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Bitcoin's Biggest Problem: It's a Den of Thieves (nyaruka.com)
33 points by nicpottier 1669 days ago | hide | past | web | 44 comments | favorite

The trust issue he encountered he mis-attributed to bitcoin when in fact the issue was with paypal and credit cards. Bitcoin is like cash. There's no "reversal" of charges. Once something has been paid for, it's public record and there's no one-sided taking it back. This is a good thing.

The use of Paypal and credit cards destroy this trust by allowing a paying party to reverse transactions so the payee gets nothing. It's empowering a third party to arbitrarily negate charges.

Bitcoin is no more a "den of thieves" than a cash-based society, which most of the world was until recently. I'd argue that Credit Cards and PayPal are much more a den of thieves by abusing their trust to cause no end of issues for people receiving payments.

You are absolutely right in that it is exactly like cash, and for transactions that are exactly like cash I think Bitcoin is great. But how much commerce is done online now? How big is Amazon.com? How many other online merchants exist?

If Bitcoin's ambitions are only to replace physical cash transactions, then sure, it works. (and that's no small success!) But if we are talking any kind of online transaction with delayed gratification, then trust is required, as is a recourse when things go wrong.

Bitcoin is something basic and should not be taken for more. What banks and other services do nowadays is something far more complex, including leveraging trust in a way or another. These kind of services can be built on top of BitCoin. Their business models won't be equivalent in all aspects with what we have now in the current system, but there is enough room and potential for such services to exist/run covering needs. It will be just a better system regarding the corruptible nature, because there won't be an central authority with whom to strike deals under the table and get empowered to "be a necessary evil".

This is an interesting perspective, and one that I hadn't considered. The obvious implication is that Bitcoin should only be used where one currently uses cash. Crucially, this means 100% offline (because even bank transfers require a bank, which Bitcoin doesn't have).

Perhaps the route to success for Bitcoin involves sophisticated offline tools?

That's a fair point. The difference is in where I think the trust should be placed.

I would love to be able to pay for goods on Amazon with bitcoin, because I trust Amazon. Right now Mastercard/Visa/Paypal takes a cut on each of those transactions to provide "trust" in them that I neither need nor want. If things go wrong in that transaction, I'm still left dealing with Amazon, as Mastercard/Visa/Paypal will not want to get involved.

In cases where you're dealing with an unknown quantity, then you have to look elsewhere for your trust metric. eBay has their, eg. "99% positive" reviews, Silk Road has their own way of dealing with this (similar with freebies/samples to build trust).

> This is a good thing.

Why do you say so, apart from ideology? The history of money and credit transactions suggests the opposite; consumers in fact clamor for transactions to be reversible. Do you have any evidence to support your claim?

You appear to be speaking from a purely consumer perspective. That's being only the client in a client/server relationship, and feeling a need for protection from the supplier.

I'm speaking from being a peer; both a consumer and a supplier at the same time. We are more than consumers, we're people and citizens that provide services and utilize services of others. Having a third party in those transactions that can arbitrarily disrupt them has proven problematic (for reference, see all of the backlash against PayPal for the way they arbitrarily freeze funds on both sides, etc).

ANY merchant provider can hold funds up to 180 days for any reason in the US. It's not just paypal that does that.

> Bitcoin is no more a "den of thieves" than a cash-based society, which most of the world was until recently.

Actually it seems that credit/debt was usually the standard and not cash per se, at least if David Graeber's book on the history of debt can be believed ("Debt: The First 5,000 Years"). While cash has certainly been used since antiquity, most transactions were on credit, even before Western Europe exited the Middle Ages, with cash limited to certain purposes and/or segments of society.

Trade credit (I'll buy these hammers today, bill me next week) is somewhat different from credit cards. Credit cards are a financial tool to provide easy access to temporary funds, and are usually backed by banks, which have only existed for ~500 years. Trade credit is part of the give-and-take of relationships in that we recognize resource ticks aren't always synchronized.

My main problems with Bitcoin:

1. I don't deeply understand the maths behind it.

2. I don't know how vulnerable the entire Bitcoin infrastructure is to hacking, allowing someone to generate fake Bitcoins.

3. There seems to be no way to securely store BC's.

4. There is no governing body to resolve disputes or to enforce rules. (Yes I realize that to some extent this is also a strength)

5. It is the Wild West. There is no rule of law and the value of the Bitcoins are purely subjective. Better be wearing your Titanium Super Pants when "investing" in BC's.

There are effectively three potential sources of vulnerability in the Bitcoin network:

1. A flaw is discovered in the Bitcoin client.

2. A flaw is discovered in the public key cryptography algorithms the network uses.

3. An attacker has control of more than 50% of the processing power of the whole network.

The first two vulnerabilities are common to any system dealing with finances.

The third vulnerability is particular to Bitcoin, and would allow an attacker to "double-spend". This is because Bitcoin relies on a CPU-majority to determine which transaction came first, rather than a central authority such as a bank.

Another point to note is that normal bank transactions can be reversed if fraud is detected, but bitcoins are like physical cash in that there's no automatic mechanism to void a transaction.

There are ways of securely storing bitcoins, but the organisations and high-profile individuals who have been hacked have not had security even close to the level you'd want for storing hundreds of thousands of dollars.

> 3. There seems to be no way to securely store BC's.

There is. You can print out the private key and lock it away in a safe.

And ideally the private key would be generated from an permanently offline machine.

"This has some very neat advantages, the largest being that no one entity controls Bitcoin, instead it is a community all agreeing to use a currency with particular rules, with some clever algorithms keeping everybody honest. No single government, much less corporation, can dictate what happens to Bitcoins."

- I'm not sure about the construct of your argument. It appears that this is indeed the biggest disadvantage with Bitcoin, not an advantage. The very thing holding back adoption of Bitcoin is this sense that there is no single entity that can ensure the offering functions as hoped.

I wonder if Bitcoin isn't the Napster and somewhere out there is a Steve Jobs ready to launch an iTunes version.....

Maybe advantage is the wrong word, maybe it is just what makes Bitcoin even possible.

Centralized digital currencies (eGold?) have been around, but their problem is twofold in that they are more vulnerable to single points of attack and more importantly, can be shut down by governments.

I don't know if there have been any real efforts yet to crack down on Bitcoin but it seems well positioned to survive such an attempt.

Yes, maybe it's "Bitcoin has some very unique characteristics that are either it's biggest advantages or drawbacks, depending on your point of view" Full disclosure. I work for a payments startup. We have a tug of war around Bitcoin. We're fascinated by it's potential but also fear tying our brand too closely to it as it seems to receive bad press around something every 90 days.

I'm very interested in trading/investing in bitcoins but I don't have confidence in any of the markets. Every few months there is another story about an exchange getting hacked and people on the site losing their coins.

If you're concerned about security, just use the exchange for trading but keep no long-term balance with them. Keep your coins under a pillow in your home and exchange security is almost a non-issue.

If you're talking about the psychology of the market or your own emotions, that's a different can of worms.

To be fair, that's mostly solved by keeping your bitcoins on your own machine/in cold storage. Buy/sell a little at a time, never keep a lot of money on any (one) exchange/wallet, and so on.

(I'm very skeptical of bitcoin, but if this were the only problem, it would be worth working around it. At least for me, but then I know/like digital security...)

This seems to be largely solved now. There are numerous digital wallets that do client side encryption, so even if they are hacked, your funds should be safe.

Two that I looked at were https://www.strongcoin.com and https://www.blockchain.info, the latter winning out after some test driving, just because it is larger and has a nice Android client.

Until they get hacked, and if history is any guide, they will get hacked.

I suppose there is the possibility of a hacker changing their actual content so that things AREN'T done client side, and therefore being able to decrypt the keys. In that case any user who used their site with that malicious code would be compromised.

That is a very real threat, I grant you that, but it is a hell of a lot better than what the state of the art was a year ago when a hacker got everybody's information once they got root.

Or the client-side computer gets hacked and the attacker gets the passphrase with a keylogger.

So don't keep your coins in an exchange - store your keys locally, offline.

BitCoin isn't a payments infrastructure. Rather, it's a set of primitives over which you can create one.

The same can be said of git w/r/t source code control systems.

[sorry; digression]

what is it about current sites that completely breaks text selection? is it something to do with web fonts? is it a bug in chrome (linux)?

for some strange reason i unconsciously select text on the screen as i read it. i've noticed that recently on many sites - this one included - i either fail to select anything, or select an area of the screen that is only vaguely connected to the text layout.

i'm pretty sure this isn't click interception. is anyone else seeing this? i guess i should poke around and see if i can find a bug report....

[edit: this seems to be the same thing - http://css-tricks.com/forums/discussion/14750/text-selection...]

[edit2: i looked at chrome's bug list and there are hundreds of text selection bugs. i can't work out if this particular one is known or not.]

Yup, you're not the only one; I've noticed the same throughout the web at the fanciest web sites. I suspect it's caused by everything being placed inside layers of nested <div>s styled with CSS. It's particularly aggravating in mobile browsers, which have worse CSS support.

The worse offenders are whole rectangular paragraphs that behave as a single button, and text input fields that don't get recognized when I click on them on my android browser (Coursera, I'm looking at you).

> for some strange reason i unconsciously select text on the screen as i read it.

I have the same condition, selectitis. Drives the people around me mad when I'm clicking loads and I don't even notice. And websites that do things on select like pop up a definition or search box are really irritating to me.

Weird, this is just a Posterous blog, so we aren't (consciously) doing anything fancy. Selection works for me on Chrome on OS X for what it's worth.

Selection works as usual (e.g., wonkier than I would like, but not too bad) on Firefox 10 on OS X.

"At its roots, Bitcoin is based on some rather clever mathematics, ironically the same primitives that keep our credit cards secure when buying things online." What is he talking about? SSL? What about credit cards is encrypted?

Yep, SSL.

Trust is a big problem for any peer to peer situation. eBay, Airbnb, and Paypal all had to figure out ways to jumpstart trust in their communities - if Bitcoin can do the same, then the potential is huge.

> if Bitcoin can do the same

You assign agency where there is no entity.


Jeez, what the hell is wrong with me? Not enough coffee apparently. Thanks.

Truthfully, I have purchased about 4-5 things with bitcoins, both digital and physical products, and got stiffed EVERY SINGLE TIME.

Yeah, go ahead and downvote me, but it's the truth.

Sounds like a huge oportunity for an online escrow business.

Fool me once, shame on you..

Fool me five times?

I was trying to unload my bitcoins and found various vendors to spend it on. Not so weird.

Wow. All jokes aside, what made you try after the 2nd or 3rd stiffing?

I was naive. I still had faith in common human decency.

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