(Following is part two of CoinDesk’s look at Bitcoin’s reputation as a currency for hackers and buyers of illegal drugs. See part one here.)
Face it: Many people who complain that bitcoin is just for criminals are thinking specifically of Silk Road, the “deep web” marketplace that uses Tor anonymizing tools to allow online purchases with bitcoins. The site sells various products, but most of them are pharmaceutical or recreational drugs.
Talking to people who use bitcoin on Silk Road, though, reveals the site is likely not creating criminals. There’s a fair amount of hassle and fiddling required to use Silk Road properly. Anecdotes and forum posts suggest that existing users who choose to buy certain, ahem, substances online were already previously buying them in the real world … much like music buyers who now use iTunes and Amazon once used Napster. In fact, many Silk Road users were previously buying drugs online through other, less secure, sites and payment methods.
CoinDesk spoke to a bitcoin and Silk Road user who requested anonymity. Asked if the currency encouraged criminality he said, “I’ve heard of a taxi driver in Hereford who takes them, and I saw something about whisky … as long as it’s not Bowmore, I might buy that.”
Anyway, he continued, engaging in the bitcoin economy isn’t for those seeking instant gratification.
“First of all buying bitcoins can take days … the first time I bought them I actually benefited from the delay by exchange rates going up about 20 percent, but it could have been the opposite.
“Everyone talks about lack of fees to buy bitcoins, but don’t forget bank charges. You need to transfer money to a foreign bank – I couldn’t find any UK-based exchanges and there aren’t that many in Europe. My bank charged me £15 to transfer £150 to Poland to buy two coins. But the next time I wanted to buy coins the exchange – Bit24 – had been closed by the Polish authorities. I had to find another exchange I trusted. There’s loads out there, but most look well dodgy.
“The biggest exchange is Mt. Gox, but it is based in Japan and transactions take five days. I wanted something for the weekend so that was too long to wait. In the end, I found two coins for sale on eBay for about £160 – at the time they were trading for about £70 (each) so I paid a bit over the odds to get them fast.”
Our source buys bitcoins and spends them almost immediately, so he isn’t unduly worried about exchange rate changes … although he points out that the long wait is a worry. He doesn’t see it as encouraging criminality:
Jeremy Cook, chief economist at online currency exchange World First, said: “I don’t think in 30 to 40 years we will see a solely online currency not backed by a central bank. As for criminality it would be disingenuous to say it was founded to help criminals, although people are taking advantage of its anonymity to use it for nefarious purposes.”
Cook continued, “The idea of people in Spain or Cyprus taking euros and changing them into bitcoins is crazy. In the short-term the price may continue to go up – because the cost of processing to earn bitcoins is getting more expensive. But we won’t really know until all the coins are mined – when all 21 million are out there, we will be able to see how useful it is.”
Cook added that World First had had no enquiries from customers wanting to trade bitcoin or any other alternative currencies.