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When news of a secret online drug marketplace broke last year, many people were left wondering: What is a Bitcoin?
At the marketplace, Silk Road, drug dealers and drug users reportedly hooked up and exchanged illegal drugs for real currency through an online medium of Bitcoins, reports ARS Technica.
The Bitcoins are an artificial currency that only existed in the digital world. However, drug dealers and money launderers reportedly were able to turn this digital currency into real dough.
So to answer what is a Bitcoin, the answer is that it is an online form of currency that is not backed by any government and whose value is only backed by the faith of its users. So in a sense, a Bitcoin is similar to the U.S. dollar in that it is not backed by anything of value (e.g.; gold or silver). However, the two are different obviously as a country does not stand behind the Bitcoin.
Regardless of having no backing, the idea of a digital currency was inevitable and Bitcoin may just be the first digital currency to have taken hold. And like with all things new to the Internet; crooks, drug dealers, and money launderers may be taking advantage of the legal gray areas of Bitcoins to do illegal things.
After all, remember that the Internet was first a playground for child pornographers and sex predators before the government got their act together and cracked down on these practices.
Right now, the legal gray areas with Bitcoins primarily have nothing to do with the Bitcoins themselves. Instead, they center around the Bitcoin exchange partners who convert the Bitcoins to actual money.
There is very little legal oversight of the Bitcoin exchanges because frankly there are no laws that regulate digital made-up money, reports ARS Technica.
But as use of Bitcoins become more commonplace and the layperson (and politicians) learn what is a Bitcoin, the laws will eventually catch up and the legal gray areas will become black and white. Until then, legal authorities may have to bust drug dealers through means other than Bitcoins.