We hooked it up to a network of mining computers that pool together computing resources and share bitcoin profits. And in six months, it has earned more than 13 bitcoins. That's more than $10,000 at today's bitcoin prices. But people who got the machine later than we did (and there were plenty of them) didn't make quite so much money.
Online Thievery
Once you get your hands on some bitcoins, be careful. If somebody gets access to your Bitcoin wallet or that private key, they can take your money. And in the Bitcoin world, when money is gone, it's gone for good.
This can be a problem whether you're running a wallet on your own machine or on a website run by a third party. Recently, hackers busted into a site called inputs.io -- which stores bitcoins in digital wallets for people across the globe -- and they made off with about $1.2 million in bitcoins.
>In the bitcoin world, when money is gone, it's pretty much gone for good.
So, as their bitcoins start to add up, many pros move their wallets off of their computers. For instance, they'll save them on a thumb drive that's not connected to the internet.
Some people will even move their bitcoins into a real physical wallet or onto something else that's completely separate from the computer world. How is that possible? Basically, they'll write their private key on a piece of paper. Others will engrave their crypto key on a ring or even on a metal coin.
Sure, you could lose this. But the same goes for a $100 bill.
The good news is that the public nature of the bitcoin ledger may make it theoretically possible to figure out who has stolen your bitcoins. You can always see the address that they were shipped off to, and if you ever link that address to a specific person, then you've found your thief.
But don't count on it. This is an extremely complex process, and researchers are only just beginning to explore the possibilities.
Bitcoin vs. the U.S.A.
Bitcoin is starting to work as a currency, but because of the way it's built, it also operates as an extremely low-cost money-moving platform. In theory, it could be a threat to PayPal, to Western Union, even to Visa and Mastercard. With Bitcoin, you can move money anywhere in the world without paying the fees.
The process isn't instant. The miners bundle up those transactions every 10 minutes or so. But today, payment processors like BitPay have stepped in to smooth things out and speed them up.
>The feds have stopped short of trying to kill Bitcoin, but they've created an atmosphere where anybody who wants to link the U.S. financial system to Bitcoin is going to have to proceed with extreme caution
The trouble is that federal regulators still haven't quite figured out how to deal with Bitcoin.
The currency is doing OK in China, Japan, parts of Europe, and Canada, but it's getting its bumpiest ride in the U.S., where authorities are worried about the very features that make Bitcoin so exciting to merchants and entrepreneurs. Here, the feds have stopped short of trying to kill Bitcoin, but they've created an atmosphere where anybody who wants to link the U.S. financial system to Bitcoin is going to have to proceed with extreme caution.
Earlier this year, the U.S. Department of Homeland Security closed the U.S. bank accounts belonging to Mt. Gox, which has generally been the world's largest Bitcoin exchange. Mt. Gox, based in Japan, let U.S. residents trade bitcoins for cash, but it hadn't registered with the federal government as a money transmitter, and it hadn't registered in the nearly 50 U.S. states that also require this.
The Homeland Security action against Mt. Gox had an immediate chilling effect in the U.S. Soon, American Bitcoin companies started reporting that their banks were dropping them, but not because they had done anything illegal. The banks simply don't want the risk.
Now, other Bitcoin companies that have moved fast to operate within the U.S. are facing the possibility of being shut down if they're not following state and federal guidelines.
Even if the feds were interested in shutting down Bitcoin, they probably couldn't if they tried, and now, they seem to understand its promise. In testimony on Capitol hill earlier this week, Jennifer Shasky Calvery, the director of the Treasury Department’s Financial Crimes Enforcement Network, said that Bitcoin poses problems, but she also said that it's a bit like the internet in its earliest days.
"So often, when there is a new type of financial service or a new player in the financial industry, the first reaction by those of us who are concerned about money laundering or terrorist finance is to think about the gaps and the vulnerabilities that it creates in the financial system," she said. "But it’s also important that we step back and recognize that innovation is a very important part of our economy."
It is. And Bitcoin richly provides that innovation. It just may take a while for the world to completely catch on.
