Bitcoin Researcher Ed Felten Named White House Tech Officer
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Since Bitcoin's largest exchange went bankrupt, rumors have been swirling about technical incompetence and fraud within the organization. The world's largest virtual currency continues to make headlines ed felten bitcoin exchange rate this, but many still don't have a clue about the inner workings of Bitcoin or its influence.
He provided us with a primer to the world's now-largest cryptocurrency. Bitcoin is a form of digital currency. That is, it's a tradeable commodity that exists only in digital form. Bitcoins are purely digital. Every Bitcoin is owned and controlled by a secret key. So, rather than keeping the coin itself, you must keep your secret key somewhere safe.
Most users do this through specific software applications or storage on their personal computers. The current owner of a coin must digitally sign the transaction. The signature itself is just a pair of numbers that have a special mathematical property such that only someone who knows the public key could have created the signature.
In some ways, a Bitcoin transaction is like writing a check; the transaction says who is paying and how much, as well as who is receiving that value. The transaction is signed by the paying party. A Bitcoin transaction will ed felten bitcoin exchange rate be part of a broader exchange. For example, you might give me dollars, and in exchange I might create a Bitcoin transaction that transfers some Bitcoins to you. Then, you might create a Bitcoin transaction giving those Bitcoins to a merchant like Overstock.
You can also create new Bitcoins by "mining," but it is really no longer economically sensible for everyday people. The cost of electricity that you will use through mining easily outweighs the expected value of the Bitcoins you earn. Bitcoins can be traded for dollars and other traditional currencies on Bitcoin exchanges, which function like foreign exchange markets. The dollar price of a Bitcoin is set by supply and demand.
What's the difference between Bitcoin and its competitors — Litecoin, Ripple and Dogecoin? For example, Litecoin can confirm transactions more quickly than Bitcoin, and Ripple organizes its markets differently. Bitcoin has the advantage of being larger and more widely accepted, but altcoins can survive if they offer their own advantages that some users want.
Bitcoin will probably continue to be a small but measurable portion of the overall economy. In the long run, Bitcoin and other cryptocurrencies like it will enable new business models and will increase competition in the financial industry. There are three ways to look at this: The Bitcoin business sector is undergoing a shakeout in which less-sophisticated companies — technically or financially — will either be driven out or will adapt and improve.
The largest Bitcoin exchange, Mt. Gox, recently went broke with rumors swirling about technical incompetence and fraud. Other exchanges have had significant thefts. Financial regulators are likely to step in and enforce stronger consumer protections. There will be turbulence, ed felten bitcoin exchange rate, in the end, the maturation of this sector will be good for users of Bitcoin. The technology itself will continue to evolve slowly.
By this point, the pros and cons of Bitcoin as a technology are mostly understood. Even if companies come and go, I expect Bitcoin technology to continue operating in roughly the current mode for a few years, as long as people continue to be interested in using Bitcoin as a store of value or medium of exchange. What is most remarkable about Bitcoin is its ed felten bitcoin exchange rate that a ed felten bitcoin exchange rate — a purely virtual currency built on cryptography and distributed computing, and governed by consensus rather than any centralized authority — ed felten bitcoin exchange rate exist and operate.
Even ed felten bitcoin exchange rate Bitcoin itself dies, cryptocurrencies will continue to exist and will provide a new type of monetary instrument. It is entirely possible that another cryptocurrency will displace Bitcoin due to technical improvements, but it seems very likely that a cryptocurrency of some type will be an important form of money in the coming years. Your Bitcoins are controlled by your secret key, so an intruder who gets your key can steal your Bitcoins.
For example, Bitcoins can be archived on paper so you could scan it back into a computer or on a storage device that is locked up somewhere. However, these are inconvenient. Many people rely on online wallets ed felten bitcoin exchange rate protect their coins, but these create a risk of misbehavior by the wallet provider. There are larger concerns about privacy of Bitcoin transactions. On one hand, transactions must appear on the public ledger, which everyone can see, so people can see money flowing into and out of your wallet.
There has been a lot of research surrounding whether and how one might identify the owner of a particular key. The privacy issues connect ed felten bitcoin exchange rate concerns ed felten bitcoin exchange rate the use of Bitcoin for criminal purposes such as money laundering.
Law enforcement agencies have had some success in tracing the ownership of coins associated with illegal activity so that Bitcoin is not an easy safe haven for criminal money. Nonetheless, this will continue to be an area of concern for governments and for legitimate Bitcoin businesses. To learn more about Felten's work, click here. Quotes from this article may be used without permission. Interested parties may also link to this story.
This story originally appeared here: Sign up for our monthly newsletter. Read Princeton's research magazine. Research A to Z Contacts. Ed Felten, professor of computer science: Where do you keep Bitcoins? How do you earn and spend Bitcoins? What is the value of a Bitcoin? And can you trade in dollars for Bitcoins?
Do you have to pay taxes on Bitcoins? How might Bitcoin affect the economy going forward? What is the future of Bitcoin? What threats, if any, does Bitcoin pose in terms of security?
