>"...it is unlikely that [Bitcoin] will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable."
And the traditional banking system is not opaque and vulnerable? Let us recall that -- despite its vaunted regulatory system -- the banking system nearly destroyed the global economy back in 2007, exactly because it was (and is) opaque and vulnerable.
Sometimes, I wonder if people stop and think about what they're writing.
I don't see any contradiction here? Both systems are opaque and vulnerable, and both may need government regulation. Some people would have it that the repeal of Glass-Steagall is what indirectly lead to the '07 crisis.
The banking and financial industry is the most heavily regulated (and thus corrupt) industry that we have, surpassing even the health industry. Basically it's just a cartel.
Saying that Bitcoin "may need government regulation" is like saying that Bittorrent "may need government regulation." The question is, how on earth can you regulate such things, when they are designed to be resistant to such threats?
Let's not forget also, that policy consists of political decisions regarding the use and threat of force. Therefore we can never actually regulate Bitcoin. At best, we can only regulate how we plan to use violence against people who use Bitcoin.
> The banking and financial industry is the most heavily regulated (and thus corrupt) industry that we have, surpassing even the health industry. Basically it's just a cartel.
I heavily disagree with your assessment that regulation is to blame. If anything the removal of regulation, specifically the repeal of the parts of Glass-Steagall that separated commercial and investment banks, is what caused the banking catastrophe.
> Saying that Bitcoin "may need government regulation" is like saying that Bittorrent "may need government regulation." The question is, how on earth can you regulate such things, when they are designed to be resistant to such threats?
No, despite using (sort of) similar protocols and having (sort of) similar names, these are not similar at all. Bitcoin will be regulated in these two, and probably more, ways: 1) It will be categorized as an instrument of value, in which case it can be taxed in USD, require licenses to transact with it etc. 2) It will be regulated at the point of currency exchange.
> Let's not forget also, that policy consists of political decisions regarding the use and threat of force. Therefore we can never actually regulate Bitcoin. At best, we can only regulate how we plan to use violence against people who use Bitcoin.
I'm not even sure I understand fully what you mean here. What do we regulate that can't be swapped for "bitcoin" in that sentence? IE: we can't regulate drugs, at best we can only regulate how we plan to use violence against people who use drugs.
> the repeal of the parts of Glass-Steagall that separated commercial and investment banks, is what caused the banking catastrophe.
This is like saying that pulling a card from a house of cards is what "caused" its collapse. When in fact, the imposition of the unsustainable system onto us in the first place was the true problem. Everything else is just consequences.
> despite using (sort of) similar protocols and having (sort of) similar names, these are not similar at all.
Both are p2p protocols designed to enable censorship-resistance by eliminating centralized points of failure.
Just as Napster was replaced by Bittorrent, so also E-Gold is replaced by Bitcoin. The persecution is actually what is driving the development of these liberating protocols.
> What do we regulate that can't be swapped for "bitcoin" in that sentence? IE: we can't regulate drugs, at best we can only regulate how we plan to use violence against people who use drugs.
This is exactly true! We can never "regulate" drugs (or Bitcoin) -- we can only regulate how we use _violence_ against people who use drugs (or Bitcoin.)
But the question is, do we have a _right_ to use violence against people who are not thieves and murderers? And is it even possible to delegate such powers?
For example, I have a right to defend myself using force. Therefore I have a right to hire a _bodyguard_ to defend me. Therefore we have the right to elect a _sheriff_ to defend us. (In fact it is the same right -- delegated.)
But I do NOT have a right to beat and rob people. Therefore, neither do I have any right to hire a _bodyguard_ to beat and rob people.
...Therefore, neither does our _sheriff_ have any right to beat and rob people -- even if we voted for him to do so! Because you cannot delegate powers you never had.
Perhaps you should be asking what makes us believe, as a society, that we have any right to use violence at all, except in defense from violence. Because if the authorities use violence for any other purpose, then aren't they the true criminals?
Careful not to throw out the precedent from the Nuremberg Trials -- that just because someone is in authority, doesn't give them the right to victimize people. (Even if they were voted into power.)
> This is like saying that pulling a card from a house of cards is what "caused" its collapse.
No it's more like saying removing one pylon from a bridge is what caused it to collapse.
> Both are p2p protocols designed to enable censorship-resistance by eliminating centralized points of failure.
This is simply not true about Bitcoin, nor Bittorrent. Especially with Bitcoin the people who seem to be taken seriously in that community do not seem to feel that the transgressive aspect of it is either true or valuable.
The banking and financial industry is barely regulated at all unless our measurement of the degree of regulation is measured by LoR (Lines of Rules). Most of those rules are to keep actors in the industry from screwing over other actors in the industry - and the rest are unenforced.
Perhaps you should Google the stories of Douglas Jackson and Bernard von Nothaus.
There is no free market in money. Therefore the problems we see in banking are not problems of a free market.
The entire market is sewn up vertically. The Federal Reserve, at the bottom, consists of the member banks. At the top, it consists of those who regulate those banks.
Therefore The System represents the ultimate "public/private partnership" where the entity that regulates, is the same entity being regulated.
The true purpose of their actions? To protect their cartel.
Seriously. It bugs me when people take the '07 meltdown as proof that the banking system need to be left alone by the government. If the government's regulatory authority hadn't been curtailed, it wouldn't have had to rescue the banking system at all.
The financial and banking system is the most heavily-regulated industry there is. The 2007 meltdown was caused by a number of abuses, but "lack of regulation" was not one of them. We most certainly do not have a free market in money, so we cannot blame the problems of the banking cartel on the "free market" when one does not exist.
I'd say that not requiring capital reserves for swaps like we do for other insurance is a lack of regulation that had a lot to contribute to the disaster that was the housing bubble.
I'd say that removing the regulation that separated investment banking from deposit banking also contributed to the collapse of one deposit bank after another in the aftermath, banks that were relying on insurance companies that barely held any capital to cover their swaps.
The fact that either no one in the financial industry committed a crime during the housing bubble, or there was no one to prosecute for crimes that were committed is proof that the financial industry is either effectively unregulated, or that there is no body that has an interest in enforcing any regulations that exist.
Not sure if you're serious or trolling. How about comparing the financial industry with some other closely regulated industry, such as pharmaceuticals or healthcare? Seems to me that it's rather easier to become a fund manager than a doctor, for example. Likewise the setup costs and regulatory burden of running a hedge fund seem rather lower than those of bringing a new drug to market.
> How about comparing the financial industry with some other closely regulated industry, such as pharmaceuticals or healthcare?
In fact, this is my whole point: that finance (and healthcare) are heavily-regulated, and that this is precisely the cause of their problems.
You could never claim that our healthcare problems are the result of a free market, because there is no free market in healthcare -- just a giant cartel of heavily-regulated (protected) bureaucracies.
Similarly, you could never claim that our monetary issues are the result of a free market, because there is no free market in money.
I think you need to rethink your definition of what constitutes a free market; at present it seems to be 'one where all participants are free to do anything.' That's superficially attractive but it's hard for it to be efficient due to information asymmetries, and a market that is inefficient is one which people are reluctant to enter and whose growth is thus limited.
You could never claim that our healthcare problems are the result of a free market, because there is no free market in healthcare -- just a giant cartel of heavily-regulated (protected) bureaucracies.
Well, I wasn't making that claim, but you appear to have a curiously binary view of these things. Healthcare in Europe, where I'm from, is in many ways far less competitive and far more heavily regulated, yet Europeans seem to have better outcomes despite lower public expenditure on healthcare. I attribute this primarily to the information asymmetries mentioned above.
> I think you need to rethink your definition of what constitutes a free market; at present it seems to be 'one where all participants are free to do anything.'
My definition would be, "one without violence and coercion, enabling decisions to be made based on voluntary choices."
> Healthcare in Europe, where I'm from, is in many ways far less competitive and far more heavily regulated, yet Europeans seem to have better outcomes despite lower public expenditure on healthcare.
"Competitive" ?
I know a doctor in Alaska who was aghast at the high prices charged by the monopoly hospital in his region. He decided to open a surgery center, so as to offer better service at lower prices.
Unfortunately he discovered that competition is illegal. You cannot open operating rooms, you see, without first obtaining a "certificate of need" from the State, certifying that your community "needs" more operating rooms. And of course, such certificates are never actually handed out, since the state boards are always manned by hospital flunkies.
Does that sound like a free market to you? There is no competition in American health care.
I'm also surprised at your characterization of European health care as being "far more heavily regulated" in contrast to American health care. You must not realize just how heavily regulated American health care is.
The American health care system is a combination of socialism and fascism, and has been for quite some time. It features all manner of central planning, forced subsidies, regional monopolies, welfare programs, hospitals and insurance "companies" protected from any competition by legislation, unfunded mandates, price charts, and tax authorities.
The problems of health care in America are the problems of socialism and fascism, because that is what we practice. We do not have the benefits of the free market because we do not have a free market.
> yet Europeans seem to have better outcomes
Saying that Europeans have "better outcomes" than Americans (with regards to health care) is like saying that Cubans have "better food" than North Koreans. You are comparing two authoritarian systems, neither of which have any semblance of a free market.
Coercion does not innovate -- it does not lower prices, nor does it improve service. Even in Europe:
"While Sweden is a first world country, its health care system - at least in regards to access - is closer to the third world. Because the health care system is heavily-funded and operated by the government, the system is plagued with waiting lists for surgery. Those waiting lists increase patients' anxiety, pain and risk of death."
I'm less than impressed by your link. Having experienced medical care, including emergency room visits, in both the US and EU, I far prefer the EU. I have found the standard of clinical care as good or better, and it's been massively less expensive.
Clearly you have an axe to grind, so I'm not expecting this discussion to go anywhere, unless you want to get back on the point and provide some evidence for your original claim that finance is the most heavily regulated industry there is. Meanwhile, I suggest you move to Singapore, Hong Kong, or New Zealand, the three countries which the world bank considers to have even more business-friendly regulatory environments than the US. http://data.worldbank.org/indicator/IC.BUS.EASE.XQ?order=wba...
You seem to be confused in believing that regulated industries do not merge with the bodies that regulate them. We see this same protectionism time and time again. See the health care "industry" for example, which is actually just a bureaucracy designed to protect itself from competition, by way of government force.
I'll keep my life savings at Chase bank any day of the week over a Bitcoin wallet thank you very much.
If my credit card is stolen or even used in a strange manner I get a phonecall and a hold put on my account. How many people have recovered money from their stolen Bitcoin wallets?
Your life savings is losing 4% of value a year (on average) due to inflation.
In some countries, this is as high as 20%.
Are your savings earning more than 4% a year, wherever they're invested in? If not, it's losing money, and if it is, subtract 4% from it and that's your "real" interest.
What do you think is going to happen once a bunch of countries with really crappy currency systems get wind of Bitcoin in any meaningful way? Do you think the value might rise? :)
We're in the early adoption phase so concerns like yours are understandable. However, give it some time and the infrastructure and services will be built to make Bitcoin a true competitor to Chase.
Just imagine back in the early days of the Internet when someone said, “I’ll shop at the brick and mortar store down the street any day of the week over an online store thank you very much.” It was a legitimate concern back then but we moved past it to the point that it sounds ridiculous today. Just wait :)
In order to achieve bank levels of trust you need to be confident of being able to enforce contracts against the organisation you're dealing with.
This usually comes from them being vulnerable to an actor who you believe will wield force on your behalf if they break contract. This then means you're stuck trying to find an actor who
1. you trust to wield force on your behalf (i.e. they're not just some cutout established by your counterparty)
2. who you are sure has means to wield the force against the counterparty (perhaps they can prove that they know where the counterparty lives)
Those are difficult criteria to fill, which is among the reasons why over a long period of time, we've invented governments we can put up with.
I can imagine two other scenarios where you might be able to generate the level of trust you want:
1. If the counterparty can somehow prove that it's not in their short-term interest (because sometimes people run successful and profitable services for years and then abscond with the money suddenly) to just take all your money and run.
2. If you have insurance with an insurer that you are sure could pay you if everyone transacting with that counterparty made a claim at once. (But then, how can you trust that insurer unless they are vulnerable to someone you can trust to wield force against them on your behalf if they break contract?)
I think any future where bitcoin organisations are as trusted as banks is a future where they are registered with the government as financial bodies and regulated in such fashion.
I always wondered why people don't transfer to offline wallets as soon as the trade goes through since most people are holding anyways.
On traditional banking, It also depends on where you live. I doubt people in Cyprus, Zimbabwe, Venezuela and a couple other places feel that safe with their life savings in banks post 2007. I know JPM recently put capital controls on transfers greater than 50k outgoing from the US (but accepting incoming), I wonder what that is all about.
Much of Bitcoin criticism (the chicagofed paper included) is very western centric and fails to take into account how utterly dysfunctional most countries' money systems are.
In most countries in the world local currencies are unstable and subject to the whim of politicans (would you keep your life savings in argentinian pesos? Neither would Argentinians!), there are no easy ways to accept online payments, there are no easy ways to transfer money to/from abroad etcetera. I would argue that adopting Bitcoin is an immediate quality of life improvement for a big portion of the world population, moreso when/if it value stabilizes.
For the record, BIP 0038 https://en.bitcoin.it/wiki/BIP_0038 was released just a few days ago (although it was a working draft for a while). You can, right now, create a BIP38 encrypted paper wallet (finally!) over at bitaddress.org which means that someone with access to your paper wallet can't just sweep it unless they know the key, and the key uses scrypt so it's quite resistant to brute forcing.
I recently moved most of my btc savings into this type of paper (or in my case, pdf) wallet and entrusted the key (broken into pieces of course) to trusted people. Much better peace of mind. I set the public addresses as "Watch Only" on blockchain.info/wallet so even if blockchain is hacked, nobody can get to those wallets, they are effectively airgapped, and I can monitor any activity on them from anywhere.
I never really meant to imply that Bitcoin was a competitor to Chase. I just referred to them because of the concern that was raised in the comment I replied to. As for Bitcoin being a competitor to centrally controlled government currencies on the other hand...
"...An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company [meaning the depositors] into equity [or stock]. In the U.S., the new equity would become capital in one or more newly formed operating entities...the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution."
===> Sounds like what happened in Cyprus. They got stock in return for the haircut. No exception is indicated for "insured deposits" in the U.S.
Bloomberg: "...Bank of America’s holding company...held almost $75 trillion of derivatives at the end of June..."
===> I don't know where you get your news, but I'm willing to bet that the sources you trust are not going to be talking about this until your haircut is complete. And when they do, they will probably blame it on "deregulation."
Hi, perhaps there is some misunderstanding of how bitcoin works.
People only need to know your credit card number, name, and expiration date to use your credit card to purchase something online. Since you give those information to many merchants, it is very easy for those info to leak out.
For someone to use your bitcoin to purchase something, they have to have your private key. When you make a purchase, you do not give out your private key to anyone. bitcoin and credit card are two very different things.
Credit card was not designed for internet, while bitcoin is.
If someone uses my credit card to buy something in Kenya it is automatically flagged and I am notified. If I tell Chase the transaction is fraudulent I am automatically reimbursed and am out nothing.
I don't think people have a problem with the banks. They have a problem with the currency. If the currency value drops to 0 (which is a possible thing), it doesn't matter if your bank was secure or not.
Ostensibly the goal of all government intervention in financial systems is to make them more transparent and secure.
Whether or not they accomplish those goals is obviously a matter of serious debate, but Velde's reasoning there is consistent with all other arguments for government intervention.
There's no point in trying to spin that statement into him giving the traditional banking system a pass.
By "opaque and vulnerable," I thought he meant "we can see who is using/operating/mining/developing bitcoin." (Which lets them pass laws to coerce those people.)
And the traditional banking system is not opaque and vulnerable? Let us recall that -- despite its vaunted regulatory system -- the banking system nearly destroyed the global economy back in 2007, exactly because it was (and is) opaque and vulnerable.
Sometimes, I wonder if people stop and think about what they're writing.