Five predictions for (Bit)coin 179
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.
Coin? (Score:4, Insightful)
Is "Coin" the hipster new way to say Bitcoin?
Re: (Score:3)
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)
Or, to bitcoin a phrase, he's trying to make something from nothing.
Re: (Score:3)
Or, to bitcoin a phrase...
And if I were to kill you, I would go to jail.
Re: (Score:2)
Re:Coin? (Score:5, Informative)
Re: (Score:3, Insightful)
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
Re: (Score:2)
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
Re: (Score:2)
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?
Re: (Score:2)
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
Re: (Score:2)
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
Re: (Score:2)
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
BiteCon (Score:2)
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.
Re: (Score:2)
If the author didn't realize 'coin' was already an existing word, I'm having trouble taking the rest of his insights seriously.
Re: (Score:2)
Re: (Score:2)
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
Re: (Score:2)
Yeah, bitcoins are mostly all owned by a very small group, so using them effectively centralizes the money supply in a few hand. And that ultimately increases wealth inequality and decreases the velocity of money. I.e. bitcoin is bad for the economy.
If however you create a bitcoin alternative with a permanent constant inflation that pays out through mining then that constant inflation reduces the transaction costs below bitcoin's and serves to redistribute wealth slightly, making the currency very good fo
Re: (Score:2)
Or (Score:3, Insightful)
I think it would be a better investment to send my money to Barrister Mohammed Gandha from Nigeria.
Re: (Score:2, Insightful)
The success of Bitcoin is the same as the increased value of the Dow Jones (15,000+ right now). It is not based on any real, tangible objects. It is based on the theory that "oh yeah, it's worth something, trust me!" Both values are completely empty and meaningless. Just like the promises from Barrister Mohammed Gandha.
Re: (Score:2, Insightful)
Actually, DJIA is based on market value of companies listed there. And value of companies tend to have something to do with their earnings and dividends. And these tend to be listed in Big Boy currencies instead of bitcoins.
So yes, DJIA is light years ahead in terms of tangible assets over bitcoins!
Now, can we stop with these adverts??
Re: (Score:2)
And value of companies tend to have something to do with their earnings and dividends
So, they're based on how many people want to buy these companies products/services, and for what price? Because Bitcoin's price is determined by how many people want to buy Bitcoins, and for what price. Bitcoin also has an additional inherent service value in easy and cheap international transactions.
Re: (Score:2)
A minor nit, but the DJIA is based on the average price of 30 odd stocks, not the market cap.
Almost every other index is based on the value of the free float of shares which is almost, but not quite, the same things as market cap – which is based on the total value of shares. When the DJIA was invented computational power was expensive, in the sense “computers” was a job like a secretary, so they did just a simple average.
why would you put money into alt-coins? (Score:5, Interesting)
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.
Re: (Score:3)
Think SixDegrees -> MySpace -> Facebook -> ???.
Re: (Score:2)
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
Re: (Score:2)
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
Let me see if I can summarize (Score:2)
I can see why the author thinks bitcoin itself is going to wither away.
Re: (Score:3)
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
Re: (Score:3)
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.
Re: (Score:2)
Re: (Score:2)
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.
Re: (Score:2)
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.
Re: (Score:2)
You really think Bitcoins are unstable? Try investing in Argentine Pesos!
Re: (Score:2)
Hay Guise! (Score:3)
It's the weekly bitcoin article, are we done with it yet? No? Damn it...
Re: (Score:3)
Re: (Score:2)
Sixth prediction: (Score:4, Funny)
We'll have two more bc articles on Slashdot this week.
Let's not call it coin (Score:4, Insightful)
Re: (Score:2)
Because no one calls it that, and it's actual name is cryptocurrency
Isn't there already something called coin? Like...coin?
Numbers way wrong (Score:2)
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)
--The author
Re:Numbers way wrong (Score:4, Informative)
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.
Re: (Score:2)
So how do your numbers jibe with BFL's homepage claims of 5GH/s?
Re: (Score:2)
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.
Re: (Score:2)
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?)
Re: (Score:2)
Re: (Score:2)
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.
Re: (Score:2)
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
Re: (Score:3)
Why do people who own iron mines sell the iron, rather than make all the end products and pocket the profit by themselves?
And the same is true in any
Re: (Score:2)
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.
Re: (Score:2)
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.
Re: (Score:3)
I can't wait.. (Score:2)
to cash in my Flooze stockpile when I retire! It's the future. Whoopi Goldberg told me herself!
Re: (Score:2)
(Edit: Flooz, not Flooze :')
The 51% attack myth (Score:3, Informative)
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.
Re: (Score:3)
It is not fatal by any definition of fatal I'm aware of. To the degree it has any effect at all it is only in terms of the current and ongoing transactions for the duration of the attack. To fit some definition of fatal the attacker must maintain the attack indefinitely, the attacker must also be able to respond to any effort by 'honest nodes' adding additional computing resources in response (i.e. there is a counter attack), and the existence of the attack is detectable and locatable.
Anecdotally the curren
Re: (Score:2)
In this scenario there is no compromise of the cryptography in any way at all.
What exactly do you think it is a compromise of? Bitcoin is not a signature system, nor is it a hash function, nor is it a cipher. Bitcoin is at least a multiparty computation system, which is also cryptography:
https://en.wikipedia.org/wiki/Secure_multiparty_computation [wikipedia.org]
Also, "lack of security definition" has no meaning in this context so I'm at a loss for what you are trying to say there.
What is the definition of "security" for Bitcoin? What would it mean to successfully "attack" Bitcoin? In cryptography, we usually define security rigorously, then design systems that meet our definitions.
Re: (Score:2)
Ok I get it. You clearly know very little about bitcoin and cryptography, and you are using words way out of context. Bitcoin does not employ 'secure multiparty computation' in any part of its design. You are probably trying to refer to the hashing of blocks in the block chain which is public. But each block is clear text and the only computation that is involved is the finding of a hash value that shows you've done a certain amount of work. This process is not related to secure multiparty computation, whic
Re: (Score:2)
Bitcoin does not employ 'secure multiparty computation' in any part of its design
Bitcoin is a multiparty computation system. The fact that it does not build on previous work does not change what Bitcoin is, nor how it can be analyzed.
the concept of digital cash in cryptography this is also well defined
Yeah, and guess what? The security definitions of those systems assume a central bank that issues the money. You do not have to believe me; here, you can read the actual work on it:
http://rd.springer.com/chapter/10.1007%2F11889663_20 [springer.com]
http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.44.8279 [psu.edu]
https://ieeexplore.ieee.org/xpls/abs_all.jsp? [ieee.org]
Re: (Score:2)
I apologize to the internet gods, but I can't help it. I must respond to the trolls.
Bitcoin is a multiparty computation system.
But it is not a "secure multiparty computation", so immaterial to your argument, and not in anyway relevant to my first post, or the link you posted.
Yeah, and guess what? The security definitions of those systems assume a central bank that issues the money.
Yes the referred too digital cash systems rely on a central authority. Of course I believe you it's in the textbook I referred you to, and as I pointed out these are all well understood. Bitcoin is the same type of system. Some details and features are different, but you did not
Re: (Score:2)
But it is not a "secure multiparty computation", so immaterial to your argument, and not in anyway relevant to my first post, or the link you posted.
Digital cash has a security definition
Yeah, and as you yourself admitted, that security definition is based on the existence of a central authority. It is not possible to apply such a definition to a system without a central authority, which means that security definition is irrelevant to Bitcoin. This is not just a slight variation, it is a fundamental departure from the definition of security for digital cash. If you think I am wrong, write a proof of security for Bitcoin using the definition of digital
Bitcoin is not just for international transfers (Score:2, Interesting)
Re: (Score:2, Insightful)
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)
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
Re: (Score:2)
Re: (Score:2)
Wow your post is so full of personal attacks, logical falacies and nonsense that i can't even bother to discuss it point by point. I just wanted to let you know that you are wrong, that many people (including me) care about bitcoin properties sethotterstad described and that i'm currently out of modpoints so i can't downvote you.
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
Re: (Score:2)
It's a matter of degree. I think it's an order of magnitude (i.e., 10x) easier to lose Coin than paper currency.
Re: (Score:2)
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
Seriously? (Score:3)
" 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.
Re: (Score:2)
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
Regulators irrelevent (Score:3, Insightful)
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.
Re: (Score:3)
"Coin exchanges have a terrible track record" (Score:5, Informative)
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.
Re: (Score:2)
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
Re: (Score:2)
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
No kidding (Score:2)
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
Let me guess, you don't have a bank account? (Score:2)
If you did, you'd know you can take out as much of your money, any time you like. Things like ATMs have daily withdrawal limits to help prevent theft/fraud, but you can go in to a branch and cash out your balance, any time you like (or transfer it to another bank electronically).
Re: (Score:2)
I have cashed cashier's checks of up to about $30,000 at a local financial institution. It took a few minutes of them talking amongst themselves, a few more minutes to count it out in $100 bills (three times), and it made my bi-fold wallet very difficult to stuff into the leg-pocket of my cargo pants (which is an absurd thing to be doing, but I did it anyway). None of this attention to detail seemed inappropriate, so I count the result as defini
Long Before 2140, The Gig Will Be Up (Score:3)
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.
Dunno if BC is the solution but we need one! (Score:2)
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
Re: (Score:1)
Re: (Score:2)
Re: (Score:2)
The currency of deluded people and unicoins.
There. Fixed that for you.
Re: (Score:3)
It is basically a digital barter currency that people can trade. It has a cryptologic foundation so you can't just claim to own any without actually either being given some or 'mining' it. There's only a finite amount of bitcoins and mining it involves solving a mathematical problem that gets more difficult as each batch/block is solved and issued. Right now the hardware to effectively mine it is very specific and you basically will burn electricity at a cost roughly equivalent to the going rate of bitco
Re: (Score:2)
Seriously, Google. Bitcoin.it. Khan Academy series of videos if you want the technical details presented a bit more clearly.
Unless you're okay with the usual replies;
It's a scam
It's for delusional people
It's for drugs
It's for fuck-the-government-I-don't-want-to-pay-taxes
It's doomed to fail
It's designed to fail
It's a pyramid scheme and guess what, you're not at the apex.
Alternatively...
It's the future
It's like money, but better
It's inherently deflationary
It's a pseudo-anonymous way to pay for whatever you
Re: (Score:2)
Re: (Score:2)
It's a stock, the value bounces up and down and if you buy right and sell right you can make some money off of it, but you should never put in more than you can stand to lose. Except you don't get to curse at a CEO for not squeezing the little guy enough to bring up the bottom line and increase the value.
See, to me that's the opposite of a stock. A share of stock is ownership in a company, making a bet that the value of the company will increase - over the long term - faster than inflation will. What you're describing is much of a lottery, where you're trying to predict the public perception (and therefore the price of the stock) rather than the intrinsic value at all. I'd agree that that's probably a fair comparison to BitCoin, FWIW, but shouldn't really be compared to fractional corporate ownership.
Re: (Score:2)
Or the more neutral - or should I say, opportunistic: It's a stock, the value bounces up and down and if you buy right and sell right you can make some money off of it, but you should never put in more than you can stand to lose.
I think that (like shares and commodities) its use as a something you can trade in speculatively, is secondary.
If you own a share in a business, you get dividends and sometimes a say in how its run. It's also something you can sell, perhaps at a profit.
If you own a ton of bricks, or aluminium, or wheat you can use it to make something. It's also something you can sell, perhaps at a profit.
A Bitcoin's primary use is as *currency* - its utility is that you can cheaply and conveniently transfer wealth electron
Re: (Score:3)
How is bitcoin mining not a waste of electricity?
Because hauling cash around in armoured vans, and credit card networks, are not exactly free and clean.
Re: (Score:2)
hauling cash around in armoured vans, and credit card networks, are not exactly free and clean.
I don't know anyone these days who regularly uses cash. I think I have a hundred dollars at home, but the rest is electronic. That *is* ecologically clean. I don't even send paper checks in paper envelopes anymore. Most of my payments for goods and services are electronic.
Re: (Score:2)
I think I have a hundred dollars at home, but the rest is electronic.
Where do you think is your electronic cash stored? It's on computers located in big datacenters protected from unauthorised remote or physical access by large teams of security experts. How much do you think all of this costs? I don't realy know but i'd say it's hell lot of more then the current price of bitcoin network. Even if bitcoin grows to the size of current fiat economy the basic network operation would be cheaper than the costs of traditional fiat money security.
Re: (Score:2)
A centralized system is cheaper to buy and easier to service. Otherwise why don't the banks run their credit card accounts on a thousand PCs on desks of their employees, in a cluster? A mainframe costs more than a thousand cookie-cutter Dell business PCs. But they opt for a mainframe because in the end it is cheaper and more reliable and more secure. In essence, it's a thousand PCs in one cabinet, with appropriate I/O channels and with contractually guaranteed reliability.
When you think of BTC you should
Re: (Score:2)
Re: (Score:2)
It's backed by the utility value of a distributed tamper-resistant accounting system that lets you send them easily to other people and makes it very hard to change the rules the system operates by.
Re: (Score:2)
Maybe this makes it easier to understand: a hundred-dollar bill doesn't derive its value from the effort used to manufacture it, it derives it
Re: (Score:2)
Decentralized authority works for some things -- the Bitcoin system demonstrates that. But some (such as judging insurance payouts) require the human touch.
Re: (Score:2)
I wanted to add that I was pleasantly surprised to find that namecheap (domain registrar) also accepts bitcoins now.