The history and mystery of "bitcoin"

To understand bit coin, let’s first brush up a few basics on the concept of money a.k.a currency.

Well, we all know trading started with some form of barter system in the beginning. The concept was simple. I have rice, you have wheat. I need wheat, you need rice so lets exchange.

Hurrah and the world was a happy place.

But what if I did not need wheat and instead needed x-box. The guy having x-box did not need rice but needed, lets say, a car. And no one knew where was this guy who sold cars so no one knew what he wanted.

What a bummer as everybody’s produce goes for a waste.

So the smarter folks felt that why don’t we create a common place where everyone can come and buy or sell what they want. Let’s call this common place as ‘market’. And let’s create this thing called ‘currency’. So instead of goods exchanging with goods, lets exchange goods with this ‘currency’ thing.  The cumulative supply or demand will decide the exchange rate of a particular good or commodity. That in a nut shell formed the basis of fancy terms like ‘price discovery mechanism’. And there you go, I just explained how economics works.

So now that everybody agreed on this ‘market driven’ system, the next thing was to figure out who owns this currency? where does this come from? Who backs it i.e. what is the guarantee that it actually represents it’s value? 

Now a simple concept started to become complex as now came in the concepts of government, monetary regulations and central banks who owned the supply of this currency and backed its value. Initially it was pegged to a natural resource like gold but because there is only a finite amount of gold in the world, which meant only a finite amount of currency could be printed, which meant nobody could become infinitely rich to be able to own private jets, holiday mansions or beautiful islands, the governments felt, ‘hell with this whole finite concept, let us just become the guarantors of the value associated with money. That way we can mint more when we need’.

As the concept of government was jurisdictional, the concept of currency also ended up jurisdictional and then came in further complication of inter-currency exchange rates. Newer forms of currency also started to show in form of cheques, promissory notes, credit cards, debit cards etc. But they were all controlled, monitored and regulated by these few central institutions like the government and the banks who controlled all these inter-currency exchanges and the value associated with the currency also as they had the power to infuse more currency in the system (or withdraw).

Anyways, this currency system enabled me to buy x-box by selling my rice but in the process I had to trust these middling central institutions and this enormously complex system that was potentially taking a cut in the process of my rice getting converted into x-box.

Now these intermediaries that we have to ‘trust’ are known to malfunction. Countries have gone bankrupt, governments have failed and their currency systems have fallen in the past. The very fact that the supply of currency or it’s exchange was controlled by handful of these institutions, made them immensely powerful. With great power comes great greed and every now and then we got a financial meltdown. 

Enter ‘bitcoin’. The formal words to describe bitcoin is “an unregulated peer-to-peer digital currency”. But actually it is a great social, technological, philosophical and economic experiment.  Sometime in the fall of 2008, someone named Satoshi Nakamoto  published a paper called “Bitcoin: A peer to peer electronic cash system”. This led to the development of the open source software that led to realization of bitcoin. The beauty of the algorithm was that no one owned bitcoins. They were “mined”, like how gold is mined. One could participate in the bitcoin mining by being part of it’s network by donating computing power. Like no one owns ‘internet’, no one owns bitcoin network. Collectively these connected computers maintain the bit coin ledger, transactions and record, which is just book keeping of who owns how many bitcoins. Bitcoins are ‘mined’ or rewarded as a part of verification of these transactions to the users. Overall there can be only 21 million bit coins and it gets progressively harder to mine newer coins. At the current rate, it is expected that after 2140 no more bit coins will be generated. Underlying this bit coin network is a very strong system of cryptographic technologies which is all in public domain for anyone to view, validate, improvise and contribute.

Geeks around the world contributed (and are contributing) their hardware into the bitcoin network in the hope of getting rewarded. But what good is a money if you can’t spend it? So the first bitcoin use as money happened in middle of 2010 where in 10,000 bitcoins were exchanged for pizza worth  USD 25. The transaction happened over internet. Bitcoins got transferred from one electronic account to another and pizza got delivered. This brought in the acceptance of bitcoin as a real world asset and very soon a bitcoin exchange called “Mt. Gox” was established in Japan. Bitcoins could be traded on the exchange for real world currency and from 10000 bitcoins being worth USD 25, the price of one bitcoin went as high as USD1240 in 2013. In 3 year, the pizza guy’s value would be 12.4 million. An entire economic ecosystem got developed around bitcoins with payment systems, exchanges, gateways and more and more merchants started to sign up for bitcoin as an accepted method of payments. It worked better than credit cards as the transaction fee was much lower. In the form of biticoin, a parallel peer-to-peer monetary system without the involvement of any corruptible middle institution got established.

Another interesting fact about bitcoin is that no one knows it’s founder. All the community knows is a Japanese name “Satoshi Nakamoto” but it’s just a pseudonym. It could be an individual or a group of individuals. The proficiency and usage of english phrases in his (if it is a ‘he’) email communication raises doubts on his being a Japanese. Furthermore, while there is an immense economic ecosystem being created around bitcoin today, he is no more actively involved. In a world where people scramble around to take credits for piddling things, someone choses to be anonymous  for a new invention that can potentially make us relook at the very basis of civilization, is indeed incredible.

If anything the human history tells, then that is that no matter what, we WILL figure a way out of misusing any invention. Guns, automobiles, nuclear energy or social networking websites, no matter what, the criminal side of civilization will find a use of it. In the words of Agent Smith “as a species, human beings define their reality through suffering and misery”. We just can’t be happy with the good side of the coin and have to neutralize it by creating a bad side. So came out to be true for ‘bitcoin’. In no time, bitcoin became the currency of the illegal transactions on internet. Business of money laundering, drugs, prostitution, guns and what not started to adopt bitcoins as their currency of choice. The anonymity of it came as a boon to those who love being anonymous. Furthermore, ‘bitcoin’ is based on enormously large infrastructure of software. Despite what we may think, software really is not a secure infrastructure and it also has it’s wear and tears, that leave holes as vulnerabilities. These vulnerabilities provide the criminals an opening to exploit the software and use it for illegitimate gains. The hacker eventually broke into bitcoin as well as bitcoin exchange (MtGox) causing price fluctuations and artificial supply of bitcoin (Although real money is also subject to such vulnerabilities by means of robbery or fake currency). Hacking, coupled with the axe the law enforcement agencies swung on “legitimate” companies engaged in bitcoin economy (because somewhere some a-hole used bitcoins for illegal purposes) dented the reputation as well the price. Today the bitcoin is fluctuating at a price of around USD 300 (down nearly 80% from it’s peak). 

Whatever the future of bitcoin might be, one thing that can not be taken away from it is the artistic novelty of the concept and the its un-institutionalized or headless realization. In a world where institutions are getting increasingly powerful, corrupt and control freaks, any such concept comes as breeze of fresh air.

Scam or Crime - Part Deux

In my earlier blog, I discussed the modalities of a sophisticated ponzi scheme crafted to cheat gullible citizens of Bengaluru. Also discussed in the blog were the provisions or remedies available in the law that the state has provided to the aggrieved citizen.

In this blog, let’s see the efficacy of those remedies.

As mentioned earlier, in case of cheating there is the section 420 of IPC under which the state can initiate the investigation, in response to an FIR, against the accused and prosecute, if necessary. (After all we are paying taxes to the state, it can do something to safeguard us, isn’t it?)

Although for some inexplicable reason, the state’s law enforcement agency showed some reluctance to register the FIR. Thankfully, and to the good use of taxpayer’s money that, we have kiosks that were launched in the city of Bengaluru that helped file an FIR (005/2015 u/s 420) against one Mr AA (name withheld), an alleged perpetrator of such a scam.

(Normally I wouldn’t have revealed any personally identifiable information on the blog with the fear of case of defamation against me, but hey, the draconian section 66A of the IT act is a talk of the past. That saves me from 'computer-blog-based-defamation' although acts of IPC could still be invoked. In that case, well, the information revealed here is already available in public domain, as we will see. So I am not really cooking up anything or passing judgements. Just making some inferences by highlighting the data from the functioning of the system, and as the great Morpheus told Neo, "It is the system that is our enemy" : Matrix-1)

The FIR should kick off the criminal justice system with the state doing the needed and proper investigation and if found grounds for criminality, charge sheet followed by prosecution of the accused in the court, which will eventually determine the guilt based on the evidence presented.

Or so one would think.

Besides the e-kiosks for FIR, another great use of taxpayer’s money has been the e-governance, under which the government data is becoming transparent and accessible to citizens at their fingertips. Cool, isn’t it.

So at the website, http://ecourts.gov.in/services, and selecting the “state” as “Karnataka”, “district” as “Bengaluru” and querying the status of the FIR (005 in the year 2015) in the CMM court of Bangalore, following data shows up:

Case Type/Reg No.	Decision Date	FIR/PS		IPC Section	Case Status	Nature of Disposal
Cr.1332/2015	19th Jan 2015	5/2015 – Koramangala	420		Disposed	Contested-closed

Interpretation of this data seems to suggest that the case has been closed and disposed of, without any verdict against the accused.

Well, so perhaps the investigation did not reveal a wrong doing and the case did not have any merit for the state to be able to prosecute the accused.

One of the main things to prosecute someone under IPC 420 is the establishment of ‘mens rea’ on the part of the accused. In English, it implies the establishment of the intent of the accused or the fact that the accused did indeed intend to commit the crime.  This safeguard is understandable and necessary. After all you don’t want law to be misused.

Anyways, to see if the accused in this case (name withheld, but let's call him Mr AA), was indeed of criminal intent or not, I looked at some more past data from the ‘ecourts’ website to get a list of cases against him and see if it offered any result or pattern. Following data shows up:

Case Type/Reg No.	Petitioner – Respondent	Decision Date	FIR/PS	IPC Section	Case Status/Details	Nature of Disposal
P.C.R. 17603/2006	STATE BANK OF MYSORE Vs AA	14th March 2013	NA	NA	Disposed (Cognizance  on 17-01-2007)	Bulk disposed
P.C.R. 6812/2007	Veena Rathod Vs AA	01st July 2012	NA	NA	Disposed	Converted
C.C. 3952/2007	S B M BASAVA GUDI Vs AA	16th August 2012	NA	NA	Disposed (NBW issued on 31-05-2008)*	Bulk disposed
Cr 411/2015	GOURISHANKAR SINGH Vs. AA AND ANOTHER	6th January 2015	9/2015 – Koramangala	420	Disposed	Contested-Closed
Cr.1332/2015	SMITA AGRAWAL Vs AA	19th Jan 2015	5/2015 – Koramangala	420	Disposed	Contested-closed

*I am not an expert on court language but I think NBW implies “Non Bailable Warrant”

This is just a list of cases against the person named “AA ”. Since in many cases and complaints, only the first name might have been used, the list can potentially be much larger.

Obviously, I don’t have any proof to establish that all these AA are the same person. In theory, they could all be different people, which would imply that the citizens of Bengaluru have something gravely against people named “AA” and the law is doing well to save them.

However, assuming they are all the same person, one of the 2 seems possible:

      Either Mr AA is a severely misunderstood person that almost every year he has someone falsely complaining against him

         Or He is in fact a person of criminal mindset with a mens rea to cheat others, in which case the law  (and law enforcement) somehow seems overly generous towards him that all cases against him get disposed/closed and he is still out at large.

They say beauty lies in the eyes of the beholder. Similarly interpretation of the data lies in eyes of the interpreter. With that, I leave you to form your interpretation.

One could file an RTI to get the copy of these weak charge sheets (although there is some unclarity in the legal fraternity about 'chargesheet' being a public document and hence accessible via RTI) and then present an application in front of the concerned magistrate and request to invoke the powers under section 156(3) of the CrPC, that can allow the magistrate to order a proper investigation of the FIR. But if the law enforcement (which is also the investigative arm) is anyway generous towards a particular perpetrator, how likely is that the magisterial order will lead to a different result?

Hmm, the plot gets thicker. Let's see if there is a "Part 3".