Bitcoin

[Ariphaos]

Wrong! Consider this hypothetical scenario (RAR!):

Someone offers an online service which will store, on several redundant servers, any data you like -- including bitcoins. The data is stored encrypted with a key known only to you, along with a hash to verify that the contents have not been meddled with. Even if I look at your files, they will be nothing but unintelligible gibberish unless I know your password. There's no need for you to prove your identity, and your anonymity need not be compromised.

Oh, and this isn't hypothetical. I could write the software for this and get it running in an hour or so, and the monthly server cost would be pennies.

At least with bitcoin, communication is not encrypted, and the full history of all transactions is in the block chain. Every, single, transaction. A man in the middle attack can snoop on anything. But even that isn't necessary - just run enough compromised hosts and see a good fraction of who is sending transactions, and you can tell who that is when they spend them.

[bilateralrope]

The difference is that if my cash burns, I still have most of my money sitting in my bank account. For bitcoins to replace existing currencies, people will need to convert all their money over to them.

Your argument does not hold. It assumes all value it put in Bitcoins.

There are people in this thread with posts like:

Any government that felt threatened by bitcoins ...

My position is that bitcoins won't get popular enough to threaten governments. Since their threat comes from them replacing the government issued currency, and that to replace the currency people would need move value currently held in currency into bitcoins, I think that assuming that someone has put all value in bitcoins then looking for problems is a reasonable way to argue against them.


The rest of your post talks about having bitcoins existing and being used alongside government issued currency. I am not arguing against that. In fact, I can see bitcoins occupying a niche where they are used when people want to send money over the internet and can't or won't use credit cards.

Wrong! Consider this hypothetical scenario (RAR!):

Someone offers an online service which will store, on several redundant servers, any data you like -- including bitcoins. The data is stored encrypted with a key known only to you, along with a hash to verify that the contents have not been meddled with. Even if I look at your files, they will be nothing but unintelligible gibberish unless I know your password. There's no need for you to prove your identity, and your anonymity need not be compromised.

Oh, and this isn't hypothetical. I could write the software for this and get it running in an hour or so, and the monthly server cost would be pennies.

You just demolished that point. So I concede that you can protect your bitcoins from being lost when your house burns down, without compromising your anonymity to the party storing them for you.

[Xisiqomelir]

I see a lot of people saying that bitcoins aren't going to supplant every other means of exchange. I agree with this. We still have gold and diamonds and chickens for trade, after all this time, and I don't think any technological invention is going bump them off any time soon.

I do disagree that governments will sit idly by. Considering the hysterical reactions evoked by every private currency from hemp scrip to Liberty Dollars, Bitcoin will probably come under fire sooner or later.

[Alyeska]

There are people in this thread with posts like:

There are people who do this with cash too. Your example is still fundamentally flawed. You assume people will use bitcoincs completely different from any other currency and suffer from it disproportionately

[Duckie]

Wrong! Consider this hypothetical scenario (RAR!):

Someone offers an online service which will store, on several redundant servers, any data you like -- including bitcoins. The data is stored encrypted with a key known only to you, along with a hash to verify that the contents have not been meddled with. Even if I look at your files, they will be nothing but unintelligible gibberish unless I know your password. There's no need for you to prove your identity, and your anonymity need not be compromised.

Oh, and this isn't hypothetical. I could write the software for this and get it running in an hour or so, and the monthly server cost would be pennies.

At least with bitcoin, communication is not encrypted, and the full history of all transactions is in the block chain. Every, single, transaction. A man in the middle attack can snoop on anything. But even that isn't necessary - just run enough compromised hosts and see a good fraction of who is sending transactions, and you can tell who that is when they spend them.

How are you proposing to associate the transaction record with a user?

[bilateralrope]

There are people in this thread with posts like:

There are people who do this with cash too. Your example is still fundamentally flawed. You assume people will use bitcoincs completely different from any other currency and suffer from it disproportionately

True. That was because I couldn't see how one could use Bitcoins with a bank, all I could see was an equivalent to someone stuffing their cash in a mattress. Sketerpot produced one way a bank could work, so I conceded that point (responding to your post about a point, then conceding that point to sketerpot in the same post was a mistake on my part).

[Alyeska]

True. That was because I couldn't see how one could use Bitcoins with a bank, all I could see was an equivalent to someone stuffing their cash in a mattress. Sketerpot produced one way a bank could work, so I conceded that point (responding to your post about a point, then conceding that point to sketerpot in the same post was a mistake on my part).

You can't put cash in a bank either. They will accept cash and then give you an account with a promise of the money. You can take a bitcoin, convert it to cash, and place that in a bank. You completely ignored monetary conversions.

Its possible to take value from some MMOs and convert those into real world money even. Some encourage it no less. Second Life for instance. While a bank won't necessarily take a bitcoin or a linden dollar, they will take cash, and you can convert bitcoins and linden dollars into cash through conversion of purchase and reselling of goods.

[phongn]

How are you proposing to associate the transaction record with a user?

Do old-fashioned police work, get a search warrant, compromise the private key.

I see a lot of people saying that bitcoins aren't going to supplant every other means of exchange. I agree with this. We still have gold and diamonds and chickens for trade, after all this time, and I don't think any technological invention is going bump them off any time soon.

You're still assuming that BTC can supplant existing currencies in the way that modern currency has supplanted barter. You have not demonstrated why this should occur.

I do disagree that governments will sit idly by. Considering the hysterical reactions evoked by every private currency from hemp scrip to Liberty Dollars, Bitcoin will probably come under fire sooner or later.

Shut down the currency exchanges ... which is happening.

[Jaepheth]

In the event of a solar superstorm, will holders of bitcoins be any more screwed than conventional currency holders (not counting cash assets)?

I'm guessing since it's a distributed program, most of it resides on unshielded computers. (Are even bank computers shielded?)

[Sriad]

Update: BitCoin is a questionable store of wealth, but a spectacular store of schadenfreude.

Yesterday night one of the largest BitCoin accounts was hacked and the hackers used it to fill every buy order on MtGox, crashing the price per coin to $.01; subsequently it became apparent that there was a systemic breech of security at MtGox and their user database was stolen.

Deeper coverage (and some pretty spectacular graphs of the crash) are available here:
http://www.dailytech.com/Inside+the+Meg ... e21942.htm

[Starglider]

I'm guessing since it's a distributed program, most of it resides on unshielded computers. (Are even bank computers shielded?)

Yes, also bank hardware uses multiply redundant memory, storage and usually processing. There are plenty of highly trained people paid big money specifically to worry about these sorts of issues. The risk of solar storms or even man-made EMP to actual computers is very low, the vulnerable part is the data networks, but even there all the backbone and high-end links are optical. The main thing likely to be disrupted are mobile phone networks, credit card terminal links and consumer DSL/cable.