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Bitcoin peer-to-peer currency (2011/02/27)

I watched this interview with Steve Gibson about the Bitcoin crypto currency. The Bitcoin software for online peer-to-peer banking was developed by Satoshi Nakamoto (中本 哲史) and it is available at bitcoin.org.

Basically every block of Bitcoins is a solution of a cryptographic equation. I.e. instead of a scarce metal (such as gold), the currency uses hard computational problems as a proof of work. Standard asymmetric encryption is used to digitally sign transactions. The proof of work is also used to cryptographically strengthen a chain of transactions in order to prevent double-spending of coins (see Bitcoin publication for more details). The only known attack requires the attacker to have more computational power at his/her disposal than the entire network of Bitcoin clients.

There’s a number of organisations and shops which already accept Bitcoins (see Bitcoin.it for a list of sites that accept Bitcoins). Furthermore there are several traders which will exchange Bitcoins for US dollars, Euros, and other currencies (there is an early review of Bitcoin exchanges). According to Bitcoin Charts the exchange rate currently is around 0.9 USD/BTC

Update:

There are concerns that Bitcoin will suffer a deflationary spiral because the total amount of currency is limited. Of course if this is a real problem one could start a new peer-to-peer currency with a built-in controlled inflation.

Update:

Here’s a nice video giving a quick introduction to Bitcoin.

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