To aging heads of state and conservative bankers, bitcoin is a tool for criminality. To those in the know, nothing could be further from the truth; most bitcoin transactions are for legitimate purposes. Proving this has always been difficult, but a new study adds weight to this argument. Its key finding? Bitcoin hit peak criminality in 2014 and has been dropping ever since.
Bitcoin: More Legitimate Than You Think
Warfare and organized crime are two of the most unsavory elements of civilized society, and yet both share one positive trait: they’re great drivers of technology. Without war, we wouldn’t have such eclectic inventions as canned food, the jerry can, the microwave, or radar. And without internet crime, much of the tech we take for granted would likely never have broken through. Encryption, Tor, privacy coins, self-destructing messaging apps and – oh yes – bitcoin, all owe their adoption to the more shadowy parts of the web.
This assertion is borne out by a recent study from University of Sydney’s Dr Sean Foley. It found that around one third of the virtual currency’s owners have used bitcoin in connection with some form of illegal activity. The study’s author claims that 34-36 million bitcoin users, out of a total of 106 million, have illicitly sent or received bitcoin. Given that not all uses of bitcoin on darknet websites are for illegal purposes, however, the true number is likely to be lower.
One thing the study fails to clarify is what constitutes illegal use. Is buying a gram of weed with bitcoin as nefarious as buying a gun or issuing ransomware? Such philosophical questions are beyond the remit of the University of Sydney study. Besides, calculating how a pseudonymous digital currency was used over the course of millions of transactions is impossible. The blockchain can tell you where those coins went, but they can’t tell you why or for what. In fairness to Dr Foley, the author has investigated the matter in some detail, analyzing the flow of bitcoins through known illicit trade networks – think Silk Road and its string of successors. The senior lecturer, as reported in Australia’s Financial Review, detailed his methodology: […]