I don't know enough about the system to get too definite an opinion, but most of what I've heard about Bitcoin has been negative. The two main things being it's a currency of choice for money laundrers, drug dealers and other deeply unsavoury elements, and the Bitcoin mining Botnet that is apparently netting its owners millions of fraudulent dollars.
Whatever it was originally created for, is it now just a criminal's dream currency?
Basically the confidence and realiability in the currency has been undermined. The criminal market uses it and abuses it heavily
Who watches the watchmen?Please. Any sane bussinessperson will prefer dollars to bitcoin, regardless of borders or anything else. If I'm accepting cash that I expect to spend immediately (to pay for the production of more goods) I don't want a currency that appreciates continually. I want one whose value is consistent and reliable.
Betaalpha: And all transactions in the Bitcoin network are logged publicly and permanently to the blockchain, which can be looked through with Blockchain Explorer. It just takes linking the bitcoin addresses to the criminal, like most other cybercrime investigation, and boom, you have permanent records of all their transactions.
De Marquis: That is nice and all but you are throwing the baby out with the bathwater there.
Bitcoin has real world value hence its use by criminal elements for laundering and trade of goods.
But like all money people have to have some faith in the currency. This one is too easily manipulated or stolen.
Criminals have abused the currency to the point no one really trusts it outside of certain segements of the population.
Who watches the watchmen?That sounds very positive. Trackability is exactly what I want in any currency. Yet it is the apparent currency of choice for criminals on Tor, and I've read various accounts of how hard it is to catch people using it as long as they are smart.
edited 13th Apr '13 9:39:34 AM by betaalpha
And the government is very familiar with Tor given that it was sponsored by the Navy, the State Department is a major financial contributor, it's open-source, and its weaknesses are well-documented. And of course if someone's smart enough it can be very difficult to catch them, this is a universal issue and not at all unique to Bitcoin. Just because something is known for being misused doesn't make it bad (BitTorrent instantly springs to mind), and there are plenty of legitimate businesses accepting bitcoins.
A lot of the negativity I've seen regarding Bitcoin just reeks of FUD. Sorry if it seems like I'm adamantly shooting down criticism, because that's not my intent. I do realize that it's not a perfect system at all, and my main interest lies in the technical side.
@Tuefel: I dont understand, could you explain?
There's aspects of Bitcoin and Tor that are very appealing - damn handy for getting around repressive governments for example. And I've read the FA Qs that give similar arguments in defence of Tor and Bitcoin that criminals take advantage of US dollars and cars too but no-one's trying to shut those down.
However, Tor and Bitcoins nonetheless appear to be the pre-eminent choice of private network and online currency respectively for criminals (and especially in the case of Tor I have to wonder what the ratio is for legitimate activity vs. immoral and illegal activity). It's the responsibility of the groups behind both to deter their appeal or else I have no sympathy at all if they get nailed as enablers for criminal activity.
edited 13th Apr '13 10:50:31 AM by betaalpha
The most common usage of Tor I know of is getting past internet filters, be they from oppressive governments like China's "Great Firewall" or simple school network filters (which I'm personally guilty of, both for goofing off and for legitimate work that a relevant site is blocked).
I'm honestly not very well-versed in Bitcoin outside of the mechanics of it, mainly because I've never been able to have enough to really do anything (what little money I get is cash, no way of getting it in a virtual form 'cept through my parents)
All this talk about criminal activity just goes to show that it is used as a medium of exchange when it makes sense to do so.
edited 13th Apr '13 12:51:41 PM by Topazan
Marquis: You seem to be dismissing bitcoins out of hand. They have actual value which is why they are used by the criminal element and targeted for theft. Various places and vendors convert bitcoin to cold hard cash or trade them for goods and services. But antics of the criminal world has caused problems with people trusting bitcoins. It has had overt negative impact on the e-currency.
edited 13th Apr '13 1:16:15 PM by TuefelHundenIV
Who watches the watchmen?I do not dismiss it out of hand, I have presented specific reasons why bitcoins make a poor currency of exchange. That doesnt prevent people from using them when, as Topazan puts it, "it makes sense to do so". I'm just saying that wont happen as often as it makes sense to use paper money instead.
Sure sounded like an offhand dismal complete with snark.
Who watches the watchmen?Where was the snark? I like snark, and if I used snark I dont want to have missed it...
I didn't see a whole lot of snark, personally.
We seem to agree that bitcoin has advantages in some situations. If all you're saying is that cash has advantages in other situations, then you're absolutely right.
We don't need to debate about which situations are more common, we just use the currency that's appropriate to the situation.
I'd also like to note a few things:
- To many people, the lack of central control of bitcoin is an advantage in of itself. One only needs to looks at the restrictions suddenly placed on fiat currencies in countries like Argentina and Cyprus to see why.
- It wouldn't be hard to introduce bitcoin-backed cash if there was demand for such a thing. Actually, it already exists.
- If constant deflation has these negative effects, why wouldn't the constant inflation of the US dollar have the same effect?
- Things were pretty stable when we were on the gold standard.
I'm not sure what you meant when you said that bitcoin's deflation hurts its role as a store of value. It seems to enhance it to me. It goes up in value when the bitcoin economy grows, as it should.
Actually, we weren't all that stable on the gold standard. The Lesser Depression nonwithstanding, recessions have been shorter and less intense since the US went off the gold standard.
Demarquis: Probably just me reading too much into it. Don't sweat it man.
Who watches the watchmen?I don't know if you put as much stock in Krugman as Fighteer and Tomu do, but the chart he cites here shows no such pattern. This chart doesn't even show the dot com recession or the current one, but the average loss per year is still higher in the 20 years after we left the gold standard in 1971 than in the 20 years before we left the gold standard.
It also shows a higher average loss after the creation of the Fed than before.
edited 13th Apr '13 7:05:51 PM by Topazan
I'm not sure how you're reading that chart–the creation of the Fed and the US leaving the gold standard are two different events. The US didn't leave the gold standard until 1933, IIRC. And the post-1940s data does have the lowest average in that chart.
I'm not sure how you're reading the chart. I know they're separate events; we left the gold standard in 1971. However, both of them show an increase in losses.
If we divide it into two periods:
Period A: 20 years before 1971 to 1971 ie 1951 to 1971 consisting of the recessions of 1953, 1957, 1960, and 1969.
122.5 + 140.1 + 93 + 98 = 453.6
453.6 / 20 years = 22.68 per year.
Period B: 1971 to 20 years after 1971 ie 1971 to 1991 consisting of the recessions of 1973, 1980, 1981, and 1990.
248.1 + 73.1 + 187.4 + 76.4 = 585
585 / 20 years = 29.25 per year.
In addition, if you compare the average before the Fed's founding in 1913 with the average after, you will see a higher average after, and that's without including the dot com bust and the current recession.
edited 13th Apr '13 8:30:38 PM by Topazan
This is totally changing the subject, but:
This just popped up in one of my news feeds.
I've suspected something like this for a while, and this would appear to confirm it. It doesn't present any comparisons though, so I'll grant the article might be using the Big Scary Number fallacy.
Yeah, I'd like to see how the world banking system compares. Anyway, as some of the commenters point out, if it's a problem we'll just switch to a cryptocurrency that uses proof of stake instead.
Even that's an example of bitcoin acting as a medium of exchange. It's the medium through which we exchange cash across distances and borders.
I want to trade with a butcher, but he wants wheat and I only have apples. So I trade my apples for money, give it to the butcher, and he trades it for wheat. That's a classical example of money as a medium of exchange.
I want to trade with someone in New York, but he wants dollars in New York and I only have dollars in California. So I trade my dollars for bitcoin, send it to the New Yorker, and he trades it for dollars in New York. It's the same deal.