A new protocol which is based on the chain of trust system used in hawala has been developed and it has the potential to empower people to transact pretty much anything they want to someone else, anywhere else in the world. (Probably not the DPRK though)
Most readers of this blog are familiar with the concept of hawala – the ancient and paperless system of transferring funds to different locations based upon trust. The sender and the recipient trust that the agent of the other side of the world will hand over the required amount of cash to the right person. Used for centuries by the South Asian diaspora, hawala’s ease of use and cost effectiveness mean it has provided fierce competition to money remittance businesses in the past and even kept them out of the market in some communities. Why use a service that only runs from Monday to Friday and will cost you ten per cent of the transaction amount when there is something that is open 24 hours a day, reaches directly into the smallest villages and costs a fraction of the rate charged by banks for a poorer service?
Enter crypto-currencies. Although not exactly without an information trail, digital currencies maintain the data of each transaction made, but not necessarily the person who made the transaction and they are traceable. They can be bought, sold, transferred or used at any time of the day or night, during national holidays and there are no geographical limitations. Some countries have tried to prohibit digital currencies and others have restricted their use, but this has had little effect on the currencies and users with access to the web have continued to use them anyway. Jurisdictions can limit or restrict the opportunities to exchange digital currencies for fiat currency, but that will have little impact on the use of non-fiat currencies overall. As this article asks, ‘What if a government banned bitcoin and no one noticed?’
So while the US and other governments are busy wringing their hands to find solutions about how to regulate crypto-currency as if it were fiat currency, new protocols and new ways to exchange value are being developed and secured every day.
Bitcoin can be used for anything – yes, even terrorist financing
News reports issued at the end of last week focused on how the US government has designated bitcoin to be a potential terrorism threat. Or at least that is what the headlines are saying.
It looks like the US government’s Department of Defence might be calling upon the expertise of crypto-currency specialists to analyse why and how terrorist groups could use et al to fund terrorist attacks. Although far from being a cryptographer nor an internet protocol developer, even I can shed some light on this one.
As Bitcoin and other crypto-currencies exist as methods of transferring funds, so they will be exploited by criminal elements to launder money, to defraud and to fund everything from buying a getaway car to financing terrorism. The point about decentralised crypto-currencies is that they exist and can be used for anything.