Bitcoin developer halted at US Customs for lack of real cash

July 27, 2011 By Molly McHugh

Bitcoin experiences some growing pains as its underground aura plagues users and anonymous network is called into question.

Last month, anonymous P2P online currency Bitcoin experienced a crash that significantly dropped its worth. Simultaneously, one of its most-used exchange sites was hacked and user security concerns skyrocketed. Regardless, faithful Bitcoin users stuck by the program, determined to support the revolutionary take on e-commerce.

Unfortunately, Bitcoin is facing more obstacles. First, a Bitcoin developer who says he is the CEO of BitcoinGlobal was turned away at US customs due to his lack of cash. “Doctor Nefario” (his Bitcoin handle) arrived at Sea-Tac International Airport with $600 and the intention to fund his two month stay using Bitcoin’s online currency. But Border Patrol was not convinced and sent him packing.

In a blog post, “Doctor Nefario” describes his experience. “Did I have a credit card? How come I only had $600? What the hell is Bitcoin? Although I was cash poor I had more than enough Bitcoin to cover all the costs of my trip.” The customs agents also questioned him on how exactly Bitcoin worked.

That very lack of understanding is part of Bitcoin’s problem. It definitely is a niche service that has a select and devote group of advocates and users, but in order for it to gain traction and be recognized as a legitimate alternative to established hard currencies (and keep Bitcoiners from being turned away at customs) it needs to become more identifiable.

While Bitcoin as a brand might need better press, its users don’t. A crucial piece of the Bitcoin model is that it is an anonymous, P2P network – but how anonymous it actually is has been questioned. Researchers from University College Dublin say the encryption system Bitcoin uses to keep transactions untraceable isn’t as reliable as consumers would hope. They looked at the situation in which one user stole a significant amount of Bitcoins. By analyzing his network, Bitcoin activity, and interactions they found out (but did not announce) who the thief was as well as were able to identify who users in his network were.

Now some casual users who turn to Bitcoin for more insignificant purchases may be protected. But if you use Bitcoin to pay for something from a well-known organization, that transaction could be traceable. For example, donating to WikiLeaks Bitcoin wallet address could be linked back to your account because WikiLeaks has publicized its donation information.

Bitcoin is undeniably a revolution for e-commerce, and an upheaval of this size and scope is bound to be plagued by problems. Some of it can be blamed on growing pains, and some on the exclusive and underground nature of Bitcoin. But we’d expect that it will be seeing some changes rather soon if it wants to reassure users and more widely legitimize the platform.

Showing 5 comments

apollo2354 at 10:36am 28th July 2011 Since he was planning to change his bitcoins for cash as soon as he got into the country, I'd guess that he was more interested in creating a news story about bitcoins than purchasing things with them. It does raise an interesting point as to whether they are used as a real currency yet or not. I think it needs more LEGITIMATE businesses, like some of the new ones cropping up (for instance, www.bitcoinharbor.com) to really help the push into bitcoins becoming a real currency.
ip2k at 5:48pm 27th July 2011 "By analyzing his network, Bitcoin activity, and interactions they found out (but did not announce) who the thief was as well as were able to identify who users in his network were."THIS IS FALSE. They did NOT find out "who the theif" was. They found out what address he used, as anyone can do by looking at the PUBLIC transaction log.
TraderTimm at 4:38pm 27th July 2011 Bitcoin is not automatically anonymous. You can take steps to make it so, but out of the box it isn't. I'm concerned about your stated belief that desiring privacy is equal to 'shady' behavior. If you truly believed that, then you should take all the cash in your pocket and burn it, as that facilitates non-traceable transactions.Bitcoin is like cash, except it can't be churned out in the trillions when monetary policy goes haywire.Some additional reading is in order:https://en.bitcoin.it/wiki/Myths - Common misconceptions cleared uphttp://forum.bitcoin.org/index.php?topic=7269.0 - Introduction to bitcoin in generalhttp://www.scribd.com/doc/34237903/Bit-Coin-Whitepaper - Technical Whitepaper
jostmey at 3:29pm 27th July 2011 To understand bitcoin you have to understand the growing community backing it. Everyone who buys bitcoins suddenly has incentive to make sure that the currency succeeds. Thus, a large number of people are willing to donate their skill sets to promoting and protecting the currency.Disclaimer: I run searchbitcoin
Mike Dunn at 12:05pm 27th July 2011 Maybe I don't travel internationally enough, but I have never been asked how much money I have on me, weird. I also clearly don't do enough shady stuff to need an anonymously pay people for whatever I'm buying.