Is Space the Key to Bitcoin's Future?

If you think "bitcoin from space" sounds like a sci-fi Mad Lib result, you're probably not alone.

But Jeff Garzik, who runs a one-man show known as Dunvegan Space Systems, doesn't think his plan is far-fetched. A few inexpensive satellites, he says, could provide fail-safe protection for the network bitcoin users rely on, as well as providing access to bitcoin in areas that lack reliable Internet.

As long as supporters get him enough funding, he's convinced his satellites will soon be spreading the bitcoin gospel around the world.

So why is this plan important, and, more importantly, can it work?

First, we have to understand how bitcoin works. All bitcoin transactions (purchases made with the virtual currency) are registered in what's known as a blockchain—a constantly-updated ledger that runs through a network of several thousand computers. Those machines provide the information that all bitcoin users rely on to maintain their accounts, as well as to send and receive transactions.

Without access to a that network, users are cut off from their bitcoin wallet—and the spending power it contains.

Garzik's plan aims to expand the coverage area to places where the current lack of Internet access also cripples potential bitcoin development—including much of the developing world.

"Outside Western nations, [a satellite data provider] greatly reduces the cost of access to the bitcoin network," he said. "If you're in Africa or just on a mobile Internet connection where bandwidth is expensive, having a free source of bitcoin bandwidth reduces your cost."

As a decentralized currency, bitcoin lacks many of the transaction fees and regulations that accompany other forms of money—which Garzik describes as a "democratizing effect." International data access could make bitcoin universal, which backers think would speed its growth and acceptance.

Beyond expanding bitcoin's reach, Garzik also wants to protect current users.

Presently, users are at risk from denial-of-service attacks, which have already halted bitcoin transactions at times. In such attacks, hackers target bitcoin programs with an overload of communication requests, rendering them unable to perform their essential tasks.

Garzik thinks his satellites could circumvent that, offering a backup source of bitcoin data in case ground-based systems get compromised or blocked. "It functions as a backup," he said, "providing alternative means for transmitting the blockchain."

Of course, Garzik's fail-safe-in-the-sky will need to be connected to the ground to get the most updated information.

As the satellites orbit the Earth, upload stations will send them the latest transactions—the blockchain "tail"—which they will then update and rebroadcast around the world. Garzik estimates 10 such stations will have to be installed to achieve 90 percent contact with satellites.

Of course, the essential component is the satellites themselves. Garzik plans to use so-called cubesats, toaster-oven-sized satellites than can be launched for as low as $100,000. The satellites' lifespan is short—one to two years at best—which has led some critics to say the plan would require constant reinvestment just to stay operational.

But Garzik says the microsatellites are the easiest path to orbital access.

Because of their universal size (10-by-10-by-10 centimeters), cubesats can be deployed en masse from a launcher known as a P-POD. When a rocket launches its primary payload, it can also release a P-POD of up to three cubesats.

For now, that remains the most low-cost route to orbit.

A single satellite, Garzik said, could be launched for around $2 million and provide bitcoin data updates for users every 90 minutes. For $5 million, he says he can launch eight cubesats, which would be more than enough to give regular updates.

His launch plans will depend on the amount of fundraising he receives, and he hopes to start campaigning in August. The earliest his satellites would launch is August of 2015, he said.

But it might be a little longer than that before they get off the ground. Launch prices have dropped drastically over time, and Garzik admitted that "you pay more to launch sooner."

Even if the fundraising comes through, establishing 10 upload stations around the world won't be an easy task. In addition to the infrastructure hurdles, Garzik will have to find a transmission method that meets several countries' frequency regulations. Governments have come up with different approaches to allocate in-demand radio spectrum, and navigating various international agencies to establish a universal, globe-spanning network could prove a complicated task.

And even if his satellites are launched, Garzik will have to keep fundraising to buy near-yearly replacements for the short-term cubesats. Still, he's convinced his project will succeed—and revolutionize both online currency and orbital technology.

"The wider you spread the bitcoin block data, the more resilient is bitcoin as a whole," he said. "This is for the bitcoin community, but it's also intending to provide a high-profile project that really incentivizes others to look at cubesat designs."