Bitcoin Forum

Hi.
Just curious about what problem bitcoin solves.

If I should setup a service in I2P and have people pay to use it, bitcoin isn't anonymous enough.
As soon as I use any of my I2P-bitcoins outside of I2P, I'm outed.
And anyone who wants to buy things from me would have a paper-trail linking their purchase from me to their regular account.

And if I setup a service on the regular internet, why should I bother with bitcoin and not just use VISA/Paypal/anything-else.

I'm trying to see a justification for bitcoin, but I just don't see it. Please educate me.

Tim

no fees. no charge-backs. no third party involved = no freezing.
to tell only a few advantages.

You seem to see bitcoin only as a method of paiement.  Bitcoin is more than that.  It's a currency.  And it's a currency that has no central issuer.

Bitcoin is more that just a payment method. It's also a currency.

Other payment methods such as Visa, Paypal, Liberty Reserve, Pecunix, etc. are not currencies. They need to denominate their payments in some external currency that they have no control over.

Bitcoin as a currency solves the problem of the need for a corruptible third party (eg. central bank) to mint the currency.  Compared to gold and silver, it solves the problem that it's hard to send gold over long distances and it's expensive to store securely.

Bitcoin as a payment method is irrevocable like Liberty Reserve but unlike credit cards and paypal. Many here see this as an advantage because revocable payment methods are often abused for chargeback fraud.

It also solves the problem of needing to trust a "bank" to hold your wealth. Liberty Reserve for instance could go bankrupt, become rogue, be shut down by government, etc.  Your bitcoins are stored in the network and you retain full control over them.

Also, anonymity will improve as the economy grows, and more and more people can offer their work/services/goods directly for Bitcoin without relying on exchanges. As long as you only purchase and sell virtual goods full anonymity is possible.

 

And immediate settlement -- the minute a transfer is made to you, those funds can then be spent.  i.e., no 3-day holds on your "deposits", no restrictions applying to new users, etc.

I read this interesting article today about bitcoin...(I dont know who posted it)
http://permalink.gmane.org/gmane.comp.finance.gold-silver-crypto/21949 (http://permalink.gmane.org/gmane.comp.finance.gold-silver-crypto/21949)

Someone might be able to see that you have some bitcoins, but how would they know how you obtained them?  Eventually, as a sufficient number of people start using bitcoin, trades will stay within the bitcoin system, i.e., there won't be much of a need to do exchanges.  There will also be services like the Bitcoin Laundry (http://bitcoinlaundry.com/).

Bitcoin solves the problem of central banking.

Thank you for your answers. I still don't quite get it though.
Ok, so bitcoin isn't just a payment method, it's a currency. And it doesn't have a central bank, the bank is seen as a problem here.
That would draw some libertarians, not many others.
And some technocrats would be interested in the implementation. For me, I don't see any big benefit yet.

The way I  see it.
Fees, too small to warrant switching form a well established currency.
Chargebacks, solveable by insurance.
Freezing, a problem if you're wikileaks, not for many others. Don't keep all money in one place and you should be fine.

Here's where I see some benefit.
Full anonymity is possible if you're only doing virtual things?  But not if I mix the two. When I buy my first pizza for my bitcoins they can link that to my I2P-website.
Is there somewhere I can read about how to be fully anonymous? I'm thinking of ways to reward those who provide valuable services to I2P, nothing illegal. Just to be clear about that. Some things might be questionable though. Supporting a I2P-torrenttracker might be one of those.
However the person running such a service has no real use of the coins, other than pushing it around the I2P network. Right?

For regular services on the internet I would not accept Bitcoin. Too insecure. Not possible to insure against value fluctuations. Among other things.
It does have some benefits, but it's no "killer app".
Find some place where bitcoin "fits" and build a community there. Perhaps the anonymous networks, perhaps somewhere else. I'm afraid bitcoin will never take off, just existing as a fun thing for the libertarians and anarchists. :-)
I would love to be wrong though.

Hyperinflation, trust, and integrity are HUGE problem. Bitcoin virtually eliminate the need to trust bankers not to abuse the printing machine.




The uncertainty of people chargebacking you is still real. Insurance is more fees you have to pay.


The historical record indicates that we are growing and continue to grow. Just this month, we broke just about every forum record. Obviously, past performance doesn't mean future performance will continue...but it is clear at this point that our community is growing beyond the slashdotting stage.

If I was holding EUR in a bank account in Greece, Spain, or Portugal, I would have reasons to be seriously worried at the moment, even if I was an "ordinary person" who doesn't know what a libertarian is.

The risk of the Euro breaking apart as a result of bad central bank policies is very real at the moment.  It is not some theoretical dystopian wet dream in the minds of libertarian philosophers.
I know lots of hands-on people who are working in the finance industry and some of them think that the risk of a EUR collapse by 2013 is 50%.

Your EUR in the Greek bank would then probably be converted to Drachmes, and god knows how far these would devalue.  Even in a German bank account you will be facing uncertainty. How would the central bank set the EUR / Deutsche Mark / EUR2.0 / whatever exchange rate?

Skepticism about centralised fiat currencies is very much in the Zeitgeist at the moment, even among ordinary people. That skepticism will draw some of them to Bitcoin.

You think I am being paranoid? Well, you don't have to take my word.

The Swiss Franc/ Euro exchange rate has recently reached a historic high. (the Swiss Franc is seen as a safe haven currency because the Swiss central bank is not quite as incompetent as the others). The market doesn't lie.


I agree, ordinary web merchants are no killer app.

Some have suggested decentralised p2p file storage as a killer app. This is an example where you can only utilise a decentralised currency. Or at least, if you utise a third party payment method, that third party has the power to shut down the entire storage network at will. This would be seen as a weakness and would increase the risk of data loss from a user's perspective.

Another killer app that has been suggested is a p2p DNS fused into the blockchain of Bitcoin.

To me, Bitcoin solves the same problem that gold solves, without the fuss of having to transport it from point A to B, and without every recipient having to assay it to make sure the gold is there.

Bitcoin solves multiple problems. It is quite a reVolutionary invention.

1. Problem of government breaking down money using printing them or manipulating them in other way.
2. Problem of centralization - too much power corrupts people too much. In bitcoin, that is not a problem, as there is no central authority.
3. Problem of single point of failure - bitcoin will work as long as internet will work. Destruction of multiple banks or data centres will not bring bitcoin down.
4. Problem of anonymous transactions (when used properly).
5. Problem of divisibility: You can divide bitcoins up to .8 decimal point, like 0.00000001 bitcoins. Actually the protocol allows dividing even to smaller pieces.
6. Problem of creating gold standard currency which can be easily sent over the internet.
7. Problem of creating an electronic virtual currency, that would not be virtual and would be a "hard" currency. Each Bitcoin has an inherent intelectual value, because it holds a solution to complex mathematical problem. And REAL work needs to be input to produce a bitcoin, just like you need real work to mine gold out of ground.



I don't think you are understanding the conception of bitcoin properly. If you would, you would also know that bitcoin can be quite anonymous when used properly.


Why would there be any paper trail ?
1. Somebody buys bitcoins somewhere - probably on some exchange or market using credit card. Trail starts.
2. It sends them to your one-time generated anonymous bitcoin address (yes, Bitcoin supports it) , trail breaks.

So how does the trail pinpoint you if nobody knows that the final address belongs to you ?

I think to most people the benefit over other payment methods is:
no fee
ability to do micro transactions
anyone can use it

Most people won't care about the austrian economic/libertarian aspects.

Let my try this comparaison :

Bitcoin is to Paypall what email is to telegraphy.

Now it's obvious that email is better than telegraphy, but I'm pretty sure that 15 years ago we could have found people saying that email has no future and that telegraphy is better.

How about Bitcoin is to Paypal as email is to fax.  They are both electronic transmission methods, but Bitcoin and email are lower in cost (nearly free). 

Yeah, sounds better indeed.

You don't get it yet, it's a store of value, that's where it fits. As it's such a good way to store and transact value, it's not going to go away until the internet does. How easy it is to buy a loaf of bread with it at this point is of no more importance then how easy it is to buy a loaf of bread with lumps of silver.

The secondary growth potential is enormous, I'm reading this forum and seeing the creation of whole new service industries, it's a self-reinforcing feedback loop. For me bitcoins have already arrived as a valued commodity that is actively traded and actively hoarded. No one's giving more than 0.05 of them away for free. Not being able to spend them directly is entirely irrelevant.

Think of it like classic cars, there' a market for that, there are people who think of classic cars, or classic shoes, or 'art' as safe place to put their money. No one cares if they can't always swap their classic car directly for something else and have to use dollars or pounds instead.

Difference here is that bitcoins are easy to change hands directly, and you can spend their value fractionally, for things smaller than the cost of a full classic car. Right now the bitcoin economy is probably the size of about a hundred chevrolets. lol.

I will never get this. A government currency is always more insecure than a non-government currency, yet people keep thinking otherwise Study history. Governments always try to steal their citizens by debasing the currency.

In reality is very simple, a government currency is backed by force. A non-government currency will only take off if it offers a quality currency, otherwise people have no reason to use it. A government currency is imposed by force, there is no incentive to offer a quality currency because people has to accept it anyways and therefore its always debased.

Government currencies are always more dangerous than voluntary currencies.

I don't really understand why you think the Wikileaks thing doesn't apply to you.

There are two things you overlook.

The first is you seem to care a lot about anonymity via I2P which rather implies you don't want somebody to know who you are or what you're doing. Yet your solution to account freezing is just "don't store all your money in one place". How do you propose to have multiple bank accounts that can't be tied together and all frozen simultaneously if you piss off the wrong people?

The second is that Wikileaks did not have their accounts frozen. Instead payments to them were blocked. That's rather different and is not solved by simply keeping funds in multiple places .... after all, if nobody can send you money, almost by definition you have no funds to spread around.

@v-tim

I2P is more of a darknet of it's own, it's not realy meant to go outside on the public web, but ofcourse you can set up proxies (and there are) to do that.

If you set up a new chain inside I2P it will be useless in the outside world unless there's some kind of exchange for it.

If you're going to proxy out you can be just fine, use multiple accounts, transfer from anonymous to non-anonymous and then spend it . Yes you can see where the money came from, but nobody knows that anonymous was you being anonymous, could have just as well been any other anonymous sending you the bitcoins.

The main problem it solves is that the government cannot reach up it's bum and pull out a trillion BC.

This will prove to be vital in the next few years.

Don't forget about pedophiles and money launderers  ;D

People have a tendency to overinsure themselves against high frequency, low impact events and underinsure themselves against black swan events.

Just because some government currency hasn't failed in the last 30 years doesn't mean it can't.

because it is. After the bubble things go back to their actual value to people. And stained paper is not very valuable.

If a government currency is always more insecure than a non-government currency, then how do you explain the e-gold fiasco?  I personally know someone who lost US$50K he was keeping in 1MDC at the time 1MDC's account was seized, and I've heard of others who lost even more.  As far as I know, no one uses/trusts e-gold today, despite the best intentions of its founders who were nonetheless forced into complying with the demands of the government after they were falsely arrested on trumped-up charges of money laundering.

The attractive thing about bitcoin is that it seems to be a non-government currency that is relatively free from the coercive force of government at the present time.  I do fear, however, that as the internet becomes regulated more and more, the day may soon come when it will no longer be possible to initiate TCP/UDP connections to arbitrary ports on arbitrary IP addresses -- something that would leave the internet as used by most sheeple intact, while denying services such at those provided by bitcoin, freenetproject, i2p, and any other innovative services that would not be granted waivers by some government-supported regulatory body.  This sort of regulatory action would likely be justified with the standard approach of insisting that it is the only way to keep people safe from terrorism (or whatever the bogey-man of the year is at the time).

In order to stay one step ahead of those who feel threatened by a non-taxable, non-regulated, relatively anonymous currency, I hope some of us will put up with being called paranoid by many others by considering these threats, and come up with effective ways to neutralize them which can be implemented by the development team ahead of time when they become necessary.
 

worst comes to worst, the bitcoin client can be modified to communicate over email.  perhaps the bitcoin messages will be hidden steganographically inside jpg email attachments.   Webs of trust will prevent government agents from knowing whether a pet photo that I sent to my aunt contains a hidden message or not.
 
then there are always wireless mesh networks for the last mile distribution.

I doubt that it will ever get to this point, unless we are already in a full-scale revolution.  That would be like telling people they couldn't leave their houses without getting their destination pre-approved by the government.  I mean, look at the stink over "net neutrality," even though this was a relative non-issue.  I do share your concerns, however.  Please help us by thinking up possible scenarios and the workarounds to avoid them.  Nice first post, by the way.  Welcome aboard.

A lot of things that have happened since 9/11 in the U.S. would have been laughed at as unlikely before the event.  Suspension of the right of habeus corpus for suspected terrorists, even if they are U.S. citizens, for one example, but there are others.  Incrementalism is insidious, and for those times when there are significant objections to some new usurpation of individual rights by the government, there is always a convenient "event" which facilitates the acceptance of new restrictions "for everyone's safety."  So long as people consider life (and by extension safety) their #1 priority (ahead of freedom, honor, etc.) then there is no reason to believe this trend will not continue until we have no meaningful rights left (compare, for example, the U.N. Universal Declaration of Human Rights to the U.S. Bill of Rights).

"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."  H.L. Mencken (written around 1918)

As those of you in the IT business already know, any approach at regulating the internet that operates on the basis of restricting individual ports or IP addresses is doomed to fail, because the "hackers" will respond by simply randomizing the ports used, or changing IP addresses.  Similarly, any attempt at using deep packet inspection will likewise fail because the hackers will respond by using encryption.  The only way for governments to stop pesky anonymous publishing services (freenetproject) anonymous network services (i2p), anonymous currencies (bitcoin), etc. will be to make a fundamental change in their approach.  Instead of the inherently promiscuous approach of allowing everything except certain services/sites, the opposite of denying everything except that which is permitted will doubtless be strongly pushed as the only way to control "child pornography, terrorism, and hacking" on the internet.  This won't affect the average person who uses the internet to order goods from Amazon or to check his credit card balance online, but it will affect those of us who bridge networks with ssh tunnels, utilize overseas VPNs to gain access to services not available in our own countries, use bitcoin/freenet/i2p, etc.  As with everything else, exceptions will always be made for larger corporations with "legitimate" communications needs, but that won't be very helpful to most of us.

I'm not claiming the above is inevitable worldwide, just reasonably foreseeable, and perhaps likely on a more localized basis.  It would be nice if it were possible to provide mechanisms by which bitcoin could survive in such an environment.  Any solutions would need to rely on the inevitable information leakage that will always be present in any worldwide communications network regardless of the best efforts made to limit it.

The ultimate fallback mechanism of manually transporting the necessary files to update one's bitcoin data directory would be a great start.  If some easily-followed procedure of accepting updated blocks in file form (either as email attachments, from a USB-key or from a file extracted from a steaganographically encoded MP3/JPG file as already suggested) were created, then many forms of human ingenuity could be utilized to keep the network alive in the face of totalitarian regulation.

Automated mechanisms would need to be carefully considered because they tend to be predictable and thus detectable/able to be censored.  However, friendly web sites would offer one possibility, although they are easily blocked.  Those of you old enough to remember analog modems/usenet ! addressing/bbs will also see that the phone lines represent another possibility.  Speaking of usenet, if it were allowed to continue in its current form (seems unlikely), then it also represents an ideal medium for block updates to propagate.

A plug-in mechanism added to the bitcoin client, through which plug-in modules could be developed on an as-needed basis to adapt to potentially rapidly changing legal conditions seems like an ideal place to start.  The plug-ins could support various mechanisms for updating blocks ranging from manual updating with files to dialing into a remote computer using an old-fashioned modem, to accessing a radio-operated BBS on an amateur satellite orbiting the earth.

E-gold **FIASCO** ?

Check this out:
http://en.wikipedia.org/wiki/E-Gold



If by "fiasco" you mean being raided by government, then fiasco it is, indeed.
Government really hates competition.

I followed the e-gold saga for some time (some people I know are/were in the digital metal currency market).

I would call it a fiasco for a number of reasons:

1)  A number of accounts (as you pointed out) were seized.  Depositors lost millions of dollars with no chance for recovery due to the anonymous nature of the systems involved (one of the accounts seized was itself a DGC based on e-gold).
2)  Before the government raids, you could in/out exchange e-gold for other currencies with ease.  Today, is there *anyone* who will out exchange e-gold?
3)  E-gold claims it contacted the U.S. government on several occasions asking if it was subject to KYC rules, and each time they were told they were not subject to the laws (see Doug's blog on the e-gold site -- though you might have to find it on archive.org if it has been removed).  Then out of nowhere the government arrested the founders and halted all operations.  The founders were given the choice of either acceding to all of the government's demands on how they could run their business, or go to jail.

In hindsight, it is easy to see a number of mistakes were made by the e-gold founders, chief among them trusting the U.S. government to play by its own rules, something that has been made even clearer recently with all the hypocrisy surrounding the thinly veiled attacks on Wikileaks.

Jason, it isn't just government currencies that are sure to fall. It is all centralized currencies. If the currency is small and centralized it can get crushed by a bigger group, if it is the hugest then it will rape you itself.

I agree with you, FreeMoney.

I'm just pointing out that in an easily foreseeable repressive environment, Bitcoin is vulnerable too.  A few steps taken soon to harden it against the inevitable attacks will be propitious to it's future.

Like ?

What you say is correct. I should have said that government currencies are always more insecure from inflation than voluntary currencies. If governments use force is another game (not saying you should not take the possibility into account).

About the problem of governments controlling the internet the answer is this: http://guifi.net You have a english button there to get a translated site, and you should check the map button on the top right, to see how big is the network. Its basically a private and voluntary tcp/ip network.

I mentioned a couple of posts back an idea for updating the bitcoin client to use a plug-in architecture for the purposes of updating blocks.  The existing mechanism could be kept as either a built-in or converted to a plug-in.  Additional mechanisms could then easily be added and tested/deployed.  The plug-ins would not be responsible for authenticating the blocks, just downloading them.

Specific plug-ins could be developed in response to changes in the threat model.  For instance, if bitcoins are outlawed, a mechanism that obscures the communications between clients could be added (for example, via i2p) in order to protect users of the software in the affected jurisdiction(s) from prosecution.

From what you are saying, it clearly looks like it was not fiasco. Government was simply more powerful and destroyed it.
It is not a fiasco of currency itself. If you have army big enough, You can destroy just any non-bulion centralized currency by simply invading the country which issues the currency.

** Also, please stop quoting below messages. It is annoying as hell. ** This is not usenet or email.

Quoting provides context to those who do not read the entire thread, so I will continue to do it.  I will, however, trim the material quoted to the minimum necessary in order to assuage your delicate sensibilities.

As for your continuing and pointless argument about whether or not the government's attack upon e-gold constituted a "fiasco" or not, we'll just have to agree to disagree and let it go.  Further debate on the subject will serve no purpose other than to let people know that you are a troll.

Jesus, using the word troll had become..less powerful these day. Just because you feel insulted, doesn't mean that said poster is a troll.

Jason, quoting is helpful. I find it more helpful if the quote is on top, maybe just because I'm used to it. I think other are the same way.

I did not say "stop quoting at all". Just quote OVER the message, not UNDER it.

Look at your post, now back at mine.
Now back at your post, now back at mine.
Sadly, your post isn't mine, but if you stopped bloody quoting under the message, it could be like mine.

Is that so difficult ?

(Also, I am on a horse)

IF bitcoin is successful, I believe there will be a inflection point in the future when government(s) will try to destroy bitcoin's existence, either indirectly (at protocol/network level as described in Jason's posts), or directly (by facilitating malicious programs/runtimes).

Considering the enormous economic and social consequence in stake, rest assured the last standing fiat government body will not give up without a fight.

The only question is which government will lead this effort, the issuer of USD, RMB, ... or IMF SPR.

For a irreversible digital currency to survive, it has to be 100% reliable -- I am not talking about individual transactions or storage, I am talking about the whole system.

I am wondering whether following nightmarish scenario can become a reality:

In year 2030, with the help from a branch of government XYZ, a computer virus is released, for a period of several days, it simultaneously hijacks sourceforg website and infected millions of bitcoin client executables, moving funds to other infected nodes before destroying the wallet.dat files. Before bitcoin development team gets the message out and releases a patch, billions users has been impacted and millions BTC have been destroyed.

You just went totally offtopic with this man.

lol.

Tons of valuable will be stolen via social engineering attack before the government have the chance to try out that attack. Thus, users of bitcoiners continue to learn...

Human is almost always the weakest link.

sounds like a fundamental conflict between collectivism and anarchism -- maybe Collectivist Anarchism is our destiny?  :o

More like conflict of Human vs Machine.
When comes to security, social techniques are more effective than strictly computer ones.

sorry, just found out an entire thread is dedicated to this topic ("Hostile action against the bitcoin infrastracture").. fascinating.

You just became my new god.

BTW,
I forgot to add that my horse is amazing.
http://www.weebls-stuff.com/songs/Amazing+Horse/

(Warning: this stuff can melt your brain, you're opening this link on your own responsibility.)

Thanks for some very interesting answers. I'm trying to write some followup questions to some of the topics that have been brought up.
I have put together some scenarios, or use-cases. I'd love some thoughts about these too.

1) I am a conservative senator with very traditional values, focus on the family and such. I do however in my spare time purchase gay porn. Naturally I don't want to associate my visa-card with such activities, so I buy some bitcoins with said card and then spend those in a shop which caters my interest. I do this though TOR or some other anonymous service, perhaps a VPN bought with bitcoins. How long, if ever, does it take for the journalists to show up at my door?

2) I am a computer professional who decide to run a service in I2P that is somewhat "gray" in the legal sense. A service that has both legal and illegal uses. I allow people who wish do donate bitcoins to this service. I already have a bitcoin wallet which I use for things that are 100% legit, so I use a receieve adress which is only used in the I2P-service. Will my anonymity be compromised by recieving bitcoins? Will it be compromised when I spend coins on the "open" internet?

If these questions have been answered a few hundred times, perhaps even in the FAQ I apologize and will hang my head in shame and go read those, if you'll just give me the link. I haven't seen anything about this, but perhaps I haven't looked hard enough.

I'll see if I can't come up with a few more scenarios later, if I can think of any.

It really depends upon, not just how careful you are, but how careful the gay porn site is.  This is why bitcoin is psudoanonymous, not truly anonymous.  You can actually choose to not disclose your identity to the porn site, but you really cannot hide it from a determined investigator.  If a reporter were to associate one or more bitcoin addresses to the gay porn site, and then associate one of the addresses that have sent them money with you; then use of Tor doesn't matter, you're going to be on the news.


Again, this isn't about the security of Bitcoin itself.  If the bitcoin address(es) used to receive donations for said service are associated to yourself, you're burnt.  And yes, you could out yourself by sending the coins to another address of your's that is known to be yours, or by spending those coins with someone or some site that could be compelled to tell the interested who it was that bought something with those coins.  There may not be a shipping address,  but there would be other clues in the logs that a talented investigator could use.

https://en.bitcoin.it/wiki/Anonymity

You can remain anonymous if you mix the coins well enough, though this is currently difficult.

v-tim,

Are you a venture capitalist or angel investor?

Wow, I almost din't escape. Does it do that to everyone every time? Maybe I'm just up too late. I'm afraid to click it again.

Well, You have been warned. You can't sue me for any permanent brain damage anymore.
I myself suspect this may contain some subliminal messages - I see no other explanation of this hypnotic power.

I don't get it.  ???

Which one ?