April 9, 2013
Among the many unpleasant discoveries made by those who stashed their cash in Cypriot banks is that the island’s government could stop them moving their money elsewhere. Capital controls are supposed to be a thing of the past, a figment of the pre-globalised world. But it turns out that when banks are threatened, the gloves come off.
One of the side-effects of this rude awakening seems to have been a surge of interest in a virtual currency called Bitcoin. At any rate, the price of a single Bitcoin reached $147 at one point last week. And people are buying and selling this virtual stuff for what we laughingly call real money via more than 40 online exchanges such as Mt Gox, though when I last looked Mt Gox was temporarily offline as a result of a denial-of-service attack that might have been the work of any number of possible suspects: cyber vandals; hackers hoping to sow uncertainty in the market to bring prices down and make a killing; or, for all we know, even the US government, which takes a poor view of people minting their own currency, even if it is virtual.
The Bitcoin phenomenon is one of the most intriguing things to have happened in cyberspace since the invention of the peer-to-peer networking that undermined the music business and enabled developments such as Wikileaks. It’s an invention of a mysterious – and, to date, unidentified – programmer who called himself Satoshi Nakamoto and claimed to be a 36-year-old Japanese male. He launched Bitcoin on 3 January 2009 and disappeared entirely from the net in April 2011, saying that he was moving on to other things. A Pulitzer prize awaits the journalist who unmasks him. At the moment, all we have is the verdict of Dan Kaminsky, a leading internet-security expert who examined the Bitcoin code and concluded that “Nakamoto” was “a world-class programmer with a deep understanding of the C++ programming language” who also “understands economics, cryptography and peer-to-peer networking. Either there’s a team of people who worked on this or this guy is a genius.”