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Author Topic: 2012-09-03 digitaltrends.com - Who Needs the FDIC? (Comedy gold!!!)  (Read 1092 times)
Roger_Murdock
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September 25, 2012, 01:37:07 AM
 #1

This one's a few weeks old but it doesn't look like anyone started a thread on it. And that needs to be remedied because it's a real gem.

http://www.digitaltrends.com/cool-tech/bitcoin-robbery-exposes-the-currencys-flaws/

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This is not the first time Bitcoin has lost money to hackers, but the discovery that they have user information stored in unencrypted files might be what finally prompts a full-fledged run on the Bitcoin bank; no one’s eager to keep their money in an unlocked vault.

Mainstream economics writers are enjoying a good chuckle at the crushing of Bitcoin’s libertarian dreams.  Solidly centrist website The Atlantic was happy to point out that U.S. banks are FDIC insured in order to guarantee that in the event of a robbery, account holders don’t have to depend on the goodwill of the bank manager to get their money back. Bitcoin’s popularity as currency of choice for skeevy sites like drug-dealing marketplace Silk Road further ensures that getting robbed doesn’t win it much sympathy, and there’s no word on whether Bitcoin will turn to the government agencies it previously scorned in order to track down the thieves.

Bitfloor is shut down while Shtylman scrambles to repay users.  He promises that international users who wish to withdraw their money can send him an e-mail requesting withdrawal, a weirdly informal system for currency exchange which calls to mind disturbing images of Depression-era banks understaffing their teller windows so customers couldn’t take out all their money at once. There would be a certain delicous irony if the latest debacle reminds the idealistic libertarians of Bitcoin exactly why government currency regulations became popular in the first place.

Good stuff, right? But the best part comes when the author responds to some comments and reveals the true extent of his ignorance:

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Wait, no Bitcoin company? So who is empowered to issue Bitcoins? And if Bitfloor is just, like, some random trading exchange, is there any reserve where a holder of Bitcoins can be assured that he'll be able to exchange them for another currency?

AND

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I read the white paper, and it made so little sense I concluded there was a scam. If anyone can make Bitcoins, you've got a recipe for inflation. If everyone can make Bitcoins but there's a ceiling, you've got a recipe for even worse deflation. And either way, you've got no protection if something goes wrong, as it inevitably will. I'm eagerly awaiting the point where the Bitcoin story goes full Bioshock.
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September 25, 2012, 01:59:10 AM
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Good catch.
It's interesting to me that we're still seeing journalists in the tech field with massive misunderstandings around Bitcoin.

If the tech journalists don't yet even understand it (whether they like it or not is another thing), it seems we have a long way to go for more widespread adoption.


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September 25, 2012, 02:11:17 AM
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Bitcoin is THE BEST currency ever made and only needs time to prove it and show the world it is the most trust-able one.

Roger_Murdock
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September 25, 2012, 02:19:25 AM
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Good catch.
It's interesting to me that we're still seeing journalists in the tech field with massive misunderstandings around Bitcoin.

If the tech journalists don't yet even understand it (whether they like it or not is another thing), it seems we have a long way to go for more widespread adoption.

Well this article is obviously pretty egregious, but I'm amazed at how often I see inaccuracies in positive stories about Bitcoin. 
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September 27, 2012, 08:37:59 PM
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Had to whip out the flamethrower on this one - what an idiot.

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Where to begin? There are so many fundamental misunderstandings in the article and the author's posted comments I doubt I'll have time to address them all.

The author doesn't understand the technical underpinnings of bitcoin, or how it operates.

The author equates theft of currency to a 'failed' implementation of that currency. I suppose all those people who lose money on the streets of the USA prove the dollar is useless, right? How absurd.

The author admits he has an obvious cognitive bias by stating he's convinced bitcoin is a 'scam' in the comments.

The author makes assertions about inflation and deflation, with no backing points or references.

Perhaps the author should consider another line of work, as researching and writing intelligently on a subject seem to be out of his grasp.

Anyone want to offer him a job? He clearly doesn't have what it takes to be an author of anything.

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October 01, 2012, 01:07:05 PM
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If everyone can make Bitcoins but there's a ceiling, you've got a recipe for even worse deflation.

It's interesting how deflation is the Great Satan to present day economists.  Gold has deflated wildly, and I don't hear the holders of gold complaining.  There may be a place for fiat currency, but that doesn't mean bitcoin will fail.  If the deflation is so bad, why are people transacting?  Currently, no one should be sending bitcoins around since they could hoard them and possibly make money!  Of course, there's that pesky word: possibly.  Since the future market cap of bitcoin is unknown (and is largely based upon the price, which fluctuates directly with demand), it's impossible to predict whether the 21 million bitcoins will be $10 or $100 or $1 each.  Now, if bitcoin were a means of denominating an entire economy, one could argue that only having 21 million might be a bad thing, but it's simply a mechanism for transfer of funds.

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October 01, 2012, 10:50:50 PM
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Yeah, I don't get the "Deflation is the death of everything" argument either - since we've never seen it in practice. Well, not to the extremes people usually are quoting that kills economies.

Another point that escapes bitcoin detractors is the divisibility. It can be changed, but the current limit would allow us to give every person in the USA a fraction of a bitcoin for less than $40 USD. A bit mind-warping when you think about it that way.

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kiba
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October 01, 2012, 11:19:50 PM
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Deflation won't kill us, because we have to spend money eventually on food and water. There's always a demand that can't be squished by monetary incentives to save.

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October 01, 2012, 11:26:51 PM
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Deflation won't kill us, because we have to spend money eventually on food and water. There's always a demand that can't be squished by monetary incentives to save.

Right - all deflation does is make people stop wasting money, not stop spending.  I always have to pay my mortgage, no matter how much I want to hoard my currency.  Sure, some industries will suffer, but that's the risk they take when they offer products nobody actually needs.

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