Trust No One

[paulk]

If you cannot trust anyone, will this not affect bitcoins in a negative way? Or any monetary system? I thought that this sort of systems are always rooted on trust even bitcoins.

For example if I buy something from an online merchant, I will have to trust he will send a good quality product. I even need to trust him, he will send anything at all. I also have some trust in the central bank, if I don't have that, the value of the currency starts to decline very rapidly.

Silkroad is a particularly strong example of trust. You buy some shady goods, you give the other party your home address and then hope you will get it and it will be in good quality. And also that the other party didn't have alerted your authorities. The upside of this is that your packet will be send by courier. The downside is, that you cannot consume the shady goods and cannot file a complaint, so the merchant looses his merchant status at silkroad.

You need to trust, that bitcoin exists tomorrow. That the developers don't make a huge unreparable mistake, that the authorities not go down on it next week. You need to trust, that there are not huge financial corporations pumping the value of bitcoins. There is a lot to trust.


The reason bitcoin is going skyhigh is that people trust third parties like mtgox, silkroad, the dark souled business men on there, the gambling sites and all those options and the lending constructions. 

I think you would wanted to say, be cautious.

But it is good advise, you give, but just don't distrust trust.

It will hurt the currency in the long run. I have converted some of my euros into bitcoins, because I have trust in the system.

[tomwoods]

I was thinking that "Trust No One" also applies to groups of people. Currently with the price of bitcoins skyrocketing like it is, I wonder if financial entities might have found in bitcoin a new way to sucker us out of our hard earned money, artificially driving up the price of the bitcoin and riding the roller coaster up they way they same way they have done during the coure of modern history?

What mechanisms are there in place to counter manipulation of the bitcoin system? What measures can be taken to reduce the volatility of the bitcoin?

What good is it for me to have my bitcoins in a physical wallet, secure from everyone, when the actual value of the bitcoin can be manipulated?

How can I protect myself against this?

[paulk]

A strong, technical party, say a HFT trader, could manipulate the market probably very easily. Bitcoin is still rather small. I would wonder, what would happen, if a financial institute starts buying and mining bitcoins and hide them after that. Thus making the amounts of bitcoins smaller and smaller and then at a certain moment, dump them quickly through various (unconnected) channels.

Is there some way to check the amount of circulating bitcoins? That would be interesting.

[BladeRunner]

I was thinking that "Trust No One" also applies to groups of people. Currently with the price of bitcoins skyrocketing like it is, I wonder if financial entities might have found in bitcoin a new way to sucker us out of our hard earned money, artificially driving up the price of the bitcoin and riding the roller coaster up they way they same way they have done during the coure of modern history?

What mechanisms are there in place to counter manipulation of the bitcoin system? What measures can be taken to reduce the volatility of the bitcoin?

What good is it for me to have my bitcoins in a physical wallet, secure from everyone, when the actual value of the bitcoin can be manipulated?

How can I protect myself against this?

There are only so many bitcoins that will ever be made. that number is around 21mil. They get harder and harder to make and there is where the perceived value is. Unlike Fiat money printed on paper. The banksters can just print more money until the paper is worth more than the value on the money itself. When you have exchanges there is no guarantee that the market wont be manipulated. Any market even stock market can be manipulated. A roller coaster can be a good thing. Volatility creates margins and margins can be profitable if you buy and sell at the right time.

Its still experimental. It could just vaporize away or it could be one of those things your grand kids ask, if you were there when the crypto currency took off?

[franl]

But it is good advise, you give, but just don't distrust trust.

It will hurt the currency in the long run. I have converted some of my euros into bitcoins, because I have trust in the system.

You don't have to trust "the system" with Bitcoin.  The algorithms and crypto are public.  As long as a majority of hashpower is operated by honest nodes, the blockchain is the _truth_ of who owns which coins. (I have a concern about how we can _know_ that the majority of hashpower is operated by honest nodes, but that's another question altogether).

You don't have to trust the Bitcoin "system", but you have to trust people. You have to trust vendors whom you pay to give you what you paid for (this is true even in a cash economy), but vendors who repeatedly rip off their customers tend to go out of business. You have to trust people with whom you share your private keys, such as family and friends in the event of your death (though secret-sharing protocols can keep them from knowing the secret without a quorum). Note the pattern here: wetware has to be trusted (sometimes), but the algorithms don't have to be trusted.
--
Fran

[tomwoods]

There are only so many bitcoins that will ever be made. that number is around 21mil. They get harder and harder to make and there is where the perceived value is. Unlike Fiat money printed on paper.

Tulips where also in limited quantity http://en.wikipedia.org/wiki/Tulip_mania and that didn't stop people from being manipulated into turning their hard earned money into vapor. That is, if I and a few cronies have enough financial power and I start buying and trading large quantities of bitcoins we can manipulate the price, start a bitcoin fever (like might be happening right now) and then sell them to all at once, we can do this time and time again to sucker people out of their money.

The price of BTC going up makes me distrust the system. I love it, don't get me wrong, and I love its filosophy. Still, I would like to put forward that when you make tons of money with no effort, this is a distortion and someone is going to get screwed. It's like that moment when you are 12 and you are running so fast that you know you are bound to trip and mess your face up big time.

Personally I'd prefer a descentralized system that when I convert fiat money to it, I know the value would maintain and that no one would have power over its value other than me.

[BladeRunner]

I am the only one who thinks that the usability of the whole BC System is in need of improvement (security) and not so good if we talk about mass suitability? o.O Don´t understand me wrong.. I like the idea behind BC. But it is much simpler to save and use (security) money on paypal.

well that and because of the distributed nature, whats going to happen when people start buying bubblegum and gasoline with it. Its almost impossible to move bitcoins around now. It certainly is not a very quick transaction. that will be its downfall.

[dan99]

I am the only one who thinks that the usability of the whole BC System is in need of improvement (security) and not so good if we talk about mass suitability? o.O Don´t understand me wrong.. I like the idea behind BC. But it is much simpler to save and use (security) money on paypal.

well that and because of the distributed nature, whats going to happen when people start buying bubblegum and gasoline with it. Its almost impossible to move bitcoins around now. It certainly is not a very quick transaction. that will be its downfall.

Yea, security needs improvement as well as making it more useable like the US Dollar.

[rachelcox99]

very good info. I agree.

[gmak]

what is the best way to purchase bitcoins?

if i send $ to mt gox can it remain in mt gox as $, or does it automaticaly get converted to bitcoins?

[24change.com]

Tip for those who wants to use skype in communicating with btc-e com staff.
When adding their skype name which is btc-e.support  dont make a mistake and dont add those who pretends to have this unique skype name (user can name its skype any name, but only original skype nick matters)

[FuriousTeam]

thx for all informations

[hadrian]

Great advice, just need to make sure its always followed!

[CrazyMiata]

Just in case anyone reads this, having a password generator is nifty its able to generate really long secure passwords but then you are relying on a password vault or program to save the password for you. It's much better to have a really long password that you CAN easily remember. Add a capital here and there, replace an A with a 4 etc and this will give you an even more secure password and one that is easy to remember! Make sure its long 20+ char.

[Saerdna]

Could I trust the exchange rates on www.bitcoins24.net ?

[dc7d]

Do you trust Casascius? The coins he made are worth about 9 Million $. Lots of lolly.

[baad]

Do you trust Casascius? The coins he made are worth about 9 Million $. Lots of lolly.

That is nice.

[rvmelkonian]

Frankly if we are going to get this market off the ground we have to trust SOMEBODY.  I like your guidelines.  If you know where and who the person is, you have a leg up in litigating your funds back (since bitcoins do have an estimate-able value, theft is a criminal action.)  Another thing you should require is a merchant agreement.  When you are making a purchase online you want there to be a page (or better yet, receive and e-mail) that says exactly what product or service you are receiving and the cost in bitcoins.  You also want this to include the deposit address for the wallet, so you can prove that you paid to that address the specified amount from your transaction history. (print off the webpage.)

Another important factor is if they accept cash transactions.  In the United States and many Western Countries cash is legal tender, required by law to be accepted for transactions.  If they do not have a method for you to buy their product using a cash method, such as paypal, credit card, Western Union, etc, and operate solely on bitcoin then they are operating illegally.  Even if they are legitimately offering products and services you are taking a gamble that they won't be closed down through legal channels before filling your order, and probably shouldn't be trusted anyways for their complete lack of business sense.

Edit http://www.treasury.gov/resource-center/faqs/Currency/Pages/legal-tender.aspx Apparently private businesses in the US are not required to accept cash, but it would definitely be a step towards their credibility in my opinion.  Since fraud with legal tender is a federal offense and raises the stakes quite a bit for criminals.

One of the best things about the Bitcoin is that it gives all the responsibility over to the individual, for better or worse, the most secure way to store your bitcoins is NOT using online wallets

[mark342]

Great write-up.  Thanks!

[Zerial]

I have used my Dremel multitool™ to make two small metal plates I've hidden inside worthless things in my house. They contain the info on my "thick" wallet which is offline. No fire will kill that data!

At the same time, I have a small mnemonic rule (like the old always deduce 1 from the numbers), that I put my account number through.

I feel 100% safe with my bitcoins!