Could Bitcoin Go Legit? 300
Velcroman1 writes "On May 15, the Department of Homeland Security seized a digital bank account used by 'MtGox,' the world's largest exchange, where people buy and sell bitcoins. DHS alleged, and a judge agreed, that there is 'probable cause' that MtGox is an 'unlicensed money service business.' If proven, the penalty for operating such a business is a fine and up to 5 years in jail. FoxNews.com caught up with several bitcoin exchanges, including CampBX, MtGox, CoinLab and more, to ask them how they've navigated the regulatory waters — and how to go legit." In other shady bitcoin news, it appears the demise of Liberty Reserve has caused hackers to find a new alternative. twoheadedboy writes "Despite suggestions Bitcoin might be the ideal currency for dealers on the dark web, it appears Perfect Money, a Panama-based operation, is proving the most popular alternative to the now-defunct Liberty Reserve. A source working the underground forums told TechWeekEurope that, for now, fraudsters are rapidly migrating to Perfect Money. Many vendors have started accepting it, having previously primarily used Liberty Reserve, which was shut down following the arrest of its founder and four other members this past week. Internet fraudsters might be interested in Perfect Money as it has distanced itself from the U.S., cutting off all new American registrations. However, one forum user said he was turned down by Perfect Money as their 'type of activity is not welcome.' Other currencies may yet win out."
Sheer genius (Score:2, Interesting)
From TFA: "Despite the regulations, technology experts say that they will not prevent people from anonymously using bitcoins for illicit things like buying drugs online. The real-world analogy is cash; the government can tell when it is dispensed by banks, and to whom, but it loses track once it is dispensed."
If someone came up with the idea of "cash" today they would be a criminal mastermind.
Re:Do your part to kill it (Score:3, Interesting)
An AC who replied to you should be moderated up. Bitcoin transactions are not always free! Small amounts of BTC (hardcoded in the software) cannot be even transferred without a fee. If you want to transfer just a fraction of a BTC then all your money will be spent on the fee, and nothing remains. Large transactions may or may not be processed, also per the will of soneone else.
This is extremely important because supplies of BTC are finite, and the currency has built-in deflation. It is already $100 USD per BTC or something - this means you have to subdivide your BTC into thousands of smaller units. Numerically, you can do it. Financially, these units are useless.
That's one of the less obvious reasons why government-issued cash is the king for legal (and not so much) transactions. Cash is sufficiently secure, is untraceable, requires no Internet, and the transaction completes in seconds instead of 30 minutes. And on top of that, you don't need to pay a fee for the privilege of transferring cash.
But, of course, if everyone starts generating transaction noise just to confuse the watchers, then BTC will grind to a halt and will be entirely unusable for payments.
Re:A question to the community (Score:5, Interesting)
It would appear that some techies realized that currency control is a tool to unjustly oppress people
All money issuers were using money to oppress people, to some extent. Why was the privilege of minting coins given only to the top aristocracy? Gold coins often were the sole privilege of the king. Lacking some advantage, why would aristocracy bother with a metalworking business?
The engineering (ie math) seem to be solid
The crypto scheme appears to be reasonably well done. However in practice there are several attack vectors, and they are possible to execute if you want to. It will cost you, but governments can do that already. It's just the matter of commitment and resources. BTC also has several usability problems, like the long time to clear a transaction (with 6 recommended confirmations, it's between 15 and 30 minutes.) Are you willing to stand in limbo at the grocery store for that much? There are no trusted BTC terminals; and if they were, they could be subverted because BTC depends on access to the network to calculate hashes - and the merchant does not control the network. Plug this merchant's network cable into your own router, run a hundred pet peers, and you can confirm any transaction you want. (On an open Internet you need to subvert the majority of hosts.)
the economic rationale is logically sound
It is debatable, and that's what is always debated in every article about BTC. In essence, there is no rationale that would work for pretty much anyone except Silk Road users. BTC transactions are not even free; but a Visa c/c pays me for using it. Why would I want to pay in BTC?
"it's a scam"
Scam or not, but early miners mined millions of BTCs when mining was good. Where are those BTCs? If the exchange rate of one BTC goes to $10K, for example, those early miners will become richer than Bill Gates. Will that be fair? I think not. Those guys (still anonymous!) may have done good for the society, but the society cannot value the formula (that doesn't even save lives!) that high. BG's Windows does save lives, as part of many computers.
Re:A question to the community (Score:2, Interesting)
Can you tell us more?
https://en.bitcoin.it/wiki/Weaknesses [bitcoin.it]
what you characterize as unfair seems more like a reward for hard work
I respect your desire to reward BTC inventors and early miners with your own money. But I have no plans to join you :-)