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Bitcoin: Revolutionary Game-Changer Or Trojan Horse?
Bitcoin Is Going Mainstream
Reddit, Virgin Galactic, and Overstock.com now accept Bitcoin.
So do dating site OKCupid and travel site CheapAir.com. Game giant Zynga is now in the testing phase.
Two big Las Vegas hotels accept Bitcoin.
Congressman Steve Stockman (R-Texas) accepts Bitcoin for 2014 campaign contributions. As does a law firm in Australia.
Reuters notes:
Already, 21,000 merchants are using Coinbase to accept Bitcoin from customers.
Indeed, there are websites listing scores of businesses which now accept bitcoin.
(And you can use Bitcoin at Amazon, Barnes and Noble, Crate & Barrel, Target, Sears, CVS, Hyatt Hotels, Kohl’s, Burger King, Applebees, Victoria’s Secret, Land’s End, Facebook, Groupon, Banana Republic, the Gap, AMC and Fandango movie theaters, Whole Foods, Wine.com, Wine Enthusiast, Papa John’s, Nike, Adidas, Sephora, Sports Authority, Staples, Zales jewelry, Game Stop, FTD flowers, Zappos and hundreds of other stores if you use Bitcoin to buy gift cards at Gyft.)
But is Bitcoin going mainstream a good thing or a bad thing?
People Power … Challenging the Status Quo?
Andy Haldane – Executive Director for Financial Stability at the Bank of England – believes that peer-to-peer internet technology will lead to the break up of the big banks.
Bank of America said “We believe Bitcoin could become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers”
Visa has attacked Bitcoin as being less trustworthy than its well-established payment system.
So it sounds like Bitcoin is shaking up the status quo …
Backed by … the Big Banks?
On the other hand, a lot of major mainstream players are backing Bitcoin and other digital payment systems.
Wells Fargo wants to get into Bitcoin in a big way.
JP Morgan Chase has filed a patent for a Bitcoin-like payment system. And Russia’s largest bank is working on a Bitcoin alternative as well.
Ben Bernanke and the Department of Justice have both cautiously blessed Bitcoin.
François R. Velde, senior economist at the Federal Reserve in Bank of Chicago, labeled it as “an elegant solution to the problem of creating a digital currency.” John Browne theorizes:
While crypto-currencies remain insulated from central bank manipulation, governments have thus far been tolerant, perhaps because their capability to track transactions is more advanced than Bitcoin believers admit.
Indeed, Bitcoin is not really that anonymous, as the NSA can track Bitcoin trades.
The NSA can apparently also hack Bitcoin. And see this. Given that the NSA may be changing the amount in people’s accounts, it would be child’s play for them to change the amount in your Bitcoin wallet.
And Yves Smith argues that Bitcoin actually plays into the hands of the central bankers:
Many [Bitcoin enthusiasts] clearly relish the idea of launching a currency outside the control of central banks (plus this beats Cryptonomicon in geekery).
If you believe the hype, you’ve been had. As Izabella Kaminska of the Financial Times tells us, you all are really just doing free/underpaid R&D for central banks, since you are debugging and building legitimacy for one of their fond projects, making currencies digital and getting rid of cash altogether.
I had wondered about the complacency of Fed and SEC officials in Senate Banking Committee hearings on Bitcoin last year.
***
As Kaminska explains (boldface mine):
Central bankers, after all, have had an explicit interest in introducing e-money from the moment the global financial crisis began…
Bitcoin has helped to de-stigmatise the concept of a cashless society by generating the perception that digital cash can be as private and anonymous as good old fashioned banknotes. It’s also provided a useful test-run of a digital system that can now be adopted universally by almost any pre-existing value system.
This is important because, in the current economic climate, the introduction of a cashless society empowers central banks greatly. A cashless society, after all, not only makes things like negative interest rates possible [background here, here, here and here], it transfers absolute control of the money supply to the central bank, mostly by turning it into a universal banker that competes directly with private banks for public deposits. All digital deposits become base money.
Consequently, anyone who believes Bitcoin is a threat to fiat currency misunderstands the economic context. Above all, they fail to understand that had central banks had the means to deploy e-money earlier on, the crisis could have been much more successfully dealt with.
Among the key factors that prevented them from doing so were very probable public hostility to any attempt to ban outright cash, the difficulty of implementing and explaining such a transition to the public, the inability to test-run the system before it was deployed.
Last and not least, they would have been concerned about displacing conventional banks from their traditional deposit-taking role, and in so doing inadvertently worsening the liquidity crisis and financial panic before improving it…
Almost of all of these prohibitive factors have, however, by now been overcome:
1) Digital currency now follows in the footsteps of a “disruptive” anti-establishment digital movement perceived to be highly accommodating to the black market and all those who would ordinarily have feared an outright cash ban. This makes it exponentially easier to roll out. Bitcoin has done the bulk of the educating.
2) What was once viewed as a potentially oppressive government conspiracy to rid the public of its privacy can be communicated as being progressive and innovative as a result.
3) Banks have been given more than five years to prove their economic worth and have failed to do so. If they haven’t done so by now, they probably never will, meaning there’s unlikely to be a huge economic penalty associated with undermining them on the deposit front or in transforming them slowly into fully-funded fund managers.
4) The open-ledger system which solves the digital double-spending problem has been robustly tested. Flaws, weaknesses and bugs have been understood, accounted for, and resolved.
The balance of the article describes how the central bank digital currency would be launched, and Kazmina finds a plan developed by Miles Kimball of the University of Michigan to be thorough and viable.
Oh, and why would Bitcoin, um, central bank digital currency make it viable to implement negative interest rates? Kaminska tells us:
…the greater the negative interest rate, the greater the incentive to hold alternative coins. The greater the incentive to hold alternative coins ,the greater the incentive to produce them. The greater the incentive to produce them, the greater the chances of oversupply and collapse. The more sizeable the collapse, the more desirable the managed official e-money system ultimately becomes in comparison.
Either way, the key point with official e-money is that the hoarding incentives which would be generated by a negative interest rate policy can in this way be directed to private asset markets (which are not state guaranteed, and thus not safe for investors) rather than to state-guaranteed banknotes, which are guaranteed and preferable to anything negative yielding or risky (in a way that undermines the stimulative effects of negative interest rate policy).
So all these tales … of how liberating and democratic Bitcoin will be are almost certain to prove to be precisely the reverse. Hang onto your real world wallet.
The head of Signature Bank – Scott Shay – raised these same issues last month on CNBC:
Bottom Line: Too Early To Tell
It’s not yet clear whether Bitcoin will be a force for good or a backdoor way for big banks – and central banks – to get people to accept a cashless society.
Tipjar for the Bitcoin-savvy:
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TULIPS---BITCHAEZ. tulips for computer freaks. boy I'll be glad when everybody has forgotten about this latest sutpid idea.
Exactly! You guys have watched the Matrix one too many times. There's an EMP every time you have a big lightning storm. If one was big enough to disrupt bitcoin P2P networks, you'd likely be have survival "Mad Max" style on your mind more than your bitcoin. BTC rids along the internet which was designed with TCP/IP to not have a central point of failure for an enemy to attack. Keep that in mind.
No, that's not what an EMP does. Reggie, your background is not science, it's finance. Mine is science, finance is merely a derivative to me for its use of math.
An EMP specifically is a compressed magnetic wave much like a sonic boom but at the level of photons, frequencies. The kind of EMP I'm thinking is coming is a 2-hit punch. #1 solar-storm EMP's, like the kind that blew up telegraph towers perhaps a century ago, and #2 the kind made from WEAPONS, intentionally destroying parts of the network.
Madmax: IT WILL HAPPEN.
If you truly believe it will not or can not you don't operate on the same plane of reality as the rest of us. Think of WW2, which included not only mass genocide but also nuclear weapons.
If you told people in 1935 that was coming they'd call you a nutter.
If you said it in 1945 they'd thank you for handing them the morning paper describing what just happened.
TCP/IP, as I well know and you do not, is NOT DESIGNED to avoid a central point of failure.
It's designed to TOLERATE a network structure which MAY have no central point of failure but such a network is not required.
If you build the hardware so central points of failure exist because they are cheaper in the short-term to operate & maintain then you can still happily use TCP/IP over it. TCP/IP doesn't give a damn what your underlying topology is, that's for nework drivers & routers to worry about. That's another layer in the network protocol.
Taking out just the 5 biggest cities' copper networks would disrupt enough, across the planet, to knock out more than 90% of bitcoin. Despite the parts that are fibre, and there's a lot, the routers are almost all copper, silver, gold, electric, conducting wires, electronic chips, VLSI & ASICs, not optical processing. That which is optical is immune to EMP but as any person in the industry would tell you the majority of the planet which has any network at all does not have a purely optical network.
You deserve respect for your good calls & for your background, as do others for theirs. Yours isn't computer science, mine is. Yours is finance, mine is not. I understand my limits & try to bend the limits rather than deny them. Any investor can get sucked into this no matter how experienced. To battle one's own ego is a constant battle. The trick is most times if you feel you've lost you've actually won because you can't actually win if you believe you never can lose. Conundrum yet it is so.
Honestly Regg
It's not the 'EMP event' BTC owners should be worrying about. It's the fact that IP security from the biggest service providers is so lame and so capable of compromise (from the inside) that should be calling into question Bitcoins future.
It's not a single layer security issue we are talking about as it has "multiple layers" both from the perspective of the end user and the service provider. When NSA got cart blanche to walk into Verizon, AT&T and Qwest with their black boxes to see everything all bets were essentially off.
To all the BTC owners out there please don't get me wrong. It's an elegant solution that definitely has the brightest future in the medium of exchange department with no equal at this point, but integrity works both ways and needs to be a permanent fixture with the service provider community building much better enhancements to the edge of their networks and more importantly endorsing it to tell their customers how they will be building it.
You can't trust the bank unless you are the bank hence the need to have your own precious metals.
You can't trust the service provider except to be the service provider, hence the need to maintain & install your own connections, whatever the means (copper, fiber optic, radio, etc.).
NSA's intrusion does not stop me from having the security I typically need, which is content invisibility. Due to compression and/or larger blocks than necessary, the NSA truly can't know how big my message is or what's in it if I use GPG, PGP, a real secure encryption exceeding 8000 bits in a key, and if I go one-time-pad they are truly fucked.
What you can never have unless you are the service provider and discrete about what you install where is the ability to defeat traffic analysis. So long as they can find the time & real-world location of a user they can find most of what they need for tactical analysis or future-capture via migration patterns of that user & their usage (content, frequency, a clear path of physical migration, etc.).
The best hackers in the world have been trying to break into bitcoin wallets for the last 5 years. There is a 10 billion dollar bounty for the 1st person to do this. So far it seems pretty secure wouldn't you say ? Just because networks can be hacked it does not mean encypted bitcoin wallets can be hacked it's a little more complicated than that.
"The best hackers in the world have been trying to break into bitcoin wallets for the last 5 years."
And many of them have been successful. Almost every day I read of a new successful hack related to Bitcoin.
"There is a 10 billion dollar bounty for the 1st person to do this."
Typical scam comment. So the person offering the reward determines whether the hack was successful, and surprisingly enough, no hack meets the criteria, so no reward is ever offered.
Bitcoin is an interesting proof of concept which is nowhere near ready for prime time.
If by "10 billion dollar bounty" you mean that a successful scammer would steal the entire market value of Bitcoin, that is ridiculous. A clever scammer will extract fragments of advantage over a long time period for the obvious reasons: to not upset the market, to evade detection, and to equalize profits over a long time interval.
My personal view with only a little evidence is that clever traders are already doing this in the crypto currency market, extracting small profits over time based on normal fluctations. So basically chumps are putting money into the market by buying Bitcoins, and traders are taking out profits slowly over time. The official value of Bitcoin may remain at about the same level for a long time, and the chumps will never profit from their Bitcoin speculations.
Clever trading does not equal hacking Bitcoin cryptography. And the bitcoin protocol has no control over how secure or insecure a website might be. That's like blaming gold because somebody left their front door unlocked and the safe open.
Bitcoin is more than cryptography: it's a peer to peer exchange of extracted-value represented by tokens. Hacking the non-encryption part still does huge, massive damage to bitcoin, and bitcoin makes much less use of encryption than even GPG or PGP, which itself has truly been immune to attacks, all attacks, all the time.
madtech
Not disagreeing with what you are saying but the operative words in (paranthesis) is what I'm getting at. One thing I am very confident in saying is that what the professional IC has inside is not what the "best hackers" have on the outside which gets to the heart of the matter.
With the dizzying amount of leaks on the violations under the law coming from the likes of Ed Snowden and his colleagues, the service provider community is sucking hind tit right about now and better be working overtime with what is left in the year to win over the confidence of customers and business alike they are continuing to hemmorhage especially international.
best way to rob a bitcoin is to own the computers that process 51% of the blockchain.
But even then bitcoins could not be stolen , the malicious actors bitcoins could theoretically be spent twice , a form of QE , somebody would have to build one hell of an ASIC network to spend a few extra coins .... It would be more profitable for them to put that power toward actually mining coins and increasing the honesty of the network ..
sorry, but i wasn't referring to a few extra coins 2-bit chump change, but the stuff in which -- as Mr. Ultracoin noted last week -- "fortunes & empires" are built. perhaps the above metaphor sacrificed too much clarity for cuteness, so let's try another:
"Give me control of a cryptocurrency's blockchain and I care not who holds its wallets."
tip e. canoe. ""Give me control of a cryptocurrency's blockchain and I care not who holds its wallets."
That is a really nice fromulation !!
A work of genius that will withstand the the corrosion of time.
George Washington could have saved many pixels had he just posted this quote of yours.
Thanks !!
TheGoldMyth
Yes to take down BTC would require taking down TCP/IP on a global scale - definitely not gonna happen any time soon , even a Carrington Event would not take out the entire internet. If we had a large enough Solar Flare to take out the AC power grid and Internet on a planetary scale permanently all bets are off regarding life as we know it anyway so BTC would be the last of our worries.
I'm assuming the blockchain is immortal and its encryption is strong. The main things I worry about with bitcoin are dilution by altcoin Tribbles and insidious centralization due to blockchain growth. Having every computer verify every transaction just doesn't scale well. Coins are increasingly being handled by intermediaries. Not only does this leave people vulnerable to theft, confiscation and tracking, but it also reduces the security of the network. If BitCoin becomes as big as credit cards then there will be only one mining supercomputer capable of digesting the blockchain. Guess who will own that supercomputer. But for now, I am still holding coins in hopes of buying more silver... or even paying the mortgage.
It took 100 years for people to understand fractional reserve and most still can not grasp it. Does anyone expect us to understand it here and now and not mistrust?
Not tested yet. We gonna need years of stability. Once you hear words like bitcoin derivatives, banks getting involved, .gov staying neutral for now except crime, look out.
YES Trojan horse.
No thanks.
is this the part story where the global corporate shadow government rolls out its digital currency, further marginalizing national sovereignty and completing the quest for one world luciferian government?
Gov't already has digital currency. It is called USD and rides on the Visa/PayPal/SWIFT networks, tracked for all time.
yes and the NSA controls this digital asset as well.
this much is lost on almost all beyond skeptic 'haters' of bitcoin. but why?
if they are not jpmorgan bankers, the 'hater' style critics of bitcoin are essentially all goldsbugs with deep technodystopian nightmares. they believe 'digital' is control and 'physical' is good. they adopt the george bush style---'you are either with gold or against gold'---mindset. no thank you. i grew up in the gold business. i am not of the exclusive mindset. it is over-simplistic and while it is not 'backwards', it is certainly NOT forwards thinking.
guess what goldbugs ?
the method by which you convert your gold into FOOD in the future will be digital. even if theres a nuclear holocaust, you can bet plenty of digital technology will survive. it will be more expensive for governments to allocate physical notes than it will be for them to allocate debit and credit cards for all monetary units. the economics of technology are that human effort flows down the canyons of technological progress like water flows down a path towards the see.
as technology progresses those canyons become steeper. you cannot fight technology, try as you might.
why is it that iran seems to be pursuing nuclear technology so hard, but you don't hear about them raising a million strong army of peltists and cavalry? technology my friend. war, money, food----all human behavior flows through our magic 'technology'. we are wizards. your gold, cannot keep you safe from it. it may be hard to believe, but at one point in our distant history, the mining refining and coining of gold truly was the bleeding edge of technology. no longer. it is like an old trustworthy horse that the new york city police still rides to do its rounds around the city. it still works, you don't cast it aside. it's the safety mechanism and insurance policy if fuel runs out for the fleet of cruisers----but it's NOT a car.
bitoin might fail as the next non-soveriegn digital asset. but the likelihood that a digital non-soveriegn asset rises and maintains staying power increases with time. assimov, milton friedman, and others saw this sort of thing coming. becuase private banking existed before state banking. and all metals and objects that were used for trade existed before their coined.
guess what: you are wrong.
In the future food will be grown by a person without machines, gold will be held by a person's hand, and two people will meet and trade in what we call barter.
In many places networks will be burned, melted, physically, using fire, using bombs. In many other places people will understand a network gains them nothing for you can not receive your good faster than your money can leave your hand so it's pointless to speed up the sending of money.
Utterly pointless.
If one day we can teleport food & people this equation will change, Until then it's actually extra risk to send money faster than services or goods can be consumed and people will figure out to stop doing it, for those who fail to figure it out will be robbed blind.
And you hit it right on the head. There is a percentage of goldbugs who view gold with near religious fervor and have a belief that only gold can be money. They don't understand that gold and silver have historically been money because of their portability, limited supply, and societal agreement that they are money. In fact, mention "societal agreement" in conjunction with money and a fraction of goldbugs will come at you with a pitchfork.
atomicwasted: It is possible to measure this fraction of pitchfork bearing bugs more or less by the down arrow count. A bit like market research. The bigger fraction not bearing pitchforks are probably thinking hard and doing lots of research in a very hostile environment that lacks transparent information in the extreme.
@ Teslaberry
<<< 'you are either with gold or against gold' >>>
Sorry to bust your premise, but most gold holders are 5-30% gold and the rest cash plus their house. That's not exactly one or the other. Is it?
dona k .
i'm with you. i never said anything about 'most gold holders' did I?
a gold bug is a minority member of the large circle who hold gold.
they are a small but overly vocal minority about the evils of everything OTHER than gold. some of them even make a living buying and selling gold and are just advertising. an honest gold seller knows that gold speaks for itself and doesn't try and sell you underkarated gold or overhyped gold. it is what it is.
you presume from my tone, i am 'talking down' gold. NOTHING of the sort. I am talking down people who mindlessly reject anything 'high tech' because they see complexity as nothing more than a smokescreen. complexity can be used as a smoke screen. but also has it's own power. like prometheus with fire.
people forget that we were literally once just 'primitives' with the same brains we have now, but with the same technology used by the amazonian tribes that remain hunting and isolated in the deep amazon.
teslaberry: Dont put the year of the trojan horse before the cart............ i disagree... If the accounting systems were of a high enough quality, and not ultra corrupt, there would be no need for any of the faddy currency including the gold stolen by central banks.
If it was not for the gold bugs and gold afflicted, gold which is easy to mine these days using incredibly toxic means, would be worth ZIRP due to this alone. It's intrinsic value is in the environmental destruction created to obtain it. In fact if people forgot about it altogether other than for industrial purposes, the world would allready be a better place for it. The crypto at least is vastly more protable and not a chemical hazard of biblical proportions in some countries..But that is not my point..
Corruption creates complexity and limits quality, whilst destroying value..
The problem with any asset you like including entire nations, is that it is now in the hands directly or indirectly of a central bank system that is impossibly corrupt.
Reading many of these posts i get the impression of prison inmates arguing amonst each other over the quality of the iron bars. That one warden is better than another, that breaking rocks is better than recieving lashes, or that it is unjust that one prisoner was able to obtain icecream in return for sexual favours, and so on including endless discussion about how best to live comfortably wiithin the debt prison system they find themsleves in. What the best currency is if it is cigarettes, the ivory from the skeletons of flies, and so on. pfffttttt
What we have here isn't a failure to comoonicate, it is a failure to realise that you are all in prison and not guilty of anything, and the cells are getting smaller and more a being crammed in, and conditions of prison life are getting worse. the prison is the monopoly manipulation of an ultra corrupted and impossibly complex accounting system and the system, if it can be called that, of fractional reserve banking and so on..
I for one think the problem is in the accounting system in the main. The legal system that protects the fraud. The very last problem is the problem what to use as currency. Here is quote from Ellen Brown.talking about accounting.
Time for a New Theory of Money
By understanding that money is simply credit, we unleash it as a powerful tool for our communities.
By Ellen Brown
Global Research, October 29, 2010
webofdebt.com 29 October 2010
"Gold is widely claimed to be the oldest and most stable currency known, but this is not actually true. Money did not begin with gold coins and evolve
into a sophisticated accounting system. It began as an accounting system and evolved into the use of precious metal coins. Money as a “unit
of account” (a tally of sums paid and owed) predated money as a “store of value” (a “commodity” or “thing”) by two millennia; the Sumerian and
Egyptian civilizations using these accounting-entry payment systems lasted not just hundreds of years (as with some civilizations using gold) but thousands
of years. Their bank-like ancient payment systems were public systems—operated by the government the way that courts, libraries and
post offices are operated as public services today. "
The "sound money campaign" is an infection that masks the unsound accounting.
Idiotic, and is putting the Trojan Year Of The Horse before a simple corrupted and rickety accounting cart
And try telling the average gold enthusiast that gold cannot be used as currency in a better economic world until accurate inventories are transparently available with respect to QE gold that was funded by the tax payer bailouts is somehow equitably distributed back into the hands of souverign nations that funded central bank bullion purchses, so that further environmental catasrophe during the mining process can be arrested and brought to a halt. At least a global economic meltdown might halt the toxic extraction of this metal.
Pathological obscession with CO2 has somehow given the starting gun green light to increase and not diminish all kinds of other toxic chemical process that are anthropogenic. So the idea that gold mining causes anthropogenic toxic emissions is not something that diminishes the value of gold in the minds of those who perceive gold as pure and clean, or not subject to corrosion. In actual fact, its horribly history is a chemical nightmare once greed used other chemcial means for its extraction.
But still, the crypto isn't a solution either in any economy that lives in the prison of an an ultra corrupted accounting system.
End of rant.
:-)
Karen Hudes RED ALERT For Collapse of Fiat Currency" February 5th, 2014 http://www.youtube.com/watch?v=Zy-2GaT6RMo
This appears to be level headed so i include it in notes and errata section of my rant about corruption which needs to be addressed first
For me, a key difference between gold and bitcoin is that gold is AUTHORIZED by the PTB as it is the wealth mechanism that they use to transfer wealth amongst themselves. I've always wondered why a mechanism for tracking it has not, at least not to my knowledge, been put into place. Probably because they themselves want the relative anonymity that gold provides. Now of course if they are transferring tons of gold around, their will be records of it but if someone loads up their private jet with a million or two worth, who will know?
I think it was Kuenstler who said recently that in a world of increasing derivatization from the real physical ANYTHING, do we need any more abstractions?