We're still missing a lot of information. For example, we don't know whether Gox claims they received a valid YubiKey code when the withdrawal was made. This may get very interesting soon though.

You live in a fantasy world where no solutions are needed because the real world problems businesses actually face miraculously don't exist.

A direct link to your bank account doesn't help because ACH transfers are reversible.

If you're a scammer using a throwaway account, putting the account in the negative doesn't do anything.

This business model will lead to a death spiral. Once scammers find the flaw in it, you get more and more scammers. This requires you to raise your prices to cover your costs of preventing fraud and covering fraud losses. The fraudsters don't care how high your prices are, they're not paying them anyway. So you wind up scaring off legitimate users and increasing your fraud percentage.

It's definitely not hopeless, though it's probably still at least a bit too early. The trick will be to come up with some kind of reasonable suggestion for how PayPal might interact with Bitcoins that actually furthers their strategic interests rather than threatening them.

For example, native Bitcoin payments don't offer any buyer protection. A key part of PayPal's business is offering buyer protection. And that's a reason many people prefer to use PayPal rather than Bitcoins to deal with an untrusted seller. PayPal could offer a buyer protection scheme if they just held the seller's Bitcoins for some amount of time.

Both of these things are true, depending on the particular situation a person is in.

For people who only want to transact in a crypto-currency, that's probably true at least for the short term. Ripple has community credit capabilities, higher transaction speeds, and a few other properties that might make it advantageous even for people who are only interested in crypto-currencies. However, until the world switches to crypto-currencies, there's still a multi-billion dollar market in payments and conversions among fiat currencies.

Quite the contrary, that would be great for Ripple. Ripple currently has the same problem Bitcoin does -- it's hard to get fiat money into and out of the system because of exactly the problems I'm trying to draw attention to here -- it's hard to mix soft money and hard money systems. If people could easily buy and sell Bitcoins, that would make it much easier for them to get money into and out of Ripple because Bitcoins are hard money.

Only because there aren't good, easy way to steal Bitcoins. If there were, Bitcoins would be much more desirable because the payments are irreversible and harder to trace.

I don't agree. There would be a flood of hacked accounts.

Right, such as not allowing people to use PayPal to buy Bitcoins.

Exactly, and that's why they currently don't permit PayPal to be used to buy Bitcoins.

That is not true. Simply saying the transaction was unauthorized is sufficient to get PayPal to reverse a gift. There is nothing the recipient can say in response. They can't say they earned it.

You have it completely backwards. You are the one saying there is no problem to solve and thus that no problem solving is necessary. It is *that* attitude that prevents things from changing. I'm trying to get you to see that there are big problems that would need to be solved and you are refusing to think and instead just dismissing the problem.

This would be an absolute disaster. If PayPal adopted this policy, the rate at which PayPal accounts are stolen would go through the roof as thieves used malware to get people's PayPal login information and easily converted that to Bitcoins. Victims would complain to their banks when PayPal doesn't help them, they would reverse ACH transactions, dispute credit card charges, and PayPal would severely damage their banking relationships.

I don't really have the patience to try to explain something to someone who isn't listening. If you really think you're right, start a company that lets people buy Bitcoins easily with a credit card and you should make lots of money.


Okay, so what does PayPal do? You still haven't answered the question. I've asked a very specific question with a very specific scenario and asked you what PayPal does. I'll try it again:

1) Jack sells Bitcoins for USD using PayPal.

2) Jack receives USD over PayPal from Jill's account.

3) Jack sends Bitcoins.

4) Jill complains to PayPal that her account shows a payment she didn't authorize.

Specifically, what does PayPal do?

(If your thinking "Whatever they do when this happens now", the answer is that this *never* happens now because they don't allow you to use PayPal to buy Bitcoins. The difference matters.)

Right, because Bitcoins present the same regulatory risk as dollars.

And by your logic, these companies can't make any money because the problems they solve don't exist.

Bitcoin transactions, unlike USD transactions, are irreversible. They can't seize the USD funds because they owner of those funds claims the payment was unauthorized. PayPal is good with those cases because they aren't dealing with hard, irreversible payments.

You're just waving your hands and ignoring the issues as if that would make them go away. Let's try another one:

1) I'm a Bitcoin seller.

2) Someone agrees to buy Bitcoins from me.

3) A USD PayPal payment is made to me.

4) I send the Bitcoins.

5) The sender claims they didn't authorize the USD payment and their account was hacked. There is no way to tell who actually received the Bitcoins or where they went, even seconds after they've been sent.

What does PayPal do?

The fundamental problem is that Bitcoin payments are hard and irreversible while USD payments are soft and reversible. It is a very thorny problem to be a middleman in mixed hard/soft transactions where the middleman cannot trust either endpoint.

If you think you can make this work, forget about PayPal. Sell Bitcoins and let people pay with a credit card. You'll make a ton of money -- except you won't because it doesn't work.

Where do they get the Bitcoins from? What do they do with the Bitcoins they receive? How do they handle exchange rate risk? How do they handle regulatory compliance?

I believe such a limit would violate the EPS12V specification (see Table 28 of version 2.91, but other versions have a similar requirement) which specifies that overcurrent protection may not trigger until a rail reaches, at minimum, its specified peak current.

Then explain how they would do it. Here's the scenario again:

1) I pay dollars for something.

2) The seller takes his money in Bitcoins.

3) I dispute the transaction.

What happens? Does PayPal cover my dollars? Where does PayPal get the Bitcoins to pay the seller?

For this to work, someone would have to provide PayPal a service to and from Bitcoins that provided substantially the same semantics as their current USD and EUR services. For very good reasons, that doesn't exist. PayPal is a soft monetary exchange, Bitcoins do not have any soft exchange. Matching soft to hard systems is very difficult if neither endpoint can be trusted by the middleman, which is PayPal's model.

And if you're going to tell PayPal to support Bitcoins but not provide any buyer or seller protection, they'll wind up providing a Bitcoin service that even Bitcoin enthusiasts will recommend against using. (This is why common advice is to use PayPal, not Bitcoins, when the buyer and seller cannot trust each other!)

As a practical matter, von NotHaus was prosecuted because he encouraged counterfeiting -- it was part of his business model. As a legal matter, I wouldn't suggest issuing metal coins that are intended to circulate as money for general use. For more details, see http://www.dictocracy.com/libertydollar/commentary/pdfs/1164570384.pdf

You can do the math. If you have an 85% efficient power supply delivering 800W and your line voltage is 117V (standard in the US), you get:

800 / .85 / 117 = 8A

8 Amps.

Right, but how would that work if PayPal permitted transactions in Bitcoins? Would they provide protection only for non-Bitcoin transactions? And thus the Bitcoin community, the community they'd be catering to by doing this in the first place, would still advise not using their service? Or would they provide protection for Bitcoin transactions? If so, how?

If you're going to petition someone to do something, the very first thing to do is to decide exactly what it is you want them to do. Ideally, such that you would support them if they did it. There are ways PayPal could be more Bitcoin friendly. These are not them.

The LD was counterfeit. If someone tried to pass off physical BTC as "current money", or encouraged others to do so, they'd run afoul of the law too.

If you sell a stolen car, you can describe the prosecution as being for, ultimately, "selling a car". But that kind of ignores the fact that the car was stolen. The key fact is that von NotHaus was counterfeiting US currency and this fact was key to his prosecution.

The thing is, it's not at all clear what it is you're petitioning them to *do*.