Currency without Borders

Written by Science Knowledge on 10:33 PM

The world’s first digital currency cuts out the middleman and keeps users anonymous

Imagine if you were to walk into a deli, order a club sandwich, throw some dollar bills down and have the cashier say to you, “That’s great. All I need now is your name, billing address, telephone number, mother’s maiden name, and bank account number.” Most customers would balk at these demands, and yet this is precisely how everyone pays for goods and services over the Internet.

There is no currency on the Web that is as straightforward and anonymous as the dollar bill. Instead we rely on financial surrogates such as credit-card companies to handle our transactions (which pocket a percentage of the sale, as well as your personal information). That could change with the rise of Bitcoin, an all-digital currency that is as liquid and anonymous as cash. It’s “as if you were taking a dollar bill, squishing it into your computer and sending it out over the Internet,” says Gavin Andresen, one of the leaders of the Bitcoin network.

Bitcoins are bits—strings of code that can be transferred from one user to another over a peer-to-peer network. Whereas most strings of bits can be copied ad infinitum (a property that would render any currency worthless), users can spend a Bitcoin only once. Strong cryptography protects Bitcoins against would-be thieves, and the peer-to-peer network eliminates the need for a central gatekeeper such as Visa or PayPal. The system puts power in the hands of the users, not financial middlemen.

Bitcoin borrows concepts from well-known cryptography programs. The software assigns every Bitcoin user two unique codes: a private key that is hidden on the user’s computer and a public address that everyone can see. The key and the address are mathematically linked, but figuring out someone’s key from his or her address is practically impossible. If I own 50 Bitcoins and want to transfer them to a friend, the software combines my key with my friend’s address. Other people on the network use the relation between my public address and private key to verify that I own the Bitcoins that I want to spend, then transfer those Bitcoins using a code-breaking algorithm. The first computer to complete the calculations is awarded a few Bitcoins now and then, which recruits a diverse collective of users to maintain the system.

The first reported Bitcoin purchase was pizza sold for 10,000 Bitcoins in early 2010. Since then, exchange rates between Bitcoin and the U.S. dollar have bounced all over the scale like notes in a jazz solo. Because of the currency’s volatility, only the rare online merchant will accept payment in Bitcoins. At this point, the Bitcoin community is small but especially enthusiastic— just like the early adopters of the Internet.

Source of Information : Scientific American Magazine 

Related Posts by Categories



  1. 0 comments: Responses to “ Currency without Borders ”


About Me

In its broadest sense, science (from the Latin scientia, meaning "knowledge") refers to any systematic knowledge or practice. In its more usual restricted sense, science refers to a system of acquiring knowledge based on scientific method, as well as to the organized body of knowledge gained through such research.

Fields of science are commonly classified along two major lines: natural sciences, which study natural phenomena (including biological life), and social sciences, which study human behavior and societies. These groupings are empirical sciences, which means the knowledge must be based on observable phenomena and capable of being experimented for its validity by other researchers working under the same conditions.


You are welcome to contact me and leave your comments in my Blog.

Science Knowledge

Want to subscribe?

Science Knowledge

Grab this Headline Animator

Enter your email address:

Delivered by FeedBurner