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Author Topic: Centralization Will Bring Down Bitcoin  (Read 5688 times)
Chaoskampf
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May 17, 2013, 12:39:51 AM
 #1

Centrally Planned = Centrally Destroyed

      Mt. Gox and friends are killing Bitcoin. While such centralized exchanges have been very good to people like me who have bots, they inherently concentrate the market into hubs that can be effectively targeted by Homeland Security and others. One of the great strengths of Bitcoin is that it evades interference from entities which draw their power from centralization. The United States government relies on this form of power to influence the world. Through internationally organized frameworks of law and finance, this institution has manipulated the course of history for almost the last century. Bitcoin has survived and flourished thus far because of its insusceptibility to centrally planned offensives. The US government cannot operate/manipulate in this framework because it's outside the scope of its dominion.
      We've seen what kinds of manipulation can already take place in these exchanges. When a few Tinklevoss-like characters with enough capital decide to participate in this economy, they hold the power to artificially influence the price of Bitcoin. This is entirely because of the way the Bitcoin exchange environment is organized. While the currency itself is decentralized, the means for acquiring it and trading it are consolidated into a few nodes.
     This is a fundamental flaw in the Bitcoin exchange system. There needs to be a way to transfer this exchanging power over to the people. This capacity is already built into Bitcoin itself with the wallet framework and the ability for individuals to effectively act as their own bank, but it is entirely confined to the transfer of Bitcoin, not Fiat. Because the majority of crypto procuring is in exchange for fiat, we inherently establish bottlenecks. We are still playing in their backyard, so they ultimately retain the power to kick us out and tell us to go home (or to jail).

{proposed solution}: We Build An Elaborate Tree-House In Their Backyard

     Because we rely on a small number of money transfer services which have at most a few bank accounts associated to them (Dwolla etc…), we provide targets for authorities to go after. With Bitcoin, the target is an internationally diffuse mesh of computers which maintain an abstract concept. This is what makes it impenetrable to governments and all those who want to maintain the status quo. Fiat money, being tied to banks and the physical realm, requires that someone actually interfaces between the banking system and the Bitcoin world. Up until the present moment, this has been a small handful of companies like Dwolla.
     We can't go forward applying individualistic capitalist ideals, like having a handful of companies act as an intermediary between fiat and Bitcoin, and expect them to work in a decentralized economy. This idea may be unnecessarily bold, and even stupid (this is why I'm posting here. I want to see what the community thinks), but it could be good food for better thoughts. So I hope everyone brought along their appetites…


     We apply the concepts which are fundamental to decentralized services like Bitcoin and Tor, and establish a web of bank accounts which are linked together in a cryptographically secure blockchain which will also orchestrate the movement of funds  from account to account. This would require ordinary people opening up checking accounts (these do not fall under Federal Reserve Board Regulation D, as far as I can tell), and subscribing to the network. This subscription would allow the network to process inter-bank transfers. There would have to be two distinct pools; the reserve pool, and the payout pool. The reserve pool would shuffle funds around and act as the digital bank vault, and the payout pool would be the transfers that are sent to individuals who want to cash out Bitcoins into their own private accounts.
     The people who have to initially open the checking accounts hold a huge responsibility, and at the same time, a huge risk. They could be assholes and withdraw money from the network node they opened (the network would have to immediately sense this and shuffle the money to other nodes). At the same time, they are the ones which will have to face the firing squad if and when it comes to that. This network would have to act similarly to the Tor network in that it would operate underground (in other words, it would be invisible due to cryptographic protocols). Instead of having 10 bank accounts which are bright red targets to authorities, we have a mesh of inconspicuous accounts with only a few thousand dollars in them. On their own they might be weak, but strung together into a network of millions of dollars worth of assets, they become part of a powerful engine for moving around Fiat. In addition, the ability to trade Bitcoin for Fiat becomes much more fluid.
      Authorities might compromise a node or two, but it's not as if we don't deal with this problem anyway. They might be able to kick a few of us out of their yard, but they'll have to spend an enormous amount of effort to tear down that tree-house. I want to make their job as difficult as humanly possible.


     There are obviously big flaws in this conception. How could we trust the openers of the accounts to not withdraw from them? Are there bank API's available for these accounts to be linked with for automated transfers? How would we organize the subscription service to this network? All of these wrinkles would need to be thoroughly ironed out for this to work, but if it were to be possible, I think this could be incredibly powerful. I'm interested to see what you guys think. Please let me know why you think this wouldn't work, apart from the points I've already raised.
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May 17, 2013, 12:45:25 AM
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QuestionAuthority
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May 17, 2013, 12:56:09 AM
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I think you need to look into Ripple.

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Chaoskampf
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May 17, 2013, 01:02:54 AM
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I think you need to look into Ripple.


Ripple ≠ This
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May 17, 2013, 01:14:59 AM
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I think you need to look into Ripple.


Ripple ≠ This

I guess I'm not sure what your trying to accomplish with all the bank accounts. Wouldn't that the govt more to seize?

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May 17, 2013, 01:34:54 AM
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I think you need to look into Ripple.


Ripple ≠ This

I guess I'm not sure what your trying to accomplish with all the bank accounts. Wouldn't that the govt more to seize?

Finding and compromising 1 bank account is one thing (think Dwolla). Doing the same for 10, is a whole different story. Now imagine 10,000.

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May 17, 2013, 01:42:35 AM
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The whole point is to develop bitcoin as its own currency and payment system combined.  When this is accomplished, then transferring into different currencies becomes less of a problem, because there is no need to.

Or you could do something such as this if you need bitcoin:

Buy something with cash, sell it for bitcoin, buy a product or service with bitcoin.

Or if you want to cash out, just buy gold or silver (or anything else of value that you could sell for cash) since there are no regulations.

When you aren't trying to use it as a commodity or stock, then solutions are easier to see.
Chaoskampf
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May 17, 2013, 01:53:12 AM
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The whole point is that the people and institutions which derive their power from Fiat see Bitcoin as a threat to their order. The recent Homeland Security action is a testament to this. To think that Bitcoin can be a "legitimate" currency alongside the US Dollar is ignoring the reality of the situation. Bitcoin is an upfront assault on the legitimacy of the international Fiat system. Services like Ripple are destined to go the way of any service which proposes to establish Bitcoin functionally within the existing Fiat frameworks. Bitcoin is not meant to live alongside Fiat. It is meant to kill it. With extreme prejudice.

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May 17, 2013, 01:59:26 AM
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I think you need to look into Ripple.


Ripple ≠ This

I guess I'm not sure what your trying to accomplish with all the bank accounts. Wouldn't that the govt more to seize?

Finding and compromising 1 bank account is one thing (think Dwolla). Doing the same for 10, is a whole different story. Now imagine 10,000.



Yeah, I guess so. In the end, with all the required effort to coordinate bank ledgers it might be easier and quicker to just overthrow the government and start a new country. LOL

GROUPTHINK kills braincells!!!!!!
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May 17, 2013, 02:10:03 AM
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The whole point is that the people and institutions which derive their power from Fiat see Bitcoin as a threat to their order. The recent Homeland Security action is a testament to this. To think that Bitcoin can be a "legitimate" currency alongside the US Dollar is ignoring the reality of the situation. Bitcoin is an upfront assault on the legitimacy of the international Fiat system. Services like Ripple are destined to go the way of any service which proposes to establish Bitcoin functionally within the existing Fiat frameworks. Bitcoin is not meant to live alongside Fiat. It is meant to kill it. With extreme prejudice.

You've just made about 1,000 points in 5 paragraphs...
The last being an overthrow of the US Government...
You forgot about Bitcoin Island and sex slaves for everyone.

The general idea for decentralized fiat transfer...
Is actually workable if implemented properly...
But this discussion is crazy unfocused and a dead end. 
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May 17, 2013, 02:17:21 AM
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The whole point is that the people and institutions which derive their power from Fiat see Bitcoin as a threat to their order. The recent Homeland Security action is a testament to this. To think that Bitcoin can be a "legitimate" currency alongside the US Dollar is ignoring the reality of the situation. Bitcoin is an upfront assault on the legitimacy of the international Fiat system. Services like Ripple are destined to go the way of any service which proposes to establish Bitcoin functionally within the existing Fiat frameworks. Bitcoin is not meant to live alongside Fiat. It is meant to kill it. With extreme prejudice.



The actual mechanism may be something akin to extreme prejudice or simple derision of what is currently in place (authoritarian dictate). The open area of approach is from an opposite direction that provides equal pressure on financing. Voting mechanisms are ancient and fragile to improvement; improved WoT system that eventually integrates a financial component. If everyone is on board or pushing for integration, the WoT has the front keys and no subterfuge is required. Just time and a well thought out implementation of a voting system will provide answers.
Sometimes kicking in the front door or sneaking in the back door is pointless. Just buy the place and move right in.

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May 17, 2013, 04:09:38 AM
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I think you need to look into Ripple.


Ripple ≠ This

I guess I'm not sure what your trying to accomplish with all the bank accounts. Wouldn't that the govt more to seize?

Finding and compromising 1 bank account is one thing (think Dwolla). Doing the same for 10, is a whole different story. Now imagine 10,000.



Yeah, I guess so. In the end, with all the required effort to coordinate bank ledgers it might be easier and quicker to just overthrow the government and start a new country. LOL


this is what computers are for....


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May 17, 2013, 04:14:47 AM
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If no centralization like Mt Gox, How can we know what our bitcoins can buy?

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May 17, 2013, 04:34:41 AM
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If no centralization like Mt Gox, How can we know what our bitcoins can buy?

We can just ask the speculators/day traders to give us a number. They're setting the price.

GROUPTHINK kills braincells!!!!!!
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May 17, 2013, 05:38:11 AM
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It's not difficult to picture a P2P system whereby people trade cryptographically secured USD and other fiat tokens and then help each other cash out when necessary by going through personal bank accounts. You just need a strong web of trust and a mechanism to hold people accountable - which is much easier said than done, of course. But still, it's simple enough to picture.

P2P is quite an intoxicating concept, isn't it?

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May 17, 2013, 09:00:13 AM
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If it was easy and cheap to "shuttle money between accounts" -- free and cross-border --  as you suggest, we wouldn't need bitcoin.

This would also be overtly illegal, whereas Bitcoin itself is not.

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May 17, 2013, 09:06:02 AM
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This would also be overtly illegal, whereas Bitcoin itself is not.

Unfortunately today illegal = something that your goverment doesn't like. I'm sure that if you really go through formal procedure, bitcoin is already illegal in most of the countries.
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May 17, 2013, 09:12:00 AM
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I think you need to look into Ripple.
Ripple is centralized.

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May 17, 2013, 09:36:36 AM
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What I don't understand is why no one is trying to create Satoshi's suggestion regarding this matter...... sigh... maybe one day after I finish the projects at hand.

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May 17, 2013, 09:42:48 AM
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I think you need to look into Ripple.
Ripple is centralized.
Ripple is centralized AND closed source.

Out of the frying pan into the fire, yeah.

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