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Will Bitcoin Go the Same Way as Liberty Reserve?
Virtual currencies were hailed as revolutions. They were the way forward., the way to overhaul the system and the way to replace the Dollar, Sterling, the Euro and the rest of them. But, just last week Liberty Reserve was closed down for illicit transactions and money-laundering activities that could have nothing more than repercussions for the rest of the companies living quietly in the auspices of cyberspace doing more or less the same sort of activity.
Now, it’s Bitcoin that has its knees knocking. Bitcoin is in the same sort of business as Liberty Reserve. It’s a cryptocurrency (digital currency, with no inflation). It has been around for a few years now (since 2009) and it’s now trying to get its act together and prepare the rocky road ahead just in case it goes the same way as Liberty Reserve and gets bumped out of the market by being busted. How? It has just announced that it will ask for all account holders to prove their identities.
Liberty Reserve and Bitcoin are not twin brothers. There are indeed similarities but they are not exactly the same. Bitcoin is not managed by a central authority, as was the case with Liberty Reserve. Bitcoins are exchanged and traded on networks that are peer-to-peer.
Liberty Reserve Effect
Liberty Reserve’s forced closing came as a welcome moment for Bitcoin. Trading increased as news broke. The value of a traded Bitcoin increased significantly. They had already seen a rise in their value when there was a swing from January to April 2013, with an increase from $13 to $190. This was in the face of the rising European sovereign-debt crisis and the Cypriot financial crisis, in particular. Bitcoin currently has a total market value of almost $1 billion. People were wary of banks and Bitcoin saw a massive surge in the value of its exchange rate. Bitcoin became the darling of the economic experts and businesspeople around the world as their confidence and trust in the banking sector drip-dried. Being the star of the moment, however temporary it might be, is like having your name up there in red lights, and flashing to boot.
Bitcoin Solution
It’s doubtful that Bitcoin will suffer from the Liberty Reserve scandal and it’s doubtful that they will go the same way. But, running checks on customers is just what people hate the most, isn’t it? Aren’t we always wary of companies that want to know too much information about us and that need to know who, when, why and what? Isn’t that like Big Brother of Orwellian fame?
Will it work?
One thing is for sure, if Bitcoin’s aim is to save their demise and stop the criminal activity that may or may not be going through their exchange doors, then the criminals will pull the plugs and move on somewhere else? If the customers are bona fide ones, they too might be dead set against having too much information shared over the tanoid? Whatever happens, perhaps the end is nigh, anyhow, for Bitcoin.
Bitcoin: Right Choice?
Maybe their only attraction for the moment is that they are still a good hedge against inflationary pressure. The digital currency is a limited one (22 million bitcoins, of which half are in circulation) and so inflation can’t bring Bitcoin holders down as other currencies might. At least, that’s the way things stand right now. Things are never set in stone though, are they? Their value is really non-existent and depends very much on whether people actually want to use them or not. Pull out, the price will drop. A downside might be that like any currency Bitcoins can be stolen as they can be sold on to someone else and exchanged for real currencies. On April 3rd 2013, Instawallet was hacked and 35, 000 of the things were swiped (worth $4.6 million).
Bitcoin is a stateless currency and that should be telling us something about how we are prepared to use money in exchange transactions today. It makes for interesting analysis of how currencies are driven by confidence and that goes for stateless or non-stateless currencies, wherever they are. What’s happening to Bitcoin is no different to what’s happening to the Greenback or the Euro these days. Lose confidence and people pull out.
Originally posted Will Bitcoin Go the Same Way as Liberty Reserve?
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Taxes are to help the crippled, maintain an infrastructure, not enrich the greedy who would be paupers were it not for slight-of-hand business practices. The leaders who think they should live like kings, with their sweaty palms under tables, taking bribes for rigged bids, are UNTOLERABLE.
The police forces are ready for this unrest because they fucking LEADERSHIT was prepared for it.
Oh shut up already
Oh my! Well since YOU said it, I will right away sir!
Lulz
what??
Taxes suck, but if your government collects them on capital gains and income, it's logical to assume they will try to collect them on realized gains denominated in BTC.
another clueless shitting outloud of brain farts about bitcoins... why do so many self-important people want to act like they know everything about something they didn't put 5 mins into researching?
It's the same story, every time someone posts an article about it. Ididots put on their bright orange dumbass signs and wear them proud and loud.
Banks are about to be fucked in the next generation by the very technology they've been fucking us with for decades: cryptography.
The death of central banking won't be easy, pretty or short but humanity will be better off for it.
Damned right.
People need more education about cryptography so they don't make blatantly false statements about "how things work."
Here's the important bit about crypto: whatever requires a trusted 3rd party (a bank, a central bank, an assayer, a ballet counter, etc) can be removed from the equation with openly published cryptographic algorithms. The key to so much corruption in government, finance, etc is that there are a few control points guarded by "trusted parties" like the DTC, CBs, the COMEX, Diebold, et al. Remove these parties and use encryption to separate the person from the identity casting a vote or making a transaction, and the process becomes transparent, open, private, and removes power from the hands of a small group of people. That's good for everyone.
Public key encryption remains secure because it requires, over a certain size of cryptographic key, an as yet unfeasible amount of computing grunt to calculate (for example)the large prime numbers the keys are based on.
If quantum computing, with it's simultaneous 'qubit' crunching potential comes along in any meaningful way, cryptography of this type will at once be rendered almost useless. I'm not sure if this holds true for elliptical curve based cryptography too, but probably.
Now, the question is, will 'they' let you know they have a quantum computer?
If they are willing to disclose the info over a BTC 1.45 trade, they're more than welcome.
I don't think they can win that way.
This is true - the real risk technically is that they break the encryption. But I tend personally to believe that most of TPTB aren't ahead of the curve, they're behind it. Otherwise, we'd have gold at $0, no financial crisis, etc, etc. Fact is, the government is a slow, lumbering bear. It's easy to avoid and not terribly stealthy. But if you get in its way, you get ripped apart.
It took 30 years to break DES, and the government didn't break it - the private sector did.
I'll take my chances.
...and classifying PGP as 'munitions' FFS. Yep, fair point, security through inadequacy :)
> Here's the important bit about crypto: whatever requires a trusted 3rd party (a bank, a central bank, an assayer, a ballet counter, etc) can be removed from the equation with openly published cryptographic algorithms.
This simple truth is going unseen by most of the world EXCEPT for those folks, both in the private and public sectors, that have a familiarity with crypto. I saw it start 20 years ago with the release of PGP and here we are now discussing how scared the government and its paymasters are about the new emerging tech that will replace it.
Am I the only one that sees these virtual currencies as a ponzi scheme? What makes people think that at some point someone won't manipulate these just like regular currencies? Yea, yea, safeguards, full-proof, system of checks and balances, blah, blah. Have we not heard that before?
YES, and here is why: The govt is printing more and more dollars, diluting your earnings. that is ponzi. Gold, Bitcoins are fixed supply. Compared to gold (which I LOVE), Bitcoins can handle smaller transactions AND you can cross international borders with bitcoins and not have them stolen confiscated from you.
Open source. Anyone can download the code, study it, compile it and verify that what you compiled matches the released object code.
Granted there are only a few million people in the world with the required skills, but that's enough.
Manipulation is an art - if you perspective is limited to a code tree, you are oblivious to the beauty of the forest.
1.) You have to spend a little time and do a deep dive on the technology and understand it, and
2.) You have to appreciate the role it plays in sterilization of capital and capital flight, and
3.) You have to agree that item 2.) happens every moment of everyday - everywhere, just not much digitally at this juncture in history...
..but obviously its time is coming.
> Am I the only one that sees these virtual currencies as a ponzi scheme?
No. Many people don't understand how Bitcoin works.
Stopped reading at: "It has just announced that it will ask for all account holders to prove their identities."
Pivotfarm is having a senior moment and confusing Mtgox with Bitcoin.
Since it handles dollars, Mtgox may go the way of Liberty Reserve, which will certainly have some effect on Bitcoin, but will not "shut it down" nor will it "cease to exist".
On the other hand, Mtgox may simply quit handling dollars.
why is it so difficult for people to grasp the concept of a decentralized, peer-to-peer system of fungibility?
The only way "they" could "shut down" bitcoin would be for "them" to remove the bitcoin application software from every participant's computer and take their wallet.dat file away from them through force.
As long as two people have the bitcoin app running on their PCs somewhere in the world, you have not stopped bitcoin.
Get it?
..its like when the NYT writer said that the internet will NEVER replace the newspaper business.
There's a technology understanding/age and math gap that some people just aren't going to cross.
Bitcoins aren't going anywhere - perhaps the more centralized concept of a handful of exchanges may, but bitcoins can't be shut down. The market will continue on even if it's a black market.
Avoid the exchanges - that's been my argument since the beginning. Go OTC, sell some products denominated in BTC to gain some, trade locally and in person - just avoid the control points of the banking system.
Wrong. They will shutdown the communication path when used by the Bitcoin protocol. Why is that so hard for people to get? The apps can't magically communicate with each other. The Internet is not nearly as decentralized as it was designed to be. I have 25 years experience and far too much education in data communications, i was a very early user of bitcoin, and I can assure you that the Achilles heal of Bitcoin is the communications path between nodes. Your bitcoins are safe. Your ability to trade them with others is quite vulnerable.
you'd have to stop all encrypted communication in order for that to work. So unless your country is will to do away with SSL entirely, you are mistaken. As someone else pointed out, you can use bitcoin on the tor network and communicate just fine.
Technically speaking, there are way too many holes to plug in order to stop an app from communication - port forwarding on your home router could put it on any port you wanted.
Exactly. All you have to do is stop your ISP from intercepting your traffic and you're good. I use Tor as an example, but any encryption mechanism will suffice.
Have you never studied the classic "man in the middle attack"??? "Any encryption" does NOT prevent your service provider from seeing your traffic. They ARE the man in the middle.
a man in the middle attack works nicely when your goal is intercepting cleartext facebook authentication data at starbucks. Unless "they" are prepared to capture your datastream and decrypt it, the man in the middle is going to have a bunch of garbage. If "they" are in fact willing to undertake to crack your session's data, you've got other problems.
This has nothing to do with Starbucks or Facebook. I'm simply explaining that it is mathematically feasible, and easy to implement, a method of monitoring SSL communications on the Internet. SSL is very good at preventing an outside party from decrypting your encrypted data. It does nothing to prevent communications nodes between two parties from decrypting your traffic. The point is that your Internet service provided can detect and stop Bitcoin traffic, even if SSL is used. They can even stop Bitcoin traffic moving in a for network.
It comes down to political will. If the powers that be want Bitcoin stopped ( and clearly they are getting concerned) then the ability to stop it when used over the Internet is within their grasp.
Bitcoin remains useful when used without the Internet. I have seen no interest in that within the Bitcoin community, however. Once again, convenience and centralization, unfortunately, drive mass adoption. People are usually stupid and lazy.
You're spewing more and more nonsense as you are hopelessly trying to maintain your worthless point.
No, I - and the other party too - do NOT need to run my Bitcoin client in countries where they try to intercept Bitcoin protocol.
Satisfied?
(P.S. I don't want to waste my time on this nonsense but I am also pretty sure that the moron in the middle is completely unrelated and doesn't apply here at all)
So what if your ISP captures your encrypted traffic? Arguably, they're capturing everyone's traffic in Utah as we speak. That's the point of encryption. The SSL certificate will be wrong if you're not connecting directly to the end party, so the only thing the ISP can do is capture the encrypted traffic.
You're thinking is very US-centric. There are a lot of places that will keep the traffic flowing. If the US goes the way of China and filters all internet traffic to avoid an open source project, then again I submit you have a bigger problem than bitcoins. You're fucked. Bitcoins are irrelevant to you - the rest of the world that doesn't sensor everything will continue to move on.
Oh please. SSL only provides secure encryption when your data path is secure. SSL is vulnerable to what is called a "man in the middle" attack. In other words, the CIA can view all SSL encrypted data simply by controlling one node in the data path between two parties using SSL.
Ok, bozo, now go here and add your invaluable moron in the middle theory
https://en.bitcoin.it/wiki/Weaknesses
Let's see how long it's going to stand...
Oh please, ever hear of ZRTP? You can also confirm that there's no mitm attack with confirming a hash.
Like I originally said, have they stopped bittorrents? Piracy? File downloading? P2P sharing?
Can you get honeypots? Sure. Will individual users make mistakes? Sure. Will the technology and platform evolve? Definitely.
If you want to hash out protocols, talk AES, or discuss attacks on crypto, I'm your Huckleberry.
You can simply drive over to my house with a USB drive and we can do a Bitcoin transaction. I realize there is always a way. They only need to make it inconvenient enough for most Bitcoin users to abandon bitcoins. Then it will be damned hard to find someone who values your bitcoins. Not to mention the value of your current Bitcoin stash will plummet.
A currency doesn't need to have any inherent value.
And so hoarding a "stash" doesn't make sense either.
But I think you miss what drives adoption: the black market will grow when financial oppression becomes unbearable to most.
There is going to be an alternative electronic currency in much the same way that gold is an alternative physical currency. BTC, or some similar offshoot, is here to stay because it has solved the one critical weak point of every other currency: centralization. That makes is it the strongest viable player in an electronic world.
"critical weak point of every other currency: centralization"
Bitcoin is hardly the first decentralized currency! Gold has been decentralized for 5,000 years. Surely you are not so naive to believe that only in your lifetime has the world found a decentralized currency.
Besides, the fact that most Bitcoin transactions take place at mtgox shows how quickly Bitcoin users lose respect for its decentralized design.
> They will shutdown the communication path when used by the Bitcoin protocol.
P2P is REALLY hard to stop when the traffic is encrypted via VPN.
You can encrypt YOUR traffic with a VPN but 99% of your Bitcoin trading partners are not. All that is required is to inhibit the protocol for a critical umber of users. It is not required that you inhibit communication for 100% of users if the goal is to make bitcoins effectively useless.
They will encrypt over time, just like an increasing number running bittorrent do. Now you even see the protocols being rewritten with encryption out of the gate.
Savvy people will protect their funds, and dying fiat will drive people to black markets (like every other time in history). When this happens, there will need to be an electronic money. BTC is the likely winner today. Other cryptocurrencies may evolve, but distributed cryptocurrencies with encrypted, distributed exchanges (something like Ripple, minus the XRP, but with Open Transactions-like contracts) will evolve and provide private, secure, electronic money.
"They will encrypt over time". Ok, I'll accept that argument. And by "encrypt" I assume you mean the something like "obfuscate", because your bitcoins are ingeniously encrypted already and are very secure from theft.
Whatever encryption you use, like tor, can no longer be done anonymously. They can detect your tor usage and shut it down too. Study tor more carefully and you find it only provides anonymity to a certain extent. It does not prevent your service provider (and thus the CIA) from monitoring your communications.
In fact, if you are using tor from your home, then you are painting a nice big bullseye on your ass for the CIA. :)
You just have to set up a VPS and connect via VPN, then route Tor through it. Not hard.
Tor was also just an example - any VPN will do. I'm simply pointing out that, for example, an SSL connection to a VPS service offshore will allow you to mine coins, trade coins, etc. No problem.
That's increasingly being built into P2P technologies. Look at Retroshare - how are you going to stop a platform like that? Make connecting to a computer not authorized by the US govt a crime? If so, you'd better have that second citizenship lined up with your assets out the country. BTC's the least of your problems.
How's this? You stick to banks, SWIFT, FATCA, FINCEN and Obama's hope. I'll work with gold, silver, BTC, LTC, and stay out of the official banking system. Let's see where each of us is in 5 years. Best of luck.
5 years!? You better have a longer time horizon than that. I'll take gold and silver. You can have bitcoins. In 20 or 40 years you'll wish you held gold and silver instead of the latest techno fad from 2013.
Don't get me wrong. I have made a good living as an uber techno geek. But I understand what value is and what an asset is, and it ain't new technology.
I hold gold and silver. Bought my first coins in late 2003.
You're not an uber techno geek - you seem to think that the "War on ____" is a feasible victory. You may have worked on fast path software on a switch or something, but you seem to miss the entire advantage that has, and continues to, work with P2P software and encrypted protocols. If these things were possible to stop - they'd be stopped....
I was once young and overly confident myself. :)
> You can encrypt YOUR traffic with a VPN but 99% of your Bitcoin trading partners are not.
VPNs are standard geek issue these days. Only those ignorant of networking go out onto the net without a VPN.
Your postulate is still incorrect: Bitcoin can't be shutdown by filtering.
Most Bitcoin users are not using tor or a VPN. The Bitcoin network was not designed to be invisible to filtering. I realize you can marry tor and Bitcoin and come out with a very interesting solution, but that's not how the Bitcoin network operates today for the most part. Applying filtering will dramatically reduce the Bitcoin user base.
Also keep in mind that tor only provides the anonymity you want when used in a decentralized network. That's not really what the Internet is today. If you are using tor then you can be certain that your CIA friends in their Utah data center know about it. Hold your nose up in technological arrogance if you wish, but I can assure you (with many yrs of deep technical understanding) that you are not anonymous or free on the Internet today. 15 years ago you were. It's now a very centralized network.
I was an early Bitcoin adopter because I found it an interesting alternative to fiat. I studied it in detail. And then sold my bitcoins.
A Bitcoin is not gold. Today is not a turning point in the 5,000 history of money. I promise. :)