US Government to Auction Virtual Currency
US Marshals are to auction off almost 30,000 Bitcoins, a controversial "virtual currency." The coins have a current market value of around $18 million dollars. The government confiscated the virtual currency when it raided an underground online trading site named Silk Road.
Silk Road was not part of the ordinary World Wide Web, and could only be accessed using special web browser software. That made it extremely difficult to trace anyone using the site and their activity. The site was well known in the digital underground community for buying and selling services of both a legal and illegal nature.
Officials shut down Silk Road in October, accusing Ross William Ulbricht (also known as "Dread Pirate Roberts") of being the site's creator, as well as being involved in both drug smuggling and a hitman operation. Ulbricht denies those accusations and his legal case is ongoing. The site quickly reopened, apparently under different administration. (Source: bbc.co.uk)
The Bitcoins that will be part of the auction are not those from the personal "account" of Ulbricht, which remain the subject of legal dispute about whether they are the proceeds of crime. Instead, the auction is for 29,656.51306529 Bitcoins which "resided on Silk Road servers" and were forfeited as part of the site's closure. (Source: usmarshals.gov)
Bitcoin Virtual Currency Entirely Unregulated
Bitcoins are a virtual currency which is neither issued by a national government nor regulated by any authority. In simple terms, each Bitcoin belongs to whoever has the relevant access code to the Bitcoin on their computer. Recently Tokyo-based Bitcoin trader Mt Gox filed for bankruptcy protection after hackers broke into the system and made off with an estimated $473 million dollars.
Supporters point to the lack of financial middlemen and transaction fees, as well as noting that there can only ever be a fixed number of Bitcoins in circulation, unlike traditional currencies which can be devalued if governments print more money. Critics argue that the value of Bitcoins fluctuates heavily and that the money effectively disappears if somebody loses their access code.
Bitcoin Auction Bidders Must Deposit $200,000
The auction is made up of nine sets of 3,000 Bitcoins each and one set of the remaining 2,656. Bidders will need to deposit a refundable $200,000 before they can take part in the sealed-bid auction. The US Marshal Service also notes that it "... will not sell to any person who is acting on behalf of or in concert with the Silk Road and/or Ross William Ulbricht, and bidders will be required to so certify."
There will be a three day gap between the bidding window and the winners being notified and having their first opportunity to pay up and collect their Bitcoins, during which the value of Bitcoins against other currencies may have changed enough to make the winning bid a bargain or a blunder.
What's Your Opinion?
Do you trust virtual currencies such as Bitcoin more or less than traditional money? Do you think that the government auctioning off these Bitcoins provide the virtual currency more legitimacy? Can you see Bitcoins becoming popular among the general public, or will they always be something that appeals only to tech-heads?
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Comments
not comparable
While both fiat currencies and virtual currencies are means of exchange, their structure is very different. Each has their own issues- the article for example mentions paper money can be devalued by governments, often to ease the pressure of debt. Essentially inflation and the debasement of wages are part of that system as practised. Other local and experimental currencies have avoided this.
Virtual currencies have built-in controls to avoid this but remain less secure, as the Mt. Gox problem illustrated. They're also not yet large enough to smooth out value variability. However, once the bugs are ironed out, it has the potential to be superior in a number of ways. It does require a more informed user at this point. There's also a pyramid effect taking place where early adopters have been made wealthy simply buy buying in at lower values.
The larger issue it will likely face is the attempt by governments to regulate it. But it does away with the need for real bank reform by by-passing the entire issue.
Governments have laws about being required to auction seized property of value. In my area for example, they were obliged to auction grow-op gear that was being re-seized again in later raids. Officers took to trashing the gear to avoid this. Eventually they exempted such gear from auction.
It will be interesting to see if they do the same here. Given the value involved, I wonder.
One also wonders at the real case they have when trying to make a host responsible for activity on their servers, even servers obviously out of his control if it's that easily restored.
There are bitcoin exchange machines in coffee shops here and I notice they had a demo machine at a street fair last weekend with its own booth. So its already begun to be semi-mainstream in some places. I don't see it as just appealing to geeks, but also protestors, anti-government, and people dealing with international trade. I understand it bypasses a lot of the issues with the transfer & exchange.