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Bitcoin Government The Almighty Buck

The Future of Cryptocurrencies 221

Posted by Soulskill
from the start-mining-Americoins-and-Mexicoins-and-Coinadas dept.
kierny writes "Today, Bitcoin, tomorrow, the dollar? Former Central Intelligence Agency CTO Gus Hunt says governments will learn from today's crypto currencies and use them to fashion future government-protected monetary systems. But along the way, expect first-movers such as Bitcoin to fall, in a repeat of the fate of AltaVista, Napster, and other early innovators. But the prospect of fashioning a better, more stable crypto currency system — and the likelihood that Bitcoin may one day burn — is good news for anyone who cares about crypto currencies, as well as the future and reliability of our monetary systems."
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The Future of Cryptocurrencies

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  • by noblebeast (3440077) on Wednesday March 12, 2014 @03:40PM (#46467459)
    Tell me again how crypto-currencies being "future government-protected monetary systems" is good news?
    • Because no black market is a bad thing, of course. If the market has demand for hired killers, for example, obviously they should exist.

      (The is/should fallacy of free marketism is legitimately scary to me)

      • by blackicye (760472)

        Because no black market is a bad thing, of course. If the market has demand for hired killers, for example, obviously they should exist.

        (The is/should fallacy of free marketism is legitimately scary to me)

        Governments and the elites have long had access to and will always have access to professional killers, the only difference is the volume of transactions that will be conducted and their targets.

      • by shaitand (626655)
        A black market is a pretty essential thing if you are opposed to tyranny, including the tyranny of the majority.
        • Yeah, I know just how tyrannical it is that you can't buy custom-shot child porn, or stolen human livers. (some things are illegal for a reason, beyond just sticking it to the little guy)

          • by hairyfeet (841228)

            And on the flip side you can now go to jail for a drawing of Lisa Simpson in an S&M outfit and thanks to their not being any way to make money many who would need a liver and kidney who aren't rich (and can bribe their way to the top like Steve jobs did) will die.

            the problem is laws and common sense almost never go together and laws WILL be abused, look at the kids doing time for taking pics of their own bodies and sexting them to their SO. Do I trust BTC? Not really but frankly I trust the government

            • I don't disagree. We have a duty as a democracy to reign in our abuses, and we do a poor job of it. But pretending a black market that enables the bad just to allow the morally ambiguous isn't a panacea.

    • Consumer protection. The possibility that when you are ripped off by wallet-services, exchanges or hackers poking around your hard disk, there is a legal authority you can go to, who may be able to get you your money back and deal with the criminals.

      • Addressing those issues sounds like a neat idea. Best of all, if you really want to, you can do all that stuff today with Bitcoin, through use of contracts, only sending money to agencies that can prove they've posted a bond (i.e. sent money to to someone you have decided that you trust, such as a government), etc. Whenever you need the extra security, you pay for it, just like everyone always does with dollars. The difference is that when you don't need those things, with Bitcoin you can opt out (or rat

        • Best of all, if you really want to, you can do all that stuff today with Bitcoin, through use of contracts, only sending money to agencies that can prove they've posted a bond (i.e. sent money to to someone you have decided that you trust, such as a government), etc. Whenever you need the extra security, you pay for it, just like everyone always does with dollars. The difference is that when you don't need those things, with Bitcoin you can opt out (or rather, it doesn't automatically opt you in).

          A reiteration of a common but naive libertarian argument. Citizens shouldn't need to check the status of each company they do business with. That would be too much work for individual in the real world to ever do it. Rather citizens should know that whenever they do transactions in their own country with companies that are known to the government, that they are covered by a common set of protections. Then they only need to take the extra steps of checking that you mention on those rare occasions when they n

          • by Richy_T (111409)

            Experience shows that government-regulated structures have their own issues. And when you have trouble with the regulating body, you can pick a better one. Oh, wait. No you can't.

      • by shaitand (626655)
        Last I checked ripping someone's bitcoin wallet off is just as illegal as taking their physical on filled with fiat.
        • Bitcoin has no chargeback mechanism. Once your transaction is gone, it's gone, regardless of whether it was really you who did it. Unlike the conventional banking system.

          Last I checked ripping someone's bitcoin wallet off is just as illegal as taking their physical on filled with fiat.

          Oh really? And how exactly did you check that? Where's the law that mentions bitcoins? As an intangible string of binary information, we can't simply treat it as property unless the law says so.
          Where's the person that's been convicted for stealing bitcoins? For sure there's been people done for drug trafficking and money laundering, who've

          • by lgw (121541)

            You don't need new law for the same old thing "on a computer". It's illegal to steal anything, virtual or otherwise. How illegal depends on the value, and jurisdiction may be particularly muddy here.

            There's no need for the law to "mention bitcoins", that's a distraction, but law enforcement is only going to go after complicated cross-jurisdictional thefts when the value is high and the evidence is clear. We might not see prosecutions because bitcoin isn't taken seriously, or because the hackers simply g

            • It's illegal to steal anything, virtual or otherwise.

              So you're claiming that there is such a thing as software theft, as opposed to copyright infringement then?

              You don't need a new law for anything tangible. But bitcoin isn't a tangible thing. It's a protocol. It needs a law or precedent before we can say whether there is such as thing as stealing "bitcoins".

              OTOH, we've already seen lawsuits.

              Lawsuits can be issued for anything, regardless of the law. A written law, or convictions under an existing one are the only things that could show that there's a crime of "stealing bitcoins".

          • > Bitcoin has no chargeback mechanism.

            You are wrong about this. There is a built-in escrow function that returns payment to the sender if the conditions of the transaction are not met. Bank card charge-backs are mostly limited to 60 days, and assumes the conditions are met if there is no objection within that time. In addition to the built-in function, people can use escrow services who hold funds until the sender is satisfied. In turn, escrow services can make arrangements with merchants about holdi

    • by bigpat (158134)

      Tell me again how crypto-currencies being "future government-protected monetary systems" is good news?

      Actually, I want to know why bitcoin wouldn't be government protected. Trading bitcoins for some good or service would just be a type of barter exchange. So unless what is being purchased is illegal, then the law, police and courts would still apply to handle situations like fraud and theft.

      • "Actually, I want to know why bitcoin wouldn't be government protected. Trading bitcoins for some good or service would just be a type of barter exchange. So unless what is being purchased is illegal, then the law, police and courts would still apply to handle situations like fraud and theft."

        Bitcoin *IS* protected, approximately as much as cash is protected. That is to say, laws against fraud and the like still apply.

        The problem (as the government sees it) is that also like cash, Bitcoin is anonymous. And the government doesn't like anonymous cash flows. It sees that as a threat.

        Which is why, of course, everybody else sees a "government-sponsored" cryptocurrency as a threat. You can bet your ass they would try to make sure they had tabs on who spent exactly how much, exactly where and whe

    • by medv4380 (1604309)
      Properly run, established, and backed crypto-dollars could be an acceptable replacement for banks to hold and transfer funds. With a central authority transfers could be rolled back, and appropriate monetary policy established, or enforced. It beat the heck out of the banks that just move gold from one vault to another at the end of the night. You could esstially tie crypto-dollars to US issued bonds that the Fed Purchases. For example one 100 dollar bond could be represented by one crypto-dollar. It would
  • I do not see any reason why the BTC protocol itself could not be adapted and adopted with some kind of backing. It really does open up some really good options when it comes to moving tokens around and the push oriented payments could do wonder for combating CC fraud.
    • by blackicye (760472)

      I do not see any reason why the BTC protocol itself could not be adapted and adopted with some kind of backing. It really does open up some really good options when it comes to moving tokens around and the push oriented payments could do wonder for combating CC fraud.

      Because anyone with that level of resources and authority would not be amenable to spreading of the wealth and letting the dirty unwashed masses mine it at the ground level.

    • This is already possible with something called "colored coins". Instead of the tokens themselves having value, they represent ownership of other things, like a share of stock or an ounce of gold. They can still be traded online, and divided into smaller parts, but additionally the holder of the colored coin can redeem them for the underlying asset. The "colors" terminology comes from each color being a different asset class. These yellow coins are backed by gold, these green ones are backed by dollars,

  • by ArcadeMan (2766669) on Wednesday March 12, 2014 @03:44PM (#46467507)

    Anything that makes it easy to transfer funds to anyone in the world without going through PayPal is a good thing.

    • Of course the problems with PayPal have been down to too little regulation, not too much. What do you get when you remove most of the regulation from PayPal? Mt Gox.

      • I was talking mostly about the high PayPal fees. Never had a trouble with PayPal myself, then again I think they're more regulated in Canada.

    • by TubeSteak (669689)

      Anything that makes it easy to transfer funds to anyone in the world without going through PayPal is a good thing.

      Right now, someone in the Department of Homeland Security is calling you a Terrorist.
      That's how Governments traditionally feel about the easy flow of currencies across borders.

      • If it's government-controlled currencies just like Bitcoins, they'll be easy to track. I'm against delays, high fees and troubles. I don't care if big brother USA knows that I bought a small stepper motor from Hong Kong, there's already a trace of that on eBay itself. But the credit card company takes a cut, eBay takes a cut, PayPal takes a cut. A small 5.00$ motor ends up costing me nearly 6.00$ instead of 5.05$

    • by hibiki_r (649814)

      The problem is that it has to be something that doesn't make it easy for a hacker to transfer all my funds to himself, with no recourse from me. With crypto currencies, I have to trust my computer security well more than I currently trust the computer security's state of the art. And even if that works, I'd still need recourse to deal with merchant fraud.

      Either way, cryptocurrencies do not really solve the problem.

  • There's certainly much the government and official banking system can learn from transactions in crypto-currencies. And actually the government backed implementation can be better. Bitcoin suffers from the problem that a transaction can take some to to become certain, as two or more block chains fight it out for fitness, before being reconciled. This only happens because of the goal of avoiding a single point of authority. A government backed system can always have a blessed block-chain. And can thus have t

  • I've made similar comments to those who've waved negative news articles about bitcoin in my face. The interesting thing about all this is; it was never about "Bitcoin", it was about the concept of cryptocurrency, driven by the revolutionary ability to create digital scarcity. You'd better believe though, that if governments get involved, the whole idea of a publically viewable global transaction ledger (i.e. blockchain.info) will never see the light of day.
    • by geekoid (135745)

      based on..what? I can find out everything going on with the dollar. Why would bitcoin be different?

    • by mvdwege (243851)

      Creating scarcity sounds like a baron homesteading a piece of land and telling the peasants that they now have to answer to him.

      Once again the language used betrays the Internet Libertarians as neo-feudalists.

  • Cryptocurrencies with no intermediaries can't become popular till we fix internet/personal devices security. If the intermediary is the government or banks then you are more or less in the same situation than with dollars, and if are thirdy party you will have the same problems that with bitcoin now, either they run/dissapear with your money or get hacked and stolen.
    • The current monetary has no security beyond the criminal justice system.

      Today, anyone who can get a photograph of one of your checks clear enough to read the routing and account numbers can forge a check on your account and deposit the funds to their account, entirely using their cell phone, without ever setting foot inside the territorial U.S.

      • by gmuslera (3436)

        They must get to you somehow. Widespread use of criptocurrencies mean that with social engineering, fake/trojaned apps or even using nsa backdoors your wallet is exposed for all the world. Social engineering is a powerful tool [coindesk.com] with bitcoin stealing trojans. Things are not so easy with bank accounts, even with all the problems they have, and of course, not with cash.

    • by blackicye (760472)

      The problem is unregulated exchanges, and the regulation of exchanges as well. That seems like it will be a key weakness in the Cryptocurrency system until there are more avenues of directly spending them for physical goods and essential services than currently exists.

    • by mlts (1038732)

      I've wondered about having part of a cryptocurrency be a way to have a mechanism for insurance. That way, if/when coins are stolen, there is a way to obtain new ones. Of course, this would have to be carefully made/watched due to fraud ("gee, I had those coins all along in a backup wallet...")

      The biggest issue with cryptocurrencies is the fact that they cannot rely on a single trusted third party or parties. This is the new ground. Conventional systems like PayPal, Amazon Wallet, etc. have a "trusted" p

  • I've always wondered whether Bitcoin actually originated with the CIA, NSA, or Federal Reserve (or analogous agencies in other countries), or maybe a major bank.

    I mean, it's a brilliant kind of experiment. Let it loose in the wild and see how it behaves, as a prelude to adopting an official, government backed version, using the lessons learned from Bitcoin. It's the kind of thing you want to have in the wild, to see what people do with it, before adopting something in an ad-hoc and flawed way (like cred

    • by PRMan (959735)
      Yes. Because the US government always does this. We never just change things willy-nilly without testing and foist it on the unsuspecting public at large making people's lives worse.
    • before adopting something in an ad-hoc and flawed way

      Like a National Healthcare portal?

  • by Animats (122034) on Wednesday March 12, 2014 @04:14PM (#46467839) Homepage

    What we've learned so far from Bitcoin:

    • The distributed, eventually-consistent blockchain anchored by mining works and is quite robust against attack. Nobody has yet successfully attacked the basic Bitcoin system and stolen money. So the low level technology appears to be secure.
    • Irrevocable, remote, anonymous transactions are the con man's dream. Especially when they're assocated with a whole community of suckers who think anonymous anarchy is a good idea. The scam level in the Bitcoin world is huge. Over half the exchanges have gone under, and that was before Mt. Gox. Bitcoin-oriented "stocks" and "Ponzis" have an even worse record.
    • Personal computers are not secure enough to store money. "Bitcoin wallet stealers" are a major problem. Many "online wallet" services turned out to be scams. Storing Bitcoins safely while still being able to use them is quite hard.
    • Volatility is far too high for Bitcoin to be a useful currency. Since last October, Bitcoin has gone from $100/BTC to $1100/BTC to $600/BTC. Daily variation often exceeds 10%. The companies that accept Bitcoin for real products have to reprice every few minutes. Bitcoin behaves like a pink sheet stock. Too many speculators, not enough real customers.
    • There are scaling problems. Currently, every user has to have a complete copy of the entire transaction journal back to the first Bitcoin, and has to keep up with all the transactions as they happen. The confirmation process has a 7 transaction per second limit. Confirmations take about half an hour before they can be trusted; longer during busy periods.
    • "Mining" is more centralized than expected. The original idea was that "mining" would be a spare-time activity of each user's computer. In practice, "mining" is done in large data centers with custom water-cooled ASIC chips. Two mining pools control more than half of Bitcoin's mining capacity, and they have the power to set fees and change the rules.
    • Thank you for an informative post. The scaling problem looks like a deal killer, in terms of adoption as a generally used currency.
    • by timholman (71886) on Wednesday March 12, 2014 @04:55PM (#46468255)

      There are scaling problems. Currently, every user has to have a complete copy of the entire transaction journal back to the first Bitcoin, and has to keep up with all the transactions as they happen. The confirmation process has a 7 transaction per second limit. Confirmations take about half an hour before they can be trusted; longer during busy periods.

      IMO, this will be the ultimate nail in the coffin for Bitcoin, or any other cryptocurrency that relies on a single blockchain. Bitcoin advocates wax eloquently about the beauty of the BTC transaction verification system, but it has always struck me as profoundly stupid. It's as if someone said, "Hey, let's create a giant Excel spreadsheet, and have everyone in the world record their financial transactions on that one spreadsheet. Plus, your transactions won't be confirmed until a majority of people verify your math. Brilliant!"

      No, it's stupid. If I want to buy a hot dog in New York, why should that matter to a guy who wants to buy a newspaper in Los Angeles? Why does my financial transaction have to be intertwined with his while we both queue up on the same blockchain? It is absolutely one of the most profoundly inefficient ways of spending money that anyone could have possibly invented.

      Or put it this way: the BTC network can handle about 604,800 transactions a day. Assuming the average person buys or sells something with BTC an average of 5 times a day, that means the network hits its limit with 120,960 users ... worldwide. And this is the financial system that is supposedly going to replace all fiat currencies? It's laughable.

      Of course, Bitcoin supporters will claim that the network can always be scaled up in speed. But what they don't point out is how quickly bandwidth and disk space requirements will explode if this happens. For example, scaling the network up to 2000 transactions per second would result in a Bitcoin node downloading about 1 MB per second. No big deal, until you realize that means each node will need about 2.6 TB of bandwidth each month, and that's just to handle the needs of 10% of the population of the United States, assuming 5 transactions per person per day.

      The numbers don't make sense, and never will. Modern economies are far too complex to operate in the serial fashion that a blockchain mandates. Bitcoin will never be more than a niche player in the world financial system.

      • No, it's stupid. If I want to buy a hot dog in New York, why should that matter to a guy who wants to buy a newspaper in Los Angeles? Why does my financial transaction have to be intertwined with his while we both queue up on the same blockchain?

        That's not unique to cryptocurrencies with blockchains. Any private digital currency (including and especially those used in MMORPGs) has to deal with the same problem, of making sure that transactions are ordered correctly, that money is still available in an account, etc. In that sense, they all have the problem of the network having to know about both transactions.

        It even affects the real-world clearing of bank transactions, which is why people always complain about the lag between when they get their

      • by mysidia (191772)

        Or put it this way: the BTC network can handle about 604,800 transactions a day.

        No.... the maximum block size can easily be expanded to 100MB, which will allow the chain to expand by approximately 14,399GB per day, or 49,151,923.200 transactions per day. It's just a software update. The arbitrarily limit of 1MB is only an arbitrary limit selected to protect against spam attacks; it can be changed.

        Clients don't need to download the entire blockchain; only the headers need to be retained to ver

        • by hibiki_r (649814)

          Did you read the entire post? Do a software update, and you still need the blocks to be sent and received. And while all clients do not need the entire blockchain, while you still have a single one, you will have problems. In architectural terms, a blockchain behaves like a single, tightly synchronized queue. There are good reasons for doing that: It's not as if the people designing the system are incompetent. However, the design decisions that make sure that no coin is spent twice make scaling very ineffic

      • by mysidia (191772)

        each node will need about 2.6 TB of bandwidth each month, and that's just to handle the needs of 10% of the population of the United States, assuming 5 transactions per person per day.

        2.6TB is insignificant -- it's at an average cost of about $1 a month on the average web hosting plan.

        2.6TB per Month = about 8.4 Megabits sustained 24x7.

        In a world where the average medium sized ecommerce site pulls sustained multiple Gigabits 24x7.

    • by crovira (10242)

      Accountants LOVE the idea that every coin you spend is traceable.
        A BitCoin like crypto currency is likely in the offing as a supplement to cash and bank transactions
      Backed by the full faith and credit of the US it is likely to be one of MANY co-existing currencies. (Just like we have now! [on paper.])

      • by mysidia (191772)

        Accountants LOVE the idea that every coin you spend is traceable.

        Except the 'accounting' can become fully automatic now, with a verifiable trail.... many low-level accountants might be out of a job; if Bitcoin were to truly replace fiat.

    • by Xyrus (755017)

      The distributed, eventually-consistent blockchain anchored by mining works and is quite robust against attack. Nobody has yet successfully attacked the basic Bitcoin system and stolen money. So the low level technology appears to be secure.

      There are a couple of unlikely scenarios where an attack could work, but newer coins also stop even those possibilities.

      Irrevocable, remote, anonymous transactions are the con man's dream. Especially when they're assocated with a whole community of suckers who think anonymous anarchy is a good idea. The scam level in the Bitcoin world is huge. Over half the exchanges have gone under, and that was before Mt. Gox. Bitcoin-oriented "stocks" and "Ponzis" have an even worse record.

      Poorly run operations fail. That shouldn't come as a surprise. And con men always prefer cash, which bitcoin basically acts like. When you buy something with bitcoin it's like wiring someone money. Once it's in their hands, there isn't a whole lot you can do about it if you get scammed. That's why for large transactions people will use a certified escrowing service.

      Never send money (bitcoi

  • It may be popular to slam bitcoins right now but the fact is after all these scandals they're still incredibly valuable with a lot of forward momentum. This is a very new technology and its going to go through growing pains. Its interesting that 'anonymous' money is such a two edged sword. One the one hand people want it because they're worried about the government stealing their money yet the very fact its anonymous makes it a ripe target for theft. You need to protect your bitcoins! Hopefully people ar
  • by brxndxn (461473) on Wednesday March 12, 2014 @04:16PM (#46467859)

    AltaVista was merely one search engine in a pool of many.. Yahoo, Hotbot, and Lycos were all around at the time and they did not all fail.
    Napster only failed because the government/court system took them down. If it weren't for Napster being forced to close up its business, there were no indications that people were leaving it. Napster was a disruption in the industry and major players moved in unison to take it down.

    A direct contrast to this comparison is TCP/IP. Since the creating of TCP/IP, there have been numerous (arguably better) protocols. However, the whole Internet runs on TCP/IP and it does not look to be going away any time soon. Like most new technologies, I would guess that the first virtual currency to be widely adopted would be the virtual currency that becomes the standard. Any new currency has a huge uphill battle in trying to become more mainstream than Bitcoin at this point.

    Bitcoin is designed so that governments or other entities cannot take it down. The fact that governments, corporations, or single powerful individuals cannot control it is a feature - not a flaw. Gus Hunt, along with every other powerful well-established individual, would naturally be against the adoption of Bitcoin. But, saying to expect it to fail looks more like wishful thinking on their part.

    • by unimacs (597299)
      I don't think TCP/IP is really a good comparison. The world is very used to dealing with a multitude of currencies and not so good at bridging the gap between competing technologies. There is a lot more pressure to adopt and use "standards" in the technology world. But if you still want to compare Bitcoin to TCP/IP it's worth remembering that there were other protocols and tools in use before TCP/IP came around. So is Bitcoin like TCP/IP or more like UUCP?

      As far as Napster goes, the government hastened i
  • The only crypto currency is one which is not traceable. interchangeable, and infinitely divisible - gold or silver or similar. Anything backed by the whim of the government can be tracked, or revoked by the same government.

    Why do you think Iran was laughing all the way to the (gold) bank when we kicked them out of the SWIFT wire network? Now they can trade oil for gold bars and the gold bars for uranium, and there's no tracing it.

  • 1. Start your own cryptocurrency
    2. Make the world use it (Implementation: ???)
    3. Profit!

    Granted, it was much the same with Bitcoin but there everybody was pooling their work and pulling in the same direction, so either Bitcoins would fly or cryptocurrencies would crash and burn. What does 100 copycat currencies run by people who figured the best way to get in early is to start a new currency get you? It reminds me of the guy who in the dotcom boom made a 1000x1000 pixel page of pure ads and sold space at $1

  • There have been a lot of projections on what would happen if even 50% of all bitcoins were stolen and 95% of exchanges were destroyed. Bitcoins still wouldn't go away. If 1/3 of the countries in the world thoroughly blocked bitcoin, it would still survive. If 99% of miners stopped minig, it wouldn't even have an effect and would simply attract new miners. Bitcoin basically can't die under any circumstances except a badly handled complete protocol meltdown.
  • I always chuckle when I read yet another pundit claim that Bitcoin is going to fail because it's not government-backed. A significant part of current Bitcoin userbase are libertarian-minded folk who believe (and with very good reason) that a goverment-backed currency equals a currency that's constantly meddled with by said government, so having a government-backed crypto currency is precisely what they DO NOT WANT. Not having central banks fuck about with the money supply and the lack of need for banking in

    • No money is government backed.

      If you have (own, semi own) a Finca on Mallorca and need to pay $1,000 a month to pay it off, your government does nothing if the "exchange rate" drops by a factor of ten.

      Either you still can pay the mow $10,000 ... or your Finca (whichs value has mot changed a little bit) is gone to the bank.

  • Especially interesting is 2nd generation coins such as Counterparty, Mastercoin and the like, building new services on top of the existing Bitcoin blockchain. Great overview in this post: http://www.ofnumbers.com/2014/... [ofnumbers.com]

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