On Friday, Federal officials seized $28 million’s worth of bitcoins from the alleged owner of the drug dealing website Silk Road.
Bitcoin is a digital currency which allows people to use it for online transactions, while remaining anonymous. Bitcoin was the only form of payment that the website would accept.
Earlier this month, law enforcement officials arrested Ross Ulbricht – who they suspected was the true owner of the site – and closed it down.
He now faces the prospect of a potentially lengthy prison sentence for charges ranging from narcotics trafficking to computer hacking to money laundering.
In total, officials have now seized over $33.6 million worth of bitcoins in connection with the case.
The IRS special agent responsible for dealing with the case, Toni Weirauch, said, “This seizure sends a clear notice to those who think they can commit crimes and conceal the fruits of their criminal activities in digital anonymity.”
While the value of bitcoins dropped the day that Silk Road was shut down, prices have since resumed their rally. So, why is Bitcoin still popular among investors? One bitcoin owner (who actually only has one bitcoin) says it’s just a case of supply and demand.
Leigh Drogen, CEO of Estimize, said “It’s not about the news and headlines. There is a finite supply of bitcoins being released,” Bitcoins are “mined” by a complicated computer algorithm that’s designed to ensure that there are never more than 21 million bitcoins in circulation at any one time.
Silk Road operated an anonymous network, making all activities on the site virtually untraceable. By using bitcoin, the buyers and sellers received an extra layer of protection because bitcoin is anonymous, decentralized, and can only be used in digital form.
To process bitcoin transactions, Silk Road used a complex system that used countless dummy transactions to digitally conceal a payment’s origins. Federal officials say the site generated sales of more than 9.5 million bitcoins over the past two and a half years. This represents about $1.8 billion at Friday’s exchange rate.
Earlier this year, bitcoin surged in value when a banking crisis in Cyprus shook confidence in many government-issued currencies.
This is not the last we will hear of bitcoin since it is so difficult to monitor transaction on the internet. Bitcoin is probably here to stay – somewhere and somehow!