Bitcoin exchange account of Coinpal shut down by Paypal
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At the end of the day, this Bitcoin hype is getting slightly tiresome. I do apologize for being negative here, but the only thing I take away from this whole spectacle is that investing in energy is a wise move. The amazing thing is, that was news a long, long time ago.
Nobody ever regulates or controls the price of anything, except if they're the only supplier or the government.
Let's say you want 1000 BTC. You could get this by investing several thousand dollars in a mining rig, and then waiting a year. In that time, you'll likely succeed in generating your 1000 BTC.
Alternatively, you could buy bitcoins from an exchange for $3000. The current price of bitcoins is several times higher than the cost of the electricity used to generate them, because there's a significant initial cost to mining, in both capital and time.
Well, you can, if you're also willing to pony up some cash to Amazon for some EC2 time. It's more like you can just exchange X bitcoins for Y BogoMIPS, but this also varies over time.
It would be far cheaper to buy bitcoins over an exchange than spend money mining them on a EC2 instance.
There's also a limit to how many coins you can generate per day. Even if your grid of EC2 instances accounted for say, a quarter of all Bitcoin processing power, you'd still only make 15 coins an hour.
People have calculated that you still can't make money mining Bitcoins on EC2, though.
Or is there something about the Bitcoin economy that I missed?
Don't you agree with this?
Or do you believe that while useful, bitcoin won't be the system that prevails, or that no system like this can prevail because of government and/or special interests?
And on the issue of energy.. The sha256 generation is only to prove that you did invest time into it, and it is not a specific amount of time or energy either, but in relation to the total time spend by ALL miners during the past hours. I'm not saying that you don't know this, but it seems to be a common misconception.
You seem to believe that "huge value" is somehow decisive.
It isn't.
> that no system like this can prevail because of government
And you're dismissive of that factor because ?
Govts require taxes. You want a system that makes it trivial to avoid taxes. Guess which one is going to win?
The difference between filesharing and BC is that in the former the value is in the files, but BC is only valuable if you can trade them for something you value.
Govt can crack down at any point where bitcoin is convertible into something that they can affect.
For example, they can stop many biz from accepting bitcoin.
Sure, you'll probably be able to buy foreign porn with bitcoin, but ....
> Note how well the crack down on filesharing is going...
That's a very different problem.
[1] - http://www.44con.com/
The Coinpal creator chose to email Paypal to ask a question that is clearly answered in the company's acceptable use policy. Under Prohibited Activities, Section 3(f): "You may not use the PayPal services for activities that (...) are associated with the following Money Service Business activities: (...) currency exchanges.
Second, the operator expresses in his post that he had kept his agreement to keep chargebacks low, at 0.9%. Consider for a moment that PayPal and the credit card company are splitting somewhere around 3% of the transaction amount to cover all of their expenses and make a profit. Let's assume that, out of 100 transactions for $100, one gets charged back. If it costs the companies $50 to investigate the customer complaint and process the chargeback, then the combined companies are losing 16% of their revenue to cover chargebacks.
I don't follow the logic here... no response != assume whatever the hell you feel like.
There's only 2 possibilities here - 1. They didn't see the emails or 2. They saw them, but chose to ignore them. Either way, his choice boils down to killing his idea or launching it and seeing what happens.
It would be utterly moronic of him to kill his idea simply because they didn't respond. Might as well leave that decision to them by launching it and seeing how they respond. If they don't shut him down, then his service isn't breaking their rules. If they do, he's no worse off than not launching in the first place.
He did the right thing.
EDIT: HN is not letting me respond to wmf below, so I'm responding here - Where does he say he knew paypal would freeze the account sooner or later? In fact, the whole point of his emails to them was to specifically ask if his service was compliant with their TOS.
Let's stick to facts and not get into subjective arguments. Your idea of 'ordinary' can be completely different from his or anyone else's idea of 'ordinary'. This is why TOSs, FAQs etc exist in the first place. But since he couldn't find an exact answer anywhere, he emailed them.
There are numerous forms of communication available. Send the email again 3 times asking for escalation to a supervisor. Call them. Send them a letter. Send them a certified letter with return receipt. This is how grown ups conduct business.
"CoinCard will be easier to bring back, minus PayPal payments. ... A possible PayPal freeze was one reason I focused on "gift cards" rather than PayPal exclusively. This whole situation has reminded me once again why distributed, resilient systems like Bitcoin and OTC are so important."
Paypal frustration led Michael to Bitcoin, and his service ended up dependent on it. That was probably not his original intention.
This makes MtGox's integration of (ACH) Dwolla even more important to BTC's liquidity. MtGox is receiving record traffic right now, nearly on the order of a DOS attack.
(Edit: This is incorrect. See comments.)
IANAL either, but I would be interested in a citation on that. My understanding is that say in the US (a) you can't print US dollars (because the Fed has a monopoly on that) and (b) you can't refuse to take US dollars (because they are legal tender). That said, I don't know of a law that says you can't also use an alternative currency. For example if a school had "school money" where "credits" are earned for good grades and are exchanged for lunch or snacks, that is a form of alternate currency that surely is not illegal.
Federal reserve notes have the very handy attribute in that they are the only currency that can be used to settle U.S tax liabilities.
Start treating those casino chips as currency and the government will step in and stop it.
That was one of the things Neal Stephenson got right- you almost certainly need to hide inside a non-US sovereignty.
The issue with alternative currencies is primarily that of tax evasion. Income earned in any currency/denomination is taxable, and most users of alternative currencies underreport or do not report their income. This problem is especially prevalent where the currency's value is not tied 1:1 with the US dollar.
"Congress has exclusive power to coin money in the U.S. and to regulate its value, according to the Treasury Department."
There exists money in my Paypal account which can be spent or transferred at my direction and which does not exist elsewhere at an account under my control.
I don't see the difference here?
If you wish to buy something and the seller only accepts PayPal, then good luck with your boycott. In my experience, the larger the retailer, the more infinitesimal the chance that they will "listen to reason" and consider accepting an alternate form of payment.
Oh, and did I mention eBay has this affinity for PayPal?
http://www.bitcoinmoney.com/post/5086167006/paypal-freezes-o...
Tying too much cash in paypal is a mistake. There is no guarantee that you won't snag on some tripwire in their rules engine. That and all BTC-cash exchanges have so far been shut down by PayPal.
But more fundamentally, Bitcoin is incompatible with the credit card system. CC security is very lax, so CC transactions have to be reversible (the onus is on the merchant rather than the buyer). Banks (and Paypal is a bank) are ill equipped to parse the math and the crypto that go with a proof that a transaction has occured. Not technically, but institutionally they are a different thing.
Yes, there are people who will exchange for Paypal and credit cards. Yes, there are some services which can start out with low charge back rates. The problem is the scammers will find you as the service grows. This is a business with low margins, eventually you will lose out.
Again, Paypal isn't perfect, but the service has plenty of experience with this issue. Too many people are getting screwed over. Unfortunately this is a lesson that people have to learn over and over again. Do NOT use Paypal for exchange.
I don't understand why I'm getting down voted for this.