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Comment by fragsworth | Hacker News Reader

Consider this: They paid $0.00 for the transfer of $150 million dollars.

A direct (i.e. not based on third party credit, regulations, etc.) transfer of wealth of this magnitude between two entities usually consists of a heavily guarded, insured, physical shipment of cash or gold. Depending how safely you want to make the transfer, and how far the entities are on the globe, it can cost hundreds of thousands to millions of dollars.

Bitcoin has real value. It solves problems on an incredible scale. I wish I realized this months ago.

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>between two entities usually consists of a heavily guarded, insured, physical shipment of cash or gold.

Err, life isn't a james bond movie. For money transfer like this we use bank wires. We dont buy gold and ship it on gunships anymore.

Any transfer over 10,000 requires a signature.

That's only if the two entities can both interact with the global banking infrastructure (i.e. they hold money in reserve currencies, their accounts aren't frozen, etc.)

If someone in Argentina wanted to buy something from anywhere else in the world in 2000, for example, they'd basically have to trade natural resources or gold for access to foreign currency, and then spend that.

In 2000...

Yes, in 2000, because that was during the period Argentina's currency was collapsed. Any other country's currency could collapse at any time, putting some other group in the same situation.

2013 Argentinian here. To buy a house right now you usually have to pay dollars cash because nobody accepts a currency that devaluates 25% per year.

The political class here is crazy corrupt and rich like in every third world country, and they are known for using piles of 500 euros bills to stay out of the bank system because euros have more wealth density than dollars.

The other big issue is how hard it is to exchange pesos for dollars. The government is doing all they can to make it nearly impossible for the average Argentinian to avoid the massive devaluation.

I'm a little offended by the "like in every third world country" statement. Chile is not like that at all, and we are a third world country.

In fact, here we are ranked right under (20th) the US (19th) in terms of transparency:

http://www.transparency.org/country#CHL http://www.transparency.org/country#USA_DataResearch

Argentina is ranked 102: http://www.transparency.org/country#ARG_DataResearch

In all of Latin America, the closest countries to Chile in that transparency ranking are Costa Rica, with the 48th place, then Cuba 58th and then Brazil 69th.

Edit: added justification data with links / I'm proud of Chile

Chile will probably stop being third-world soon enough, though (I heard something about startup accelerators popping up there?)

There should be a term for "third-world country that's probably going to stay third-world for the forseeable future, excepting a revolutionary change of government." Maybe... dystopia? Argentina is a dystopia.

Checkout http://startupchile.org they've made a lot of noise. There are quite a few cool (and successful) companies that have come out of there. My two favorites: Padlet (padlet.com) and Admetricks (admetricks.com). Padlet was also in YC and Imagine K-12 (after StartupChile)

>Chile will probably stop being third-world soon enough

Sorry, I don't think so. Chile is doing good nowadays but basically their only export is copper. Copper is a semi-precious metal right now and thats why that country suddenly has so much wealth, but the difference between rich and poor is abysmal and their economy is tied to the price a single non-renewable resource.

Compared to Chile, Argentina still has a huge tech industry capable of exporting value-added products like cars.

Chile is in the top-10 freest countries in the world right now, alongside Switzerland, Hong Kong, Singapore and other economic successes. Taxes are low, and there are huge incentives for people to start their own businesses. You can register a new business in 3 days, and registering trademarks is one of simplest processes in the world. This is in very sharp contrast to Argentina.

Yes, copper is selling very well, and it takes up a large proportion of the country's exports, but you are mistaken to think that this is the driving cause of the country's increase in wealth over the last 20 years.

The increase in wealth comes from the fact that incentives now exist for people to create wealth. Where wealth is created, there is more wealth. It's the same principle we have seen working throughout history.

Check out this graphic http://atlas.media.mit.edu/explore/tree_map/export/chl/all/s...

USA and allies: 1st-world; Soviets and allies: 2nd-world; all others: 3rd-world.

"Third-world" is a loaded term and doesn't really have a useful definition anymore.

You are right, just like developed country. Your comment reminded me of this very interesting video that compares the US, Cuba and Chile: http://www.gapminder.org/videos/gapmindervideos/gapcast-6-ch...

not exactly.. there was a proper term.. fourth world as well.

for 15-20 years, third world in military terms at least, meant the signatory of NAM movement. fourth world was anyone left after that.

Rushed and misread your comment, apologizes.

Still today in fact. Not sure exactly of all the details, but Argentinians are simply not allowed to change their currency.

They need to fill documents to officially ask the government, which will likely refuse you the right if it is for a huge amount (remember, this 'non-change' policy is exactly for that, avoid flights of capitals).

AFAIK, the government does allow the exchange of currency, it just mandates an unrealistic exchange rate at which there is practically no supply. However, there is a lively black market that is tolerated (probably because it's cash based and thus does not scale but serves average people well enough) - newspapers publish the rates, traders operate quite openly.

In an interesting validation of basic economy, the black market rates are much closer to the official ones in rurual tourist hotspots, presumably due to the much bigger supply of foreign currencies.

I think they use reserve accounts with each other backed against gold held in larger central banks. At the end of the day it's still a plain bank wire (I owe you x) hoping for an opposing (we owe you x) to cancel it off. Or for the reserves to build up of what is owed..

The parent comment said direct transfer. Bank wire involves intermediate parties, is subject to various capital limits, account closures, funds freeze etc.

and fees

with Bitcoin, fees are optional

And if you don't pay the Bitcoin bribes, sorry fees, your transaction can take hours or even days to be accepted by the benevolent miners.

Not true:

http://www.bloomberg.com/news/2012-01-31/venezuela-receives-...

http://www.forbes.com/sites/afontevecchia/2013/01/16/germany...

Not only is gold shipped frequently, it's also stolen frequently:

http://rt.com/news/gold-shipment-stolen-france-304/

http://www.reuters.com/article/2013/05/16/us-usa-miami-gold-...

Not only is Bitcoin sent frequently, it's also stolen frequently:

http://rt.com/news/bitcoin-hacking-stolen-million-417/

http://www.nbcnews.com/technology/250-000-worth-bitcoins-sto...

http://www.esecurityplanet.com/network-security/czech-bitcoi...

edit: unrelated, someone should make an index of how many Bitcoin threads hit the front page of HN per day.

It's well-known that you can at least secure your bitcoins as well as you can secure gold, if you use cold wallets.

The advantage, however, is you don't have to worry nearly as much about the security of a transaction (moving it from one place to another)

Not really. It is much easier to lose or make illegible a piece of paper or data than it is to lose large heavy gold or to damage the gold to a degree that severely reduces its value.

OTOH, its hard to make redundant copies of a gold bar that retain the full value of the original so that if the original is damaged, nothing is lost.

Actually, you could--you could irradiate the gold to the point where decontamination would cost on the order of the worth of the gold itself.

I don't know about you, but no, I can't do that.

upvote for mentioning the evil scheming of a Bond villain in a serious conversation as a serious answer :)

No one said it was impossible to damage gold (there are easier wayd than to make it radioactive).

It's just much harder compared to doing comparable or greater value destruction to a bitcoin address, especially accidentally.

It has been demonstrated that:

1) gold can be stolen due to mistakes

2) bitcoin can be stolen due to mistakes

but this does not mean that it is impossible to avoid having either stolen.

I agree that long term storage of both of these can be done very securely, but the risk for both is when trading or using them. Additionally, Bitcoin does require a lot of worry about security - how many people do you think have airgapped wallets?

Aren't the facts that you shouldn't store Bitcoin at exchanges, should use an airgapped storage mechanism, and are otherwise out of luck if your computer is compromised, enough to demonstrate that you also have to worry a lot about the security of Bitcoin transactions? Your stack of gold ingots won't vanish if you take one from the pile in your safe, but your Bitcoins can if you don't take stringent precautions.

If you view a Bitcoin transaction as only what happens on the blockchain, you're missing the context of where it occurs - which gives both gold and Bitcoin risk.

Good point, the minimum security of Bitcoin is that of gold; i.e. a safe guarded by people with weapons.

But since Bitcoin is digital, its maximum security is far, far higher. Your private keys can be encrypted and safely stored with any desired level of redundancy. Paper wallets are a big step backwards.

Also, if secret sharing is used, Bitcoins cannot be stolen unless the attacker gets to k of the n involved parties.

The difference is Bitcoin can be secured much more cheaply than gold. You can't encrypt gold, setup "n-of-m" multisig transactions, etc. Unless you want to transport gold yourself you're always going to have to trust someone.

Hardware wallets should help immensely as well.

From where I stand, this seems to be true of Bitcoin as well. I've never had any Bitcoins personally, but don't you have to store them in a wallet, which you're either going to have to worry about backing up, keeping secure, etc on your own. Or you're going to have to trust someone else to do it for you.

You can also store it physically, like on a piece of paper I believe. Or on a USB.

Yep: https://blockchain.info/wallet/paper-tutorial

As with _all_ security, there's a tradeoff between security and convenience. Inline wallets are spectacularly convenient - and guess what that implies security-wise?

Paper wallets are much more hassle. But a paper wallet in a bank vault is arguably up there with the most secure bitcoin storage techniques.

As the stored value of your bitcoin varies - so should your security requirements. If I need to keep under $100USD available to pay for my anonymous vpn or my torrent-box vps - an online wallet (who's operator could make off with my half or quarter of a bitcoin at any time) might be a sensible choice. If I'd been mining bitcoin at a reasonable rate since 2009 and was sitting on a house-worth of bitcoins, I'd make a _very_ different choice.

Consider the value of your wallet(s) - if they were piles of $50 notes, how much would you spend securing that? Would you leave it in your pocket? Hide it under you mattress? Buy a lockbox or a safe for your home? Rent a safe deposit box? At what stage is a never-internet-connected laptop a perfectly sensible expense to incur? I'd suggest a lot of people I see posting in forums about how much they lost in onine-wallet-hack-de-jour who should be kicking themselves for not having a dedicated $300 laptop fr storing their wallets on.

There is a difference in how the two scale, because one is physical.

Adding a BTC to a transaction doesn't really require any additional infrastructure. But once you've packed your first tanker with gold, you kind of have to hire a second boat.

Given the way each scales, it seems that BTC transfers are easier, at least at some values.

There is not enough gold in the whole world to fill up a tanker.

The word "tanker" was evocative, I wouldn't get hung up on it.

All I was saying was that physical stores of value increase in awkwardness (principally through weight and volume) when you increase their number, not so for digital.

Challenges in movement of large sums of gold: http://blogs.reuters.com/felix-salmon/2011/08/23/how-to-get-...

Here's what $300 Billion in gold looks like: http://www.celebritynetworth.com/articles/entertainment-arti...

(Note that it would be harder to transport, than, say, the amount of gold one can fit in a pocket.)

Your point stands, but most thefts occur on third party sites/applications where the address of the coins and their private key are stored in a central location. Owners of the bitcoin should transfer their coins to a private wallet.

I don't understand how so many sites can't use password hash generation to secure the private keys, or something to keep it more secure. The first link you posted was a site run by an 18 year old.

This is a good point and one that I considered and wish I followed up on. I'm in the "support queue" with Coinbase right now because they absconded with 10% of my bitcoin holdings for no discernible reason. In case you're concerned, I'm not the one with $150M in bitcoin - it was 1 btc that went missing (greatly appreciated in value from when I acquired it).

Sorry to digress a little, but I'm sensitive on age issues :)

Pinkie Pie won his first $50k award by creating a 0-day sandbox escape on Chrome, by chaining 10 different vulnerabilities. He was 19 (now almost 21). Two years before, at 17, he released jailbreakme.com, all by himself, which was a 0-day able to jailbreak all iOS models shipped to date by just visiting a website.

Age means nothing by itself, but the point is correct. The problem is that we don't know how much we can trust bitcoin site owners, as most of them are relatively new with no history to inspect, closed source, and sometimes even run by anonymous users whose experience we can't inspect.

Anecdotes don't negate stereotypes, which are themselves generalizations across numerous anecdotes. And stereotyping is not by itself an invalid source of information, just less reliable than, say, a study. Everyone knows one person who negates a stereotype -- any stereotype. The existence of that person doesn't reduce the usefulness of that stereotype.

Outliers exist, this doesn't make them likely, age does matter far far more often than not. Generalizations have value, but they're not expected to always be true.

Sure, there are 18 year olds with impressive technical chops.

But do you know _anybody_ who would deposit money in a bank run exclusively by an 18 year old?

Coding skills can be created and honed by highschoolers - business, legal, and commercial experience - very much less so.

I think any skills can be created and honed by highschoolers.

But I think it's extremely rare in the cases you mentioned.

the question is, if they really know if he/she is 18 year old or something.

Sorry, didn't mean to put down the skills of young people! I'm 28 and I work on lots of security related systems, and although I understand most all of it, I wouldn't attempt to build a Bitcoin exchange without someone with years and years of hardened workplace experience. That's all I meant ;)

Because "online wallet" sites are the sort of bad idea that _needs_ to have access to the private keys. If you can spend bitcoin out of an "online wallet", the person in control of the software managing that wallet _does_ have access to your bitcoin. Even if they've tried to set things up "securely", the very best they can do is achieve Lavabit levels of security - if they (or someone coercing them) wants to, they'll get full access to your funds anytime you try to access them.

Think of them as like keeping your change on the bar - the security relies _purely_ on social conventions encouraging the bar owner, bar staff, other customers, and your friends to not take your money.

You would no more store your weekly pay, your rent money, or your new car savings on the counter at a bar - why the hell are people storing those sorts of values of bitcoin in other people's webservices?

Sure, online wallets might be _useful_, but anyone keeping any more value than they can afford to lose in one is insane (or, less critically, very poorly informed).

True.

I may be wrong here - but is the private key only required to send the money? So, if the user kept the key and it wasn't recorded on the server...or if they use some type of password hash for encrypting it, then there wouldn't be hundreds or thousands of wallets stolen at once. The user would enter their password when they want to transfer funds, the hash is calculated, private key decrypted, transaction made, and the private key is never recorded anywhere.

But, this would require the user to NEVER forget their password, or else they lose their money.

It's possible to sign transactions offline, so that the private key never touches a device that's connected to the internet. Check out http://www.bitcointrezor.com/

If the user kept the secret key, that's not much of an online wallet - you might as well just use your secret key at home and send it directly yourself. They could encrypt it with a password or a pin that isn't saved on their site so that you would have to enter it to decrypt the secret key. That still counts on the site not just lying and keeping it or you getting it keylogged or otherwise compromised on your side. Many online wallets do nothing of the kind, they simply have the secret key and use it to send. Someone with your password or access to the site could do the same. It's the same as a normal bank really, you have no physical/technical control over what they or someone who snuck into the bank does. You can control your access credentials (passwords, cards, account numbers, ID info, etc) and that's good and well, but there's nothing preventing it from disappearing on their side besides what they (not you) do for security.

How about the users keeping the key and supplying each time its need from a separate secure app? And that app wouldn't even contain the complete key, but requires they supply the last three digits each time. And they can tattoo that somewhere on their body.

>someone should make an index of how many Bitcoin threads hit the front page of HN per day

Something like that: http://influxdb.org/blog/visualizing_bitcoin_post_frequency_... ?

Awesome! Thank you, I was hoping someone else would have had the same idea.

This is a point that I can't help thinking about regularly. Gold and cash, at least 147 million dollars worth is physically difficult to store and transfer. In most cases it is also difficult to steal.

The equivalent commodity value in BTC can be stored on a tiny rom, and transferred anywhere in the world for free from anywhere with network access.

I hate to be cynical, because the ideals behind this currency seem nobel -- but I can't help but feel dread that it is only a matter of time before bad things start happening here.

Is this outlook too negative?

True but these are both transferring gold so that the gold is in a different physical location, not transferring gold to pay someone. I'm sure both cases would much rather sell the gold in place A and buy it in place B, but that's just not possible at this quantity of gold.

The same can be done with bitcoins - because they do exist in physical locations (as many physical locations as you want, actually, but you probably don't want too many...)

Central banks moving gold reserves is very different from everyday financial transactions because reserves have a special status tied to their physicality. They act as a form of physically controlled collateral.

Corporations and individuals generally do not move wealth via physical assets.

False, and trivially easy to demonstrate.

Off the top of my head, I am thinking of ...

- A deep, pervasive culture of gold hoarding and gold wealth transfer for dowries (yes, even in 2013) for Indians.[1]

- Persians/Iranians who have a deep cultural link to carpets as a store of value that can be used in day to day life, but also transported and stored as value.

How about any middle american over the age of 50 who counts his or her "vehicle" as an asset and shops/deals in used cars every 12-18 months. A lot of people think about cars this way.

As for corporations just consider casino counting rooms and exxon tankers full of crude oil.

[1] http://www.bloomberg.com/news/2013-11-17/gold-laden-brides-i...

I think you need to google the definition of 'generally'. A list of narrative exemplars does not refute an assertion of proportion.

Like the first google result for payments volume yeilds this: http://www.gfmag.com/component/content/article/119-economic-... As you can see, credit transfers dwarf everything. It's worth noting that all of these payment types are cleared electronically (including checks).

I sincerely doubt gold bugs and Persian carpet fans are trading at total volumes of 100's of trillions of fucking dollars globally.

Is orders of magnitudes larger than 150$, I am pretty sure $150 million are usually wired.

>For money transfer like this we use bank wires

Yeah and there is a fee involved too, right?

Isn't this what happens at the Reserve in downtown Manhattan?

Everyone just keeps (a huge portion of) their gold in a single vault. A gold transfer involves carrying gold bars from one compartment of the vault to a second compartment in the same vault.

Reminds me one of Michael Lewis' anecdotes from The Big Short. Something along the lines of one of the big Wall Street banks transferring tens of billions of dollars to the Fed by literally gathering up a set of bonds from their safe, putting them in a briefcase and giving them to a secretary and an armed guard to carry to the building across the street where the Fed had set up an impromptu office.

Utterly incorrect. They did not transfer a single dollar. For them to turn those Bitcoins into dollars, they will have to pay more than $0.00. Possibly A LOT more. They may not even be able to turn those bitcoins into dollars for a while, and in all likelihood it will not be $150 million dollars.

This is the correct answer. People rave about how "cheap" it is to transfer bitcoin. What about actually buying anything with that 'money'? Sure, you might be able to buy some crap on the internet with bitcoin, but it won't put food in your table anytime soon without you having to pay a good % in fees to convert it to real currency.

Although I agree with the point you are making, saying "you might be able to buy some crap on the internet with bitcoin" is slightly short of the truth. While you might not be able to live off 100% bitcoin purchases (although some people are doing it), acceptance is growing every day.

A lot of people who are claiming that you will need to pay a large % in fees in order to spend your coins are missing the point.... as bitcoin gains traction, you wont need to convert it to USD first.

You're conflating liquidity with value.

The same is true of any foreign currency. I could send $150 million in Russian rubles to my sister, and she wouldn't be able to do jack with it until she finds someone willing to give her dollars for it. With the amount of money involved, getting it all converted at once would be extremely difficult.

That doesn't mean that what's transferred doesn't have real value. Just that the assets involved aren't terribly liquid.

That's exactly the point. If you had $150 million in rubles, you could transfer it for only a nominal fee ($20 for my bank, although you can get a lot cheaper if you regularly did transfers like that) to any account in the world that could hold rubles. Exactly the same with bitcoin.

The only real cost in transferring sums of money is either extreme convenience, transferring to a country with an extremely poor banking service or exchanging currencies. None of which bitcoin solves yet.

> If you had $150 million in rubles, you could transfer it for only a nominal fee ($20 for my bank, although you can get a lot cheaper if you regularly did transfers like that) to any account in the world that could hold rubles.

I have no counterproof, but I find this hard to believe.

I've only transferred / had transferred internationally sums around 50-100k, that was just a nominal fee.

http://www.stgeorge.com.au/online-services/business-banking/...

Telegraphic Transfer (TT) Request $20.00 per transaction or item

Pretty sure that would be fine up to ~$1 million. Anecdotally I know TT happen for sums in the range of $10-$100 million (there was a case where ~$150 million was stolen by a rogue TT in Australia to overseas bank accounts).

If you had $150 million in rubles, you'd almost certainly have an account with the private banking side of whichever bank you use. Private accounts generally come with perks like free wire transfers.

Source: Someone I trust who works in Private Client Services at JP Morgan (not sure if other banks offer free wires, but I'd be surprised if they don't).

How about buying gold with BTC?

http://www.amagimetals.com/gold

http://www.coinabul.com/index.php/gold-bars-bitcoin.html?a=8...

Actually you can here in the Netherlands. We have a website called thuisbezorgd.nl that allows you to order food from thousands of shops through the country with Bitcoins, and have the food delivered at your house.

"it won't put food in your table anytime soon without you having to pay a good % in fees to convert it to real currency"

False. Last summer, I ate at EVR, a bar/restaurant in New York City accepting Bitcoin. I paid in bitcoins and their processor (BitPay) only charged a 1% fee.

Fees from Bitcoin payment processors are actually quite good compared to credit card fees.

I hope their kitchen is well-staffed if we're all going to start eating there.

How about a Virgin Galactic space flight, which can be bought on the internet with bitcoins?

http://www.cnbc.com/id/101220710

How about you provide a scenario an average person can use? Like, say, County Market accepting bitcoin?

I can't afford a sub-orbital tour in USD, let alone bitcoin. Is there any leading supermarket that accepts bitcoin? Literally allowing me to use bitcoin to put food on the table?

Hmm. Buy an Amazon Gift Card via Gyft with bitcoins, use gift card to pay for Amazon Fresh. Mmmm, food on the table.

Assuming I can pay for Amazon Fresh with a gift card. :-)

To chime in here, one of the largest sites for ordering out in Germany, lieferservice.de, accepts Bitcoin. They have hundreds of participating restaurants.

Here's a picture of the food on our table, paid with Bitcoin:

https://twitter.com/epaga/status/399221499749343232

My guess: Bitcoin is just facilitating the transaction. Restaurants are likely settled in Euros. I wonder how they hedge the volatility. There needs to be a BTC hedging market.

Call me crazy but if I am ever in a position to transfer $150M I'd probably also want a third party involved to make sure the transaction goes smoothly, like a bank. Like we do today. With wire transfers.

Choice is good. People shouldn't be forced to use banks or bitcoin.

Who's forcing anyone to use a bank even without Bitcoin?

Two words: inflation.

That's one, and banks hardly help with inflation at today's 0.01% interest rates.

True, but other than the recent years it was necessary and effective to put your money in a bank to counteract inflation.

Sorry about the fencepost error. (Perhaps I was originally intending to say "inflationary finance"?)

You mean you didn't actually intend to make that clever and subtle joke? :-(

that's one word

Give it some time.

I see what you did there.

This site is becoming more and more painful to visit...

The second word is invisible to fools.

You're not actually under the impression that Bitcoin value will maintain value over time, are you? If you use banks because of the "cost" of holding cash then you will very well have to engage in the same type of speculation as the "cost" of holding Bitcoin. At least the bank can effectively guarantee your investment will be worth more in numerical terms over time, raw Bitcoin can guarantee no such thing.

Well, you can still have a 3rd party provide oversight for a bitcoin transfer and insurance against failure. Because bitcoin is simple and reliable, these 3rd party fees would be very cheap.

Those third party fees having nothing to do with bitcoin's simplicity or reliability, but with the amount of the insured transfer, the perceived risk of the failure, and the expected costs and complexity of recovering any losses from either party involved.

Whether it is in bitcoin, CHF, EUR, USD, gold, platinum, Amazon Coins, Zorkmids, yams or sheep skins, insuring a transaction will depend on those factors.

True, but what's significant here is that bitcoin gives you a zillion third party verifiers (the entire network), and does it for free.

If you meant in terms of escrowing to make sure one party doesn't back out, then I agree that comparison wouldn't apply.

You can do an exchange as an escrow with a third party using a transaction only. No services required ;)

https://en.bitcoin.it/wiki/Contracts#Example_2:_Escrow_and_d...

I may be ignorant here, but isn't the BTC system entirely based on 3rd party oversight?

It's not instantaneous, therefore you have to have faith in the system (as opposed to faith in your bank). Sender sends $150 million and receiver needs to wait 30 minutes for enough verifiers to trust the transfer went through.

In the meantime, the $150 million is in limbo.

30-minute mexican standoff

How often is there a direct transfer of this size? Fedwire moves about 2.7T/day and I believe it would have cost $0.26 to transfer this amount, assuming that its at the upper end of their sliding scale ($0.08 - $0.26/transfer).

Besides cost there is also risk- a transfer of this size in the light of day would raise a lot of questions- Where did this money come from? Was tax paid? And depending on the reason for the transaction regulators may interfere or freeze the funds.

Yes, because making sure someone isn't buying a nuke on the black market and is paying the taxes they owe is just terrible. Don't get me wrong, the regulatory framework for money transfers seems to suck, but I don't want to go from "shitty regulation" to "zero regulation", I want to go from "shitty regulation" to "smart regulation".

>I want to go from "shitty regulation" to "smart regulation".

I'm tempted to conclude this is something that happens so rarely you may as well count the times it happens as a rounding error.

It's a bit like saying government will just work if we only vote for the right candidate.

I'm tempted to conclude this is something that happens so rarely you may as well count the times it happens as a rounding error.

Everyone's tempted to conclude things like that, but there's a subtle fallacy happening when we do. Generally speaking, we notice government programs of all stripes when they get in our way. When they don't get in our way, we don't. It's very easy for someone paying attention to the news to be able to rattle off incidents where the FDA and FEMA and the SEC screwed up, because the screw-ups are in the news. But when they do their job correctly we never hear about it. Basically, the dataset we carry around in our heads about How Well Government Works is substantially biased toward instances of failure.

The only way to really measure how useful a regulation is or isn't is to determine what it is the regulation is supposed to address and examine a substantial set of "before and after" data points; trotting out vivid but essentially anecdotal examples of WHEN REGULATORS GO BAD makes for great editorializing, but it doesn't actually tell us very much.

whoa whoa whoa, that would never happen in bitcoin libertarian paradise

"Where did this money come from?"

I guess, not from you. Is that the reason to question it?

"Was tax paid?"

What makes you think that this money supposed to be taxed?

If it is a transfer between two accounts owned by two different people - I guess that this huge amount would be taxable with some amount.

What is taxable is not determined by the amount nor by ownership of accounts.

Not everyone can participate in Fedwire.

I believe it also requires that you put your assets one of their accounts if you're going to use it, so you're relying on the credit of the U.S. government (which is pretty good, but still adds risk, and subject to U.S. laws) until you withdraw your funds. And there's probably a lengthy process to deposit and withdraw funds.

Keep in mind though, this transaction was nearly instantaneous. Bank Wire transfers take 3-4 days to complete (at least, as far as I know with normal-person quantities of money). Instant international money transfer is amazing!

No, that's ACH. SWIFT (or even FedWire) transfers happen within a few minutes.

My experience tell me otherwise with both of them. It can take from a few days to a couple weeks.

What country are you in? In the UK bank transfers happen within a couple of minutes.

You can login to your bank, transfer money to someone elses bank, they'll login, and see the money.

My guess is the previous commenter is in US. There's an excellent episode of the podcast "planet money" which addresses exactly this question, and which also explains why the system in the UK is much faster.

http://www.npr.org/blogs/money/2013/10/04/229224964/episode-...

Nope. Third-world here. I don't think it'll take a couple weeks in the US.

Fedwire and other real time gross settlement services (RTGS) are almost instantaneous.

SWIFT transfers usually are not: SWIFT is a way to communicate messages about transfers between banks, but they would still need a way to do the actual settlement. This could be very fast in the case of two large banks in different countries: if you are a customer in bank A, which has a correspondent account with B, and the recipient is also a customer with bank B. Then bank A can use SWIFT to say “please transfer $1 trillion from our account to the recipient’s account”, and that could happen instantly. (It usually doesn’t.)

But if the final recipient is actually a customer at bank C, then the money needs to get from B to C somehow. That could happen in the recipient country’s RTGS—Fedwire if it’s the United States—but it might also be slower, through ACH or an equivalent.

One problem with fast transfers is that many banks don’t have straight through processing for RTGS. This means that the money can get instantly from bank A to bank B, but may not get posted to the recipient’s account with bank B until a clerk gets around to verifying and booking the transaction.

The Fedwire transaction better be instantaneous -- interest on intraday overdrafts accrues by the minute.

http://www.federalreserve.gov/paymentsystems/psr_policy.htm#...

Overdraft fees up to $150 are waived. Very generous of the Fed.

> this transaction was nearly instantaneous

Aren't Bitcoin transaction times generally in minutes?

Not exactly. To be sure it isn't a double spend it needs to be part of the block chain at least six down from the most recent block generated. Each extra block on top of the block where your transaction exists is a confirmation. For smaller purchases, ie not $150 million worth it's near instantaneous.

Yeah, I would bet that credit card fraud with chargebacks is probably more likely than the double spend scenario so it would make sense for a company just not care about verifying.

Don't BTC transactions take 10-30 minutes to settle?

I believe FedWire has a $50M pert transaction max, thus $1T would cost around $5K.

As far as I can tell, the $50 million limit only applies to the Fedwire Securities Service for transferring Treasury and certain other securities, and there is no such limit for the Fedwire Funds Service that transfers money.

I stand corrected.

Sorry but you can wire transfer $150 million dollars and it will not cost you millions.

Actually if you look carefully, the fees is 0 and not 0.5 BTC. 0.5 BTC in fees is quite high actually. That's right, he paid $0 to move $150 million.

And they received $0 worth of assurance that it would be successful. If it were my $150M I would not want to leave it up to the block chain and hope it works.

Huh, if you make a valid transaction there is no reason why it would fail.

Not true. The transaction has to be verified by multiple other people before it can be trusted. If you spend the same bitcoin twice in a short time period, it's a toss-up as to which one gets accepted into the official blockchain.

>The transaction has to be verified by multiple other people before it can be trusted.

That's not how it works, sorry. If you don't double spend your transaction and you attach a proper fee it's going to get in the chain, period.

They received a mathematical assurance that it would work. The relying nodes, blockchain, miners and priority rules are all well-known and straightforward to account for. If you pay enough fees given your transaction priority, it'll get into a block eventually. If you want it to be mined sooner, you can pay higher fees.

And even if it won't be mined, the worst case scenario is that you would keep your Bitcoins and can try re-sending them later, they won't disappear to anywhere.

Except for that pesky blockchain split that happened once...

There have been more than one block chain splits. I think you are talking about the hard fork that happened in May, which was planned for and not an unexpected accident. If you conduct a transaction and it is included in the shorter block chain, then by definition the network doesn't recognize the transaction and you keep your money and just send again.

I'm not sure what you're talking about, exactly none of the blockchain splits that have happened so far were expected to happen.

That hard fork was rolled out over a period of two months, with warning (whilst older clients were sent messages to upgrade) and smaller splits are part of the protocol and happen quite regularly. as expected (like when two miners hit the same block within seconds and they wait for the network to recognise the block).

That is the justification Satoshi Naakamoto gave in the original paper for waiting for 6 blocks for a full confirmation.

I hear you, but I also notice the developers still have not assigned bitcoin-qt a 1.0 version number. I might go ahead and transfer those millions anyways but the beta status would give me pause for thought.

"They received a mathematical assurance that it would work"

No they did not. Mathematics is about proofs; Bitcoin does not even have the rigorous definitions needed for that.

To put it another way, what you said is the equivalent of saying that Hacker News gives you mathematical guarantees of security because it happens to use TLS.

If you were worried about how it would go through, you could break the transaction into many small transfers (which would've been very smart in this context).

Unfortunately for me right now bitcoin has zero value.

Until I can use the millions in coins to pay off my house, buy a car easily, pay my taxes and go out to eat with them, or hassle free convert them to cash in my bank, it is still funny money.

You could say the same for gold, stocks, or bonds. But at least Bitcoin has the ability to be cheaply, easily, and quickly transferred to anyone else in the world, meaning it has the potential to be useful for paying for your house, car, taxes, food, and be easily converted anywhere, once enough people are using it.

I can relatively easily convert large amounts of gold, stocks or bonds to cash currently unlike bitcoin. Also I don't care about potential use in the near future (20 years? 2 months?).

Unless you provide me a way to realize bitcoin to actual USD in non trivial amounts with the same amount of effort it would take to convert my stocks or bonds, it is as useful a currency for real life as is my current GTA V Online bank account.

"Unless you provide me a way to realize bitcoin to actual USD in non trivial amounts with the same amount of effort it would take to convert my stocks or bonds, it is as useful a currency for real life as is my current GTA V Online bank account."

So it's either as easy as stocks or it's useless?

Hmmmmm.

I think you're overstating your case a wee bit there.

Yes. If I can't get a million bucks out of my wallet so I can actually use it in the real world, then it is pretty useless to me.

I think you might be missing the point. Bitcoin right now operates more like gold. You can't pay off your house, buy a car, pay your taxes or go out to eat with gold. However, there is a healthy market for exchanging gold for currency. You wouldn't call gold funny money. I think it would be more appropriate to compare bitcoin to gold right now. I have no idea how healthy the market is for exchanging bitcoin for other currency, though.

Gold is a physical good with actual useful value. It is hugely overvalued right now, and anyone telling you to "buy gold" usually holds gold and benefits a lot from that.

Those cable "invest in gold" deals are exactly this but worse - they sell you gold more expensive then the commercial market that can never be redeemed for that price.

But it has a real cost of production that represents its relative industrial worth.

Bitcoin is valueless though. Created Bitcoins do not have any industrial value - you can't use them for anything else, even though they have a cost to create. There's no reason, if they lose value, for anyone to buy them from you - whereas with gold if you sit on it long enough, it will become valuable when someone needs gold for some type of industry at minimum.

Fiat currency is valueless and can only be used because people trust the government issuing it. If Bitcoin can gain the trust of enough people, it can easily become more 'valuable' then many currencies in existence at the moment.

Fiat currency is backed by the legal obligations of the country that issues it that it is a suitable means to extinguish debts.

Bitcoin is not. No one is obliged to accept Bitcoin as a currency for settling debts anywhere in the world, it has to be converted to something else. Similarly to gold - you don't have to accept gold as payment for debt, but you do have to accept USD.

This is where the problem lies: BTC acts like a commodity, not a fiat currency - and people are treating it like one buying into it. The problem is it has no value as a commodity other then being Bitcoin.

It does have value. It's long lasting, pseudonymous, secure, and it costs less to make transfers between two parties. These are qualities that are hard to find in a physical commodity. What gives value to an individual bitcoin is the Bitcoin network. There is real value there.

But which is the cause, and which the effect?

https://bitcointalk.org/index.php?topic=183571.0

You can at least buy a Ford.

I doubt you can pay your house with gold bars alone.

I doubt you can pay your car with stocks alone.

I doubt you can pay taxes with option derivatives alone.

I doubt a lot of people call those funny money.

You're missing the point that all kinds of symbolic wealth can be easily converted into other kinds of symbolic wealth. If this weren't true, it wouldn't be symbolic wealth.

Coinbase will let you sell up to 50 BTC per day, so if you don't mind waiting 2 or 3 days you can certainly buy a car with bitcoin.

While that is true, Bitcoin is far from a bulletproof preserve of wealth. Gold has other uses if it isn't used as a currency anymore.

Bitcoin on the other hand can be made completely useless if some critical flaw is found, or the wealth is too concentrated in a few users and the majority decides to switch to a newer crypto-currency.

I'm pretty sure that if we consider only the industrial uses of gold, and the available supply, it would have a low value. Probably even if we count jewelery as a non-currency use.

Almost all the value is because it's shiny, yellow, and traditional.

Gold asteroid mining isn't too implausible, either.

> Gold asteroid mining isn't too implausible, either.

More plausible than some hacker news post 'bitcoin 2.0 is here - look it's shinier!', though? Or 'new crypto currency approved by the US govt?' You think people won't reinvent this wheel to death?

Sure, you could also synthesize gold from some nuclear reaction, or mine it from space... You pays your money (and you takes your chances)

Gold's other uses wouldn't make gold worth much on their own.

"Legitimate" uses of a commodity that trades more for its properties as money should be thought more of a really crappy put option, that is it sets a low price floor.

For example, it's been estimated that gold's industrial uses would only allow it to be traded in the low double digits per ounce if people didn't desire it for other reasons.

It's just in the case of something that isn't physical and isn't "backed" by any alternative uses, the floor is 0% of the current price instead of 1%, or similar.

Gold isn't just shiny, it is the most unreactive metal.

It has a lot of other potential uses that other industries avoid because it is so expensive. If the price ever falls it will be kept up by those uses.

http://geology.com/minerals/gold/uses-of-gold.shtml

Indeed, without gold, modern electronics would not be the happy place it is now. I am old enough to have had to use a pencil eraser to periodically clean tin plated contacts. Even silver oxidizes under normal conditions. I like my gold (plated contacts).

Just as people say, "the market can act crazy, longer than you can remain solvent" about trading stocks on Wall Street, so I would point out that gold's value "as money" has been around a lot longer than even the lifetime of Methuselah.

People have been using gold in some form for thousands of years - I don't see that changing anytime soon.

People used silver for a long time too, but it was demonetized in 20th century.

http://www.dailyreckoning.com.au/silver-a-brief-history-of-d...

People still buy silver as an investment, I hesitate to say "as money" ; although I told in Mexico you can buy and sell silver in many banks (I don't know the details however).

In the USA, gold was demonetized (1933) before silver (1965) in the currency when used in the USA. The dollar was convertible into gold internationally however.

The international gold window was closed by Nixon in 1971.

Gold's price is sensibly on the order of the price of silver (which gets classed as money but has a pile of uses).

Gold's magickal role is largely cultural bias. There's lots of metals that are rarer and pricier than gold, but you don't hear about scandium-bugs or rhodium-bugs.

SHA-256 may go in several years, and this is an active concern in the Bitcoin community:

https://bitcointalk.org/index.php?topic=264552.0

I really am not a bitcoin fan, but my hatred towards PayPal's payment monopoly may one day weigh more heavily than my reservations about cryptocurrency. :)

I don't think they paid anything at all, actually. Transactions above a certain priority are free, as I understand it:

https://en.bitcoin.it/wiki/Transaction_fees

Not that $350 would have meant much - your point stands and is well taken. I was convinced of this money transmission use case as the most important when I was writing up something on Bitcoin a while back and talked with a few experts. They were all psyched about this kind of thing, not about "you can buy your groceries with a bitcoin card" stuff, which will have better solutions than this. Global liquidity is what it adds, really.

Finally, someone mentioning good reasons why bitcoin is actually great. You're absolutely correct, and this is why bitcoin will continue to remain relevant. Taking service fees out of transactions is a huge boon for businesses and consumers everywhere. My mother is the CFO for a large retailer, and I believe service fees are the third largest cost they have after rent and personnel.

So maybe I'm ignorant here, but did they do the transfer over the Internet, or was it a thumb drive taken out of "cold storage" and handed off to someone else. Do we even know? Don't you think there are vulnerabilities in the system for transferring Bitcoins just like there are vulnerabilities in the system for transferring other valuable things?

> So maybe I'm ignorant here, but did they do the transfer over the Internet, or was it a thumb drive taken out of "cold storage" and handed off to someone else.

Every bitcoin is controlled by a private key. The private key can be put in 'cold storage', but if I hand you the USB key with a private key stored in a text file on it, you have no way of being sure that I didn't keep a copy elsewhere and in a few minutes will make a transaction sending it to some other private key (which you don't have). So unless you trusted me an extraordinary amount, you would immediately want to make a transaction transferring from the private key on the USB to a new private key you generated just that moment.

> or was it a thumb drive taken out of "cold storage" and handed off to someone else

A transaction like this is invisible to the bitcoin network. This would be equivalent to me handing you a 20 USD bill, no one but us (well, there is surveillance, but you get the point) knows what happened. Unlike handing over 20 USD, if I had you a USB drive with a wallet containing 20 BTC, you need to move that money from that wallet to another, because you can't trust it's my only copy. If I have another copy of the private key somewhere I can take that money back at any point by announcing a transaction before you do.

So exchanges like this are done via the bitcoin network by specifying a from address and a to address (simplified, other more detailed explanations are out there detailing the actual cryptographic tools and protocols) and an amount. So you provide me an address, I use my private key to encode a transaction from an address containing my 20 BTC to your address. Everyone knows about this, though they may not know who we are as the addresses are pseudonyms and the connection to our real identities may be virtually non-existent. Now, you control that 20 BTC and its spending, and my 20 BTC are gone from my address, I can't spend them again (legitimately at least). Supposing that address now has less than 20 BTC. If I try to spend 20 BTC again the network will consider it an invalid transaction since I can't spend BTC I don't have.

That 0.5 BTC you see there is another output, not the fees. They didn't pay any fees for that transaction.

That is the side I think many in the financial world are realizing and what hits banks the most. It hits the fees. Daily transfer fees, rates, management etc.

It could be beneficial to banks to move money more rapidly and make some coin just like funds they have do with their holdings even though it strikes the core of the business model.

If used right it could be helpful like torrent is to distribution, cheaper, faster ways to move things. It would be nice one day when regular bank transfers don't take 3-5 business days or a fee for same day.

Banks don't make money from fees. Banks make money from lending out your deposits with only a fractional reserve.

Solving problems is nice in the abstract, but I can't really get excited that someone has solved the problem "I wanna move $150 million without paying for it." In terms of things that actually make a positive difference in the world, it's right up there with "that breastplate I want for my Warcraft paladin won't drop."

Months ago? I was considering buying some coin when it cost only a few dollars. You can imagine how I'm kicking myself now.

You think you feel bad? I _did_ buy some at $4. 250BTC. Now worth around $120k. Sold at $23.

I have 1BTC. I wish I could turn the money in that into more. Wish I would have bought more initially.

Or a $50 wire transfer. Used ALL the time.

But this was likely just moving money around to own accounts.

Couldn't it also be done by writing a check?

No, the Bitcoin system has real value. Or rather, it would have real value, if Bitcoins themselves had real value.

A slight correction, he paid zero fee. The 0.5 bitcoin is change, that he got back.

You can see the fee amount further down the page. If he had paid a fee, 0.0001 BTC, or $0.04 worth of BTC, would have been enough to ensure the transaction was included in the next block.

You're right, I misread it. Even better though.

Isn't it quite possible that the 0.5 BTC is the actual transfer, and the other 194993 BTC is the change?

Yes, but that makes for a very uninteresting story

I'm not sure why he would use that many inputs to transfer 0.5 Btc.

so what? i just paid $0 to transfer 1000 unicorns from Narnia to Neverneverland

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