Bitcoin is safe, sustainable and here to stay

“Tulips”, “Ponzi scheme”, “fraud”, “only used by criminals and drug dealers'” have been some of the descriptions of Bitcoin in the past few weeks.

Whether or not “fake news” is driving the price, the mystique of Bitcoin is enhanced by the fact that its “true” value cannot be determined using traditional financial analytical techniques.

That mystique, however, does not justify the gulf between the bad press and what the facts show.

For instance, former ASX boss Elmer Funke Kupper’s imputation that Bitcoin is “trade in drugs and other illegal products” drew instant scorn from Marco Santori, a regulatory expert and adviser to the International Monetary Fund at Cooley, a New York law firm.

He described alleged links between bitcoin and criminal activity as a “demonstrably false narrative, long disproven, driven mostly by ignorance and wilful blindness, held by financial intermediaries losing their grasp on the market”.

It was nine years ago last week that “Satoshi Nakamoto” (the nom de plume of an unknown author) published a breakthrough paper in titled “Bitcoin: A Peer-to-Peer Electronic Cash System”.

The invention came immediately on the back of the collapse of Lehman Brothers during the global financial crisis.

The Bitcoin breakthrough

Bitcoin was a breakthrough in computer science: it built on 40 years of research in cryptography by tens of thousands of researchers around the world.

It combined the speed of the internet to enable global, fast, real-time transactions in a practical way by solving a computer science problem called the Byzantine Generals’ Problem.

This, in effect, allowed for trust between different parties over an untrusted network such as different banks or the internet.

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Source: Bitcoin is safe, sustainable and here to stay | afr.com