The Bitcoin Strikes Back 344
smitty777 writes "Slashdot readers are no doubt informed of the infamous crash of Bitcoin. In fact, its demise was followed closely here. Wired has a recent article tracking Bitcoin's climb out of chaos. Valued at $17 before the crash, it had lost 90% of its value due to the hacking incident, down to a low of $2. It climbed back up to $3 in December, and is currently valued at $4. From the article: 'Bitcoin boosters have traditionally suggested that Bitcoin is an alternative to [the world's] currencies. But we'll suggest an alternative explanation: that Bitcoin is not so much an alternative currency as a "metacurrency" that allows low-cost and regulation-free transfer of wealth between nations. In other words, Bitcoin's major competitors aren't national currencies, but wire-transfer services like Western Union.' Still, Bitcoin has significant obstacles to overcome, such as covert mining, criminal uses, and other security issues."
Amir Taaki of the Bitcoin Consultancy (who did an interview here a while back) disputes the reasoning and the conclusions in the Wired article.
Propaganda (Score:5, Insightful)
The speculators push the price up, pay for press releases and stories, put up blogs talking about how awesome Bitcoin is... then they get out as soon as it starts selling for enough. They've done it once, judging from this article they're doing it again, are people going to fall for it again?
Re:Criminal uses? (Score:1, Insightful)
True but bitcoins are completely untraceable and the cops can't even tail you to see you exchange them like cash. Many child porn sites and contraband trading sites on darknets take payment in bitcoin.
That said, the genie is out of the bottle now so there's no going back. Might as well make the positive uses outweigh the negative. So far the best positive I've seen has been the lulz generated by bitcoin miners.
Oh, give it up already, it was a niche quirk (Score:3, Insightful)
What was the peak (notional) value? A few tens of millions of dollars? That's just noise. A few nerds, pimps and pushers got all excited, played with it for a while, then got bored. The number of bitcoin nodes has been dropping steadily even before the Bit Sploit, and that's coming from the true believers on the bitcoin forums.
Sure, it's fun to discuss the theory, but can we please stop pretending that it was or could ever be a real currency used by actual folks.
That's how money works (Score:5, Insightful)
It has value because we pretend it does.
So stop pretending about the US $, then.
C'mon, Slashdot admins (Score:5, Insightful)
Please, PLEASE add "BitCoin" to the "Exclude stories by topic" /. site option.
Re:That's how money works (Score:4, Insightful)
The value of the US $ is in the fact that it's accepted at millions of places, not just in the US but around the world. Yes, it might only have a set value because we allow it to, but the real difference between it and BitCoin is the number of people willing to allow that set value. Personally i wouldnt accept any payment in BitCoin today, because i have no reasonable use for it as-is, and the exchange rate to another currency is nowhere near stable enough to be sure my balance doesnt become worthless overnight.
BitCoin doesn't have the momentum to be a viable fiat currency yet - look at the problems the Euro is currently suffering, and that's bing pushed by governments and huge financial institutions, did anyone really think BitCoin had a better chance?
Re:Propaganda (Score:2, Insightful)
They've already had one bubble (a quite marvellous one, straight out of the text books). I think at this point there are many disillusioned "investors" that want out. Some people even claim they invested all their savings [falkvinge.net] in bitcoin. That's gotta smart right now.
As long as they can lure new people with money into the system, they can dump slowly dump their coins without crashing the market again.
Stability (Score:5, Insightful)
Yes, because relative value of a Bitcoin vs USD is really what's holding the currency back, and not, in fact, the massive price instability.
Realistically, people don't want to use a currency that gains 1000% in value, then drops again, then up 200% in only a few months. Until you can pay your taxes in Bitcoin, you're going to have to convert money out of Bitcoin ASAP after getting it, to ensure you can actually meet future obligations, and that makes it a right pain to deal with.
Why the quoted price of Bitcoin doesn’t matt (Score:5, Insightful)
Bitcoin is a very new technology, even though the concept that it brings to life is decades old. The double spending problem has been solved; this means that it is possible to use a digital certificate to stand in the place of money and be sure that no one else can spend that certificate other than you as long as you hold it. This is an unprecedented paradigm shift, the implications of which are not yet fully understood, and for which the tools do not yet exit to fully take advantage of this new idea.
This new technology requires some new thinking when it comes to developing businesses that are built upon it. In the same way that the pioneer providers of email did not correctly understand the service they were selling for many years, new and correct thinking about Bitcoin is needed, and will emerge, so that it reaches its full potential and becomes ubiquitous.
Hotmail used familiar technologies (the browser, email) to create a better way of accessing and delivering email; the idea of using an email client like Outlook Express has been superseded by web interfaces and email ‘in the cloud’ that provides many advantages over a dedicated client with your mail in your own local storage.
Bitcoin, which will transform the way you transfer money, needs to be understood on its own terms, and not as an online form of money. Thinking about Bitcoin as money is as absurd as thinking about email as another form of sending letters by post; one not only replaces the other but it profoundly changes the way people send and consume messages. It is not a simple substitution or one dimensional improvement of an existing idea or service.
As I have explained previously, Bitcoin is not money. Bitcoin is a protocol. If you treat it in this way, with the correct assumptions, you can start the process of putting Bitcoin in a proper context, allowing you to make rational suggestions about the sort of services that might be profitable based on it.
If Bitcoin is a protocol and not money, then setting up currency exchanges that mimic real world money, stock and commodity exchanges to trade in it doesn’t make any sense. You would not set up an email exchange to buy and sell email, and the same thing applies to Bitcoin.
Staying with this train of thought, when you type in an email on your Gmail account, you are inputting your ‘letter’. You press send, it goes through your ISP, over the internets, into the ISP of your recipient and then it is outputted on your recipient’s machine. The same is true of Bitcoin; you input money on one end through a service and then send the Bitcoin to your recipient, without an intermediary to handle the transfer. Once Bitcoin does its job of moving your value across the globe to its recipient it needs to be ‘read out’, i.e. turned back into money, in the same way that your letter is displayed to its recipient in an email.
In the email scenario, once the transfer happens and the email you have received conveys its information to you, it has no use other than to be a record of the information that was sent (accounting), and you archive that information. Bitcoin does this accounting in the block chain for you, and a good service built on it will store extended transaction details for you locally, but what you need to have as the recipient of Bitcoin is money or goods not Bitcoin itself.
Bitcoin’s true nature is as an instant way to transmit money anywhere in the world. It is not an investment, or money itself, and holding on to it in the hopes that it will become valuable is like holding on to an email or a PDF in the hopes it will be come valuable in the future; it doesn’t make any sense.
Despite the fact that you cannot double spend them and each one is unique, Bitcoins have no inherent value, unlike a book or any physical object. They cannot appreciate in value. Mistaken thinking about Bitcoin has spread because it behaves like money, due to the fact it cannot be double spent. This fact however has masked Bi
Re:Building a case... (Score:4, Insightful)
One could make the same argument for the Internet. But now we have SOPA, which has a real chance of passing. It is true that SOPA will not actually stop piracy, and likely not even make a significant dent in it. But for the average person, the Internet will become a significantly more regulated and diverse place. Censorship masquerading as copyright enforcement.
There used to be (and mostly still is) a regime had censorship masquerading as media consolidation with the resultant centralized control over distribution. Sure, you can say anything you want, but your ability to reach an audience is gated by people who have a vested interest in making sure certain ideas aren't heard.
Regulation doesn't have to be absolute in order to succeed as a tool of social and economic control. It just has to be successful enough to make not following it seem like something only unsavory people do.
I don't necessarily agree with the grandparent. But I don't think his or her paranoia is unwarranted.
Re:Building a case... (Score:4, Insightful)
If the US governement wanted to they could put a lot of pain on bitcoin. For example they could go after the financial transactions with offshore bitcoin exchanges (just as they now go after financial transactions offshore online poker sites). They could announce that anyone caught running an unlicensed bitcoin exchange was open to prosecution and that authorised exchanges were only to accept coins whose history could be traced back to either an authorised miner or to before the introduction of the rules. They could further introduce laws stating that authorised miners and exchanges were required to keep transaction records including bitcoin addresses, that using or operating a "mixing service" was a felony and so on..
Personally I think the reason they haven't done any of this yet is that bitcoin is too small for them to care. Afaict there are currently just under 8 million bitcoins in existence (and some unknown proportion of those bitcoins have been rendered irretrievable as the associated keys are lost) at $30 per bitcoin that gives a theoretical "market cap" of arround $240 million. The actual amount of money involved is probablly a hell of a lot smaller than the aforementioned theoretical market cap.
"fair and balanced"? (Score:4, Insightful)
If you want to offer a contradictory viewpoint from a less-biased observer, that's fine. But if you go straight to the maximally biased source, it's suggestive that there isn't an unbiased source with that perspective in the first place. Maybe there is, but if so, use them. If not, don't bother with "balance".
Re:Criminal uses? (Score:3, Insightful)
You actually have this backwards. Every Bitcoin transaction is necessarily public information permanently. It's impossible to make a hidden transaction in Bitcoin. The issue with Bitcoin is that it's pseudonymous, so you can't, without out-of-band information, which physical person lines up with which Bitcoin identities.
Obstacles? (Score:4, Insightful)
So long as governments define myriad victimless activities and mere attempts to keep their prying nose out of your private financial transaction as "crimes," I would say Bitcoin's "criminal uses" are a feature, not an obstacle.
Re:Criminal uses? (Score:5, Insightful)
Re:Criminal uses? (Score:3, Insightful)
Back in my home country, a good 20 years ago, when we got payed in our own currency, we switched most of it to gold, USD and DM, almost daily. I live in Europe now, but have much more money so EUR volatility too becomes important and I still need to diversify, though not constantly. Maybe it's because I'm a maths guy, but I don't see the difference in volatility coefficient as a fundamental problem. Your local currency may lose value too, but usually more slowly.
If you are a merchant that wants to accept Bitcoin and don't want to be affected by volatility, you can use an intermediary system that converts Bitcoin to USD on the fly, at the time of sale. That's does with the problem once and for all.
Or otherwise, if you also want to accumulate Bitcoin, you could sell a percentage of your Bitcoin earnings daily (this kind of automation is pretty easy with Bitcoin obviously, and I suspect there are services that do this already). Say, your expected profit is 10%, so you only keep 10% of your earnings as Bitcoin.
Although, eventually the volatility will settle. It's not a specific problem about Bitcoin; any 'free' currency does have to overcome this obstacle.