The author's complains are a sober reminder that society is not yet ready, and has not yet evolved all the infrastructure it will need to cope with rising global Bitcoin adoption.[1] Regardless, if the number of people using Bitcoin continues to grow, our institutions and infrastructure will have to evolve to address the problems mentioned by the author.
Among other things, society will need more secure (truly malware-resistant) personal computing systems, more secure (from snooping) communications systems, substantially better authentication mechanisms, more secure energy generation and transmission equipment and facilities, more secure financial institutions, and more technologically-savvy regulatory and policing institutions.
Those are all really good things.
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[1] Compare, for example, how society works with paper cash and gold bars versus Bitcoin:
* Paper cash or gold in substantial amounts is always stored in private or bank safes, or in high-security underground vaults that most people have only seen in movies. In contrast, Bitcoin private keys are often stored in general-purpose personal computers running a wide variety of applications, managed by people who don't know how to secure a computer.
* Transporting any substantial amount of paper cash or gold is often done via armored trucks operated by highly-trained security personnel. In contrast, Bitcoin private keys are transported via all sorts of highly insecure methods by people who don't know better.
* No sane person holding a substantial amount of cash or gold at home would ever let complete strangers come and go into their house as they please, while giving them keys to all doors, cabinets, drawers, and safes. In contrast, people regularly give complete access to their computers to complete strangers by willingly or unwillingly installing software created by such strangers.
* Our regulatory and policing institutions know how to identify, prosecute, and even prevent illegal gold and cash transactions, successfully keeping them to a tiny percentage of overall economic activity in most advanced economies. In contrast, those same institutions do not yet know how to cope with the use of Bitcoin for illegal activities.
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Edits: moved comparison of Bitcoin to gold and cash to footnote; also, made minor changes to several sentences so they more accurately reflect what I intended to write in the first place.
I love how it's not a problem with Bitcoin, it's a problem with the rest of the world not adapting to use Bitcoin fast enough!
So basically, to be able to use Bitcoin, we need to develop a utopian society where the regulators are as smart as the people they're trying to regulate, the average person on the street is able to secure their computer against a financially motivated hacker, the global energy problems are solved and total privacy is achieved. We'll get right on that.
Bitcoin is useful for some purposes, but its lack of traceability is MOST useful for criminal enterprises (aka money laundering). It's also not at all risky to attempt to steal Bitcoin; robbing an armored car involves a significant amount of risk. A failed armored car robbery ends with you dead or in jail; a failed attempt to steal Bitcoin ends with you just not having any Bitcoin.
Bitcoins are the most traceable currency ever, this is true.
However the value behind bitcoins is the most untraceable thing ever.
If you send 10 BTC from ADE to 143 and I send 10 BTC from 5FC to 057 you can probably trace that we both still have 10 BTC. Now take advantage of how much data you can shove into a single 10 minute transaction and do 100 transfers with a group of 10 other people turning a total of 10 original addresses into 20, and it becomes tricky to trace. Make that 100 new addresses and it becomes nearly impossible with current technology.
Even if you could trace it, all people have to do is not worry about getting all their money back, say by donating 0.1 BTC to a central coordinator overall, and it becomes really hard to figure out that someone put in 99 BTC and got out 98.9 BTC.
You don't have to trace all the money. You can mark all wallets that receive money from mixers as suspect, and disincentivize accepting suspect bitcoins.
Imagine someone's wallet gets compromised, and all the funds are transferred elsewhere. The theft is reported to the police. Some arbiter of trust will indicate that all wallets that have received funds that flowed from the stolen wallet after the theft are suspect, and communicate to participating merchants and consumers that accepting funds from suspect wallets will put them on a blacklist. People will stop accepting funds from tainted wallets, and the incentive for future theft will go down.
Bitcoin is not a permanent haven for crime. It is more traceable than any widely accepted currency, and that traceability will be used to deter financial crimes.
Too easy to game. I just send you 0.001 bitcoins and you are screwed. Add a limit and I will just go under it.
Ultimately though there is an even more effective method. New coins are always clean, trading pristine coins for tainted coins at a discount is damned effective, even if it requires a lot of computing power to pull off. The trick is you have infinite wallets, so avoiding any way of figuring out which is which is not difficult, especially since distributing pristine coins is standard practice.
>Too easy to game. I just send you 0.001 bitcoins and you are screwed
You seem to assume that a regulator must mark all the BTC in a wallet as tainted just because 0.001 of tainted BTC was sent to it, which seems to me a false assumption.
It is so easy to send transactions that you have a problem, do you ignore transactions under a certain amount (leading to a potential group going under the limit for mixing) or do you introduce these problems.
If you don't mind false positives it will be easy enough, but I don't know how you would develop a system that would work.
Well I would say someone brought forward the concept of the US or other entity marking bitcoins, that could definitely work, but I don't know if that would solve the problem of laundering non-marked bitcoins.
Great, so as long as we solve six of the major technical hurdles of the day, we can avoid the societal and technical dangers that BitCoin poses. What a pleasant ultimatum.
As you pose it, it's now a race between the darker aspects of BitCoin and our ability as a world society to check off the items on your wishlist. I don't disagree that those are all good things to have, but I don't see how holding a gun to everyone's head and demanding short-term solutions to long-term problems is going to accomplish anything. I don't see a world where we get there in time.
These are not technical dangers that Bitcoin possesses, they are dangers that exist with or without Bitcoin when dealing with money online. Computer security didn't all of a sudden become important because BTC came into existence: most of OP's same arguments could be made against having online banking:
* Online banking credentials are often stored in general-purpose personal computers running a wide variety of applications, managed by people who don't know how to secure a computer.
* In contrast, people regularly give complete access to their computers (where they manage their online banking, etrade, etc) to complete strangers by willingly or unwillingly installing software created by such strangers.
People have been being ripped off before BTC existed. The main difference with BTC is simply that a large amount of capital appeared very quickly in the hands of people that may not have been previously used to having a lot of money. If you imagine a hypothetical analogous scenario where .1% of online banking users suddenly saw their funds increase by 100x, and they didn't move those funds anywhere but instead continued treating them the same way, you could imagine them becoming fresh targets for malware or key loggers or phishing or what have you.
Yeah but that's not some fundamental property of fiat, there can be bitcoin banks that offer protection in exchange for fees/longer waits as well, USD cash doesn't magically have these properties, its a function of the services built on top of it. This is the point where most people would come in and say "How hypocritical! I thought the WHOLE point of bitcoin was instant transfer etc etc and now you've just reduced it to the same as USD". No, that is not the whole point of bitcoin. That's the whole point of bitcoin for some people. The real power of bitcoin is choice.
Today if I want to do an instant transfer it is flat out impossible at certain times. I've been in situations where I needed to desperately get money to an individual past 8PM for an emergency and the feeling was absolutely debilitating having him on the phone and literally having no options because he had no Western Union next to him. I am happy to have tradeoffs, and sometimes choose less security.
To me what is important is the experiment. Just like I wouldn't want to try to make ONE company by trying to pontificate what the perfect P/E ratio should be, but instead am happy to have lots of companies and allowing experimentation and evolution with different monetization strategies, so to I feel that a world of many different freely available currencies would be far more useful in determining good monetary theory than writing tons of papers and then committing our ONE currency to it for decades.
Right. But this comes with the cost of having to wait several days to be able to transfer money, or having your account locked for triggering fraud detection, or extremely low interest payments on the profits the bank makes from loaning your money out.
Bitcoin has none of those costs, but you have to take on all the risk of getting defrauded. For some, especially people who understand security, bitcoin seems like the better deal.
>The world wasn't ready for computers, the internet and cryptographically secure communication either, but we still managed. For a forum that supposedly loves "disruption" everybody seems to be really frightened when it actually happens.*
Amen, brother. I've also been preaching cold fusion and perpetual motion machines like forever, and nobody's listening to me either. They are not ready for it.
I don't see it as a significant problem. Those hurdles only need to be crossed for folks using Bitcoin to do so safely. If they are not crossed, it's only Bitcoin users that are harmed. Since there is nothing to force anyone to use it, all possible harm arising from weaknesses in the underlying infrastructure is opt-in.
Consider a slightly different version:
"As you pose it, it's not a race between the darker aspects of The Internet and our ability as a world society to check off the items on your wishlist."
What a nonsense. About 70% of the world's population have their cash in a pocket and living from a wage to a wage or by some craft or sales business without any bank deposits.
Currencies do work because anyone in the local environment will accept it instantly and tomorrow its purchase power will not deviate more than 1%. Otherwise alternative currency will be adopted by black market, like USD in Cambodia or in Russia in 90th or Indian Rupee in Nepal. It is all about liquidity and money velocity, as they call it.
Bitcoin is not a currency, it is a technology, a service and now a commodity for speculators which is crashing right now.
>Bitcoin is not a currency, it is a technology, a service and now a commodity for speculators which is crashing right now.
Agree on that it is not a currency (the word "currency" doesn't even appear on the Bitcoin client's website). However, please explain why you say it is "crashing"? 3 months ago the price was $130 on average. It's around $500 today. How is that a crash?
> if the number of people using Bitcoin continues to grow, our institutions and infrastructure will have to evolve to address the problems mentioned by the author
So basically Bitcoin will be successful if Bitcoin will be successful.
>society will need [...] substantially better authentication mechanisms, [...] more secure financial institutions, and more technologically-savvy regulatory and policing institutions.
This is describing how to improve online banking. Isn't Bitcoin supposed to present an alternative to that?
>In contrast, those same institutions do not yet know how to cope with the use of Bitcoin for illegal activities.
There was just recently a (Senate?) hearing about regulatory institutions and law enforcement dealing with Bitcoin and cryptocurrency in general. Also, Silk Road used Bitcoins and still managed to get busted (and the bitcoins seized). Whatever other transformational aspects Bitcoin may or may not have, it doesn't appear to be so alien that the government doesn't know at least in principle how to cope with it.
Some dotcoms could have succeeded if computing and bandwidth was 10x cheaper. Others could have succeeded if the Internet had 10x more users. That's why some successful Web 2.0 startups are very similar to failed Web 1.0 startups. Starting a company five years too early could be considered a form of business stupidity. Of course, free shipping for pet food is still a bad idea.
The "10x more users" thing sounds suspiciously like social network sites, but the expert opinions I've heard on those have suggested that the failure wasn't a lack of traction but bad policy.
And that's before the complete lack of monetization, a business model that didn't seem to really take off until Google figured out how to do it well.
I better preface this with that despite being a libertarian, I don't back, believe in, or own BitCoin. (For that matter, despite also disagreeing somewhat with cstross here, I've also upvoted the article for being interesting; they are valid concerns.)
In a way, BitCoin is a mathematical fact of the universe rather than an "idea for what society could choose to do". Not BitCoin specifically, but the general ideas it embodies. If BitCoin is long-term viable (which I personally doubt), or if anything like BitCoin is viable (which I consider somewhat likely, but not proved), it's going to be created. You're going to have to deal with the existence of it, and society is going to have to learn how to live in a universe in which it exists, just as you have to learn how to live in a universe with crime. It's too simple to just suppress out of existence. You don't really get a vote over BitCoin any more than you get a vote over murder.
(You may choose to suppress it, but you're going to have to deal with the non-100% effectiveness of that choice somehow.)
On what, the universe's part? True, it doesn't particularly care what you think, but you don't have much choice but to deal with it. Math simply is. If a cryptocurrency can be made to work, it will be made to work. Contrariwise, if it can't be made to work, it will collapse, no matter how vigorously BitCoin advocates yell the contrary.
Again, I'm not the one making it this way. I still think collapse is the more likely outcome. I'm not lifting a finger to help or putting a single shiny penny into BitCoin or anything like it. I assume you're trying to reassure yourself that you can dismiss my statement as arrogance on my part, but I have nothing to be arrogant about here.
Positing extremely radical, society destabilizing measures like "unplugging the internet" does not lend much credence to the idea that Bitcoin can be controlled.
There may be other less drastic ways, of course, like leaning on ISPs to choke off blockchain traffic or something. I'm sure the bigger, scummier ones like Verizon and Comcast would even jump at the opportunity to curry more favor with the government in exchange for rent-seeking opportunities down the road. But it seems to me that these half-measures would just accelerate the rush to develop alternatives and detours around such roadblocks.
Honestly I didn't even realize I was trolling until I slowed down and gauged the responses from everyone.
I'm honestly just worked in to a bit of a stressed out frenzy here in San Francisco...
...and I'm taking a break from this bullshit. No more HackerNews for me... it is driving me, and I think a bunch of other people, batshit insane...
I'm also looking forward to getting out of SF for a couple of weeks and hopefully not hearing anyone talk about fucking Bitcoins or Google busses or Seasteading...
Interesting. I feel like the only person around here who isn't in the thick of it in Silicon Valley. Hacker News is it for me, as far as that is concerned.
Take a breath. Look around. Maybe you're doing great things down there, maybe you aren't, but chances are that nothing is as big of a deal as you're making it.
I know that I'm really nobody in any position to say this, but I will do it anyway. Relax.
Get out of SV. Get out of SFCA. There is more to life than greed. Hacker News is a refuge of scoundrels seeking to enrich themselves and/or corroborate their lack of humanity.
Bitcoin is a "mathematical fact" just like what we currently believe are unbreakable cryptography systems. The two are strongly related. Can't have one without the other, and can't avoid having cryptocurrencies if you have strong encryption.
So Stross's argument quickly moves from economics to freedom of speech: The only way to really eradicate cryptocurrencies is to make use of strong encryption outside of government-supervised uses a crime.
Non sequitur. The parent comment simply takes uncontroversial facts and follows them to conclusion. Solutions to the problems raised by Bitcoin are good solutions to other problems as well.
every comment you have made in this conversation has been insult and dull sarcasm. no insight has been provided. I am no supporter of hellbanning, but I cannot fathom how, given this site's heavy use of moderation, you are still allowed to comment.
I know I have made no friend from you with this, but I hope you reevaluate the content of future posts.
Dude, how can you even begin to argue when people just refuse to budge from this position of 'this is beyond our control now, you will just have to learn to live with it'?
You're right. I'm being incredibly impatient. I'm being very disrespectful to the people on this forum who aren't Bitcoin zealots. I'm sorry for that and I owe you guys an apology.
I've lost almost all respect for the industry and the members of this forum, but even that doesn't warrant my actions.
But this Bitcoin madness is driving me fucking insane... and I'm letting fears of sedition and anarchistic revolution get to me.
I should heed my own real life advice and just channel all of this energy in to storytelling... I'll get you bastards with a song and a smile!
Again, I'm not going to apologize for my explicit rudeness when I'm faced with the implicit rudeness of the extreme arrogance of most BitCoin supporters.
You people think you have it aaaaaall figured out and that no one has a right to interfere with 'the due process of nature'...
> "You people think you have it aaaaaall figured out and that no one has a right to interfere with 'the due process of nature'..."
I realize you've already tapped out of this conversation, but I think the root of this whole misunderstanding is right here. The other people you are talking to here are not saying that nobody has the right to stop bitcoin (or whatever crypto-currency may follow it). They are saying that nobody has the ability.
That should be about as uncontroversial as stating that a democratic, non-draconian, society has no ability to eliminate the sale of cocaine. Pointing that out isn't saying that cocaine is a good thing or something that society should tolerate; it is just saying that society lacks the ability to prevent it.
There's a big difference here, and that's that there isn't a bunch of pro-cocaine conferences or cocaine start-ups getting funded by venture capital firms...
But much like the coke heads I've known through out the years, you all have an overblown sense of self and can't seem to shut the fuck up and listen for a second... so maybe that's where you're coming from?
If you read the other comments I have made today, you'll see that I am not particularly "bullish" on bitcoin...
Anyway, I don't think you have understood the comment you just responded to. My point is that you have crossed your "morality/right" and "capability" wires. Stating that "you cannot stop the cocaine trade" is not making a statement about the virtue of cocaine, or stating that pro-cocaine conferences or startups are a good idea. These are entirely orthogonal concepts. You can be very anti-cocaine while still recognizing that cocaine cannot be eliminated.
In other words, if there were lots of pro-cocaine conferences and cocaine peddling startups, the statement "cocaine cannot be eliminated" would not be any less true. That statement is a statement about the nature of law enforcement in a free society; not a statement on the morality or virtues of cocaine.
Among other things, society will need more secure (truly malware-resistant) personal computing systems, more secure (from snooping) communications systems, substantially better authentication mechanisms, more secure energy generation and transmission equipment and facilities, more secure financial institutions, and more technologically-savvy regulatory and policing institutions.
Those are all really good things.
--
[1] Compare, for example, how society works with paper cash and gold bars versus Bitcoin:
* Paper cash or gold in substantial amounts is always stored in private or bank safes, or in high-security underground vaults that most people have only seen in movies. In contrast, Bitcoin private keys are often stored in general-purpose personal computers running a wide variety of applications, managed by people who don't know how to secure a computer.
* Transporting any substantial amount of paper cash or gold is often done via armored trucks operated by highly-trained security personnel. In contrast, Bitcoin private keys are transported via all sorts of highly insecure methods by people who don't know better.
* No sane person holding a substantial amount of cash or gold at home would ever let complete strangers come and go into their house as they please, while giving them keys to all doors, cabinets, drawers, and safes. In contrast, people regularly give complete access to their computers to complete strangers by willingly or unwillingly installing software created by such strangers.
* Our regulatory and policing institutions know how to identify, prosecute, and even prevent illegal gold and cash transactions, successfully keeping them to a tiny percentage of overall economic activity in most advanced economies. In contrast, those same institutions do not yet know how to cope with the use of Bitcoin for illegal activities.
--
Edits: moved comparison of Bitcoin to gold and cash to footnote; also, made minor changes to several sentences so they more accurately reflect what I intended to write in the first place.