Bitcoin, Network Effects, and Illegal Transactions
https://medium.com/@byrnehobart/crypto-currency-and-network-effects-winners-usually-stay-winners-d28117a199aa
Bitcoin is a currency that is largely dependent on other customers using it for transactions; without it, there is no proper faith in the currency, which could cause it to die out. This is due to how currencies must have the backing of some sort; people must have confidence in the value of the currency in order to perform transactions with it regularly. Although Bitcoin is certainly not obscure, it’s also not the main currency that most people use in today’s world; paper money has held that throne for years, and will probably continue to dominate as the main form of currency used. This means that Bitcoin is fighting in the cracks of currencies, operating as a method for pseudonymous transactions between two people that are extremely hard to trace.
Because of such pseudonymity, it only seems obvious that Bitcoin would be used for many illegal purchases of hard drugs, such as heroin and cocaine, that are found all over the dark web. However, there is a big distinction between pseudonymity and anonymity, in that Bitcoin transactions, while hidden, can still be revealed to the public, given that the code behind Bitcoin is broken down by whoever is trying to gain access to such information. This means that although Bitcoin would seem to serve as the basis for a secure transaction at first sight, there is always the possibility that any illegal transactions through Bitcoin could eventually be uncovered by a federal agency, which, long story short, would be bad news bears for everyone involved. The potential for shutdown of illegal activity appears to harm the legitimacy of Bitcoin within legal transactions, as the possibility of some Bitcoin being linked to non-legal transactions by a certain person would mean that any further transaction using Bitcoin has the potential to be shut down. Thus, one of the main security features of Bitcoin prevents even those using it for its best purpose from expanding toward the realm of legal usage, meaning that the network spread of Bitcoin starts off as relatively crippled. Because Bitcoin derives a substantial amount of its value and trust from its usage by people within a network, the split between illegal activity and legal activity means that its popularity can never leak from the circles of the dark web to more common transactions, effectively condemning it into a secondary role in terms of society’s currencies.