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Bitcoin, WikiLeaks and other hacktivists

Week 44, 2011

Bitcoin were originally created by "mining", or devoting a share of one's computing power to achieve distributed computations. However, in order to limit hyperinflation, a maximum has been set to the amount of Bitcoins in circulation at 21 million Bitcoins. The consequence is that Bitcoin model is per se deflationist. Bitcoins that once traded at EUR 22 are now worth around EUR 2.20.

In fact, money is just a physical materialization of trust. We accept Euros, Dollars, Yuans, or other currencies because we know we will be able to obtain goods and services with them. This is guaranteed by an issuing authority, which issues the currency (in physical or electronic form), regulates the market, brings guarantees, etc. In a word, the value of a currency is just a matter of trust. Also, being totally anonymous, Bitcoin cannot comply with AML or KYC regulations, and is often criticized as a money laundering means for various mafias.

Perhaps to answer this need for trust, to make Bitcoin enter the real physical world, Casascius has started to manufacture physical Bitcoin coins, and an organization is proposing an application running on a VeriFone terminal to accept them (cf. Payment section).

At the same time, WikiLeaks has just announced it was suspending its publishing activities due to lack of funds. The last major WikiLeaks release, hundreds of thousands of U.S. government documents about Guantanamo Bay detainees, was in April. Bank of America, Visa, MasterCard, PayPal and Western Union have blocked payments to WikiLeaks in a financial blockade deemed as arbitrary and unlawful by WikiLeaks. The leaks organization says "the blockade is outside of any accountable, public process. It is without democratic oversight or transparency. The US government itself found that there were no lawful grounds to add WikiLeaks to a US financial blockade". WikiLeaks' revenue is estimated to have dropped 95% as a result of the restrictions.

WikiLeaks is among the sites accepting Bitcoins. But as long as the Bitcoins acceptability is limited, and trust is not built into the virtual currency, there is little chance this would be enough to allow WikiLeaks to continue its operations.

Thierry Spanjaard

Chief Editor

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