Bitcoin's Success With Investors Alienates Earliest Adopters 158
holy_calamity writes "Digital currency Bitcoin is gaining acceptance with mainstream venture capitalists, reports Technology Review, but at the price of its famed anonymity and ability to operate without central authority. Technology investors have now ploughed millions of dollars into a handful of Bitcoin-based payments and financial companies that are careful to follow financial regulations and don't offer anonymity. That's causing tensions in the community of Bitcoin enthusiasts, some of whom feel their currency's success has involved abandoning its most important features."
If you... (Score:5, Insightful)
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No, If you did not see this coming, you must not be new here...
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If you saw this not coming, you must not be here.
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I never read articles pertaining to bitcoin; I just read the /. comments with a bucket of popcorn.
The hysteria from both sides is going to get a lot better as the bitcoinpocalypse approaches.
Think of the planet! (Score:1)
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Why are they complaining?
Nobody is forcing them to use the payment and financial companies.
They can use bitcoins just as they did before any corporate entities got involved.
How do they remove anonimity? (Score:5, Insightful)
I don't understand, how are they removing the anonimity of Bitcoin? They aren't changing how the algorithms work I assume?
Re:How do they remove anonimity? (Score:5, Informative)
I don't understand, how are they removing the anonimity of Bitcoin?
They aren't. Bitcoins can now be used in new venues, but that does not stop private transactions. The article is just stupid. If I deposit cash in a bank, I will be recorded by a security camera. But that doesn't mean I can no longer buy stuff anonymously with cash at the local flea market.
Re:How do they remove anonimity? (Score:5, Informative)
But you can wipe your fingerprints off that cash. Coins don't even have serial numbers and the numbers on notes are not tracked in every transaction.
You can't wipe your bitcoin address off the block chain.
If you associate that data with a person, they're forever tied to that transaction and you can follow it.
Re:How do they remove anonimity? (Score:5, Insightful)
So? That's been the case with bitcoins since day one, the anonymity claims were always pure hyperbole. If you wanted anything more than security-through-obscurity grade anonymity you needed to pass your coins through an (illegal in most jurisdictions) money-laundering service and hope they didn't keep any records themselves. All that's changing is that now there's institutions joining the game who are doing their legal record-keeping duty to tie the accounts they deal with to particular people. Unless they refuse to honor any bitcoins that have passed through a money-laundering service recently nothing has really changed except the currncy is . And if they do so refuse, well then... nothing has really changed because they didn't honor *any* bitcoins previously, so your laundered coins are still just as good.
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The fact that they can even tell the difference makes bitcoin less anonymous than physical money. Maybe the anonymity wasn't the selling point for bitcoin, maybe it rather was that they can be used without any regulation. Bitcoins can be used without regulation, but what you trade with bitcoins can still be regulated. That holds regardless if that something is goods or real currency. (The large focus on bein
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The fact that they can even tell the difference
How is that a fact? How would one readily tell whether a transaction has come from, say, a Silk Road wallet?
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The comment I was replying to, was implying it was a fact. Others have implied that as well, and I haven't seen anybody deny it. If you think they are wrong, you are welcome to present your argument, then I'll watch from the sideline until I know which side to believe.
Silk Road run a mixing service? I have only seen it presented as a market place for trading goods using bitcoins.
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Silk Road run a mixing service?
I believe they have an internal bitcoin mixing service. See here [slashdot.org], "Bitcoin wallet that mixes all incoming and outgoing coins so as to obscure their origin".
Or here [bitcointalk.org] "Silk Road has a built in coin mixer. When you add coins to your account, they are sent through a bunch of dummy transactions, split up and recombined with the coins of other people."
There is likely more detailed info on the SR forums.
Re:How do they remove anonimity? (Score:4, Interesting)
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Please feel free to support your claim with facts.
Re:How do they remove anonimity? (Score:4, Informative)
You can't wipe your bitcoin address off the block chain.
If you associate that data with a person, they're forever tied to that transaction and you can follow it.
But you can create as many bitcoin addresses as you want. You can use a different address from every transaction. The only way it can be tracked to you is if "they" already know who you are by other means.
Re:How do they remove anonimity? (Score:5, Informative)
Unless you use a different address for every transaction you will ever make, "They" find out your entire transaction history as soon as they match you to a single transaction, through one of these new services popping up that keeps and shares records with "Them"
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I don't use it myself, but I remember reading something along the lines of "never reuse your addresses" in the documentation.
Re:How do they remove anonimity? (Score:4, Informative)
I thought using a new address for every transaction was the advised method of using bitcoin.
I don't use it myself, but I remember reading something along the lines of "never reuse your addresses" in the documentation.
How do you get bitcoins into the new address? You either have to mine it, buy it, or transfer it from another address. Most likely you transfer it, and what account you transferred it from is public record. So, all your accounts are effectively linked, even if you use a new one for every transaction.
Sure, you can have multiple completely-independent accounts, but you can't move money between them unless you pass it out through cash, or you mine it. The ability to pass it out through cash is limited due to the developments in TFA - banks are asking for ID. So, unless you mine ALL the cash you use in discrete unrelated bundles, you're traceable. Mining is pretty expensive and a hassle, though it can be done (though over time it will become less and less practical).
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It's really just finally getting to the point where it is getting easier to buy bitcoins with THINGS instead of MONEY if you want to maintain your pseudonymity.
Sure, assuming you can find another party to sell your things to who doesn't log your identity. However, chances are the money you buy in this way is traceable to the person who sold it to you, which means that they'll probably get questioned by the police when you use that money to do something illegal. If that becomes a trend, expect to find few people willing to trade things for bitcoins without ID.
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The point is at some stage you are using bitcoins to purchase real things
And how do you lose anonymity with that? Even if you can be identified by that transaction, so what? You can't be associated with previous transactions. Buying a car with bitcoins doesn't prove that you were the same guy who sold marijuana for bitcoins a few transactions back.
Re:How do they remove anonimity? (Score:5, Interesting)
If you associate that data with a person, they're forever tied to that transaction and you can follow it.
Yes and no. Once you associate "me" with a transaction, you can always prove I owned part of block B at time T. You can't, however, prove that when I "spent" those bitcoins, I did or did not simply send them to myself, making anonymity (at least, at the "plausible deniability" level) always just one easy transaction away.
And for the really paranoid, you can use any of a dozen "mixing" services, that take your bitcoins along with those of thousands of other people and stir them all together to make tracing the ones you put in to the ones you take out as close to impossible as matters.
Re:How do they remove anonimity? (Score:4, Insightful)
The term "mixing" sounds less pejorative than "laundering", but the principle is the same: disguise the transfer of wealth. I expect that some extreme pressure will be put on these mixing services as Bitcoins gain traction with nations.
Re:How do they remove anonimity? (Score:4, Interesting)
As I pointed out, though, you don't really need to use a mixer - You can accomplish almost the same thing just by sending your bitcoins to other accounts you control in more or less random chunks. You could even, if really motivated, create your own mixer with thousands of your own accounts. A handful of illegal sources go in, along with a large volume of legit transactions, stir stir stir, and who knows that you-#1701 equals you-#42 unless you tell on yourself?
Granted, we already have laws against "structuring", but even as blatant of a cash-grab as those laws appear, they still require "you" to deliberately make a series of related sub-$10k deposits specifically to avoid filing a CTR/8300. Key point there, they need to prove both intent (the standard defense), and the "you" part (which Bitcoin's entire structure makes all but impossible, though ironically, if they could prove all the accounts as you, that would pretty much put a nail in the "intent" coffin).
Re:How do they remove anonimity? (Score:4, Insightful)
Or a search warrant is issued and your wallet file is taken from you, containing all your addresses.
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Presumably someone as paranoid about anonymity as this would have their wallet file encrypted.
I agree with the rest of your post about reasonable suspicion, but encryption won't get you anything. In the US they can keep you in jail for life for failing to divulge an encryption key, even if you were only charged with a crime that carried a six month sentence.
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That case was novel because it was the first time a court DIDN'T toss somebody in jail indefinitely for failing to disclose an encryption key. The only reason they ruled this way was because the prosecution couldn't give evidence that it was likely that the defendant knew the key, and divulging the key would have therefore provided evidence that he did, and was therefore associated with the encrypted content. The defendant argued that he had just received the hard drive and did not know anything about the
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I assume in the US they'd issue a search warrant for suspicion of money laundering.
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You're confusing wealth with money.
As a side note, the poor - and everybody else for that matter - are wealthier than they've ever been. Not by a little, but by a lot. DVD players, cell phones, cars, personal computers...If you look back far enough, only the richest of the rich owned any one of these things. This is the difference between wealth and money. Try to find somebody who doesn't have any one of these things who wants one.
http://buburuza.net/2009/01/homeless-bum-using-the-web/ [buburuza.net]
Capitalism has done fo
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Re:How do they remove anonimity? (Score:5, Insightful)
Bitcoin is and always has been psudononymous. It's trivial to track the flow of coins between bitcoin addresses (which are essentially psudonyms). So how much anonymity there is depends on how difficult it is to associate those bitcoin addresses with real people.
How difficult it is to associate those addresses with real people depends hugely on both what records are kept and how many significant players there are in the bitcoin market (it's much easier to force a small number of large entities to hand over records to the cops than it is to force a large number of small entities to do it)
When was Bitcoin anonymous? (Score:3)
Most important, though, is this: very few people actually want to use Bitcoin. Most view it as a way to make an electronic transfer of government-backed fiat currencies, so they rely on services that do the Bitcoin transfers for them and exchange Bitcoin currency for fiat currency. Those services are going to comply with the law and require things like i
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This implies that you need another agent to complete a Bitcoin transaction which is not the case.
Yes most bitcoins flow through currency exchanges (though personal transactions such as LocalBitcoins.com are pretty common still).
I suppose of Bitcoin anonymity you could say you can keep track of the contrac
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I suppose of Bitcoin anonymity you could say you can keep track of the contractor you paid the BTC to, but you can't tell where his employees buy their groceries.
Unless you bother to examine the public record of all Bitcoin transactions.
This implies that you need another agent to complete a Bitcoin transaction which is not the case.
Except that you need to broadcast the transaction to the Bitcoin network, which must then confirm that the transaction is valid. What I said is that most people rely on another agent to complete their transactions for them -- because most people want fiat currency, not Bitcoin currency, and they usually do not want to wait for confirmations (nor do they want to accept payments without confirmations) or deal with an ever-fluctuat
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You certainly used to be able to do that for centuries. That only stopped when governments needed to finance expanding military debts and started moving to fiat currencies; that entailed making the use of other forms of currency illegal.
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Actually, you can still do this. Its just that most people don't want to receive a lump of what might be gold (and the attendant responsibility for validating it, weighing it, etc) in exchange for cooking you some pancakes. In the age of international shipping we're currently in it also holds your country's currency hostage to the countries that own the mines and can increase your money supply for you.
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You can barter with gold, but that's legally quite different. As for currency being held hostage by the countries owning the mines, mining gold is hard and annual production is a small fraction of total gold in circulation; countries already have an incentive to extract as much as they can. In addition, the amount of available gold per capita has remained fairly constant over time, actually making it a pretty good standard of value.
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No, half of all gold ever mined has been mined since 1967.
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And in 1967, the world had about half the population it has today. Funny how that works out.
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Bitcoin is not by itself anonymous. It doesn't hide IPs, all the transactions are public, all the accounts balances are public. Bitcoin can be anonymous if you never link your identity to a bank account. That is, if you manage to hide your identity while buying bitcoins and while buying stuff with it.
Bitcoin was touted as an anonymous currency because it can be used as such in the dreams of cryptoanarchists who imagine a so
Hipsters (Score:5, Funny)
"I liked Bitcoin before it was cool. It's too mainstream now"
Re:Hipsters (Score:5, Funny)
Re: Hipsters (Score:2)
nothing acceptable without "sellout" (Score:3, Funny)
also, no "free as in beer" and no "quality goes in before the name goes on." the news knocked me right off my unicorn, and I am so embarassed...
If you think Bitcoin was ever Anonymous... (Score:5, Interesting)
...I've got a bridge somewhere that needs to be sold that you might be interested in.
Bitcoin does irrefutability (i.e. the ability to prove that a transaction occurred, and occurred only once). I can thus prove that I do, in fact, own all Bitcoin I possess.
It never has been anonymous. There are characteristics that make it more difficult to trace the payer, but the protocol and implementation have never been configured (or designed) to be a strongly anonymous technology.
Re:If you think Bitcoin was ever Anonymous... (Score:4, Informative)
http://www.theregister.co.uk/2013/05/23/bitcoin_spam_byzantine_generals/
-I'm just sayin'
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I would agree with you if Silk Road was not still operating strongly, and with the only related busts being from tracking criminals through something other than the bitcoin trail.
In theory it may not be anonymous but in practice it is.
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I'm not even sure if it is legally significant who paid for the drugs. I'd think it's more important to know who received them. Two quick scenarios to illustrate; one is legal, another is not.
1) You approach the drug dealer and give him $10. You never receive anything in return.
2) You approach the drug dealer and receive a dose of a drug for free.
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It is...kind of.
The transactions are fully public of course.
The semi-anonymous part is tying a bitcoin address with a specific person. You'll have a lot of difficulty doing that if they are being careful.
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You and I will (for now). I seriously doubt it'd be more than a minor project for the FBI or other institution that deals with the pattern analysis necessary to identify tradtional money laundering operations.
Now of course you could use any of the numerous mixing (aka money-laundering) services out there to "disconnect" your public and anonymous tranactions - but they have two major problems that I can see:
* money laundering is illegal in most jurisdictions, and you've just publicly announced that
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Laundering is complicated. And seldom effective. It also requires trust, somewhere along the line.
Microsoft has been exploring the ZeroCoin protocol, which - when added atop bitcoin - provides for real anonymity.
Here's a Microsoft Research video presentation:
http://research.microsoft.com/apps/video/dl.aspx?id=192058
Enjoy.
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Masking your IP is another (solved) problem
I fully expect that tor will be completely mappable by this time next year, with every packet in tracked to the exit out (or onionsite) and back, especially as we get closer to universal data retention laws making it trivial to find out who sent every packet where.
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Yes, but you'll still need to at some point transfer money from account A to account B before you can spend it in another transaction, and unless you're a brilliant information-theorist or use a money laundering (excuse me, "mixing") service it won't be terribly difficult to link your various accounts to the same entity.
Bitcoin is a novel success (Score:2)
Loss of anonymity and regulation happens to anything that becomes large enough to be noticed.
The ultimate laissez faire capitalist technology (Score:4, Insightful)
Is selling out to the highest bidder. How dare they.
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Is selling out to the highest bidder. How dare they.
Duuuuuuuuude, this is some chronically dank stank you got. I need to buy ME some bitcoins, man!
Simmons, he's the one. That's the highest bidder. Sell Now!
Hipster Bitcoiner Kitty (Score:2)
The only anonymity lost it the ability to convert (Score:5, Insightful)
Bitcoin is and always will be just as anonymous as it was promised. No one EVER said exchanging Bitcoin for other currencies would be an identity protected venture. In fact it's always been assumed by anyone with any brains at all that Bitcoin is only anonymous as long as you keep it Bitcoin and don't trade it for any hard goods or currency.
There have always been regulatory requirements that make transaction tracking easy for government when you convert to currency or goods. And this has ALWAYS been BitCoins greatest weakness because at the end of the day the currency is only as valuable as it's ability to exchange it for goods. That exchange will never be anonymous.
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In fact it's always been assumed by anyone with any brains at all that Bitcoin is only anonymous as long as you keep it Bitcoin and don't trade it for any hard goods or currency.
But if no one ever trades Bitcoins for hard goods or currency, then they are worthless.
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That exchange will never be anonymous.
I wouldn't say that... I would say that exchange will sometimes not be anonymous. Especially when that exchange is made from bitcoins to a currency, and one of the trading partners is a large institution with regulatory requirements to meet.
But there will be other cases where it could be nearly anonymous. Mainly when neither of the trading partners keeps records of the identity of the other trading partner; or when they trade without learning the identity of
the bottom line.. (Score:3)
Pyramid scheme (Score:2)
why do i have this suspicion that the whole bitcoin is some elaborate, very drawn out, convoluted, mutated version of a pyramid scheme?
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why do i have this suspicion that the whole bitcoin is some elaborate, very drawn out, convoluted, mutated version of a pyramid scheme?
You tell me why... because I don't see it. No referrals, no downlines, none of that telltale pyramid stuff.
First they were worth squat, then there was all kinds of marketing hype, the value skyrocketed as a result, and then bam...it crashes. A lucky few got in before the marketing (knowing it was coming) and bailed out while it was spiked. To me that more closely represents a pump & dump.
Re:Pyramid scheme (Score:4, Interesting)
there are tons of unaccounted for bitcoins harvested in the early days they will not reenter the market until
a) the market is large enough to not crash when whoever is sitting on them cashes out
or
b) whoever is sitting on them needs the money badly enough not to care.
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Because you don't understand it.
Bitcoin versus Real Money (Score:4, Insightful)
Bitcoin may have its problems and speculators are really bad for anything, but so called 'real money' is just as bad and maybe worse.
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...which is part of why fiat money makes sense.
Yes, and there are reasons why fiat money does not make sense...like being able to create more by more fiats.
Re:Bitcoin versus Real Money (Score:4, Funny)
I paid cash for a Fiat. Worst car I ever owned.
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If you think about it cash is at least as ridiculous. That's just some guys with a fancy printing press and government backing saying "Hey, let's print a few million bucks more today". Works great so long as the government is responsible about it, but as every case of hyperinflation in history shows there's no guaranty on that front.
This is as it should be. (Score:1, Interesting)
It is impossible to build an anonymous irrevocably currency on top of a revocable non-anonymous. Thus, you can't make something like bitcoins as a layer ontop of credit cards, traditional banks, checks etc.
However, it is possible to do the reverse: you can (and they did) build a revocable non-anonymous payment system on top of bitcoin. This is good: now bitcoin is being used for both kinds of currency. You don't lose the ability to spend bitcoins anonymously and irrevocably just because there are now ways t
A replacement for BitCoin! (Score:2)
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You can tell what level people got stupid cynical and stopped figuring out Bitcoin:
Level 1. - Internet Money
Level 2 - Mining
Level 3 - Anonymous
Level 4 - Pyramid Scheme
Level 5 - Specific Theft vs Overall security
Level 6 - Government shutdown
If you're so sure that BTC will drop in value then sell it short, there are resources available.
Selling Short: I talk to someone who owns some Bitcoins or more likely has clients who own Bitcoins. I agree with him to sell those Bitcoins now with an agreement that I will p
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I'd be more than happy to short the hell out of Bitcoins if I had the resources. And even if I did, a smart man once said the market can remain irrational longer than I can remain solvent.
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SilkRoad as an example (Score:1)
Lets look at the structure of silk road and we can come to some sort of understanding of how this may play out for anonymity.
You have a account with Mt. Gox, So they know your starting wallet number. They then trace it to a ID over at silk road, however they have no idea that it is silk road, for all they know it is simply another wallet of yours, or your friends. Then silk road handles the transaction between the two wallets it has. After that the seller needs to transfer the bitcoins back to a agency l
Yeah, they may control the gates to Disney Land... (Score:2)
... but once you get in, you can take any ride you want.
"Anonymity" (Score:2)
Bitcoin NEVER afforded real anonymity. It only afforded slight obfuscation. See: http://anonymity-in-bitcoin.blogspot.com/2011/07/bitcoin-is-not-anonymous.html [blogspot.com]
You guys are missing the point (Score:1)
The weakness is not with bitcoin itself, but with trading traditional currency for them. There will be a point where only people with extravagantly modern mining rigs will be able to make any profit from mining.
Therefore, the average person will have to buy bitcoin from an exchange where it will undoubtedly be regulated.
another untruthful bitcoin article (Score:2)
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They could throw $50 billion at it and not destroy the network
If they want to destroy bitcoin then all they need to do is get more hasing power than the rest of the bitcoin network put together. I'm fairly sure that with the current level of hashing power that is within the reach of most governments.
Once they do that they can create arbitary rules for refusing transactions they don't like. For example they could require that all bitcoin addresses used as transaction destinations are registered with the government before use. They would enforce these rules by refusing
This is all about money laundering (Score:3)
The regulatory agencies that control the major banks won't permit overt laundering schemes that are within the reach of any but the most sophisticated bankers.
That said, f' them. By all means, allow bitcoin to become whatever it is going to become. But the technology that built it can be made again and again and again.
Set up another bitcoin currency. And this time learn from the mistakes. We might have to proxy the money into and out of the system through cash. That is... no electronic deposits or withdrawals. Rather, use cash. Cash is by its nature opaque. Set up accounts like pre paid debit cards. The cash in the system but no names. Only ID codes linked to the money but not to people.
This will shield the next system behind the legitimacy of physical currency itself. Physical currency won't go away. The governments say they don't like it because its hard to trace but there are many purchases they make that are intentionally murky. Remember the giant bricks of cash sent to Iraq? Literally pallets of 100 dollar bills stacked and shrink wrapped. Why did they do that? Think we couldn't have come up with an electronic and documented system? We chose not to do that. And think the big banks are entirely upfront about all the money that flows through their systems? Most of it is tracked and documented. But some of it is intentionally obfuscated. Go to Switzerland or Luxemburg and you'll find whole industries based on the practice.
All Bitcoins would do is let the middle class have access to the same financial toys afforded to the very rich.
I believe in the freedom of money. I understand that controlling money makes law enforcement easier. You can track what people are doing by following money. But you could say the same thing about putting cameras in people's homes or tapping every phone in the country.
I have the right to privacy. And while many will disagree with me, I will respond that they can TRY to stick cameras down my throat to see what I ate for breakfast but I won't make it easy for them.
We can be free. If even 1 percent of the economy flows through these systems it will break the control the government has on us.
Sucks for early adopters (Score:2)
This 1,000,000% increase in Bitcoin's value has made it soooooo uncool.
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It is super-easy if the contents of that wallet were created by a credit card purchase and the transfer from a Bitcoin exchange wallet. The exchange then has the identity of the credit card holder linked to the wallet.
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If someone tries to hide by creating a new wallet, you can also see that money from a known account got transferred to a wallet for which no previous transactions exist. Perhaps this is a different person, but when you see the same transaction patterns in the new account you can start narrowing your assumptions.
You could generate a large number of holding wallets in advance of any transaction, and retain a set amount of money in each wallet.
Then when you are planning to make another transaction, you
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Value of BitCoin - just like any other currency - is based purely on faith of people trading in it.
Faith in real world currencies is supported by government and regulations limiting what you can do with alternative currencies on country's territory. This is pretty unique for every currency - Russia props up faith in RUR and China does the same for RMB.
BitCoin's value is exact opposite, lack of government and regulations. What do you think happens when there are a hundred competing BitCoin branches, all want
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Faith in real world currencies is supported by government and regulations limiting what you can do with alternative currencies on country's territory
I know of no real world cases where that sentence even makes sense. Do you mean everyone had great faith in the Z$ when Mugabe banned all use of all other currencies? Or great faith in it when they gave up and started letting people use whatever currency they wanted? Faith in currency is directly tied to the production of that currency.
when there are a hundr
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