

Nations Mull the Ways to Regulate Bitcoin - JumpCrisscross
http://dealbook.nytimes.com/2014/02/26/japan-studies-regulation-of-bitcoin-after-mt-gox-goes-dark/?nl=business&emc=edit_dlbkam_20140227

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dmix
Exchanges can be decentralized. It's technically possible and likely the
future of cryptocurrencies. The market doesn't need a centralized MtGox to
function. BTC does't need to be stored in exchanges, only transferred.
Therefore, vast sums can't be stolen. Only hypothetically BTC hitting a
specific node at one time could be stolen. Not the whole batch.

Wallet services on the other hand, need some level of centralization, they
have to provide trust and security. People are not good enough at information
security to protect their own wallets. Storing BTC on your PC is equivalent to
storing money under your bed. Except the thing stealing it is mostly automated
malware not people breaking into your house.

Regulation for BTC has been primarily targeted at money _transfer_ businesses
and exchanges. Insurance is well oriented towards protecting money _storage_
businesses. Insurance can exist and function for the latter outside of
government regulation.

~~~
shawabawa3
> Exchanges can be decentralized. It's technically possible and likely the
> future of cryptocurrencies.

Would you mind explaining how? I can't see how it's possible to do the money
side of the transfer in a decentralised way

~~~
dmix
Vendor model, decentralized exchanges serve as the transfer, mediation, and
escrow point. Vendors and consumers take care of sending/receiving fiat
currency. Ala localbitcoin except decentralized.

Then there is no single point of failure. It then becomes regulation vs
(hundreds of)thousands of individuals and small operations. Compared to
regulation of a few mega-exchanges. This would result in a critical increase
in the complexity of the regulatory environment.

Assuming the government gets serious about it, enforcement of the regulation
will become a media side-show similar to the war on drugs. Taking down a few
prominent individuals, parading them in the news, but barely hurting market
supply/demand.

~~~
rubinelli
Why would consumers worry about whether there is a single point of failure in
the Bitcoin economy? What they do worry is whether they will be able to take
their money out when they want it, and that means fewer, larger, and
supposedly more trustworthy exchanges.

~~~
dmix
> Why would consumers worry about whether there is a single point of failure
> in the Bitcoin economy?

Consumers will worry when it becomes either illegal or prohibitively expensive
to operate centralized Bitcoin exchanges, which is the likely outcome. That
will quickly lead to a oligopoly of 2-3 exchanges dominating the market, just
like every heavily-regulated market where it's too expensive for small shops
to compete legally. Then you'll have a Paypal type experience where money/BTC
is constantly withheld and all transactions are under surveillance. Defeating
many of the benefits of Bitcoin (privacy and fluidity).

> What they do worry is whether they will be able to take their money out when
> they want it

Consumers don't need to worry about taking money out of decentralized
exchanges. Since exchanges don't hold their money. That's the whole point:

a) Disconnecting the massive BTC wallets storage on exchange servers, instead
they are strictly for facilitating transactions (escrow is built into the BTC
protocol)

b) P2P distributed hosting of exchange servers so operating "trustless"
exchanges can't become outlawed

~~~
rubinelli
You do realize that what cryptolibertarians and regular consumers value is
drastically different, right?

~~~
dmix
For now :)

The things I mentioned are the inherent value in BTC.

If you want regulated centralized exchanges then you might as well just keep
your fiat currency and PayPal.

------
lectrick
Decentralized systems see regulation as "damage" and route around it.

------
eternalban
a super computing cluster spewing nop trades will kill it t scale.

