Mercedes Ruehl Reporter

Mercedes writes for The Australian Financial Review and BRW from the Sydney newsroom. She has an interest in technology, politics and travel writing.

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Disappearance of Bitcoin’s founder won’t stop flood of interest

Published 19 April 2013 10:21, Updated 13 May 2013 10:37

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Disappearance of Bitcoin’s founder won’t stop flood of interest

Bitcoin is one of the first crypto-currencies, a concept meaning it is designed on the idea of using cryptography to control the creation and transfer of money, rather than on authorities. Photo: Bloomberg

He’s the entrepreneur who has created digital gold and his invention is known and used across the globe. Yet he has disappeared without a trace and, apparently, without pocketing a cent.

Bitcoin is now the world’s most widely used experimental digital currency. At its high point in early April this year, the total amount of Bitcoins in circulation was valued at over $US2 billion. As a result of its success, a whole new subculture of so called “crypto-currencies” has sprung up to compete with it.

But a month ago, you could be forgiven for never having heard of Bitcoin and its founder, Satoshi Nakamoto. Now, thanks to a hacking scandal, a slump in the Bitcoin price and the Facebook-funding Winklevoss twins emerging as Bitcoin barons, everyone has at least heard of the digital currency, even if they are still scratching their heads as to how it all works.

In a move that shows how much Bitcoin is making its way into becoming mainstream, IG Markets, one of Australia’s top contract for difference (CFD) and forex providers started offering options on Bitcoin on Monday this week, allowing investors to speculate on the price of Bitcoin and how it may perform over a certain time period.

“Compared to our core businesses, for instance the Aussie dollar and other currencies, the volumes in Bitcoin are nowhere near and they never were going to be,” IG Markets chief markets strategist Chris Weston says.

“But for a special situation trade or product, yes we have seen a lot of interest from our Australian clients compared with other similar products we’ve done. The best way to get exposure to this is to offer a binary option.”

But Nakamoto is still just as elusive as he was four years ago when he founded Bitcoin.

At its high point in early April this year, the amount of Bitcoins in circulation was valued at over $US2 billion.

Most people believe the name Satoshi Nakamoto, whose owner claimed to be a 36-year-old Japanese businessman when he invented the currency in 2009, is a pseudonym. Before Bitcoin, there is no record of any coder with that name. He used an email address and website that were untraceable.

Crypto-cash

Bitcoin is one of the first crypto-currencies, a concept meaning it is designed on the idea of using cryptography to control the creation and transfer of money, rather than relying on authorities.

It can be bought and sold in return for traditional currency on several exchanges, and can also be directly transferred across the internet from one user to another using special software.

For Nakamoto however, it was never about riches. Between January 2009 and April 2011 he wrote hundreds of posts describing his vision: creating a currency that was free from erratic monetary policy and the scheming of politicians and central bankers.

He managed this by making it harder and harder to “mine” Bitcoins over time, meaning, like gold, there is a finite amount of coins that can ever be mined, meaning in theory they would hold their value.

Then, he sent his final note to his fast-growing digital community saying he had “moved on to other things” and was never heard from again.

“The world is very cynical. With everything going on in the Bank of Japan and lack of faith in currencies, people were looking at other options. People are also very inquisitive, so as soon as some businesses started accepting Bitcoin maybe people started to think, wow maybe this could turn out to be an alternative currency.”

Weston suggested a lack of faith in traditional currencies had prompted the turn to Nakamoto’s alternative.

“The world is very cynical. With everything going on in the Bank of Japan and lack of faith in currencies, people were looking at other options. People are also very inquisitive, so as soon as some businesses started accepting Bitcoin maybe people started to think, wow maybe this could turn out to be an alternative currency.”

“But there is a need to calm the market down if it is going to become a long-term viable option.”

Some have pegged Nakamoto as a group of intelligent computer programmers. Others say he is just another particularly intelligent computer coder – and not necessarily from Japan.

But the hacking of more than $12,000 worth of Bitcoins last month and an unexplicable plunge in the market cap back down to $US1 billion last week raises important questions about crypto-currencies and what lawmakers can do when there is no company or central monetary authority in control to blame.

Litecoins, PPcoins and Namecoins are just some of the other digital currencies that have cropped up as competition to Nakamoto’s invention.

Litecoin is the second-biggest alternative to Bitcoin. Charles Lee, the man who designed Litecoin says its allows transactions in the currency to be confirmed as valid much quicker than in Bitcoin.

Bitcoin, however, is still the golden goose for disillusioned investors.

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