Flexcoin is shutting down
flexcoin.com
flexcoin.com
So many hacks and people are just not getting it. Trust no one, stay safe.
My Mac wallet of choice: https://electrum.org
"But wait!" you say, "I shall use modern cryptography to protect my wealth from prying eyes!" Yes, and the thief in the night will use rubber hose cryptography on you.
There is a reason why the vast majority of people entrust their wealth to banks & not a safe buried under the floor of their house. I'm sure the BitCoin community will learn this truth about monetary systems at roughly the same rate as they've learnt all the others & probably the hard way given recent evidence.
Why is this? Well, if you choose to "use rubber hose cryptography" on someone to steal their Bitcoins, you've graduated from a faceless, online, white collar crime that many police departments won't even take a report for ("they've stolen your Bitwhats? Yeah, we'll get back to you.") to an extremely serious crime that will get you locked up in violent prisons for a very long amount of time in every country of the world.
So it's not surprising that the scenario you describe has not happened. It may happen yet, but it will be a rarity and not a statistically-meaningful threat.
Print 3 copies of paper wallet. Store in 3 different bank vaults.
Bank vaults are very rarely compromised. And as you said you can still use multisig.
> Or if your computer was compromised at the time of generating your paper wallets. Or the printer. Or if you somehow downloaded a malicious copy of wallet generating software.
If you factor malicious software into account, you're far more likely to have your credit card or bank account credentials stolen.
Cold storage surely isn't a panacea, but let's be honest in the criticism of BTC. With reasonable security standards your bitcoins are probably safer than your bank account money. (The only difference is that your BTC's probably aren't insured against theft)
Yes, that's not absurd at all. These blockchain-monitoring, bitcoin-wallet correlating cyber-thieves with their rubberhoses are a real plague.
It's just so much easier than, say, robbing people near an ATM at gunpoint...
Shouldn't that really be rubber hose cryptanalysis?
Deleted comment
Electrum doesn't store the wallet in the cloud, it just uses a web service instead of downloading the entire blockchain.
I believe in the potential of bitcoin, but if cloud wallet services cannot succeed, then bitcoin can't succeed.
At least Debian have had their repositories hacked in such a way that the hacker could have distributed tailor made exploits users would receive by running "apt-get upgrade". It's not so hard imagining someone inserting code in a bitcoin client to send all your coins to one specific address. If it's not a hacker, it could be an insider at Debian or the author of the bitcoin client themselves.
I haven't seen any bitcoin advocate solving that conundrum. If the supposed experts of securing software can't keep their free software safe, how on earth are regular users going to keep their life savings safe on their own?
I have the main Bitcoin app (which takes up almost 20GB on my SSD with it's blockchain) and I have a few others, like multibit. There doesn't appear to be any wallet management, each app creates its own wallet and can't open the wallet from another BTC app.
The difference is that Bitconin is decentralized, so there in no equivalent of A.A. to handle the servers. But it's easy to understand that a number in a computer screen is valuable. Well, most of the dollars are only a number in a computer screen, not real life bills.
I've just smiled to myself picturing those guys coming together and then slowly re-learning everything we know about statesmanship and politics. Like the moment they first realize different people have different values and want different things. Then they're going to come up with the idea of democracy and a parliament. Only this time around it will be the Aspergers among us who try to figure out how to influence people. :)
But, of course, the best bit will be when they, so rationally, decide to give up the final ruling power to a super-intelligent AI, and then the look on their faces when the AI decides to do something that, while 100% rational, nobody wants.
http://www.hmrc.gov.uk/briefs/vat/brief0914.htm
If the government regards something as having value it wouldn't seem unreasonable to expect them to regard theft of assets in this form to be a crime.
NB I think I'll re-read Halting State:
Many fierce proponents of Bitcoins are the anarchy-leaning libertarians. Its appeal is that government agencies can't track and tax it (or have a tougher time with it)
While I do think a crime has occurred, it feels a bit like collecting a benefit you refused to pay into.
Can you give me a list of all the people who have been criminally investigated and put in jail for such theft?
Besides, isn't lack of effective prosecution of failed financial institutions a reason often cited for using bitcoin?
10. Eventually price goes back up, as it _always_ does.
11. ????
12. Profit
So my tulip investments are safe after all? That's certainly a load off my mind.
I know people keep making the comparison between bitcoin & tulips. I still don't understand why. I do understand that there is a lot of speculation driving bitcoin prices up & down right now and I also understand that BTC is experimental tech where the chance of a random disastrous event killing the whole thing is possible(like almost anything else that is new), but I also think that bitcoin, its protocol & services built around it can't be compared to a flower.
The Dutch believed tulip bulbs had value because the new breeds of tulips were beautifully designed and growing them took effort, which gave each bulb some kind of intrinsic value in terms of expended energy.
There is no inherit reason for the transaction volume of tulips to stay strong after a burst bubble, because they have no special practical ability. Whereas cryptocurrencies generally have a practical application, like fiat, that makes people want to keep making transactions with them, even after a bubble. The practical application of Bitcoin is its low fees and ease of use for person to person international transfers.
(Assuming infinite parallel universes, there's bound to be a universe where each bitcoin is the genetic code for an awe-inspiring dragon... But that's not where we live.)
The value in those bits is a cultural intangible: someone you trust tells you that there's a value beyond the practical level. This is like an invisible piece of metadata attached to the seemingly useless information.
It's the same reason why a vintage Gucci bag costs $2000 even though you can get a used leather bag for $5... Or why an Andy Warhol canvas with a dollar sign on it costs $20 million, and one painted by me can't be sold at any price.
And frankly (I'm sure tptacek or someone will come in here to tear me a new one for saying this) but the state the art of computer security is a complete joke. These systems we have are just too complex, and it's a statistical impossibility to close all the security holes in the operating system and all the software on top. You can never predict when and where the next Goto Fail or Debian Random Number Generator flaw will show up. And that's for gigantic corporations and governments. And people are telling end users to keep Bitcoin safe on their home computer instead? Home computers will NEVER be safe.
The only proper way to proceed is to use multisignature wallets. If you want to know why that's better, visit our explanation site: https://www.bitalo.com/why_bitalo
Fortnunately Bitalo is not the only service that provides this. More and more services were created lately, most notably:
https://api.trustedcoin.com/wallet/
Vote with your money, don't support "Bitcoin banks" that can run with your money any time they want.
Banks as we knew them did not work this way. Yes, having to wait three days for settlement is absurd, but folks are working to speed that up (to just one day, haha). Yes, the fees add up. But the systems have been developed over a really long time, and they have multiple levels of protection against you losing all your money. In the US that's the FDIC and SIPC, for regular-sized accounts. There will never been a direct equivalent for BTC, precisely because no one's national security is tied to BTC. And most people won't buy deposit insurance at any price higher than the "free" one they get from their government.
Early adopters of Bitcoin spoke fondly of the fact that there are no chargebacks. That's a great way to reduce transaction costs. It's also a great way to make sure that when you get hacked (and you will) you cannot recover.
Compare this to the situation with ACH transfers (the US-only, low-cost "wire transfer" system). Anyone who knows anything about computers would be aghast at the technology comprising that system. The security appears to be pretty lame. Yet people do not lose their savings via ACH. Why? It isn't because ACH transfers are so secure--it's because the banks can undo them, which in turn lowers the incentive for thieves. This is a virtuous cycle, by contrast to Bitcoin's vicious one, and the way it works has nothing to do with technology.
It's a product that can't really be sold, because the only people buying would be fraudsters. Suppose a new bitcoin "bank" came to an insurer and said "we want to buy insurance against losing any of our customers' money". The insurer would, quite rightly, assume that the business plan here was to steal all the money and put the loss on the insurer. The insurer would assume that to even consider writing such a policy, they'd need to verify and stand behind every single aspect of the "bank"'s business operations, website, and so forth. The insurer would quickly realize that the premiums for such a policy would have to be extravagant, like 100% of the amount insured. And the insurer would decline the business.
The FDIC insurance "works" because of the large body of regulation and the mandatory enrollment requirement, neither of which exist in bitcoin-land. There isn't insurance for bitcoin banking, and can't be.
(Well, I suppose someone could offer fraudulent insurance - take premiums but have no intention of paying out. But that's just fraud, not insurance.)
So what I'm proposing is industry self regulation. That said, I doubt that any deposit insurance scheme could ever be large enough to cover losses of such enormous proportions as we have seen in recent weeks. The hope would be that utterly incompetent adventurers like Mt. Gox would never pass the audit.
A bank can verify, on a daily basis, that they still have "most" of their assets. And a lot of the assets can't be stolen in any real way. Banks owns a house - house can't be stolen. The legal process will get it back. Bank owns treasury bonds - can't be stolen, we know who is "supposed" to own them. Etc.
Occasionally there may be an unexpected asset leak (rogue trader or something). But the damage is still limited, it's still small compared to the assets of the bank. Barings lost something like 20% of all their assets - obviously disastrous, but they still had 80% left. And a failure that large is intended to be impossible to occur.
A bitcoin "bank", well, you audit it at 11AM and at 11:02AM it can have nothing, 0, zero. No insurer is going to sign on for that sort of risk at any price.
One already has: http://www.bbc.com/news/technology-25680016
But I'm not suggesting getting insurance from insurance companies. I'm suggesting that every bitcoin bank should set aside some small share of its revenues to fund the industry's own deposit insurance scheme. That's how deposit insurance works in many countries. If the losses exceed the fund's resources then it's too bad for the depositors.
Insuring bitcoin banks (or rather storage companies) is not actually that problematic because losses at different banks are uncorrelated. That's a much simpler situation than insuring regular banks, which have loan loss risks that are strongly correlated. Recession -> unemployment and bankruptcies -> non performing loans at many banks at the same time.
You are right that regular banks cannot lose everything in a single event. But that's not true for many other types of insured assets. Fire insurance being one example. As long as there are many insured and the losses are not strongly correlated it's not a problem for insurers.
For example, Venmo[0] is simply an app layer over the ACH system. Sending someone money is as easy as sending a text on iOS, or an email on your computer. Payouts to your bank account can be same-day but usually take 1 business day.
Other than the pseudonymity (which is admittedly one of Bitcoin's stated value propositions), doesn't Venmo capture most of Bitcoin's advantages? What's preventing someone from using the Venmo API to, for example, write a reddit micro-tipping bot? Is it that an app having ACH access to people's bank accounts is scary?
Those aren't rhetorical questions -- I'm genuinely interested in knowing what advantages cryptocurrencies have for the layperson compared to an enhanced ACH system where security is already taken care of.
(I do use Venmo, but am not affiliated with the company otherwise.)
[0] http://venmo.com
Just brainstorming here. I really do suspect that most of the benefits of cryptocurrency are due to the way it interacts with technology, which can be imitated through just a bit of innovation in the banking industry. (Imagine banks allowing customers to script transactions, like Bitcoin, or providing direct APIs to bill-pay and ACH transactions.)
Bitcoin needs a solution to address this for it to be a valid way of spending money. And irreversibility, pseudonymity, and no regulation make it impossible.
Disclaimer: I'm with GreenAddress.it
Really, I'm not going to go to your site to find out why this variation of the perpetual motion machine is going to work. And it's the "only proper way to proceed" which means if we find a problem in it, there is no proper way to proceed.
Last week on HN someone called a Bitcoin wallet a pressurized system that can in an instant lose everything. There is no room for error. The slightest hole anywhere and you lose, instantly and irrevocably.
The Gox debacle will teach people to cold-store their wallets themselves, which is an excellent thing for bitcoins.
I wonder what something like that might look like...
Maybe: http://www.fdic.gov/
For larger amounts cold wallets are better. No US$ 100,000 FDIC cap.
Recent events provide strong support for exchanges and banks to work with insurance houses and develop insurance products. Flexcoin shouldn't be shutting down and telling its customers "oh well" over their hot wallet theft; they should have an insurance policy paying out value to their customers.
"While the MtGox closure is unfortunate, we at Flexcoin have not lost anything."
"Flexcoin will be shutting its doors."
The arguments for Bitcoin are that you don't / shouldn't need anything like Flexcoin in the first place. Apparently though, some people end up buying Bitcoins and then not storing them in their own wallets, ensuring they get the worst of all worlds - no low-trust technology and no government bailouts.
I'm really curious about how it will evolve.
It's in the same category as rocketry, nuclear reactors or medical software, not "move fast and break things" startups. There is no room for error.
Entertainingly, they've left the FAQ up:
Q: Are there advantages to bitcoins?
A: Of course! It is secure, anonymous and it removes the middle man resulting in very little transaction fees.A while ago a site was hacked because they didn't upgrade rails which put out an urgent security update a few day's previously. This is sloppy. There is no excuse.
In many other cases the problem is that people running and building the website are not security experts. They know the fundamentals and learn new things from exploits used elsewhere. However, this knowledge falls short of attackers who relentlessly look for and try to create exploits every day.
I think this is the main issue. Too many hackers, not enough security experts, not enough funds to continuality audit the application and servers running the website.
http://en.wikipedia.org/wiki/Information_asymmetry
In other words, the people selling the bitcoin services know more about their own security than users do.
We know good security is difficult but this is getting ridiculous - it has to be a priority.
The only time you should be exposed to any sort of counterparty risk in Bitcoin is when you buy or sell them. And if you use a reputable service like Coinbase or Bitstamp, and only keep your Bitcoins on that site for the few minutes it takes to buy, sell, and transfer them, your risk should be miniscule.
This AND hire your own pentest team to make sure you keep your bitcoins safe. There's a reason people use banks for "normal" money.
IMO it's a pretty good way for them to deal with the situation.
I know that Bitcoinica, Gavin Andresen's faucet and TradeHill all got hacked through Linode's support system a while back, in which the attacker managed to reset all their passwords.
[0] https://bitcointalk.org/index.php?PHPSESSID=r2dliaaebhrctppc...
Suppose you make a Bitcoin service where they print your keys onto pieces of paper and store them in a big vault. When people want to withdraw coins, they must visit the vault location and take money out, where the transaction is verified by a physically present person. The owner of the vault could also release an API to allow trusted third parties to conduct transactions on behalf of the people who deposited Bitcoins in the vault.
We wouldn't need to worry about hackers, and if the vault is strong enough we wouldn't need to worry about thieves.
But we would have to worry about the banker. The owner of the vault can devise ways to increase the apparent value of his vault, through financial mechanisms like derivatives and credit default swaps. To prevent this from happening, we could get a big organization with lots of guns and power to regulate the actions of the banker.
But then again, the banker controls all your Bitcoins, so he can just use your money to pay off the people with all the guns and power. Nowadays, everything is for sale, everything can be stolen, and nothing is what it seems.
That's why I have a lot of faith in Bitcoin. Even though we haven't figured out how to make a good vault, there's no real place for crooked bankers and powerful organizations.
Ok, when I studied history many years ago, I took a class in early modern Europe (think 15-16th centuries). That was when modern capitalism first gradually appeared. The most important thing to understand about the origins of modern capitalism is the change in society it required. That change was the transition from a face-to-face society (where you personally knew all the people you transacted with) to a society of strangers, where you had to put faith not only in complete strangers, but in people whom you'd never met and never would meet. Most importantly, you had to put faith in institutions. That was when the first institutions started, modeled after the oldest institution of all, the Roman Catholic Church. There was a time when there were no institutions (well, other than the church). People couldn't even understand the concept of an institution: they knew there was a guy named John and a guy named Paul, but what the hell is a group of people that has an identity of its own, and lasts more than its members?
Anyway, modern capitalism required institutions, most important among which were banks and insurers. Insurers reduced risks and encouraged investment while bankers lent money to support such investments. Now, when you put your money in the bank, it has to be loaned to others, otherwise the economy will come to a standstill. You have to put faith in the bank to get the money back to you. Same with insurance. You have to have faith in the insurer to pay your claim, or, at the very least, faith in the court to compel the insurer to pay up.
The way you look at BTC, disconnects money, a central instrument in the economy, from the economy at large. That doesn't make sense, and even if no one ever steals your money, your money won't "work", because there will be no economy to use it in. A modern economy is built on trust. Trust that in the long run, most people will be honest because that's what's best for them, and they know it. If we don't have trust in institutions, there will be no economy to speak of, or, rather, there will be a very primitive one (only, this time, with computers). In that case, I suggest you take good care of your machine, because in your utopia there will be no new models coming out. Sheesh, how some people, in time of crisis, cling to their laptops and algorithms.
All of these spectacular exchange failures out there have nothing to do with Bitcoin itself.
Go read up on trustless cryptographic systems, and understand that we're entering a different era. The failures that occur around the periphery of Bitcoin are nothing more than a fault line between the old system (trust in failing institutions) to a new one (trustless).
Signed,
A humanities major back in college (yeah, I studied economic history, too)
While you don't want people to think that Bitcoin is failing after ceaseless thefts, you call our institutions "failing" based on what? I don't know about you, but my institutions aren't failing. They just require regular maintenance.
Also, if you think Bitcoin is about creating a new kind of trustless economy (in other words, the very same economy that existed prior to the modern one or in lawless frontiers like the Wild West), you are mistaken in believing that most people will follow you. That is precisely the libertarian politics that hangs around Bitcoin's neck, and if anything will choke it, this will be it. Forget about who's right and who's wrong. The reality is that most freedom-loving people aren't libertarian. They like their institutions and want to fix them. They don't want a trustless economy. We may be misguided; we might be wrong; but we're the vast, vast majority.
And if you like history, you probably know that people have been warning about the collapse of modern institutions pretty much since their inception. There were always those who wanted to grab their gold and head for the hills because the system is falling apart. And let me tell you that there were times the system was close to crumbling, but today we're not even close to such a big crisis. Nevertheless, the vast majority of people have put their faith in their institutions, and for about 500 years now, they've been right (well, more or less).
Why not? I mean sure, it would mean losing the anonymity, but the receiver would owe you the interest-adjusted amount just like someone you lent money to. A loan isn't magical boomerang money, it's a legally encumbered transfer, which can be done with dollars, bitcoins, tractors or anything else.
In fact here's bitcoin lender right here: https://www.bitbond.net/
Lending -- as an institution, as opposed to as an individual -- is all about fractional reserve banking. The bank pools the money of its depositors and lends it out without restricting the ability of the depositors to access their money. This increases the money supply, and generally works OK because of a combination of (a) most people not needing most of their money most of the time and (b) a lot of transactions happen purely through the bank's internal ledger, without needing cash at all. If Alice writes a check to Bob, who immediately deposits it, the bank just updates their ledger and it doesn't matter whether they have cash on hand to cover it.
There's nothing preventing you from operating a traditional fractional reserve bank using Bitcoin instead of cash, and it would work the exact same way as a traditional bank with exactly the same advantages and problems. But if you're writing checks for Bitcoins instead of dollars which end up being processed entirely through a bank's internal ledger instead of through the Bitcoin network's blockchain... why? How is that really Bitcoin?
The problem with the more vociferous proponents of Bitcoin – and not only Bitcoin; you can see the same thing happen in the tech industry in discussions of women or minorities – is one of politics. The problem is this: many in the American tech industry don't know what politics is. According to Wikipedia, it "is the practice and theory of influencing other people on a civic or individual level;" it's a general term for managing powers and spheres of influence in society. Worse, they seem to shun it.
But politics can't be avoided. It is essential to human society. When people shy away from politics, a dangerous thing happens: they practice bad politics based on naturalistic fallacies. I think science oriented folk are particularly prone to that because science concerns itself with what is, while politics concerns itself with what ought to be. Science people might, and do, come to believe that what is, is what ought to be (or the only way to be).
In fact, Bitcoin is a very interesting example because it allows (actually, it is only imagined to allow) removing people out of the equation altogether, leaving algorithms. When you take power away from people and put it in the hands of mathematics you indeed lose politics (except, of course, for the original act of seizing that power). But then you lose a lot of what makes us human.
I think that there is in Bitcoin a confluence of tech people falling into naturalistic fallacies with a general lack of trust in institutions that has possibly been growing of late among Americans. It is interesting to watch, but the arguments, unfortunately, are no different from the old American-libertarian anti-government, pro-gold, arguments. The difference, this time, is not in political awareness (of which there is a dire lack), but in – here's that word again – power. American libertarians traditionally had little power. They have been a small minority of both the general population and even of the rich and influential. But now technology is not only a power (which it always was), but one with exceptionally low barriers to attain. Bitcoin supporters, by virtue of their part in the powerful Silicon Valley sphere of influence, actually do carry a not-insignificant political weight. This will be interesting to watch.
Whatever happens, even those who believe in institutions should welcome this challenge, because democratic institutions always benefit, in the long run, from worthwhile challenges. So far they've shown an incredible ability to adapt (though the rate still appears too slow to humans who only live about 80 years), and there's no reason to believe they will not evolve for the better as a result of this interesting challenge.
It is interesting to watch.
Sure banks fail and make mistakes but the FDIC has kept small depositors from losing all there money for a long time. Computers are hacked or mess up all the time and with Bitcoin such issues are unrecoverable which makes trusting computers seem like a terrible idea. For reference 1/2 the people I know had there WoW account stolen and that's worth less than 50$, if significant numbers of people where to try to hold significant amounts of bit-coins directly you could expect similar things. Right now bit-coins are small enough and fractured enough not to be a useful target but it just does not scale without 3rd party institutions.
There's the rub: do they get the regular maintenance they require, and who foots the bill when it breaks? What are the incentives to do so, and the consequences if you don't?
I don't believe institutions are 'failing' in the sense that they cannot operate, but that they are a net loss to society. The trustless economy is a response to the lack of trust in those who control the economy - whether by enacting policy or being too-big-to-fail - to operate for the greater good of society. It is not about distrusting people, it's that you shouldn't need to trust people. You may evade or buy your way out of the laws of the land, but you can never escape the laws of mathematics.
Of course the economy runs a lot better when you can trust everyone. There also exist better forms of government, if you ignore human fallibility or selfishness. But it's not about abolishing institutions, even if the purpose is to obsolete certain types.
Very true, but the laws of mathematics don't have feelings, desires or empathy. That might be good, except for one thing: we're human and we do. As people, we should want to have the freedom to decide our own fate, not put it in the hands of an alien entity. That entity might be right but it won't be right for us.
This is what I don't understand about your argument: the governance of cryptocurrencies is the same democracy you're advocating elsewhere. The difference is replacing the fallible human element with a set of mathematical rules. Noone is saying the rules cannot change (or altcoins would not exist). The entire purpose of the cryptocurrency experiment is to find rules that everyone will like and aren't based promises from politicians, corporatists, or plutocrats.
I think you're reading too much into what cryptocurrency is. It is simply a somewhat-elegant solution to the problem of building a decentralized, digital cash. That's it. It doesn't try to find new ways to run the economy, although some of its supporters do because that's their politics. It doesn't even prove that this is, indeed, a serious practical problem, but that's what some of its supporters believe.
What you call fallible, others might call "free". For example, I would like to give the government the freedom to quickly devalue the currency in a time of a job crisis. What you're proposing either takes away that freedom altogether, or places a serious bureaucratic burden on the process, so that it might not be feasible. You're basically suggesting a system with an unbreakable bureaucracy which is just about the only thing worse than the current situation. There will be no one to talk to – hey, it's just the algorithm – other than somehow convince a majority of anonymous account holders, with whom you can't bargain because they're unlikely to reveal their true interests.
The difference between us, I think, is this: we both don't like politicians plutocrats and corporations. But you believe that they can be eliminated through some elusive algorithm, while I think society contains within it endless cycles of many concurrent power struggles, and each of us must find their place in it, and fight for the values they believe in, knowing full well that the fight is never truly over.
I do think, though, that almost any imaginable form of society has been thought of at one point or another, and I would suggest that you learn about those atecedents and how they played out. A "society... not based on arbitrary geographical bounds" was the slogan of communism, a beautiful ideal that didn't quite live up to expectations.
Also, I would suggest that if you have revolution in mind, get out more and learn what people really want. I'm not saying that you'll change your mind, but that's how revolutions happen: by organizing lots and lots (and lots) of people.
Please, please learn more about the system you're trying to topple and how it came to be this way (trace the whole process). Not that that would mean success, necessarily. When the communists wanted to established their own world order, not based on national borders, they actually thought about this problem a lot: how the world came to be this way. They even came up with the right answer: all human conflict is a result of an unequal distribution of resources. The only thing they missed (which turned out to be crucial), is that humans, by virtue of their evolutionary wiring, probably, like it that way. So conflict is a result of inequality, but we want inequality. Illogical, but that's what we are. Also, conflict, while brutal, does tend to bring out the creativity in people, which is another thing they missed.
As an observer, I'd love to see a revolution take place ('cause that's cool), but I'd hate it to bring about something worse. So please, think it through, preferably with the help of some history.
Even look at the comments on this page. Someone suggests a loan system; another suggests insurance. And when asked, well, how will the different interests and values of people be managed, you get something like "we'll figure out a way".
Well, that's a legitimate answer, but you can't say "we'll figure out a way" and at the same time call it a "cryptocurrency system". Either you have a system or an outline of one (it can be general, but it must be forward-thinking, and it can't discard politics just like communism couldn't discard psychology – politics is a part of us) or you can play the wingnut game like Glen Beck and talk about FEMA takeovers and other conspiracies, but you can't have it both ways.
Seriously, some of the stuff you were saying in other comments actually made sense, but all you're doing is losing credibility when you go off the deep end and start with the 'fear the machine' nonsense.
Take a deep breath, go get some food or something; you don't have to reply to every single comment.
(...and a considered comment is worth 10 flash responses that haven't been thought out~)
i think the problem is deflation, actually. which leads to 2 practical problems..lack of credit and hoarding. shutting down the ability to spend newly created fiat money i suspect will reduce the amount of credit alot. that probably makes most businesses as we know them now unoperable. hoarding is a social problem i guess. it just increases the wealth gap. not sure if most societies want that.
this is getting ridiculous, stating your degree just to tell people your argument is backed by studies that really don't help you that much (if at all) in economics (yes I have a degree in mathematics too).
There's an argument that we're entering a "low trust" society, and this is not a good thing: http://fistfulofeuros.net/afoe/high-trust-and-low-trust-soci...
There would be no insurance either, so everyone would be forced to save tons of money to cover adverse events that don't happen to most of them most of the time. For instance, everyone would have to save up enough to rebuild their home in case it burns down. That amount would be thousands of times what is needed to rebuild the homes that actually do burn down.
While that is technically correct, don't you think to most people Bitcoin is rather more than the protocol - it is the entire eco-system of applications and services that have been built over the last few years.
If the "fault line" between this "trustless economy" and the vastly larger "normal" economy isn't pretty painless then I can't see much of a future for Bitcoin and exchanges seem to be a pretty important part of that interface.
Yes, bitcoin might be a nice pocket of 'trustless economy', but any practical use inevitably requires trust. There's the hardware, the OS/software, the ISP's, the exchanges, etc., that all, to a greater or lesser extend, require trust.
Now Snowden clearly exposed that this trust is not deserved, and that's a problem. But while working on increasing this 'trustless economy' is a worthy goal, I can't help but feel that the best approach is to both work at increasing trust where it can't be avoided, and decrease the need for it where possible.
But perhaps that's too defeatist. I'm following developments in this area with great interest!
Here's the secret: Deposit insurance.
Bitcoin related organizations are well advised to start copying some of the good parts of the traditional financial system instead of just pointing at its weaknesses. Some have already started: http://www.bbc.com/news/technology-25680016
http://www.fdic.gov/bank/individual/failed/banklist.html
If you go here, you see depositors not being made whole:
http://www2.fdic.gov/divweb/index.asp#bottom
But $250,000 of insurance for each account is much better than none.
(That's a lot of banks! The US system seems quite fragmented?)
(remember, those are 'dividends to claimants' and the claimant listed is almost always 'depositors')
[1]http://www.bankrate.com/finance/savings/6-ways-to-insure-exc...
Basically there are banks that will divide your money amongst a bunch of independent banks, and let you access the money as if it were all in one bank.
All they have to do is up their QA game and organize some external audit and certification system for all participants in the insurance scheme.
Yes. It no longer includes weaving looms, and now includes consumer electronics. You have an issue with that?
We don't spend our money on the same basket of goods as we did 50, 25, or even 10 years ago. The CPI should be and is fluid. You should look into how it's actually calculated, rather than going by your favourite conspiracy site's reports.
That's completely false. You are ignoring the velocity the of money: http://en.wikipedia.org/wiki/Velocity_of_money
And contrary to a savings account your bitcoin wallet doesn't even pay interest.
If you were in Cypress, or had a less trustworth (irony?) government that went out of business, you probably didn't do well either.
The world don't work that way. Cash inflates. Houses decay. Land uses shift. Tastes in art change. Uranium decays. Even our gold supply increases at a rate of 1-2%.
It's the Red Queen's Race. You've got to run as fast as you can just to stay in one place. The only way to maintain value is to invest in productive activities.
http://en.wikipedia.org/wiki/2012%E2%80%9313_Cypriot_financi...
So the only people who suffered were those who were daft enough to deposit amounts large enough to be uninsured in a badly run bank - can't say I have much sympathy.
I should probably write up a good explanation of why asking for zero inflation == asking for price controls, and is not a good idea either.
That's only true of cash, and money in checkings accounts. Money deposited in savings accounts yields interest, which (on average) more than compensates for inflation.
If you're talking about money market accounts (where I believe you need to park a substantial amount and can't touch the money in the account for something like 10 years, but correct me if I'm wrong), you can get up to 3% yield (just beating the stated inflation of 2%).
Am I missing something?
Interest rates are very low right now, but you appear to be off by a order of magnitude.
What if next year some other cool new "currency" comes along and no one wants your stinkin' bitcoins any longer? Does it matter that supply has a cap? No. It matters as little as the limited supply of paintings created by some forever unknown artist.
A bank teller is always present while you're making a withdrawal, and you need 2 keys to open your vault. 1 key from the teller, and 1 key from you.
The chances of this kind of vault getting robbed is very, very slim. If you're worried about that, you can BIP38 encrypt your paper wallet's private keys, so its impossible to use them even if paper itself is stolen.
There is also some chance that the vault will be struck by a flood, earthquake etc. For that, I recommend using a USB as a back-up, where the keys are encrpyted using truecrpyt etc, and the physical drive itself being kept in a very secret location, ideally located in a different city than the bank vault itself, so that the chances of being affected by the same disaster as your vault is minimized.
This is almost a failproof setup in my opinion (you can worry about loosing your Bip38 or truecrypt encryption keys, or what happens if you die etc -- there are good ideas about how to deal with these kind of circumstances as well, e.g. write a hint for BIP38 key which only you or your family may understand on the paper wallet).
So best place to store your wallet might very well be your good old bank, ironic enough.
Bitcoin as a solution to human greed and corruption will work as well as Communism did.
It seems to me the solution to this problem (which will keep on happening apparently) is not primarily to make a site that is absolutely penetration proof, but to devise a system where the scope of a breach is guaranteed to be very limited.
Among every Bitcoiner I've ever known, we'll all stressed the importance of not using any type of online wallet, unless it's a special one like blockchain.info that lets you maintain control over your coins.
You do gain some convenience by storing your Bitcoins in an online wallet, since you can use them then from any device. But you make a very tempting target for unethical people. Plus, you get all the convenience of an online wallet with blockchain.info, and yet you still maintain control over your money.
That said, even a system like blockchain.info is not appropriate for storage of large amounts of Bitcoins, like your savings. For that, only a system like paper wallets or Electrum or Armory deterministic wallets -- created on a secure, offline computer -- are appropriate.
This highlights that bitcoin (not CamelCased) simply isn't a consumer reality yet. Having a wallet on your computer means you have to secure it. Offline wallets aren't very practical and not trivial to generate. Easy to use hardware devices have been promised but not delivered yet.
Use Electrum, back up your passphrase in a secure location, and be done with it. Unless you're storing your inheritance, that should be fine. There have been no security flaws in any of the SPV clients on desktop, including Electrum.
If you're storing a huge sum, you should be using Linux.
(there are some people having a dick fight about their majors in college...well I was an English major.)
Sad this has to happen again and again.