This Whole Bitcoin Thing Could Be Big, Says Bank of America 276
Nerval's Lobster writes "Bank of America has issued a research report suggesting that the crypto-currency Bitcoin could become 'a major means of payment for e-commerce' on its way to emerging as 'a serious competitor to traditional money transfer providers.' The bank attaches a 'maximum market capitalization' of Bitcoin at roughly $1,300, based on its position as a 'major player in both e-commerce and money transfer' as well as 'a significant store of value with a reputation close to silver.' Bitcoin has come close to exceeding that theoretical ceiling in recent weeks, although its valuation dove today after the People's Bank of China decided to declare it a volatile 'currency' without real legal status; that financial institution is also concerned about its use in money laundering and black markets. Bank of America sees Bitcoins' advantages as low transaction costs, its finite supply (which will protect its value), and its increasing attractiveness as an alternative to 'traditional' cash. As with the People's Bank of China, however, the bank sees the currency's extreme volatility and lack of legal backing as a bad thing, and frowns at the possibility that regulators could step in and increase transaction costs. 'A 50 minute wait before payment receipt confirmation is received will prohibit wider use,' the report adds. 'This is less of an issue for two parties that know each other because they trust the other will not double spend, but when dealing with an anonymous counterparty this creates a high level of unhedgeable risk.' Without a 'central counterparty' to verify transactions and thus mitigate that risk, Bitcoin could fail to break into wider use."
Re:I understand how to value (Score:5, Interesting)
Honestly I find that one of the most interesting things about it. There is no intrinsic value. None! And yet it's indestructible* and peer to peer confirmed. Therefore (ultimately) the only cue anyone has to the value is what others value it at. Gold is sometimes considered to have become valuable for similar reasons. Sure, it's pretty, and that likely helped, but it doesn't have enough use to justify its value other than what everyone has previously valued it at.
* I can't say that with absolute certainty, given how software goes, but as a thought experiment it's fascinating.
Re:It's official (Score:3, Interesting)
When the maximum number of bitcoins has been mined - who is going to have an incentive to run miners? At that point, nobody's going to compute hashes, and transaction chains won't be verified any longer. It works great as long as all those people out there dedicate their clock cycles to pounding out hashes. But without an incentive, it's all going to evaporate.
Re:I understand how to value (Score:4, Interesting)
Straight up money laundering no fucking about, be you Dictator, Gangland criminal, Corrupt politician, Bank of America is the bank for you, now with untraceable bitcoins and supercomputers to generate more ;D.
Re: It's official (Score:5, Interesting)
Miners will still receive the transaction fees for all the transactions included in the blocks they mine.
Transaction fees are key but there's a subtle issue here: while there are a finite number of bitcoins, there are an infinite number of (possible) digital currencies.
Sure, a few years from now bitcoin is going to be supported by transaction fees. But what happens when, say, Google, comes along with their own digital currency and offers lower (or even no) transaction fees? And what happens when (not if) someone develops a currency that is clearly technically superior to bitcoin - e.g. with a more (space) efficient mechanism to record transaction in the block chain.
One way or another there's eventually going to be another digital currency that is clearly superior to bitcoin. And people are going to start flocking to the hip new digital currency. So, not only will bitcoin be fundamentally inferior, it will also be losing value (i.e. massive inflation) - while the other currency will gaining value making it all that much more attractive.
That's not to say that there isn't a lot more money to be made it bitcoin before that happens - just that eventually someone's going to be left holding the bag (i.e. a whole lot of nearly worthless bitcoins.
Re:Of course it could be big. (Score:2, Interesting)
yes, bofa is a bank, and they will do anything to make a profit a long as it does not cause them lose customers or take on legal fees to the point that they do not profit from their fleecing ways... up to this point their primary competitors are just as 'fleecy' as they are and the customers are stuck with the same fleecing habits wherever they go
bofa seems to be recognizing that bitcoin could become a non-fleecy competitor to their market and they are laying down the claim that good old American Dollars traded through their banking system are both quicker and more trustworthy than bitcoin...
So... what financial processes would be mucked up by a 50 minute lag and what elements of contract law are present in bitcoin that would enforce payment if the bitcoins have been tapped out before you got payment?
there would seem to be a lot of opportunities for scoundrels to game timing and anonymity to their favor... would players like bofa attempt to put themselves as a layer of trustworthiness between bitcoin and consumers?. of course there would be fleecing
Re:Replacement for cash not bank accounts (Score:4, Interesting)
Credit cards, bank accounts, etc. that offer me asset protection and such will be just as useful for Bitcoins as they are for cash, but they will be denominated in a currency independent of any given country.
That makes sense for joe average consumer. Let a third party "bank" do the heavy lifting of keeping your wallet and private keys; the bank is responsible for security and providing convenient access.
When you want to go to a store and buy something; you do something that directs your bank to execute the bitcoin transfer.
By the same token; you can go online, withdraw some bitcoins from your bank account to a local wallet -- and pay the vendor.
Re:It's official (Score:4, Interesting)
Not to mention states. There has been talk of a government-run electronic payment infrastructure for a long time (why shouldn't there be one? After all, paper bills and coins are government-run payment infrastructure too).
But the owners of the private payment infrastructure (Visa, Mastercard, Paypal, banks) lobby against it with tooth and nail.
Now the little people, cryptographers, libertarians and online geeks, have actually managed to build up a decentralized payment infrastructure without government or corporate help. That's a damn impressive achievement, but one of the consequences is that it'll be harder for governments to sit on their behinds and let their own payment infrastructure remain in the 7th century.
Bitcoin has lots of value (Score:3, Interesting)
Americans or Europeans could probably not understand it, but in some countries in the world taxes are almost on confiscating levels, leaving nothing to people.
I send glasses to Argentina and they tax 15$ per item, way more than the 3$ it cost to make and send, then they tax again and again like crazy. End result is that what used to cost 9$ to the final customer now cost 100$.
This happens all around South America now, Venezuela, Bolivia...
The same happens with money transfer, governments consider money from the people their own, they tax it to death and they spend the money mostly on their own, using military force and police to subjugate them.
So bitcoins means the people could transfer money very easily and fast, without being watched so they could survive.
Again this is something that people in the first world can't really understand. Their "crisis" is a joke compared with what most of the people in the world have to life.
Re:Bitcoin has lots of value (Score:3, Interesting)