Bitcoin's Popularity as Ransom Currency Pretty Much Insures It'll Never Become Mass Market Currency

Last weekend the New York Times ran a very illuminating cover story on the popularity of Bitcoin as a currency demanded in criminal ransom exchanges:

In a modern day version of a mob shakedown, hackers around the world have seized files on millions of computers, taken down public websites and even, in a few cases, threatened physical harm. The victims — who have ranged from ordinary computer users to financial firms and police departments — are told that their only way out is through a Bitcoin payment that is sometimes more than $20,000.

One set of attackers, believed to be based in Russia and Ukraine, collected about $16.5 million in Bitcoins in a little over a month, primarily from victims in the United States, according to the security firm Sophos. Criminals like the virtual currency because it can be held in a digital wallet that does not have to be registered with any government or financial authority — and because it can be easily exchanged for real money. At the moment, a single Bitcoin can be sold online or on the street for around $290.

So in other words, Bitcoin's lack of regulation by government authorities, which Bitcoin enthusiasts usually tout as one of the virtual currency's chief virtues, is the very thing that makes it so popular as a currency for criminals. This is a sobering fact, especially when you line it up against another reality: Hardly anyone uses Bitcoin for purchasing goods and services. Taken together, you can pretty much be assured Bitcoin well never reach mass usage that its advocates hope:

Somewhat in the same way that bad money drives out the good, bad uses of a currency drive out potential good uses for it. Or to put that point into a plain, common sense examples: If you're a shopkeeper pondering if you should accept Bitcoin as payment, you're probably now wondering if doing so will lead to few actual purchases, while also making you a more likely target for a ransom shakedown.

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Comments

[Cinder]

In less biased news, cash is still king for criminals because cash transactions aren't recorded on a public ledger forever and can be laundered much more effectively that way.

[Wagner James Au]

... but as the article mentions, cash can be tracked in ransom situations, while Bitcoin advocates are resistant to giving it that ability:

"Some leaders in the Bitcoin community have suggested potential ways to fend off the ransom threats, digitally marking any coins used for ransom payments, similar to how dollar bills used in hostage situations are marked with invisible dye. But such solutions have been held up because of the value that many Bitcoin believers have put in the virtual currency’s unfettered free movement."

[megabucks]

Every bitcoin is 'watermarked', in that anyone can check their source and destination through analysis of bitcoin's open 'blockchain'. When someone spends bitcoin, anyone can check against a known list of 'flagged' coins, and inform law enforcement if they deem it necessary.

Your post reads very much like those "Why the Internet will fail" type essays written in the mid-90's. Fear of new technology often brings people to dismiss ideas before they even understand them. The New York Times article seemed quite factual, whereas the conclusions you make don't add up.

The New York Times article mentions that some big names in the financial world are investing in the technology, so clearly they see some positives. Please think about writing an article that explores the positive dimensions, because all your bitcoin "reporting" thus far comes off as badly researched and one-sided.