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The Almighty Buck Bitcoin

Five predictions for (Bit)coin 179

Posted by timothy
from the invest-in-apc dept.
Contributor Tom Geller writes: "I recently wrote an article about Bitcoin and the law for Communications of the Association for Computing Machinery. In researching it I ran into plenty of wishful thinkers, ridiculous greedheads, and out-and-out nutbags promising a rosy future. I also found the expected blowback from vehement naysayers who think the best way to combat crazy is with more crazy. But despite that, I walked away believing that Bitcoin — or a decentralized cryptocurrency like it (let's call it "Coin") — is here to stay. As an interested outsider to the Coin economy, and a long-time technology commentator, here's what I think its future holds." Read on for Tom's predictions.
Coin's primary use will continue to be in international transactions.

While people wonder "When will I be able to pay for groceries and utilities with Bitcoin?", that use might never come. But Coin already shines in international transactions, where it provides a clear advantage over current systems, which are expensive and complicated hassles. That's why PayPal has become the go-to solution: it just works, albeit with typical fees around 3-5%.

Coin reduces that fee to a small fraction of 1% (when sent directly), and is available in places where PayPal fears to tread (Zimbabwe, Pakistan, etc.). Coin transactions occur instantly, with no intermediary, and — for better or worse — without recourse.

That leads to Coin's second primary use: to store liquid value in places where other stores (such as national currency) are unreliable. For all the cries that Bitcoin is "unstable", it seems to have settled quite nicely after its April spike. Certainly it looks appealing to anyone in an unstable country, and it's even tempting for those in places where the currency's been on a long, slow slide, like Argentina.

Coin's big vulnerability is its interface with national currencies ("real money").

None of this matters if you can't get your money out again. And that's where governments are taking a close look at Coin — with good reason. First, Coin exchanges have a terrible track record; second, such points of exchange are bottlenecks through which financial crimes often flow.

In the U.S., the government's Financial Crimes Enforcement Network (FinCEN) issued guidance asserting its right to regulate "Money Services Businesses", and defining exchanges dealing in virtual currencies (including Bitcoin) as such. That's a problem for many existing Coin exchanges, as the costs for complying with regulations are high. But if there's not a stable and reliable way to get national currency in and out of Coin, its value will plummet.

Conversely, Coin's value is likely to shoot up if this interface gets easier. Right now, it's surprisingly hard to buy Bitcoin (et al.) directly with U.S. dollars. Most methods require bank wires, tricky multi-step workarounds, and high fees. (I found Coinbase to be the most accessible, albeit with long delays and a bank verification procedure similar to PayPal's.) If Coin becomes as easy to buy as a gift card and redeemable at every bank, its practical utility will soar for everyday people.

No government will make Coin illegal.

Despite bloviation by a few politicians and baseless statements in the press, Coin is not per se illegal, and there have been no serious attempts to make it so. The FinCEN guidance mentioned earlier explicitly says that ordinary users — those who buy and sell using Coin — are "not subject to FinCEN's... regulations for MSBs". It's possible that other government agencies will continue to claim authority, but there doesn't seem to be much support for it.

A lot of noise has been made about Coin's use in illegal business, for example on Silk Road (where it's the only currency). But law enforcement is realizing that the currency isn't to blame, much as they've started to say that Craigslist isn't responsible for crimes organized through its ads. I predict that that distraction will continue to surface from time to time, but will essentially die soon.

Even if governments attempt to illegalize Coin, there's only so much they could do to criminalize ordinary users. Again, Coin's real vulnerabilities are higher up the chain. However....

If Coin succeeds, governments will get involved — for the better.

"Noooo!!!" scream the cryptoanarchists who are Coin's pioneers. "Keep the government out of this! Coin can't be controlled! Nobody can take away our freedoms!" What they don't realize is that this attitude doesn't reflect the values of Coin's future users. The benefits of "freedom" matter to the innovators; convenience and safety matter to those who follow.

"Government" in this case could also be a government-size corporation, syndicate, or other entity. The important thing is that it's big enough to administer, back, and enforce initiatives to protect the Coin economy. Whatever that "bully entity" is, Coin adopters will welcome it because of two major flaws currently in (Bit)Coin's design.

First, Coin is ridiculously easy to destroy by accident. If you lose the private cryptographic key that identifies your coin, it's gone. Not just stolen, but removed entirely from the economy, so nobody will ever own it again. Consider these stories on Bitcointalk.org, where within a few messages the cumulative total tops 10,000 BTC — currently valued around a million dollars. A central authority could address this in several ways such as tracking, restitution, etc.. People don't care that their cash is anonymous when the rent money disappears.

Second, the entire system is vulnerable to a brute-force attack. Without getting into the specifics, Coin (well, Bitcoin) works because it assumes that at least 50% of the computer power on the network is held by honest players. But a recent 51% attack on Feathercoin (a Coin with much lower capitalization) showed that it's possible for a single party (or syndicate) to trump that.

Let's do the math for Bitcoin, the Coin with by far the highest capitalization, at just north of USD$1 billion (1 x 10^9). To reliably overwhelm the network, you'd need computing power delivering about 100,000 gigahashes per second. Computers optimized for Bitcoin processing are currently available for about $1,000/gigahash, so sufficient computing power can be bought for $100 million. Electricity cost for the deed would be about $200,000/day.

O.K., it's not something a basement hacker could whip up. But there are over 400 people, and thousands of syndicates with a billion dollars in the U.S. alone. Perhaps at least one of them is crazy enough to drop 1% of the wealth to partially control (or completely destroy) a billion-dollar system. (Hell, one of them recently spent 1/10th of that price tag on his wedding.)

Those are only the two biggest technical concerns. Then there's the galaxy of financial services (such as insurance) that's available for fiat money, but which would be hard or impossible to provision for Coin without a central authority. Time could overcome these barriers; a bully entity would overcome them faster, and with greater public buy-in.

Bitcoin is not the end game.

Along those lines, I don't believe that Bitcoin will be the ultimate winner in this game. It's the 1.0, and a brilliant first effort at that. But it's not perfect, and several pretenders to the throne already claim to fix some of its bugs. In fact, shifting conditions may require periodic issuance of new Coin as a matter of course. (As I said before, I believe such issuances will involve a central authority.)

These predictions all assume that Coin will grow, and there are many reasons it might not. However, I'm bullish on it for the long-term. It's already proven its value in use; the public is used to handling Coin-like money (viz. Square Wallet); and its first major hurdles are in the past. Now it's ready to enter a fascinating future.



- - - - -
Tom Geller (tomgeller.com) writes about technology and business. He's best known for Drupal-related work that includes eight video courses for lynda.com, a book for Peachpit Press, and corporate work for Acquia, Commerce Guys, and others. He first became involved in computers as a grade-school student in 1976, playing "Hunt the Wumpus" on a 100-pound monster that spewed tractor-feed paper onto the floor. He lives in Oberlin, Ohio.
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Five predictions for (Bit)coin

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  • Coin? (Score:4, Insightful)

    by Anonymous Coward on Wednesday June 19, 2013 @03:50PM (#44053365)

    Is "Coin" the hipster new way to say Bitcoin?

    • First sentence the writer made it clear that that's how he'd refer to bitcoins in the article. My guess is he's trying to inject his own dumb idea into the vernacular.

      • Re:Coin? (Score:5, Funny)

        by ArcadeMan (2766669) on Wednesday June 19, 2013 @03:59PM (#44053453)

        Or, to bitcoin a phrase, he's trying to make something from nothing.

        • Or, to bitcoin a phrase...

          And if I were to kill you, I would go to jail.

        • Re:Coin? (Score:5, Informative)

          by dotHectate (975458) on Wednesday June 19, 2013 @04:07PM (#44053537) Journal
          He's invoking the lawyer-talk rule of "hereafter referred to as..." to simplify the article. Why bother with " Bitcoin - or a decentralized cryptocurrency like it - " when you can just say "Coin" instead. If you read the first paragraph you'd know this...
          • Re: (Score:3, Insightful)

            by Anonymous Coward

            Why bother with " Bitcoin - or a decentralized cryptocurrency like it - " when you can just say "Coin" instead.

            Because it's confusing and sounds silly. We're not running low on electrons here. You can spell out what you mean. It might even help to spend some electrons defining what is meant by a "decentralized cryptocurrency". Puzzlingly, the author seems to assume that "Coins" will share rather specific properties of Bitcoin but not others.

            For example, we know that "Coins" all have low transaction fees and are available in Zimbabwe and Pakistan:

            Coin reduces that fee to a small fraction of 1% (when sent directly), and is available in places where PayPal fears to tread (Zimbabwe, Pakistan, etc.).

            But somehow a "Coin" that is managed by a central authority is still a

            • by tgeller (10260)
              Hi, AC -- thanks for your comment. I understand why you think there's a contradiction, but I don't believe there is.

              I think that future Coin will be based on essentially the same specs, procedures, and algorithms Satoshi described -- in that sense, it's decentralized. However, I think there'll be a layer above that which *isn't* decentralized. And there will be a tie between the two layers.

              Here's an example. Let's say that Bitcoin continues to be the leading cryptocurrency -- anonymous and decentralized. Ho
              • by oreaq (817314)

                Let's say that Bitcoin continues to be the leading cryptocurrency -- anonymous and decentralized.

                bitcoins are not anonymous.

                However, if you want to insure deposits in it, you have to submit to some kind of identity proof through a central authority.

                No. Pseudonyms with private keys can achieve the same thing.

                For example, what if merchants could only accept coin if it was authenticated to its identified spender

                This is done in bitcoin today without any centralized authority.

                Are you sure you're qualified to comment on this subject?

                • by tgeller (10260)
                  We disagree on what "identity" means. A cryptographic token that stands for "Tom Geller" isn't the same as the meatspace Tom Geller. Heck, even the name "Tom Geller" isn't the same -- it's just a token as well.

                  The meatspace Tom Geller can be arrested and held. He has to personally show up at the bank to verify his identity when he opens an account. He has a picture on his driver's license that more or less matches his face.

                  <quote>bitcoins are not anonymous.</quote>

                  That's true in a technical sens
                  • by oreaq (817314)

                    But practically speaking, they can be mostly so.

                    I'm pretty sure that the bitcoin mixing services don't have enough volume to obfuscate any transaction of significant size. At least today; this might change in the future. The mapping from your pseudonyms to your "real" identity can be done as soon as you trade your bitcoins for anything not bitcoin. In theory, bitcoins can be mostly anonymous. In practice - i. e. when they are actually used, they are not.

                    The spender is never identified in a real-world way.

                    I misunderstood you there. I thought you meant "authenticated" in the context of the transaction. Than

                    • by tgeller (10260)
                      <quote>The mapping from your pseudonyms to your "real" identity can be done as soon as you trade your bitcoins for anything not bitcoin.</quote>

                      That's a good point, assuming that government regulations will require exchanges to record traders' identities (which seems likely). On the other hand, one could use the money to buy something with the Bitcoin and remain anonymous.

                      Tangentially: I used to think that Bitcoin couldn't be anonymous because one could build an identifying profile based on a se
    • you think regulated Wall Street and currency exchange is crooked, we are starting to see the slicks manipulate what I prefer to call BiteCon. because they will turn it into a con, and you will get the bite.

    • by Livius (318358)

      If the author didn't realize 'coin' was already an existing word, I'm having trouble taking the rest of his insights seriously.

    • No, he is using Coin as a generic term for all decentralized cryptocurrencies. Bitcoin is the most popular, but not the only one; he mentions Feathercoin by name and gave this link to a list of others: https://en.wikipedia.org/wiki/List_of_cryptocurrencies [wikipedia.org]
    • by Beautyon (214567)

      This article is a perfect example of why Slashdot doesnt matter anymore. Its just not serious; its more like a very sophisitcated troll article, from its infantile renaming of Bitcoin to "Coin" to every other fallacious assertion, economic fallacy and Stockholm Syndrome belief in the State. Its an a-historical hysterical piece of fluff; and what is the point? Honest writing and article posting is still needed online, so why not be like Reddit and post stories honestly? Its more useful, makes more money and

  • Or (Score:3, Insightful)

    by Sparticus789 (2625955) on Wednesday June 19, 2013 @03:57PM (#44053423) Journal

    I think it would be a better investment to send my money to Barrister Mohammed Gandha from Nigeria.

  • by gl4ss (559668) on Wednesday June 19, 2013 @03:59PM (#44053449) Homepage Journal

    the entire reason for bitcoin to be the coin is that it is the coin, exactly because of the 51% attack. the popularity is the safety, in both that it's harder to take over and it's more probable you will not end up with so many of the coins that everyone else on the network just decides "fuck it" and leaves you with worthless bits. if one single entity had all the bitcoins in the world nobody would consider them worth anything.

    what puts any credibility into bitcoin clones? wishful early adopters? why would anyone else after them adopt it - just to pay the early greedos?
    was feathercoin tradeable to real currency? who in their right mind put any money into it.

    • by tgeller (10260)
      I think this is a fair question. In my opinion, none of the existing alt coins have a real advantage -- technical or in terms of buy-in -- over Bitcoin. I just think that one (or more) will eventually appear.

      Think SixDegrees -> MySpace -> Facebook -> ???. :)
    • by King_TJ (85913)

      One *might* argue that using the existing "default" fiat currency means we're 100% sure of getting screwed -- as buying power drops with govt. printing more paper to cover increasing debt.

      Bitcoin may have the theoretical threat of the 51% attack, but it seems to me this risk drops as more people start using the e-currency? Furthermore, the talk of someone buying up enough processor power to take over the network seems to make an assumption that it would be possible to purchase the latest generation of bitc

    • by Fr33z0r (621949)
      The new coins have shorter blockchains and often faster confirms. If I want to do stuff with bitcoins a week after having last opened the client, I have to wait a few hours for it to sync the changes to the blockchain, then after sending or receiving the payment, the confirmations take a few more hours. Doing the same in the likes of digicoin or worldcoin is currently far faster.

      That's one advantage the new coins offer. Sure, their value is in the pennies rather than the hundreds, but that doesn't stop u
  • So the big advantage of bitcoin is that it lets you send money overseas without the traditionally high service fees, but US (and other countries) are looking to add expensive regulation to the system that will drive up the prices to something similar to what you would find with a traditional service, only without any of the protections a traditional service might provide (which are admittedly pretty slim when sending money overseas).

    I can see why the author thinks bitcoin itself is going to wither away.
    • by icebike (68054)

      Actually, the US is only concerned with two things: 1) large sums of income in bitcoin not declared on your income tax, and 2) large sums transferred to or from criminal activities, drugs, terrorism, etc.

      Addressing concern numbe 1: (income tax)...
      Bitcoin income is taxable just as barter "income" is taxable. To date this has been a small problem, because when you sell your bitcoin to buy a loaf of bread that transaction comes under scrutiny, and at this point in time, that transaction is the only bit the U

    • by plover (150551)

      You missed

      For all the cries that Bitcoin is "unstable", it seems to have settled quite nicely after its April spike.

      That's the one that got me. Two months where the price only fluctuated by less than 40% does not a pattern of stability make! There is no trend on this chart that leads me to believe it's ever been any more stable than the Iranian Rial.

      • by jandrese (485)
        See, for me the stability is less of an issue because for the primary uses of Bitcoins you aren't holding on to them very long. It doesn't really matter what their current value is because you're buying only what you need to transfer your money to the other guy and then getting out.
      • 40% does not a pattern of stability make!

        Yeah, I know I'm new here but...

        He never claimed it will be useful for people who live in a very stable economy (e.g. G20). But hell if it isn't a good bet over the Zimbabwe dollar, or as he pointed out the Argentine currency which is going down, down down and down: it's been a slow but steady slide losing 80% of its value relative to the dollar since the 90's.

        • by plover (150551)

          80% over a period of 15 years, when compared to 40% over two months, makes their peso look rock solid.

          The problem with an unstable currency is it attracts currency speculators. They will come in and suck value from the economy, while contributing nothing but minuscule trading fees.

      • You really think Bitcoins are unstable? Try investing in Argentine Pesos!

  • by Mashiki (184564) <mashiki.gmail@com> on Wednesday June 19, 2013 @04:05PM (#44053511) Homepage

    It's the weekly bitcoin article, are we done with it yet? No? Damn it...

  • by Black Parrot (19622) on Wednesday June 19, 2013 @04:07PM (#44053531)

    We'll have two more bc articles on Slashdot this week.

  • by Eightbitgnosis (1571875) on Wednesday June 19, 2013 @04:08PM (#44053559) Homepage
    Because no one calls it that, and it's actual name is cryptocurrency
    • by tompaulco (629533)

      Because no one calls it that, and it's actual name is cryptocurrency

      Isn't there already something called coin? Like...coin?

  • His numbers on Bitcoin Hardware are way off with ASIC's. Just visit Butterfly Labs, I have a rig doing 11GH/s, cost about $260 USD and uses ~ 50 watt of electricity. It costs less than $5 a month to run. BFL has some other hardware that has not shipped yet that can do 500 GH/s.

    They sell their ASIC chips for $75 each (50 each if you have a coin credits) with min orders of 100. I assume each chip can do 2.5GH.

    His numbers seem to stem back about a year or so ago.
    • Re:Numbers way wrong (Score:5, Informative)

      by tgeller (10260) on Wednesday June 19, 2013 @04:39PM (#44053873) Homepage
      I actually considered doing the calculations based on Butterfly Labs' machines, which claim 1 gigahash performance for only $50 (!). But their machines aren't actually available! The waiting list is, what, nearly a year now? So I said "currently available"... which doesn't include BL's machines, which are (for most people) pure vaporware.

      --The author
      • Re:Numbers way wrong (Score:4, Informative)

        by ZeroNullVoid (886675) on Wednesday June 19, 2013 @05:58PM (#44054637)

        Thanks for taking the time to reply,

        While there is a huge backorder, BFL is shipping products.

        They are catching up on backorder fairly quickly.
        (About 9 months off now)
        The current trend every week and a half, they catch up on a month. The current delay is in actual power brick availability and they are contacting people asking if they want to wait or get it shipped without a power supply and the owner can provide their own.
        BFL Judy posts every few days on shipment updates.
        https://forums.butterflylabs.com/blogs/bfl_jody/ [butterflylabs.com]

        As for the actual chips, they are rated at 4GH/s and have a delivery term of 100 days. However, the actual chips shipped will be of mixed grade, meaning they will have at least 12 working engines in them and up to 16 working engines. I would say about .25 GH/s per engine, so we are looking at 3-4GH/s no matter the chip grade. With stale shares in mining pools and the speed of these chips, my previous guestimate of 2.5GH/s each would probably be the expected output of a D grade chip.

        • by tgeller (10260)
          Thanks for all the details! Great summary.

          So how do your numbers jibe with BFL's homepage claims of 5GH/s?
          • I typically get 5.3-5.6GH/s per device, I have 2x5gh/s units. (Avg around 11GH/s for the pair)
            Average Temp is 19-24c
            My killawatt shows just under 50 watts of usage for the pair.
            In the eclipsemc mining pool, average about 0.32btc/day
            Estimated cost of electricity is $5/month for the pair.
            Devices will pay themselves off in about 1.5 weeks unless trends change.

            • by tgeller (10260)
              Thanks for the details! Always welcome.

              What makes are the units? This sounds quite out of line with what others have reported.

              (Consider that Blockchain.info reports a net *loss* for mining -- see https://blockchain.info/stats . Maybe that includes only transaction fees or something?)
              • by tgeller (10260)
                Oh, duh -- I guess your units are from Butterfly Labs. (Sorry, was reading comments in non-threaded mode and got confused.)
        • In any case, anyone with enough money to buy miner to control a 51%, could probably buy Butterfly Labs, or just hire people to design/build him his own machines; no need to go to a retail.

      • by rjstanford (69735)

        Of course, if BitCoin was really legit and stable, why would they be selling those machines in the first place when they could just farm BC, swap it for dollars, buy more machines, lather, rinse, and repeat?

        In any silly boom (some of which (tulips for example) get exceedingly silly), the solid, predictable money is made selling to the intrepid entrepreneurs. Not that long ago I had a friend who made a mint building custom enclosures for Emu and Llama down here in Texas - and anyone who invested in UPS/FedE

        • by ultranova (717540)

          Of course, if BitCoin was really legit and stable, why would they be selling those machines in the first place when they could just farm BC, swap it for dollars, buy more machines, lather, rinse, and repeat?

          Why do people who own iron mines sell the iron, rather than make all the end products and pocket the profit by themselves?

          In any silly boom (some of which (tulips for example) get exceedingly silly), the solid, predictable money is made selling to the intrepid entrepreneurs.

          And the same is true in any

          • by rjstanford (69735)

            That seems to be the general theme of your post: anyone willing to engage in an economic transaction must be either a scammer or a fool.

            When the items concerned have no intrinsic value but exist only for arbitrage, I'd tend to agree with your characterization. With most sales, the purchaser can use the items they buy to enable other things to happen. With currency swaps, that's not the case, especially when moving from a widely accepted highly traded currency to an almost not accepted thinly traded one.

    • by sstamps (39313)

      That's one of the problems with so-called "writers about technology" -- when one writes a fact-backed article, one best do his research.

      Not very impressive work, to say the least.

  • to cash in my Flooze stockpile when I retire! It's the future. Whoopi Goldberg told me herself!

  • The 51% attack myth (Score:3, Informative)

    by fireteller2 (712795) * on Wednesday June 19, 2013 @04:19PM (#44053673) Homepage

    People continue to be distracted by the 51% mining control issue when in fact that is not the issue, or it is not the issue they think it is. This sort of attack doesn't only happen at 51% it can happen at any level of computing power, but the probability of success increases and the attackers relative computing power increases.

    https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power [bitcoin.it]

    Further once and attacker has such power the ability they have to do damage to the system is limited to specific things. Things that importantly don't include taking all your bitcoin savings.

  • Bitcoin has a huge smorgasboard of advantages over anything else out there that make it vastly superior: Decentralised and free from control, Always running 24/7, International, No/low fees, New privacy model, Transparent system, Divisible, Secure, Fast transfers, No chargebacks, Environmentally friendly / efficient, Digital It increased in value by 1,750% in 2011, 186% last year, and 1,000% this year, more than any other asset class. Time to load up imo. This is a radically superior money compared to pi
    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Bitcoin has a huge smorgasboard of advantages over anything else out there that make it vastly superior: Decentralised and free from control,

      Decentralization is not automatically an advantage. As we've seen with Bitcoin, where in practice most of the activity takes place on one centralized exchange.

      Always running 24/7,

      Except when that one exchange shuts down trading for reasons ranging from "we cobbled this system together from sticks and chewing gum" to "oh shiiiit bitcoin is crashing we have to hold back the final bubble pop!!!" Oh, let me guess, though, you're counting the way that you can still do all-bitcoin transactions even when the exchanges are down. Ne

      • Re: (Score:3, Interesting)

        Wow. I have never seen someone who knows that much about bitcoin not be able to admit that it has any advantage over existing systems. What do you think millions of venture capital is pouring into bitcoin for? What exactly is your problem with it that makes you not want to admit that it has ANY improvements on existing systems? Let's take a look again:

        Decentralised and free from control, always running

        There are dozens of exchanges, and thousands of local exchangers on localbitcoins. If the biggest one gets taken out, there are plenty

  • Crap. (Score:2, Insightful)

    A lot of crap. First we have this "Coin" business, instead of Bitcoin. If you want to talk about various *coins, say cryptocurrency or cryptocurrency based on Bitcoin.

    Also, alternative bitcoin based currencies are mostly scams or failures for various reasons. There is no way there will be a 51% attack on Bitcoin. Sure your math says there could be. But it ain't happening. Sure Feathercoin got attacked. But what the fuck are they? What can I buy with that?

    The transaction fee is 0% at present. Most miners wil

    • by tgeller (10260)
      <blockquote>Oh, and its easy to lose your bitcoins. Gee, just like "paper" money.</blockquote>

      It's a matter of degree. I think it's an order of magnitude (i.e., 10x) easier to lose Coin than paper currency.
    • by brit74 (831798)

      Oh, and its easy to lose your bitcoins. Gee, just like "paper" money. Whoops I ran my hundred dollar bill through the washer a few times. And now it's indistinguishable from lint. Or, hey, my house just burnt down, and I lost my life savings ('cause fuck banks).

      Yes, well, people tend to have a lot more money in bitcoin than in physical dollars. I don't think I ever have more than $80 in physical money at any moment in time. The rest is in the bank. And if your house burns down, burning your money, you

  • by ADRA (37398) on Wednesday June 19, 2013 @04:31PM (#44053793)

    " Coin's primary use will continue to be in international transactions. While people wonder "When will I be able to pay for groceries and utilities with Bitcoin?", that use might never come. But Coin already shines in international transactions, where it provides a clear advantage over current systems, which are expensive and complicated hassles. That's why PayPal has become the go-to solution: it just works, albeit with typical fees around 3-5%."

    The reason why existing systems cost so much and take non-trivial delays is because these systems can be attacked or exploited in ways that cost people real substantial amounts of money. If you see BitCoin carrying millions of dollars of transactions daily / hourly / in minutes, do you still think it'll be the hot sexy magical fairy of transactions that it is now? No, you'll have to raise fees to buff up the infrastructure against attack, and build in extra fees to compensate against fraud, or no legitimate business will deal with it.

    There are a ton of bank to bank transfers that are generally a lot slower, but you're all but guaranteed against fraudulent transfers (and the ability to claw back accidental ones). BitCoin may be a fun geek interest area like HAM radios and DIY projects, but the realities of international commerce are fraught with realities that go far beyond any of the problems solved by this technical solution.

    • by tgeller (10260)
      Your points are why I think a government-like body will get involved -- and I do believe that there will be an increase is costs when that happens.

      Will those costs be greater than for current systems? I don't know. I'm guessing they won't, if only because of Coin's inherent self-defense mechanisms (crypto). On the other hand, most attacks are against "wetware" -- i.e., tricking the people who hold value. Those attacks will need just as much protection -- at just as great a cost -- as for any other medium of
  • by Anonymous Coward on Wednesday June 19, 2013 @04:51PM (#44053973)

    I read the article, I think the conclusion is flawed. What the regulators want or can do is pretty much irrelevant.
    Bitcoin is already out of the bag and is designed to make an end run around the "normal" ways of secured money transfers. I'm guessing they're not fighting this harder because they're trying to avoid the Streisand effect, as well as legitimize it as a threat to "normal" banking business by saying it is.
    A rose by any other name... doesn't give a damn what it's called.

    About the Streisand effect, the article mentions the recent jump in value from 20 to 250 to 120, but didn't mention the first jump over a year ago from 7 to 37 to 20 when senator Chuck Schumer pointed out how easy and untraceable it was to buy illegal drugs off silkroad using bitcoin through tor and how it should be stopped. Best bitcoin advertising ever!

    The surge from having Cyprus banks skim value out of accounts will probably end up being a rather small bump once people realize that every time the US government creates more debt (and more money) by spending beyond what the collect in taxes, they are effectively pulling value out of the entire dollar-based-economy (everyone's pockets and savings). It will be interesting to see how they try to prevent people from moving their savings from one that perpetually looses value to one that is designed to perpetually grow in value.

  • by Animats (122034) on Wednesday June 19, 2013 @04:57PM (#44054011) Homepage

    Coin exchanges have a terrible track record...

    Right. Many of them have gone bust, usually without returning the money. Bitcoin is the con man's dream - untraceable, irrevocable one-way money transfer from sucker to anonymous scammer. No worries about the mark coming back with the cops, or a few friends with baseball bats.

    Getting money out of the various exchanges is hard. Even Mt. Gox has severe limits on withdrawal rates. That's suspicious. They should have 100% of the assets entrusted to them by their customers, and should be able to deliver them on demand. Because they resist that, I suspect they don't have all the assets they should. Withdrawal rate limits are commonly associated with Ponzi schemes and "high yield investment programs", where if the customers take out their money, the whole thing collapses.

    • If you knew anything about how exchanges work John, you'd know that withdrawal limits are typically imposed by the banks themselves and/or AML rules. Not your entirely unfounded theories about them being fractional reserve. Mt Gox has made many references over the years to having to negotiate with banks to up the amount of money they're allowed to transfer per day. Just one more reason why the banking system sucks. There are typically no withdraw limits on the Bitcoin side once AML verification and good sec

      • by Animats (122034)

        If you knew anything about how exchanges work John, you'd know that withdrawal limits are typically imposed by the banks themselves and/or AML rules.

        Yeah, right. Mt. Gox regularly blames the businesses they deal with for their own problems. If you have unencumbered assets with a a real brokerage firm, and you want it converted to cash and sent to your bank account, you can have it in three days, or they're in big trouble. Brokerages routinely deliver amounts in nine figures on demand. Mt. Gox wants a delay of two weeks to over one month [mtgox.com] for just US$10,000.

        And we haven't even covered the Dwolla/Mt Gox/Mutum Sigillum LLC/Homeland Security debacle. [uproxx.com] Mt

    • With any regular bank or brokerage, you can take your money out whenever you want, on fairly short notice. This applies even if you have tons of money in it. Now, if you have a lot, like lets say multiple billions of foreign exchange reserves, then placing a sell order on all of it will drop the value, the price will have to go down for all of it to sell, but you can do that, if you wish.

      Heck that was part of the problem in the big downturn a few years ago. People were panicking and selling their whole port

  • Bitcoin, itself, will remain a niche currency. The author's point about places where banks fear to go is good. Otherwise, the built-in deflationary tendency will make it increasingly irrelevant in the larger economy.

  • The current efforts to combat tax evasion has created a need for a monetary system out of reach from greedy governments. Sure if everybody paid a small amount in tax and government spending was kept in check there would be no need to hide money. Now, governments wastes money like never before causing a high demand for taxes, and combined with various socialistic tax systems (progressive taxing for instance), create a need for those with larger incomes to hide some of it in order not to be taxed unfairly, an

If I'd known computer science was going to be like this, I'd never have given up being a rock 'n' roll star. -- G. Hirst

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