A GLANCE AT BITCOIN DEVELOPMENT

panelgameSecurity

Dec 3, 2013 (3 years and 9 months ago)

81 views

FROM PAGE 22
“Some people ask how to pay with
bitcoins just out of curiosity but pay
with cash or bank cards,” he says.
Sun Yan, a 22-year-old holder of
bitcoins in Wuhan, says he believes
that even if bitcoins fail to achieve
widespread recognition and survive
in the long term, it is meaningful in
that it pushes forward the develop-
ment of digital currency. Sun holds
three coins, all of which were bought
from online traders.
“Just as bank cards in many ways
have replaced banknotes, digital cur-
rencies will do the same thing. All we
need is a wider network that accepts
digital currency,” Sun says.
Risks remain
Chang says he and many other
bitcoiners have been aware of the
potential risks of holding bitcoins.
One possibility is that governments
may decide bitcoins are illegal
and conduct a crackdown on the
exchange platform.
The US Commodity Futures Trad-
ing Commission is exploring wheth-
er bitcoins fall under the United
States regulator’s purview, reported
the Financial Times.
“It’s not monopoly money we’re
talking about here. Real people can
have real risks with these instru-
ments so we need to ensure that we
protect markets and consumers even
in what at fi rst blush appear to be
‘out there’ transactions,” said Bart
Chilton, one of the fi ve commission-
ers at the US Commodity Futures
Trading Commission, the Financial
Times reported on May 7.
For bitcoiners in China, the news
is a signal that the currency may
become more widely accepted.
“Putting bitcoins under regula-
tion means they are not regarded as
something outlawed and so they are
recognized as a currency. If authori-
ties want to see the currency die,
they can just announce it is illegal,”
Chang says.
Wang Yujie, a 27-year-old wealth
manager in Shanghai and a holder
of bitcoins, says he has considered
the possible risks that may aff ect the
value of his bitcoin deposits.
“It may become illegal if the
authorities announce as much. It
may be replaced by more advanced
digital currencies. Individual e-wal-
lets may be hacked and people will
worry about safety issues. The entire
system may be corrupt,” Wang says.
In March, a branch of the US Trea-
sury Department said all exchanges
or transfer platforms of bitcoins will
be considered as “money services
business”, which means companies
involved must provide information
to the government and introduce
policies to prevent money launder-
ing. Since then, at least three compa-
nies in North America have report-
ed having their business accounts
closed by their banks. Bitfl oor, a New
York-based Bitcoin exchange, says it
is shutting down entirely and has
not yet been able to return funds to
customers.
In China, the transferring and
trading platforms of bitcoins are
run by individuals and the prices
and exchange rates are aff ected by
overseas platforms, Shen says.
Currently no domestic authorities
claim responsibility for regulating
the bitcoin market in China.
“The safety of trading bitcoins
on these platforms mainly relies on
people’s trust and good faith,” Shen
says.
Wang says he has explored the
currency and understands how it
works because some clients asked
him whether bitcoins are worth
investing in.
“My answer to my clients at the
current stage is: ‘Wait for another
year to see how regulators may
respond to it’ because I regard it as a
big risk if bitcoins are declared ille-
gal,” he says.
The mechanism of bitcoins, which
challenges many banking industry
insiders’ current knowledge and
understanding of currencies, may
be obscure to wealth managers and
investors even if they have decades
of expertise in investments in tradi-
tional areas.
“Bitcoins are highly technical in
almost every step from their issu-
ance to payment. It takes time for
people to understand how the sys-
tem works and decide whether it is
worth real money,” Wang says.
The issuance of bitcoins based
on computational calculation sets
a benchmark that is too high for
investors without much knowledge
or interest in information technol-
ogy, says Liu Xinyue, an investor in
gold and silver futures in Shanghai.
“I heard my son talking about the
bitcoin and I got a headache just two
minutes after he started explaining
it. It’s all too complicated and bizarre
to me. I think this may be one of the
biggest barriers for investors like
me,” Liu says.
PROVIDED TO CHINA DAILY
A pile of newly minted bitcoins arranged for a photograph in Sandy, Utah, in the United States. Created four years ago by
a person or group using the name Satoshi Nakamoto, bitcoins are a virtual currency that can be used to buy and sell a
broad range of items — from cupcakes to electronics. People can also pay with bitcoins in various coff ee shops, phone and
computer stores and bookstores in big Chinese cities including Beijing and Shanghai.
A GLANCE
AT BITCOIN
DEVELOPMENT
• 2008: Pseudonymous devel-
oper Satoshi Nakamoto posted
a paper describing the bitcoin
protocol on the Internet. Naka-
moto called it a peer-to-peer,
electronic cash system.
• 2009: Bitcoin network estab-
lished; fi rst open source bitcoin
clients joined the network and
fi rst bitcoins issued. Bitcoin
creation and transfer is based on
an open source cryptographic
protocol and is not managed by
any central authority. Each bit-
coin is subdivided down to eight
decimal places, forming 100 mil-
lion smaller units called satoshis.
Bitcoins can be transferred
through a computer or smart-
phone without an intermediate
fi nancial institution.
• 2010: First bitcoin transactions
were negotiated by individu-
als on the bitcoin forums. One
transaction was a pizza sold for
10,000 bitcoins.
• 2010: A major security fl aw
found and exploited.
• 2011: First bitcoiners in China
started “mining” and trading
bitcoins.
• 2012: More bitcoin trading
platforms established and
increasing number of stores
around the world said they would
accept bitcoin payments.
• 2013: Bitcoin prices fl uctuate
violently. On April 10, the bitcoin
exchange rate dropped from
$266 to $76 before returning to
$160 within six hours.
• 2013: Market valuation of
the total stock of bitcoins ap-
proached $1 billion. Critics said
bitcoin prices are a bubble.
Some said it’s a Ponzi scheme,
constantly relying on new
customers who eff ectively pay
existing ones.
• 2013: Speculation in bitcoins
began in China.
— WU YIYAO
CHINA’S NETIZEN POPULATION
Source: CNNIC ZHANG YE / CHINA DAILY
Unit: million people
PENETRATION RATE OF CHINA’S INTERNET USERS
Unit: percent
200820072006 2009 2010 2011 2012 2013 2013 March
200820072006 2009 2010 2011 2012 2013 2013 March
578564513.1457.3384298210137111
8.5 10.5 16.0 22.6 28.9 34.3 38.3 42.1 43.1
PAGE 2 3J UNE 7 - 1 3, 2 0 1 3

C HI NA DAI LY AS I A WE E KLY