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Author Topic: My first impressions  (Read 795 times)
Topazan
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April 23, 2012, 02:44:22 PM
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Well, I guess I have to post something to get access to the other boards.  Hi, a friend told me about Bitcoin earlier today, and I've been reading all I can about cryptocurrencies since.

The idea of a secure, decentralized, open source, online currency certainly catches my interest.  Being free from any centralized authority is always a plus, and the low-no transaction costs make it perfect for paying for online content, micro-donations and other things that may not have been practical before.  However, I see some things that I think will have to improve before it really catches on.

The first is security.  I don't really understand how bitcoin system works, so I'll take those who say it's secure at their word.  However, even if the coins themselves are secure, the mechanisms used to store and exchange them don't appear to be.  I was reading that by stealing someone's private key, you can transfer all their bitcoins to your account and there would be no way to trace you.  I see people with schemes involving multiple wallets, flash drives, live cds etc.  That might be more secure, but it might be way too complicated for the average non-technical minded person.  I also note that a couple of major exchanges have been compromised.  It's one thing to know that the bitcoins on the private key in our bank vault are safe, it's another thing to have a safer way to use them.

Another thing is the ease of entering the market.  I considered buying bitcoins almost as soon as I heard about them, but I learned it's not a simple process.  None of the major exchanges take the more common online payment methods, with bank transfers being the only non-obscure option.  I understand that there have been problems with chargebacks, but it means that buying bitcoins is now a major time investment.  If it were a little easier, then all you'd need to do to get people to try them is have a few good businesses that prefer BTC.  As it is, I suspect most people have to be convinced of the merits of the BTC system itself, and since most people aren't that interested in economics it limits the market. 

Finally, I think the value of bitcoins will be limited if they're only used in online transactions.  Not everyone in the world has a home computer with internet, and even fewer have the knowledge and means to properly secure their bitcoins.  Maybe at some point in the future there will be bitcoin swipe cards, with service centers to convert BTC to and from fiat currency.

Anyways, I'm pretty excited about BTC.  I'm confident that there will be solutions to these problems, maybe new businesses will be created in the process.  I'm sure what I've said has been said before, but like I said I guess I need to post something.

Save the last bitcoin for me!
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April 23, 2012, 03:44:07 PM
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Check out https://blockchain.info/wallet .   It stores and encrypted version of your wallet on their servers.  You can email it to yourself for extra backing up.  When you access the site it sends you the wallet, its decrypted by a Bitcoin instance running your browser (javascript).  The blockchain is hosted by blockchain.info so it loads instantly.  Fast and pretty secure and no need to trust a 3rd party outside of them continuing to provide the service.  But the jscript client code is open source so, some one will jump in if they go down.

"It is, quite honestly, the biggest challenge to central banking since Andrew Jackson." -evoorhees
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April 23, 2012, 03:44:56 PM
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Finally, I think the value of bitcoins will be limited if they're only used in online transactions.  Not everyone in the world has a home computer with internet, and even fewer have the knowledge and means to properly secure their bitcoins.  Maybe at some point in the future there will be bitcoin swipe cards, with service centers to convert BTC to and from fiat currency.

not just home computers, phones etc as well, most people have those these days
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April 23, 2012, 05:37:36 PM
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Well, I guess I have to post something to get access to the other boards.  Hi, a friend told me about Bitcoin earlier today, and I've been reading all I can about cryptocurrencies since.

The idea of a secure, decentralized, open source, online currency certainly catches my interest.  Being free from any centralized authority is always a plus, and the low-no transaction costs make it perfect for paying for online content, micro-donations and other things that may not have been practical before.  However, I see some things that I think will have to improve before it really catches on.

The first is security.  I don't really understand how bitcoin system works, so I'll take those who say it's secure at their word.  However, even if the coins themselves are secure, the mechanisms used to store and exchange them don't appear to be.  I was reading that by stealing someone's private key, you can transfer all their bitcoins to your account and there would be no way to trace you.  I see people with schemes involving multiple wallets, flash drives, live cds etc.  That might be more secure, but it might be way too complicated for the average non-technical minded person.  I also note that a couple of major exchanges have been compromised.  It's one thing to know that the bitcoins on the private key in our bank vault are safe, it's another thing to have a safer way to use them.

Another thing is the ease of entering the market.  I considered buying bitcoins almost as soon as I heard about them, but I learned it's not a simple process.  None of the major exchanges take the more common online payment methods, with bank transfers being the only non-obscure option.  I understand that there have been problems with chargebacks, but it means that buying bitcoins is now a major time investment.  If it were a little easier, then all you'd need to do to get people to try them is have a few good businesses that prefer BTC.  As it is, I suspect most people have to be convinced of the merits of the BTC system itself, and since most people aren't that interested in economics it limits the market. 

Finally, I think the value of bitcoins will be limited if they're only used in online transactions.  Not everyone in the world has a home computer with internet, and even fewer have the knowledge and means to properly secure their bitcoins.  Maybe at some point in the future there will be bitcoin swipe cards, with service centers to convert BTC to and from fiat currency.

Anyways, I'm pretty excited about BTC.  I'm confident that there will be solutions to these problems, maybe new businesses will be created in the process.  I'm sure what I've said has been said before, but like I said I guess I need to post something.

You might want to invest a little in each cryptocurrency.

Maybe like $1 worth in (for example) LiteCoin, MicroCash, and BitCoin.
You can also get a little of each for free.
I hope you have a fast connection & computer if you decide to run the client on your computer. The blockchain is huge, so on even a 100kb/s connection, it takes a long time to download (which you need in order to see any money you have).

Let's make some Dogecoins together! http://doge.litemoons.com:9555
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April 23, 2012, 06:31:39 PM
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Maybe like $1 worth in (for example) LiteCoin, MicroCash, and BitCoin.
Please don't mix "microcash" (=ScamCoin) with Bitcoin and Litecoin. Thank you.
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April 23, 2012, 09:08:58 PM
 #6

Thanks for sharing your thoughts.  For bitcoin to further gain traction and get past the early adopter gap it it needs to be seen as useful to those who are not already using it, so you've presented valuable info.

However, even if the coins themselves are secure, the mechanisms used to store and exchange them don't appear to be.

There are different methods to store bitcoins, with varying levels of protection from the risks.  The greater the amount of value stored the greater the attention to the level of protection is necessary.  The methods that are the most secure also have higher costs (special-purpose equipment and knowledge, and the cost of inconvenience).   Thus is not unlike in the real world.   Paper currency in your back pocket or purse is cheap to manage and is convenient and is adequately secure enough that most people will carry around $100 or more without worry.  For amounts than that they use more secure methods (e.g., bank account).

involving multiple wallets, flash drives, live cds etc.  That might be more secure, but it might be way too complicated for the average non-technical minded person.

That's for people trying to store larger amounts of funds.  For "walking around money" levels, the current protections (passphrase-encrypted wallet with the Bitcoin client, or a password-protected Javascript wallet like My Wallet on Blockchain.info) are seen as adequate to most and don't require much technical skills.

I also note that a couple of major exchanges have been compromised.

And that gets lots of press, yet in those instances customers didn't lose access to their funds. Bitomat's funds were restored through Mt. Gox acquisition.  Bitcoinica ate the losses.  In each of those incidents the underlying security inadequacy has been identified and remedied.  There will always be risks and new vulnerabilities discovered -- so keep that in mind when considering how much and where your bitcoin (and fiat) funds are stored.

Of the exchange markets based in the U.S.  (Camp BX, BitFloor and previously ExchB) there had been no been no compromises reported and no customers reporting problems accessing funds.

Another thing is the ease of entering the market.  I considered buying bitcoins almost as soon as I heard about them, but I learned it's not a simple process.  None of the major exchanges take the more common online payment methods, with bank transfers being the only non-obscure option.

In the U.S., cash deposit at a bank through BitInstant is the easiest (though not cheapest) method.  BitInstant supposedly is coming up with a way to accept cash for getting funds into bitcoin for those from other parts of the world.

have a few good businesses that prefer BTC.  As it is, I suspect most people have to be convinced of the merits of the BTC system itself, and since most people aren't that interested in economics it limits the market.

There already are merchants that have this preference.   Coinabul is able to leverage bitcoin's strengths to be able to compete against other bullion dealers because Coinabul's competitors rely on the slow banking system or they have the added expense of payment cards in market that sees a lot of fraudulent purchases.

Here's a list of categories of merchants that might benefit from bitcoin:
 - http://bitcointalk.org/index.php?topic=73694.0

But for now it is a chicken and egg situation.  Those using bitcoins are a small market so merchants that consider it aren't immediately convinced enough to proceed.  

Finally, I think the value of bitcoins will be limited if they're only used in online transactions.  Not everyone in the world has a home computer with internet, and even fewer have the knowledge and means to properly secure their bitcoins.

The market for a merchant that sells online is orders of magnitude larger than one that requires physical presence.  For instance, GrubGo has a lot of enthusiastic bitcoin fans for its to-go restaurant delivery service, but only a tiny fraction of these fans live in St. Louis and can patronize them.

There are a number of solutions at the edge though.  Gift cards that can be spent at retailers but purchased using bitcions is one such area.  SpendBitcoins sells Kroger gift cards, for instance, which are USD-denominated and redeemable at Kroger, Ralphs, Food 4 Less, Fred Meyer, and elsewhere.  This lets you use bitcoins as a store of value but cash out to a fiat you can use without losing a chunk in the conversion to fiat.

Here's a thread describing the various ways Bitcoin is gaining traction:
 - http://bitcointalk.org/index.php?topic=76633.msg850690#msg850690

Maybe at some point in the future there will be bitcoin swipe cards, with service centers to convert BTC to and from fiat currency.

But everyone has (or will have) a mobile phone.  Particularly useful are smartphones.  Have you seen the Blockchain app for Android or iPhone?  As far as buying bitcoins when you only have one of these the BitInstant + Coinapult combination.

I'm sure what I've said has been said before, but like I said I guess I need to post something.

And you did a fantastic job with it.  Welcome to the bitcoin community!

Topazan
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April 24, 2012, 03:43:28 AM
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Check out https://blockchain.info/wallet .   It stores and encrypted version of your wallet on their servers.  You can email it to yourself for extra backing up.  When you access the site it sends you the wallet, its decrypted by a Bitcoin instance running your browser (javascript).  The blockchain is hosted by blockchain.info so it loads instantly.  Fast and pretty secure and no need to trust a 3rd party outside of them continuing to provide the service.  But the jscript client code is open source so, some one will jump in if they go down.
Seems like a good idea, if they're trustworthy and you keep a physical backup around in case they disappear.



Finally, I think the value of bitcoins will be limited if they're only used in online transactions.  Not everyone in the world has a home computer with internet, and even fewer have the knowledge and means to properly secure their bitcoins.  Maybe at some point in the future there will be bitcoin swipe cards, with service centers to convert BTC to and from fiat currency.

not just home computers, phones etc as well, most people have those these days
True, didn't think of that.  I've been hearing a lot that phones are pretty common even in Third World countries.  Still, phones need electricity and network coverage, so I don't think they can replace cash entirely.

You might want to invest a little in each cryptocurrency.

Maybe like $1 worth in (for example) LiteCoin, MicroCash, and BitCoin.
You can also get a little of each for free.
I hope you have a fast connection & computer if you decide to run the client on your computer. The blockchain is huge, so on even a 100kb/s connection, it takes a long time to download (which you need in order to see any money you have).
As Gabi said, some of the stuff I've been hearing about MicroCash makes me uncomfortable.  What does LiteCoin bring to the table that BitCoin doesn't?

Quote
There are different methods to store bitcoins, with varying levels of protection from the risks.  The greater the amount of value stored the greater the attention to the level of protection is necessary.  The methods that are the most secure also have higher costs (special-purpose equipment and knowledge, and the cost of inconvenience).   Thus is not unlike in the real world.   Paper currency in your back pocket or purse is cheap to manage and is convenient and is adequately secure enough that most people will carry around $100 or more without worry.  For amounts than that they use more secure methods (e.g., bank account).
The methods used for storing cash are better established and better understood by the average person.  Banks are everywhere and have a lot of experience in what they do.  Everyone knows about the ways cash can be stolen (eg burglars, muggers, pickpockets) and the technologies used to protect it from being stolen  (eg safes, locks, guns, inside pockets).

I meet many people who have no concept at all of what they can do to protect the data on their computer.  They've never heard of encryption, they've never heard of any OS but the Microsoft Windows installation on the only partition on their hard drive, and in many cases they just take malware to be a fact of life.  Sad but true.  These people will need a service to manage their cryptocurrency for them.  Something like Blockchain.info might do.

Quote
That's for people trying to store larger amounts of funds.  For "walking around money" levels, the current protections (passphrase-encrypted wallet with the Bitcoin client, or a password-protected Javascript wallet like My Wallet on Blockchain.info) are seen as adequate to most and don't require much technical skills.
True, but as BTC becomes more prominent, people will indeed want to store larger amounts of funds.

Quote
There already are merchants that have this preference.   Coinabul is able to leverage bitcoin's strengths to be able to compete against other bullion dealers because Coinabul's competitors rely on the slow banking system or they have the added expense of payment cards in market that sees a lot of fraudulent purchases.

Here's a list of categories of merchants that might benefit from bitcoin:
 - http://bitcointalk.org/index.php?topic=73694.0

But for now it is a chicken and egg situation.  Those using bitcoins are a small market so merchants that consider it aren't immediately convinced enough to proceed.  
My point was that the difficulty of buying BTC means that people are unlikely to do so just to deal with one merchant.  If it were a little easier it wouldn't take much for individuals to convince their customers to try BTC.  The difference between "I'll pay you with paypal" and "I'll use paypal to buy some bitcoins and pay you with that" is minor, the difference between "I'll pay you with paypal" and "I'll go down to the bank and pay for a wire transfer, wait for it to go through, then buy some bitcoins and pay them to you a few days later" is not.


As to the rest, my perception is this: currently, BTC does not act like a currency, but rather as a way of storing and transferring USD and other fiat currencies.  It's able to do this because it has value from the speculation that it one day will be a currency.  It order for that to happen, it needs to break out of its current niche of privacy seekers and futurists, to be used for more mundane business.  It's good that we can use to buy gift cards for a lot of businesses, but that's not the same thing as those businesses accepting it as payment and thereby giving it value.

I have a few questions:
1.  Is there some way to check the balance of a wallet with only the public key?
2.  How do online purchases with BTC work?  How do they know I'm the one who sent the money?  Is there any place I can see this in action without needing to fill out personal information?
3.  Isn't there any way to mitigate the risk of credit card transactions?  What if you required a video interview and a copy of govt. issued picture ID?  Is there a time frame in which a dispute can be raised?  What if you agreed to pay out the bitcoins a little at a time, over the course of a year?

Anyways, thanks for the welcome, and I hope I have something to contribute.

Save the last bitcoin for me!
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April 24, 2012, 04:22:14 AM
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My point was that the difficulty of buying BTC means that people are unlikely to do so just to deal with one merchant.  If it were a little easier it wouldn't take much for individuals to convince their customers to try BTC.  The difference between "I'll pay you with paypal" and "I'll use paypal to buy some bitcoins and pay you with that" is minor, the difference between "I'll pay you with paypal" and "I'll go down to the bank and pay for a wire transfer, wait for it to go through, then buy some bitcoins and pay them to you a few days later" is not.
Bitcoins are not difficult to buy at all. They're just difficult to buy using reversible payment systems, since bitcoin transactions are irreversible. There is absolutely no way around that. I'm not really sure why people (other than scammers) insist on using reversible payment systems. Cash is easy. Wire transfers are easy. Why do people insist on doing it the hard way?

I have a few questions:
1.  Is there some way to check the balance of a wallet with only the public key?
Enter the address at blockexplorer.com. Note that one wallet typically contains many addresses, including some which aren't displayed in the client, so the balance shown at blockexplorer may will be less than the total amount owned by that person.

2.  How do online purchases with BTC work?  How do they know I'm the one who sent the money?  Is there any place I can see this in action without needing to fill out personal information?
The site will typically generate a unique bitcoin address for your specific purchase when you check out. Any bitcoins paid to that address are presumed to be your payment, since you're the only person who will ever see that address.

3.  Isn't there any way to mitigate the risk of credit card transactions?  What if you required a video interview and a copy of govt. issued picture ID?  Is there a time frame in which a dispute can be raised?  What if you agreed to pay out the bitcoins a little at a time, over the course of a year?
No. Video interviews are more effort than most people are willing to go through, and ID can be photoshopped. There's generally no time limit for chargebacks. You can avoid all these problems by just not trying to marry reversible and irreversible payment systems. It's just never going to work.

Will pretend to do unverifiable things (while actually eating an enchilada-style burrito) for bitcoins: 1K6d1EviQKX3SVKjPYmJGyWBb1avbmCFM4
Topazan
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April 24, 2012, 05:17:23 AM
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My point was that the difficulty of buying BTC means that people are unlikely to do so just to deal with one merchant.  If it were a little easier it wouldn't take much for individuals to convince their customers to try BTC.  The difference between "I'll pay you with paypal" and "I'll use paypal to buy some bitcoins and pay you with that" is minor, the difference between "I'll pay you with paypal" and "I'll go down to the bank and pay for a wire transfer, wait for it to go through, then buy some bitcoins and pay them to you a few days later" is not.
Bitcoins are not difficult to buy at all. They're just difficult to buy using reversible payment systems, since bitcoin transactions are irreversible. There is absolutely no way around that. I'm not really sure why people (other than scammers) insist on using reversible payment systems. Cash is easy. Wire transfers are easy. Why do people insist on doing it the hard way?

I'm a US citizen currently located in a smallish city in China.  Cash is out of the question unless you know someone who sells BTC here.  I'm used to paying for small purchases with cash, check, or credit card, and usually that's enough.  I suppose I can order a wire transfer through my bank's 800 number, but not without paying a hefty fee and probably having to wait for several days.  Buying something with my credit card takes minutes in contrast.

It's not that hard to understand.  Cash can't be spent online, wire transfers take time and are too expensive for small purchases.  That's why I'm interested in BTC.  It could be the answer to the flaws of these other systems.

Well, maybe once BTC becomes more commonplace there will be more places to pay cash for it.

Quote
I have a few questions:
1.  Is there some way to check the balance of a wallet with only the public key?
Enter the address at blockexplorer.com. Note that one wallet typically contains many addresses, including some which aren't displayed in the client, so the balance shown at blockexplorer may will be less than the total amount owned by that person.

2.  How do online purchases with BTC work?  How do they know I'm the one who sent the money?  Is there any place I can see this in action without needing to fill out personal information?
The site will typically generate a unique bitcoin address for your specific purchase when you check out. Any bitcoins paid to that address are presumed to be your payment, since you're the only person who will ever see that address.

3.  Isn't there any way to mitigate the risk of credit card transactions?  What if you required a video interview and a copy of govt. issued picture ID?  Is there a time frame in which a dispute can be raised?  What if you agreed to pay out the bitcoins a little at a time, over the course of a year?
No. Video interviews are more effort than most people are willing to go through, and ID can be photoshopped. There's generally no time limit for chargebacks. You can avoid all these problems by just not trying to marry reversible and irreversible payment systems. It's just never going to work.

Thanks for the answers, that's really helpful.  I think I'm starting to understand how this works.

Save the last bitcoin for me!
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April 24, 2012, 06:21:49 AM
 #10

I'm a US citizen currently located in a smallish city in China.  Cash is out of the question unless you know someone who sells BTC here.

Alipay was used for a short while to move funds into Bitcoinica.  Unfortunately, after a bit they had to discontinue accepting that payment method.

Here's a thread on discussing those wishing to cash out to CNY.  Perhaps you can post a note there saying you would like to cash in.
- http://bitcointalk.org/index.php?topic=67272.0

And another you might wish to read / post on:
 - http://bitcointalk.org/index.php?topic=66580.0;all

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April 24, 2012, 07:54:24 AM
 #11

Thanks.  I read the threads you posted, but I think I'm just going to have to eat the cost of a bank transfer.  I don't know anything about the bitcoin market in China, and I'm only going to be here for a couple months anyway.

Save the last bitcoin for me!
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April 24, 2012, 08:19:15 PM
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Check out https://blockchain.info/wallet .   It stores and encrypted version of your wallet on their servers.  You can email it to yourself for extra backing up.  When you access the site it sends you the wallet, its decrypted by a Bitcoin instance running your browser (javascript).  The blockchain is hosted by blockchain.info so it loads instantly.  Fast and pretty secure and no need to trust a 3rd party outside of them continuing to provide the service.  But the jscript client code is open source so, some one will jump in if they go down.
Seems like a good idea, if they're trustworthy and you keep a physical backup around in case they disappear.

According to the guys at Blockchain.info they never see your unencrypted wallet.  The Jscript is open source so if it were sending your wallet in the clear anywhere that fact would be all over the forums...

Of course i'm not sure what kind of protection one has from them changing the code one day and quickly making off with some coin.  I haven't looked that deeply into it, but these guys have been around a long time and they are the go-to place for perusing the block chain (aka the public ledger).

"It is, quite honestly, the biggest challenge to central banking since Andrew Jackson." -evoorhees
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April 24, 2012, 08:35:52 PM
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oh yeah and since you are accessing from china you definitely need to read about and download Tor (The Onion Router).

Bitcoin client is compatible with it so if you need to it will route the traffic over Tor.

"It is, quite honestly, the biggest challenge to central banking since Andrew Jackson." -evoorhees
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