At what point should we take Bitcoin seriously?

[Unbeatable]

When it blows up a van.

 

[semiopen]

I thought I made some criticisms about bitcoin on FRDB at the end of last year when it was over $1000. but maybe that's partially wishful thinking (might have been a little before that).

Anyway it hit a high of $1147 on 12/4/13 and was worth $322.50 on Friday. Obviously that's too volatile a place to stick your cash - especially if it goes down almost 75%. If you wanted to make money on currencies for the past year, you probably wanted to be long the US dollar, that's up about 10%. I guess that's boring and some people might find a 75% loss more exciting.

Compared to this, the people who invested in gold were geniuses... that's only down a little bit.

Also, if you use the service to convert the bitcoins to dollars, you probably get raped again by the fees.

 

[Nice Squirrel]

Also, if you use the service to convert the bitcoins to dollars, you probably get raped again by the fees.

And this is the kicker, you buy Bitcoins and use Bitcoins (with merchants) through the banking system which still collects their transaction fees.

Bitcoins remind me of the  Liberty Dollars where individuals would spend 33% more than face value to get a alternative currency.

 

[Loren Pechtel]

(me on making gold with particle accelerators...)

Particle accelerators are horrible as bulk synthesizers.

True, but I've found it hard to get good numbers for that. But one doesn't need to go up to LHC energies, only to a few MeV, what medical accelerators typically do.

http://forums.silverstackers.com/message-295062.html#p295062

 

[Will Wiley]

I thought I made some criticisms about bitcoin on FRDB at the end of last year when it was over $1000. but maybe that's partially wishful thinking (might have been a little before that).

Anyway it hit a high of $1147 on 12/4/13 .

Now we have good idea why that happened though.
The Willy Report

Somewhere in December 2013, a number of traders including myself began noticing suspicious bot behavior on Mt. Gox. Basically, a random number between 10 and 20 bitcoin would be bought every 5-10 minutes, non-stop, for at least a month on end until the end of January. The bot was dubbed “Willy” at some point, which is the name I’ll continue to use here. Since Willy was buying in such a recognizable pattern, I figured it would be easy to find in the Mt. Gox trading logs that were leaked about two months ago

 

[untermensche]

You take it seriously when you personally know the people behind it for long enough that you trust them.

 

[Will Wiley]

You take it seriously when you personally know the people behind it for long enough that you trust them.

This misses the whole point of Bitcoin. The idea is that Bitcoin does not need a "trusted third party".
Transactions are secured not by a "trusted third party" but by the encryption science.
If there is a third part between, say, you and I, in a transaction then we have to be able to trust that third party and be able to trust that there won't be "double spending".

There is no "person behind" Bitcoin (although it's possible on person wrote the code)
https://bitcoin.org/bitcoin.pdf

1. Introduction

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot
avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers. In this paper, we propose a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.

 

[bilby]

Companies, taking Bitcoin:

Dell
Overstock
NewEgg
TigerDirect
1-800-Flowers.com
Expedia
CheapAir

And many more...

You can buy Bitcoin gift cards that work at Walmart, Amazon, and Target.

We should start taking bitcoin seriously when people start making lists like this, but of companies that do NOT take bitcoin.

 

[NobleSavage]

Paypal does not take Bitcoin directly, it allows services like Coinbase to convert them to USDs. You are still using USDs to make the purchase.

I will continue to use USDs since they are accepted everywhere, and I don't have to worry about currency volatility.

Ok, good point. I've been laughing at Bitcoin for some time, but now I'm thinking it might catch on.

1) Merchant fees are actually reasonable for converting to local currency. Coinbase charges 1% plus $0.15. That's better than CC fees. Merchants are also protected from chargbacks. (The buyer would get screwed). Visa, MC, amex, etc have to factor in costs of fraud.

2) There are a lot of countries that the normal CC companies refuse to do business.

3) The black market in the US alone is $2 Trillion.

 

[Will Wiley]

Paypal does not take Bitcoin directly, it allows services like Coinbase to convert them to USDs. You are still using USDs to make the purchase.

I will continue to use USDs since they are accepted everywhere, and I don't have to worry about currency volatility.

Ok, good point. I've been laughing at Bitcoin for some time, but now I'm thinking it might catch on.
.

I don't know whether Bitcoin will but blockchain technology might do so. The way Satoshi Nakamoto soled the Byzantine Generals problem could have many applications.

IBM Executive Highlights Block Chain's Utility for Internet of Things

Brody added that it’s feasible that hundreds of billions of devices could one day be connected on a single block chain or network of block chains, all of which communicate with each other via automated transactions. He envisioned an ecosystem of both centralized and decentralized systems based on security needs, but ultimately, pushing automated system intelligence to new heights.

Byzantine Generals problem

The underlying concept – maintaining truth in a network where the potential for fraud exists – has been discussed for decades.

First labeled as the “Byzantine Generals Problem” in a 1982 study, the problem of keeping a group of connected but separate parts honest is akin to an army attacking a city suffering from an infiltration of spies. Because the couriers carrying messages between generals can’t be trusted, a way must be found to ensure that information coming from the different parts to the army is true.

How does this apply to decentralized payment systems like bitcoin and Ripple? In order to maintain network integrity, a majority of participants must be accepted as truthful. Should someone or a group of bad actors gain control of the network, they have the potential to disrupt it. At the very least, this risk threatens the overall legitimacy of the system itself.

Bitcoin solves this problem by creating a reward incentive, thus promoting good behavior among network participants. The application of incentive to the transaction confirmation process makes miners want to contribute to a successful – and public – ledger

 

[NobleSavage]

Will Wiley are any of the other crypto coins worth looking into -- not as a currency -- but as a intriguing way of solving the trust problem?

 

[Duke Leto]

Bitcoin is a pretty classic example of a solution in search of a problem.

 

[Will Wiley]

Will Wiley are any of the other crypto coins worth looking into -- not as a currency -- but as a intriguing way of solving the trust problem?

As far as I am aware the "trust problem" is dealt with much the same way in all other crypto coins. The way people are rewarded seems to have shifted towards "proof of stake" rather than "proof of work" though.

 

[Nice Squirrel]

http://abcnews.go.com/Technology/wireStory/feds-announce-1st-bitcoin-securities-fraud-case-26734204
This thread seemed as good as any to stick this in.

The federal government on Thursday announced its first bitcoin securities fraud case, accusing a Texas man of engineering a Ponzi scheme by getting people to turn over their bitcoins in return for promises of high interest rates and the ability to recoup their investment at any time.

Trendon Shavers, of McKinney, awaited an initial court appearance in Texas on securities fraud and wire fraud charges that were outlined in a criminal complaint unsealed in U.S. District Court in Manhattan.

"This case, the first of its kind, should serve as a warning to those looking to make a quick buck with unsecured currency," U.S. Attorney Preet Bharara said in a news release.