

Establishing Trust in the Bitcoin Ecosystem - carlchenet
http://techcrunch.com/2015/04/16/people-arent-algorithms-or-an-argument-for-establishing-trust-in-the-bitcoin-ecosystem/

======
ianpurton
The reason Bitcoin is not used for remittance is not due to trust, it's due to
the fact Bitcoin doesn't have an advantage in the remittance space.

There are companies such as
[https://transferwise.com/](https://transferwise.com/) that provide cheap
money sending with no Bitcoin involved. Quick, simple and easy to understand.

Bitcoin has many strengths, but remittance isn't one of them.

~~~
luizparreira
I will have to disagree with you on that. I don't think this is the reason, I
think the reason is that most companies fail to partner with other established
financial institutions. Although this companies, such as transferwise and
dwolla do a great job around Europe and US, most of them are not even known in
the developing countries, in those countries people still rely on the old
fashioned, bank transfers and western union mostly. There is a great
opportunity out there for serious people to create great companies, and
remittance surely is one of them.

~~~
davidgerard
rebit.ph is making a serious attempt at remittances to the Philippines using
Bitcon, but have discovered they basically have to become a Bitcoin exchange
as not enough people are buying the Bitcoins at the .ph end.

Also, the expensive bit that you're paying Western Union those fees for? Turns
out to be the last mile, that a Bitcoin-based remittance company would also
have to implement.

------
grovulent
This article is correct in stating that trust and reputation is a serious
problem for Bitcoin. But I don't think the article diagnoses exactly what is
causing it.

After all - there is nothing in all these negative headlines that give you a
strong reason to believe that the Bitcoin ecosystem is less reliable overall
than more traditional institutions. For every Bitcoin related scandal you can
find an enormous number relating to the traditional financial system. The
Bernie Madoff ponzi scheme alone was six times the size of the entire Bitcoin
market cap at the moment. Yet every Bitcoin related scandal is interpreted by
commentators as a sign of the anarchic failure of its central premise; while
every scandal relating to the traditional sector does nothing at all to impede
its reputation as the default way of doing business.

I presume the explanation for this bias than a deep and abiding fear of
distributed consensus - not just in the authorities and institutions that
would lose their power; but in the culture at large. What else could it be?

I don't know what you should do to combat that - but it's clear to me that
this is the fundamental idea that needs to be targeted.

~~~
Nursie
>> The Bernie Madoff ponzi scheme alone

People who invest tons of cash in schemes like this, or in fact make
investments at all, should be doing a lot of due diligence. Investment is not
something that Joe Average thinks about much, if he can help it. He doesn't
have millions of dollars, he probably has small-scale retirement funds managed
by companies he didn't even choose by himself, just some default adopted at
some point. Any cash he's sitting on is managed by other people as well, and
is protected and insured in a variety of ways.

Joe looks at Bitcoin and sees there have been scams and hacks by the dozen,
and that when they happen there is little to no comeback, legal or otherwise.
Some of the perps were the people running the services. He's probably also
heard about the Silk Road. When it comes down to it he probably doesn't have a
clue about computer security so there's no way in hell he's going to keep his
cash on his own computer in a file he could lose with a hard-drive crash, that
a hacker could steal from an infected machine. And if he's going to trust a
third party with his money, why a bitcoin third party? There's no compelling
reason to use bitcoin anyway when he has a credit card, and the credit card
has the insurance and chargeback facilities that make Joe feel comparatively
safe.

I realise that from a technology standpoint most of this stuff is not specific
to bitcoin. But where money is concerned I doubt the technically-correct*
standpoint is going to win.

I think the fear of distributed consensus might well be there too, but it's
probably waaaay down the list of concerns, if most people even have any idea
what it is.

(*the best kind of correct!)

~~~
grovulent
I think you're not quite seeing my point.

I agree that something like what you wrote is likely descriptive (very
roughly) of the conscious thoughts of the average punter - but what we need
here is an explanation of WHY this is going through the average punter's head.
And such an explanation is not necessarily going to be something that is
included on their conscious list of concerns (though it might).

What you have reiterated here is just what the article has already said. We
already know facts like: - Punter hears about silk road, associates Bitcoin
with illegal drug markets. What we want to know is why hearing such a fact
causes such an association.

Now you might think that there is no explanation here that is needed beyond
how reputations are assigned generally by human societies. You might just
think that - well, it's natural to associate a low reputation score to a
system when you hear headlines about Silk Road style marketplaces, and so
there is nothing more to say here.

I'm saying - no, there is something more going on here than just standard
reputation assignment. Why? Well - as I said before - because for every
negative headline that is supposed to prove Bitcoin's low reputation, we can
produce a fact about the traditional system that completely trumps the
negative bitcoin headline.

As another example since you mentioned Silk Road. What is the financial
instrument used overwhelmingly by the world's drug dealers to exchange value?
It is the U.S. 100 dollar bill. But is the reputation of the U.S. dollar
impacted by this? Not at all. The even greater irony is that while the Bitcoin
ecosystem overall gets branded as the province of nutbar libertarians that
love drug dealers - the U.S. government is renown the world over for fighting
the war on drugs. Except the U.S. has done nothing to remove the hundred
dollar bills that drug dealers love to use. There is no greater single act the
U.S. government could do to fight the drug cartels. It doesn't do it.

So the reputation assignments here are odd to say the least. They certainly
aren't consistent. This is something that cries out for explanation.

~~~
CJefferson
Speaking as someone who vaguely follows bitcoin, the major success story of
bitcoin seems to be only Silk Road.

I can see no personal advantage to using bitcoin for anything, except for
illegal transactions. The problem is that while you can find negatives of the
normal network, you can't find enough positives for bitcoin. Also, the
failures seem much bigger -- when MtGox failed it was the biggest exchange,
and everyone lost everything. Such a thing has (in modern times) never
happened with the normal monetry system, and couldn't happen (because
governments wouldn't let it).

I trust my bank to look after my money more than I trust a bitcoin exchange,
or myself not to misplace a vital private key / get my wallet stolen. The idea
that bitcoins are largely untraceable and unrecoverable does not to me (I'm
afraid) seem like an advantage.

Further, from a technical viewpoint, it seems to me I'm just replacing one
series of masters with another -- 2/3 of all bitcoins are already in
circulation, so the "1%" (current users) of bitcoin are already extremely
wealthy. The idea that bitcoin is uncentralised and uncontrollable seems
false, when 2 or 3 (or 1?) large mining groups effectively control the bitcoin
network, and can (and have) just "stopped" it for a while to sort out
problems.

~~~
grovulent
>> Such a thing has (in modern times) never happened with the normal monetary
system, and couldn't happen (because governments wouldn't let it).

Easily trumped once again. Not only have governments let failures happen at a
much greater scale - they've facilitated them.

Bear Stearns - when it collapsed was actually relatively well capitalized - it
just couldn't get access to the day to day liquidity that all large
institutions need access to these days because the markets were spooked. The
fed could have just provided them a loan to see them through, and the NY fed
were poised to give them funding - but instead at the last moment changed
their mind and ordered Bear Stearns to do a deal with JP Morgan to have them
bought out. JP Morgan came to the table with an offer of 2 dollars per share.
It eventually went up to 10 - but this was a stock that was trading at over a
hundred dollars per share not a few months before. Shareholders were
effectively wiped out.

Despite this event being part of a catalyst that almost ended modern
capitalism as we know it - you state that the failures of Bitcoin seem much
bigger. I'm sorry - but this isn't just a matter of perception - this is just
false. There were no systemic failures that happened on account of the failure
of Mt Gox. People lost money. Trade moved onto the other exchanges. That was
it. The fact that you can come to the conclusion that Bitcoin's failures seem
bigger somehow proves everything that I've been saying about the absurdity of
Bitcoin perception.

~~~
pjc50
The finance system failing has nothing to do with failures of the monetary
system, nor of _retail_ banking. If I wanted to point to one of those, I'd say
Cyprus.

Gox failed in a remarkably traditional way: a bank run. They didn't have
enough reserves to cover their liabilities. It turns out that this was due to
fraud and/or insolvency.

It's always possible to say "bitcoin cannot fail, it can only _be failed_ ",
because the failures are those of its support institutions. However, the
support institutions are critical to actually using it and it retaining its
value. They're not part of the tech but they're part of the system.

~~~
grovulent
I can't tell if you agree with me or not. We're talking about the
institutional systems built on top of the monetary system and our respective
trust in each. You seem to say the same at the end of your comment.

But I'm not claiming that the collapse of Bear Stearns was a failure of the
traditional monetary system. The fact that the fed can print money at will is
the reason why essentially they had it in their power to extend an emergency
loan to Bear Stearns. That they chose instead to wipe out shareholders was an
institutional failure. It was an institutional failure on a colossal scale -
and yet clearly water off a duck's back.

~~~
Nursie
Wiping out shareholders is entirely different from wiping out depositors
though, entirely different.

------
wmf
The spirit of Bitcoin is to trust no one and nothing. If that can't be
accomplished in practice due to things like interfacing with the real world,
you might as well use Stellar and save yourself a lot of mining.

~~~
Nursie
Yup, the spirit of Bitcoin, at least its original spirit, was total distrust,
with no authorities needed or wanted, and it was designed specifically to
fulfil this function.

The article talks about starting groups of trusted companies, setting up
barriers to entry etc etc, in order to build trust. These are authorities.

Arguably Bitcoin is already dependent on trust - collusion between pool
operators is entirely possible, they and the developers have already shown
that they _are_ an authority (when the various forks and merges have
happened).

A crypto-currency with an authority can be done in such a way that mining is
unnecessary.

~~~
superobserver
Collusion isn't just possible. It's already been going on for at least two
years now. As was said by one pool operator (paraphrasing), "the only people
mining are 12 pools".

Bitcoin isn't about distrust. It's about decentralized trust as that is the
primary function of the blockchain. Bitcoin as an ecosystem hasn't been about
distrust, but decentralized trust, and it has long been moving away from
decentralization, which is fundamentally problematic.

~~~
Nursie
It's very interesting to watch.

In microcosm it demonstrates something I've often thought about libertarian
proposals for government-less societies - in fairly short order a class of
barons will appear and we're back to feudalism of a sort.

------
debacle
The problem with the Bitcoin "ecosystem" is simply that the people in that
ecosystem are the same people who have been attracted to Bitcoin: speculators,
opportunists, and wide-eyed idiots.

The biggest problem of Bitcoin is that the problem it solves is not the
problem fiat currencies need solving. Bitcoin has no real competitive
advantage over traditional currencies, and many drawbacks.

~~~
Rmilb
I would disagree that it has no competitive advantages. For people in
Venezuela and other places where the state has failed to control inflation,
Bitcoin allows people to escape capital controls(Think China). Of course there
are still many drawbacks, but there are competitive advantages over 'some'
currencies.

------
luizparreira
I think he makes a valid point on the article, however, I do think all this
bad stuff that has happened to it was going to happen anyway, its impossible
to stop it from happening, the traditional system does not stop it neither,
this is part of human nature where there are large sums of money there will be
other people trying to hack into it to benefit themselves and its peers. But
the joy of the bitcoin ecosystem, and one that he fails to point out on the
article, is that it rewards and encourages players to follow the rules,
because in terms of cost of running enough computing power that hacks into the
block-chain and a system that mines bitcoins to get the rewards associated
with it, the latter is way more viable. I think that the Bitcoin Bloc-Chain is
going well, with needs for some updates in the system, as any other software
does, but going well so far. What really needs to be done, and the writer
recognizes that in the article, is all the businesses built around it must
follow best-practices, following the example of established organizations, to
increase the overall trust in the ecosystem and people start to accept it more
into their daily lives, this is obviously easier said than done, but I think
that any serious individual who are starting a Bitcoin related company must
have building trust relationship with the rest of the world at its top
priority, and to do that he must follow practices that other people know and
trust.

