BitInstant CEO Says World Operates "On an Inferior Monetary System" 185
hypnosec writes "BitInstant's CEO Charlie Shrem and Erik Voorhees were invited to speak about virtual currency at the NACHA (the North American Payments Association) Annual Global Payments Forum held in Rio de Janeiro. At the conference the duo stated that the world operates 'on an inferior monetary system'. One of the more interesting parts of the whole forum was how Bitcoin as a currency and transaction system "works within current legal frameworks." A presentation by Senior Legal Counsel to the Federal Reserve titled: 'The Implications of Dodd-Frank Section 1073' sheds light on requirements that need to be fulfilled by "Remittance Payment Company" (RPC) guidelines. This law requires such companies to disclose a lot of information about money transactions. This is where Bitcoin as a currency and system collide head-on with the law."
Ignoring the theoretical for a moment (Score:2, Informative)
Bitcoin is useless from a PRACTICAL standpoint. Why?
1) Transactions aren't instant, you have to wait potentially for hours for your transaction to go through and the value in your account to change. (Even transactions between two accounts you own, because Bitcoin isn't smart enough to handle that.)
2) Every device using Bitcoin needs a copy of the Bitcoin database. As of about a year ago, this was 700 MB of data. Every device needs a copy of this. Every device needs to go through this file and parse it. Including your low-power cellphone.
I'm not against the concept of Bitcoin, but the implementation stinks.
Re:Tracking money (Score:5, Informative)
the bitcoin system would require only trivial mods to do remove the privacy and track the "who" as well as the "what".
That's not how it works. First and foremost, the creation of public addresses can be done entirely offline, without connecting to the Internet and without any information leaving RAM. I can request money to be sent to one of these addresses and only the person sending it knows that it belongs to me as there is no other record of its existence. An infinite number of such addresses could be created and there is no way to tie them directly to me.
Secondly, any such non-trivial changes to the network would require nearly everyone on the network to agree, which is EXTREMELY unlikely given Bitcoin's user base and ideology.
Re:Ignoring the theoretical for a moment (Score:5, Informative)
1 - Ten minutes max, usually.
2 - Not true, there are several wallet tools now that don't hold the blockchain locally.
Re:Ignoring the theoretical for a moment (Score:5, Informative)
I think your comments are fair, but not entirely accurate any more;
I agree with them to a degree, and have raised those issues a number of times in the #bitcoin IRC channel on freenode;
The response to 1) is well, sure, transaction confirmations are not instant. So what? Neither are credit-card transactions. They can take days, even weeks to confirm. The banks agree to go with instant-confirmation based on probability. In a real-world implementation of bitcoin, I suspect that people would accept small transactions without 6 confirms. In fact, in a real-world implementation, I think most stores could do a lot worse than go down the "Starbucks" route; you have an automated payment app on your phone (or accessible via the web, or via a payment machine at the counter that uses your card number etc.). This "starbucks" account is filled by bitcoin, by you, at home. Or in store etc. but the point being that you fill it before you need it, 9 times out of 10. Ergo that reduces the need for instant confirms. Since it's only a small amount of cash in your Starbucks account, it mitigates the worries over hyperinflation & governmental interference that running all your finances in this way would raise.
2) Not every device needs a full copy of the database now. They have thin-use clients. I'm not sure on the exact specifics of how it does it, but I know it's supported, and will become "the norm" for most domestic users; I believe the main such desktop app is called "Electrum". The network as a whole isn't endangered as long as a fair number of clients continue to use the whole block chain apps. And a lot of people will. But on your iPhone or whatever, sure, thin-client, instant usage, no waiting on downloading the block chain.
Really, the way to get BTC into common, physical-world use, is to go down the accounts system aka "starbucks". A lot of retail chains are already set up for such a system, small retailers can easily roll their own thanks to the likes of OpenTransaction, and it makes it very easy to get btc into common usage without the worries over physical terminals, having to accept low confirm levels or make customers wait for ages etc.
Re:Ignoring the theoretical for a moment (Score:3, Informative)
Days before you get to sign the slip?
Those transactions are not actually "pending", the bank is holding your money for a few days to collect interest off of it before passing it on to the next gent.
Re:Ignoring the theoretical for a moment (Score:4, Informative)
You forgot something: Bitcoin supply decreases exponentially over time.
They're based on prime numbers, which become increasingly rare as the numbers increase.
Can I have some of what you're smoking? The exponential decay curve of Bitcoin supply has nothing whatsoever to do with prime numbers. It is simply a planned feature that after every 210000 blocks produced, the block reward will halve.
Also, as others have already corrected you, Bitcoins are fine for microtransactions. There are currently 8 decimals, with a possibility to increase in the future.
Re:Ignoring the theoretical for a moment (Score:4, Informative)
Wrong on every detail.
1a) Using the "move" RPC command, bitcoin makes an instant transfer between two accounts that you control.
1b) All transactions are published instantly, and available instantly, via the bitcoin P2P network. There are also several websites like http://mtgox.com/ which facilitate instant transfers. After that, you wait on average 10 minutes per confirmation, each of which makes your transaction exponentially more secure. While not recommended, yes you can spend zero-confirmation transactions.
2) Did you bother to look at Android Market before posting? Only full nodes require the full block chain database (2+ GB now). Lightweight software exists for phones, or you can use a web wallet from places like http://blockchain.info/ or http://instawallet.org/
- jgarzik, bitcoin core dev
Re:better than bitcoin though (Score:4, Informative)
A different level of security vigilance is necessary for a Bitcoin exchange operator, than for an individual holder of Bitcoins - because it's a much more tempting target for thieves. Much like a traditional bank requires rather more security than one's wallet.
Re:Digital currency is only as good (Score:2, Informative)
People need to learn how to barter again and save on taxes
In general, countries that have sales taxes or value added taxes officially tax barter as well. In British Columbia, and in Ontario the last time I lived there, there is no sales tax on the resale of used personal items: i.e. you don’t have to pay sales tax at a garage sale/boot sale/flea market.
But if you trade computer repair for plumbing repair, the law says that you are required to collect the service/sales/value add tax for the computer repair and send it to the tax man, and the plumber likewise is required to collect the tax on the plumbing repair.
The government generally doesn’t try to track down and collect such taxes because it would be too much effort for too little return, but the law is clear, and if a significant portion of the populace switched to barter without paying taxes on it, there would be a tax crackdown. The government couldn’t afford not to.
Re:Tracking money (Score:5, Informative)
Alice doesn't put your Oxytocin in the mail until she sees your transaction confirmed by six or seven nodes on blockchain.info -- the people calculating the blocks are validating the transactions against the rules of the system. Once the money passing to Alice is "spent" on the blockchain, all of the peers processing transactions will see your wallet as empty and any attempt to debit BTCs from a wallet that's empty will be rejected.
This can be broken if you get a peer to accept your transaction, stick it in as block and lie that it's validated; but other peers are seeing your transaction too and computing their own blocks against the truth on the chain. Six or seven different nodes have to agree on the validity of your transaction, and you have no control over which nodes will be able to validate a block containing your transaction. If you got some vast percentage of the computing power on the block chain (not a vast amount of power per se, but a commanding proportion of the total cycles computing transactions), you might be able to get enough confirmations to make your false transaction look valid. And that's a problem, and it's a way that a large single guild could possibly create rule changes, but at his time it's probably not a major issue.