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Author Topic: 2013-11-05 BI: Nine Trust-Based Problems With Bitcoin  (Read 748 times)
Arvicco
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November 05, 2013, 03:27:38 PM
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http://www.businessinsider.com/nine-trust-based-problems-with-bitcoin-2013-11

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Nakomoto cites as conventional currency's root problem: "all the trust that's required to make it work." But Bitcoin requires us to replace trust in legal systems, institutions and procedures, with a system where we must:

Trust the willingness of counterparties to accept Bitcoin as currency for payment -- a huge leap of faith. Purchasing Bitcoins means participation in a 100 percent trust-based system, without any legal mechanism to compel their acceptance. Conventional currencies rely not just on trust, but also on the force of law. For example, in America the "Legal Tender Statute" (31 USC Sec. 5103) specifies that: "United States coins and currency ... are legal tender for all debts, public charges, taxes, and dues." No country issues Bitcoins, and no government legally compels anyone to accept them as payment.

Trust unregulated institutions with your personal bank information just to purchase Bitcoins. As described in Mother Jones: ... if you ... have qualms about handing over all of your bank information to an anonymous internet stranger, then you might want to just give up now. The major Bitcoin exchanges don't accept credit cards ...

Trust a cryptographic, peer-to-peer network computer technology most Bitcoin users don't understand.

Trust that Bitcoin (really, a beta) won't be replaced by a superior digital currency system, rendering original Bitcoins obsolete and worthless.

Trust that the Bitcoin Foundation/other participants won't create additional Bitcoin series, thereby diluting the value of the original Bitcoins.

Trust that governments won't intervene to render Bitcoins worthless (e.g., if Bitcoins facilitate too much drug-dealing or money laundering, the U.S. government could make their possession illegal).

Trust an anonymous creator (Nakamoto) who's mysteriously "moved on to other projects" and disappeared.

Trust that Bitcoin markets will be available to provide prices in real currencies -- as recent events demonstrate, also a leap of faith.

Trust that your Bitcoins are stored in a secure location. Precisely because Bitcoin transactions are anonymous and non-reversible, they're highly vulnerable to theft. If your Bitcoins are stolen, they're pretty much untraceable. For a non-exhaustive list of major Bitcoin theft incidents, click here.

Rather than as currency, perhaps we should evaluate Bitcoin as the first example of Dadaist Digital art. An art work exists as part of some limited edition and has no intrinsic use. If you purchase art (for financial reasons), you must believe/trust that members of the art ecosystem will value/be willing to purchase that work at a future time.

Clearly, the author knows a thing or two about Dadaist art. Just as clear, he has not a clue about Bitcoin. So probably the best advice for him would be to write about things he DOES understand next time...

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November 05, 2013, 03:37:05 PM
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The FUD purveyors are out in full force, it seems.
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November 05, 2013, 03:42:40 PM
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The FUD purveyors are out in full force, it seems.

Yes, "Bitcoin is broken!" is all over the news...

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November 05, 2013, 05:03:25 PM
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The FUD purveyors are out in full force, it seems.

Yes, "Bitcoin is broken!" is all over the news...

They are getting really desperate, but it's too late.  Their fate is sealed.  The momentum behind Bitcoin has exceeded escape velocity, and is not reversible.

I'd suggest the author, as a fair comparison, do an article about the "trust problems" inherent in the legacy financial system.  But of course, that will never happen, as it would be too embarrassing to enumerate the long list of trust violations by politicians/bankers within just the past 5 years, let alone the past 100.

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