As the world migrates ever more so to the internet it seems like a logical step that a currency would develop for those online. Known as alternative, or more specifically, digital currencies, these relatively new creations have become more popular as internet connectivity has expanded and is also seen as a safe haven for some when more traditional currency markets take a hit.
The variety of alternative currencies is many. From Linden Dollars to QQ Coins to Facebook Credits there is an overall rise in the use of alternative currencies. Bitcoin is one that has become known of late – mostly because of it hyper-bubble rise and subsequent volatility. Unlike the previously listed currencies the attraction to Bitcoin is the fact that it is decentralized. This means that it is not created, nor overseen by a central bank as most national or multinational currencies are. Other alternative currencies are beginning to pop up in response to the growing demand and are trying to provide value in areas that Bitcoin is not. Bitcoin has experienced problems with loss of currency as well as slow transactions, which can take up to ten minutes. OpenCoin, a Silicon Valley startup, provides an avenue for converting currencies as well transferring them from account to account. This is just like a using a credit card online or wire transferring funds from a bank but they also have their own native currency known as Ripples.
A new development in the digital currency world is likely to alter the landscape and shake its very foundation. Liberty Reserve, a Costa Rican based digital currency provider, is under indictment along with seven current and former employees. Liberty Reserve had the loosest requirements of any digital currency and as a result was the favorite medium for all sorts of illegal activities. With an estimated $6 billion in transactions this is the largest case of cross-border money laundering. Though this is only one currency, and certainly the easiest target due to their complete lack of respect for laws, it does make the future for other digital currencies fraught with uncertainty. Bitcoin is used extensively on the Silk Road, an online marketplace specializing in illegal products, many of which are drugs. With Liberty Reserve’s downfall all other digital currencies now have reason to look over their shoulder.
Despite the current issues surrounding digital currencies it seems as though they are here to stay. They will most certainly develop and evolve as time progresses but the ability to have a currency that is not bound by borders and easily transferrable will remain an attractive option. As of now, these currencies are simply trying to emerge from the shadows.