A new private currency called "Bitcoin" has hit the scene. It is a digital currency that my producer tells me is valauble partly because it's untracable: there is supposedly no way for the government, or anyone else, to see who owns or transfers Bitcoins.
An article in today's Wired says that allows buyers and sellers of illegal drugs to transact online without being detected:
Mark, a software developer, had ordered the 100 micrograms of acid through a listing on the online marketplace Silk Road. He found a seller with lots of good feedback who seemed to know what they were talking about, added the acid to his digital shopping cart and hit "check out." He entered his address and paid the seller 50 Bitcoins - untraceable digital currency - worth around $150. Four days later, the drugs (sent from Canada) arrived at his house.
Through a combination of anonymity technology and a sophisticated user-feedback system, Silk Road makes buying and selling illegal drugs as easy as buying used electronics...
Yet another reason the government's "War on Drugs" will continue to fail.
Bitcoins are also supposed to protect coin holders from politically- motivated inflation. The "Bitcoin" currency is not run by any government or company. Rather, it runs on "peer-to-peer" computer networks without any central adiminstrator: All the currency needs to operate is multiple individuals running the same computer program. Those computers form a network that keeps track of how many coins each user (identified only by long strings of numbers to keep things anonymous) has, and when they transfer Bitcoins to other users.
The number of new Bitcoins issued is determined by a formula written into the program, and new coins are distributed to those with computers connected to the network.
Bitcoins are in high demand right now. The exchange rate is currently 9 U.S. Dollars to one Bitcoin.
The government will certainly have a harder time shutting down this currency than it did when it got rid of the gold-backed "Liberty Dollars."
(Reason TV also released this video about Bitcoin today.)