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Author Topic: Bitcoins as Currency: A Serious Logical Analysis.  (Read 4437 times)
Synaptic
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June 11, 2011, 09:18:09 PM
 #1

I've read a lot of posts lately from individuals who claim to believe in the long term viability of bitcoin as a currency. My initial assumption is that these folks are actually NOT invested in the ideals, but the speculative returns, whether they consciously admit it or not, however for the sake of this analysis I'll assume that balls to bones they do believe in bitcoin on an ideological and utility basis.

When talking about bitcoins as a currency, we're talking about the adoption of it by a critical mass of average consumers. Therefore it's advantageous to remove our own interests and understanding from the equation and approach this analysis from the perspective of such a mundane consumer. A good way to go about that is a simple Pro/Con list.

Additionally, we'll then work off the assumption ( a very, very generous one too) that a plurality of useful merchants will accept bitcoin as payment, alongside fiat.

<<<PROS AND CONS OF BITCOIN FROM THE PERSPECTIVE OF AVERAGE CONSUMERS RELATIVE TO FIAT>>>

Pros:

- Potentially stronger store of value than inflationary fiat

Cons:

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
- Difficult to buy
- Difficult to sell
- Major issues of trust in relation to transactions
- Major issues of security relating to local storage
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
- Fear of negative Governmental intervention
- Perception of facilitating illegal activity to a greater extent and ease than cash
- No consumer protections by law

That's all I'm going to bother thinking up for now. If anyone has anything to add to either the pro or con side please do.  Once it seems settles that our pro/con matrix is populated with a representative sample of possible perceptions (I'm not going to bother thinking up more, and I'm sure other people have things to add I haven't thought of anyway), then we can continue the analysis of what bitcoin's future prospects as a currency actually are.

Thank you,

~ Synaptic
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June 11, 2011, 09:20:49 PM
 #2

No consumer protections by law

Hahaha, oh wow. Did somebody have a brain fart? Please elaborate on this.
Synaptic
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June 11, 2011, 09:24:24 PM
 #3

No consumer protections by law

Hahaha, oh wow. Did somebody have a brain fart? Please elaborate on this.

Do you, Atlas, honestly believe that bringing a case involving bitcoins to any small claims court in the nation (world even!), would result in a positive judgement against the defendant?

Please elaborate on this.

EDIT:  It's also quite telling that you chose to quip on the last item on the list, and really offered no critique of substance, even at that...
Anonymous
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June 11, 2011, 09:26:22 PM
 #4

No consumer protections by law

Hahaha, oh wow. Did somebody have a brain fart? Please elaborate on this.

Do you, Atlas, honestly believe that bringing a case involving bitcoins to any small claims court in the nation (world even!), would result in a positive judgement against the defendant?

Please elaborate on this.
Yes, if you had a good contract. We have contract law, do we not? If you violate a contract requesting Bitcoins on either side and those Bitcoins are not supplied, obviously it is not a frivolous case.
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June 11, 2011, 09:29:55 PM
 #5

Oh, oh...
They have just riled Atlas. I am going to get my popcorn, case of beer, an' a few smokes. This is gonna be good.
 Shocked

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June 11, 2011, 09:32:29 PM
 #6

Most of the objections are just the lack of maturity of the infrastructure that supports bitcoin. These will come in due time if bitcoin succeeds.
Synaptic
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June 11, 2011, 09:33:52 PM
 #7

No consumer protections by law

Hahaha, oh wow. Did somebody have a brain fart? Please elaborate on this.

Do you, Atlas, honestly believe that bringing a case involving bitcoins to any small claims court in the nation (world even!), would result in a positive judgement against the defendant?

Please elaborate on this.
Yes, if you had a good contract. We have contract law, do we not? If you violate a contract requesting Bitcoins on either side and those Bitcoins are not supplied, obviously it is not a frivolous case.

Let me explain smalls claims courts to you:

Firstly we'll (falsely) assume that some Judge sides with the plaintiff. Courts do not award compensation, only judgments. It still remains the duty of the plaintiff to collect their compensation.

In cases where plaintiffs cannot get the defendant to pay, there exists the option to request law enforcement to intervene and seize tangible assets of the liable party in compensation for the claimants positive judgement.

The seizures can only meet the general value of the compensatory judgement.

So, Atlas, I pose to you, for the purposes of legal seizure, on what authority are the tangible worth of bitcoins going to be based?  The current exchange rate of Mt. Gox?

Please Sir, enlighten me with your wisdom and insight.
Synaptic
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June 11, 2011, 09:35:49 PM
 #8

Oh, oh...
They have just riled Atlas. I am going to get my popcorn, case of beer, an' a few smokes. This is gonna be good.
 Shocked


Yes, I have indeed riled the feisty guinea pig.

The cedar chips are about to hit the proverbial exercise wheel, certainly.

Ready up your snacks, assorted tobacco products and alcoholic beverages, this is going to be a hoot!
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June 11, 2011, 09:39:28 PM
 #9

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
- Difficult to buy
- Difficult to sell
- Major issues of trust in relation to transactions
- Major issues of security relating to local storage
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
- Fear of negative Governmental intervention
- Perception of facilitating illegal activity to a greater extent and ease than cash
- No consumer protections by law
Fear, Uncertainty, and Doubt

It is pitch black. You are likely to be eaten by a grue.

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Synaptic
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June 11, 2011, 09:41:57 PM
 #10

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
- Difficult to buy
- Difficult to sell
- Major issues of trust in relation to transactions
- Major issues of security relating to local storage
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
- Fear of negative Governmental intervention
- Perception of facilitating illegal activity to a greater extent and ease than cash
- No consumer protections by law
Fear, Uncertainty, and Doubt

"You have to let it all go, Neo; Fear, doubt, and disbelief."

WHEEE!

lol...
Anonymous
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June 11, 2011, 09:42:15 PM
 #11

No consumer protections by law

Hahaha, oh wow. Did somebody have a brain fart? Please elaborate on this.

Do you, Atlas, honestly believe that bringing a case involving bitcoins to any small claims court in the nation (world even!), would result in a positive judgement against the defendant?

Please elaborate on this.
Yes, if you had a good contract. We have contract law, do we not? If you violate a contract requesting Bitcoins on either side and those Bitcoins are not supplied, obviously it is not a frivolous case.

Let me explain smalls claims courts to you:

Firstly we'll (falsely) assume that some Judge sides with the plaintiff. Courts do not award compensation, only judgments. It still remains the duty of the plaintiff to collect their compensation.

In cases where plaintiffs cannot get the defendant to pay, there exists the option to request law enforcement to intervene and seize tangible assets of the liable party in compensation for the claimants positive judgement.

The seizures can only meet the general value of the compensatory judgement.

So, Atlas, I pose to you, for the purposes of legal seizure, on what authority are the tangible worth of bitcoins going to be based?  The current exchange rate of Mt. Gox?

Please Sir, enlighten me with your wisdom and insight.
Heh, I apologize for being... erm, on the offensive. You raise a good point and I now understand where you are coming from. It's certainly a sketchy situation; however, I can envision escrows and different tools in the digital arsenal easing this issue.
Findeton
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June 11, 2011, 09:49:17 PM
 #12

Bitcoin will last as much as SHA-2. That's the only problem I see with bitcoin, but we can then move to another currency, maybe bitcoin2.

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tymothy
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June 11, 2011, 10:06:08 PM
 #13

Most of these issues are surmountable through better infrastructure and are not inherent issues with bitcoin, only the state of bitcoin at this point.
Synaptic
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June 15, 2011, 08:28:02 AM
 #14

OP states that bitcoin will only survive if they gain a critical mass of consumers using them. I feel that there is another possible future for bitcoins. If a critical mass of investors uses them, they may even be stronger than just consumers using them. What I see is that bitcoins offer an amazing way to transfer wealth around the world, so wealth can easily be invested where it is most useful.

This is quite simply the stupidest idea I've heard lately.

A critical mass of investors?

Ok, what good will that do anyone? Say, we just go about speculating daily as to how much BTC is worth without having anything to back it up?

We'll all just sit around and wonder who has the most BTC and when they're going to sell them off crashing the price?

What a mockery of any semblance of an idea...

BTC only has value when people use it for goods and services. Is that too difficult for your pie in the sky mind to fathom? You honestly think a "critical mass" of investors is just going to pour money into something that is almost literally economically bereft?

There's a word for that, it's "pump and dump."  That is what you're saying the future of BTC is...a pump and dump for "investors."

From your own mouth! Not mine!

EDIT: I have played Devil's Advocate here trying to test this community and see if anyone worth their salt knows Jack Shovel about the realities of BTC.  So far, I've seen that the BTC community is made up of nothing but young fools thinking they're going to get rich quick, or get something for free, and older "investors" who fail at real life investing and come here to mingle at the kids table.

If anyone who thinks there's a future in BTC, please, engage in a mature, reasoned debate with me about the fundamental concepts impeding BTC's adoption, without coming off as a total idiot.
mewantsbitcoins
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June 15, 2011, 08:46:38 AM
 #15

It is difficult to engage in discussion with someone who's calling everybody fools and has his mind already made up.
BubbleBoy
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June 15, 2011, 08:52:24 AM
 #16

This is not an apples to apples comparison. You are comparing cash with an electronic transfer over the internet. Maybe you should compare Bitcoin with PayPal and see if most items on list still hold (they don't, Bitcoin can be abstracted behind a web interface just like PayPal from the consumers point of view).

On the other hand, I can also list a few drawbacks that PayPal and all similar services have compared to a user friendly implementation of Bitcoin:
- The risk of having all your funds seized for a minimum of 6 months, at the sole discretion of PayPal
- The uncertainty of when a transaction is really "final"; all transactions can be rolled back at the request of the payer
- Related, the inability to chose a 3rd party arbiter, escrow service, or none; you are stuck with PayPal as an arbiter (consumer protection you say), and this is no way a feature but a drawback
- The intense privacy violation employed by the PayPal system: for moving anything more than a few bucks, you need to send them proof of identity, proof of address, description of business. You also implicitly give them the identity of all business partners, and the object and value of your transactions.


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Synaptic
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June 15, 2011, 08:59:51 AM
 #17

It is difficult to engage in discussion with someone who's calling everybody fools and has his mind already made up.

I haven't made my mind up in the slightest. No one can reliably say what the future of BTC will be.  My point, is that at least here on these forums, the representative set of public BTC users/proponents are weak minded about what they believe in and why.
Synaptic
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June 15, 2011, 09:03:15 AM
 #18

This is not an apples to apples comparison. You are comparing cash with an electronic transfer over the internet. Maybe you should compare Bitcoin with PayPal and see if most items on list still hold (they don't, Bitcoin can be abstracted behind a web interface just like PayPal from the consumers point of view).

On the other hand, I can also list a few drawbacks that PayPal and all similar services have compared to a user friendly implementation of Bitcoin:
- The risk of having all your funds seized for a minimum of 6 months, at the sole discretion of PayPal
- The uncertainty of when a transaction is really "final"; all transactions can be rolled back at the request of the payer
- Related, the inability to chose a 3rd party arbiter, escrow service, or none; you are stuck with PayPal as an arbiter (consumer protection you say), and this is no way a feature but a drawback
- The intense privacy violation employed by the PayPal system: for moving anything more than a few bucks, you need to send them proof of identity, proof of address, description of business. You also implicitly give them the identity of all business partners, and the object and value of your transactions.

PayPal is not a currency. Paypal was never advertised as a currency. PayPal will never be a currency.

So, what is your point again, BubbleBoy?

That BTC is great as a payment processor, to easily move fiat from one person to another with a minimum of hassle?

Great, thanks for your input.  I made a comment about people such as yourself a couple of times. Stop comparing BTC to PayPal, it makes you look foolish and denigrates BTC for what it's supposedly supposed to become...

Is this the best you people have?
BubbleBoy
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June 15, 2011, 09:08:38 AM
 #19

The currency used by PayPal is the USD/EUR. If you are too dense to acknowledge that you need a service such as PayPal to move USD online, yet you don't need it for bitcoins, thus making cash USD <-> bitcoin an apples to oranges comparison, then there's really nothing much to talk about.


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Synaptic
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June 15, 2011, 09:13:18 AM
 #20

The currency used by PayPal is the USD/EUR. If you are too dense to acknowledge that you need a service such as PayPal to move USD online, yet you don't need it for bitcoins, thus making cash USD <-> bitcoin an apples to oranges comparison, then there's really nothing much to talk about.

Oh my holy bleeding Jesus in heaven...

Listen, Boy:

Bitcoins have been touted as being the next greatest currency on the planet. A currency to end all modern currencies. The salvation of people's pocketbooks behind an impenetrable wall of anonymity, distributed security, and deflationary tendencies.

THAT is where the debate lies, you cretin.  On the merits of BTC as a CURRENCY.

IT'S IN THE FUCKING TITLE OF THIS THREAD, IDIOT.

Now run along and go blow some bubbles like a good little lad now, darling.
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June 15, 2011, 09:20:06 AM
 #21

We have contract law, do we not?

HA! you wish.  you have contract law unless the judge doesn't like the contract.

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June 15, 2011, 09:24:06 AM
 #22

Quote
Bitcoins have been touted as being the next greatest currency on the planet. A currency to end all modern currencies. The salvation of people's pocketbooks behind an impenetrable wall of anonymity, distributed security, and deflationary tendencies.

So if you are to inept to argue your point, you viciously attack a straw-man that was never written on the Bitcoin site, and never affirmed in this thread, much less by me ? You fail at serious logical analysis, but not at being an obnoxious troll.


                               ,,,,╓╖µpp╖╖,,,,
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          '"       ╓@▓▓▓▓▓▓▓▓▀▓▓▓▓█████████████▀╙        ,
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            ▓▀`            ╙▀▀▀███████████████▀▀▀"
COMSA
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Synaptic
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June 15, 2011, 09:26:12 AM
 #23

Quote
Bitcoins have been touted as being the next greatest currency on the planet. A currency to end all modern currencies. The salvation of people's pocketbooks behind an impenetrable wall of anonymity, distributed security, and deflationary tendencies.

So if you are to inept to argue your point, you viciously attack a straw-man that was never written on the Bitcoin site, and never affirmed in this thread, much less by me ? You fail at serious logical analysis, but not at being an obnoxious troll.

Lol, sure.

Let's let the community decide for themselves, shall we?

Thanks for your visit.
mewantsbitcoins
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June 15, 2011, 09:36:55 AM
 #24

I would rename this thread "Seriously retarded and emotional nonsense"
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June 15, 2011, 09:37:45 AM
 #25

We have contract law, do we not?

HA! you wish.  you have contract law unless the judge doesn't like the contract.

Yep, pretty much.

That's one of the things that concerns me the most about using BTC for daily transactions, is that there is ZERO lawful protections in place for anything you might possibly do with bitcoins.

Our natural Marchant and/or Consumer will just not put up with this fact.  It makes BTC a non-point as a widespread currency at this juncture in time.
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June 15, 2011, 09:39:39 AM
 #26

I would rename this thread "Seriously retarded and emotional nonsense"

Well that's great! Thanks for your enlightening input! You've brought us all to a greater understanding of the situation, and we all owe you more than a slight debt of gratitude for taking the time to type those few words for our benefit.

Can I offer you a donation?

Cheers!
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June 15, 2011, 09:45:49 AM
 #27

I've read a lot of posts lately from individuals who claim to believe in the long term viability of bitcoin as a currency. My initial assumption is that these folks are actually NOT invested in the ideals, but the speculative returns, whether they consciously admit it or not, however for the sake of this analysis I'll assume that balls to bones they do believe in bitcoin on an ideological and utility basis.

When talking about bitcoins as a currency, we're talking about the adoption of it by a critical mass of average consumers. Therefore it's advantageous to remove our own interests and understanding from the equation and approach this analysis from the perspective of such a mundane consumer. A good way to go about that is a simple Pro/Con list.

Additionally, we'll then work off the assumption ( a very, very generous one too) that a plurality of useful merchants will accept bitcoin as payment, alongside fiat.

<<<PROS AND CONS OF BITCOIN FROM THE PERSPECTIVE OF AVERAGE CONSUMERS RELATIVE TO FIAT>>>

Pros:

- Potentially stronger store of value than inflationary fiat

Cons:

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
- Difficult to buy
- Difficult to sell
- Major issues of trust in relation to transactions
- Major issues of security relating to local storage
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
- Fear of negative Governmental intervention
- Perception of facilitating illegal activity to a greater extent and ease than cash
- No consumer protections by law

That's all I'm going to bother thinking up for now. If anyone has anything to add to either the pro or con side please do.  Once it seems settles that our pro/con matrix is populated with a representative sample of possible perceptions (I'm not going to bother thinking up more, and I'm sure other people have things to add I haven't thought of anyway), then we can continue the analysis of what bitcoin's future prospects as a currency actually are.

Thank you,

~ Synaptic


I agree with your cons to a certain extent, no worry though, as bitcoin grows it will iron out its own wrinkles.

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June 15, 2011, 09:51:52 AM
 #28

I've read a lot of posts lately from individuals who claim to believe in the long term viability of bitcoin as a currency. My initial assumption is that these folks are actually NOT invested in the ideals, but the speculative returns, whether they consciously admit it or not, however for the sake of this analysis I'll assume that balls to bones they do believe in bitcoin on an ideological and utility basis.

When talking about bitcoins as a currency, we're talking about the adoption of it by a critical mass of average consumers. Therefore it's advantageous to remove our own interests and understanding from the equation and approach this analysis from the perspective of such a mundane consumer. A good way to go about that is a simple Pro/Con list.

Additionally, we'll then work off the assumption ( a very, very generous one too) that a plurality of useful merchants will accept bitcoin as payment, alongside fiat.

<<<PROS AND CONS OF BITCOIN FROM THE PERSPECTIVE OF AVERAGE CONSUMERS RELATIVE TO FIAT>>>

Pros:

- Potentially stronger store of value than inflationary fiat

Cons:

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
- Difficult to buy
- Difficult to sell
- Major issues of trust in relation to transactions
- Major issues of security relating to local storage
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
- Fear of negative Governmental intervention
- Perception of facilitating illegal activity to a greater extent and ease than cash
- No consumer protections by law

That's all I'm going to bother thinking up for now. If anyone has anything to add to either the pro or con side please do.  Once it seems settles that our pro/con matrix is populated with a representative sample of possible perceptions (I'm not going to bother thinking up more, and I'm sure other people have things to add I haven't thought of anyway), then we can continue the analysis of what bitcoin's future prospects as a currency actually are.

Thank you,

~ Synaptic


I agree with your cons to a certain extent, no worry though, as bitcoin grows it will iron out its own wrinkles.

Thank you for your comment. I'm interested to hear your ideas about how the cons category can be worked through.

Also, I'm very interested to hear from anyone about what else we can place in the pros category.

Remember, this is from the perspective of a general consumer...
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June 15, 2011, 09:54:48 AM
 #29

The currency used by PayPal is the USD/EUR. If you are too dense to acknowledge that you need a service such as PayPal to move USD online, yet you don't need it for bitcoins, thus making cash USD <-> bitcoin an apples to oranges comparison, then there's really nothing much to talk about.

Also, just to beat your horse as dead as it can be, you DON'T need a service such as PayPal to exchange BTC online. That's supposedly one of its pros.

BUT NOT FOR YOUR AVERAGE CONSUMER.

Why?

No charge-backs. Plain and simple.
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June 15, 2011, 10:28:02 AM
 #30

I've been thinking about some of the cons you mention for a little while now, and the only solution I can come up with is probably the exact opposite of what the bitcoin community thinks should happen.

Basically, I see centralised 3rd parties that offer users online wallet management with merchant services, ala bitpal. This will appear to erode some of the ideals of bitcoin, such as each user being in total control of their currency, but I think those ideals won't work in reality. Just look at the guy who recently lost 25k of coins, and ask youself if the typical mum & dad is going to know MORE or LESS than him about cryptology, security, etc.
Having online 3rd part bitcoin wallet management will allow a number of benefits, however, such as setting up automated payments (your computer doesnt need to be on to send them), access from any computer, potentially better security than the average person can muster, etc.

The main bebefit of bitcoin then, will be that various 3rd parties can compete with value added services along with their wallet management, be based in different countries to avoid certain laws, and generally avoid some of the unwanted side effects such as having wallet assets frozen, etc. However, the tendency will be towards trusting a few established provideers, since new startups could just be out to scam your wallet.

I hope that made some sense, I obviously haven't been thinking about it as long as some others.

Any intelligent fool can make things bigger, more complex and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction.
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June 15, 2011, 10:32:08 AM
 #31

Here is how I believe bitcoin may solve its own problems:

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
as bitcoin matures and becomes more widely accepted, people will simply place their faith into the system and assume that it works since it has been working all this time. how many people understand how the dollar works? i sure as hell don't.
- Difficult to buy
Mtgox is making a killing right now on trades, you can bet more and more people will want in on that action. over time, as new exchanges come into existence they will need to offer better services to keep their edge, and one of thing that would give them an edge would be to make it easier to buy and sell bitcoins.
- Difficult to sell
same as above
- Major issues of trust in relation to transactions
reputation will play a major role in the bitcoin economy, i wont send my bitcoins unless i know where they are going.
- Major issues of security relating to local storage
new services will come into existence due to demand for security
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
same as above
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
development of better ui, i already see some new stuff coming http://forum.bitcoin.org/index.php?topic=15824.0
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
the exchanges might be integrated directly into point of sale devices, so when you want to buy something in bitcoins but it only sells for usd, you can use a card that will do an automatic exchange. if you're talking about day traders, i don't think it has ever been simple to be a day trader.
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
bitbills or any other physical incarnation of bitcoin
- Fear of negative Governmental intervention
go underground, move to where its legal, or change the laws. i believe that by the time the government decides to anything to bitcoin, it will be too late.
- Perception of facilitating illegal activity to a greater extent and ease than cash
mind your own damn business. people will eventually become desensitized
- No consumer protections by law
there may be services that come into existence which will offer you insurance on your purchases if you use their trust network (merchants which the insurer trusts)

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June 15, 2011, 10:39:56 AM
 #32

I've been thinking about some of the cons you mention for a little while now, and the only solution I can come up with is probably the exact opposite of what the bitcoin community thinks should happen.

Basically, I see centralised 3rd parties that offer users online wallet management with merchant services, ala bitpal. This will appear to erode some of the ideals of bitcoin, such as each user being in total control of their currency, but I think those ideals won't work in reality. Just look at the guy who recently lost 25k of coins, and ask youself if the typical mum & dad is going to know MORE or LESS than him about cryptology, security, etc.
Having online 3rd part bitcoin wallet management will allow a number of benefits, however, such as setting up automated payments (your computer doesnt need to be on to send them), access from any computer, potentially better security than the average person can muster, etc.

The main bebefit of bitcoin then, will be that various 3rd parties can compete with value added services along with their wallet management, be based in different countries to avoid certain laws, and generally avoid some of the unwanted side effects such as having wallet assets frozen, etc. However, the tendency will be towards trusting a few established provideers, since new startups could just be out to scam your wallet.

I hope that made some sense, I obviously haven't been thinking about it as long as some others.

3rd parties and trust networks will rule the bitcoin realm. the beauty being that people will be able choose or create their own services.

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June 15, 2011, 10:45:06 AM
 #33

Quote
3rd parties and trust networks will rule the bitcoin realm. the beauty being that people will be able choose or create their own services.

I agree, I've been thinking about the need for a reputation system since discovering bitcoins.  It's a free-for-all right now and fertile ground for scammers.   People are posting up lists of who to trust or avoid and that seems awfully primitive for a community that is supposedly on the cutting edge of the digital age.  

Once a global reputation system was working reasonably smoothly, 3rd parties could use the statistical data to provide a fee-based guarantee system to protect the average user who wants the security they are used to with payapl etc.
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June 15, 2011, 10:50:25 AM
 #34

I've been thinking about some of the cons you mention for a little while now, and the only solution I can come up with is probably the exact opposite of what the bitcoin community thinks should happen.

Basically, I see centralised 3rd parties that offer users online wallet management with merchant services, ala bitpal. This will appear to erode some of the ideals of bitcoin, such as each user being in total control of their currency, but I think those ideals won't work in reality. Just look at the guy who recently lost 25k of coins, and ask youself if the typical mum & dad is going to know MORE or LESS than him about cryptology, security, etc.
Having online 3rd part bitcoin wallet management will allow a number of benefits, however, such as setting up automated payments (your computer doesnt need to be on to send them), access from any computer, potentially better security than the average person can muster, etc.

The main bebefit of bitcoin then, will be that various 3rd parties can compete with value added services along with their wallet management, be based in different countries to avoid certain laws, and generally avoid some of the unwanted side effects such as having wallet assets frozen, etc. However, the tendency will be towards trusting a few established provideers, since new startups could just be out to scam your wallet.

I hope that made some sense, I obviously haven't been thinking about it as long as some others.

Yeah man! Made a lot of sense, great post.

I'm thinking along the same lines, too. I think one of the great things of bitcoin is that we can have these third party services and still not have to compromise the deeper aspects of bitcoin that appeal to many of the current adherents.

I see two ways this could play out:

1.) Some enterprising bitcoiner forms his own "BitPal" type service, with wallet management, escrow services, possibly even payment insurance. The problem here is one wholly of trust. Maybe it can be done, but maybe it can't.  Trust is a difficult thing to earn when it comes to hard earned money, products, and services.

2.) Some big name company who already has a great deal of mindshare and trust develops bitcoin services. I think this could potentially be the best thing that could happen in the near term, but poses it's own issues. Firstly, I fear there's not a major company willing to gamble with beginning to accept a "currency" that's both untested by the market, and most importantly, by the law. I believe that any major company will be sitting on the fence waiting for whatever Govt. agency applicable to give their yea or nay on bitcoin's acceptability as a medium of exchange.

Which brings in the second issue, which is what if they do get into the game, with Govt. blessings? How much control are we willing to let some potentially massive multi-national corporation (possibly banks even!) exert influence on the bitcoin economy? They might not be able to affect things like block chain integrity and the like, but what about the markets? What about the public consciousness surrounding BTC? If they do step in, in a big way, would the early community even be able to stop them from cornering the market in the long term?
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June 15, 2011, 11:00:26 AM
 #35

Here is how I believe bitcoin may solve its own problems:

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
as bitcoin matures and becomes more widely accepted, people will simply place their faith into the system and assume that it works since it has been working all this time. how many people understand how the dollar works? i sure as hell don't.
- Difficult to buy
Mtgox is making a killing right now on trades, you can bet more and more people will want in on that action. over time, as new exchanges come into existence they will need to offer better services to keep their edge, and one of thing that would give them an edge would be to make it easier to buy and sell bitcoins.
- Difficult to sell
same as above
- Major issues of trust in relation to transactions
reputation will play a major role in the bitcoin economy, i wont send my bitcoins unless i know where they are going.
- Major issues of security relating to local storage
new services will come into existence due to demand for security
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
same as above
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
development of better ui, i already see some new stuff coming http://forum.bitcoin.org/index.php?topic=15824.0
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
the exchanges might be integrated directly into point of sale devices, so when you want to buy something in bitcoins but it only sells for usd, you can use a card that will do an automatic exchange. if you're talking about day traders, i don't think it has ever been simple to be a day trader.
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
bitbills or any other physical incarnation of bitcoin
- Fear of negative Governmental intervention
go underground, move to where its legal, or change the laws. i believe that by the time the government decides to anything to bitcoin, it will be too late.
- Perception of facilitating illegal activity to a greater extent and ease than cash
mind your own damn business. people will eventually become desensitized
- No consumer protections by law
there may be services that come into existence which will offer you insurance on your purchases if you use their trust network (merchants which the insurer trusts)

It does seem that time is the biggest question as relates to Bitcoin right now. In that regard, I think the Bitcoin economy will develop at such a glacial pace that Governments will have very little trouble instituting controls or outright bans.

Indeed it seems the Bitcoin community is resourceful, and only recently has the BTC/USD exchange been large enough to command any respectability (though still wholly though speculation and not commerce), however useful new services seem to be rather slow on the uptake.

Dwolla deals in USD, and they bootstrapped incredibly fast, and they're already partnering with financial institutions and POS vendors. Bitcoin needs something like Dwolla (especially Dwolla Grid), and quickly. If BTC/USD hits a steady $25, and no such service materializes on the quick, we all better take a hard goddamn look at what's really going on and wonder why...
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June 15, 2011, 11:48:54 AM
 #36

The first "mundane consumers" to use bitcoin will be poker players, porn consumers, MMOG players, "mechanical-turk" style workers, and people who send money to relatives in developing countries,.  Bitcoin's pros for those markets are obvious. 

Then, once the bitcoin economy becomes more established, better security tools and exchanges for the average user will emerge, and bitcoin will slowly expand into other markets.

GPG ID: FA868D77   bitcoin-otc:forever-d
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June 15, 2011, 11:57:17 AM
 #37

That's one of the things that concerns me the most about using BTC for daily transactions, is that there is ZERO lawful protections in place for anything you might possibly do with bitcoins.

As soon as somebody develops a user-friendly version of bitcoin-otc web of trust, lawful protection won't be needed for 99% of transactions.

Facebook is just the beginning. Once the power of "Six degrees of separation" is fully tapped, it will act as a much stronger enabler of social cohesion than any court of law. 

GPG ID: FA868D77   bitcoin-otc:forever-d
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June 15, 2011, 12:02:49 PM
 #38

That's one of the things that concerns me the most about using BTC for daily transactions, is that there is ZERO lawful protections in place for anything you might possibly do with bitcoins.

As soon as somebody develops a user-friendly version of bitcoin-otc web of trust, lawful protection won't be needed for 99% of transactions.

Facebook is just the beginning. Once the power of "Six degrees of separation" is fully tapped, it will act as a much stronger enabler of social cohesion than any court of law. 


This is pure fantasy.

Courts have and always will play a vital role in any fair (or unfair) market. Unless your apex of bitcoin usage is coffee and socks, down the road I guaran-fucking-tee you that Courts are going to be called upon by uncompensated merchants/workers/servicemen, and unhappy consumers. You can bet your bottom BTC on it. 
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June 15, 2011, 12:03:05 PM
 #39

I think you missed a few pros. Smiley

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June 15, 2011, 12:23:29 PM
 #40

I think you missed a few pros. Smiley

Please name them and I'll gladly edit them in, with attribution!
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June 15, 2011, 01:02:16 PM
 #41

This is pure fantasy.

Courts have and always will play a vital role in any fair (or unfair) market. Unless your apex of bitcoin usage is coffee and socks, down the road I guaran-fucking-tee you that Courts are going to be called upon by uncompensated merchants/workers/servicemen, and unhappy consumers. You can bet your bottom BTC on it.  

Pure fantasy? I'll give you a real life example: The vast majority of disputes on ebay are settled outside court. This was especially true during the earlier years of ebay.  Well, you could argue that this is only because courts act as a deterrent.   But if that were true, intercontinental trade over ebay would not exist.  If I purchase some computer hardware from a mom-and-pop store in Hong Kong, what recourse do I have in court if it isn't delivered? Realistically, none.  Yet, millions of people keep doing this and the majority of trades are honest.  The reason this works is not because of courts, but because ebay has an escrow service and a rating system (which is vastly inferior to otc-wot but still does its job).  

De facto, courts already offer no protection for everyday voluntary exchanges.  For any purchase worth less than $1000 going to court is simply not worth the hassle and cost for an average consumer.  The few people who do go to court over such small amounts tend to do it out of personal pride, not because of a rational cost/benefit analysis.    

Of course, courts will always be required for big deals such as real estate purchase.  But for everyday transactions they are simply not needed.

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June 15, 2011, 01:24:41 PM
 #42

This is pure fantasy.

Courts have and always will play a vital role in any fair (or unfair) market. Unless your apex of bitcoin usage is coffee and socks, down the road I guaran-fucking-tee you that Courts are going to be called upon by uncompensated merchants/workers/servicemen, and unhappy consumers. You can bet your bottom BTC on it.  

Pure fantasy? I'll give you a real life example: The vast majority of disputes on ebay are settled outside court. This was especially true during the earlier years of ebay.  Well, you could argue that this is only because courts act as a deterrent.   But if that were true, intercontinental trade over ebay would not exist.  If I purchase some computer hardware from a mom-and-pop store in Hong Kong, what recourse do I have in court if it isn't delivered? Realistically, none.  Yet, millions of people keep doing this and the majority of trades are honest.  The reason this works is not because of courts, buy because ebay has an escrow service and a rating system (which is vastly inferior to otc-wot but still does its job).  

De facto, courts already offer no protection for everyday voluntary exchanges.  For any purchase worth less than $1000 going to court is simply not worth the hassle and cost for an average consumer.  The few people who do go to court over such small amounts tend to do it out of personal pride, not because of a rational cost/benefit analysis.    

Of course, courts will always be required for big deals such as real estate purchase.  But for everyday transactions they are simply not needed.

Hey, good post.

Y'know, you're correct. However, ebay and specifically PayPal have become known recently as the bane of many merchants due to frivolous charge-backs.

Now just for hypothesis let's say that a sizeable number of merchants banded together to form a class action lawsuit against PayPal for allowing so many flagrant fraudulent chargebacks (such as the ones months after receipt of products). Let's also assume that this were even able to make it to court in spite of the recent bullshit Supreme Court judgement about class action suits and arbitration.

Now, if this class action suit were to involve any degree of bitcoin transactions, how would that even be handled by this suit if there were no legal precedent for the use of bitcoin as a medium of exchange?

This might be a poor example, but it's just one of many examples dealing with a VOLUME of transactions by a merchant or body of merchants.

Sure, a couple of < $1000 transactions aren't going to usually end up in court (unless you're Californian!), but when you're doing multiple millions of USD in sales a year, you WANT there to be a very real and tangible presence of law backing up your commerce.

The fact remains that there is no such lawful tangibility for Bitcoin, and until there is it will only ever be useful as an exchange medium for entities the size of your general mom-and-pop shop.
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June 15, 2011, 01:57:23 PM
 #43

Cons:

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
- Difficult to buy
- Difficult to sell
- Major issues of trust in relation to transactions
- Major issues of security relating to local storage
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
- Fear of negative Governmental intervention
- Perception of facilitating illegal activity to a greater extent and ease than cash
- No consumer protections by law

Aren't these all user issues? (Except -Fear of losing coins..) Granted, people have to use Bitcoin if it is going to be a currency.

I'm just trying to clearly understand the argument. Is it: People are stupid, so Bitcoin is a poor currency?

If so, it will work like everything else in the world. The smart kids will make it easy for the public to use, at a price. The bonus is, the smart kids who just want to use it in it's raw form can.
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June 15, 2011, 09:52:02 PM
 #44

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy)
- Difficult to buy
- Difficult to sell
- Major issues of trust in relation to transactions
- Major issues of security relating to local storage
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic
- Fear of negative Governmental intervention
- Perception of facilitating illegal activity to a greater extent and ease than cash
- No consumer protections by law
Fear, Uncertainty, and Doubt

First time I see the term FUD used as FUD.

I'm out of here!
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June 16, 2011, 02:09:15 AM
 #45

Now just for hypothesis let's say that a sizeable number of merchants banded together to form a class action lawsuit against PayPal

...

Now, if this class action suit were to involve any degree of bitcoin transactions, how would that even be handled by this suit if there were no legal precedent for the use of bitcoin as a medium of exchange?

The plaintiffs can't just "band together to form a class action."  A class action suit must be certified by the court after the petition by lawyers to consolidate a lot of plaintiffs.  The defendant(s) are also going to have a say in the matter, and various requirements have to be met before the case(s) will be certified as a class action.

But in any case, including a class action, if it involved bitcoin it would be handled just like any (claimed) fraudulent transaction which may or may not involve or be denominated naturally in U.S. dollars.  For example, a contractor may work on a home in exchange for a car.  If the title is never turned over or is found to be fraudulent then the contractor can sue for redress.  Or if the contractor did work in exchange for a stamp collection which turned out to be counterfeit then the contractor can sue for redress.  Or if the contractor did work in exchange for gold which was never paid then the contractor can sue for redress.  Or if the contractor did work in exchange for bitcoin which was never paid then the contractor can sue for redress.  Contract (written or not) law and fraud related to it is pretty well established.  Bitcoin makes no difference.

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June 16, 2011, 12:33:00 PM
 #46

OP states that bitcoin will only survive if they gain a critical mass of consumers using them. I feel that there is another possible future for bitcoins. If a critical mass of investors uses them, they may even be stronger than just consumers using them. What I see is that bitcoins offer an amazing way to transfer wealth around the world, so wealth can easily be invested where it is most useful.

This is quite simply the stupidest idea I've heard lately.

A critical mass of investors?

Ok, what good will that do anyone? Say, we just go about speculating daily as to how much BTC is worth without having anything to back it up?

We'll all just sit around and wonder who has the most BTC and when they're going to sell them off crashing the price?


You completely misunderstood what I was saying.

I did not mean people investing in bitcoin. I meant people using bitcoin to invest in other things. Investing in goods and services. Helping the economy grow. If I am in America and Joe is in Australia, and I think Joe has an amazing business model, I can send him some bitcoins which he uses to start his business and sends me back profits as bitcoins. That way I don't need Australian dollars and he doesn't need American dollars.

Maybe before calling everybody idiots you should actually think about what they are saying.

Well, if I'm to take a guess again I'm to understand that what you're essentially saying is that...money laundering...is the great salvation of Bitcoin...

EDIT: I must say that altruistically it's not a bad idea you're expressing.  Legally, it's money laundering (tax evasion).
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June 16, 2011, 12:47:39 PM
 #47

OP states that bitcoin will only survive if they gain a critical mass of consumers using them. I feel that there is another possible future for bitcoins. If a critical mass of investors uses them, they may even be stronger than just consumers using them. What I see is that bitcoins offer an amazing way to transfer wealth around the world, so wealth can easily be invested where it is most useful.

This is quite simply the stupidest idea I've heard lately.

A critical mass of investors?

Ok, what good will that do anyone? Say, we just go about speculating daily as to how much BTC is worth without having anything to back it up?

We'll all just sit around and wonder who has the most BTC and when they're going to sell them off crashing the price?


You completely misunderstood what I was saying.

I did not mean people investing in bitcoin. I meant people using bitcoin to invest in other things. Investing in goods and services. Helping the economy grow. If I am in America and Joe is in Australia, and I think Joe has an amazing business model, I can send him some bitcoins which he uses to start his business and sends me back profits as bitcoins. That way I don't need Australian dollars and he doesn't need American dollars.

Maybe before calling everybody idiots you should actually think about what they are saying.

Well, if I'm to take a guess again I'm to understand that what you're essentially saying is that...money laundering...is the great salvation of Bitcoin...

Money laundering? WTF?

In the first instance I said "Investor" and you read "Speculator". I tried to explain more clearly what an investor is, and you read "Money Laundering." If I invest in a stock on the NYSE, is that money laundering?

Sorry, didn't get my edit off soon enough.

Essentially what you're talking about would constitute money laundering, most notably for tax evasion.
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June 16, 2011, 12:57:19 PM
 #48

OP states that bitcoin will only survive if they gain a critical mass of consumers using them. I feel that there is another possible future for bitcoins. If a critical mass of investors uses them, they may even be stronger than just consumers using them. What I see is that bitcoins offer an amazing way to transfer wealth around the world, so wealth can easily be invested where it is most useful.

This is quite simply the stupidest idea I've heard lately.

A critical mass of investors?

Ok, what good will that do anyone? Say, we just go about speculating daily as to how much BTC is worth without having anything to back it up?

We'll all just sit around and wonder who has the most BTC and when they're going to sell them off crashing the price?


You completely misunderstood what I was saying.

I did not mean people investing in bitcoin. I meant people using bitcoin to invest in other things. Investing in goods and services. Helping the economy grow. If I am in America and Joe is in Australia, and I think Joe has an amazing business model, I can send him some bitcoins which he uses to start his business and sends me back profits as bitcoins. That way I don't need Australian dollars and he doesn't need American dollars.

Maybe before calling everybody idiots you should actually think about what they are saying.

Well, if I'm to take a guess again I'm to understand that what you're essentially saying is that...money laundering...is the great salvation of Bitcoin...

Money laundering? WTF?

In the first instance I said "Investor" and you read "Speculator". I tried to explain more clearly what an investor is, and you read "Money Laundering." If I invest in a stock on the NYSE, is that money laundering?

Sorry, didn't get my edit off soon enough.

Essentially what you're talking about would constitute money laundering, most notably for tax evasion.

Synaptic you are completely mistaking what peter is trying to say. You are drawing incorrect conclusions. What peter is saying is that BTC is a great way to transfer money anywhere in the world. As a result of this ability, you can easily invest in any country in the world and invest in ventures which you would normally not have access to.

Speculate is to buy and hold BTC in hopes of selling it for more. This is a  zero sum game.
Investing is referring to investing the capital into businesses which generate goods and services that are sold for a profit. This process ultimately creates wealth and increases the standard of living of the world, as long as the capital is invested in such a fashion that it satisfies consumer demand and generates a profit.
 
It would not constitute money laundering as long as it is not from illegal sources. Remember, money laundering is the process of taking money derived from illegal sources (drugs, gambling, prostitution etc.) and making it appear as if it were derived from a legitimate source. It would not constitute tax evasion as long as all accrued taxes are paid.

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June 16, 2011, 01:07:51 PM
 #49

OP states that bitcoin will only survive if they gain a critical mass of consumers using them. I feel that there is another possible future for bitcoins. If a critical mass of investors uses them, they may even be stronger than just consumers using them. What I see is that bitcoins offer an amazing way to transfer wealth around the world, so wealth can easily be invested where it is most useful.

This is quite simply the stupidest idea I've heard lately.

A critical mass of investors?

Ok, what good will that do anyone? Say, we just go about speculating daily as to how much BTC is worth without having anything to back it up?

We'll all just sit around and wonder who has the most BTC and when they're going to sell them off crashing the price?


You completely misunderstood what I was saying.

I did not mean people investing in bitcoin. I meant people using bitcoin to invest in other things. Investing in goods and services. Helping the economy grow. If I am in America and Joe is in Australia, and I think Joe has an amazing business model, I can send him some bitcoins which he uses to start his business and sends me back profits as bitcoins. That way I don't need Australian dollars and he doesn't need American dollars.

Maybe before calling everybody idiots you should actually think about what they are saying.

Well, if I'm to take a guess again I'm to understand that what you're essentially saying is that...money laundering...is the great salvation of Bitcoin...

Money laundering? WTF?

In the first instance I said "Investor" and you read "Speculator". I tried to explain more clearly what an investor is, and you read "Money Laundering." If I invest in a stock on the NYSE, is that money laundering?

Sorry, didn't get my edit off soon enough.

Essentially what you're talking about would constitute money laundering, most notably for tax evasion.

Synaptic you are completely mistaking what peter is trying to say. You are drawing incorrect conclusions. What peter is saying is that BTC is a great way to transfer money anywhere in the world. As a result of this ability, you can easily invest in any country in the world and invest in ventures which you would normally not have access to.

Speculate is to buy and hold BTC in hopes of selling it for more. This is a  zero sum game.
Investing is referring to investing the capital into businesses which generate goods and services that are sold for a profit. This process ultimately creates wealth and increases the standard of living of the world, as long as the capital is invested in such a fashion that it satisfies consumer demand and generates a profit.
 
It would not constitute money laundering as long as it is not from illegal sources. It would not constitute tax evasion as long as all accrued taxes are paid.

Yes, I did draw a conclusion based outside of the suggestion, and I withdraw my statement that it would intrinsically constitute tax evasion (and thus money laundering).

My presumption was that these funds would likely be paid pre-tax, and then also likely, unreported by the recipient.
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June 16, 2011, 04:43:25 PM
 #50

I withdraw my statement that it would intrinsically constitute tax evasion (and thus money laundering).

Tax evasion is not money laundering and money laundering is not tax evasion.  Doing one does not imply the other as they are completely orthogonal concepts.  The only thing they have in common is that both are illegal and both involve money.
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June 16, 2011, 06:00:13 PM
 #51

I withdraw my statement that it would intrinsically constitute tax evasion (and thus money laundering).

Tax evasion is not money laundering and money laundering is not tax evasion.  Doing one does not imply the other as they are completely orthogonal concepts.  The only thing they have in common is that both are illegal and both involve money.


If you appropriate money through an illegal activity (tax evasion) and attempt to obfuscate transactions involving said funds (bitcoin) you have committed money laundering...
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June 16, 2011, 06:42:20 PM
 #52

Wow, lots of emotional discussion going on here. I think Synaptic has a point though. Regardless of what you may think the true and technical issues with Bitcoin are, I think the list sums up the average consumer's qualms fairly well. After all, the list was titled:

<<<PROS AND CONS OF BITCOIN FROM THE PERSPECTIVE OF AVERAGE CONSUMERS RELATIVE TO FIAT>>>

Because I find it a fairly good list, I've reproduced it here and added a couple parentheticals.

Pros:

- Potentially stronger store of value than inflationary fiat

Cons:

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy) (Given broad enough adoption, the consumer will not care about these details.)
- Difficult to buy (Broad sense of "buy" here: includes buying BTC with one's labor. More a problem for non-tech workers ATM.)
- Difficult to sell (Broad sense of "sell" here: includes going down to the corner store and selling BTC for food.)
- Major issues of trust in relation to transactions (Escrow services and web of trust services can help. Wallet services could also create "credit transfers," where the bitcoins can be recalled within a certain timeframe. Not my favorite solution, personally, but it could be done if the consumer absolutely, positively must have their chargebacks.)
- Major issues of security relating to local storage (+1. Wallet services will come in handy here.)
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy) (See above.)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy) (I don't think this is necessary. As long as a consumer can use something easily, and as long as most of their friends are using it too, they will not usually care how it works.)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy) (Overstated, perhaps. All a consumer needs to see is a price. They understand buying. Hide the graphs, flatten the fluctuations with some sort of averaging so they can get all their coins for the same price per piece, and they should be fine.)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic (+1. Wallet services will help here, as will BitBills.)
- Fear of negative Governmental intervention (Only the passing of time without negative intervention can help this one.)
- Perception of facilitating illegal activity to a greater extent and ease than cash (A PR problem. Can be handled. Get enough of a person's friends using it and that perception will go away. Think MP3 sharing, which is technically illegal but not really thought of as criminal by the average consumer.)
- No consumer protections by law (Give it time. Governments will have to deal with Bitcoins somehow. If we get big enough, we can start sending out consumer rights advocates to our various governments.)

None of these negative points are insurmountable. I do personally believe in Bitcoin as a system of currency. I think it's stronger and more robust as a system than the US dollar. Regardless of what it does short-term, I think it will outperform the US dollar in the long term. (I am preoccupied with the US dollar as I currently reside in the US.)

I did initially think of BTC as a way of speculating myself to more USD, but as I began dealing more with bitcoins a change in my thinking took place. I think the final straw was reading the article at http://bitcoinweekly.com/articles/one-apple-today-two-apples-tomorrow-or-how-i-stopped-being-afraid-and-learned-to-love-deflation

To be fair, right now I'm hedging my bets by selling the BTC I mine for USD until I make back my sunk cost. But once that's done, I'm holding onto my BTC and working to get it accepted by more vendors so I can spend it more places. Because it's not until we have a bottom-up Bitcoin chain of exchange that Bitcoin will be a true, sovereign currency. I'm working, for my part, to see that day come to pass.
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June 16, 2011, 06:55:07 PM
 #53

Wow, lots of emotional discussion going on here. I think Synaptic has a point though. Regardless of what you may think the true and technical issues with Bitcoin are, I think the list sums up the average consumer's qualms fairly well. After all, the list was titled:

<<<PROS AND CONS OF BITCOIN FROM THE PERSPECTIVE OF AVERAGE CONSUMERS RELATIVE TO FIAT>>>

Because I find it a fairly good list, I've reproduced it here and added a couple parentheticals.

Pros:

- Potentially stronger store of value than inflationary fiat

Cons:

- Difficult to understand concepts of crypto-currency (3+ hours minimum, tech savvy) (Given broad enough adoption, the consumer will not care about these details.)
- Difficult to buy (Broad sense of "buy" here: includes buying BTC with one's labor. More a problem for non-tech workers ATM.)
- Difficult to sell (Broad sense of "sell" here: includes going down to the corner store and selling BTC for food.)
- Major issues of trust in relation to transactions (Escrow services and web of trust services can help. Wallet services could also create "credit transfers," where the bitcoins can be recalled within a certain timeframe. Not my favorite solution, personally, but it could be done if the consumer absolutely, positively must have their chargebacks.)
- Major issues of security relating to local storage (+1. Wallet services will come in handy here.)
- Extreme difficulty in understanding proper security practices (1-2 hours, tech savvy) (See above.)
- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy) (I don't think this is necessary. As long as a consumer can use something easily, and as long as most of their friends are using it too, they will not usually care how it works.)
- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy) (Overstated, perhaps. All a consumer needs to see is a price. They understand buying. Hide the graphs, flatten the fluctuations with some sort of averaging so they can get all their coins for the same price per piece, and they should be fine.)
- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic (+1. Wallet services will help here, as will BitBills.)
- Fear of negative Governmental intervention (Only the passing of time without negative intervention can help this one.)
- Perception of facilitating illegal activity to a greater extent and ease than cash (A PR problem. Can be handled. Get enough of a person's friends using it and that perception will go away. Think MP3 sharing, which is technically illegal but not really thought of as criminal by the average consumer.)
- No consumer protections by law (Give it time. Governments will have to deal with Bitcoins somehow. If we get big enough, we can start sending out consumer rights advocates to our various governments.)

None of these negative points are insurmountable. I do personally believe in Bitcoin as a system of currency. I think it's stronger and more robust as a system than the US dollar. Regardless of what it does short-term, I think it will outperform the US dollar in the long term. (I am preoccupied with the US dollar as I currently reside in the US.)

I did initially think of BTC as a way of speculating myself to more USD, but as I began dealing more with bitcoins a change in my thinking took place. I think the final straw was reading the article at http://bitcoinweekly.com/articles/one-apple-today-two-apples-tomorrow-or-how-i-stopped-being-afraid-and-learned-to-love-deflation

To be fair, right now I'm hedging my bets by selling the BTC I mine for USD until I make back my sunk cost. But once that's done, I'm holding onto my BTC and working to get it accepted by more vendors so I can spend it more places. Because it's not until we have a bottom-up Bitcoin chain of exchange that Bitcoin will be a true, sovereign currency. I'm working, for my part, to see that day come to pass.

Hey, thanks for the post, great points.

I hope you're able to recoup your costs and even more importantly get more people on board with bitcoins. I had the same plan, but with the total weirdness of the markets (NOT just the volatility, but what's pretty obviously some spooky strange shit going on behind the picture, imo), and bills looming and having to live/work near a quite a powerful space heater in the middle of a Texas summer, I've decided to exit the mining network and sell off my gear.  It would have been great to be able to reach that point of being able to have recouped my costs and start saving BTC, but alas.

And so it goes...

Anyhow, best of luck to you and again thanks for taking the time to respond thoughtfully.
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June 16, 2011, 07:09:58 PM
 #54

I hope you're able to recoup your costs and even more importantly get more people on board with bitcoins.

Thanks! There's this super-progressive anarcho-syndicalist cafe near where I live that I think might be willing to be an early adopter. Might be able to point me in the direction of other interested parties as well. :-)

I had the same plan, but with the total weirdness of the markets (NOT just the volatility, but what's pretty obviously some spooky strange shit going on behind the picture, imo)...

Spooky strange shit? I haven't heard about this. Can you elaborate?

...and bills looming and having to live/work near a quite a powerful space heater in the middle of a Texas summer, I've decided to exit the mining network and sell off my gear.  It would have been great to be able to reach that point of being able to have recouped my costs and start saving BTC, but alas.

And so it goes...

Indeed. Sorry you couldn't recoup your costs! :-(

Anyhow, best of luck to you and again thanks for taking the time to respond thoughtfully.

Thanks! Best of luck to you as well.
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June 16, 2011, 07:15:36 PM
 #55

This thread has a few of the things I'm talking about listed:

http://forum.bitcoin.org/index.php?topic=17934.20

Maybe we're just being subjected to some kind of clever, expensive ruse, but especially in the case of the addresses that keep sending huge amounts of BTC back and forth between them, what are we to assume?  Are they just being super generous acting as sort of a behind the scenes faucet in donating so many fees to moving BTC back and forth?

I have no idea, but overall this whole lack of any economy propping up the price, coupled with a totally retarded acting market has put me off of this entire endeavor.

There's just so much else worth spending time on...
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June 16, 2011, 07:46:28 PM
 #56

I think you missed a few pros. Smiley

Please name them and I'll gladly edit them in, with attribution!

How about these pros:

  • Privacy
  • Lower transaction fees

I'd also throw in "wresting power away from entities who've been ass-raping economies on a global scale", but the average consumer/vendor may not see that as a pro as much as I do.

Generally, I tend to agree with your list of cons.  Some less than others, though.

- Difficult to buy
- Difficult to sell


If you're speaking of buying or selling BTC on the exchanges, it's no more difficult than buying or selling any other currency.  If you're speaking of buying goods or services from vendors...yeah, it's a lot harder to figure out than cash.  But in my mind it's only marginally more difficult than learning/configuring/using Visa or Paypal or any other existing electronic transaction medium.  If you're speaking of the difficulty of vendors pricing their goods in BTC, I would agree that's VERY problematic right now.  But since you've decided to assume a plurality of vendors accepting BTC alongside fiat, it seems to me that by extension you've assumed those problems have been resolved.

- Major issues of security relating to local storage

Storing cash locally has major issues of security as well. Bigger issues, IMO.

- Extreme investment of time involved in learning requisite knowledge relating to wallets/coins (1+ hours, tech savvy)

One also has to invest time figuring out how to use bank, credit card, and paypal accounts.

- Extreme investment of time involved in learning requisite knowledge relating to using bitcoin exchanges (1+ hours for financial savvy)

If your plurality of vendors is a 49.999% plurality, the average consumer wouldn't need to know anything about trading on the exchanges - because they wouldn't need to use them.  If I can buy many of my consumables with BTC, there is no need for me to constantly convert my BTC to fiat or vise versa.  If I have fiat but no BTC - and I want BTC - it is a trivial matter to walk into a BTC/USD grocery store, buy a pack of gum with a $10,000 bill, and ask for my change in BTC (or vice versa).  There are plenty of places in the world right now where regular people transact in multiple currencies without participating in currency exchanges.

- Fear of losing coins to computer or network failures/virtual currency less tangible than paper or plastic

Just because I can hold cash in my hand doesn't mean I'm not afraid of losing it.  Tangibility is also a double-edged sword.  Lets say a thief breaks into my home, and sitting on my dresser is a stack of paper money right next to a USB key containing a bitcoin wallet.  Which is more likely to be lost?

- No consumer protections by law

For causes of action where a plaintiffs only damages were the loss of bitcoins?  Perhaps.  But other damages could arise out of a BTC transaction that would be covered by law, such as damages from product liability.  Buying PCB-laced baby food with BTC doesn't preclude anyone from successfully suing the pants off Gerber.

Additionally, your "plurality of vendors accepting bitcoins" assumption undermines the validity of this "con".  If a court awards me a 100 BTC judgment against a vendor that accepts BTC payments, don't you think it's possible the vendor might have some BTC lying around that could be seized?  In such a scenario, there's no need for a judge to look to Mt. Gox and do any fancy maths for me to get my BTC damages back.

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My point is, none of your cons stand alone as reasons no one will adopt bitcoin as a currency, because most of them also apply to the currently existing alternatives.

Finally, there's no need to edit your first post attributing me with the new "pros".  And please, don't bother replying unless you can resist the temptation to call me an idiot, use foul language, or otherwise be as impolite as you've been previously in this thread.  Thanks in advance.
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