Summary of Bitcoin

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Rating

8

Qualities

  • Comprehensive
  • Overview
  • For Beginners

Recommendation

Given the considerable attention Bitcoin is receiving in the media and from various governmental agencies, this report is a timely, even necessary overview. Mercatus Center researchers Jerry Brito and Andrea Castillo assume readers have no prior knowledge of Bitcoin – the virtual currency plus electronic payment system – so they clearly, methodically explain how bitcoins work. Their primer delves into the system’s origins and incorporates fairly recent media coverage of this technological phenomenon. The authors present a largely balanced discussion of the pros and cons of the “digital currency,” though they tend to come out in favor of Bitcoin’s potential benefits and against intrusive government regulation. getAbstract recommends this report to anyone intrigued by what could turn out to be the virtual currency of the digital future.

About the Authors

Jerry Brito is a senior research fellow and director of the Technology Policy Program at the Mercatus Center, where Andrea Castillo is an associate for the Spending and Budget Initiative.

 

Summary

What Is Bitcoin?

A few short years ago, you would have been ahead of the curve if you’d even heard of a bitcoin. Today, the “Bitcoin economy” is worth more than $1 billion, and people around the world are using bitcoins to buy, sell, trade, speculate, and more. Bitcoin is the first “digital currency” that is “completely decentralized,” and it’s also an electronic payment system. Because you can use bitcoins “pseudonymously,” they can also be used for illegal transactions, money laundering and tax evasion. As a result, regulators are highly interested in the Bitcoin platform. The US Department of Justice and the Department of the Treasury have already issued statements about virtual currencies like bitcoins, while the Internal Revenue Service and the Commodities Futures Trading Commission (CFTC) are both working on addressing them.

A programmer referred to as Satoshi Nakamoto (his or her actual identity is unknown) came up with Bitcoin in 2008. While electronic payment systems have existed for years, Bitcoin differs because it is an “open-source, peer-to-peer digital currency.” Prior to Bitcoin, a third party – for instance, a bank, a credit card company or a firm like...


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