2013-06-04 infoworld.com - Don't trust anonymous e-currencies like Bitcoin

[Roger_Murdock]

http://www.infoworld.com/d/security/dont-trust-anonymous-e-currencies-bitcoin-219932?page=0,0#disqus_thread

The case against e-curriences
So why don't I trust e-currencies? For the following reasons:

Traditional currencies are backed by nation-states and regulated financial industries, and as much as you might hate or distrust those entities, they have staying power. In my nearly 30 years on the Internet, I've seen e-currencies come and go. When they go, everyone immediately loses everything. Just ask Liberty Reserve's customers.

Nation-states have laws, police, and armies. Those laws make the fiat currency legal. People in those systems accept the their currency. No one in the real world has to accept your e-currency or rock with a hole in it. If someone steals your real currency, the police will at least try and help you get it back. In cases of online theft, you may have a hard time getting a law enforcement authority to determine if a crime has happened. Even then, it's often only because the intangible online value could be immediately traced back to real money. For example, if you tell the police someone stole your gaming points, you'll have a harder time proving a crime occurred if you earned them during the game than if you purchased them with your credit card.

Let's not forget nation-state armies. Ultimately, those armies protect the treasures of countries. If they didn't, another country could bust into your country, take the money, and walk away with it. I don't know of an army willing to send a soldier to recover a stolen Bitcoin.

The safety net
You don't even need nation-state armies to get back your stolen money. In most industrialized nations, if you can prove that a malicious hacker stole your money, the bank will often put the money right back. For example, some bad guys broke into a friend's stock account and stole more than $50,000. He notified the stock trading company where he had his account, and in a few minutes, the money was back. The entities that put your money back don't even require you to work too hard to prove your money was stolen. It's a cost of doing business, and they're ready to help get back what you lost. Try that with your e-currency. In almost every case, if your e-currency is stolen, it will be gone for ever.

In the real world, if you lose your credit card, checkbook, or even bank account log-on password, your money isn't gone. In fact there are lots of services and laws to protect you and your money. Not so in the e-currency world -- check out a statement posted on a Bitcoin Wiki Faq regarding the potential loss of Bitcoins: "Consider it a donation to all other bitcoin users."

Ultimately, most e-currencies possess the security of whatever your email address and password is. If hackers break into your computer, learn your password -- or even break in and steal all your money at the bank -- it will be replaced fairly quickly. This is absolutely not true of e-currency sites.

I'm not saying that e-currency schemes are evil. And I'm not saying fiat money is perfectly trusted or protected -- the runaway inflation that led to wheelbarrows of money being exchanged in Weimar Germany come to mind. I'm just saying that by comparison, over the long run, there is no comparison. The trust equation isn't even close.

The perfect e-currency would be one that is widely accepted, where I'm protected against malicious loss -- by armies, law enforcement, or the fiduciary entity creating it. Oh, yeah, I already have that. It's called real money.

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[cypherdoc]

Extremely shallow analysis.

[Stephen Gornick]

Extremely shallow analysis.

It's funny how two people generally equal in many ways can look at Bitcoin and form opinions that are polar opposites of each other.

One sees that the government has no control over Bitcoin and is all over it.   Then you have people like the author of that article, who run away from Bitcoin for that very same reason.

[Mike Christ]

Traditional currencies are backed by nation-states and regulated financial industries

Not gonna lie, I stopped reading here.  This guy's been sipping on some sour kool-aid, but for some odd reason, refuses to put it down.

[marcus_of_augustus]

I don't know why but the image of an adult kid, still in nappies, sucking on a pacifier clutching a mythical security blanket just jumped into my head.

[Rygon]

We send our troops to recover stolen cash? That's new to me. I thought the official policy was to drop it on them in pallets: http://www.guardian.co.uk/world/2007/feb/08/usa.iraq1

[aigeezer]

He's very fond of nation-state armies. I am not, as a pragmatic matter, even ignoring moral issues. Most people lose when nation-state armies do their thing, and maintaining them is a huge high-risk overhead, as the American founding fathers wisely noted when they explicitly advised against keeping standing armies.

He believes that nation states and their armies have staying power. Woot! Ozymandias moment.

He claims that fiat is good because people are coerced to use it and that BTC is bad because using it is voluntary. Woot! 1984 moment.

He likes fiat because it's not like fiat - in his world, when you lose fiat somebody gives it back to you. Odd - in my world the nation-state takes it away from me, half now through taxation and the rest later through inflation, and if I lose my wallet full of fiat it's gone forever. The nation state urges (compels?) me always to go back for more though with its clever "full employment" meme which some might call voluntary lifetime servitude.

I imagine we can expect to see a lot of pro-state anti-BTC propaganda pieces as all this heats up. There will be more FUD than facts - gotta figure out veridical reality for oneself, as always, or suffer the consequences.

[linuxer]

Extremely shallow analysis.

It's funny how two people generally equal in many ways can look at Bitcoin and form opinions that are polar opposites of each other.

One sees that the government has no control over Bitcoin and is all over it.   Then you have people like the author of that article, who run away from Bitcoin for that very same reason.

No one have control over bitcoin and it's prices.  That's good and bad too
Any crazy billionaire can make you begger in no time. He just need to buy some million bitcoins and sell them after people go crazy and prices goes super high.

[cypherdoc]

Extremely shallow analysis.

It's funny how two people generally equal in many ways can look at Bitcoin and form opinions that are polar opposites of each other.

One sees that the government has no control over Bitcoin and is all over it.   Then you have people like the author of that article, who run away from Bitcoin for that very same reason.

No one have control over bitcoin and it's prices.  That's good and bad too
Any crazy billionaire can make you begger in no time. He just need to buy some million bitcoins and sell them after people go crazy and prices goes super high.

it's also a great way for him to quickly become a millionaire.

[aigeezer]

Extremely shallow analysis.

It's funny how two people generally equal in many ways can look at Bitcoin and form opinions that are polar opposites of each other.

One sees that the government has no control over Bitcoin and is all over it.   Then you have people like the author of that article, who run away from Bitcoin for that very same reason.

No one have control over bitcoin and it's prices.  That's good and bad too
Any crazy billionaire can make you begger in no time. He just need to buy some million bitcoins and sell them after people go crazy and prices goes super high.

it's also a great way for him to quickly become a millionaire.

For some entities, that kind of loss might be worthwhile - money well spent. For example, hypothetically, a hostile-to-BTC government entity might choose to squander a lot of (public) money on such a venture. It's not like it's their own money. "Rational behavior" is all too subjective in everyday life. "I thought he had a gun, your honor."

[Raoul Duke]

Brb, taking my bitcoins out of the BitCorp server before the gubermint shuts it down with its army.

[elux]

... A Pulitzer Prize-winning economist has voiced his opinion on Bitcoin ...

Opinions on Krugman aside, a Pulitzer winner he is not.

Krugman was a Pulitzer nominee in 2009. He never won it.

Krugman was awarded the 2004 Príncipe de Asturias award.

Which is "understood to be the European Pulitzer Prize".

(Well, according to paulkrugman.com)

The distinction must have escaped the journalist.

[cbeast]

Yet another statist that worships violence to maintain economic order.

[Gabi]

Failometer is over 9000 

[TraderTimm]

This is precisely the dinosaur that we'll be marvelling at in the financial museum of past failures, when they open up their "Sovereign Apologist" Exhibit.

The wake-up call this guy is going to get when Bitcoin kicks down the feeble hedges in his sheltered garden will be priceless. I wish we could watch it streamed live.

[vokain]

It is prudent advice not to tread lightly around with Bitcoin though

[KSV]

who writes this shit? a drunk leprechaun?