“The internet is going to be one of the major forces for reducing the role of government. The one thing that is missing …is a reliable e-cash, a method by which on the internet you can transfer funds from A to B without A knowing B or B knowing A.
There have been plenty of efforts to fulfil the economist Milton Friedman’s 1999 prediction (see below for the interview). As far back as 1982, the computer scientist David Chaum wrote a groundbreaking paper on the concept of a cryptographic digital currency. He subsequently founded “Digi-cash” and then developed “e-cash”. Others followed in the 1990s and 2000s. All failed.
Now we have a genuine contender: Bitcoin. Here’s the simple version of how it works: it’s a peer-to-peer digital currency, which uses cryptography to secure and validate it. Users can transfer bitcoins to each other – they are stored on a “digital wallet” on users’ computers – without any intermediary and a high degree of anonymity. You can trade them for real world currencies and back again at a number of exchanges. New coins are produced when a computer cracks an algorithm, which get harder the more coins are produced, until, one day, all 21 million Bitcoins are in circulation….. Read more
