The Rise of Digital Money (Decentralized(?))

In this segment we will deal with digital money, specifically, cryptocurrency. Before we continue let us define cryptocurrency,

“A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.” (Frankenfield, Cryptocurrency Definition)

 

There are several cryptocurrencies currently so for the purposes of brevity and by what many can relate to we will deal with Bitcoin. Let us define bitcoin,

 

“Bitcoin is a digital currency created in January 2009. It follows the ideas set out in a whitepaper by the mysterious and pseudonymous Satoshi Nakamoto.1 The identity of the person or persons who created the technology is still a mystery. Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms and, unlike government-issued currencies, it is operated by a decentralized authority.” (Frankenfield, Bitcoin Definition: How Does Bitcoin Work?)

 

Who is Satoshi Nakamoto?

 

“Satoshi Nakamoto is the most enigmatic character in cryptocurrency. To date, it is unclear if the name refers to a single person or a group of people. What is known is that Satoshi Nakamoto published a paper in 2008 that jumpstarted the development of cryptocurrency.” (Hayes)

 

In 2009, a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was published that detailed a peer-to-peer network[1] as a solution to the double-spending problem.[2] Since a physical bill can only exist at one place at a single time a single bill cannot be a victim of the double-spending problem. Digital currencies do not exist physically but digitally, so the double-spending problem poses a threat. Nakamoto ultimately proposed a decentralized approach to transactions that would culminate in the creation of something called blockchains.[3]

 

Bitcoin is considered an electronic coin that is considered “… a chain of digital signatures.” (Nakamoto) “The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.” The Bitcoin document purported to be written by Nakamoto mentions an argument against a central authority and a mint, with every transaction having to go through them, just like a bank. (Nakamoto) It also mentions an electronic payment system that would be based upon a cryptographic proof instead of trust as well as a system for participants to agree on a single history of the order in which they were received. My question would be who is to run this system? Who would be the trusted participants within this system?

 

I, personally, hold that we should diversify where we can and make money in whatever store of value that we can. Cash, stocks, bonds, electronically traded funds (ETFs), commercial paper, precious metals (physical or paper), cryptocurrencies, real estate, etc. Recently many have discussed their biases or genuine concerns of cryptocurrency due to the dark web, money laundering and the drug markets. James Martin observes,

“Cryptomarkets are complex computer-based phenomena. In cyberspace they represent virtual meeting places for a motley assortment of deviants, drug users, entrepreneurs and political activists who come together online to share information and to trade. Whilst logged on to a cryptomarket, the physical location and identity of users are masked by free yet highly sophisticated encryption technology. This enables anonymous communications and commerce, the nature of which is often subversive or illegal, particularly with regard to the use, sale and distribution of illicit drugs.” (Martin 6)

 

While it is true indeed that the dark net/dark web exists, it is interesting how fewer in number discuss the Anti-Money Laundering Regime (AML Regime) and the fact that drugs, corporations, banks, and financial institutions in relation to drugs go back to at least the 1800s as we have covered here in the following mediums:

Jardine Matheson and HSBC:

https://cue-talks.blogspot.com/2021/01/jardine-matheson-and-hsbc.html

Nothing New Under the Sun:

 

https://cue-talks.blogspot.com/2021/01/nothing-new-under-sun_12.html

Disagreement Among the Invisible:

 

https://cue-talks.blogspot.com/2021/01/disagreement-among-invisible.html

 

A Look into Russell and Company:

 

https://cue-talks.blogspot.com/2021/02/a-look-into-russell-company.html

 

When Corporations and Governments Mix:

 

https://cue-talks.blogspot.com/2021/02/when-corporations-and-government-mixes.html

 

When Corporations, Churches, Newspaper Media, and Governments Collaborate:

 

https://cue-talks.blogspot.com/2021/02/when-corporations-church-newspaper.html

 

Another Look at Jardine Matheson & Co.:

https://cue-talks.blogspot.com/2021/02/another-look-at-jardine-matheson-co.html

 

When Corporations Assists Governments in Wars:

https://cue-talks.blogspot.com/2021/04/when-corporations-assist-governments-in.html

 

There are several other sources that I could make available on drug money laundering utilizing the United States Dollar (USD) and other world currencies concerning advanced economies (AEs) or emerging market economies (EMEs). I will leave you with these to show the relationship with the banking industry.

Buzzfeed News:

THE FINCEN FILES

 

Thousands of secret suspicious activity reports offer a never-before-seen picture of corruption and complicity — and how the government lets it flourish.

 

By Jason Leopold, Anthony Cormier, John Templon, Tom Warren, Jeremy Singer-Vine, Scott Pham, Richard Holmes, Azeen Ghorayshi, Michael Sallah, Tanya Kozyreva, and Emma Loop

https://www.buzzfeednews.com/article/jasonleopold/fincen-files-financial-scandal-criminal-networks

 

The International Consortium of Investigative Journalists (ICIJ):
Global banks defy U.S. crackdowns by serving oligarchs, criminals and terrorists

 

The FinCEN Files show trillions in tainted dollars flow freely through major banks, swamping a broken enforcement system.

 

By The International Consortium of Investigative Journalists (ICIJ)

 

September 20, 2020

 

https://www.icij.org/investigations/fincen-files/global-banks-defy-u-s-crackdowns-by-serving-oligarchs-criminals-and-terrorists/

Lastly a visual for you:

https://cue-talks.blogspot.com/2020/12/financial-rules-changes.html

Next we will be diving into Govcoins and Stableboins:

https://intelpub.podbean.com/e/the-rise-of-e-money/

 

References

Cope, James. What's a Peer-to-Peer (P2P) Network? Prod. ComputerWorld. Needham, 8 April 2002. 29 June 2021. <https://www.computerworld.com/article/2588287/networking-peer-to-peer-network.html>.

Frankenfield, Jake. Bitcoin Definition: How Does Bitcoin Work? Prod. Investopedia. New York, 1 June 2021. Website. 29 June 2021. <https://www.investopedia.com/terms/b/bitcoin.asp>.

—. Cryptocurrency Definition. Prod. Investopedia. New York, 25 May 2021. Website. 29 June 2021. <https://www.investopedia.com/terms/c/cryptocurrency.asp>.

—. Double-Spending Definition. Ed. Julius Mansa. Prod. Investopedia. New York, 30 June 2020. Website. 29 June 2021. <https://www.investopedia.com/terms/d/doublespending.asp>.

Hayes, Adam. Satoshi Nakamoto Definition. Ed. Erika Rasure. Prod. Investopedia. New York, 8 March 2021. Website. 29 June 2021. <https://www.investopedia.com/terms/s/satoshi-nakamoto.asp>.

Martin, James. Drugs on the Dark Net How Cryptomarkets are Transforming the Global Trade in Illicit Drugs. UK: PALGRAVE MACMILLAN, 2014. Book.

Nakamoto, Satoshi. Bitcoin: a Peer-to-Peer Electronic Cash System. 2009. Document. 29 June 2021. <https://bitcoin.org/bitcoin.pdf>.

 

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[1] In its simplest form, a peer-to-peer (P2P) network is created when two or more PCs are connected and share resources without going through a separate server computer. A P2P network can be an ad hoc connection—a couple of computers connected via a Universal Serial Bus to transfer files. A P2P network also can be a permanent infrastructure that links a half-dozen computers in a small office over copper wires. Or a P2P network can be a network on a much grander scale in which special protocols and applications set up direct relationships among users over the Internet. (Cope)

 

[2] Double-spending is the risk that a digital currency can be spent twice. It is a potential problem unique to digital currencies because digital information can be reproduced relatively easily by savvy individuals who understand the blockchain network and the computing power necessary to manipulate it. (Frankenfield, Double-Spending Definition)

 

[3] In a blockchain, timestamps for a transaction are added to the end of previous timestamps based on proof-of-work, creating a historical record that cannot be changed. (Hayes)