Secretive Bitcoin Startup 21 Reveals Record Funds, Hints at Mass Consumer Play
blogs.wsj.com
blogs.wsj.com
I'm also still not clear what 21 does. According to the article they are building out the blockchain into the internet of things (IoT). That sounds really vague. Plus, the article mentions a contractual twist - like smart lawyer contracts. These two things don't seem to obviously go together.
The rough sketch of the idea is
-Hardware device runs a full security bitcoin node in your house -Provides a multisig for your mobile wallet. -Automatically moves savings into cold storage -Provides a basic environment for implementing crypto banking features
Otherwise, I don't know of many companies who've actually worked into the space of the less well-known features of bitcoins that can be used via the embedded pseudo-language.
http://www.wired.com/2015/03/opinion-bitcoin-may-gets-us-rea...
21 aims to provide the tools and build the full stack infrastructure to make that happen.
The biggest question in my mind is whether or not they have developed a realistic revenue model. The whole point of the Bitcoin protocol is to relinquish control of the blockchain to the network's participants, which makes it hard to monetize. They could license whatever software/hardware they manage to build for various applications of the technology (voting, research, etc), but $116 million seems like a big bet on a company building solutions on top of open source software.
Edit: It appears that they are building both software and hardware, and more interstingly, intend to operate their own datacenters. One of the job descriptions from https://21.co/#jobs :
"21 is seeking a Datacenter Operations Engineer to travel to our datacenters and keep them up and running smoothly. You should like big iron, cutting edge equipment, and firmware. The job description says you will be responsible for "day-to-day operations of 10,000+ server installations". I guess we know where $116M is going.
Maybe if it was expensive art, exotic animals or something difficult and tricky to buy and store without having specialized knowledge, yes then you'd invest in a company to buy and manage these assets.
But storing bitcoin is storing private keys... a password. Anyone can buy it and store it. Hell you can even buy it on registered exchanges, or as a security from SecondMarket's bitcoin fund.
No. These guys raised money to hire software and hardware engineers, they're looking to build a product.
Does that mean the investors aren't buying bitcoin? No, they do so, but outside the company. It's well known that there are a number of VCs (e.g. Chamath) who have bought a few million worth of bitcoins besides their investments in bitcoin companies.
I don't any evidence that many of the 'large rounds' have this business model. There are some companies that bought bitcoin, but that's for liquidity, not investments. Circle, Coinbase or exchanges all need bitcoin to sell as they're brokers/exchanges. But they didn't buy it as an investment, they could just buy bitcoin as individuals, as could investors.
If being an expert in computer security isn't "specialized knowledge", I don't know what it is.
I'm not arguing whether investors right now buy bitcoin directly or through a fund. Obviously they do both.
I'm arguing that NOBODY buys bitcoin through a non-fund bitcoin company that has actual products, like payment processing, consumer brokerage, wallet etc, which is what this new company is about. It's not a fund, it's a company with a product.
i.e. nobody invests in jet fuel by investing in an airline, despite the fact that all airlines trade in jetfuel. They either buy jetfuel (rare considering its properties) or buy into a jetfuel fund, etf, index.
It's just completely ridiculous and not true and unsupported by any evidence, that investors would want exposure to the price of bitcoin by investing in say Coinbase or Circle or Bitpay. They're two completely separate investments.
This is a company that will build hardware and software. It has engineers, management, marketing people, customer service, offices, warehouses, factories, supply chains. It has a product and it has costs. To invest in all of those costs to get exposure to the bitcoin price is ridiculous, again you either buy bitcoin directly, or you buy through a fund like I mentioned in my last post.
As for needing to be an expert in computer security to buy and store bitcoin, hardly, but that's another discussion.
Consider that Bitcoin has return characteristics that are highly desirable to a VC's risk profile, yet the restrictions of their limited partnership agreements precludes VCs from directly buying Bitcoin.
My best guess is this is an IoT play targeting embedding cheap cell chips into devices which will carry their own wallets. The cell chips connections to the network can be funded with cryptocurrencies the devices carry, but the ultimate goal is likely enabling software delivery into the devices. Devices pay for the software downloads. Users fund devices using credit cards, etc. Think of it as a fancy licensing engine for the trillions of devices that will be hooked up.
My second guess would be a decentralized cell network, powered by cryptocurrencies.
Either of those is a massive market.
I've been hoping someone will design a bitcoin cash voucher reader/printer, like you see in the casinos.
(For use in small retail business and vending machines.)
I ask because I was maintaining my own wallet for awhile but stopped because the block chain database was getting unwieldy - it would take up to a week to resync if I ever turned my wallet software off for a significant amount of time.
You know though... I actually don't care. Bitcoin was an interesting curiosity and useful in some situations (transferring money to people in rural areas of 3rd world countries, for example), but it's slow (up to 15 minutes for the transaction to be approved?), has high fees in its transactions and even higher to convert from/to cash, it's unwieldy...
To use it from consumer devices would require someone else managing the wallet, and at that point I'll instead just use cash or a credit card.
To guarantee a transaction goes through you have to wait for it to be confirmed, but most transactions really aren't that important/high risk, so beyond checking that the address does actually have the money, it's instantaneous. Many payment processors (I know Bitpay has this option) actually take the 0 confirmation transaction risk, allowing customers to pay instantly.
Transaction fees are not high, with a typical fee of .0001 bitcoin (3 cents), which is small compared to credit card fees. While work needs to be done converting to/from cash, actually using bitcoin (that you already have) to buy things is a better experience than using credit cards. You simply grab your phone, scan the QR code, and hit send. This is much better than entering your credit card for the thousandth time on another website, or being redirected to paypal, entering your password, and choosing your preferred payment option for the thousandth time (stop asking me to use Paypal Credit!).
Using an Android wallet such as Mycelium, or a desktop wallet like Electrum doesn't require you to download the entire blockchain, and although that comes at the cost of some trust, I personally don't find that problematic.
Basically, bitcoin has some problems, but I think some of your criticisms are no longer applicable to most everyday usage of it.
It's just not. It's not easier than swiping a magnetic strip and signing something, or typing in sixteen digits (or using autofill or the site's previously saved CC info) and pressing buy.
It's not good that I can't demand a return or have recourse in the event of fraud. And it's not a benefit that with bitcoin I have to spend the money first (to buy bitcoin) and wonder if it will hold its value, versus just buying stuff when I feel like it on credit and covering the transaction within 30 days at no interest cost.
I know there are a lot of people who really want your above quoted statement to be true. But, for now and the forseeable future, it isn't.
It's much easier to take your phone, open an app, and scan a QR code, than to take out your credit card, transcribe a 16 digit number, check the expiration date, and enter the CSC (or is it CVC?).
Sure, for websites where your information is already saved, or if you leave all your credit card information saved in the browser, then this isn't easier, but they're still pretty comparable in my opinion. Even if it was slightly more work (which I personally disagree with), I would find that worth not having my credit card information saved by who knows how many third parties.
> It's not good that I can't demand a return or have recourse in the event of fraud.
I've never had to go to my credit card company for a refund, since most places I buy from will take refunds with a receipt or proof of purchase (and if they don't, why would I buy from them?). Fraudulent purchases are another issue, but the risk of fraud is lower with bitcoin versus credit cards (no single number that allows access to all funds, a properly secured wallet is impossible to steal, although I know wallet security is still not the easiest thing to have).
> And it's not a benefit that with bitcoin I have to spend the money first (to buy bitcoin) and wonder if it will hold its value, versus just buying stuff when I feel like it on credit and covering the transaction within 30 days at no interest cost.
This is a very real problem, and what I think will truly determine whether bitcoin gains anything near a large following.
The CC companies have full control over the transactions. They can stop and/or reverse charges. As far as the consumer is concerned, there is very little risk of fraud.
The "no recourse for fraud" meme about Bitcoin is simply wrong. There are not many dispute-resolution mechanisms right now because the technology is young and because most existing users don't particularly want (and don't want to pay for) the second-order services that credit-card companies provide. If Bitcoin catches on among a wider demographic, dispute resolution and most other things that Bitcoin "can't do" will get built.
The technology is very flexible and can accommodate just about everything that existing payment mechanisms (and monetary systems) offer; the reverse is not true.
OK, but wait:
> There are not many dispute-resolution mechanisms right now... If Bitcoin catches on among a wider demographic, dispute resolution... will get built. The technology is very flexible and can accommodate just about everything...
Ah, OK. So the fact that there's no recourse for fraud is actually correct. But because, in theory, there could be fraud detection, then there's no reason to worry about fraud.
Reminds me of: https://www.google.com/search?q=assume+a+ladder
I don't know what Bitcoin will look like in ten years. I do understand the technology and am interested in having a discussion about it. But on Hacker News, in threads like this one, a great many of the comments demonstrate fundamental technical misunderstandings or seem to regard Bitcoin as a mature ecosystem. So I think it's appropriate to try to dispel the ignorance and to emphasize that Bitcoin is actually a nascent technology, one that offers far more than the rudimentary sort of magic Internet money that we see today. Bitcoin is a base layer for permission-lite financial innovation in whatever direction the market demands. You can build all sorts of stuff on top of it.
That means that if Bitcoin's still around in a decade, the ecosystem will likely look very different from today's. "Assume we will never have a ladder," you seem to be saying. Meanwhile, plenty of capable people are hard at work building ladders.
https://blockchain.info/charts/blocks-size?timespan=all&show...
> Sure, for websites where your information is already saved, or if you leave all your credit card information saved in the browser, then this isn't easier, but they're still pretty comparable in my opinion. Even if it was slightly more work (which I personally disagree with), I would find that worth not having my credit card information saved by who knows how many third parties.
This is the crux of the disagreement though. It's really just not easier to use bitcoin on a practical level. I use Paypal all the time for online business purchases when it's allowed, and it's as simple as clicking on the paypal button, seeing my email address already in the field, and then typing in a memorized password.
For a CC sure I might have to grab the card out of my wallet and punch it in, but my numbers are pretty much memorized by now and it's beyond simple. And I'm one of the anal ones who doesn't like my browser keeping my CC info, many people just autofill in seconds. And the number of times I have to enter the information for the first time is pretty low, I usually use Amazon and various other regular places that have my CC info saved, like everyone else does.
As for having my credit card information saved by third parties, aren't you yourself describing a situation where you have your bitcoin information saved by a third party? Are you really keeping your entire wallet and its keys in your phone and settling the transaction yourself? I assume not.
Difference is if your third party implodes you're totally screwed. If one of my merchants blows their security I might have to be sent a new CC number, or worst case scenario spend some time on the phone disputing a few charges or something, with no real economic risk.
> a properly secured wallet is impossible to steal
Yes. In related news an immovable object is impossible to move.
"beyond simple", really? A lot of people would disagree with you. The inconvenience of typing in the CC billing info is the number one reason why fewer sales take place on mobile than on desktop.
And it is one of the main reasons why people stick with a store they know have their CC saved (eg. Amazon) as opposed to buying on some random site where they know it is going to be a PITA to type in all the billing info.
Bitcoin solves this payment friction for a first-time shopper at a given shop, and that's a big deal. You should know this. This is why you yourself admit preferring using Paypal over CC because Paypal also solves first-time shopping friction.
Typing 16 digits plus four digits on the front and three digits from the back of a card in your pocket is incredibly simple. I just described it in one short declarative sentence.
In addition it is mildly tedious, and slightly inconvenient. But extremely simple it remains.
In contrast, bitcoin requires typing in an extremely long and essentially random sequence of alphanumeric characters.
Except that it doesn't you say? Because an app can automate it? Oh wait.
Except you forgot: you have to type the expiration date, the cardholder's name, and sometimes the full billing address. I will repeat again: typing the CC billing info is not simple enough and this is the number one reason e-commerce sales conducted on mobile are not as high as sales conducted on the desktop.
> bitcoin requires typing
No. It sounds like you have never made a Bitcoin purchase. Typically the merchant's site launches your local wallet app via a "bitcoin:" URI pre-populated with an address and an amount -> click OK to confirm transaction -> done.
I don't have that trust and security using Bitcoin with a site I've never used before. I don't know if the site is on the up and up, or if they'll just take my BTC and run.
IOW: you would have no problem paying Amazon in bitcoins, because you trust them.
Does it matter? Some defrauded users WILL be persistent and WILL go through the effort of using these recourses, so they do keep merchants in check.
The fraud world is not as simplistic as you think it is ("oh crap customers can issue chargebacks against us, I guess we have to be honest now").
Fraudulent merchants will act fraudulently, regardless if chargebacks exist or not. Honest merchants will act honestly, regardless if chargebacks exist or not.
The problem isn't just out right fraud. Say you come to my online store and buy something. My warehouse screws up and doesn't ship it but they list in the system they have. You call up in a week and say "Wheres by foo" and I say "We shipped it". With chargebacks I am encouraged to go investigate and solve the problem. Without I am encouraged to trust my system.
Or say I sell you tickets to an event. For whatever reason I go bankrupt before the event can exist. With a credit card I'm still getting my money back. Without chargebacks I'm boned.
So then you say "Well only use trusted merchants like Amazon!" which is great if you want to centralize all commerce on the internet to one provider per vertical but not really ideal.
You aren't answering my point. Your argument was that we need the threat of chargebacks to make merchants more likely to ensure customer satisfaction. I told you that other threats like legal action are sufficient to keep the pressure on merchants to remain honest. For example a merchant repeatedly taken to court will eventually be shut down, or maybe fined sufficiently that it will eat his profits so he will be enticed to be more honest.
> Without I am encouraged to trust my system
If customers threaten to go to court or report you to the FTC/BBB I can ensure you you will be encouraged to go investigate too.
> So then you say "Well only use trusted merchants like Amazon!"
I am not asking for change. People already do it. They already use trusted merchants (mostly). This was the central point stated at the beginnig of this thread: "most merchants are honest, most disputes are resolved without chargebacks. Therefore chargebacks aren't really that needed or that important for most transactions." So yeah for the 1% of cases where you think the merchant might be fraudulent use Bitcoin with escrow, or a credit card, or cash-on-delivery, or whatever. For the other 99% a standard non-escrowed Bitcoin transaction is acceptable.
>If customers threaten to go to court or report you to the FTC/BBB I can ensure you you will be encouraged to go investigate too.
No you're encouraged to wait until they actually go through the process of taking action then if its cheaper resolve it.
You keep saying most merchants are honest which I agree with but honesty isn't the only reason for charge backs as I mentioned.
But I am not claiming a legal action is as likely as a chargeback to make the customer whole. I am claiming a legal action works just as well as a chargeback to put pressure on merchants to keep them honest.
> honesty isn't the only reason for charge backs
What other reasons? Illegal charges after theft of credit card billing information? I would say this is an argument for Bitcoin since using Bitcoin makes impossible for the merchant to steal or lose your billing information :) So what other reasons for a chargeback are you thinking about?
And then what? What happens to get my money back? What evidence do I have of fraud if its just a shipping dispute and their word against mine?
>What other reasons?
I gave you other reasons above and neither were illegal charges. Mistakes, and disruptions in the continuance of the company to name two.
> What evidence do I have of fraud if its just a shipping dispute and their word against mine?
The same evidence you would supply to your credit card issuer for a dispute: shipment info, package tracking numbers, pictures of items delivered, customer/merchant email exchanges, etc.
> Mistakes, and disruptions in the continuance of the company
As I said, most merchants are trying to please customers, so most mistakes are resolved without a chargeback. I don't think you will disagree here. I have never had to issue a chargeback, yet I had a few mistakes happen on me and the merchant always resolved them in my favor.
As to "disruptions in the continuance of the company" this is an extremely rare event, even rarer than outright fraud. So I will agree this is a nice case to have chargebacks available, but again as I said for 99.9...% of other purchases Bitcoin's lack of chargebacks is totally acceptable. I don't think you will disagree here either.
If you are still honestly convinced that is an acceptable replacement for charge backs we will never find agreement here.
>I have never had to issue a chargeback, yet I had a few mistakes happen on me and the merchant always resolved them in my favor.
You dismiss completely the possibility that this is because of the existence of chargebacks? The fact that you have the ability to reverse the charge, cost the company a charge back fee and potentially raise their payment processing rates if they don't help you out satisfactorily? You don't think that has anything to do with the way they act?
Google tiger direct bitcoin refund for some examples of how a company handles these things without that threat. People spending days trying to resolve the issues bouncing between multiple companies. The alternative is calling their credit card company and having the funds available again in a few minutes.
Or look at all the people waiting >1 year past their expected delivery date for miner shipments and in some cases having the company go out of business before they arrive or send them used equipment.
Likewise, a good fraction of credit card disputes end up being resolved in favor of the merchant, not the customer.
> involves a lot more work on their part
I already told you submitting an FTC or BBB complaint is no more work than submitting a credit card chargeback.
> It also requires that the company screw up repeatedly
True if you go to the FTC. Not true if you go to small-claims court: it will be investigated even if only 1 screw-up occur. Yes going to small-claims court is more work than filing a credit card dispute, but then if it is not worth your time given the transaction amount, it kind of proves that being refunded isn't THAT important to you. In this case you would complain to the FTC, and write off the small amount lost.
> You dismiss completely the possibility that this is because of the existence of chargebacks?
I acknowledge chargebacks incentivize merchants to act honestly. But I will repeat for the third time: this is not the only thing that incentivize merchants. FTC, BBB, legal actions, etc.
> Google tiger direct bitcoin refund
I did and I found 2 stories, both resolved in favor of the customer:
- "Edit: The situation is resolved" from http://www.reddit.com/r/Bitcoin/comments/1wesnv/beware_of_ti...
- "He personally verified my address again for the shipment as well as a "care package"" from http://www.reddit.com/r/Bitcoin/comments/1wi95l/another_tige...
This proves my point that most merchants act honestly and that most disputes get resolved without chargebacks :)
> having the funds available again in a few minutes
No. When credit card issuers refund you instantly, it is always a TEMPORARY refund (check the fine print of your credit card agreement) - you still need to submit a full package usually within 60 days with evidence of the dispute (tracking numbers, product descriptions, pictures of what was received, etc) for the credit card issuer to investigate and either make the refund permanent, or resolve in favor of the merchant. That's why I keep explaining t you that submitting this evidence of the dispute is similar in complexity to submitting a complaint to the FTC as they ask the same things a credit card issuer would ask.
Out of curiosity: how many credit card disputes have you ever filed? What proportion were resolved in your favor, and in the merchant's favor?
Do you have any evidence of this?
>I already told you submitting an FTC or BBB complaint is no more work than submitting a credit card chargeback.
But then right after you said I would need to compile all the evidence to do so. So what is it? No more work(and I just have to fill in a form) or more work?
Also you realize the BBB is a private company that has no teeth right?
>True if you go to the FTC. Not true if you go to small-claims court:
I see bitcoin people recommend small claims court all the time. It works great when the merchant it local. It doesn't work so well when the merchant isn't since you have to file in their county. So add on travel time, missed work, etc to travel to where ever they are(assuming they are in your country) and it becomes a lot less likely someone is going to go this route.
>I did and I found 2 stories, both resolved in favor of the customer:
Both of which involved around a week of hassle just to get their product. And if they weren't newly accepted and watched by the bitcoin community at that time what would the result have been? Also if you'd looked a few results down on google you'd have also found this story https://www.cryptocoinsnews.com/coinbase-extreme-bitcoin-tra...
This was a big company and if you read the correspondences they were more than happy to ignore the people until a 3rd party stepped in. This works great on rare occasions but bitpay isn't going to be able to afford to police transactions with their fees.
I'll also note you skipped over the miner disputes in your response.
You admitted already you have never filed a dispute yet you seem to talk with authority about the process? I've filed 2 disputes against merchants both found in my favour neither required submitting evidence and 1 dispute due to fraud that required me to submit a signed letter confirming I didn't make the charges.
http://bit.ly/10iW5wJ page 12: "Merchants report that they win, on average, 40% of the chargebacks they dispute". Obviously x% of these disputes (with 0 <= x <= 100) are disputes that the customer should have won, but the merchant did because the dispute process is not flawless.
> So what is it? No more work (and I just have to fill in a form) or more work?
Typically it is no more work. I have experience from almost filing a dispute on my Wells Fargo credit card against Sprint. I didn't end up filing it because Sprint sent me a refund at the last second. Wells Fargo's online dispute forms do ask for some evidence: such as a log of email exchanges, shipping tracking numbers, etc. That's how I know. Obviously the process varies between credit card issuers. And I am sure no evidence is required when it is clear the merchant is at fault (a phone call will do). But either way this is similar to the complexity of the process of submitting a complaint with the FTC, where it can be as simple as a phone call if verbal info is all you are willing to provide to them.
> Also you realize the BBB is a private company that has no teeth right?
The BBB is quite effective: "The overall settlement rate for all complaints filed by consumers in 2014 reached a record high of 91 percent" http://www.bbb.org/charlotte/news-events/bbb-in-the-news/201... Why do you imply they are ineffective?
> I see bitcoin people recommend small claims court all the time. It works great when the merchant it local. It doesn't work so well when the merchant isn't since you have to file in their county. So add on travel time, missed work, etc to travel to where ever they are(assuming they are in your country) and it becomes a lot less likely someone is going to go this route.
I agree, but don't lie by saying "it also requires that the company screw up repeatedly".
> This was a big company and if you read the correspondences they were more than happy to ignore the people until a 3rd party stepped in. This works great on rare occasions but bitpay isn't going to be able to afford to police transactions with their fees.
You imply TigerDirect was intentionally dishonest, but it is very obvious the incorrect refund amount ($14.99 instead of $167.21) was a glitch, a bug. No matter how you want to believe it, this story doesn't show that merchants are dishonest and evil when they take bitcoins and they know there are no chargebacks. Are you claiming some evil TigerDirect employee typed in $14.99 intentionally on his terminal to try to rip off the customer?
> I'll also note you skipped over the miner disputes in your response.
I didn't reply because this is not relevant: most customers who paid the manufacturers with credit cards could not dispute the charges either, because of the 60-day limit after which chargebacks are not allowed. So I am not sure what is your point... Whether you paid the manufacturer with a credit card or in bitcoins, all customers are out of their money regardless.
Also, you too skipped over many of my points:
- "But I am not claiming a legal action is as likely as a chargeback to make the customer whole. I am claiming a legal action works just as well as a chargeback to put pressure on merchants to keep them honest."
- "But I will repeat for the third time: this is not the only thing that incentivize merchants. FTC, BBB, legal actions, etc."
- "As I said, most merchants are trying to please customers, so most mistakes are resolved without a chargeback. I don't think you will disagree here"
- "So yeah for the 1% of cases where you think the merchant might be fraudulent use Bitcoin with escrow, or a credit card, or cash-on-delivery, or whatever. For the other 99% a standard non-escrowed Bitcoin transaction is acceptable."
Your non-reply means you agree with these points?
A chargeback is simple, easy, and fast. And it puts the onus on the merchant to prove they didn't do anything wrong.
These steps have nothing to do with BitCoin though.
>a properly secured wallet is impossible to steal
Define "properly secured wallet"? And whose responsible for securing wallets? "The consumer is responsible" is not the right answer.
Cold Storage[0] done right, that's a properly secured wallet. I think this is the best, and cheapest security (minus fiat currency conversion expenses) available atm.
> And whose responsible for securing wallets?
With cold storage, you are.
Cold storage is essentially isomorphic to keeping treasure in a safe, and needless to say very much not equivalent to making a credit card transaction.
Two things make currency work: usability and security. How can this be a digression?
> Cold storage is essentially isomorphic to keeping treasure in a safe
I'll admit the wiki is a bit tl;dr .. (I guess you didn't read it). Using your "keeping treasure in a safe" quote: Cold storage is like keeping a treasure in a safe, at the bottom of the deepest ocean of another earth-like planet in a solar system which we cannot even assume (knowing about it is impossible;) that exists.
It's true that it's inaccessible to the internet. It's not true that it's more secure than physical storage, because ultimately it is physical storage.
I await your "But you can memorize a key such that the attacker can't use it!" response and am presently googling the XKCD link to zing you with.
A (public) bitcoin address is useless without the private key. Suppose you do find one, you'd just knew the transactions referring to it(by looking up the blockchain).
One can easily have thousands of addresses. Many people generate a different address for each transaction, so good luck finding the one that looks like a safe.
A safe will be opened up without a key, eventually, a bitcoin address never: [0]The private key is mathematically related to the Bitcoin address, and is designed so that the Bitcoin address can be calculated from the private key, but importantly, the same cannot be done in reverse.
You're just saying that recovering a private key is mathematically hard, but that's not the attack vector in question. You still need to store the private key somewhere, and that storage is subject to attack. Network-attached storage is subject to lots of attacks, thus there's interest in storing this stuff offline.
But still: > Cold storage is essentially isomorphic to keeping treasure in a safe
Though I don't like this analogy, if we must use it then it's the key that you keep in a safe[0]. As previously mentioned, one can have many keys and simply stealing one doesn't mean their "treasure" is stolen, whereas a safe is easier to be found and opened.
[0]:https://en.bitcoin.it/wiki/Cold_storage
A simple example of deep cold storage is opening a safe deposit box and putting a USB stick containing an encrypted wallet file in it. The public (sending) addresses can be used any time to send additional bitcoins to the wallet, but spending the bitcoins would require physical access to the box (in addition to knowledge of the encryption password).
A properly secured wallet is a true Scotsman.
- You shop and check out
- You are presented a QR that you scan
- The "app" asks you to sign into your bank.
- The bank issues you a virtual card with your billing address details, but a one-time-PAN (credit card number), CVV and expiry.
- There is a sub-account created that is the amount you are about to auth with the merchant. The merchant about to be doing the authorization is linked.
- The "app" presents the merchant "POS" with the virtual card details
- The merchant "POS" authorizes it using any gateway they happen to be using. Which in turn does the Brand-Net auth dance with the issuer.
- On positive auth, the sub-account balance is transferred to the merchant (thanks, VisaNet!), and the OTP (one-time PAN) is tossed in the recycle bin.
If the merchant doesn't have the QR-code thing, you can still manually key-enter your one-time PAN virtual card details like you do today, knowing that you don't care about the number past its use right now.
There are a lot of weird details about how it all works if some party or another isn't an active full cooperating member of the system, but the idea is to:
1) Limit card number exposure
2) Get a user's explicit pre-auth for a specific merchant, amount and date
3) Get the usability factor you are talking about
4) Leverage the existing bank card consumer protection rules already in place
Which is not to say that Bitcoin isn't cool. But I'm not sure that it is useful enough for consumers to replace the thin-veneers like this that the existing payment infrastructure players will inevitably roll out.
There may be (and probably are) lots of uses for the blockchain. Consumer payments may not ultimately be one of the big ones.
*EDIT: I apparently am an idiot that can not figure out how to convince the system to let me wrap "bullets".
And as for credit cards - product can be built on top of bitcoin to provide similar service I believe.
Also, CC chargebacks are far from being perfect. In many cases the customer has no recourse for fraud. For example you cannot chargeback a transaction made more than 60 days ago. Some fraudulent merchants stall shipping (eg. claim delays, issues, ship the wrong thing, etc) for 60 days specifically to exploit this fact and exploit the fact customers don't know about this 60-day chargeback limit. Or if your PIN code is stolen and a fraudulent transaction is made with the PIN code, you will typically be held liable (check your CC fine print, for example: "If your Password or PIN is used in such a transaction, you will be liable for the full debt" from http://www.scotiabank.com/ca/common/pdf/borrowing/revolving_...)
Don't forget that despite the lack of chargebacks, you still have all the other usual recourses available to you if you are defrauded after paying in bitcoins: small court claims, send a complaint to the FTC or BBB, etc. But the fact chargeback mechanisms are rarely needed in the first place, and have various limitations (60-day, PIN stolen, etc) indicates that Bitcoin doesn't need them to be reasonably successful as a payment technology.
[1] https://en.bitcoin.it/wiki/Scalability#Storage [2] http://bitcoin.stackexchange.com/questions/4650/upper-limit-...
https://itunes.apple.com/us/app/breadwallet-bitcoin-wallet/i...
SPV helps with some scalability issues, but doesn't solve them all.
From http://bitcoin.stackexchange.com/questions/4649/what-is-an-s...:
> SPV: A Bitcoin implementation that does not verify everything, but instead relies on either connecting to a trusted node, or puts its faith in high difficulty as a proxy for proof of validity. BitCoinJ is an implementation of this mode.
See also:
http://bitcoin.stackexchange.com/questions/11054/understandi...
I imagine in any IoT scenario, a fleet of sensors talks to a trusted central hub. If Bitcoin is involved then the hub could run the wallet and the sensors could delegate transactions to it.
Too much effort for too little reward. Right now, the only thing I'd actually want to buy with BTC is illegal stuff off the darknet. There is virtually nothing else I need that bad that normal cash can't do.
I can't believe this doesn't immediately make you think that maybe, just maybe there is something good about Bitcoin. Are you 0K with the central bank stealing wealth from you and your family through the debasing of your currency? Are you 0K with working your ass off so that bankers and other powerful people can live a life of wealth and pleasure? How can you take advise from such people?
"Bitcoin is bad, don't use it! It's a drug currency... very shady... also, terrorism!"
That is basically what every central bank said to the people in their country.
You also very likely ran into the problem that older versions of Bitcoin Core were slow to download blocks. For example version 0.10.0 released in February 2015 introduces parallel block download, which makes resyncing faster. Numerous other optimizations were made over the last 12-24 months (eg. better detection of stalled downloads). From your description it sounds like you were running a significantly older version of Bitcoin Core, so you were missing out on all these optimizations.
I would like to point out that despite the block chain growing continuously, we are still very far from the point where only large service providers can hold the block chain. The average block size is currently ~400 kB (https://blockchain.info/charts/avg-block-size?showDataPoints...), this means the block chain grows by ~20 GB every year. This is only 1% the size of an average desktop hard drive (2 TB), and would take only 4.5 hours to download (once a year, mind you) assuming a steady common residential Internet download speed of 10 Mbit/s.
Heck, a dedicated computer on a common residential Internet connection could still run as a full node and handle an average block size 100x larger that today (~40 MB per block, 2 TB growth per year = 0.5 Mbit/s continuous download). I would hardly describe something an enthusiast can do as a thing that "only large service providers can do". And keep in mind by the time 100x growths happens, CPUs/HDDs/Internet speeds will be much faster than today. Bitcoin's scalability has already been benchmarked pretty well: https://en.bitcoin.it/wiki/Scalability - no immediate bottlenecks are in sight.
"high fees in its transactions"
Fees are optional, and typically 0.0001 BTC (3 cents).
"up to 15 minutes for the transaction to be approved"
No, transactions are typically "received" instantly within seconds, and take 10-60 minutes on average to "settle" (be confirmed by 1 to 6 blocks). This is a lot faster than credit cards or ACH which both take 24h (or more if this is a weekend) to be received (ie. dollars available in the recipient's account), or bank wires which take days (or end-of-business-day if your are lucky).
(For those curious: http://blog.zorinaq.com/ )
The basic idea is that bitcoins are actually units of money that are in your wallet. Rather bitcoin works by chaining transactions (put into blocks, hence the blockchain).
Thus if you give me $1, I don't have $1, I actually have a record that you gave me $1 so that must mean I have $1 to spend. That's the simplistic idea.
That is the reason why instead of storing account numbers with money numbers in them, bitcoin stores transactions.
By now it's probably obvious to you that the vast majority of those transactions don't need to be stored. If I give you $1 and you give it back, repeat 1 million times, we end up with exactly the same amount of money. And all but the last few transactions can be reasonable deleted. (pruning)
As for syncing, syncing up a wallet is much, much faster now that it's headers first. But most users never sync, they either use 3rd party wallets like Coinbase, or they use wallet software that plugs into various nodes and APIs, so that no blockchain has to be present on-disk. The blockchain is really stored mostly by nodes, dedicated servers, businesses, a few enthusiasts.
That doesn't mean someone else manages the wallet by the way, like you mentioned for 'consumer devices', it just means that someone else manages the node. But the node doesn't control your money, your private keys do, and those are just a few bytes of storage. And as there are thousands of nodes and many APIs, trust of nodes isn't any different as when running your own node (which gets and sends data to other nodes, requiring the exact same amount of trust which is zero when it comes to controlling your money).
As for transaction fees being expensive, they're extremely cheap? Pennies to send thousands or millions, and as it's an open protocol anyone can build free centralized payment networks on top of it, like Changetip. Conversion with other currencies is also cheaper than most fiat conversions (e.g. dollar to euro), and in fact some companies already offer it for free (e.g. bitcoin/usd is completely free and pretty much instant with Circle, founded by Jeremy Allaire who founded Coldfusion).
The 15minute thing might be a deal-breaker for some. There are lots of solutions though that can remove that timer, built on top of bitcoin. Sidechains, treechains, payment channels etc. Anyway time will tell if these things work well but there don't seem to be any dealbreakers yet on the horizon.
Power consumption, on the other hand, may not be solvable even in theory, and it also seems likely to drive mining to just large service providers. The current pools aren't a solution in this case because the startup cost to even participate meaningfully will grow too large.
Maybe this could be solvable with a different proof mechanism. A few have been suggested and tried (PPC etc.), but I don't think it's solvable for BTC as it's currently defined. I'm happy to be proven wrong.
Blockchain is now 30GB. A 4TB drive costs around $120. So it literally costs you 90 cents to store that data.
If 30GB bothers you, use MultiBit or Electrum.