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What in the Heck are these things called “Bitcoins”

It is possible that you’ve heard of bitcoins, but more likely that you have not. In any case, bitcoins are a rising digital currency that is controlled by no government and is backed by no precious metal. Because it is backed by pure mathematics, it is the only truly “international” currency. Bitcoins as a currency is unregulated and completely virtual. Only a limited amount of 21 million of these “coins” will be created by 2040. Each bitcoin is divisible by eight decimal places and the smallest bitcoin unit is a “satoshi.”

Bitcoins are based on a Peer-to-Peer electronic cash system in which users directly transfer bitcoins to other users, without going through PayPal or a bank. They exist to replace real cash when buying or selling goods and services over the internet. This new currency exhibits many flaws, but a significant number of bitcoin users are ready to accept the currency as that of the future. Hardcore bitcoin enthusiasts are libertarians, cryptographers, coders and others who are enticed by the idea of using a currency that is operable without government interference. Today, it is uncommon but not impossible to meet someone who relies solely on bitcoins to do his spending.

The idea of digital currency is nothing new; though bitcoins were launched in January 2009, a few other (unsuccessful) attempts of setting a non-government-controlled currency were made, starting in the late 1990s with the invention of Flooze. Since it is not controlled by the Federal Reserve, bitcoin has its own exchange rate. Right now, 1 BTC = $125.80 USD. In bitcoin’s infancy, opportunists purchased thousands of dollars worth of bitcoins at just $3.00 each. Many sold when the bitcoin rose to its peak rate of 1 BTC = $200 USD on April 9th 2013.

Like cash, the use of bitcoins to purchase goods or services through the internet makes it impossible to trace those purchases back to the buyer in the same way as a credit card number and ID card. Every bitcoin wallet contains one or more addresses—long streams of numbers and letters that identify the specific user of bitcoins. It works the way recording each serial number on every dollar would work, to prevent the falsification of bills and the introduction of counterfeit money into the currency’s circulation. Today, some software programs are designed to safe lock IP addresses that are used in conjunction with bitcoins to make the buying and selling of questionable goods impossible to track.

Herein lies the critics’ favorite hitch—bitcoins are often used to trade illegal goods through a digital black market. The most popularly sited website for buying and selling illegal drugs is Silk Road, a website that can only be accessed once the software program TOR is installed on a computer. TOR is free to download and provides complete online anonymity. By directing traffic through a worldwide network of volunteers consisting of thousands of relays to conceal a location, it is almost impossible to trace a person’s internet activity. This protects buyers and sellers of the drugs available on the site which functions similarly to eBay and by enabling customer reviews to enhance its legitimacy. As easily as buying and selling any other product online, people looking to buy anabolic steroids and other performance-enhancing drugs are able to buy these substances in large quantities using bitcoins. There is no need to prove prescriptions or surrender personal information. Just about anything can be found on the digital black market, and steroids are among the best-selling items.