StarTribune: Bitcoin has more staying power than other digital currencies

Said one Minnesota fan of the digital money:  “Right now I wouldn’t call it investing, I would call it gambling.”

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Business writer Jennifer Bjorhus with the Minneapolis Star Tribune newspaper covered the Bitcoin research of SMU cybersecurity expert Tyler W. Moore, an assistant professor of computer science in the Lyle School of Engineering.

Moore’s research found that online exchanges that trade hard currency for the rapidly emerging cyber money known as Bitcoin have a 45 percent chance of failing — often taking their customers’ money with them.

The finding is from a new computer science study that applied survival analysis to examine the factors that prompt Bitcoin currency exchanges to close. Moore carried out the research with Nicolas Christin, with the Information Networking Institute and Carnegie Mellon CyLab at Carnegie Mellon University.

The coverage by Bjorhus, “Bitcoin has more staying power than other digital currencies,” was published online June 8.

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EXCERPT:

Jennifer Bjorhus
StarTribune

Bitcoin has shot up and crashed at least twice now.

Exchanges where the fast-rising new digital currency trades have been hacked, and so have individual accounts. It’s been linked to illegal activity in underground cyber haunts such as Silk Road, and sparked a move by the U.S. government to halt unregulated use.

And Bitcoin persists.

Heck, CNBC has a Bitcoin ticker on its website.

In its fourth year of circulation now, the decentralized online-only form of money has evolved from a libertarian-styled geek curiosity to a contender for becoming the first digital currency to go truly mainstream. There are now more than 11 million “coins” created worth more than $1 billion. Lumpy and volatile as it is, the math-based cash is one of the fastest rising alternative currencies in a world filled with them.

Tyler Moore, who studies alternative currencies, said he still isn’t sure why.

“It’s one part luck, one part decentralization and one part this design that carries appeal for people that don’t like inflation,” said Moore, an assistant professor of computer science and engineering at Southern Methodist University in Dallas. “The timing of it was really good.”

Bitcoin slipped onto the scene in 2009, as trust in established banks crumbled and inflation fears rose. It’s not managed by anyone. There’s no central bank. It’s based on open-source encryption technology.

In fact, the digital cash can be created by anyone with the hefty computer power required to solve specified algorithms that secure the network. Bitcoins are rewards for effort. The system takes banks out of the picture completely as individuals pay each other directly. Transactions are private but because there’s a public ledger of them it’s unlikely they are perfectly anonymous.

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