Don't get me wrong. The proof of work ledger is a cool idea. However using it as a currency in this kind of implementation with complete disregard to anything else doesn't work in the long term.
Other than that, bitcoin behaves more like cash than like banks or credit cards. You can build banks and credit cards around bitcoin, and you should, but bitcoin itself is just like cash, and that's all it should be. It doesn't need to solve other problems that as you say have already been solved by systems like two-factor authentication and the like.
This particular attack is more like thieves walking into a bank and claiming to be a person and then being able to get cash from the bank's safe (an analogy that also fits nicely with the relatively small amount of money they were able to steal). It is not like being able to rack up fraudulent charges on a credit card.
Well, it solves more than one problem, and a few of them are certainly real-world.
>However using it as a currency in this kind of implementation with complete disregard to anything else doesn't work in the long term.
Would you care to expand on what you mean by "complete disregard to anything else"? I mean, clearly this is hyperbole, but I'm curious what you are referencing specifically.
In addition one of the biggest problems with bitcoin stems from the problem it solves. Transactions cannot be reversed, thus making thefts extremely lucrative.
Normal banks simply reverse transactions if they are fraudulent. As an example someone hacked Nordea (Bank operating in Nordic countries) last spring and got away with 600 000 euros. All of the transactions except one were reverted and the missing one was compensated by the bank.
That's not a feature.
I don't think there is a working implementation of the multisig contracts in the wild yet, but the protocol does support a way to solve these problems.
So what? Banks have the same problem. If I call up my bank and ask them to do something, they'll ask for a bunch of random information I didn't know I'm supposed to keep secret.
> Bitcoin solves a problem which is not actually a problem in real world.
What? It solves the problem where some incompetent fucks are in charge of your money and screw you over, which is exactly what happened to this company (except they trusted them with hosting instead of money)
Bitcoin transactions are irreversible, so there is no way to get back stolen coins. And there is insufficient consensus to block them from being spent in future. These, combined with the magical pure-virtual, ethereal nature of Bitcoin, makes it an unprecedented target for thieves.
Maybe Bitcoin can yet be extricated from these issues, but the basic system Nakamoto gave us does not address the needs we so clearly have. Given the track record of so many exchanges and other services, we have a long, long way to go.
So are cash transactions.
People need to think of bitcoins more like cash than like credit cards.
Now, whether that's an effective deterrent and whether there's a realistic chance of catching the thieves is a big question, but there's nothing inherently different. It's not that hard to rob your house of cash and not get caught either. The main reason it doesn't happen is because the criminals who are good enough to do it have bigger fish to fry. If they found out that you had $100,000 under your mattress then there would be trouble.
If I get robbed/assaulted, I can contact my pimp and he can go with his gangsters and kill the offender.
> There's no such thing with Bitcoin.
This is a feature.
What about Bitcoin? If I have a bunch of it, can I convert it to an obligation with a reputable counterparty? One who will not store it in a form which makes it so easy to get away with, once stolen?
We can treat it like cash, but then we must wonder what we are doing piling up cash in our exchanges. Conventional exchanges do not work like this at all--there might be a good reason for that.
Again, this sort of "virtual" currency (more technically, M2 currency), is something that you can build on top of bitcoin, and something I don't think that the bitcoin protocol itself needs to build, since we already have it.
http://en.wikipedia.org/wiki/M2_%28economics%29#Empirical_me...
In China, for example, bank transfers aren't great and it's pretty common to buy things like cars with cash. It's especially crazy in China since the largest banknote there is 100RMB, roughly equivalent to 16USD, but cars cost about twice as much as they cost in the US, so it requires a lot of cash.
It's as if you are discontent that you are now liable for walking across the road safely after being driven around by a private taxi all your life (if the taxi crashed, the company would not lose any reputation, it would be the driver's fault, despite the low wages paid to the driver, pushed to the limit time pressures on the drivers, the recent line of flawed cars they ordered and decided to keep to expenses, and you would die, and it would just be like any other day).
You'd never store $100,000 actual dollars in a place where the employees let anyone walk in and take it if they just claim to be you. Bitcoins are equivalent to cash but they are not being stored anything like how cash is stored. It's a fundamentally difficult problem that bitcoin requires you to solve, so I think this really is highly related to bitcoin's security.
This is not a solution that bitcoin itself needs to build into the protocol. It's just something that we already have that should be used when using bitcoin. People are taking a while to get used to the idea of securing a decentralised currency.