Bitcoins as Currency: A Serious Logical Analysis.

[nazgulnarsil]

We have contract law, do we not?

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

[BubbleBoy]

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.

[Synaptic]

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]

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

[Synaptic]

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.

[Synaptic]

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!

[triforcelink]

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.

[Synaptic]

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...

[Synaptic]

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.

[mouse]

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.

[triforcelink]

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)

[triforcelink]

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.

[aral]

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.

[Synaptic]

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?

[Synaptic]

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...

[Timo Y]

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.

[Timo Y]

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. 

[Synaptic]

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. 

[DamienBlack]

I think you missed a few pros.

[Synaptic]

I think you missed a few pros.

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