Bitcoin is an experimental, decentralized digital currency enabling instant payment anywhere in the world. While still not fully legitimized by many governments, financial analysts continue to debate whether the crypto-curency will represent the wave of the future for the world's economy, or just be a flash in the pan. The Bitcoin essentially uses "peer-to-peer technology to operate with no central authority," providing a powerful substitute to paypal or to credit cards. Its encryption code eliminates the hassles of banks serving as its middle men.
The original Bitcoin software was set up by the anonymous 'Satoshi Nakomoto' in 2009 and was released under the MIT license.
"[The Bitcoin] is building on the notion that money is an object, or any sort of record, accepted as payment for goods and services and repayment of debts in a given country or socio-economic context," according to its web site. While constantly fluctuating in value, a Bitcoin, as of late last week, is worth approximately $700 dollars.
Nonetheless, countries like Russia, have deemed the currency illegal.
Russian authorities issued warnings, saying the virtual currency can be used for money laundering or financing terrorism.
"Systems for anonymous payments and cyber currencies that have gained considerable circulation - including the most well-known, Bitcoin - are money substitutes and cannot be used by individuals or legal entities," the Russian Prosecutor General's Office said on February 6.
A week earlier, on January 27, Russia's central bank also said that "citizens and legal entities risk being drawn - even unintentionally - into illegal activity, including laundering of money obtained through crime, as well as financing terrorism."
24-year-old Charlie Shrem, an operator of the Bitinstant Bitcoin exhange company, was recently arrested, and was charged by U.S. prosecutors with conspiring to commit money laundering for helping to funnel cash to the illicit online drugs bazaar known as Silk Road. Shrem resigned as vice chairman of the Bitcoin Foundation a day later.
The Silk Road web site became a black market for illegal products, such as drugs, weapons, as well as a place to hire a mercenary. Bitcoin was accepted as acceptable currency, and the site had over 957,000 registered users before it was ordered to shut down by the FBI.
"Based on my training and experience, Silk Road has emerged as the most sophisticated and extensive criminal marketplace on the Internet today," FBI Special Agent Christopher Tarbell said in the criminal complaint. The FBI said the site generated revenue worth equivalent of approximately $1.3 billion, or 9.5 million bitcoins. Undercover agents used Silk Road to buy ecstasy, cocaine, heroin and LSD, while also purchasing hacking software, according to Reuters.
Bitcoin's prices fell sharply on Monday.
"The virtual currency traded as low as $500 on Monday and is down more than 50% from its all time highs," according to Marketwatch.
All is not lost for the future of Bicoins, however.
In January, Venture Capital Post's gave Top 10 Predictions for the Bitcoin. One such forecast: "The underlying Bitcoin protocol makes itself applicable beyond the use cases of 'store of value' and 'payments'. The Bitcoin foundation took a huge step in allowing meta data to be included in the blockchain. This will unlock a lot of innovation and may even prompt regulators to acknowledge the potential of Bitcoin, making it all the more difficult for them to shut it down or suppress it. There are almost no start-ups, which solely use the protocol without using the 'coin' or the 'currency' as a function. 2014 will be the first year to see some of these [start-ups]."
