12 Days of Bitcoin: Is It Really Legal?

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Dec. 11 (Bloomberg) –- Romano Law’s Domenic Romano and Bloomberg’s Matt Miller discuss how Bitcoin works and the legality of the virtual currency. They speak with Adam Johnson and Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Hat, you're going to give us a lesson in how a bitcoin transaction works.

After i went out and bought it yesterday, the first bitcoin purchased ever was pizza for 10,000 bitcoins.

That pizza today would be worth over a million bucks.

In any case, i'm going to show you, for those of you who have no idea how bitcoin works at all or what it is, i'm going to show you a very simplistic tutorial.

First of all, you have to exchange some form of currency.

You have to go into the inter- webs and get some bitcoin.

You have to start with a digital wallet.

For consumers, the wallet will be the same as what your wallet is now.

You will pay money out of it and get money into it.

For merchants or vendors or people who offer goods and services, it will be more like a cash register, which is why we've shows that -- chose that image there.

The way you do it is with public or private keys.

A public key, you can show someone.

It has a code on it.

We have a picture of it we can probably pull up.

I have a picture of the public and private keys.

They have to come together to make a transaction.

The private key has all the little numbers on it.

There you go.

You put the transaction altogether in a box and they verify the transaction and make it your of reversible.

Explained to the viewers what that means.

What miners do, they are trying to get bitcoin as a reward for verifying or wrapping these transactions in a code armor.

Every block bay mine, they get a reward of 25 points, which is a lot of money right now -- every block they mine.

I hear all that, and it is really interesting.

Could you somehow hack the system to put more bitcoins out there in the universe?

It is an open source code, which everybody is warring over all the time every day, and has been for years.

Could it be hacked?

Probably so, but so could the nuclear launch codes.

It is unlikely that they would be.

There are people who are aware of where the bitcoins live , and might there be a way to actually break into someone's wallet and effectively steal?

There are ways to do it, but the miners are the ones who are providing the most security in this issue.

Let's just bring in our guest to help explain it.

We do have a guest here to give us more insight into the legality of bitcoin activity.

We are joined by dominic romano.

One of the questions is, is this really legal?

Can you have a currency that is being used in the united states and throughout the world that is not effectively backed by anything at all?

It's not illegal yet.

It's perfectly legal.

Coming back to something you were just discussing, there have been a few instances in the last few years, 30 instances where 1000 or more bitcoins were illegally transferred.

From wallets.

So there is a serious problem.

I think that is part of the volatility if you compare that to the instance of dollars taken from wallets by fraud.

There is a lot more fraud when it comes to physical dollars and other established currency, but there are established laws.

It is a bit ironic that the very decentralization of the open- source system that made bitcoins so popular transnational he is now part of the greatest problem.

There is no regulation.

It's like the wild west, there are no laws specifically.

Some have said the sec may step in.

A texas man was running a ponzi scheme using bitcoin.

You can use wire fraud legislation, but it's not established.

The u.s. is not actively policing this.

Thank you for being here today.

More "street smart" after this.

This text has been automatically generated. It may not be 100% accurate.


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