/ Bitcoin

About Bitcoin

The story of Bitcoin started in November 2008[1], when the paper[2] authored by Satoshi Nakamoto (pseudonym, identity unknown[3]) became available to the public. It was followed by the development of the application (computer program) that record ownership changes into decentralised database by following algorithms from the published article. The idea of "alternative money" attracted IT specialists and the small number of early adopters started to use this technology.

The idea of Bitcoin quickly emerged through viral videos[4], TV shows[5], numerous meetings and events. Being technically advanced, the technology leveraged the idea of freeing people from banks and corporations giving them cheap, easy, and decentralised money transfer tool[6]. Unsurprisingly, the first significant beneficiaries from the Bitcoin features were people and organisations for whom such control implies risks: illegal drugs dealers[7], ransomware makers[8], people avoiding anti-money laundering control[9].

Although there is the strong agreement about significance of the blockchain (technology behind Bitcoin) and many companies participating in its development[10], there is a number of evidences that Bitcoin itself is currently associated with high risk or criminals:

  • Recent WannaCry ransomware asks for Bitcoins to decrypt the data[11];
  • Coinfloor restricts their services to EU area only and even does not allow certain nationalities to use the service[12];
  • Startup Circle, originally cryptocurrency startup[13], now restricts operations with Bitcoins[14];
  • Transferwise's statement, published in April 2013, says: "we know our banking providers are not comfortable with Bitcoin and want payments to these firms [Bitcoin exchanges] restricted."[15];
  • it is reported that banks are closing accounts over bitcoin activity[16].

It is a duty of a bank to protect its customers and reputation so it is completely understandable that people playing with highly volatile and unregulated commodity bring risk not quite welcomed in risk-sensitive community.

While buying Bitcoins is not a problem nowadays, selling Bitcoins (or converting them into "real" money) is quite problematic. There is no risk-free way to convert it to cache or get money on your bank account and keep your tax adviser happy. As none of the banks in the UK provide Bitcoin related services, the only way to deal with it is to contact some third party[17] - exchange or individual broker and carry the risk of disclosing your personal information either to exchange or broker (all legally operating companies require proof of ID and address from Bitcoin sellers) or meeting face-to-face with a stranger in case of selling it for cache.

Another way to benefit from high Bitcoin price for happy Bitcoin owners in the UK is to spend them. There are about 70 shops in London that claim that they accept Bitcoins for many things, from food to computer parts and art[18]. But it is quite hard to spend a big amount in Bitcoins in these shops buying for yourself.

  1. History of bitcoin, https://en.wikipedia.org/wiki/History_of_bitcoin ↩︎

  2. Bitcoin: A Peer-to-Peer Electronic Cash System, https://bitcoin.org/bitcoin.pdf ↩︎

  3. Satoshi Nakamoto, https://en.wikipedia.org/wiki/Satoshi_Nakamoto ↩︎

  4. What is Bitcoin?, https://www.youtube.com/watch?v=Um63OQz3bjo ↩︎

  5. The Good Wife (season 3), https://en.wikipedia.org/wiki/The_Good_Wife_(season_3) ↩︎

  6. Bitcoin is an innovative payment network and a new kind of money, https://bitcoin.org/en/ ↩︎

  7. Silk Road (marketplace), https://en.wikipedia.org/wiki/Silk_Road_(marketplace) ↩︎

  8. How Bitcoin helped fuel an explosion in ransomware attacks, http://www.zdnet.com/article/how-bitcoin-helped-fuel-an-explosion-in-ransomware-attacks/ ↩︎

  9. What is the Threat of Money Laundering Associated with Bitcoin?, https://www.hg.org/article.asp?id=31835 ↩︎

  10. Enterprise Ethereum Alliance Members, https://entethalliance.org/members/ ↩︎

  11. WannaCry ransomware attack, https://en.wikipedia.org/wiki/WannaCry_ransomware_attack ↩︎

  12. Who can use Coinfloor's services?, https://coinfloor.zendesk.com/hc/en-us/articles/201745793 ↩︎

  13. Blockchain just had two major firsts with new social payment app Circle, Barclays and Britain's financial regulator, http://www.cityam.com/238281/blockchain-just-had-two-major-firsts-with-new-social-payment-app-circle-which-has-partnered-with-barclays ↩︎

  14. Bitcoin on Circle, https://support.circle.com/hc/en-gb/articles/213560743-Bitcoin-on-Circle ↩︎

  15. Bitcoin, https://transferwise.com/help/article/2534649/other/bitcoin ↩︎

  16. Banks Still Closing Accounts Over Bitcoin Activity, https://www.cryptocoinsnews.com/banks-still-closing-accounts-bitcoin-activity/ ↩︎

  17. How to Sell Bitcoin, http://www.coindesk.com/information/sell-bitcoin/ ↩︎

  18. Where to Spend Bitcoins UK, http://www.wheretospendbitcoins.co.uk/ ↩︎

Alex Netkachov

Alex Netkachov

Alex Netkachov is a Senior Software Developer, currently working in Central London on new generation of energy trading solutions for brokers, traders and exchanges.

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