Bitcoin by Kyle Schurman

Author:Kyle Schurman
Language: eng
Format: epub
Publisher: Hyperink
Published: 2013-04-23T04:00:00+00:00

Chapter 12: Criticisms of Bitcoin

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Criticisms of Bitcoin

“The Bitcoin system has some potential problems”

Keep in mind that the Bitcoin system has its share of critics. Of course some of these critics are people who don’t know how the system works or who don’t really want to understand it. Still, there are some potential problems with the system, and no one will really knows whether they will be worked out favorably until some time in the future.

One of the most common criticisms of the Bitcoin system is that it simply allows people to become tax evaders or to participate in illegal activities. Because of the anonymity built into the system, this is understandable. Keep in mind that cash transactions also are completely anonymous and could have the same number of problems.

At least Bitcoin appears to be anonymous. Security expert Dan Kaminsky questioned this aspect of the Bitcoin system in a discussion at Toorcon Seattle in June 2011, saying, in the most simple explanation, that because people can be identified by their Bitcoin address, there is no anonymity. He also says that as Bitcoin grows, it will be forced to resemble more of a centralized banking system, because only certain computers will be able to handle the processing required of the block chain. Dan Kaminsky’s comments drew quite a bit of heated discussion on Bitcoin forums.

(http://www.slideshare.net/dakami/bitcoin-8776098)

Kaminsky has a point. Drug purchases are a reported use for bitcoins, as these users seek anonymity in the transaction. Even a drug purchase made over the Internet requires mailing the illegal substances to a physical address, though. One blog post on Gawker.com spelled out the ease with which drug purchases can occur.

(http://gawker.com/5805928/the-underground-website-where-you-can-buy-any-drug-imaginable)

An American computer programmer, Mark, visited a Web site, Silk Road, that claims to offer almost any types of drugs in exchange for bitcoins. He used a technique that was Amazon-like in nature, just selecting the 10 tablets of LSD he wanted and clicking a Checkout button, paying with bitcoins. Four days later, the drugs arrived at his home from Canada in a plain package. No one was arrested in this case, but the physical addresses used in a case like this would have given police a starting point, negating the anonymity of the system.

After the post appeared at Gawker.com, Bitcoin developer Jeff Garzik responded. Although Bitcoin transactions are anonymous, police could access the chain block to find a transaction they consider illegal, potentially gaining some clues on tracking down the seller and purchaser. “Attempting major illicit transactions, given statistical analysis techniques deployed in the field by law enforcement, is pretty damned dumb,” Garzik told Gawker.com.

These types of drug purchases using bitcoins have grabbed the attention of the U.S. government, primarily Sen. Chuck Schumer of New York. “It allows buyers and users to sell illegal drugs online … through a program that makes them virtually untraceable,” Schumer said. Some Bitcoin users would be extremely disappointed to see illegal drug activity cause the U.S. government to scrutinize the Bitcoin system and potentially declare it illegal. (http://www.

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