

The SEC Shows Why Bitcoin Is Doomed - MikeCapone
http://www.bloomberg.com/news/2013-08-08/did-the-sec-just-validate-bitcoin-no-.html

======
ihsw
This article is riddled with factual errors, outright deception, and logical
fallacies. It makes a variety of attempts to scare the reader (what if
"Bitcoin gets hacked"? utter nonsense). They even make a claim that Bitcoin's
anonymity may appeal to users, but it's been stressed repeatedly and
constantly that the BTC transaction network is far from anonymous.

Here is an excellent 3 minute video summary on Bitcoin:
[https://www.youtube.com/watch?v=CdVVECKKSXo](https://www.youtube.com/watch?v=CdVVECKKSXo)

Far more informative and far less spin. It's even from Bloomberg -- the same
news organization that's affording blog hosting to article's author.

~~~
etchalon
As far as I can tell, nothing in the article is factually inaccurate.

Why is it nonsense that Bitcoin _might_ get hacked? It's entirely possible,
though perhaps improbable.

~~~
eksith
How does one "hack" Bitcoin? Not snark; I'm genuinely curious because I've
seen this mentioned quite a number of times.

Do you mean your computer could be compromised? If so, then is that any
different than a house going up in flames with money under mattress?

Article mentions "Unlike gold or silver, Bitcoins have no intrinsic uses"
which is true, but then fiat money has value not because the
paper/fabric/plastic blended note and ink add up to what's printed on the
face. In that regard Bitcoin has value on faith as well.

~~~
ihsw
Surprisingly (or not), there is a Bitcoin wiki[1] that is actively maintained.

Here is a short list of weaknesses:

* Wallet Vulnerable To Theft: malware searching and downloading wallets

* No authentication for IP transfers: you can send transactions to IP addresses, this is vulnerable to MITM attacks and someone can re-route transactions to a different IP address

* Energy Consumption: electricity has a variable and external cost, which can be manipulated

* Illegal content in the block chain: arbitrary data can be included transactions, including binary data (eg: child pornography)

* Breaking the cryptography: Bitcoin uses SHA-256 and ECDSA, this isn't vulnerable now but it could be in the future

* Double-spending[2]

* Coin destruction: if your wallet file is deleted, your coins are gone forever

Obviously wallet theft is the biggest issue, especially with using third-party
wallet services and running insecure operating systems (ie: old versions of
OSes). There are a variety of reliable learning resources for managing your
wallet files securely.

[1]
[https://en.bitcoin.it/wiki/Weaknesses](https://en.bitcoin.it/wiki/Weaknesses)

[2] [https://en.bitcoin.it/wiki/Double-
spending#51.25_attack](https://en.bitcoin.it/wiki/Double-
spending#51.25_attack)

~~~
oleganza
The only real "weakness" is theft/loss of your wallet and keys. Bitcoin is
like cash in that respect, but with unique new properties. It's easier to hide
and move, but it can be stolen remotely (unlike paper bills). This is a
problem and we all are working on different ways to decrease risks. E.g. by
having multi-party authorization, "cold storage" (e.g. keys printed on paper),
3rd party services ("banks"), hardware wallets.

Not real issues:

\- "No authentication for IP transfers" \- not an issue, no one uses it. If
you need to authenticate payment address, either get it over HTTPS, or use
upcoming (in 0.9) payment API (same principle as with HTTPS, but without HTTP)
or any other way that reduces risks of spoofing payment address.

\- "Energy Consumption" \- not an issue. Miners spend as much energy as
profitable for them, just like anyone else on the planet. Visa datacenters
also consume energy. Who decides how much energy spending is "too much" if
everyone spends what they can afford?

\- "Illegal content in the block chain" \- not an issue with Bitcoin, but an
external arbitrary threat created by feds. Same applies to unencrypted WiFi
connection or someone sending a well-hidden picture in email attachment to
you. Also: users are not required to store the blockchain. If you don't like a
threat of "illegal content", use lightweight client to keep your keys only.

\- "Breaking the cryptography" \- does not uniquely apply to Bitcoin comparing
to, say, PayPal or bank wires. If some algorithm becomes weak, Bitcoin can be
upgraded just like your bank's SSL certificate can be.

\- "Double-spending with 51% attack" is getting less economically viable with
every single day as more people mine, use or simply know about Bitcoin. Also,
it does not affect all the users, but only those with whom attacker transacts.
And if that happens once, people would start sending expensive transactions
directly to miners they trust to mitigate the issue.

\- "Coin destruction" is not a problem for society. Everyone's money gets more
valuable when you lose yours. Divisibility is enough for a long time to come
and can be increased on many levels, inside and outside Bitcoin core protocol.
Lost/stolen wallet issue is covered above already.

------
ferdo
> They invented a very clever peer-to-peer payment system that also happens to
> enable fraud, tax avoidance, drug dealing and other sordid pursuits that
> governments won't abide for much longer.

This sounds like cash. What's the problem?

The status quo is annoyed because Cash 2.0 is better than the swill they're
handing out at banks.

~~~
etchalon
Cash is regulated. Bitcoin isn't.

Looks like that's gonna change pretty quickly.

~~~
ihsw
"Bitcoin" encompasses multiple and distinctly separate concepts, namely: a
transaction network, a currency, a wallet, and mining operations.

Does the wallet in your pocket get regulated? No, that's silly. It's just a
container for currency.

Do the coins in your pocket get regulated? No, that's silly. It's just coins.

Does the generation of money get regulated? Absolutely, it's more tightly
controlled than most other activities are in humanity. How will they regulate
BTC mining? It's not really possible, but they'll likely engage computer
hardware vendors of all stripes and sizes (across the planet) to pool purchase
order histories to the government.

Do money transactions get regulated? Absolutely, it's another tightly
controlled activity. How will they regulate BTC transactions? It's not really
possible, but they'll likely engage BTC exchanges of all stripes and sizes
(across the planet) to pool transaction histories to the government.

~~~
dragonwriter
> It's not really possible

Both places this is used with regard to regulation, this claim needs to be
justified. It seems to me it misunderstands what it means for it to possible
to regulate something.

------
bryogenic
> The closer Bitcoin gets to being an accepted currency, the less useful it
> will be as a method of exchange. And the less useful it is as a method of
> exchange, the harder it is to see why it has any value at all.

I really don't understand how they are arriving at this 'contradiction'.
Unless you really squint, there is really no support for it in the article.

Codifying that virtual currencies have actual real-world value doesn't change
anything about how the ecosystem/currency works. Am I missing something here?

~~~
Shamanmuni
The paradox is that as Bitcoin gets more mainstream, in practical terms it
will be more and more similar to "real" money.

Bitcoin has been off the radar for the SEC, but as it gains notoriety there
will certainly be an interest in regulating it.

Imagine that tomorrow Bitcoin gets really big, it isn't crazy to think that
many people will be worried about having all their money in the computer they
use everyday and is connected to the Internet. Then some companies start
offering a service which lets you deposit your bitcoins and they assure you
that they won't get robbed and if they do, they will be held responsible for
that. Oh, and they require you to have a verifiable identity for your account
since that helps to prevent fraud. They just ask a monthly fee for the
maintenance of your account and a small fee for every transaction you make
through them. You have in front of you something similar to a bank.

So, if you have to pay bureaucratic costs of regulation, and institutions like
banks for Bitcoin, then it's not that different from the money we are used to.
The one which also hasn't intrinsic value and for most of us is just a number
in a computer anyway.

------
tlrobinson
_" so either users will willingly submit to a further deflationary spiral or,
more likely, they'll clamor to expand the stock"_

This doesn't make any sense. Why would users care that their bitcoins are
getting more valuable over time (i.e. deflation)?

It sounds like the author is throwing around the term "deflationary spiral"
without understanding what it actually means.

Anyway, it's damn near impossible to "expand the stock". If somehow a majority
of miners decide they want a larger reward the users who actually hold bitcoin
can decide to ignore their fork. See "economic majority":
[https://en.bitcoin.it/wiki/Economic_majority](https://en.bitcoin.it/wiki/Economic_majority)

~~~
Zigurd
Yeah, that line made me wonder about the article's author. He really appears
not to know. It makes me suspect a lot of financial writing is like writing
about cars. He's throwing stock phrases around.

------
codesuela
tl:dr

> The group of developers who came up with Bitcoin did not produce a viable
> replacement currency, a revolution or even a particularly wise investment
> opportunity. They invented a very clever peer-to-peer payment system that
> also happens to enable fraud, tax avoidance, drug dealing and other sordid
> pursuits that governments won't abide for much longer.

article is basically a smear, little to none informational content

------
smutticus
As long as there are things which can only be purchased with bitcoins they
will always be relevant. If people can only buy drugs on the internet in
bitcoins then bitcoins will continue to be used.

I could possibly say the same about USD. As long as I must pay my taxes in USD
the USD will always be relevant and continue to be used. There might be other
things which also help to make the USD relevant, but this is its basis, its
keystone point to being.

------
Groxx
> _The closer Bitcoin gets to being an accepted currency, the less useful it
> will be as a method of exchange._

Within America, due to taxes, etc.... _possibly_ (marginally, arguably) true.
America has many alternatives that are cheap or free and mostly reliable
(paypal, google wallet, square, cash). In many other countries, and _between_
countries? More legitimacy is purely a good thing.

------
ianstallings
The problem with this article is it's a straw man basically. The author argues
that BTC appeals to people because of the lack of regulation but I would
counter that's not the case, and the advantage is that you separate your
currency from central banks and their inherent financial systems. Of course
you will always be coupled to real world economies, financial industries, and
the regulations that come with it. BTC isn't strictly about hiding your
transactions, it's about decoupling from a currency system that many think is
flawed.

~~~
bryogenic
... and to believe that BTC actually 'hides' your transactions in any real way
is the naive assumption that just wont go away.

~~~
ianstallings
I agree. Right now I think the biggest hurdle to BTC truly is FUD. People are
nervous when it comes to money. Probably a healthy skepticism. But judgements
should be based on the truth. Right now it's hard to get the proverbial _fair
trial_ when it comes to BTC and the facts.

