The questions for digital currencies are, of course, should they be regulated and, if so, by whom? Based on Bitcoin’s short history, what could regulation achieve? What might it impede?
A paper published anonymously in 2008 outlined a method for creating a digital currency that could be exchanged on a peer-to-peer basis, but which would not be susceptible to unauthorized duplication. A year later the first Bitcoins were “mined” using an open-source program, which by design constrains how many digital coins can be created and at what intervals (currently 25 every 10 minutes, but dropping in half every four years, with a total cap of 21 million). Digital currencies, of which Bitcoin is just one example, although the one with the largest circulation thus far, are creatures of the Internet. They may have no issuing or governing body, can be self-authenticating, and are usable worldwide by members of the general public to engage in the same types of direct, one-to-one transactions that daily occur using government-issued currencies.