In­ter­net cur­rency Bit­coin has been hailed as the fu­ture of fi­nance, but is it a vi­able al­ter­na­tive to real-world money, asks Nick Hard­ing

Friday - - Society Living Leisure -

Michael Clear ad­mits to be­ing be­mused when he was asked, “are you Satoshi?” He an­swered with a sur­prised smile, “I’m not, but even if I was I wouldn’t tell you.” To this day he re­grets that tiny hint of mis­chievous doubt that left the ques­tion hang­ing. It put him in the frame of ar­guably the world’s most per­plex­ing cyber mys­tery; just who or what is Satoshi Nakamoto?

The sim­ple an­swer is Satoshi is the in­ven­tor of Bit­coin, the con­tro­ver­sial in­ter­net cur­rency that many ex­perts be­lieve will change the world. But Satoshi is anony­mous. He wrote the code for the pro­gram that con­trols the com­plex Bit­coin sys­tem and then dis­ap­peared, leav­ing a few scant clues as to his or her true iden­tity.

Michael, an Ir­ish com­puter science stu­dent, was ap­proached by an in­ves­tiga­tive jour­nal­ist on the trail of Satoshi be­cause of his in­ter­est in cryp­tog­ra­phy – the study of the math­e­mat­i­cal al­go­rithms be­hind com­puter codes and se­cure com­mu­ni­ca­tions. He’s also an ex­pert in peerto-peer net­works (the pro­cesses by which com­put­ers com­mu­ni­cate) and has knowl­edge of bank­ing trad­ing soft­ware. Th­ese fac­tors made him a pos­si­ble Satoshi can­di­date.

Since he was linked to the mys­tery, Michael has re­ceived an avalanche of emails. In April he is­sued a state­ment to try to end the spec­u­la­tion, in which he ad­mit­ted he was flat­tered to be a sus­pect but de­nied the ac­cu­sa­tion.

“I am cer­tainly the wrong per­son,’’ he wrote. “There are far too many pos­si­bil­i­ties to con­sider for Satoshi, not to men­tion the many thor­ough in­ves­ti­ga­tions that have been un­der­taken. How­ever, it seems that even limited searches yield can­di­dates who fit the pro­file far bet­ter than I think I do.

“I’m a hum­ble re­search stu­dent with an in­ter­est in crypto; I am very far from be­ing any kind of ex­pert in any­thing.’’

While the search for the mys­te­ri­ous fig­ure be­hind Bit­coin con­tin­ues, Satoshi’s in­ven­tion is go­ing through an un­cer­tain pe­riod of highs and lows, which could see the cur­rency ei­ther flop or be­come the next big thing.

The first boost for the Bit­coin came when the Cyprus fi­nan­cial calamity high­lighted an as­pect of bank­ing that many in­vestors found shock­ing. Money stashed in banks ac­counts, which peo­ple as­sumed was se­cure, was ac­tu­ally vul­ner­a­ble to the va­garies of a volatile po­lit­i­cal sit­u­a­tion.

Ac­counts were frozen and sav­ings were raided to pay for the trou­bled na­tion’s $13 bil­lion (Dh48 bil­lion) fi­nan­cial bailout. Some in­vestors stand to lose 80 per cent of the de­posits they hold on the Mediter­ranean is­land.

The is­sue left many ques­tion­ing whether cen­tralised, cor­po­rate banks were sen­si­ble places to hold money in, and sent dis­grun­tled in­vestors look­ing for new homes for their cash.

The re­sult was an up­swing of in­ter­est in Bit­coin, which can be traded on­line and is not con­trolled by any govern­ment or cen­tral bank.

On­line gold

So what is a Bit­coin? Launched in 2009, the vir­tual cur­rency is like the on­line ver­sion of gold – it is a store of value. But in­stead of be­ing made of phys­i­cal ele­ments, such as gold, pa­per or me­tal as money is, Bitcoins are made of com­puter code.

Like gold, they are mined over time by a com­puter process. Bit­coin spec­u­la­tors can join to­gether and link their com­put­ers to mine for more Bitcoins in the vir­tual world. In or­der to do this the com­put­ers have to solve in­creas­ingly com­plex math­e­mat­i­cal puzzles.

Bitcoins can be ex­changed through per­sonto-per­son on­line Bit­coin ex­changes, which trade cur­rency for Bitcoins and pay that money into a PayPal ac­count from where you can with­draw it as cash.

As in­ter­est in Bit­coin rose, so did its value, lead­ing to a dig­i­tal gold rush, which saw the price of a Bit­coin see-saw pre­car­i­ously.

When first launched Bitcoins were worth just 20 cents each, and for much of their short life they have been worth less than

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