This seems so very lazy....
Obligatory http://buttcoin.org link.
Bitcoin is interesting (I have ~50 bucks in it) but while the Libertopians may have plenty of interesting points of what the future looks like, BTC itself is not the product of the future for the caveats mentioned and the speculation that keeps it from being useful as a currency.
WHY IS THE FONT ON MEDIUM.COM PREPOSTEROUSLY LARGE?
Does the site think we need glasses?
Bitcoin is a classic network effect, a positive feedback loop. The more people who use Bitcoin, the more valuable Bitcoin is for everyone who uses it, and the higher the incentive for the next user to start using the technology.
The same is of course true of a Ponzi scheme or a lot of Internet stocks. Like Netscape, a stock which went up and up and up for ages until it suddenly started going down and down and down. Positive feedback works both ways in a bubble: It works when people rush to put their money in and it works even faster when people start running for the exits.
Having seen five rounds of crypto-currency hype, I see no reason for the outcome to be any different this time round. Just like Gold-Age, eGold and dozens more that have been forgotten, the current round of crypto currencies will either fail to take off or they will die a sudden death when the Feds move in.
The banking and RICO statues give the Feds almost unlimited power to regulate the movement of money. They don't even need to have the law on their side either, all the feds need to do to make the bitcoin bubble burst is to cause people to stampede for the exits. They can do that with one grand jury handing down a RICO indictment for using bitcoin.
Further, there is no shortage of regulatory topics and issues that will have to be addressed, since almost no country’s regulatory framework for banking and payments anticipated a technology like Bitcoin.
Only they have done. There have been alternative currencies floating around since the start of modern banking. There has never been a time when the central banks had a monopoly on issue of currency. Ask Mickey Mouse.
This group was around over 20 years ago when I wrote a paper on digital currencies when I was at W3C.
Most times the payment systems get to a certain point and the tax authorities show interest and they suddenly collapse. Because avoiding the attention of the authorities is usually the whole point.
Right now the holders of bitcoins are almost exclusively speculators and drug dealers. All the drug dealers care about is that they can use the scheme to transfer money reasonably effectively with acceptably low transfer risk. Bitcoin does not need to be absolutely stable to fullfil that need. They are not going to transfer all their money in one go. Meanwhile the authorities will be looking to trace the money to the source and destination rather than shut down the infrastructure.
But no, go ahead. Libertopia is always right. Bitcoin is the future of banking and you will all have a pony.
glenn touches briefly on the key question for most people: the difference between a payment system and a currency.
i have zero interest in bitcoin as a currency, despite some awareness of the theoretical interest in what it would mean politically and economically.
i have HUGE interest in a fee-less (or least absurdly cheap) payment system (particularly in the US where even a regular one-time bank-to-bank transfer takes either 2 days or ridiculous fees).
people need to split these two functions apart a lot more when they discussion bitcoin, because they are in no way necessarily related.
Except there are numerous costs involved in Bitcoin as a payment system. For example:
- The transaction fees themselves: very small by comparison with several other systems, but these will eventually be higher.
- Costs to convert to/from other currencies: these are currently often higher than credit card fees.
- Tax reporting costs: in the US, at least, to the best of my understanding, almost every payment you make with Bitcoin needs to be reported as a transaction with capital gains/loss. Every meal you have, every dollar worth of bitcoins you spend online, needs to be accounted for with the cost basis of the bitcoins you purchased, the dollar/bitcoin exchange rate at the time you made the payment, and so on. If you use bitcoin to replace all your payments, you could easily end up preparing a tax return several hundred pages long and involving huge preparation costs in terms of either accounting bills or time.
I think folks are about as likely to fill in the "illegal gambling and drug transactions" part their tax form as they are to remember to report the stuff they bought online.
Honestly, as much as people shit on Bitcoin for facilitating black market transactions, I think that these are by far the most interesting. Silk Road was a pretty solid example of how you can use Bitcoin to bring trust and a little safety (from drug dealers) into black market transactions. By all accounts, getting drugs on Silk Road was a pretty sure what to make sure that you get good properly made drugs. Outside of law enforcement, the biggest danger in a black market is a lack of trust. A lack of trust is what gets people shot or given fatally flawed drugs. Bitcoin, for a brief time, offered up a pretty appealing alternative.
In an ideal world, we wouldn't need a black market because people wouldn't have to resort to it. We don't live in an ideal world. I would rather live in a world with a safer black market than a world with a dangerous one. Attempts to keep shut down black markets do vastly more damage than the actual products being sold, especially when there is a little trust within the system.
It still bugs me whenever professional journalists repeat the claim that Bitcoin is untracable. Fleischman's article bothers me even more, because he mentions that every transaction is recorded in the block chain (the reason why Bitcoin transactions are totally easy to trace and impossible to launder), and then immediately repeats the claim that transactions are untracable. Jesus Christ, dude -- read your own article.
The truth is that the transactions are pseudonymous with a very nearly one-to-one relationship between an address and a person or organization. After all, while you can make many addresses, in order to have any benefit with regards to tracability none of the addresses can be directly connected to each other (in other words, you can't use any of the money supply from one to pay for anything with the other because you can't transfer money between them without making a publicized connection). There are no Tor-like mixmaster systems for Bitcoin, because the whole point of Bitcoin is to minimize necessary trust levels (and a mixmaster would be the precise opposite: you pay into a giant network of independent nodes, any of whom could steal your money, in order to generate enough transactions to make it prohibitive to trace). Using Bitcoin to pay for anything is like paying in cash and then displaying the itemized reciept on prime-time television every night for eternity.
Fascinating. I never say they are untraceable. In fact, I wrote, "Bitcoin is only traceable within the system to a certain extent." I then provide details about the extent to which they are, including a reference to an October 2013 academic paper that shows how some kinds of transactions can be unpeeled and tracked (to a surprising extent) but others can't.
Recorded, traceable, and anonymous are different commodities. All transactions are recorded. It is possible to use change addresses in a way (described in that paper) to prevent easily or at all linking a sequence of transactions in and out. (Zerocoin would eliminate all connections between in and out transactions.)
Anonymity in the way you're discussing it isn't within the Bitcoin system, but rather an externality: can an association be made between an individual and a Bitcoin address, because, ultimately, the value has to be taken out of the system to be traded for goods and services. That's increasingly less the case, the more companies accept Bitcoin for payment.
"There are no Tor-like mixmaster systems for Bitcoin": There are, in fact, coin mixing operators, but they are unreliable or corrupt currently.
Jesus Christ, dude -- read my own article.
How is that lazier than a screen grab of the page, as I was GOING to use!
I mean only to applaud your sense of parody.
What about Potcoin? Quoting from someone else:
The next potentially successful cryptocoin is Potcoin, which is only a day old. We're hoping that it gains success in potshops in CO. Banks are not permitting funds from any cannabis-related shops, so maybe PotCoin can fill that gap.
PotCoin was designed to empower, secure and facilitate the Cannabis community's daily transactions. The now legalized Marijuana industry is calling out for its own distinct crypto-currency - PotCoin effectively forms a global community with each coin holder a participant anchored in this new economy.
Official site: http://potcoin.info/
Pools: http://pot.scryptominers.com/, http://cryptovein.com/, http://pot.bitember.com/, http://pot.blockchasers.com/
BitcoinTalk thread: https://bitcointalk.org/index.php?topic=426324.0
IRC: irc.freenode.net #potcoin
Current difficulty: 2
Current net hashrate: 180MH/s (as per scryptominer)
I think it's hilarious when people don't realize you're a regular BB commenter.
First, Mr. Fleishman takes issue with the origin of Bitcoin, claiming that because we don't know who Satoshi Nakamoto is - then we must cast a pall over any subsequent analogies to protocols and building networks. He clumsily paints a picture of Satoshi's anonymity as being a drawback, even though the full source code is available for inspection, as is the whitepaper that describes Bitcoin's internal workings.
He then dives into the decentralization of Bitcoin, where he agrees that its useful and important, but then flubs it when saying it isn't a currency AND a payment system. It is both, naturally - as the code that describes each verification node also details the rules for the minting of new Bitcoins. They are incorporated into each other. You can't have Bitcoins without the underlying system, just as you can't have TCP/IP packets without the underpinnings of electricity and ethernet software drivers.
Then he starts to drill down into the core of things, making a few flawed logical leaps along the way. Suddenly, irreversibility of Bitcoin is not true when coupled with the legacy financial system. I must wonder how Mr. Fleishman managed to conflate Bitcoin with the rest of the system, when a majority of the transactions are peer-to-peer and not Bitcoin to external fiat. And in the case of transfer to fiat, how can you hold Bitcoin responsible for this? It makes no sense.
Given that Bitcoin is barely 5 years old, it seems unfair to expect a system to suddenly rival its closest and oldest competitor - the Banks and Credit Card processors. Yet, he persists with this line of thought until he lays on the real doozy -- Bitcoins can be stolen, so what then?
Well Mr. Fleishman, if you're suggesting that Bitcoins should be 'tainted' or 'marked', then you've completely lost the point. Every Bitcoin must be treated the same, or there is no fungibility. Its the same as cash - I don't ask someone handing me 20 dollars for a personal debt whether a few steps back someone stole it from another person.
The analogy Mr. Fleishman paints is rather dramatic and used for effect - trying very hard to associate the personal responsibility of holding your Bitcoins as that of an overbearing regulator. It doesn't work that way for cash either, contrary to his efforts, and it won't work that way for Bitcoin transactions either.
More to the point, even the pending 29K BTC auction from the FBI will allow a large amount of coins to be bought by whoever has the means. When HSBC was busted for laundering money, they didn't "clawback" the currency they had distributed, they paid a fine. This is how the system really works, and it is a far cry from what Mr. Fleishman suggests.
His final gyrations are contradictory leaps into thin air, such as:
The use case for PC's and the Internet were for utility - and they were complex for end users, and cost a lot to acquire. Then he switches gears saying the uptake was swift compared to Bitcoin. Sorry, could you possibly stay on the subject? He uses this non-sequitur to waltz in and declare we already have digitized money, in the form of credit card payments, so why do we need Bitcoin?
That's simple, Mr. Fleishman - we need Bitcoin because your credit card processor can deny payments to an entity they disagree with. And cash doesn't solve the problem, as sending a fistful of currency across the world in minimal amounts of time isn't a trivial enterprise. That's the underlying gap in this "critique". Mr. Fleishman makes surface comparisons, but misses the meat of the issue.
Bitcoin is about financial FREEDOM. Banks and Credit Card Processors dictate terms and report you to the authorities if they think you are doing something wrong -- even if you aren't. They will deny payment if they choose, without bothering to explain, or even have a legal standing on the matter. Bitcoin flattens this interference and makes the globe a smaller place, allowing the transfer of wealth without the meddling and firewalls of the current flawed system.
I also take issue with Boing Boing, who thinks a Charles Stross' "kick the hornets nest" smear piece on Bitcoin is "fun to watch", and then promotes this "critique", as the bitter byline to an essay crafted by the father of the web. Perhaps I should blame their corporate masters, to whom they are beholden to "tow the line" in regards to a game-changer like Bitcoin. (Would they tell us if such a bias exists? I somehow doubt it.)
Boing Boing is becoming like Wired in that respect, I fully expect "Bitcoin is Dead" articles every few months, followed by the "Well gosh, we were wrong that time - but you never know, har har" half-hearted apologies.
You're supposed to be more open-minded than that, and I think it reflects poorly upon your editorial balance and individual contributors.
We should respect those who tow the line, as they have the ability to expand our boundaries in new and exciting ways. Those who toe the line, not so much.
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