> They invented a very clever peer-to-peer payment system that also happens to enable fraud, tax avoidance, drug dealing and other sordid pursuits that governments won't abide for much longer.
This sounds like cash. What's the problem?
The status quo is annoyed because Cash 2.0 is better than the swill they're handing out at banks.
US businesses that exchange Bitcoin are already considered money transmitters and thus subject to regulation. FinCEN issued guidelines earlier this year.
"Bitcoin" encompasses multiple and distinctly separate concepts, namely: a transaction network, a currency, a wallet, and mining operations.
Does the wallet in your pocket get regulated? No, that's silly. It's just a container for currency.
Do the coins in your pocket get regulated? No, that's silly. It's just coins.
Does the generation of money get regulated? Absolutely, it's more tightly controlled than most other activities are in humanity. How will they regulate BTC mining? It's not really possible, but they'll likely engage computer hardware vendors of all stripes and sizes (across the planet) to pool purchase order histories to the government.
Do money transactions get regulated? Absolutely, it's another tightly controlled activity. How will they regulate BTC transactions? It's not really possible, but they'll likely engage BTC exchanges of all stripes and sizes (across the planet) to pool transaction histories to the government.
Both places this is used with regard to regulation, this claim needs to be justified. It seems to me it misunderstands what it means for it to possible to regulate something.
This article is riddled with factual errors, outright deception, and logical fallacies. It makes a variety of attempts to scare the reader (what if "Bitcoin gets hacked"? utter nonsense). They even make a claim that Bitcoin's anonymity may appeal to users, but it's been stressed repeatedly and constantly that the BTC transaction network is far from anonymous.
The article writer describes "the system" getting hacked, but links to malware searching for wallet files. It's deceptive at best, and blatant lying at worst.
Never attribute to malice that which is adequately explained by stupidity. This author doesn't know what he's talking about. Another example: He shows how the SEC can regulate the major bitcoin-cash exchanges, but the author never notices that there is a plenty large enough economy just inside the bitcoin network. The SEC can't regulate you if you use an anonymous Internet connection, and never exchange for real-world cash.
> The SEC can't regulate you if you use an anonymous Internet connection, and never exchange for real-world cash.
The SEC can regulate you if you do that and still fall within their jurisdiction.
You may be meaning to argue that the SEC would have difficulty identifying and prosecuting illegal activity within their regulatory jurisdiction if you do that, but that's a very different argument than "cannot regulate".
How does one "hack" Bitcoin? Not snark; I'm genuinely curious because I've seen this mentioned quite a number of times.
Do you mean your computer could be compromised? If so, then is that any different than a house going up in flames with money under mattress?
Article mentions "Unlike gold or silver, Bitcoins have no intrinsic uses" which is true, but then fiat money has value not because the paper/fabric/plastic blended note and ink add up to what's printed on the face. In that regard Bitcoin has value on faith as well.
Then it's still the same as a trojan surreptitiously stealing bank account info and siphoning off the funds.
I think we have to face the fact that digital currency (fiat terms) and Bitcoin are essentially the same except for the means of generation. "Money" is printed when physically present, but once stored in the bank, that's converted to bits and the physical notes (depending on wear) are destroyed.
Also the fact that there's no equivalent for FDIC et al. for Bitcoin losses.
Surprisingly (or not), there is a Bitcoin wiki[1] that is actively maintained.
Here is a short list of weaknesses:
* Wallet Vulnerable To Theft: malware searching and downloading wallets
* No authentication for IP transfers: you can send transactions to IP addresses, this is vulnerable to MITM attacks and someone can re-route transactions to a different IP address
* Energy Consumption: electricity has a variable and external cost, which can be manipulated
* Illegal content in the block chain: arbitrary data can be included transactions, including binary data (eg: child pornography)
* Breaking the cryptography: Bitcoin uses SHA-256 and ECDSA, this isn't vulnerable now but it could be in the future
* Double-spending[2]
* Coin destruction: if your wallet file is deleted, your coins are gone forever
Obviously wallet theft is the biggest issue, especially with using third-party wallet services and running insecure operating systems (ie: old versions of OSes). There are a variety of reliable learning resources for managing your wallet files securely.
The only real "weakness" is theft/loss of your wallet and keys. Bitcoin is like cash in that respect, but with unique new properties. It's easier to hide and move, but it can be stolen remotely (unlike paper bills). This is a problem and we all are working on different ways to decrease risks. E.g. by having multi-party authorization, "cold storage" (e.g. keys printed on paper), 3rd party services ("banks"), hardware wallets.
Not real issues:
- "No authentication for IP transfers" - not an issue, no one uses it. If you need to authenticate payment address, either get it over HTTPS, or use upcoming (in 0.9) payment API (same principle as with HTTPS, but without HTTP) or any other way that reduces risks of spoofing payment address.
- "Energy Consumption" - not an issue. Miners spend as much energy as profitable for them, just like anyone else on the planet. Visa datacenters also consume energy. Who decides how much energy spending is "too much" if everyone spends what they can afford?
- "Illegal content in the block chain" - not an issue with Bitcoin, but an external arbitrary threat created by feds. Same applies to unencrypted WiFi connection or someone sending a well-hidden picture in email attachment to you. Also: users are not required to store the blockchain. If you don't like a threat of "illegal content", use lightweight client to keep your keys only.
- "Breaking the cryptography" - does not uniquely apply to Bitcoin comparing to, say, PayPal or bank wires. If some algorithm becomes weak, Bitcoin can be upgraded just like your bank's SSL certificate can be.
- "Double-spending with 51% attack" is getting less economically viable with every single day as more people mine, use or simply know about Bitcoin. Also, it does not affect all the users, but only those with whom attacker transacts. And if that happens once, people would start sending expensive transactions directly to miners they trust to mitigate the issue.
- "Coin destruction" is not a problem for society. Everyone's money gets more valuable when you lose yours. Divisibility is enough for a long time to come and can be increased on many levels, inside and outside Bitcoin core protocol. Lost/stolen wallet issue is covered above already.
Like any program or protocol, there are probably dozens of attack vectors that might lead to an exploit in either the clients, or the protocol. I'm not 100% sure what it'd look like, only that Bitcoin is ultimately something written by humans that runs on computers, and both of those things have proven time and time again to be stupid.
And of course there's nothing different between a compromised computer contained BTC and a cash mattress fire. Yes, in both situations you lose all your money. You're missing the point.
And yes, of course, fiat and bitcoin share the same fundamental weirdness of faith values, the comparison was to gold and silver, not fiat. So the point you're making is moot.
> And of course there's nothing different between a compromised computer contained BTC and a cash mattress fire.
The difference is that I can use USD and mitigate the risk of a cash mattress fire by using a bank, savings-and-loan, or credit union, and mitigate the risk of using such an institution by using an FDIC-/FSLIC-/NCUA-insured institution.
That's why the availability of insured banks to place some of one's dollars in mitigates the risk of mattress fires. Is there some part of "mitigate the risk" that wasn't clear to you?
The author likely has no idea what Bitcoin getting "hacked" means. He linked to a piece about malware that can steal individual user's Bitcoin wallets, not some actual or potential systemic flaw.
> The group of developers who came up with Bitcoin did not produce a viable replacement currency, a revolution or even a particularly wise investment opportunity. They invented a very clever peer-to-peer payment system that also happens to enable fraud, tax avoidance, drug dealing and other sordid pursuits that governments won't abide for much longer.
article is basically a smear, little to none informational content
As long as there are things which can only be purchased with bitcoins they will always be relevant. If people can only buy drugs on the internet in bitcoins then bitcoins will continue to be used.
I could possibly say the same about USD. As long as I must pay my taxes in USD the USD will always be relevant and continue to be used. There might be other things which also help to make the USD relevant, but this is its basis, its keystone point to being.
The problem with this article is it's a straw man basically. The author argues that BTC appeals to people because of the lack of regulation but I would counter that's not the case, and the advantage is that you separate your currency from central banks and their inherent financial systems. Of course you will always be coupled to real world economies, financial industries, and the regulations that come with it. BTC isn't strictly about hiding your transactions, it's about decoupling from a currency system that many think is flawed.
I agree. Right now I think the biggest hurdle to BTC truly is FUD. People are nervous when it comes to money. Probably a healthy skepticism. But judgements should be based on the truth. Right now it's hard to get the proverbial fair trial when it comes to BTC and the facts.
> The closer Bitcoin gets to being an accepted currency, the less useful it will be as a method of exchange. And the less useful it is as a method of exchange, the harder it is to see why it has any value at all.
I really don't understand how they are arriving at this 'contradiction'. Unless you really squint, there is really no support for it in the article.
Codifying that virtual currencies have actual real-world value doesn't change anything about how the ecosystem/currency works. Am I missing something here?
The paradox is that as Bitcoin gets more mainstream, in practical terms it will be more and more similar to "real" money.
Bitcoin has been off the radar for the SEC, but as it gains notoriety there will certainly be an interest in regulating it.
Imagine that tomorrow Bitcoin gets really big, it isn't crazy to think that many people will be worried about having all their money in the computer they use everyday and is connected to the Internet. Then some companies start offering a service which lets you deposit your bitcoins and they assure you that they won't get robbed and if they do, they will be held responsible for that. Oh, and they require you to have a verifiable identity for your account since that helps to prevent fraud. They just ask a monthly fee for the maintenance of your account and a small fee for every transaction you make through them. You have in front of you something similar to a bank.
So, if you have to pay bureaucratic costs of regulation, and institutions like banks for Bitcoin, then it's not that different from the money we are used to. The one which also hasn't intrinsic value and for most of us is just a number in a computer anyway.
"so either users will willingly submit to a further deflationary spiral or, more likely, they'll clamor to expand the stock"
This doesn't make any sense. Why would users care that their bitcoins are getting more valuable over time (i.e. deflation)?
It sounds like the author is throwing around the term "deflationary spiral" without understanding what it actually means.
Anyway, it's damn near impossible to "expand the stock". If somehow a majority of miners decide they want a larger reward the users who actually hold bitcoin can decide to ignore their fork. See "economic majority": https://en.bitcoin.it/wiki/Economic_majority
Yeah, that line made me wonder about the article's author. He really appears not to know. It makes me suspect a lot of financial writing is like writing about cars. He's throwing stock phrases around.
>The closer Bitcoin gets to being an accepted currency, the less useful it will be as a method of exchange.
Within America, due to taxes, etc.... possibly (marginally, arguably) true. America has many alternatives that are cheap or free and mostly reliable (paypal, google wallet, square, cash). In many other countries, and between countries? More legitimacy is purely a good thing.
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[ 3.0 ms ] story [ 123 ms ] threadThis sounds like cash. What's the problem?
The status quo is annoyed because Cash 2.0 is better than the swill they're handing out at banks.
Looks like that's gonna change pretty quickly.
Does the wallet in your pocket get regulated? No, that's silly. It's just a container for currency.
Do the coins in your pocket get regulated? No, that's silly. It's just coins.
Does the generation of money get regulated? Absolutely, it's more tightly controlled than most other activities are in humanity. How will they regulate BTC mining? It's not really possible, but they'll likely engage computer hardware vendors of all stripes and sizes (across the planet) to pool purchase order histories to the government.
Do money transactions get regulated? Absolutely, it's another tightly controlled activity. How will they regulate BTC transactions? It's not really possible, but they'll likely engage BTC exchanges of all stripes and sizes (across the planet) to pool transaction histories to the government.
Both places this is used with regard to regulation, this claim needs to be justified. It seems to me it misunderstands what it means for it to possible to regulate something.
Bitcoin is covered by lots of existing regulations -- as keeps being demonstrated -- contrary lots of the hype advanced by proponents.
Here is an excellent 3 minute video summary on Bitcoin: https://www.youtube.com/watch?v=CdVVECKKSXo
Far more informative and far less spin. It's even from Bloomberg -- the same news organization that's affording blog hosting to article's author.
Why is it nonsense that Bitcoin _might_ get hacked? It's entirely possible, though perhaps improbable.
The SEC can regulate you if you do that and still fall within their jurisdiction.
You may be meaning to argue that the SEC would have difficulty identifying and prosecuting illegal activity within their regulatory jurisdiction if you do that, but that's a very different argument than "cannot regulate".
Do you mean your computer could be compromised? If so, then is that any different than a house going up in flames with money under mattress?
Article mentions "Unlike gold or silver, Bitcoins have no intrinsic uses" which is true, but then fiat money has value not because the paper/fabric/plastic blended note and ink add up to what's printed on the face. In that regard Bitcoin has value on faith as well.
I think we have to face the fact that digital currency (fiat terms) and Bitcoin are essentially the same except for the means of generation. "Money" is printed when physically present, but once stored in the bank, that's converted to bits and the physical notes (depending on wear) are destroyed.
Also the fact that there's no equivalent for FDIC et al. for Bitcoin losses.
Here is a short list of weaknesses:
* Wallet Vulnerable To Theft: malware searching and downloading wallets
* No authentication for IP transfers: you can send transactions to IP addresses, this is vulnerable to MITM attacks and someone can re-route transactions to a different IP address
* Energy Consumption: electricity has a variable and external cost, which can be manipulated
* Illegal content in the block chain: arbitrary data can be included transactions, including binary data (eg: child pornography)
* Breaking the cryptography: Bitcoin uses SHA-256 and ECDSA, this isn't vulnerable now but it could be in the future
* Double-spending[2]
* Coin destruction: if your wallet file is deleted, your coins are gone forever
Obviously wallet theft is the biggest issue, especially with using third-party wallet services and running insecure operating systems (ie: old versions of OSes). There are a variety of reliable learning resources for managing your wallet files securely.
[1] https://en.bitcoin.it/wiki/Weaknesses
[2] https://en.bitcoin.it/wiki/Double-spending#51.25_attack
Not real issues:
- "No authentication for IP transfers" - not an issue, no one uses it. If you need to authenticate payment address, either get it over HTTPS, or use upcoming (in 0.9) payment API (same principle as with HTTPS, but without HTTP) or any other way that reduces risks of spoofing payment address.
- "Energy Consumption" - not an issue. Miners spend as much energy as profitable for them, just like anyone else on the planet. Visa datacenters also consume energy. Who decides how much energy spending is "too much" if everyone spends what they can afford?
- "Illegal content in the block chain" - not an issue with Bitcoin, but an external arbitrary threat created by feds. Same applies to unencrypted WiFi connection or someone sending a well-hidden picture in email attachment to you. Also: users are not required to store the blockchain. If you don't like a threat of "illegal content", use lightweight client to keep your keys only.
- "Breaking the cryptography" - does not uniquely apply to Bitcoin comparing to, say, PayPal or bank wires. If some algorithm becomes weak, Bitcoin can be upgraded just like your bank's SSL certificate can be.
- "Double-spending with 51% attack" is getting less economically viable with every single day as more people mine, use or simply know about Bitcoin. Also, it does not affect all the users, but only those with whom attacker transacts. And if that happens once, people would start sending expensive transactions directly to miners they trust to mitigate the issue.
- "Coin destruction" is not a problem for society. Everyone's money gets more valuable when you lose yours. Divisibility is enough for a long time to come and can be increased on many levels, inside and outside Bitcoin core protocol. Lost/stolen wallet issue is covered above already.
And of course there's nothing different between a compromised computer contained BTC and a cash mattress fire. Yes, in both situations you lose all your money. You're missing the point.
And yes, of course, fiat and bitcoin share the same fundamental weirdness of faith values, the comparison was to gold and silver, not fiat. So the point you're making is moot.
The difference is that I can use USD and mitigate the risk of a cash mattress fire by using a bank, savings-and-loan, or credit union, and mitigate the risk of using such an institution by using an FDIC-/FSLIC-/NCUA-insured institution.
> The group of developers who came up with Bitcoin did not produce a viable replacement currency, a revolution or even a particularly wise investment opportunity. They invented a very clever peer-to-peer payment system that also happens to enable fraud, tax avoidance, drug dealing and other sordid pursuits that governments won't abide for much longer.
article is basically a smear, little to none informational content
I could possibly say the same about USD. As long as I must pay my taxes in USD the USD will always be relevant and continue to be used. There might be other things which also help to make the USD relevant, but this is its basis, its keystone point to being.
I really don't understand how they are arriving at this 'contradiction'. Unless you really squint, there is really no support for it in the article.
Codifying that virtual currencies have actual real-world value doesn't change anything about how the ecosystem/currency works. Am I missing something here?
Bitcoin has been off the radar for the SEC, but as it gains notoriety there will certainly be an interest in regulating it.
Imagine that tomorrow Bitcoin gets really big, it isn't crazy to think that many people will be worried about having all their money in the computer they use everyday and is connected to the Internet. Then some companies start offering a service which lets you deposit your bitcoins and they assure you that they won't get robbed and if they do, they will be held responsible for that. Oh, and they require you to have a verifiable identity for your account since that helps to prevent fraud. They just ask a monthly fee for the maintenance of your account and a small fee for every transaction you make through them. You have in front of you something similar to a bank.
So, if you have to pay bureaucratic costs of regulation, and institutions like banks for Bitcoin, then it's not that different from the money we are used to. The one which also hasn't intrinsic value and for most of us is just a number in a computer anyway.
This doesn't make any sense. Why would users care that their bitcoins are getting more valuable over time (i.e. deflation)?
It sounds like the author is throwing around the term "deflationary spiral" without understanding what it actually means.
Anyway, it's damn near impossible to "expand the stock". If somehow a majority of miners decide they want a larger reward the users who actually hold bitcoin can decide to ignore their fork. See "economic majority": https://en.bitcoin.it/wiki/Economic_majority
Within America, due to taxes, etc.... possibly (marginally, arguably) true. America has many alternatives that are cheap or free and mostly reliable (paypal, google wallet, square, cash). In many other countries, and between countries? More legitimacy is purely a good thing.