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Author Topic: If I cared about Bitcoin I would do this  (Read 2143 times)
Findeton
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November 28, 2011, 04:11:30 PM
 #1

Hi,

I'm an engineer, also somewhat involved in politics and therefore money comes to the question. I have some bitcoins but I won't waste much time in developing anything for bitcoin because I just don't have time for this shit. But, if I were one of you who actually care about bitcoin, I would do the following if you really want bitcoin to take off:

I would create a secured and fast bitcoin bank.

This is the idea: The bank must have all kind of security measures so that its money doesn't get stolen and the bank complies with the law. The bank holds your bitcoins, and the bank guarantees that all transfers that you want to do will take place.

For example, lets say that you want to pay 10btc to your local shop. You use your bitcoin bank credit card to allow the payment. Instantly, the transaction "10btc from this btc account to this other account with this id" gets published in the public board of the bitcoin bank. As the owner of the shop trusts the bank, he won't need to make you wait 10-30mins because the bank guarantees that the transfer will take place.

Also, you need to be able to do instant transfers between banks. Therefore you need to define some kind of process or protocol by which new banks will get to trust each other so that transfers between them can be done instantly.

In other words, what you need is BITCOIN LIQUIDITY. Then, and only then bitcoins can be useful to the layman. And for that you actually need to be able to TRUSTS some BANKS, with a serious plan for security, banks that follow the law and people who are willing to pay for that TRUST. Of course this bank will need some kind of software to interface all this (and/or some kind of credit card). And of course I would like this type of bank NOT to be a fractional reserve bank.

Once you have bitcoin liquidity, bitcoin-usd liquidity is not much of a problem because bitcoins will be actually useful for the lay man.

As I don't have TIME on my side I would be willing to put some MONEY where my mouth is. Not much, but some (perhaps $1000). And others may also like the idea.

Also, you need to understand that this bitcoin liquidity is the means to be able to make CASH out of bitcoins, meaning some kind of money that can be instantly transferred from person to person. You really nee that if you want bitcoins to succeed.

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November 28, 2011, 04:37:34 PM
 #2

I understand where you're coming from, but isn't the whole point of bitcoin that it ideally should be decentralized? Alas mtGox seems to be dictating the price at the moment as this is the largest exchange with the most trade volume.

The structure that you suggest, would it not cost a lot? And how would we pay for it? Fees? Banking fees is something bitcoin is trying to avoid.
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November 28, 2011, 05:06:26 PM
 #3

We Bitcoin users are our own bank. We hold the bitcoins more securely ourselves, and we can make absolutely trustable money transfers instantly. We also can choose to tell the law about our money. Banksters are obsoleted.

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November 28, 2011, 05:27:20 PM
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I understand where you're coming from, but isn't the whole point of bitcoin that it ideally should be decentralized? Alas mtGox seems to be dictating the price at the moment as this is the largest exchange with the most trade volume.

The structure that you suggest, would it not cost a lot? And how would we pay for it? Fees? Banking fees is something bitcoin is trying to avoid.

I don't understand this sentiment - the allure of Bitcoin isn't that it is always decentralized, it's that it can be if you want it to. You decide the level of trust you want to have. If you trust almost no one, you run a full Bitcoin client connected to a few trusted nodes. A step up from that, you're running a chain-less client that has to trust wherever it gets it's balances from. Continue up the ladder until you reach whatever Bitcoin will eventually call banks.

Same goes with mining - yes pooled mining is essentially doing away with the decentralized auditing and blah blah blah... who cares? The fact is that there are plenty of smaller pools to choose from, and the bar is still adequately low that almost anyone with an upper-middle-class disposable income could setup a pool if they so chose to.

Bitcoin isn't about "my way or the high way" in that respect. It's also worth noting that plenty of people are already using places like MtGox as a Bitcoin bank for the exact purposes put forth in the OP - the system just isn't very good yet.

^_^
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November 28, 2011, 05:34:00 PM
 #5

We Bitcoin users are our own bank. We hold the bitcoins more securely ourselves, and we can make absolutely trustable money transfers instantly. We also can choose to tell the law about our money. Banksters are obsoleted.

But if you get mugged on the street by a common criminal you can only lose the cash in your wallet and the largest daily ATM withdrawal that you can make. If you get mugged on the street by someone with a smartphone who knows you keep your money in Bitcoin, they could coerce you to hand over your entire life savings. There is a legitimate reason to not want to have instant access to all of your money at any time.

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November 28, 2011, 05:36:43 PM
 #6

I don't understand this sentiment - the allure of Bitcoin isn't that it is always decentralized, it's that it can be if you want it to. You decide the level of trust you want to have. If you trust almost no one, you run a full Bitcoin client connected to a few trusted nodes. A step up from that, you're running a chain-less client that has to trust wherever it gets it's balances from. Continue up the ladder until you reach whatever Bitcoin will eventually call banks.

Many of us see no reason to go that far up the ladder.  Those banks will have regulatory and insurance costs.  Cost that will need to be borne by higher fees.  If the fees get high enough why even use Bitcoin just use Paypal and optionally hedge your exposure to inflation.

The proposal is an "old world" way of thinking.  Green addresses solve the problems indicated by the OP and honestly for most transactions the confirmation delay is a non-issue.  There is no need to wait for confirmations on revokable transactions and double spends in meatspace are essentially impossible for a well designed merchant system.

So
revokable transactions & low value physical world transactions - confirmations a non-issue.
longer time frame transactions - confirmation delay a non-issue.
high value realtime transactions - use a green addreess.

Why do I need a bank (w/ never ending and always growing bank fees) again?
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November 28, 2011, 05:42:54 PM
 #7

We Bitcoin users are our own bank. We hold the bitcoins more securely ourselves, and we can make absolutely trustable money transfers instantly. We also can choose to tell the law about our money. Banksters are obsoleted.

But if you get mugged on the street by a common criminal you can only lose the cash in your wallet and the largest daily ATM withdrawal that you can make. If you get mugged on the street by someone with a smartphone who knows you keep your money in Bitcoin, they could coerce you to hand over your entire life savings. There is a legitimate reason to not want to have instant access to all of your money at any time.

If that ever became an issue a deterministic plausible-deniability wallet is certainly a possibility.  Enter one passphrase and it generates one (low value wallet).  Enter a second (or third or nth) passphrase and generates a higher value wallet.

Still even today a bank isn't required to ensure non-access to all of ones funds.
Findeton
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November 28, 2011, 05:52:57 PM
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I don't understand this sentiment - the allure of Bitcoin isn't that it is always decentralized, it's that it can be if you want it to. You decide the level of trust you want to have. If you trust almost no one, you run a full Bitcoin client connected to a few trusted nodes. A step up from that, you're running a chain-less client that has to trust wherever it gets it's balances from. Continue up the ladder until you reach whatever Bitcoin will eventually call banks.

Many of us see no reason to go that far up the ladder.  Those banks will have regulatory and insurance costs.  Cost that will need to be borne by higher fees.  If the fees get high enough why even use Bitcoin just use Paypal and optionally hedge your exposure to inflation.

The proposal is an "old world" way of thinking.  Green addresses solve the problems indicated by the OP and honestly for most transactions the confirmation delay is a non-issue.  There is no need to wait for confirmations on revokable transactions and double spends in meatspace are essentially impossible for a well designed merchant system.

So
revokable transactions & low value physical world transactions - confirmations a non-issue.
longer time frame transactions - confirmation delay a non-issue.
high value realtime transactions - use a green addreess.

Why do I need a bank (w/ never ending and always growing bank fees) again?

Because bitcoins work well if what you want to do is something like bank transactions. But waiting 10 minutes is just too much if you want it to work as if it was cash. Credit cards and cash are way better than bitcoins because the money goes from one hand to another instantly.

The lay man won't accept waiting for 10 minutes, not even 1 minute to be able to pay -in a physical shop- in bitcoins when you can just pay in USD cash or USD credit cards. Until you solve that problem, bitcoins just won't get mainstream.

And if you don't accept that fact, well then you'll have to deal with the fact that bitcoins will not become mainstream.

So if you want bitcoins to become mainstream, you want to be able to use bitcoin cash. And for that you need a trusted third party that will guarantee to the seller that the transaction will take place. And the name of such a thing is a bank by definition. So you need banks.

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November 28, 2011, 05:58:21 PM
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Because bitcoins work well if what you want to do is something like bank transactions. But waiting 10 minutes is just too much if you want it to work as if it was cash.

SNIP


Please read before replying.

There really is no need for confirmations on low value transactions assuming the merchant (either directly or via a service) has a large number of connections to the network.  Double spends are very difficult, even more difficult in the physical world (where risk of caught, losing coins, and timing all become more critical).

Any revocable transaction doesn't require any confirmations.
Any low value physical transaction doesn't require any confirmations.
Any mail order transaction (or other longer timeframe transaction) takes longer than a confirmation anyways.
I know these claims are Heresy to the "church of the 6 confirmations and protection from double spends" but not everything needs a confirmation.  Not everything is affected by the "delay" in confirmations.

Some things need confirmations.  High value irreversible anonymous transactions that must be completed rapidly.  Honestly those are a tiny minority of economic activity but a solution already exists called green-addresses.


Building giant expensive banks with intra bank networks defeats the entire purpose of Bitcoin is a solution in search of a problem.

Simple solution ... just use a bank.  Why even use Bitcoin?
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November 28, 2011, 06:02:07 PM
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Also, you need to be able to do instant transfers between banks.

Good grief, from my experience you'd be extremely lucky to get transfer same day in Australia. I've even had a couple of days for a transfer within the same bank.
Bitcoin's 10 minutes is lightning by comparison.


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Findeton
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November 28, 2011, 06:18:49 PM
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Any low value physical transaction doesn't require any confirmations.

Yes they do. Ask any merchant if those "low value" transactions need confirmation. Many companies rely on those "low value" transactions so they want to be damn sure they take place.

Ask Mt Gox if they'll accept instant transactions for "low value" figures.

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November 28, 2011, 06:21:22 PM
 #12

Any low value physical transaction doesn't require any confirmations.

Yes they do. Ask any merchant if those "low value" transactions need confirmation. Many companies rely on those "low value" transactions so they want to be damn sure they take place.
It would be *extremely* difficult to pull off a double spend, and would simply not be worth even trying for a low value transaction.

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Findeton
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November 28, 2011, 06:22:26 PM
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Any low value physical transaction doesn't require any confirmations.

Yes they do. Ask any merchant if those "low value" transactions need confirmation. Many companies rely on those "low value" transactions so they want to be damn sure they take place.
It would be *extremely* difficult to pull off a double spend, and would simply not be worth even trying for a low value transaction.

So why does Mt Gox and everybody else wait at least 10mins and normaly 30mins even for "low value" transactions.

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November 28, 2011, 06:24:54 PM
 #14

Any low value physical transaction doesn't require any confirmations.

Yes they do. Ask any merchant if those "low value" transactions need confirmation. Many companies rely on those "low value" transactions so they want to be damn sure they take place.
It would be *extremely* difficult to pull off a double spend, and would simply not be worth even trying for a low value transaction.

So why does Mt Gox and everybody else wait at least 10mins and normaly 30mins even for "low value" transactions.

1. They probably wouldn't have to (they could wait for 1 conf. instead of 6 or Cool
2. Online transactions would be a lot more conducive to attempting a double spend than in-person, brick-and-mortar purchases, due to the logistics.

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November 28, 2011, 06:28:02 PM
 #15

That's basically where we are headed: partial centralization (well, right now is mostly a monopoly because 80% of the money goes through MtGox...).
 
Anyway, you described green addresses. The rest of it will naturally happen. When laws are made, exchanges will need to get additional paperwork done which will increase trust from users. When the network volume grows, there will probably be "supernodes".
Centralization is much more simple to people, I can understand that. But the underlying protocol will still be open and somewhat decentralized.
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November 28, 2011, 07:05:56 PM
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MM ok I've read it. This is very similar to green address. Well then it's solved.

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November 28, 2011, 08:05:03 PM
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Any low value physical transaction doesn't require any confirmations.

Yes they do. Ask any merchant if those "low value" transactions need confirmation. Many companies rely on those "low value" transactions so they want to be damn sure they take place.
It would be *extremely* difficult to pull off a double spend, and would simply not be worth even trying for a low value transaction.

So why does Mt Gox and everybody else wait at least 10mins and normaly 30mins even for "low value" transactions.

if you have to ask ?  Roll Eyes

maybe you should stick with politics.
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November 28, 2011, 08:18:27 PM
 #18

FWIW, I've posted similar thoughts to the OP.

Green addresses can handle the instant transfer issue nicely, but only as a default or minimum part of the infrastructure, sort of like the client.

I don't think most eventual Bitcoin users (over 90%) should ever need to bother with the client. I feel two things should exist above the base infrastructure: 1. banks 2. a person-to-person payment service (Bitcoin PayPal - pay/receive with just an email address). I'm encouraged there seems to be progress in both areas.

FlexCoin (flexcoin.com) - is the first dedicated Bitcoin Bank. It appears they are transitioning the entity to become an independent U.S. corporation. They mention clearly that they are not ultimately responsible for Bitcoin loss, which is fine as a start. Ideally, a later version will provide some minimum level of guarantee (say 500 BTC), even if they need to charge fees.

SafeBit - I think will fulfill the role as a simple Bitcoin PayPal. (http://techcrunch.com/2011/10/24/the-business-of-bitcoin-entrepreneurs-see-opportunities-in-alternative-currencies/)
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November 28, 2011, 09:15:40 PM
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Isnt this exactly what Flexcoin actually is?
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November 28, 2011, 09:22:06 PM
 #20

I have zero interest in a bank to manage my bitcoins for the same reason I don't want a bank to manage my gold bars, I don't need it.
I guess it's a good thing you don't care, because I think you would have lost money on your idea.

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