "Needles [sic] to say I feel like I have lost faith in bitcoin." He speculated that a Windows security flaw may have allowed the culprit to gain access to his digital wallet. "I feel like killing myself now," he said. Some other members of the Bitcoin forum expressed skepticism about allinvain's story, but most believed it. Another member of the Bitcoin forums chimed in to report that he'd lost a smaller amount of money to the same Bitcoin address. Forum members discussed several options, including calling the police and asking MtGox, the popular Bitcoin currency exchange, to block the funds from being converted into more traditional currencies. 6

Like all forms of currency, both traditional and digital currencies, even cryptocurrencies, face the risk of theft and corruption. There is no such thing as an entirely safe means of currency exchange. Bitcoin is the latest instantiation of digital cryptocurrency but it will certainly not be the last. Conclusion With some arguing that the Federal Reserve is unjustifiably printing money and thereby contributing to hyperinflation, coupled with the global economic collapse of 2008, there is great legitimacy in steps toward decentralizing our currency. If cryptocurrency is the vehicle with which global currencies are decentralized, then the foundation of this new vehicle must be based on sound and safe business practices which do not directly or intentionally contribute to money laundering and black-market enterprises. If there is any hope to legitimize bitcoin as a respectable form of digital cryptocurrency, steps must be taken to ensure that criminals and deviance do not find financial safe havens within the architecture of the P2P bitcoin network. Keywords/Resources: Ben Bernanke, Alan Greenspan, proof-of-work, bitcoin address, Mt. Gox, block, mining pool, BTC, mining, scalability, accepting sites, donation hash, nonce, GPU, playstation, silver, gold, economic, collapse, debt default, resource, resource, resource, resource, anonymous, Satoshi Nakamoto, digital signatures, transaction log, fiat currency, block chain, C++, BitcoinJ, java, state backed, The Ryan Haight Online Pharmacy Consumer Protection Act (21 U.S.C. 841), 21 U.S.C. 853(a)(2), technology, mixer, censorship-resistant, wikileaks, Chuck Schumer, Gavin Andresen
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http://arstechnica.com/tech-policy/news/2011/06/bitcoin-the-decentralized-virtual-currencyrisky-currency-500000bitcoin-heist-raises-questions.ars