We got trust issues...

[moneymuncher]

Hi all,

First post here, pretty new to the Bitcoin scene. So I think (like most of you) the bitcoin movement is a fascinating experiment, but is too disorganized and not well polished enough to engender trust on a large, consumer scale. Not everyone is familiar with cryptography and is comfortable with using a string of random digits to use as their personal checking account. In many ways, it is (ironically) similar to a unique bank routing number, but the fact that it is not registered or tied to any one particular "trustworthy" party ends up spooking people. One of the reasons many people trust their very own banking institutions is because of the FDIC's $250,000 guarantee, i.e. it's government insured. Also, when you go to a bank, you can see and speak to an actual representative...The problem with Bitcoin, of course, is that its basic function almost mandates a disconnect from traditional banking sources. So how do we resolve this and foster more confidence in the system?

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[dragonkid]

Welcome to the forum.

[jackjack]

Looks like you want to resolve one of the biggest Bitcoin feature
If one can't handle his money then he should not use Bitcoin

[moneymuncher]

Looks like you want to resolve one of the biggest Bitcoin feature
If one can't handle his money then he should not use Bitcoin

Since when is lack of confidence ever a positive trait of a system? If we want widespread adoption, then there is no reason why prohibitive barriers to entry should be seen as a admirable part of the system. That's like saying you shouldn't be able to use the internet if you don't know how to code. It's preposterous.

[HyperBeam]

He does have a point though; bitcoin would be more popular if people felt more confident putting their money into it.

[Vod]

He does have a point though; bitcoin would be more popular if people felt more confident putting their money into it.

Bitcoin itself is perfectly secure.  Just be careful in the services you trust.

[Kluge]

He does have a point though; bitcoin would be more popular if people felt more confident putting their money into it.

Well - you have two options. You can use Bitcoin as probably intended, as your own bank - or you can use one of the increasingly-prevelant off-chain "banks." As example, the company paying me for sig-space does this, where you have people you can talk to directly about your account. It isn't really "Bitcoin," but instead a kind of exchange system where you get BTC-redeemable IIO-BTC, but get a good many advantages along with it (in effect, this is quite similar to Ripple, except Ripple is stupid-complicated and cumbersome for what it does). There is no reason you can't go a step further and have banks actually deal with BTC in their own accounts (similar to how you can have mixed fiat accounts, maybe a JPY and USD account), keeping in mind that currency in a bank is not the same currency, and you're instead issued a new redeemable currency in effect (for example, in the US, you deposit USD, but are not guaranteed access to that USD -- you're basically given an interest-bearing certificate of deposit you can slowly withdraw from on-demand, or in other ways as agreed to with the financial institution). -But, going that route, converting BTC to redeemable BTC, you lose a lot of what makes Bitcoin "Bitcoin," from increased security to certain cryptographic capabilities which stem from controlling individual Bitcoin addresses. If you want to use Bitcoin as if it were fiat and have the option to use Bitcoin as a p2p currency, you can put them in online wallets (later, I'd guess - actual banks).

I mean - if you want Bitcoin to be the equivalent of PaypalBTC, you can use it that way. There's nothing stopping you except all the benefits of Bitcoin you lose by doing so. You can also use it both ways, with some coins owned by you, and some coins converted to redeemable notes with online wallets.

[nahtnam]

Welcome! The closest thing you are going to get is coinbase... They are insured, so if there is a failure on their side, they can pay you back . Maybe in the future Bitcoin will have tellers or something... (don't know how that would work)

[tspacepilot]

He does have a point though; bitcoin would be more popular if people felt more confident putting their money into it.

Well - you have two options. You can use Bitcoin as probably intended, as your own bank - or you can use one of the increasingly-prevelant off-chain "banks." As example, the company paying me for sig-space does this, where you have people you can talk to directly about your account. It isn't really "Bitcoin," but instead a kind of exchange system where you get BTC-redeemable IIO-BTC, but get a good many advantages along with it (in effect, this is quite similar to Ripple, except Ripple is stupid-complicated and cumbersome for what it does). There is no reason you can't go a step further and have banks actually deal with BTC in their own accounts (similar to how you can have mixed fiat accounts, maybe a JPY and USD account), keeping in mind that currency in a bank is not the same currency, and you're instead issued a new redeemable currency in effect (for example, in the US, you deposit USD, but are not guaranteed access to that USD -- you're basically given an interest-bearing certificate of deposit you can slowly withdraw from on-demand, or in other ways as agreed to with the financial institution). -But, going that route, converting BTC to redeemable BTC, you lose a lot of what makes Bitcoin "Bitcoin," from increased security to certain cryptographic capabilities which stem from controlling individual Bitcoin addresses. If you want to use Bitcoin as if it were fiat and have the option to use Bitcoin as a p2p currency, you can put them in online wallets (later, I'd guess - actual banks).

I mean - if you want Bitcoin to be the equivalent of PaypalBTC, you can use it that way. There's nothing stopping you except all the benefits of Bitcoin you lose by doing so. You can also use it both ways, with some coins owned by you, and some coins converted to redeemable notes with online wallets.

Hey, I found your answer really helpful even though I didn't ask the question.  Thanks!

[User705]

I'm not sure there's anything to resolve here.  Kluge makes some excellent usage suggestion but the reality is that bitcoin is completely the opposite of the current modern banking system.  It's more analogous to the old time gold system.  Not gold backed fiat but further back.  Where you just had your money in your pocket and that's it.  You could trust it to a bank but then that money was no longer really yours and you just got a promise from a bank.  The modern system with so money layers of guarantees obfuscates the fact that modern money isn't really yours anymore.  Even the paper fiat in your pocket is just debt from the issuing reserve bank.  I think you are commingling two issues.  Trust and ease of use.  Trust is earned and the only trust in bitcoin is that others will accept it from you in an exchange.  Unfortunately no amount of guarantees will solve that problem.  But the good news is that it's a self fulfilling loop.  The more people that learn about it the more will accept it as exchange money and the more trust bitcoin carries.  Ease of use is just like early Internet.  It just takes time.  Soon enough even your grandma will learn how to create a wallet. 

[crazynoggin]

There are trust issues in modern day life outside of Bitcoin, just be careful and smart about who you send your coins to just as you would be cautious of scams outside of Bitcoin.

[umbrel]

Yes, I think it's not just there yet.
There will be banks, and other financial layers for bitcoins too, just give it a time.

However real mass usage will come when bitcoin-qt will be as simple to use as Skype or whatever.
Yes, probably real Bitcoin usage will loose it's anonymity and security. It will stay as it is only for geeks.
Right now all the installation and address creation processes scare everyone, who's not into cryptography or computer science.

[hulk]

Hi all,

First post here, pretty new to the Bitcoin scene. So I think (like most of you) the bitcoin movement is a fascinating experiment, but is too disorganized and not well polished enough to engender trust on a large, consumer scale. Not everyone is familiar with cryptography and is comfortable with using a string of random digits to use as their personal checking account. In many ways, it is (ironically) similar to a unique bank routing number, but the fact that it is not registered or tied to any one particular "trustworthy" party ends up spooking people. One of the reasons many people trust their very own banking institutions is because of the FDIC's $250,000 guarantee, i.e. it's government insured. Also, when you go to a bank, you can see and speak to an actual representative...The problem with Bitcoin, of course, is that its basic function almost mandates a disconnect from traditional banking sources. So how do we resolve this and foster more confidence in the system?

There might be Bitcoin Bank in the future. Once all the legal issue and more people know about it, most likely after all 21 million bitcoin is mined.

[moneymuncher]

I'm not sure there's anything to resolve here.  Kluge makes some excellent usage suggestion but the reality is that bitcoin is completely the opposite of the current modern banking system.  It's more analogous to the old time gold system. Not gold backed fiat but further back. Where you just had your money in your pocket and that's it. 
You could trust it to a bank but then that money was no longer really yours and you just got a promise from a bank. 

So you are effectively saying that you like Bitcoin because you don't want to loan money. To anyone. Ever. Do you think this should be a model adopted by everyone? You realize that this obliterates the concept of investment / savings and growth. If you want to argue that Bitcoin should be used in the same way a checking account is used today, then I wouldn't have a problem with that. But if you ultimately want everything to be denominated in Bitcoin, savers are going to have to be somehow rewarded. In any monetary system, loans are common. It is obvious even with Bitcoin today. There are plenty of people issuing "stock" to raise money for their ventures. Are they not acting in the spirit of Satoshi by lending money to others?

The modern system with so money layers of guarantees obfuscates the fact that modern money isn't really yours anymore.

 

Again, I don't think this has nothing to do with fiat / non-fiat; see above.

Even the paper fiat in your pocket is just debt from the issuing reserve bank.  I think you are commingling two issues.  Trust and ease of use.  Trust is earned and the only trust in bitcoin is that others will accept it from you in an exchange.  Unfortunately no amount of guarantees will solve that problem.

 

No. Trust is more than that. Trust is knowing that the entity I am transacting with is not going to steal my money. Some other poster mentioned something about "Just be careful and don't get scammed." This is what I'm talking about. There shouldn't be such a large burden on the user to "not get scammed," especially without any real legal recourse. And if that were the solution to everything, then why did Ebay institute stronger consumer protections against scammers? Why can't we have greater transparency?

But the good news is that it's a self fulfilling loop.  The more people that learn about it the more will accept it as exchange money and the more trust bitcoin carries.  Ease of use is just like early Internet.  It just takes time.  Soon enough even your grandma will learn how to create a wallet. 

And this is something that everyone is ignoring. Why do you think Apple products are so wildly successful? Because they made it easy for anyone to use them. Nobody in the Bitcoin movement wants to shoulder the responsibility of making it easy for a newcomer to understand and use. If I have a question about the new health insurance plan I'm about to purchase, are they just going to tell me, "just figure it out yourself?" No, they are going to help me understand the product. If my grandmother ever learns how to create a wallet, it is not because she is going to do stumble upon an article about bitcoin and spend time researching about cryptography. She will do it because someone she trusts has explained it to her. So far the only service I've seen that's making progress on this is inputs.io and even that seems shady at first (wtf is .io?). If you guys really think that things are fine the way they are, then you will never see the day where Bitcoin prospers.

[User705]

You are mixing a lot of issues again.  Lending and investing is currently and will continue to be done with bitcoins.  What you seem to want is guarantees that only exist in the make belief mind of people who blindly trust the gov or banks or other official entities to protect them from doing their own research or paying for their own mistakes.  There are no free guarantees.  FDIC that provides that 250k "insurance" you mentioned in the original post has maybe a dozen billion covering five thousand banks with many trillions of total deposits.  Also all of this is super early in the game.  Bitcoin is but a few years old.  Modern fiat is hundreds of years old.  Gold is thousands of years old.  As far as usability there are plenty of companies now working to make bitcoin easier.  Look at blockchain.info armory and other lite clients.  Also there is as much legal recourse with bitcoins as there is with cash if not more.  Feel free to provide examples if you disagree?

[moneymuncher]

You are mixing a lot of issues again.  Lending and investing is currently and will continue to be done with bitcoins.  What you seem to want is guarantees that only exist in the make belief mind of people who blindly trust the gov or banks or other official entities to protect them from doing their own research or paying for their own mistakes.

I am not mixing up any issues. The poster I responded to claimed that he didn't want to put his money with anyone else; that the entire purpose of bitcoin is to be in control of your own money. It therefore logically follows that he envisions a world where no lending occurs. I, like you, find that to be more than ridiculous. As you point out, lending and investing do occur. Unfortunately scams happen all the time. Do they happen in real life too? Of course, but unlike in the bitcoin world, people have a choice to use, for example, a FINRA licensed broker to trade, or invest in a company that is registered with the SEC. Sure, there are occasions where even these companies are found to be fraudulent (Enron, Worldcom, etc) but these cases are far more more infrequent than what occurs in the "unregulated" world of random internet posters. This shouldn't be the fucking wild west - it's 2013. Why don't you want governments to embrace Bitcoin? Many law enforcement agencies were created to enhance protection and engender confidence in the marketplace. It doesn't even have to be a government agency; I'm sure a private institution can run a similar operation. A bitcoin startup could, for example, "register" with a trusted 3rd party and therefore have a greater ease in raising capital, while scammers would have a lot more trouble doing so. It wouldn't be perfect, but it would definitely be an improvement over the current model. But if you think that more transparency doesn't lead to more optimized capital allocation then perhaps you think the Earth is flat too...

As far as ease of use is concerned, I think companies like Coinbase and inputs.io are doing an excellent job of making it simple and easy for people to create accounts and deposit money. This is the type of trust I'm talking about - easy to register, user friendly website, helpful in explaining bitcoin, etc. They are the future of Bitcoin.

[User705]

You are mixing a lot of issues again.  Lending and investing is currently and will continue to be done with bitcoins.  What you seem to want is guarantees that only exist in the make belief mind of people who blindly trust the gov or banks or other official entities to protect them from doing their own research or paying for their own mistakes.

... Many law enforcement agencies were created to enhance protection and engender confidence in the marketplace. It doesn't even have to be a government agency; I'm sure a private institution can run a similar operation. A bitcoin startup could, for example, "register" with a trusted 3rd party and therefore have a greater ease in raising capital, while scammers would have a lot more trouble doing so. It wouldn't be perfect, but it would definitely be an improvement over the current model. But if you think that more transparency doesn't lead to more optimized capital allocation then perhaps you think the Earth is flat too...
...

Damn and I thought many law enforcement agencies enhanced the protection of existing monopolies profits and enforced barriers to entry against smaller players.  Thanks for explaining.  Damn if only there was a website where you can see into the past posts of different people who were involved with bitcoin from the beginning to see who's trusted and perhaps those can raise capital on said website for their various ventures.  Maybe it can be some sort of a forum.  Oh well I guess here on this flat earth it's but a fevered dream.

[Abdussamad]

This shouldn't be the fucking wild west - it's 2013. Why don't you want governments to embrace Bitcoin?

The Internet is the wild west! It always has been and probably always will be. You said you are new to bitcoin? I think you may be new to the Internet as a whole!

As far as governments embracing bitcoins goes then I have nothing against that. But it looks like they want to shut it down rather than "embrace" it. Let's see what happens.

Anyway I don't think you will find the security and ease of use you are seeking. If it was insured and easy to get into the price would be many times higher. It is your choice what you do with your money. Just don't be under any illusions that this is easy.

[wdu]

many responses in this thread could use a TL;DR

My 2 cents to help guide the discussion

It's one thing to question the logistics behind the bitcoin system (blockchain etc.)

It's another to question the adoption of the system - which our thread weaves in and out of...  to discuss the "bank" of BTC as said earlier, really defeats the point of BTC.  At that point, we would be debating what do you call "cash".  Is money in your checking account "cash"? Just a thought here.

Also, OP- there's no need to take extremes to make a point.  I would love to see BTC gain widespread adoption, but that doesn't mean I'm suddenly going to stop having a fiat bank account... If you think of BTC as just another currency that has purchasing power - its existence does not force other currencies to suddenly not exist.

anyway - welcome to the forum, it's a cool topic to debate.

[Shallow]

Bitcoin is comparable to the wild west right now