Once Bitcoins become a serious threat ...

[Frizz23]

Once Bitcoins become a serious threat to the "banking industry", wouldn't it be easy for them to kill Bitcoins? E.g. spend some peanuts (e.g 20 million $), design some advanced ASICS - and take over 51% of the network.

[ElectricMucus]

long story short: Once BTC is considered a serious threat it won't be peanuts anymore to kill it. For now we are under the radar and probably for a while longer.

[Stephen Gornick]

Once Bitcoins become a serious threat to the "banking industry", wouldn't it be easy for them to kill Bitcoins? E.g. spend some peanuts (e.g 20 million $), design some advanced ASICS - and take over 51% of the network.

Well,right now at 17.67 Thash/s capacity (per BitcoinWatch.com) that means about 700 of the BFL BitForce FPGA mini rigs are all that are needed to achieve 51%.  If that much equipment was available (except it isn't), at $15,295 each only a little over $10 million would be needed to achieve 51%.

But what they can do with 51%?  Not much.

They can omit transactions from the blocks and they can go back some blocks and double spend transactions sent to them.  That's the extent of it.  They can't spend my coins.

So who can they double spend against?  Orders placed with online merchants for physical delivery requires a physical address.  It is not good for business if you are a bank and get caught doing something like this, so that's out.  So what businesses that are left for double spending against are the exchanges.  But exchanges have AML limits that cap the per-day withdrawal, even for trusted accounts.  

So for the attack to do damage would require the control of a lot of non-verified accounts.  I suspect the bigger exchanges would sense something is up if all of a sudden a lot of non-verified accounts were to suddenly request withdraws all at once.

A double spend attack might do damage to some exchanges and possibly harm those who had funds held at certain exchanges if those exchanges become insolvent as a result.  So the exchanges would learn and implement better detection to impose stricter withdrawal limits when the hash rate rises rapidly.  Or whatever.  But the banking industry wouldn't "kill bitcoin" as a result.

Now if they gain 51% and are not accepting new transactions in any blocks, then that would be disruptive.  It would be a shame if they went through all that work and an economic majority of the Bitcoin economy decided to hard fork and the algorithm was made to include one extra step, such as adding one more operation  e.g., sha256(LShift(sha256())) and that rendered those ASICs completely useless.

This is a temporary vulnerability anyway.  ASIC designs from more than one vendor are being worked on.  Once we get past wide distribution of ASICs, then there is no longer the risk of some vastly more powerful technology available to an aggressor attempting to thump what the free market has achieved.  (at least not until quantum computers arrive).

[Frizz23]

But what they can do with 51%?  Not much.

They can destroy trust.

Basically it's: "currency = trust".

Without trust, there's no currency.

When trust is gone, this happens (beer becomes pretty expensive *g*):


(Zimbabwe Dollar)

[DeathAndTaxes]

Well two counter points.

You say ONCE Bitcoin becomes a serious threat.  If/when that happens tx volume and thus revenue for miners will likely be significantly higher.

This illustrates why ASICs are necessary.  The banks can only kill bitcoin "on the cheap" using a more efficient technology.  Once the "good miners" have that there is no cheap option just pure brute force.

The combination of those factors means if Bitcoin is every successful enough that banks need to attack it (hint: banks haven't attacked PayPal) the costs would likely be in the billions. 

[Etlase2]

Anyone who says 51% "can't do much" is delusional or anti-FUDing. Anyone with 51% can refuse to add blocks from other miners which will cause other miners to drop out and give them even more than 51%. They can either create an effective monopoly to control the price of transactions or they can decide to drop transactions for whatever reason (and perhaps all of them, making the network useless). And of course they can double spend at will, though anyone doing this is probably a lot more interested in breaking bitcoin than making a few bucks.

lol @ "banks haven't attacked paypal"

[Frizz23]

... (hint: banks haven't attacked PayPal) ... 

Of course not - since PayPal is part of the banking empire. Part of the Dark Side.

[Gabi]

But what they can do with 51%?  Not much.

They can omit transactions from the blocks and they can go back some blocks and double spend transactions sent to them.  That's the extent of it.  They can't spend my coins.

Wrong, wrong, wrong.

With 51% they can destroy bitcoin, they can happily stop bitcoin with that. They control everything. They can go back months in the blockchain, rewrite all that and yes, they CAN spend your coins, if your coins were mined in the blocks that they reverted.

[midnight]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

[Gabi]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

[Frizz23]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, ...

You could as well ask the Mafia to stop taking protection money. Or wolfs stop eating sheep.

[ElectricMucus]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, ...

You could as well ask the Mafia to stop taking protection money. Or wolfs stop eating sheep.

You can't generalize that. If you mean Governments will never support it by referring to the power structures ruling over nation states right, as with the entities controlling the fiat system.
But both regional Governments and  community Banks might support it and in time when everything goes right probably will.

[melikeit]

I hope banks won't destroy BTC

[DeathAndTaxes]

But what they can do with 51%?  Not much.

They can omit transactions from the blocks and they can go back some blocks and double spend transactions sent to them.  That's the extent of it.  They can't spend my coins.

Wrong, wrong, wrong.

With 51% they can destroy bitcoin, they can happily stop bitcoin with that. They control everything. They can go back months in the blockchain, rewrite all that and yes, they CAN spend your coins, if your coins were mined in the blocks that they reverted.

Not really.  In time layer defenses will make 51% less effective.  Bitcoin is what the consensus of users say it is.  One option would be checkpointing more frequently.   Anything prior to a checkpoint can never be double spent.    Another option would be to change the hashing algorithm.   Given the lowest cost method of performing a 51% attack is ASICs that cost would be utterly wasted.  Tens or maybe hundreds of millions spent would be wiped out and worthless by a small change to the algorithm.

Finally it is possible that an entity could kill Bitcoin but they won't kill cryptocurrency.   Bitcoin is like napster.  Smart entities would realize then spending a huge sum to kill it would only spawn dozens of replacements which are even harder to kill.   Now this doesn't mean users won't lose money, it doesn't mean cryptocurrency won't be set back years (maybe even a decade) but eventually some future alt-chain will become the "bittorrent" equivalent and will be far harder to kill.

If hypothetically Bitcoin was killed by a 51% attack (or more likely never ending sequence of 51% attacks) I would imagine the next cryptocurrency could implement two major countermeasures
1) Use a variety of hashing algorithms.   i.e. from a pool of 20 algorithms, the algorithm used is rotated every block.
2) Use a "proof of history" system to dynamically checkpoint the primary chain once it is more than say older than 7 days.

[DannyHamilton]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

Banks existed and were profitable before fiat became popular, banks will continue to exist and be profitable long after fiat is gone.

[mrvision]

If a bank tries that i suppose THEIR system will be somehow hacked and corrupted in hours. I wouldn't start a war.

[flatiron]

Nah, Banks can't bring down bitcoin. we got satoshi on our side .

[midnight]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

So that helps me understand why bitcoin is revolutionary and valuable. Thats why we should be protective of it. Should the little people be concerned of a 51% attack or centralization, is there anything they can do to help secure the network?

[goodlord666]

The banks will love Bitcoin. Has anyone ever thought of that possibility?

[nbnBokayUH]

Banks "make" money by printing it while Bitcoins and gold can only be made by mining them.  No politician can decree it into existence to fix the problems they've created.

[PinkyPie]

I would welcome any organization to try to "destroy" bitcoin, if only so I could laugh at them... Ha ha ha ha!

[Bitcoin Oz]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

There is nothing preventing fractional reserve banking with bitcoin.

[DeathAndTaxes]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

There is nothing preventing fractional reserve banking with bitcoin.

True but you can opt out of it.  Any fractional reserve bitcoin bank will need to compete with "pure" digital wallets.  With current FRN system every dollar is a product of fractional reserve.  If you feel a bank's reserve requirements are inadequate you can take your money out of the bank but your money is still debased anyways.

[Bitcoin Oz]

Why would banks see bitcoin as a threat? Coudnt they just accept it as a new currency, and incorporate it into the system like any other currency? Why try to destroy it when there could be money to be made?

Do you realize that central banks just PRINT money at will? You can't do that with bitcoin

when there could be money to be made

As i said, central banks literally MAKE money. With bitcoin, you can't. You can't go and be "ok let's print 2 billions bitcoin"

There is nothing preventing fractional reserve banking with bitcoin.

True but you can opt out of it.  Any fractional reserve bitcoin bank will need to compete with "pure" digital wallets.  With current FRN system every dollar is a product of fractional reserve.  If you feel a bank's reserve requirements are inadequate you can take your money out of the bank but your money is still debased anyways.

Sure you can opt out. Thats why I never use Mt Gox 

[Gabi]

Banks "make" money by printing it while Bitcoins and gold can only be made by mining them.  No politician can decree it into existence to fix the problems they've created.

+1
and that's why they do not want bitcoin

[Abu22]

I don't think it'll ever become a serious threat that is attacked directly... Check out the 'Streisand effect' ...Face it, Bitcoin is here to stay.

[PawShaker]

The banks will love Bitcoin. Has anyone ever thought of that possibility?

The banks have love/hate relationship with lawmakers: they love their protection, but hate their regulation. Bitcoin may free banks from regulation, but it will leave them without protection as well. Banks worked long and hard to get themselves in their current position and I doubt they are willing to give it up.

[XxionxX]

I just want to know if anyone is going to try and arrest me for it :/

I know that crypto stuff is covered under the right to free speech, but I still feel like this might become a Problem. I mean, they are currently trying to do away with a lot of second amendment rights under the guise of 'think of the children!' Why would bitcoin be any different?

No that they could take it away, it is totally decentralized. I would rather keep on the legit side though if you know what I mean.

[MJGrae]

As an investment banker and all-around financier, let me assure you that banks will never try to "destroy" bitcoin. In fact, as someone mentioned earlier in this post, banks will LOVE bitcoin, that is, if they don't already have a finger or two in the pond (you would be surprised what banks do under the table).

Let me explain:

Why were banks originally created?
People learned two things, one: that their money wasn't safe under the mattress, and two: it actually lost value sitting under their mattress due to inflation. Banks were created foremost as a "secure" place for people to put their money.

Doesn't this sound a little like something Bitcoin users could get behind? Hacking is all too common, and your wallet is all to unsafe no matter what you do. Of course, there are "extreme" ways to get around this, but most people (and I 100% assume "most people") aren't willing to put up the work to create these ultra-secure wallets. On top of that, they aren't exactly so secure when it comes to things like you dying with your life savings in it leaving your family with no way to access them. Were a big enough bank to come around with the financial backing to insure funds, a bank storing bitcoins would have plenty of users flocking to them, especially after being hacked once or twice.

Secondly, you're forgetting all of the money there is to be made with bitcoin. Bitcoin is more of a commodity than a currency, however, remember that all currencies either were or were backed by commodities in the beginning of trade. Any commodity will have a value tied with it, and it seems to me that Bitcoin is beyond dying at this point, with over half the amount that will ever exist already mined. Some big players are getting involved in the game, for instance: Bitpay just secured half a million in angel capital the other day. As we approach the limit of bitcoins that will ever exist, behavioral finance would tell us that we will react to the idea of scarcity more severely towards these upper limits. Banks, money managers, and investors have another commodity to invest in and that alone will keep the community going. That is the end-all be-all. As long as there is money to be made with  minimal risk of losing it, bitcoin will flourish. The first people to want in on this action? Banks.

You should look at this situation more as the rare opportunity to get into an investment before the really big players (i.e. banks) because when they decide to enter, you can both cash in a little to give them a stake as well as retain the rest as it appreciates while the institutions pump money and take liquidity temporarily out of the system. When this happens, the value of bitcoins will increase.

[Syndicate]

Not sure that they could kill bitcoin but if they do what you say I think it would only jack up the price a ton. It would be hard to buy every btc from the many thousands of users.

[Kluge]

Hacking is all too common, and your wallet is all to unsafe no matter what you do. Of course, there are "extreme" ways to get around this, but most people (and I 100% assume "most people") aren't willing to put up the work to create these ultra-secure wallets. On top of that, they aren't exactly so secure when it comes to things like you dying with your life savings in it leaving your family with no way to access them. Were a big enough bank to come around with the financial backing to insure funds, a bank storing bitcoins would have plenty of users flocking to them, especially after being hacked once or twice.

Ha! Securing a wallet is so ridiculously easy that I would trust the security of my Bitcoins before all of my other assets combined. Plus, it's completely free. I can't say the same for the others.

As to the rest of your post. Modern banks have a love affair with the lender of last resort. This love affair won't exist with Bitcoin. A bank will succeed or fail on it's ability to provide a valuable service to it's customers.

I'm not saying that such a service doesn't exist, only that strong money will tend to keep the banks honest. Much like before they converted physical gold to paper script.

A lender of last resort can still exist without being able to print money, though if dealing with "raw Bitcoins," it would mean governments must be more up-front about how they keep "the economy" working as they want it to (needs "real" loans [government would basically be a co-signer at that point] or cash-on-hand to lend). Gox is pretty much the de facto BTC bank (though it hasn't been very..... "creative"). With BTC address whitelisting, cooperating businesses could even make "GoxBTC" more valuable than "raw BTC" with instant availability of funds when a user pays with "GoxBTC" and the merchant has Gox addresses whitelisted. Simply by this, Gox has justification to charge for withdrawals and even storage.

Banking hasn't yet been done "right" with BTC, but if enough creative minds had or secured enough funding for implementation, "mainstream Bitcoin" could quickly become radically different than what we currently know it as. And, with such a change, we could again see fractional reserve practices become commonplace. You probably remember when Gox was being charged with engaging in fractional reserve practices when GoxUSD was considered less valuable than physical USD (or "claims on USD" created by other entities more able to process withdrawals quickly)...

Unlike you, most probably don't understand all the reasons why USD is debt, though it's more difficult to comprehend now that USD isn't backed by something tangible. US Dollars were effectively bond notes issued by the US government which could be redeemed for PMs. "Modern public economics" is brilliant enough to combine this with the idea of covertly inflating bonds issued without fundamentally increasing the total value of the bonds issued, minimizing public awareness (and slowing "tangible" inflation) by not just dumping the money onto the public. The USG effectively issues debt and makes the BUYERS pay the interest, and for US residents, they MUST accept US debt due to legal tender laws, so US citizens are practically locked into this. It's awe-inspiring how they've pulled this off, and even managed to drag widely-respected governments into "dollar traps." I don't see any reason these same people could not be dragged into something like a "GoxUSD trap." Or, perhaps a "USGBTC trap." ... It will be interesting to see whether or not the majority of the community accepts the risk of accepting "BTC debt notes" like GoxBTC when Gox or a similar business starts advertising the perks. Will we fall for it again?

(edit: I'm not at all sober. Please forgive me for egregious errors.    )

[bitman74]

I have no doubt that the big corps, banking and payment processing will KILL this if they can....no govt or corporation wants a currency they can control or citizens with ANY financial freedom....control the the coin, control the world...and as wise man on here said, you might as well ask wolves not to eat sheep....they WILL detroy BTC if they can..

the question is...is that really possible..?.....and how would they do it...and more importantly...what can we do to stop it ??

[KarlChappe]

As an investment banker and all-around financier, let me assure you that banks will never try to "destroy" bitcoin. In fact, as someone mentioned earlier in this post, banks will LOVE bitcoin, that is, if they don't already have a finger or two in the pond (you would be surprised what banks do under the table).

Let me explain:

Why were banks originally created?
..............

You said that Banks will LOVE Bitcoin.

However, there is a huge gap between retail banks, investment banks like Goldman Sachs and Central Banks.

- The retail banks will follow people usage. If more and more people use Bitcoin, they will try to adapt and offer services to use Bitcoin with bank account. i.e the partnership between the French bank Credit Mutuel with Paymium.

- The investment banks will try or is trying to make huge profit on Bitcoin without any concern to build something valuable to people. The best way to make a lot of profit is to invest into Bitcoin, increase and drop the price by pseudo legal activities like Goldman Sachs use to do, and then re-invest.

- For the Central Banks which manage money supply and interest rate, Bitcoin is a threat. The European Central Bank has made a report recently on Bitcoin and virtual currencies. One quote from their report "... it might affect a central bank’s tasks". That's seems clear to me. They will try to kill this technology or make it against the law for our "own" safety. Then, they will create a virtual currency or technology and they will control it for our "own" safety.


How can we fight?

- We need more and more people using Bitcoin. I'm not talking about people who get bitcoins to keep it as a speculative currency but people using bitcoins for buying products and services. We need more and more businesses that accept bitcoin as payment. The recently fund raising of BitPay is a very good thing. I would like to see Bitcoin out of the bank control, but we cannot win without alliances and the partnership between Credit Mutuel and Paymium is also a good thing.
- We need to protect Bitcoin against any possible threat i.e 51% attack.



 

 

[kokjo]

- For the Central Banks which manage money supply and interest rate, Bitcoin is a threat. The European Central Bank has made a report recently on Bitcoin and virtual currencies. One quote from their report "... it might affect a central bank’s tasks". That's seems clear to me. They will try to kill this technology or make it against the law for our "own" safety. Then, they will create a virtual currency or technology and they will control it for our "own" safety.

Wrong! The ECB report was neutral about bitcoin, with a clear "wait and see" opinion.

http://www.ecb.int/pub/pdf/other/virtualcurrencyschemes201210en.pdf

[KarlChappe]

- For the Central Banks which manage money supply and interest rate, Bitcoin is a threat. The European Central Bank has made a report recently on Bitcoin and virtual currencies. One quote from their report "... it might affect a central bank’s tasks". That's seems clear to me. They will try to kill this technology or make it against the law for our "own" safety. Then, they will create a virtual currency or technology and they will control it for our "own" safety.

Wrong! The ECB report was neutral about bitcoin, with a clear "wait and see" opinion.

http://www.ecb.int/pub/pdf/other/virtualcurrencyschemes201210en.pdf

I've read the whole report.

They said a lot of positive things about virtual currencies and financial innovation. But they also wrote that virtual currencies could have a negative impact on central banks.

They are smart enough to not write they want it dead but as I said they wrote "it might affect a central bank’s tasks".

What are the central bank's tasks?
Managing a state's currency, money supply and interest rate.

They have to be part in the game.

[MJGrae]

As an investment banker and all-around financier, let me assure you that banks will never try to "destroy" bitcoin. In fact, as someone mentioned earlier in this post, banks will LOVE bitcoin, that is, if they don't already have a finger or two in the pond (you would be surprised what banks do under the table).

Let me explain:

Why were banks originally created?
..............

You said that Banks will LOVE Bitcoin.

However, there is a huge gap between retail banks, investment banks like Goldman Sachs and Central Banks.

- The retail banks will follow people usage. If more and more people use Bitcoin, they will try to adapt and offer services to use Bitcoin with bank account. i.e the partnership between the French bank Credit Mutuel with Paymium.

- The investment banks will try or is trying to make huge profit on Bitcoin without any concern to build something valuable to people. The best way to make a lot of profit is to invest into Bitcoin, increase and drop the price by pseudo legal activities like Goldman Sachs use to do, and then re-invest.

- For the Central Banks which manage money supply and interest rate, Bitcoin is a threat. The European Central Bank has made a report recently on Bitcoin and virtual currencies. One quote from their report "... it might affect a central bank’s tasks". That's seems clear to me. They will try to kill this technology or make it against the law for our "own" safety. Then, they will create a virtual currency or technology and they will control it for our "own" safety.

You got the retail banks right, aside from a few details like proper savings and lending to the "average Joes" which, as you can see on these very boards nobody wants to deal with because of the quantity and quality of scammers which is not unlile the real world, we as regular people are just never directly on this side of the table. These services and options WILL be wanted by people using bitcoin as an every day currency. They WILL want a place to go that has the capital and the process and the discreet-ness (not even a word) to fund their private loans.

However, let me shed some light on what an Investment Bank really does, instead of what you read/heard on CNBC. Investment banks act as a sort of mediator bank similar to retail banks but for businesses. Of course there are some extra services unique to businesses but they handle large business transactions like acquisitions and whatnot as well as financing needs which become a lot more complicated for businesses. They do not operate in the holdings/savings portion of "regular" banks.

What an investment bank really does is help businesses expand and better themselves. Have a website that sells trinkets and you want to also sell widgets? Well, instead of spending years building a separate business that may fail, an investment bank will help to find a seller of widgets that may be willing to sell the business, everyone is happy! Someone made a lot of money, another grew/perpetuated their business, and the investment bank did the work of setting them up, detailing the terms, and almost acting like an escrow in a way. Think of the mining companies that good ol' James T. Everyman sank his life savings into buying a mining rig. Sadly, he didn't look at all of the expenses and is going under and will have nothing to show for it. An investment bank can connect him with someone that is wanting to expand and can show him how to run it better or just cash him out and he then has a safety net as opposed to before. There are countless GOOD things investment banks do, so don't believe that the bullcrap Goldman Sachs stories are how the whole industry is. That is one bulge bracket bank that had a grand total of five or something people that actually knew they were doing something wrong. Go look up how many boutique investment banks there are around and then do some simple math and you will see a really surprising percentage of investment banks that actually have records of "wrongdoing".

Lastly, bitcoins are no more a risk to central banks than gold is currently. People can own it if they want, they can trade it, they can do whatever they please so long as there are consenting parties. That is all currently. However, what will make Bitcoins a threat to central banks is people running around claiming and persuading others that Bitcoin should be the only currency, which will not be happening in our lifetime and probably a few more lifetimes (evidenced by the fact that the Euro is the closest thing to a "globalizing" currency, albeit confined to a smaller than truly global area).

The fact of the matter, regardless of what is currently happening, is that we need banks to live our lives the way we do. To quote the movie Margin Call: (this may not be exact, forgive me I'm out of pocket at the moment)"They need us, they need us because they all want their fancy cars and big houses, and the only reason they can have them is because we have our hands on the scale tipped in their favor." Banks "create" the artificial value that we use to conduct our daily lives in terms of spending outside of our immediate means like home and auto financing.

Long story short, the banks have zero reasons to want to "Destroy" bitcoin unless everyone was to abandon their currency entirely for bitcoins which is increadibly unlikely.
Moreover, if you want bitcoin to become a global force of significant strength and influence under the direction of free men that want to live their lives as such, we will need the banks, all of them sooner or later.

[KarlChappe]

@ MJGrae. will read it carefully and respond to you later. Cheers.

[KarlChappe]

As an investment banker and all-around financier, let me assure you that banks will never try to "destroy" bitcoin. In fact, as someone mentioned earlier in this post, banks will LOVE bitcoin, that is, if they don't already have a finger or two in the pond (you would be surprised what banks do under the table).

Let me explain:

Why were banks originally created?
..............

You said that Banks will LOVE Bitcoin.

However, there is a huge gap between retail banks, investment banks like Goldman Sachs and Central Banks.

- The retail banks will follow people usage. If more and more people use Bitcoin, they will try to adapt and offer services to use Bitcoin with bank account. i.e the partnership between the French bank Credit Mutuel with Paymium.

- The investment banks will try or is trying to make huge profit on Bitcoin without any concern to build something valuable to people. The best way to make a lot of profit is to invest into Bitcoin, increase and drop the price by pseudo legal activities like Goldman Sachs use to do, and then re-invest.

- For the Central Banks which manage money supply and interest rate, Bitcoin is a threat. The European Central Bank has made a report recently on Bitcoin and virtual currencies. One quote from their report "... it might affect a central bank’s tasks". That's seems clear to me. They will try to kill this technology or make it against the law for our "own" safety. Then, they will create a virtual currency or technology and they will control it for our "own" safety.

You got the retail banks right, aside from a few details like proper savings and lending to the "average Joes" which, as you can see on these very boards nobody wants to deal with because of the quantity and quality of scammers which is not unlile the real world, we as regular people are just never directly on this side of the table. These services and options WILL be wanted by people using bitcoin as an every day currency. They WILL want a place to go that has the capital and the process and the discreet-ness (not even a word) to fund their private loans.

However, let me shed some light on what an Investment Bank really does, instead of what you read/heard on CNBC. Investment banks act as a sort of mediator bank similar to retail banks but for businesses. Of course there are some extra services unique to businesses but they handle large business transactions like acquisitions and whatnot as well as financing needs which become a lot more complicated for businesses. They do not operate in the holdings/savings portion of "regular" banks.

What an investment bank really does is help businesses expand and better themselves. Have a website that sells trinkets and you want to also sell widgets? Well, instead of spending years building a separate business that may fail, an investment bank will help to find a seller of widgets that may be willing to sell the business, everyone is happy! Someone made a lot of money, another grew/perpetuated their business, and the investment bank did the work of setting them up, detailing the terms, and almost acting like an escrow in a way. Think of the mining companies that good ol' James T. Everyman sank his life savings into buying a mining rig. Sadly, he didn't look at all of the expenses and is going under and will have nothing to show for it. An investment bank can connect him with someone that is wanting to expand and can show him how to run it better or just cash him out and he then has a safety net as opposed to before. There are countless GOOD things investment banks do, so don't believe that the bullcrap Goldman Sachs stories are how the whole industry is. That is one bulge bracket bank that had a grand total of five or something people that actually knew they were doing something wrong. Go look up how many boutique investment banks there are around and then do some simple math and you will see a really surprising percentage of investment banks that actually have records of "wrongdoing".

Lastly, bitcoins are no more a risk to central banks than gold is currently. People can own it if they want, they can trade it, they can do whatever they please so long as there are consenting parties. That is all currently. However, what will make Bitcoins a threat to central banks is people running around claiming and persuading others that Bitcoin should be the only currency, which will not be happening in our lifetime and probably a few more lifetimes (evidenced by the fact that the Euro is the closest thing to a "globalizing" currency, albeit confined to a smaller than truly global area).

The fact of the matter, regardless of what is currently happening, is that we need banks to live our lives the way we do. To quote the movie Margin Call: (this may not be exact, forgive me I'm out of pocket at the moment)"They need us, they need us because they all want their fancy cars and big houses, and the only reason they can have them is because we have our hands on the scale tipped in their favor." Banks "create" the artificial value that we use to conduct our daily lives in terms of spending outside of our immediate means like home and auto financing.

Long story short, the banks have zero reasons to want to "Destroy" bitcoin unless everyone was to abandon their currency entirely for bitcoins which is increadibly unlikely.
Moreover, if you want bitcoin to become a global force of significant strength and influence under the direction of free men that want to live their lives as such, we will need the banks, all of them sooner or later.

I'm agree with you on some points:
-  we still need banks
-  we cannot judge an industry on one or few bad players

But even if I understand what you say about Bitcoin is not a threat because it will not replace all currencies, I doubt central banks will allow the development of Bitcoin as it is today.

I've recently discussed about it with the ex innovation strategist for 5th bank in the world. And he told me the same thing, if Bitcoin carry one its development they will fight back.

Now, let me clear my point. I'm not against banks, I'm for Bitcoin.

[MJGrae]

Now, let me clear my point. I'm not against banks, I'm for Bitcoin.

I'll cheers to that, mate.

There will always be a power struggle, definitely. However the only real way I can see them fighting back is by lobbying internationally to attempt taxing the living hell out of every bitcoin transaction while also imposing strict "trade" regulations for the acceptance and transmittance of bitcoins. Their goal of course, would be to make using bitcoins so expensive and such a hassle that users drop it all together.

Why this doesn't worry me: Look at what independent developers can do. They're always three steps ahead of any authority figure when it's a good cause. We've got more heads around, more interest, and more devotion. Just look at Amazon, and how much tax they have avoided (and saved their shoppers) by working around the rickety system. The central banks will be forced to stick to backwards regulation and taxation as well as a "safe and friendly" smear campaign, which would entail over-quoting scam rates and the caliber of loses to try and scare people off. Any direct affront to bitcoin would insight global unrest, at this point. If there was a chance for them to snuff Bitcoin quickly and quietly, I think that time has surely passed.

I guess we'll see though, I'm curious to observe what happens. Lord forbid they try "easing" the bitcoin market by buying up, leveraging, and selling mass quantities of coins to drive down the price. The easiest way to combat this scenario is to not have people use any future bitcoin "bank" that is federally affiliated, which there likely will be (because this would give them the resources at hand to work their magic sheets and a likely way to "control" the bitcoin market), thus choking their leverage funnel. If their leverage is properly canned, they would be little more than Market Makers which are actually good for the system.

The last "possible" scenario I can see is that they are currently buying up bitcoins bit by bit very slowly. Since they would have the capital (however fake it may be) the value of these coins would be the equivalent to grains of sand in your wallet. If they're smart, they are buying them up now and keeping it quiet so that when the time comes and is deemed necessary on their part, they would inject every last one into the market and crash prices. Countering this would be a bit harder, and really depends more on the resilience of the community. Most people can't stomach a drastic cycle like this and would sell off. However, if there were enough people with enough capital, we could buy up the ultra-cheap manufactured liquidity and prices would recover rather quickly as the majority of bitcoins returned to the people that respect them.

Curious, curious.

[KarlChappe]

Now, let me clear my point. I'm not against banks, I'm for Bitcoin.

I'll cheers to that, mate.

There will always be a power struggle, definitely. However the only real way I can see them fighting back is by lobbying internationally to attempt taxing the living hell out of every bitcoin transaction while also imposing strict "trade" regulations for the acceptance and transmittance of bitcoins. Their goal of course, would be to make using bitcoins so expensive and such a hassle that users drop it all together.

Why this doesn't worry me: Look at what independent developers can do. They're always three steps ahead of any authority figure when it's a good cause. We've got more heads around, more interest, and more devotion. Just look at Amazon, and how much tax they have avoided (and saved their shoppers) by working around the rickety system. The central banks will be forced to stick to backwards regulation and taxation as well as a "safe and friendly" smear campaign, which would entail over-quoting scam rates and the caliber of loses to try and scare people off. Any direct affront to bitcoin would insight global unrest, at this point. If there was a chance for them to snuff Bitcoin quickly and quietly, I think that time has surely passed.
......

I have to admit all of your points make sense and I am less worried about the banking threat after I read your post.

I'll read it again tomorrow because it's late here and maybe I will add something.

This discussion was very interesting. Thank you for that.

[Anon136]

Of course, there are "extreme" ways to get around this

These methods are extreme right now because there isn't a great deal of financial incentive to build devises to simplify this process however people are working on building flash drive sized physical bitcoin wallets that will be virtually unhackable. Basically they are unhackable because these devises by design only contain enough memory to store a few bitstrings which means there is physically no place to put any malware.

since im just a noob who doesn't really know what hes talking about heres a thread you can check out https://bitcointalk.org/index.php?topic=122438.0

[Anon136]

But what they can do with 51%?  Not much.

They can destroy trust.

Basically it's: "currency = trust".

Without trust, there's no currency.

When trust is gone, this happens (beer becomes pretty expensive *g*):


(Zimbabwe Dollar)

its a good time to be a rubber band manufacturer in Zimbabwe no?

[twolifeinexile]

Bitcoin could be controlled by government , just as gold

[amlorusso]

The banks will love Bitcoin. Has anyone ever thought of that possibility?

The banks have love/hate relationship with lawmakers: they love their protection, but hate their regulation. Bitcoin may free banks from regulation, but it will leave them without protection as well. Banks worked long and hard to get themselves in their current position and I doubt they are willing to give it up.

There's an alternate theory that once you are established you actually love regulation because regulatory compliance places a larger burden on smaller operations giving larger operations a competitive advantage.

[twolifeinexile]

The banks will love Bitcoin. Has anyone ever thought of that possibility?

The banks have love/hate relationship with lawmakers: they love their protection, but hate their regulation. Bitcoin may free banks from regulation, but it will leave them without protection as well. Banks worked long and hard to get themselves in their current position and I doubt they are willing to give it up.

There's an alternate theory that once you are established you actually love regulation because regulatory compliance places a larger burden on smaller operations giving larger operations a competitive advantage.

Absolutely true. Big establishments all loves certain burdensome regulations (as long as not too much, not too little that makes new comers costs prohibitive and profit still good)

[Fuzzy]

I would welcome any organization to try to "destroy" bitcoin, if only so I could laugh at them... Ha ha ha ha!

It would be healthy for decentralized currency as a whole if someone succeeded in damaging bitcoin, as it would give rise to an even more resilient strain of cryptocurrency.

[EarlyCuyler]

I for one am NO friend of banks and really do hope Bitcoin can at least become a viable alternative to them.  We have built this society to revolve around banks and the other ill-reputed companies that go hand in hand with them.  It's systematically impossible to live a day to day life without some of your earnings being syphoned off to some banker somewhere.  You can't pay a power bill without the,m touching your money.  Don't even get me started on the "fees" they charge. 

Anyway, in spite of my rant, I'd love to be able to use BTC without ever seeing a bank again.  The only alternative to banks at the moment is basically a hand to mouth existence, which has been made extremely difficult by the government.  /rant

[rovsky]

Bitcoin is an electronic gold standard...

Bitcoin is like napster. 

This.

Only Bitcoin avoids the key failings that brought down Napster. So Bitcoin is already a lot closer to BitTorrent -- PayPal, Liberty Reserve, Pecunix were all more like Napster than Bitcoin.

None of those suffered any major attacks, so Bitcoin hasn't had that learning experience. If somebody goes after Bitcoin, whatever evolves out of it may inspire a new version of BitTorrent (or whatever) unlike anything we've ever seen, as well.

Next up... HiggsBosonCoin!