

Bitcoin does not pose a threat to law and order - alyrik
http://www.snell-pym.org.uk/archives/2011/05/12/bitcoin-security/

======
Duff
The only thing Bitcoin poses a threat to is the t-shirt vendors and hosting
providers who are accepting it as payment. Until the Bitcoin PR campaign
graduates from hacker news, it's at best an academic discussion

At worst, BitCoin at this point is a scam where people who got involved with
it early who are sitting on lots of BitCoin need to keep up a level of
interest to cash out BitCoin for coin, as the curious poke around with it.

~~~
pemulis
_The only thing Bitcoin poses a threat to is the t-shirt vendors and hosting
providers who are accepting it as payment._

This. The volatility that makes bitcoins so attractive to speculators makes
them a nightmare for merchants. Bitcoins have - on multiple occasions -
dropped or risen by 25%+ in the course of a few minutes. If you accept
bitcoins as payment, when should you cash them out? There's a chance that they
dramatically rose or dropped in value during the short time it took you to
process the transaction.

You could peg your price in bitcoins to the amount of USD they're worth at a
particular time at the Mt. Gox exchange, but that is even more dangerous. The
Mt. Gox exchange has shown itself to be incredibly vulnerable to market
manipulation by anyone with more than ten thousand dollars (which is a
miniscule amount of money, all things considered). Someone could cause the
price of bitcoins to crash for just a few minutes and quickly buy thousands of
dollars worth of goods from your store at firesale prices. (Edit: See two
posts down for the inverse version of this scam, which I think would be even
more effective.)

What honest bitcoin speculators don't realize is that until the volatility
problems in the exchange are worked out, no big merchants are going to want to
accept bitcoins. When the speculative value of bitcoins goes up, the practical
value of bitcoins goes down.

~~~
weavejester
_The volatility that makes bitcoins so attractive to speculators makes them a
nightmare for merchants._

Well, not necessarily. You set the cost of your products to a price in dollars
multiplied by the current Mt. Gox exchange rate. You could then immediately
exchange your Bitcoins for dollars upon receipt of payment. Mt. Gox has an API
for getting the current buy rate, and for placing a sell order, so this
wouldn't be hard to automate.

The only problem with this is that getting dollars out of Mt. Gox involves
messing about with Liberty Reserve.

~~~
pygy_
Or, if you sell software or other digital goods, you can set the price at a
fixed rate per day (based on either a moving median, the closing price or
whatever), and cash out at a longer interval.

It's a bit more risky (you may lose one day of sales if bitcoin was to crash
definitely), but since you don't have any fixed cost, it shouldn't matter.

~~~
Duff
That's a big downside of fixed monetary systems like what many developing
countries used or the gold standard. In inability to inject liquidity
perpetuates instability.

In the 19th century, you'd usually see financial crises appear in the fall
before harvest, because local banks would be at their weakest point before the
harvest came in and crop loans were repaid.

------
Goronmon
Though I have some bitcoins out of sheer curiosity, I'm not sure they have
much of a chance catching on. Has anyone actually spent much time on the
BitCoin forums? It seems like the majority of users are either speculators
hoping for a big payday down the road, or some level of anarchist hoping
bitcoins will overthrow the government.

This doesn't seem like the type of community that will spearhead a mainstream
currency alternative.

------
throwaway32
However bitcoin does pose a threat to the banking elite and their
congressional lapdogs. A crackdown is comming soon unfortunately.

~~~
eof
>A crackdown is comming soon unfortunately.

Is that just conjecture or do you have some evidence?

I hold bitcoin and expect it to prosper in time; I also expect a crackdown if
it does succeed, but I would be very surprised to see anything soon.

It's hard for them to touch: the existing currency laws certainly don't apply.
The more-likely scenario of them becoming stores of value and/or securities
(legally speaking) gives them little room for enforcement as there is no
central issuing party to go after.

I think the most likely crackdown will happen at the exchange level; but the
only major one is in Japan, with new ones popping up _everywhere_ within 6
months.

Honestly, the market is so small right now I would expect nefarious market
manipulation as the main course of action for at least another order-of-
magnitude growth in bitcoins market cap.

~~~
pemulis
Actually, bitcoins being classified as securities might make it easier for
governments to crack down on them:
<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817857>

Securities are more closely regulated than commodities in the US. I'm not sure
what the laws are in Japan, where Mt. Gox is located, but I expect they could
find some legal pretense to raid the exchange. There may be more exchanges
popping up all the time, but almost everyone uses Mt. Gox. As a result,
they're holding a _huge_ amount of bitcoins and digital cash. That makes it a
major target for a raid.

I wonder if they will start keeping backup servers in multiple countries, like
Wikileaks? I'm not sure if that would protect peoples' digital cash, but their
bitcoins would be safe in the event of a raid on the main server.

~~~
maurice
Hm, what do you mean by 'main server'?

~~~
pemulis
Wherever Mt. Gox is storing people's bitcoins (the exchange's wallet.dat) and
their deposits in USD and EUR, as well as wherever trades, deposits, and -
especially - withdrawals are processed. Lots of people have large non-bitcoin
deposits in the exchange, and if a raid on a small number of locations in
Japan can prevent them from withdrawing or result in their money being seized,
that's a serious issue for the bitcoin project as a whole.

Edit: Also, it looks like Mutum Sigillum LLC, the company that processes Mt.
Gox's deposits and withdrawals through Dwolla, is incorporated in Delaware. I
wonder if they process those transactions in the US?

------
motters
Presently I don't hold any Bitcoins, but I think that cryptocurrencies are an
interesting development, and are quite likely to be the future of money -
especially for micropayment transactions. It's entirely possible that Bitcoin
may not succeed, or be subjected to various kinds of political nonsense. In
general though I think cryptocurrencies are a phenomena which will persist, at
least so long as their cryptographic basis remains valid.

