With its volatile currency and dysfunctional banks, the country is the perfect place to experiment with a new digital currency. ... His occupation is one of the world’s oldest, but it remains a conspicuous part of modern life in Argentina: Calle Florida, one of the main streets in downtown Buenos Aires, is crowded day and night with men and women singing out “cambio, cambio, cambio, casa de cambio,” to serve local residents who want to trade volatile pesos for more stable and transportable currencies like the dollar. For Castiglione, however, money-changing means converting pesos and dollars into Bitcoin, a virtual currency, and vice versa. ... That afternoon, a plump 48-year-old musician was one of several customers to drop by the rented room. A German customer had paid the musician in Bitcoin for some freelance compositions, and the musician needed to turn them into dollars. Castiglione joked about the corruption of Argentine politics as he peeled off five $100 bills, which he was trading for a little more than 1.5 Bitcoins, and gave them to his client. The musician did not hand over anything in return; before showing up, he had transferred the Bitcoins — in essence, digital tokens that exist only as entries in a digital ledger — from his Bitcoin address to Castiglione’s. Had the German client instead sent euros to a bank in Argentina, the musician would have been required to fill out a form to receive payment and, as a result of the country’s currency controls, sacrificed roughly 30 percent of his earnings to change his euros into pesos. Bitcoin makes it easier to move money the other way too. The day before, the owner of a small manufacturing company bought $20,000 worth of Bitcoin from Castiglione in order to get his money to the United States, where he needed to pay a vendor, a transaction far easier and less expensive than moving funds through Argentine banks. ... Avalancha offers customers a 10 percent discount when they use the virtual currency, because accepting credit cards generally ends up costing Avalancha more than 10 percent as a result of the vagaries of the Argentine financial system.
How a bullied geek forged an empire out of digital currency, and became a suspect in a half-billion-dollar heist ... During his reign, bitcoin, the leading form of virtual currency, rose in value from approximately a quarter to more than $1,200. The Wall Street Journal estimated that at one point Mt. Gox was processing 80 percent of all bitcoin transactions in the world. At its peak, the company traded more than $4 million a month. ... in February 2014, it was discovered that a half-billion dollars worth of bitcoins simply vanished from Karpeles' exchange, leaving customers around the world unable to withdraw their funds. It's the largest online heist in history. (Estimates vary on the exact amount. Many have reported $450 million; Karpeles says it could be as high as $650 million.) Some — including even those who worked closely with Karpeles — suspected it was an inside job. ... Mt. Gox was originally a site McCaleb had made for people to exchange Magic cards (thus the name — Magic: the Gathering Online Exchange, or Mt. Gox for short). But by July 2010, he'd devoted it to bitcoin instead, setting it up as the currency's first online brokerage ... According to Karpeles, the problem stemmed from what's called a "transaction malleability," a software flaw that allowed people on the outside to manipulate the bitcoin transactions and steal money from the exchange. At first, he tells me, he had no idea how much bitcoin was missing, but the deeper he dug, the worse it became
In a matter of months, this word, blockchain, has gone viral on trading floors and in the executive suites of banks and brokerages on both sides of the Atlantic. You can’t attend a finance conference these days without hearing it mentioned on a panel or at a reception or even in the loo. At a recent blockchain confab in London’s hip East End, the host asked if there were any bankers in the room. More than half the audience members, all dressed in suits, raised their hands. ... Now, everyone’s trying to figure out whether the blockchain is just so much hype or if Masters’s firm and other startups are really going to change the systems that process trillions of dollars in securities trades. When investors buy and sell syndicated loans or derivatives or move money around the world, they must cope with opaque and clunky back-office processes that rely on negotiated contracts between buyers and sellers, lots of phone calls, lots of lawyers, and even the occasional fax. It still takes almost 20 days, on average, to settle syndicated loan trades. ... A June report backed by Santander InnoVentures, the Spanish bank’s fintech investment fund, estimated the blockchain could save lenders up to $20 billion annually in settlement, regulatory, and cross-border payment costs. ... Venture capitalists plowed $400 million into dozens of digital currency startups in the first six months of this year, a fourfold jump from all of 2013, according to industry news site CoinDesk.
The technology behind bitcoin lets people who do not know or trust each other build a dependable ledger. This has implications far beyond the cryptocurrency ... lack of secure property rights is an endemic source of insecurity and injustice. It also makes it harder to use a house or a piece of land as collateral, stymying investment and job creation. ... Such problems seem worlds away from bitcoin, a currency based on clever cryptography which has a devoted following among mostly well-off, often anti-government and sometimes criminal geeks. But the cryptographic technology that underlies bitcoin, called the “blockchain”, has applications well beyond cash and currency. It offers a way for people who do not know or trust each other to create a record of who owns what that will compel the assent of everyone concerned. It is a way of making and preserving truths. ... Other applications for blockchain and similar “distributed ledgers” range from thwarting diamond thieves to streamlining stockmarkets: the NASDAQ exchange will soon start using a blockchain-based system to record trades in privately held companies. The Bank of England, not known for technological flights of fancy, seems electrified: distributed ledgers, it concluded in a research note late last year, are a “significant innovation” that could have “far-reaching implications” in the financial industry. ... Some of bitcoin’s critics have always seen it as the latest techy attempt to spread a “Californian ideology” which promises salvation through technology-induced decentralisation while ignoring and obfuscating the realities of power—and happily concentrating vast wealth in the hands of an elite. The idea of making trust a matter of coding, rather than of democratic politics, legitimacy and accountability, is not necessarily an appealing or empowering one.
In the last weeks, WIRED has obtained the strongest evidence yet of Satoshi Nakamoto’s true identity. The signs point to Craig Steven Wright, a man who never even made it onto any Nakamoto hunters’ public list of candidates, yet fits the cryptocurrency creator’s profile in nearly every detail. And despite a massive trove of evidence, we still can’t say with absolute certainty that the mystery is solved. But two possibilities outweigh all others: Either Wright invented bitcoin, or he’s a brilliant hoaxer who very badly wants us to believe he did. ... Wright’s blogging and leaked emails describe a man so committed to an unproven cryptocurrency idea that he mortgaged three properties and invested more than $1 million in computers, power, and connectivity—even going so far as to lay fiberoptic cables to his remote rural home in eastern Australia to mine the first bitcoins. His company, Tulip Trading, built two supercomputers that have officially ranked among the top 500 in the world, both seemingly related to his cryptocurrency projects. (Wright seems to enjoy tulip references, a likely taunt at those who have compared bitcoin to the Netherlands’ 17th century “tulip bubble.”)
A year ago a hacker stole $55 million of a virtual currency known as ether. This is the story of the bold attempt to rewrite that history. ... Rather than moving bitcoin from one user to another, the ethereum blockchain hosts fully functioning computer programs called smart contracts—essentially agreements that enforce themselves by means of code rather than courts. That means they can automate the life cycle of bond payments, say, or ensure that pharmaceutical companies can authenticate the sources of their drugs. Yet smart contracts are also new and mostly untested. Like all software, they are only as reliable as their coding—and Gün was pretty sure he’d found a big problem. ... Gün feared the bug could allow a hacker to make unlimited ATM-like withdrawals from the millions, even if the attacker, who'd have needed to be an investor, had only $10 in his account. ... This staggering amount of money lived inside a program called a decentralized autonomous organization, or DAO. Dreamed up less than a year earlier and governed by a smart contract, the DAO was intended to democratize how ethereum projects are funded. Thousands of dreamers and schemers and developers who populate the cutting edge of computer science, most of them young, had invested in the DAO.