
Living Only on Bitcoins - evilsocket
https://www.evilsocket.net/2016/05/08/Hacking-Yourself-out-of-the-Banking-System-and-Live-only-on-BitCoins/
======
lisper
I spent five years fruitlessly trying to improve the current banking system
(actually, the current money transfer system) so I am more intimately aware of
its shortcomings than most people. Considering how many things are wrong with
it, it's astonishing to me that it works at all. And yet, most of the time, it
does.

There are two things that make the current banking system robust: first,
because anonymity is limited, most of the actors in the system are honest.
Trying to pull a fast one is risky, and that prevents most people from trying.
And second, there are humans in the loop that you can appeal to when things go
wrong. Most of the time this keeps the system humming along despite the fact
that under the hood it's all held together with spit and baling wire.

Bitcoin is the exact opposite. Because it provides greater anonymity than the
traditional banking system, it attracts dishonest actors. For example, bitcoin
has made ransomware more economically viable than it was before. And second,
if something goes wrong with a bitcoin transaction, you are totally hosed.
Your bitcoin payment is only as safe as your ability to reliably bind a
bitcoin address to an intended recipient. If you get it wrong, there's no
recourse. If you accidentally send some bitcoin to the wrong address, you are
hosed. If you lose your private key, you are hosed. Period, end of story.

If I have to choose between bitcoin and traditional banking I'll take the
latter simply because it's generally more robust and forgiving of everyday
human foibles. But I'll continue to wish for (and work towards) a system that
gives us the best of both worlds.

~~~
timbowhite
> Trying to pull a fast one is risky, and that prevents most people from
> trying.

Well not these guys: $81M was stolen from the Bangladesh Bank via the SWIFT
network in February
[https://en.wikipedia.org/wiki/2016_Bangladesh_Bank_heist](https://en.wikipedia.org/wiki/2016_Bangladesh_Bank_heist)

> And second, there are humans in the loop

There sure are!

The IRS Seized $107,000 From Store owner for "structuring"
[http://www.foxnews.com/politics/2015/05/12/nc-store-owner-
on...](http://www.foxnews.com/politics/2015/05/12/nc-store-owner-on-hook-
for-107000-with-irs-over-structuring-laws.html)

MasterCard Cuts Off Wikileaks, Assange's Bank Account Frozen
[http://gawker.com/5707851/mastercard-cuts-off-wikileaks-
assa...](http://gawker.com/5707851/mastercard-cuts-off-wikileaks-assanges-
bank-account-frozen)

DOJ's 'Operation Choke Point' May Be Root of Porn Star Bank Account Closings
[http://reason.com/blog/2014/04/28/doj-operation-
chokepoint-a...](http://reason.com/blog/2014/04/28/doj-operation-chokepoint-
and-porn-stars)

~~~
lisper
> $81M was stolen the Bangladesh Bank via the SWIFT

Nearly all of which was later recovered.

> The IRS Seized $107,000

> DOJ's 'Operation Choke Point'

Those are political problems, not problems with the banking system. If the
government decides to fuck with you, then you're fucked no matter what the
banking system looks like.

> MasterCard Cuts Off Wikileaks

This is a real problem, and it a result of what is IMHO the main unaddressed
flaw in our current system: banking is conflated with money transfer. Bitcoin
does address this problem, but IMHO it doesn't do it very well. The risks and
costs are too high.

~~~
timbowhite
> Nearly all of which was later recovered.

Citation needed.

> Those are political problems, not problems with the banking system. If the
> government decides to fuck with you, then you're fucked no matter what the
> banking system looks like.

I disagree. Has any government shut down a Bitcoin address for "structuring",
or publishing pornography?

~~~
lisper
> Citation needed.

Sorry, $951M was stolen. All but $81M was recovered.

[http://www.reuters.com/article/us-usa-nyfed-bangladesh-
malwa...](http://www.reuters.com/article/us-usa-nyfed-bangladesh-malware-
exclusiv-idUSKCN0XM0DR)

But let's put this in perspective. MtGox lost BTC600k. As a fraction of the
primary money supply, that loss was comparable to a USD loss of about $35
billion (M0=$1.2 trillion). So even _before_ most of the Bangladesh money was
recovered it was only 1/30th the size of the MtGox loss. And MtGox wasn't even
a theft, it was simple mismanagement. Imagine the attacks people would start
to mount if they could net the equivalent of $35 billion (or more) risk-free.

~~~
timbowhite
I think you're conflating Bitcoin (the system) with Bitcoin opsec skills.

Yes, I agree: Bitcoin is probably easier to steal from people who don't know
what they're doing. (And yes there is probably is smaller chance of the thief
being caught).

But as of now, properly secured Bitcoin can't be stolen by any criminal,
government, or bank. Even if they have physical access to the owner's shit!

The same cannot be said for any modern national/fiat electronic monetary
system.

~~~
lisper
If you want to use bitcoin in the real world then opsec skills become part of
the equation whether you like it or not.

~~~
timbowhite
Couldn't agree more. Bitcoin is not for everyone.

Just like using a bank account in the real world involves not divulging your
account #, bank website passowrd, SSN, birthday, etc.

------
zer00eyz
I up-voted this because it is an interesting guide in securing bitcoin.

I think this is stupid in the extreme, and you SHOULD NOT do this ever.

Bitcoin is super interesting as an asset vehicle, but I would not put all my
eggs in that basket. For as much as I might not like the Fed and some of the
monetary policy it makes, it still gets things done. Right now bitcoin can't
seem to change the block size, it needs to, and a squabble could cause serious
devaluation of the product as a whole.

There is also the ticking time bomb of the satoshi coins. Right now one
individual (or group) controls something like 6% of all the coins available,
and on a whim, could cause a major devaluation over night.

All this having been said would I consider buying and holding some bitcoin as
very LIQUID asset, and cash equivalent. I sure would. How much would I put
into it, no more than a few grand honestly, a sum I am willing to loose.

~~~
paavokoya
>Right now one individual (or group) controls something like 6% of all the
coins available, and on a whim, could cause a major devaluation over night.

The Fed does this on an annual basis and actually publicly states when it's
going to devalue the currency through QE and rate cuts.

~~~
Frondo
The Fed, like all public institutions, is ultimately answerable to every
voter. It's one of the benefits of citizenship, the decision-making power is
in our hands.

No, your one vote won't change everything to suit your personal preferences,
and if you wanted to change the way some aspect of our system works (like
money, or health care, or drug policy, or whatever) it'd be a lot of work,
consensus-building, and time. But, at least the power is in our hands,
collectively.

~~~
mixedCase
The Fed is not a public institution. It's a private bank. It's as Federal as
Federal Express.

~~~
maxerickson
The Fed pays its profits to the US government. The chairman of the Federal
Reserve board is appointed by the President and approved by Congress. It has
statutory legal authorities. It's a little more federal than Federal Express.

[https://en.wikipedia.org/wiki/Federal_Reserve_System](https://en.wikipedia.org/wiki/Federal_Reserve_System)

~~~
jsprogrammer
>The Fed pays its profits to the US government.

After paying a dividend to its stockholders (commercial banks).

~~~
fanzhang
The dividend to stockholders are less than 10x what they give back to the
Federal Government.

~~~
jsprogrammer
What was "given back" was mostly proceeds from maturing Federal bonds.
Commercial banks are just first in line to get a special cut, by law.

------
cesarb
> I do not accept the concept of “trust”, I don’t know those guys, why should
> I trust them? On the other hand, with BTC trust is not even considered to be
> a factor.

That is a strange argument. The value of Bitcoin comes from the trust people
have on Bitcoin. If nobody trusts Bitcoin, it's worthless except as a
mathematical curiosity.

And after just a few more paragraphs, we see another instance of trust. The
author describes leaving most of the money in a hardware wallet. That is, the
author is trusting that the hardware is neither malicious nor buggy. A
malicious hardware wallet could use kleptographic attacks to exfiltrate the
private keys, or derive them from an attacker-controlled seed. A buggy
hardware wallet could, for instance, have a "stuck" RNG (like a well-known
OpenSSL fiasco), such that the generated private keys are predictable.

The author is trusting people he doesn't know: the designers of the hardware
wallet, the manufacturers of the hardware wallet (including workers at
whichever factory manufactures the hardware), and even the postmen. Moreover,
the author is not only trusting them to not be malicious, but also to not make
mistakes (with crypto, even small mistakes can be deadly).

And there's also at least one other problem the author didn't consider, or at
least didn't mention: inheritance. If the author has an accident, what happens
to the money? And what if the accident is not fatal, but leads to neurological
sequels which render the author unable to access the hardware wallets?

~~~
timbowhite
> That is a strange argument.

If Bitcoin was closed source, I'd agree with you.

But it's not, and I don't. Bitcoin is 100% transparent and reviewable: the
code, the transactions. The same cannot be said for any national or bank
electronic monetary system.

As a technical person, I'd trust an open source system more than closed source
system any day of the week.

~~~
mirashii
It's not that you need to trust the implementation, it's that you need to
trust that the currency will remain useful and usable over time. If nobody
believes that they can purchase things using bitcoins tomorrow, nobody will
buy them today. There's just as much (if not more) blind trust required in
bitcoin, because at least fiat currency is backed by a government. Bitcoin
isn't.

~~~
drdeca
I think there are two different senses of the word "trust" being used here.

------
qaq
"I do not accept their fees, they’re way too much high for the quality of
service they give to you." So to fight this the author is paying
Cashila.com/BitWage.com transaction fees and CryptoPay fees and takes on the
exchange rate risk.

"I do not accept the concept of “trust”" Right Cashila.com/BitWage.com are
operated by magic trustworthy unicorns.

~~~
evilsocket
The difference is that with those services, you can always close your account
and switch to a new one ( that's why I've specified to avoid using them as
your primary wallet ) ... on the other hand, if a Bank goes bankruptcy, it's
not that easy to recover your money.

~~~
jcater
In what country? Certainly not the US for FDIC insured accounts. My bank went
under in 2009 and I never lost access to money.

~~~
tinkerrr
Did you have more than $250,000 in your account? If so, then you would have
lost access to part of your money, or gotten if after a bankruptcy court
hearing. Deposits are not the highest priority item on a bank's liability side
of the balance sheet, and as a depositor, you'll likely not get paid in full.

~~~
giaour
That limit is per account, not per person. If you have more than $250K in an
account, open a second one.

~~~
mikeash
Not so. The limit is per depositor, per bank, per ownership category:

[https://www.fdic.gov/deposit/deposits/](https://www.fdic.gov/deposit/deposits/)

Ownership category is just something like single, joint, retirement, etc. If
you have more than $250,000 spread across multiple accounts but with the same
account holder and ownership category, the excess is _not_ covered.

~~~
fasteddie
Right, but easy enough to select a second bank.

Let's also make a note that people with $250k+ in cash savings are a tiny
group that should have no really bearing on whether cash is trustworthy.

~~~
mikeash
Totally agreed, I just didn't want any clueless HNers with lots of cash lying
around trying to open a second account to secure their money on the basis of
that comment.

------
matt_wulfeck
> I do not accept the concept of “trust”, I don’t know those guys, why should
> I trust them? On the other hand, with BTC trust is not even considered to be
> a factor.

This is a strange argument to me. There's plenty of community credit unions
around. For trust you can walk right in and speak to the manager. Some of them
are older than dirt.

However there's nothing really new in these fears (especially after 1929). The
solution has always been to keep your money locked up in a safe. Pay for
things in cash or cashiers check.

~~~
ekianjo
> The solution has always been to keep your money locked up in a safe. Pay for
> things in cash or cashiers check.

You are never safe against the risk of fiat money devaluation, though (or even
folks breaking into your home and stealing your safe). Of course, the
devaluation risk exists with BTC as well, but at least it does not depend on a
central government.

~~~
res0nat0r
Call me crazy but I'm betting that the USG is going to provide me more
stability than Bitcoin...

~~~
CyberDildonics
The United States Government is extremely likely to provide more stability.

The same cannot be said for every government, in fact the number of people
that are under a government that forces them to use a currency that is more
unstable than bitcoin is already in the 10s of millions.

------
jbmorgado
...and see your money oscillate around 20% per day with the probability that
you can loose it all by having it easily stolen by some hacker or having
bitcoin value completely crash.

There is this group of people that had higher education and are well versed in
system security, they are called sys admins and even they get hacked some
times... but here you are trying to convince us to put all our money into
easily movable and untraceable bits in some bitcoin wallet claiming it it the
safer option we have.

~~~
j15t
> and see your money oscillate 20% per day

I get that you're not a fan, but exaggerations don't enhance your argument.
Over the last 60 days the XBT/USD pair has an average volatility of 1.23 % [1]
which is obviously higher than most major currency pairs, but comparable to a
many stock markets. That is, many people invest money in securities with
similar or greater volatility profiles.

> easily stolen by some hacker

Whilst Bitcoin is obviously less user friendly than fiat currency, an
experienced user like OP can make store their Bitcoin in a way that makes it
much more difficult to steal than conventional payment systems.

Firstly, using a hardware wallet (with offline backup) will make your Bitcoin
almost invulnerable to 'hackers', plus the use of multi-sig can allow one to
dial up physical security to very high levels.

Compare that to conventional payment systems like a credit card - all your
credentials are on your card! Anyone who handles your card (waiters, cashiers)
gets access to all of your credentials, for the life of the card! (Bitcoin's
use of public key cryptography is far more sane in my opinion). And any
malware on your computer that could steal Bitcoin could also steal your CC
information etc. The only reason that this isnt more of a problem is because
by using a bank you are paying insurance for your money and the Bank will
generally reimburse you for small amounts - this doesn't make the conventional
payment system more secure, just more insured.

~~~
jbmorgado
You tacitly disregarded the points that don't suit your narrative.

1st. It's not the average volatility that matters it's the maximum volatility
that you can normally have. This year it only happen once to have 20% it's
true. But you have plenty of days where it oscillates more than 5%.

2nd. Bitcoin is much easier to steal than conventional payment systems like
reality tells us, not only because of it's lack of security but also because
of accountability. It's hacker free reign, you just steal bitcoin and send it
anywhere you want and you have no more trouble. In traditional payment systems
this doesn't happen like you try to imply, not because it's insured but
because we are talking about real money and that money is connected to a name
and an address and sooner or later the police will knock on your door or the
door of the person that received the goods purchased with the stolen money or
card.

3rd. _" Firstly, using a hardware wallet (with offline backup) will make your
Bitcoin almost invulnerable to 'hackers'"_: In a site like this dedicated to
people that actually understand a bit about computer security. this sentence
is just funny.

------
wslh
I take this kind of articles with the same interest of how to live with $ 100
per month or some other [self or imposed] living with hard constraints: it is
insightful but don't try it at home.

Also, when you analyze the details you can discover that using
[https://cryptopay.me/bitcoin-debit-card](https://cryptopay.me/bitcoin-debit-
card) takes extra commissions beyond bitcoins (loading fee 1%), so the magic
of bitcoins fade a little bit.

------
funkysquid
Interesting idea, but it feels a bit like "how to use the stock market instead
of a bank account". The author mentions fluctuations but seems to think bank
fees would be more of an issue - but bank fees could be like $100 at most,
where bitcoins could fluctuate all your cash by any percentage at all.

~~~
f_allwein
I am also missing anything on the stability of Bitcoin over time. People in
Europe, and especially Germany, are obsessed about that, given the experiences
of hyperinflation in Germany in the 1920s, when it took 200 billion marks buy
a loaf of bread:
[http://www.usagold.com/germannightmare.html](http://www.usagold.com/germannightmare.html)

The Euro may not be perfect, but at least there are rules and institutions
working to prevent this happening again.

~~~
pointsphere
[https://btcvol.info/](https://btcvol.info/) shows the volatility over the
last few years. Still very wild, but looks like it is decreasing.

------
cvucm
Wow, it's interesting how divergent perspective can be.

Just the other day I came to the conclusion bitcoin is a monitoring tool for
the powerful to keep track of advances in digital security by incentivising
implicit disclosure.

If someone cracks integer factorization or tsp and thinks bitcoin would be a
great way to make some dough on the discovery it will immediately set off red
flags to anyone watching.

If your typical nonce is found in a pool of many, but an individual suddenly
starts solving blocks and banking 25btc, as of this writing, left and right
you'll know straight off that individual has compromised the entire system.

Putting a target on the poor rube's back and destroying any confidence in
bitcoin as a currency.

Perhaps this is unlikely but to put all of your trust in a system with such a
huge potential to immediate failure terrifies me.

Who is satoshi? Maybe a three letter acronym.

------
hueving
>373$ and 479$, which might seems a lot but if you move your BTC at the right
time you’re not going to lose anything, on the contrary, compared to the fees
you would normally pay for Bank transactions, chances are you’re going to
spend way much less anyway.

This is INSANE. Justifying monthly 30% swings in the value of your currency
with "bank fees suck" is complete nonsense. Currency instability like that
destroys economies because people lose the ability to budget and they become
fearful.

In the worst periods of inflation in the US, the currency never devalued by
30% in a month. That's Zimbabwe level crazy.

Also, I pay precisely $0 a month in bank fees, as do many other Americans, so
that argument would fall flat even if the swings were much smaller.

~~~
cesarb
No, Zimbabwe was way crazier than that, approaching 100% per _day_ (see the
table at
[https://en.wikipedia.org/wiki/Hyperinflation#Most_severe_hyp...](https://en.wikipedia.org/wiki/Hyperinflation#Most_severe_hyperinflations_in_world_history)).

I've lived through 30% a month inflation. See the table at
[http://hcinvestimentos.com/wp-
content/uploads/2011/02/IPCA-I...](http://hcinvestimentos.com/wp-
content/uploads/2011/02/IPCA-Inflacao-Historica-Tabela.png) (source:
[http://hcinvestimentos.com/2011/02/21/ipca-igpm-inflacao-
his...](http://hcinvestimentos.com/2011/02/21/ipca-igpm-inflacao-
historica/?hvid=NcSFP)). At this level, people can still cope, but it does
generate some distortions. For instance, as soon as you received your monthly
salary, you bought all the food you'd need for the whole month. If you can
read Portuguese, I found an interesting article about it at
[http://www.bbc.com/portuguese/noticias/2014/06/140619_plano_...](http://www.bbc.com/portuguese/noticias/2014/06/140619_plano_real_vida_ru)
.

------
pjc50
What I don't understand is the extent to which people are paranoid about
inflation in Europe or the US. It's low, stable, managed and not a problem
unless you're keeping very large amounts of money in accounts which offer
inadequate interest. It seems to me that worrying about this or the FDR gold-
confiscation collapse of the gold standard is not merely fighting the last war
but analagous to hiding in the jungle and refusing to admit that the war on
inflation is over.

Residents of e.g. Brazil and Argentina are entitled to a different opinion due
to different history, but in those countries people sought hard currency ..
the dollar.

~~~
xiphias
When was the last time you tried to rent an apartment in a city (close to the
jobs available)? I'm sure the official inflation rates are low, but when
you're looking at real life of real people, they _need_ to move to a big city
in a western country to have a normal life and rent a flat there (which is
probably the biggest single cost of living).

~~~
jbmorgado
Seriously, are you trying to tell us that with bitcoin rents wouldn't go up?
Are you trying to tell us that rent hikes are not a symptom of gentrification
but of evil inflation?

~~~
xiphias
With Bitcoin cash wouldn't be so cheaply available to the selected few.
Gentrification means that the demand for urban space is growing. The huge
inflation in fiat supply means that more fiat can be spent on buying urban
buildings and assets (and stopping urban development). The natural reaction
way would be to build Skyscrapers in every city (and blend it somehow nicely
with the cities)

------
Chirael
While I appreciate the time it must have taken to write this article, the
credibility of an article that recommends services and provides _affiliate
links_ in the recommendations is severely degraded in my opinion.

------
xfour
Couldn't you just as easily for 90% of the problems you mention use cash?

~~~
evilsocket
i pay my rent and bills with wire transfer, same goes for 99% of my purchases
( mostly on amazon ) ... my paycheck is sent me as wire transfer as well ...
how am I supposed to live just on cash? :) I only use cash to buy cigarettes
basically XD

~~~
jbmorgado
If it all already works so fine with wire transfer for you then why should you
use bitcoin anyway?

------
barnacs
As long as you have to interface with "the fiat world" for income and
spending, this sounds like more trouble than it's worth.

The gateways (fiat->btc, btc->fiat) know your identity, take a higher fee than
banks and you still have to trust them. Additionaly, you now have the risk of
varying exchange rates at multiple points in your money flow.

As for the global bitcoin adoption, I don't see this approach helping at all.
If you think of yourself as a node in a global economy graph, you still take
fiat as input and produce fiat as output.

------
RubyPinch
> but if you move your BTC at the right time you’re not going to lose anything

does this include a larger desire to spend BTC (because of wanting a value
store, for example) compared to USD?

------
known
Does
[https://en.wikipedia.org/wiki/McDonald%27s](https://en.wikipedia.org/wiki/McDonald%27s)
accept Bitcoin?

~~~
rtkwe
Actually read the article the author uses CryptoPay which works essentially as
a prepaid debit card and provides a normal card that you can use like one from
a bank.

------
dang
The title of this article ("Hacking Yourself Out of the Banking System and
Live Only on BitCoins") reminds me of Colbert's "I am America and so can you".
I expected to find title rage in the thread, but apparently grammarians sleep
in.

We gave it symmetrical gerunds.

Edit: on second thought, "hacking yourself out of the banking system" is kind
of baity and doesn't seem to add information, so we'll take that out.

~~~
justifier

        Which tense do you want to live in ?
        — I want to live in the imperative of the future passive participle— in
        the “what ought to be.”
        I feel like breathing that way. That’s what I like. There exists such a
        thing as mounted, bandit-band, equestrian honor. That’s why I like the
        fine Latin “gerundive”—that verb on horseback.
        Yes, the Latin genius, when it was young and greedy, created that form
        of imperative verbal traction as the prototype of our whole culture, and it
        was not the only thing that “ought to be” but the thing that “ought to be
        praised”—laudaturaest—the thing we like. . . .
          ..The Prose Of Osip Mandelstam

~~~
dang
Wow, you made my day. I love Mandelstam.

I also know of a (small but consistent) linguistic practice in which people
deliberately speak in gerunds as a form of verbal indirection, and it works
surprisingly well.

~~~
logicallee
>linguistic practice in which people deliberately speak in gerunds as a form
of verbal indirection

? could you give an example? (I can only think of sentences like "stealing is
wrong" \- but it doesn't seem like this is what you mean, because where's the
indirection?)

~~~
dang
In certain forms of bodywork the practitioner will not say things like
"breathe deeply" or "pay attention to x", but rather "breathing deeply" and
"paying attention to x". I've not studied the origin of this (it may come from
trance induction), but it does feel easier to absorb such instructions when
they're not issued head-on.

~~~
logicallee
Thanks! interesting

