Bitcoin Forum

      Mt. Gox and friends are killing Bitcoin. While such centralized exchanges have been very good to people like me who have bots, they inherently concentrate the market into hubs that can be effectively targeted by Homeland Security and others. One of the great strengths of Bitcoin is that it evades interference from entities which draw their power from centralization. The United States government relies on this form of power to influence the world. Through internationally organized frameworks of law and finance, this institution has manipulated the course of history for almost the last century. Bitcoin has survived and flourished thus far because of its insusceptibility to centrally planned offensives. The US government cannot operate/manipulate in this framework because it's outside the scope of its dominion.
      We've seen what kinds of manipulation can already take place in these exchanges. When a few Tinklevoss-like characters with enough capital decide to participate in this economy, they hold the power to artificially influence the price of Bitcoin. This is entirely because of the way the Bitcoin exchange environment is organized. While the currency itself is decentralized, the means for acquiring it and trading it are consolidated into a few nodes.
     This is a fundamental flaw in the Bitcoin exchange system. There needs to be a way to transfer this exchanging power over to the people. This capacity is already built into Bitcoin itself with the wallet framework and the ability for individuals to effectively act as their own bank, but it is entirely confined to the transfer of Bitcoin, not Fiat. Because the majority of crypto procuring is in exchange for fiat, we inherently establish bottlenecks. We are still playing in their backyard, so they ultimately retain the power to kick us out and tell us to go home (or to jail).


     Because we rely on a small number of money transfer services which have at most a few bank accounts associated to them (Dwolla etc…), we provide targets for authorities to go after. With Bitcoin, the target is an internationally diffuse mesh of computers which maintain an abstract concept. This is what makes it impenetrable to governments and all those who want to maintain the status quo. Fiat money, being tied to banks and the physical realm, requires that someone actually interfaces between the banking system and the Bitcoin world. Up until the present moment, this has been a small handful of companies like Dwolla.
     We can't go forward applying individualistic capitalist ideals, like having a handful of companies act as an intermediary between fiat and Bitcoin, and expect them to work in a decentralized economy. This idea may be unnecessarily bold, and even stupid (this is why I'm posting here. I want to see what the community thinks), but it could be good food for better thoughts. So I hope everyone brought along their appetites…


     We apply the concepts which are fundamental to decentralized services like Bitcoin and Tor, and establish a web of bank accounts which are linked together in a cryptographically secure blockchain which will also orchestrate the movement of funds  from account to account. This would require ordinary people opening up checking accounts (these do not fall under Federal Reserve Board Regulation D, as far as I can tell), and subscribing to the network. This subscription would allow the network to process inter-bank transfers. There would have to be two distinct pools; the reserve pool, and the payout pool. The reserve pool would shuffle funds around and act as the digital bank vault, and the payout pool would be the transfers that are sent to individuals who want to cash out Bitcoins into their own private accounts.
     The people who have to initially open the checking accounts hold a huge responsibility, and at the same time, a huge risk. They could be assholes and withdraw money from the network node they opened (the network would have to immediately sense this and shuffle the money to other nodes). At the same time, they are the ones which will have to face the firing squad if and when it comes to that. This network would have to act similarly to the Tor network in that it would operate underground (in other words, it would be invisible due to cryptographic protocols). Instead of having 10 bank accounts which are bright red targets to authorities, we have a mesh of inconspicuous accounts with only a few thousand dollars in them. On their own they might be weak, but strung together into a network of millions of dollars worth of assets, they become part of a powerful engine for moving around Fiat. In addition, the ability to trade Bitcoin for Fiat becomes much more fluid.
      Authorities might compromise a node or two, but it's not as if we don't deal with this problem anyway. They might be able to kick a few of us out of their yard, but they'll have to spend an enormous amount of effort to tear down that tree-house. I want to make their job as difficult as humanly possible.


     There are obviously big flaws in this conception. How could we trust the openers of the accounts to not withdraw from them? Are there bank API's available for these accounts to be linked with for automated transfers? How would we organize the subscription service to this network? All of these wrinkles would need to be thoroughly ironed out for this to work, but if it were to be possible, I think this could be incredibly powerful. I'm interested to see what you guys think. Please let me know why you think this wouldn't work, apart from the points I've already raised.

I think you need to look into Ripple.

Ripple ≠ This

I guess I'm not sure what your trying to accomplish with all the bank accounts. Wouldn't that the govt more to seize?

Finding and compromising 1 bank account is one thing (think Dwolla). Doing the same for 10, is a whole different story. Now imagine 10,000.

The whole point is to develop bitcoin as its own currency and payment system combined.  When this is accomplished, then transferring into different currencies becomes less of a problem, because there is no need to.

Or you could do something such as this if you need bitcoin:

Buy something with cash, sell it for bitcoin, buy a product or service with bitcoin.

Or if you want to cash out, just buy gold or silver (or anything else of value that you could sell for cash) since there are no regulations.

When you aren't trying to use it as a commodity or stock, then solutions are easier to see.

The whole point is that the people and institutions which derive their power from Fiat see Bitcoin as a threat to their order. The recent Homeland Security action is a testament to this. To think that Bitcoin can be a "legitimate" currency alongside the US Dollar is ignoring the reality of the situation. Bitcoin is an upfront assault on the legitimacy of the international Fiat system. Services like Ripple are destined to go the way of any service which proposes to establish Bitcoin functionally within the existing Fiat frameworks. Bitcoin is not meant to live alongside Fiat. It is meant to kill it. With extreme prejudice.

Yeah, I guess so. In the end, with all the required effort to coordinate bank ledgers it might be easier and quicker to just overthrow the government and start a new country. LOL

You've just made about 1,000 points in 5 paragraphs...
The last being an overthrow of the US Government...
You forgot about Bitcoin Island and sex slaves for everyone.

The general idea for decentralized fiat transfer...
Is actually workable if implemented properly...
But this discussion is crazy unfocused and a dead end. 

The actual mechanism may be something akin to extreme prejudice or simple derision of what is currently in place (authoritarian dictate). The open area of approach is from an opposite direction that provides equal pressure on financing. Voting mechanisms are ancient and fragile to improvement; improved WoT system that eventually integrates a financial component. If everyone is on board or pushing for integration, the WoT has the front keys and no subterfuge is required. Just time and a well thought out implementation of a voting system will provide answers.
Sometimes kicking in the front door or sneaking in the back door is pointless. Just buy the place and move right in.

this is what computers are for....

If no centralization like Mt Gox, How can we know what our bitcoins can buy?

We can just ask the speculators/day traders to give us a number. They're setting the price.

It's not difficult to picture a P2P system whereby people trade cryptographically secured USD and other fiat tokens and then help each other cash out when necessary by going through personal bank accounts. You just need a strong web of trust and a mechanism to hold people accountable - which is much easier said than done, of course. But still, it's simple enough to picture.

P2P is quite an intoxicating concept, isn't it?

If it was easy and cheap to "shuttle money between accounts" -- free and cross-border --  as you suggest, we wouldn't need bitcoin.

This would also be overtly illegal, whereas Bitcoin itself is not.

Unfortunately today illegal = something that your goverment doesn't like. I'm sure that if you really go through formal procedure, bitcoin is already illegal in most of the countries.

Ripple is centralized.

What I don't understand is why no one is trying to create Satoshi's suggestion regarding this matter...... sigh... maybe one day after I finish the projects at hand.

Ripple is centralized AND closed source.

Out of the frying pan into the fire, yeah.

Exchanges are already decentralized.

They are also highly profitable businesses, and you can be sure more investor will want to setup exchanges to serve their local community.

However, it will take time for new exchanges to build up their reputation and to work with their respective local authority for the right operating license.

These will naturally replace the needs for cross boarder transaction with Mtgox.

No they are not decentralised. The count is a misconception of decentralization. Unless it is a pseudo P2P network.

They are anything but decentralized, therein lies the problem. MTGox is only a problem because it was one first exchanges, naturally without a lot of other options they carried 80% of trade, which makes it dangerous to the market as a whole. This is changing with more exchanges starting to come online.

We need a true p2p exchange platform to truly decentralize it. Though Gox and others are still necessary as intermediaries from coin to fiat currency.

You are barking the wrong tree.  MTGOX isn't the problem.  The problem is why aren't there other options.   What happen to all the other exchanges that come and go?   Why can't they run a viable business to attract and keep their customer.

No matter how you design your P2P platform, the exit point is going to be an exchange of some sort for you to convert crypto to fiat and vice versa.     

If the exit node is badly run, they will still not get sufficient participation.  Either they run out of cash to buy your crypto currency, or they run out crypto currency to sell to the user, or in worst case scenario, they go rogue and run away with your money.


 

Because regulation, licenses , etc aren't cheap.

Yes, that's exactly why we will never have 100 competing legit exchanges. Just think of stocks, bonds, even forex. You cannot simply open another exchange while being 100% transparent and legally secure. That's exactly the reason why there is so small competition to Gox even taking into account huge profit margin one can have. Thus no number of ordinary exchanges will replace a good p2p exchange.

P2P is the way to go, turn the exchanges into a Hydra with a million heads that can't all be cut off.

Have the client handle their own buy/sell info and distribute the load of a virtual exchange via VPN.

Make the entire network a single virtual trading floor where everyone can digitally "shout out" their order.

I dont want to scan my national id and bills and send them to mtgox. Where is the privacy?

Exactly. Easier said than done, obviously, but this is the only way that I can imagine Bitcoin progressing to the next level of legitimacy.

You could ask your neighbor how much they would take for a bitcoin. Since bitcoin is still in beta, you will be doing him or her a favor by just mentioning it to them.

A "price" is simply a measure of how much someone values a good. If I can find someone willing to pay $500 a Bitcoin, then that's the price of Bitcoin, regardless of what's happening on some Japanese website.

What exactly was his recommendation?

I love the idea of a totally decentralized exchange like this.  But I see one legal problem with it: if the government sees this going on and realizes what is happening, it's likely going to treat it as money laundering.  I don't see any way this can happen and actually be thought of as legal by the US government.  Would it be harder to target than an exchange?  Absolutely, but by no means impossible.

They wouldn't be able to see that those accounts are linked into a large network, because the underlying program would be invisible. After a very long time they might notice patterns emerge, since transfers are being made to nodes on a semi-regular basis, but on the surface it would just appear as a small account with a few thousand dollars sending out a few hundred dollars to other small accounts at very irregular time intervals. Also, they already consider Bitcoin itself as a money laundering vehicle, so it's too late to worry about that.

MY FACE EXACTLY :o

As in, you're interested? Or you're amazed that anyone would consider this?

I have a better idea: Start a buttonwood in your local area.

Advertise it on Craigslist (yes, I've seen bitcoin ads on Craigslist), localbitcoins, meetups section of forum, other forum, Facebook, etc.

Show up each week and wait.

 8)

Worst case scenario, you get extra time to read books or check email.

Best case, you get a free exchange and place to trade bitcoins for cash and vice versa.

Not only cash! If you live in an interesting, diverse, and somewhat popular area, you can have people selling turnips for bitcoins, or gold/silver, or goods/services. You never know what kind of monster you can create...

How would I get $500,000 worth of Bitcoin at a buttonwood? How bout a million?

Yep, true, I'm sure they already consider bitcoin a money laundering vehicle.  But so far they're only targeting the exchanges, not the users.  That would change with this system.  I could be wrong, but me, personally?  I'd rather them target the exchanges than the users.  Let someone else have the legal burden of bitcoin.  (Assuming you're not in fact operating an exchange yourself, in which case, you would be that someone else.)

I haven't fully read the OP, going to go more into it later when my head is clear.

https://bitcointalk.org/index.php?topic=208945

Check out my idea there, want to create a blockchain for IOUs.  Basically ripple but open source, that way people can exchange currencies with a trust based system.

Insert your favorite talking head's voice here:

"Breaking news people. You don't want to miss this....A large group of 'crypto-currency' fanatics have had billions of dollars seized by authorities. Experts say these individual's facilitated transactions between criminals dealing in child pornography, identity theft, illegal narcotics, counterfeit money, money laundering, and may have played a role in the terrorist attacks of (insert date here). It took 18 months and almost 1 billion dollars in tax payers' money to catch these cagey cyber-crooks, but the effort has paid off in a big way! (cuts to many guys being arrested for doing nothing more than being the 'b' - see below. The spin makes them look like KPers or meth dealers.)  This was the largest money seizure of it's kind anywhere in the world. Stay tuned for more details on this exciting report by Trisha Takanowa."

I like the idea of the circle of trust. I don't like the idea of spending time in Gitmo for doing nothing more than being the the 'b' in a->b->c. When will we realize, as a society, that 'b' has NOTHING to do with the ultimate outcome? It's going to happen either way.

These must be stepping stones toward a world where we don't have to worry about Fiat at all. The only reason this is necessary is because not everyone has Bitcoins. Not everyone has a business accepting Bitcoins. Not everyone has friends they can buy Bitcoins from. To truly establish the crypto-economy (it's already happening, just slower than it needs to), we need to first extract as much capital out of the old economy as possible.

Has anyone thought of creating a universal crypto wallet client that does the exchange rate for you ?.

Yup Chaoskampf. Its time for the dragon to eat it's tail.

pEACe

The point is, any "elaborate tree house" is just money laundering, plain and simple.

I agree the solution is to have more exit nodes... Yes. But why focus on BTC-> fiat conversion? It's the fiat that is the problem.  We need more grass roots buyers and sellers of physical goods accepting Bitcoin. Focus on that. There is no need to hide it, and it is not illegal.

In the eyes of the law, Bitcoin itself is already money laundering...plain and simple.

The main point here is that we can't move fiat around as easily as Bitcoin. This is where services like Dwolla come in. If you're proposing we build the Bitcoin economy solely on the backs of merchants, you're ignoring the fact that there are billions of people who don't have Bitcoins. Where would they get it from? Mining? You can't expect everyone who wants to get involved in Bitcoin to become a merchant in order to do so. The reason we've had such a huge explosion in the value of this currency is because massive amounts of Fiat have been taken out of the old economy in exchange for Bitcoin. As this becomes more and more difficult because of government intervention, we'll have to start considering ideas like this, however inconceivable they may seem at first.

Except that's not true. It can be used for money laundering once the fiat is in the equation.

The trader problem is a chicken and egg problem. Ultimately the more people who accept BTC as payment, the more the problem goes away. Until then we still need exchanges. But to get to this ideal point in the future, we need to focus on the traders, and keep the exchanges from being shut down.

On the contrary, proposing an overt money laundering scheme strikes me as bait for the authorities. and could bring more harm than good. For all intents and purposes, it moves your aim from "Want to buy and use digital currency" to "Want to launder money". And if that's your aim, a public forum is probably not the wisest place to set that kind of thing up.

And this is why it is a de facto money laundering tool as far as the government is concerned. The key word is "can". Think of these scenarios:


Me and you meet in some dark alleyway. I have 10 million dollars I need "laundering". You have the equivalent in Bitcoin. Commodities exchange hands


Me and you meet on some public internet marketplace for the world to see. I just spent 10 million dollars on some classic work of art (you could say I "laundered" my fiat with it). You have the equivalent value in Bitcoin. Commodities exchange hands.


Is there a substantive difference between these two scenarios? In my eyes, no, and neither to the eyes of the US government. There's no need for wishful thinking. Bitcoin will never be accepted by the status quo (at least in its present state. They could always co-opt it and produce some bastardization, e.g. Ripple).

Your mother should be ashamed of what a weak coward you are.

The idea of p2p exchange has been discussed on here for years, but hasn't materialized. My guess is that the people with the skills to do it are already too busy and there is not a lot (if any) money to be made doing it. Also, it would take time for nodes to build a trusted reputation for paying out the fiat - during which a lot of people will get scammed.

I would like to see a whole bunch more localbitcoin sites that are hosted all over the world and on TOR. Its a great way to build reputations and the more trusted, LOCAL exchangers, the better. I'm in LA and already have a book of contacts to buy from and sell to.

Double speak is the status quo's greatest past time.

What was that I heard.. something about how the clamp down on money laundering put the banks into a cash shortage because nearly all fiat is in the hands of people who are involved in various illegal activities.

The return of the Greenback and/or the gold/silver standard is more vital now than it ever was.

Really? You must be listening to Bill 'the Mason shill' Still and his Money Masters disinfo movie. Do I really need to explain why greenbacks are a total non-solution in THIS forum?

The problem is that most developers don't want to spend time and effort developing something that is in a shady legal realm. You could code a framework that would minimize the instances of scamming considerably, but the bigger problem must be where do you go once everything is complete? How many developers are willing to dedicate themselves to this underground project after it's up and running? Most like certainty (who doesn't), and the amount of work required to establish and orchestrate something like the idea I proposed would be well outside the comfort zone of most of our coding brethren. Obviously my proposal is somewhat extreme (though I consider it to be a very serious option), but even a simple p2p fiat exchange outside of the banking system would be inviting legal scrutiny.

I do not know who this Bill is. At least you do. :p

Is there anything else you would like to assume about me ?

ANYTHING that causes the banksters to lose their grip on the world economy, is a gooood thing.

You'd think there would be a Greenback altcoin by now. lmao

I don't think it is possible, at a fundamental level, to have any sort of distributed, or P2P, or non-centralized method to go USD<->BTC


All you can do is local bitcoins.

Every way of moving USD into the digital internet realm is highly regulated

The key is to use this regulation to your advantage. That was the whole point of my post. Instead of trying to pick away at the system from the outside, infiltrating from within (like my proposal, or something analogous) seems like the most "fundamental" way of going about this. Use the system to process it's own downfall. As far as local exchanges, I love the idea, but I don't expect that to be legal for very much longer...

With this reply, I reach 100 posts, finally becoming a full member. Just wanted this milestone post to be on one of my own threads. Can't believe I didn't join bitcointalk earlier. Also, watch out for the Chaoskampf proxy trading platform, coming to an internet near you:

https://bitcointalk.org/index.php?topic=221863.0

this. +1

Mt.Gox is dying.
This was part of the plan.

Since writing the original post, the Feds have just plowed through even more legally questionable (to put it lightly) regulation. If they don't mind breaking the law in order to enforce their law, then why should we get our panties all up in a bunch over fears of "money laundering" statutes? Stop depending on the Bitcoin Foundation to guide Bitcoin in its relations with governments. This community needs to learn to do its own PR.

Also, this....

http://www.guardian.co.uk/technology/2013/jun/01/google-ordered-hand-over-data-fbi

And this.....(our system in a nutshell...#IllusionsOfProsperity)

http://www.theworld.org/2013/05/northern-ireland-town-fakes-prosperity-for-g8-summit/

      I just got back from a long discussion with one of the hot-shot econ professors at my university (Steven Landsburg, if anyone's interested), and he says that he would invest tens of thousands into Bitcoin if the exchange frameworks were more friendly/legal for doing so. We talked about p2p exchanges and the need for true decentralization in almost every regard in order to establish pure markets.

      There's clearly a tremendous amount of interest buzzing around concerning Bitcoin. Its power as a vehicle for transferring value is noticed by internet trolls, drug dealers, and prominent economists alike. Despite all the threads on here with plans for a p2p exchange, there doesn't seem to be a concerted effort to craft anything of the sort. Planning is clearly of fundamental importance, but there have already been a few protocols planned out that, to me, seem incredibly legitimate (The BitMessage thread being one of them). If nothing else, these should serve as blueprints for anyone to implement analogous or complementary frameworks. Who is doing this? If I had 6 months of uninterrupted development time, this is what I'd do 24/7 (maybe I'd sleep and poop from time to time as well). Do you guys know of any active development projects on this frontier? I read the Development board pretty regularly, but all the p2p projects there are very speculative rather than explicitly undertaken and being written up/designed. I truly hope that serious programmers are actually working on this, because there's only so much time left before the Internet is fully regulated and Bitcoin has another HUGE obstacle to traverse apart from the exchange legality issue and money laundering regulations.

      That brings me to another point. Do you guys know of any legitimate p2p internets? I'm familiar with mesh-net among a few others, but I'm curious to to see if the community knows of/is developing any alternatives. We need to appreciate the incredible importance that this factor will to play in the upcoming months and years. I'd argue that Bitcoin's future depends SOLELY on a free and open internet. No other issue is even close to being as important to the continued success and evolution of Bitcoin as this. What do you guys think?

There is a lot of work right now being down on P2P exchanges and if you PM me, then I can make some introductions. This topic is very dear to me and vital to the long term success of Bitcoin.

First off, thank you for the work you do in spreading knowledge about Bitcoin and cryptographic currency. I've always believed that Bitcoin's greatest tool for expansion and influence in our society is education. This goes for almost anything you can think of, but for something as obscure as a cryptocurrency, we need all the help we can get in educating the lay man and women about the principles that give Bitcoin its legitimacy and strength, along with its inherent superiority over all other forms of money. I'm looking forward to hearing from you about active projects in p2p exchanges. I need some educating myself!

+1

Grassroots. It's how national elections are won (ask Obama campaign strategists).

Using the internet to spread a message makes it doable for any campaign.

Who would ultimately benefit the most from this? The early miners/purchasers/adopters of cheap BTC. Maybe some of them would help support a bounty campaign to begin an internationally loose but semi co-ordinated Sunday afternoon coffeehouse/market/public square etc meet up. THE BITCOIN HOUR - Could be any day or any venue but at a set time. And focus OUTSIDE the US for this. Let the US gov continue doing exactly what they're doing while BTC growth outside the US eventually dwarfs the US, making their actions insignificant.

As for those interested in buying 500/1000/5000/100,000, MTGOX is available. Nothing stopping you from buying now.

Just my 2 cents.



 

While I agree that local exchanges are an awesome idea and should be encouraged, international Bitcoin buttonwoods would not be immune from federal regulation either. Most developed countries are all part of the same central banking system, whether you're in France, Peru, Turkey, or Israel. (http://en.wikipedia.org/wiki/Bank_for_International_Settlements). The fact of the matter is that exchanging Bitcoin for fiat is not a welcomed activity, and if you're doing out in the open in broad daylight, you're just inviting unnecessary attention and scrutiny.