Mystery, scandals and speculation: Bitcoin's record

From dark web currency to investment hype?

10 Mar 2024 01:01pm
Bitcoin stickers are seen at Pubkey Bar on February 29, 2024 in New York City. - Photo by AFP
Bitcoin stickers are seen at Pubkey Bar on February 29, 2024 in New York City. - Photo by AFP

PARIS - Bitcoin, which has just hit a record price of $69,000, is the most famous cryptocurrency, but remains shrouded in mystery and controversy.

Mysterious creator

More than 15 years after its invention, no one has been able to name its founder.

The foundations of the virtual money were laid in a nine-page "white paper" released 31 October 2008 by Satoshi Nakamoto. It theorised "a purely peer-to-peer version of electronic cash (that) would allow online payments to be sent directly from one party to another without going through a financial institution."

And it would be free from the control of central banks, traditionally the only institutions who can create money.

But is Satoshi a real name or a pseudonym or a team of people? Various theories have emerged over the years but the mystery remains.

Craig Wright, an Australian entrepreneur and computer technician, has claimed since 2016 to have written the white paper and a trial is underway in London to determine if he's telling the truth.

Since its creation, bitcoin has been accused of being the currency of choice on the dark web for illegal payments that leave no trace. It is notably the currency that hackers generally demand to be paid in during ransomware attacks.

Related Articles:

Major collapses

The world of cryptocurrencies has also been shaken in recent years by high-profile bankruptcies and the dramatic fall of several star entrepreneurs.

Changpeng Zhao, who was head of the world's largest cryptocurrency platform, Binance, has pleaded guilty to violating anti-money laundering laws in the United States.

His main rival, FTX, went bankrupt at the end of 2023, and its founder Sam Bankman-Fried was found guilty on several counts, including fraud, conspiracy, and money laundering.

Two experts at the European Central Bank (ECB) claimed in a blog last month that "bitcoin has failed on the promise to be a global decentralised digital currency and is still hardly used for legitimate transfers."

"The latest approval of an ETF doesn't change the fact that Bitcoin is not suitable as means of payment or as an investment. The fair value of Bitcoin is still zero."

Attempts to be respectable

If many bitcoin investors are only there for speculative purposes, it has gained some respectability in recent years.

US financial regulators at the beginning of January approved bitcoin "ETFs" -- or exchange traded funds -- which allow a wider public to invest indirectly in cryptocurrency, without having to hold it directly. This decision was the main reason for the price surge that led to Tuesday's new record.

El Salvador in September 2021 became the first country to accept bitcoin as legal tender. But the crypto money hasn't won over the country's population.

According to a study by Central America University (UCA), 88 percent of Salvadorians never used it in 2023.

Some merchants have said they will accept it as a means of payment, including billionaire Elon Musk who declared in 2021 that he'd sell Tesla cars for bitcoins -- before changing his mind, arguing that its production was too polluting and that he's only accept it when it was less polluting.

Based on blockchain

Bitcoin is based on blockchain technology, a virtual ledger that allows information to be stored and exchanged in a secure, secret and unmodifiable manner. Each transaction is recorded in real time, in a tamper-proof register.

Bitcoins are created -- or "extracted" -- as a "reward" when powerful energy-sucking computers solve complex problems. So-called "miners" validate the transactions to create bitcoins.

To prevent uncontrollable growth, Satoshi Nakamoto limited the global number of coin units to 21 million, a level that should be reached around 2140.

And every four years, the reward for "miners" is cut in two. The next "halving" is planned for April, which will slow down the rate that new bitcoins enter the market, further boosting their scarcity -- and their value. - AFP