He launched Buttcoin.org in mid-2011 after becoming fascinated by the community around bitcoin -- libertarians, scammers, developers, hackers, early-adopters -- as well as its embrace by the Silk Road online drugs market.
"There were a lot of weird things that were going on," Schmidt said.
Buttcoin immortalizes bitcoin supporters at their most hyperbolic moments, with heavy doses of sarcasm. The blog gets more than 15,000 hits a month, said Schmidt, who said he's fine with bitcoin as a speculative play but doubtful of it as a currency.
It's clear bitcoin could be positive for e-commerce. Once a bitcoin is sent, the transaction cant be reversed unless the receiver gives it back, similar to a cash deal. Thats good for merchants, who may end up liable if someone uses another person's credit card to pay for goods and the money is reclaimed in what's known as a "chargeback."
In addition, consumers don't have to submit personal information when sending bitcoins, reducing opportunities for identity theft.
No major website was quicker to seize on bitcoins than the Silk Road marketplace, shut down in October by the FBI for facilitating contraband sales using the virtual currency as its only payment method.
For vendors of illegal goods, bitcoin is close to perfect. "I think it is one of the best innovations coming from the modern computing era," said a former Silk Road methamphetamine and heroin dealer, via instant message. The dealer, who confirmed his role in Silk Road, has a strong background in technology and said he'd place bitcoin high on the list of the most important creations in the last few hundred years.
For the Silk Road, it also meant the site didn't have to interact with credit card companies or banks, which would have led to a swifter end.
Bitcoin transactions are considered final after six verifications are received from computers on its decentralized network. Since computers verify the transaction, people don't have to trust the person who sent them a bitcoin, or any other entity.
But on a broader level, people using bitcoin must trust the software and ecosystem, said Toby Miller, a professor of journalism, media and cultural studies at the University of Cardiff in Wales.
Youve got to have several kinds of trust involved when you dont have government or reserve banks or the banks themselves, Miller said.
That hasn't stopped some legitimate businesses from accepting and even keeping some bitcoins, even with its wild exchange rate.
David Maloney runs Honestbeef.com.au, a Web-based business from Casino, a small town in northern New South Wales in Australia. Honestbeef brokers orders between farmers and buyers seeking high-quality beef.
Maloney, a database programmer by trade who has watched bitcoin since it started, said he doesn't accept credit cards, only interbank transfers, which carry no fee, and bitcoins.
But bitcoin is much more than just a payments system, Maloney said.
Bitcoin's blockchain, a public ledger that record transactions, holds much potential for other kinds of cryptographic verification rather than just transferring bitcoins, he said.
Bitcoins software protocol could accommodate escrow payments and contract arrangements, where trust is placed in the network rather than one entity.
"I think it will be used as a currency, but not in a way anyone's imagined it," Maloney said.
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