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Comment by arjunnarayan | Hacker News Reader

The great thing about this is it that it puts a floor on the bounty on all network bugs. Since we know that lots of national security folks are regularly exploiting various bugs for their own purposes, this means that the internet will be significantly improved. I see it as a bonus.

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The unfortunate thing about this is a lot of people are going to lose a lot of money before either 1. Mainstream web security catches up to the cleverness of the bitcoin hackers or 2. People lose faith in bitcoin because the internet is generally not secure enough to support it.

Lots of money has been lost in other security breaches, oftentimes with much worse consequences because the data is centralized. This hasn't stopped people from shopping at Target for instance.

The nice thing is, security breaches in a decentralized network like bitcoin serve to make the entire network anti-fragile. There's a huge incentive for people with bitcoin to secure their own bitcoins against known exploits and hence make that exploit null while inevitably protecting against similar class exploits.

The difference is that with the Target breach, people knew that they would get their credit card $$ back.

But the way this is implemented is "credit card companies will take 3% of every transaction they perform, and then give back a very small portion of that to counteract fraud". The power we give these organizations - basically a 3% tax on every transaction - is mind boggling.

The credit card companies don't actually don't give up part of their 3%. Chargebacks are up to the merchant: http://en.wikipedia.org/wiki/Chargeback_fraud.

Compared to the spread and inconvenience on $ -> bitcoin -> $ transactions, that's quite cheap.

Keeping bitcoin online enough for convenient transactions carries the small but important risk of losing your entire wallet.

True, and there are benefits you get for that 3% (rental car insurance, reduced cost of a mugging, etc. etc.) but I still wonder if cash (not necessarily bitcoin) would be better for the system as a whole for everyday purchases.

Keep in mind that cash has costs too. It has to be counted and secured. You have to hire a security company to pick up deposits and most banks charge for cash deposits over a certain amount.

But then that tax gets selectively reimbursed via dividend to shareholders. Upward redistribution.

There are externalities to this "you don't have to worry at all about the security of your credit card info" feature.

Barely 0.01% of the world population uses Bitcoin and we already see a technology on the market that is expected to significantly improve security, and this was the result of 1+ year of engineering effort from teams of engineers: hardware wallets like http://www.bitcointrezor.com So security isn't great overall right now, but clearly it is improving way ahead of time with respect to a potential mainstream adoption of Bitcoin.

It seems to be a transitional period where people must trade security for freedom, while the industry figures out the security part.

Much like early immigrants to North America who had leaving the stability and safety of UK/European banks for an emerging market and/or the Wild West.

You should not "invest" in bitcoin if you cannot afford losing it. So I would not shed a single tear.

I agree. I actually leverage this by leaving a couple Bitcoins unencrypted in my 1Password file and have setup an alert to let me know if any of those coins ever move. Which would be a good indication that its time to use a new password manager.

Seems like the right kind of way to do a canary.

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