A Fistful of Coins, Part I - Anonymity Week


By Zach Schepis

Photo courtesy of Zach Copley.

The xCubicle location, on Manhattan’s Lower East Side, is nondescript–its sign hangs discreet and canted between illuminated Chinese symbols advertising real estate. Next door is a quaint smoothie shop with a single table and two chairs. Store windows are filled with an assorted piling of electronic odds and ends.

To those in the know, however, there is much more going on behind xCubicle’s closed doors.

A narrow entrance leads to the back of the electronic repair center–a place really better known for hosting “a hybrid tech and skill-share hackerspace.”

Sidestepping around an artificial wall exposes a dimly lit room with a set of tables arranged into a “U” at its center. A shadowy circle of nine individuals sits waiting patiently. Occasionally, some exchange bouts of tech-savvy small talk.

“Hello everybody,” a young man near the center of a table speaks up. “And welcome to our seventh meeting. I’m happy all of you found your way without any trouble.

“I’d like to preface this gathering,” he adds in the same breath. “Nobody here is a leader. I am only facilitating the group conversation because I’ve been here since the first one. I expect all of you would do the same.”

A general murmur of affirmation responds. One by one, each of the computer programmers, analysts, designers, and hackers begin to introduce themselves.

To protect the identities of those present, the following names have been changed.

“I’ve developed a new way to expand the network,” says Dennis, clearly the senior member. “I’ve been a licensed HAM radio operator for nearly twenty years, with access to broadcast bands reserved by the Federal Communications Commission. We could set up a decentralized peer-to-peer connection on one of them.”

Members around the table begin to perk up in their swivel chairs. A young hacker, Eric, leans forward.

“What about setting up encrypted connections, with illegal links?” he asks. “Would you feel comfortable doing that, given the legality?”

Dennis bows his head in thought, but not for very long.

“Yes,” he says. “But if we do this, we have to commit to it.”

Commitment is unquestionable for those present, and so are bold intentions. The group, operating under the auspice nycmeshnet, is working together to realize a common dream: a brand new internet for a non-exclusive future. They aim to employ high-powered wireless routers and Nano station nodes to establish a network that any user within a radius of several miles can join with ease (though the legality of these unapproved new channels is questionable).

All of the technical details required to run their operation are solved through the use of CJDNS software. It serves as a networking protocol to establish a series of rules and security measures.

“The core philosophy behind CJDNS is that security should be ubiquitous and unobtrusive like air,” says Rachel, the only woman present at the xCubicle meeting.

CJDNS software is hosted and maintained by the world-wide group Project Meshnet, whose overall objective is to create a decentralized network capable of competing with the central supporting infrastructure that we all rely upon; aka the Internet.

“This could provide an ideal base for Altcoin transactions,” Eric chimes in.

That’s all it takes. Before long the tiny room has erupted into a loud and heated discussion.

Before we go any further, let’s take a step back for just a moment.

Bitcoins: A Nutshell

To understand what an alternative coin is, it is first necessary to have a basic concept of Bitcoin. There are countless online periodicals available to read on this expansive topic, but for those of you who don’t know, here is a lightning tour of the virtual currency:

Bitcoin was conceived to sidestep problems in the “paper” commodity. The idea was to create something with more transparency than the inflated dollar, an object which has been printed by banks for years without any verified backing. Banks rely on garnering trust through long-standing reputations and illusion of financial stability. Bitcoin is a currency that operates legitimately outside of these banks or (in concept) any central authority.

Peer-to-peer (P2P) technology is what makes Bitcoin possible. P2P is an open source technology that allows for transactions to be carried out by literally anyone, but no one can truly control the coins.

A Bitcoin can be “mined” from virtual streams of data through the use of what has become very expensive, sophisticated machinery capable of solving complex mathematical algorithms efficiently. Due to a rapidly expanding network and the price tag of these machines, making serious sums through mining has become reserved for the elite only.

The facts may read a little fishy, but the network is trusted for a couple of reasons. First, it constantly maintains an up-to-date ledger of all Bitcoin wallets, something that people essentially trust banks to do.

The second reason is that cryptocurrency has rapidly approached, and perhaps even entered, the too-big-to-fail region. Why is this?

The biggest potential problem posed by these networks is that if one private entity were to obtain over 50 percent of the network’s hash rate then they could falsify transactions, and subsequently besmirch the validity of the currency. But as stated before, the pitfall has become virtually impossible. The amount of money needed to realistically finance such an arsenal of computer power would be absurd.

Sounds great right? To some the virtual currency is too good to be true, and poses some considerable issues. While there are certainly big perks to using Bitcoin (CVS, Kmart, Sears, and Amazon.com now accept them), the difficulty in mining has rendered them into a far less profitable endeavor than previously.

Let’s not get into the scandal with Mt. Gox, one of Bitcoin’s principal exchange sites which stored consumer’s coins in an online “wallet”–and reportedly lost all of them. The damage was equivalent to nearly half a billion dollars. As a result, a new ruling was passed earlier this week regarding the cryptocurrency. The IRS deemed Bitcoin to no longer be a form of currency, but rather property instead.

So what?

The very system that was set up to evade centralizing forces is now facing a regulatory structure that will give governments a share of the digital pie.

If the change isn’t enough of a deterrent, heed Warren Buffett’s words of wisdom. Commonly heralded the most successful investor of the 20th Century, and worth nearly $65 billion, Buffett called the cryptocurrency nothing more than a “mirage” and warned users to “stay away” during a recent interview with CNBC.

For more about the birth of Altcoins and knowing the game of alternative currencies, check out part two of this story, available now on BreakThru Radio here.