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Bitcoin Government Your Rights Online

Ask Slashdot: Should Bitcoin Be Regulated? 385

Nerval's Lobster writes "Federal regulators are starting to make noise about Bitcoin, the digital currency that's gained in recognition and value over the past few years: the Treasury Department's Financial Crimes Enforcement Network (FinCEN) is offering up 'guidance' for digital currency and those who use it as part of commerce. But the Bitcoin Foundation, which is devoted to standardizing and promoting the currency, doesn't like that idea; as Patric Murck, the organization's general counsel, wrote in a March 19 blog posting: 'If FinCEN would like to expand its statutory authority over "money transmitters" to include brand new categories such as "administrators" and "exchangers" of digital currency it must do so through proper rulemaking proceedings and not by fiat.' If Bitcoin continues to gain in value, it could spark a rise in virtual currencies—and force some very interesting discussions over regulation. But here's the question: would regulation actually be good for Bitcoin, if it made organizations and businesses more comfortable with using it as a currency?"
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Ask Slashdot: Should Bitcoin Be Regulated?

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  • by Cornwallis ( 1188489 ) on Saturday March 30, 2013 @06:32PM (#43320821)

    It should if you want it to be as legitimate as the dollar.*

    * That's a joke son.

    • It might be a joke but it raises the question: whose dollar? As a virtual currency whose regulations will apply to a transaction when, for example, one person is in Europe and another in the US?
    • by murdocj ( 543661 )

      it has a LONG way to go to be that legitimate.

  • Confused (Score:2, Informative)

    by Anonymous Coward

    How can your regulate something that you do not or can not control?

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      You might think bitcoin is impossible to control, but you're misinformed. The immediate rollback from 0.8 proves that all it requires is the large mining pools to reach a decision behind closed doors, and they'll implement whatever modified protocol they desire. The problem with such power being in the hands of the pools and large miners means all the government has to do is change them minds of 10 people, and they'll introduce whatever tracking/anti-laundering controls they desire right at the point of exc

      • The immediate rollback from 0.8 proves that all it requires is the large mining pools to reach a decision behind closed doors, and they'll implement whatever modified protocol they desire.

        If most of the power lies with the active miners, then perhaps there will be a temptation to change the protocol to increase the production rate. The people sitting on huge stacks of previously mined bitcoins don't seem to be have much control over the current mining/validation.

        • by Rich0 ( 548339 )

          Indeed, you can't even spend bitcoin without the consent of the miners.

          In fact, there is no obligation for the miners to allow any bitcoin to be spent at all (though if they did that they'd find it hard to spend their own bitcoin). They could simply generate new blocks and not include any transactions in them at all.

          It does self-regulate to some extent. If you offered a $100k transaction fee for your transaction I'm sure somebody would be willing to spend some CPU cycles to get a block and list your trans

      • Until of course, there are no more bitcoins to mine.

    • Re:Confused (Score:5, Insightful)

      by khchung ( 462899 ) on Saturday March 30, 2013 @11:16PM (#43322211) Journal

      How can your regulate something that you do not or can not control?

      So many posters here like to lament that lots of so-called "inventions" and patents are simply real world concepts with "on the internet" attached to it, so those should not be an invention nor should it be treated differently than their real life counterpart. E.g. selling songs on the Internet should be no different from selling songs on CD, i.e. you should be able to resell or lend it.

      Yet when it comes to Bitcoin, which is practically "money ... on the Internet!", all common sense got thrown out of the window.

      Cannot control? How can the government control the movements of small sheets of paper (i.e. cash)? Yet cash movement is still regulated. Same with small pieces of metal (i.e. gold, platinum, silver), or small bits of crystal (i.e. diamonds). Heck, even export of mathematical algorithms (encryption), information (movies, songs, classified documents) have been regulated in the past.

      The real world is not WoW, the authorities can and do have laws in effect without first needing the ability to make that law impossible to break in the world. The law is not a game, you won't get away with something simply because the physical world do not prevent you from doing it like you do with using aimbots and cheats.

      Bitcoin ARE already regulated just as everything of value is regulated. i.e. You can certainly _try_ to take a bag of diamond across border, and you will very likely succeed, though if you got caught, you will face harsh penalties. Similarly, you can certainly go ahead to transfer a large amounts of Bitcoins across borders, and you will most likely succeed without getting caught. But IF some law enforcement decided to target you, that transfer will be something they can get you punished for.

  • by Anonymous Coward on Saturday March 30, 2013 @06:35PM (#43320845)

    Here's another pointless story to remind you to invest in it! You'll be a billionaire!

  • I've looked, didn't find it. I just found some vague mumbo about cryptography with a ton of loaded buzzwords.

    I want specifics.

    1.) What is a bitcoin, EXACTLY?
    2.) How divisible is a single bitcoin?
    3.) All the specifics of any relevant protocols.

    • by GrandCow ( 229565 ) on Saturday March 30, 2013 @06:39PM (#43320877)

      I've looked, didn't find it. I just found some vague mumbo about cryptography with a ton of loaded buzzwords.

      I want specifics.

      1.) What is a bitcoin, EXACTLY?
      2.) How divisible is a single bitcoin?
      3.) All the specifics of any relevant protocols.

      You looked at what? First result of a google for "bitcoin white paper" is http://bitcoin.org/bitcoin.pdf [bitcoin.org], the white paper originally released by the creator of bitcoin.

      • My understanding is:
        1) A bitcoin is 100 million Satoshis. A satoshi is the smallest amount of value that can be exchanged on the bitcoin network. Each transaction on the bitcoin network transfers some number of Satoshis from one address to another. The number of bitcoins a wallet/person owns is the sum of the number of all the Satoshis that have been transferred to addresses in wallets they own minus the number of Satoshis sent *from* addresses in wallets they own, all divided by 100 million.
        2) 100 million

    • by Gendou ( 234091 )

      Protocol specification: https://en.bitcoin.it/wiki/Protocol_specification [bitcoin.it]

      1 Bitcoin can be subdivided into 100,000,000 Satoshis, the smallest possible unit under the current specification.

      • Why did they divvy it up this way? Since it exists only on computers, they could have divided it into 1,073,741,824 (2^30) parts for the smallest value. But what when the value grows and bitcoins need to be divided into more? Wouldn't Satoshis appreciate as well?
  • Bored (Score:4, Interesting)

    by stevencbrown ( 238995 ) on Saturday March 30, 2013 @06:37PM (#43320861) Homepage Journal

    If Slashdot now sponsored by the Bitcoin promotional council or something?

    seems like a story a day about it this week, I do find Bitcoin fairly interesting, but not reading about slightly different thoughts on it every day...

    • Re:Bored (Score:5, Funny)

      by Anonymous Coward on Saturday March 30, 2013 @06:42PM (#43320893)

      Dice pays the Slashdot staff in Bitcoins, so it's in their best interest to promote it.

    • by Sycraft-fu ( 314770 ) on Saturday March 30, 2013 @07:21PM (#43321165)

      One (or more than one) of the editors/staff is in to it and thus they push it here. Bitcoin is only valuable so long as people keep giving a shit and buying in to it. If suddenly everyone ignored it, the value would drop to zero. It has no national economy behind it, there are no taxes you can pay with it, there is no reason to hold it unless you are playing the bubble game with it. So those in Bitcoins need it to keep getting hype.

      • Well it's not a very effective strategy since most up-voted posts are against the technology.

        I'm starting to find the sociology of bitcoin even more interesting then bitcoin. It's fascinating how people are so passionately against a piece of crypto technology. Many people seem to have such a visceral dislike for it long before really understanding the fundamental technology. It's as if people kept yelling about how /. should stop posting about some new programming language.

        Oh wait I think I did do that abou

        • Funnily enough, many of those same posters have huge erections for gold. They probably feel that Bitcoin is a threat to their uneducated nostalgia.
      • While I'm no bitcoin miner, how is this sentence "only valuable so long as people keep giving a shit and buying in to it. If suddenly everyone ignored it, the value would drop to zero" any different to our current system?

        • by murdocj ( 543661 )

          The difference is that you can go pretty much anywhere in the world and buy things with dollars. Not so much with bitcoins.

          I have a wonderful new currency, the donuthole, that I think is much better than the dollar. Why would you want dollars instead of donutholes?

        • by ceoyoyo ( 59147 )

          National currencies are backed by large organizations (national governments) with lots of guns (national militaries). If, for example, some shopkeeper in the US decided to stop accepting US dollars, he'd get a nice visit from a man with a gun. On a larger scale, when Iraq decided they were going to stop accepting US dollars, they got a nice visit from a bunch of men with guns (and aircraft carriers). That last one might have been a coincidence, but the first one definitely isn't.

          In order for national cur

        • So yes, all currencies are just theoretical constructs, they have value purely because we believe they do. Yes even in the case of things like gold coins. If the world suddenly decided to stop taking a currency, it would cease to be one. Money is only money if you can spend it, and money is only money if people do spend it.

          However the difference is that US dollars are legal tender in the US. What that means is the government requires taxes to be paid in them, and so all of the country's residents who pay ta

    • Re: (Score:2, Insightful)

      In fairness to /., bitcoin value has risen dramatically in the last few weeks, so the attention isn't entirely unwarranted.

      • by murdocj ( 543661 )

        Will it get as much attention when the bitcoin has another huge swing and drops way down in value?

    • Re:Bored (Score:4, Insightful)

      by khallow ( 566160 ) on Saturday March 30, 2013 @09:26PM (#43321745)
      How many Linden dollars is a bitcoin worth?
    • its because its rose above 90$ a coin duo the run on them because of that bank having troubles. once the run on them ends and the new rigs get shipped i bet they will drop back down to below 11$.
  • Let's not get confused here, people.

    1. Government doesn't care about stability. They care about being able to tax it.
    2. Government doesn't care about stability. They care about being able to tax it.
    3. Government doesn't care about stability. They care about being able to tax it.
    4. Government doesn't care about stability. They care about being able to tax it.

    • They care about stability if it interferes with their tax revenues.

    • Actually, no. As a rule governments do care about stability - more accurately they care that they have final control over the stability so that they can game the system as they see fit. For an extreme example see exhibit A: every case of hyperinflation, ever. Now I suppose you could consider inflation a savings tax, but very few economists (or governments) will actually term it such.

  • If it moves, tax it.
    If it keeps moving, regulate it.
    If it stops moving, subsidize it.

  • by JabrTheHut ( 640719 ) on Saturday March 30, 2013 @06:57PM (#43321001)
    If regulation is based out if the USA that will make it a no-go for me. The US already illegally snoops my EU-based bank account, illegally gets my UK-based purchase data and has illegally obtained SWIFT data in the past. A US-based regulator is not to be trusted.
  • by Lehk228 ( 705449 ) on Saturday March 30, 2013 @07:01PM (#43321033) Journal
    bitcoin already is regulated, it's just difficult for .gov to track so many people do not report their income and the banks like mtgox don't follow the rules.
  • by Anonymous Coward on Saturday March 30, 2013 @07:06PM (#43321063)

    Perhaps a more pertinent question would be this - if an international currency is to be regulated, who should be in charge of the regulation? Who has jurisdiction?

    In science fiction (at least, in games, not so sure about literature) we often see the term 'credit' used to refer to some vague internationally accepted currency. But if such a thing existed (and bitcoin might be heading that way), who sets the rules on it? if it's 'every country', then the concept breaks down and the currency becomes unworkable as you start having to track too much to use it. If it's the UN? I don't see the US ever accepting that.

    So that leaves the only workable answer as the originators or the currency.

    Regardless, different nations can tax transactions in the currency with the same rules they use for domestic currencies. If the currency is processed by a domestic bank or financial institution, they'd have to process it in much the same way as they would any other transaction. So it seems the simplest way to handle these things is just to make it clear in the law (if it isn't already) that all transactions, regardless of currency, must adhere to the same rules.

  • by onyxruby ( 118189 ) <onyxruby&comcast,net> on Saturday March 30, 2013 @07:08PM (#43321093)

    Exchanges have been compromised, customers have lost money, basic protections are absent. It is used freely for the silk road drug trade, hiding money from governments and evading taxes. Can anyone seriously make the argument that it won't be regulated?

  • Already is regulated (Score:4, Informative)

    by michaelmalak ( 91262 ) <michael@michaelmalak.com> on Saturday March 30, 2013 @07:15PM (#43321135) Homepage

    https://en.bitcoin.it/wiki/Tax_compliance#Are_my_bitcoins_taxed_as_income.2C_or_as_capital_gains.3F [bitcoin.it]

    Are my bitcoins taxed as income, or as capital gains?

    Income that is earned through the exchange of services with another person, whether in the form of bitcoins, dollars, or barter; is included in gross income, and would be subject to income tax at applicable rates. Also these bitcoins could be subject to self employment tax.

    In some jurisdictions, income earned through the process of buying and selling bitcoins would also be included in gross income, but would be treated as capital gains.

    Note: The above interpretation is based on the assumption bitcoins are treated as a store of value such as gold, or other such commodity. If instead they are treated as a currency or debt, the full gain could be taxed based on market value at the end of each tax year. 3858 IRS Ends Currency ETN Adantage Simply put, the IRS never considers currency a long-term investment. Consequently, if bitcoins are treated as a currency, you will be taxed the same as holding an account in any non-functional (foreign) currency.

    I.e. if bitcoins are treated the same as gold coins, then for every transaction, one must calculate the capital gains or loss, and pay 28% tax on the total net gain on Form 1040 Schedule D. For anyone who tries to comply with U.S. tax code, such as those seeking political office or security clearance, this makes it impractical to use bitcoins for everyday transactions, and practical only for occasional, large transactions such as investing in bitcoins for the medium or long term.

    • I'm pretty sure you only pay capital gains upon those gains actually being realized. For example, if you own a house that suddenly doubles in value, you aren't expected to pay any taxes* on those gains until you sell it. Otherwise they could very well be taxing you for money that you never earned and possibly don't even have. I don't think the government would fare too well if they booted you out of your house because you haven't paid them on the income that you never received.

      * property tax is separate.

  • by Rinisari ( 521266 ) on Saturday March 30, 2013 @07:18PM (#43321149) Homepage Journal

    Please check out http://bitcoin.stackexchange.com/ [stackexchange.com] for questions and answers like these!

  • by detain ( 687995 ) on Saturday March 30, 2013 @07:20PM (#43321159) Homepage
    bitcoin isnt a popularity contest, its an open distributed currency that was originally created to get away from the current system. asking if government regulation is a good tradeoff for increased popularity means you clearly dont get why people created bitcoin or are switching to bitcoin
    • by CaptBubba ( 696284 ) on Saturday March 30, 2013 @09:24PM (#43321731)

      No. Bitcoin was created as a plaything "fun with crypto" proof-of-concept and was never intended to be used for anything more. A bunch of people who wanted to get away from the current system (both those with hopes of striking it rich as a early adopter and those who needed a new currency for less-than-legal activities online after e-gold got shut down) latched on and that's where we are at now.

      The bitcoin protocol is showing its weaknesses every day, particularly when it comes to scaling up to higher transaction volumes. The blockchain is getting bloated by SatoshiDice which is a nearly perfect transaction spamming system and the bugs in the older clients which nearly forked the blockchain a while ago mean there is presently a hard limit to the number of transactions registered every 10 minutes. Combined with the fact that some miners set the number of transactions they process if they hit a block to be very low in order to try and beat out others (smaller block propagate ever so slightly faster) and there is now a very real delay in transactions going through: more than enough to scuttle any chance to use bitcoin for anything other than a curiosity and which will only get worse.

      Government doesn't need to regulate bitcoin: it will kill itself.

      • by tftp ( 111690 ) on Saturday March 30, 2013 @11:11PM (#43322193) Homepage

        there is now a very real delay in transactions going through: more than enough to scuttle any chance to use bitcoin for anything other than a curiosity and which will only get worse.

        Nonatomicity of transactions (caused by delays in processing, for example) will result in you being able to pay for two products with the same bitcoin. Credit card transactions are atomic, and besides c/c does not transfer assets. BC transactions do that.

        While an Internet seller may be able to detect the failure in time and refuse to ship, a brick-and-mortar store cannot do the same; so if several people walk in with copies of the same wallet and buy a $1,000 TV at the exact same time their transactions will be registered.

        The official solution is to wait for several (six) confirmation blocks. But that can take 10 minutes on average - and more if BC sees more use. Do I want to wait 10 to 30 minutes at the store until my payment goes through? No way. Those [mythical?] BC users who buy coffee with their BCs, do they wait 10 minutes before they are given a cup?

        • by ceoyoyo ( 59147 )

          That's not really that much of a problem. Big transactions take time. When I bought my car I had to wait a day for the dealership to confirm that my cheque was good. I could have gotten around that by getting it certified by a bank, but only if I stored my money with that bank already.

          Small transactions will be on the (short term) honour system. I the days before we had electronic credit card verification the store would take an imprint and only find out later whether the card was good or not. If you d

  • yes (Score:2, Informative)

    by houbou ( 1097327 )
    all forms of currency should be regulated, else there will be abuse, it's that simple and it's been proven historically over and over again.. Even today, normal currency gets counterfeited.. So, digital currency can't?
    • Re: (Score:2, Informative)

      by Anonymous Coward

      No, bitcoin can't be counterfeited, that's kinda the point. Distributed transaction history shows source of every satoshi.

    • Show me how you can -truly- counterfeit gold/silver, the only things that have been historically always accepted as money. Sure, you can try to fake it with brass/white metal but under any sort of inspection it fails miserably, its density won't be close to gold and so it will either be the wrong weight or wrong diameter. You can try to fake gold with tungsten but, in all but the largest bars, a simple punch (like what you see on silver/gold bullion ranging from antiquity to present) will bring the counter
  • Bitcoin was built to evade controls. Sure you can regulate that transactions above a certain amount must be reported, but good luck enforcing it. Transactions can be split into thousand of components at no cost, be dispatched through mixers to thousands of wallets. If the government become savvy enough to track such movements, then anonymous internet banking with chaumian cash can be implemented on top of bitcoin.

    So if regulation gives the government the temporary illusion that it's controlling bitcoin, the

  • One of the founders of a currency designed from the ground up to be resilient to Government intervention, is now complaining that the Government wants to intervene. Have they realised they failed in their mission (which at this point, I think is too early to say) or were they naively hoping it would never actually happen. Or maybe, the anti Big Brother thing was just marketing and they actually expected the whole thing to collapse (and they would have cashed out) long before that point.
    • They haven't failed in anything. There is no central authority on bitcoins, so I'm not sure what or who they would regulate. That would be like saying the government could regulate the tor network. If they had that much power, the Silk Road would be gone already.

  • I owe you (Score:5, Interesting)

    by dinther ( 738910 ) on Saturday March 30, 2013 @08:04PM (#43321361) Homepage

    Money is a "I owe you" As long as we play the game and use fiat money the governments can regulate but there are so many kinds of alternative currencies becoming more popular.

    It is quite common to do a plumbing job for a mate and have the mate come around one weekend to build a fence. I owe you. Currencies can take so many forms and those that are trusted will become main stream.

    After I have done a plumbing job for my mate he owes me building a fence. However, I don't need a fence but my neighbor who is a baker does. What I do need is bread. I can go to the baker and pass on my mates debt of building a fence to the baker in exchange for bread but if my mate has a bad reputation and the baker doesn't trust my mates promise then there can't be a deal.

    Governments can only regulate through compulsion. Fiat money that may not be refused as a legal tender. But with bitcoin, they don't appear in the game at all. I like that.

  • Wrong Question (Score:5, Insightful)

    by bill_mcgonigle ( 4333 ) * on Saturday March 30, 2013 @08:32PM (#43321473) Homepage Journal

    Clearly everybody involved with Bitcoin does not want to be regulated - if they did it would have been designed differently.

    So the actual question here is, "should an unregulated currency be allowed to exist?" Or, without the euphemisms and passive voice, "should we bust the heads of people who use an unregulated digital currency?"

    • when we used the gold standard are currency was unregulated. the feds started the regulated crap so they could control the money and make themselves richer..
    • I prefer your second choice of conceptualizing the question. The phrase "should X be allowed" puts the burden of proof on choosing freedom, but I prefer that freedom always be the default choice until otherwise persuaded.

      I guess it's somewhat definitive of libertarian to consider the answer to "should X be allowed" to always be true, until someone gives a very convincing argument otherwise.

  • Bitcoin is not "legal tender" nor is it a government-backed currency. It is a contract for trade based on a nearly secure system. If you can buy discount coupons or tokens and trade them for goods and services, why not Bitcoins? Not only is this virtual currency helpful, but the purchase price changes to reflect the relative risk and combined value of the purchasing currency. Apparently the value of a non-regulated currency has appreciated about $40 per unit over the last month.

  • by Gonoff ( 88518 ) on Saturday March 30, 2013 @09:30PM (#43321773)

    I am just not keen on the idea of the US government being the one to do it.

    Is Bitcoin restricted to the US only? In that case, it would be up to the US to look after its own.

    The problem is that the US government regularly shows that it has as much idea about "international" as I have about gynaecology. It's complicated, do do with other people and it really helps if you actually know where the patient is.

    You can tell the suitability of someone to have any say in something trans national if you find out how they feel about it being regulated by a UN body.Yes the UN contains corruption but so does every government in the world and the US one is well known to be in corporate pockets to an impressive degree.

    Sure Congress can identify Bitcoin use as gambling or something and that will keep it under control of the Mafia where it belongs but fortunately, the remaining 96% of humanity can ignore their veniality.

  • by slashmydots ( 2189826 ) on Saturday March 30, 2013 @10:01PM (#43321955)
    Let me end this right now. It's unregulateable. They can try to nip at the heels of the exchanges but other than that, it's impossible. Nobody runs it, nobody controls it. It's distributed, encrypted, and transactions cannot be modified or blocked or intercepted or duplicated. So that sort of makes any "decision" pointless.
    • by tftp ( 111690 )

      Let me end this right now. It's unregulateable.

      It's trivial to regulate. On the mild end of regulation a BC user probably violates a few IRS and local taxation laws per transaction. On the harsh end of regulation BC transactions may be made illegal.

      You can still hold illegal BCs and you can use them - just as you can own a "hot" handgun and carry it illegally. Once you are apprehended this becomes an additional charge. Nobody will to go after you unless you are "a person of interest." Once the authorit

  • hell no. (Score:4, Interesting)

    by shentino ( 1139071 ) <shentino@gmail.com> on Saturday March 30, 2013 @11:42PM (#43322285)

    Regulation doesn't stop corporate elite from robbing us blind and committing all sorts of fraud with our money.

    Fuck regulation, all it gets us is smoke and mirrors reassurances that don't have any teeth.

    I'd say that bitcoin is better off staying wild and untamed. At least that way people KNOW not to be stupid with who they trust.

    With dollars, people get lulled into a false sense of security.

    With bitcoins people are naturally paranoid and are much more careful.

  • by czth ( 454384 ) on Saturday March 30, 2013 @11:59PM (#43322327) Homepage
    Translating "Should Bitcoin Be Regulated?" into its plain meaning, that is, "Should peaceful Bitcoin users be threatened with harm, or harmed?" should yield the answer almost immediately: of course not, any more than any other peaceful people should be harmed, whether they want to sell or consume "large" sodas, trade or manufacture "high" (standard) capacity firearm magazines, use drugs, give food to the hungry, or engage in any other pursuit that is not directly harmful to other people or property. How can it ever be right to so threaten and harm peaceful individuals? And is not all regulation such a threat - give us money or we will harm you (take the money by force, cage you, murder you if you resist); conform to our requirements, even though you do no harm, or we will harm you? There is no case where such harm is justified.
  • By whom? (Score:5, Insightful)

    by jandersen ( 462034 ) on Sunday March 31, 2013 @04:39AM (#43322961)

    Bitcoin is already regulated by somebody, so it is only a question of who gets to write the rules. It's a bit like PayPal - they do all the things a bank does, but they escape bank regulations by not calling themselves a bank - I don't think I need to reiterate all the complaints against PayPal, so I won't, but they are getting away with these things because they don't follow the normal banking rules.

    The reason we have laws and standards regulating the handling and production of money is to protect society, ie mostly ordinary people. And the reason the rules have to be written by the legislature is that self-regulation never works in favour of people, it only works for the said industry. At least the government has to consider all the industries, and who knows, maybe even the people sometimes.

    As far as I can see, somewhere behind Bitcoin there's a group of people who are making a profit from it, and whose profit would be diminished by having to follow rules meant to protect the ordinary user. I haven't been able to find out who they are; IMO, you should never trust a business who doesn't want to look you in the eye. There is nothing wrong with wanting to make money out of something, so why hide behind anonymity? It is certainly not because they are saintly idealists who only want the best for you. Remember the old saying: "If it's too good to be true ..."

Any sufficiently advanced technology is indistinguishable from a rigged demo.