From a game theoretic perspective where no parties can be held accountable, being a scammer or hacker will always yield higher pay-offs. This is why Bitcoin will tear itself apart.
What's funny is that because the bitchain (the transaction history of EVERY BITCOIN EVER) is public knowledge, one could easily blacklist stolen bitcoins (simply blacklist the wallet that received the stolen goods and all subsequent receiving wallets, and refuse to accept bitcoins from any of them).
The difficulty would be making the blacklist fast but accurate, i.e. there'd need to be high standards of proof that coins were stolen rather than traded fairly. But if blacklisting took too long the thief could already have fenced the coins for real assets before the blacklist took effect.
Ultimately it could end up looking like credit card fraud alerts - suspicious bitcoin transactions could be put on hold (temporarily blacklisted) until confirmed by the wallet owner. But at that point you lose anonymity. I guess you can't have anonymity and accountability...
How would this work though? You have 4m worth of blacklisted bitcoins. What happens if you go to a legitimate store, like NameCheap, and buy a domain using those bitcoins. You're going to add NameCheap to the blacklist now, because these coins went through them?
Well, you could say NameCheap wouldn't accept those coins in the first place, but can you really expect every store and person to be using this list?
What happens if you take those 4m worth of bitcoins, send 3m to your own wallets, and distribute 1m to random wallets of strangers? How do you know which wallets to blacklist? All of them? You're just going to put tens of thousands of people in the dark, and say their bitcoins are now worthless and blacklisted, because they received a random payment?
Hmm, I didn't realize you could send money to people without their consent. That would make blacklisting more difficult. But if receiving the bitcoins was indeed unintentional on their behalf, you could just temporarily blacklist them until they returned the stolen bitcoins to the original owner.
In theory this could lead to attacks where small amounts of stolen bitcoins are continually deposited in victims' accounts, but that could be avoided if the exchanges themselves enforced the blacklist and refused to process transactions from blacklisted accounts (except back to the theft victim).
> Well, you could say NameCheap wouldn't accept those coins in the first place, but can you really expect every store and person to be using this list?
It would certainly require a cultural shift in bitcoin use, yes. I just find it funny that the entire transaction history is public record, yet bitcoins can still be stolen!
> I didn't realize you could send money to people without their consent.
I think the point of blacklisting would mean that miners wouldn't include transactions from those addresses in blocks. Once the transaction is in a block then there's not much that can be done, so blacklisting will require cooperation among a majority of miners.
People aren't going to maintain such lists individually. So you'd want some central operators, like the antispam DNS services. But then they have to decide what counts as "stolen". Ordered something and then claim it doesn't arrive - who do you believe? You're back to the paypal situation, except rather than reversing transactions you're declaring bitcoins "stolen".
Not to mention the difficulties of running a collaborative central operator in a community of radical individualists.
Can I maliciously transfer my stolen bitcoins to rich/famous people and get their accounts frozen? Is there a minimum transfer, of will 1 satoshi per account be enough? What if I feed them into a bitcoin tumbler before the theft is discovered, does whoever was selling on silkroad that day get their account frozen?
For that matter, can I start stealing bitcoins, and transferring them all to known FBI controlled addresses in order to 'pin' those attacks on the FBI?
It's "normal" to use a different address for each transaction (even when you spend from an address, you spend all of it, sending your "change" to a new address). But I don't know whether you could deliberately send to existing addresses.
One possible group would be a consortium of parties that are interesting to transact with. Say Paypal decided to mess around, they might have a blacklist.
People that received tainted coins could repudiate them with high fee transactions to invalid addresses (so that most of the coins go back into the network as mining fees). I guess 'invalid address' is the wrong language, but you get the idea, an address with no private key.
No no no no no. This sounds like a nice idea on the surface but it would be terrible. It would destroy the fungibility of Bitcoin, making some coins worth less because they could only be spent freely in countries that don't follow the same blacklists, or on the black market. It would be a huge fucking mess.
Interesting (slight?) counterexample is the foreign exchange market 10-20 years ago, just as it was going electronic. Lots of levered investment but lots and lots of fraud as there was almost no regulation. Like this example, you would have brokerages just take customer funds and then just disappear. The move towards foreign exchange trading was, also like bitcoin, driven by the lack of regulation, speculative possibilities, etc. Since then it's become regulated heavily globally and the game-theoretic defection has not held. Probably something similar will happen to bitcoin.
That's an interesting point. However, I think that the difference between forex and bitcoin in this situation is the goal of the end user. Many bitcoin users are using it because of the anonymity that the system provides, whereas users making large forex trades 10-20 years ago were mostly happy to add regulation and accountability to make sure that they received their money.
Forex traders may have been attracted to a market without regulation but their customers were there to make foreign currency trades. I'm sure that not as many bitcoin users would be happy to lose their anonymity to gain that accountability.
>>Many bitcoin users are using it because of the anonymity that the system provides [...]
I'd say that more and more bitcoin users are using it because of the hype, not because of the anonymity.
>>I'm sure that not as many bitcoin users would be happy to lose their anonymity to gain that accountability.
Maybe not yet. But if everybody currently holding and hyping bitcoin achieves their goal of mainstream adoption, then at that point the new majority bitcoin user demographic will probably be very happy to lose anonymity to gain accountability.
True. Perhaps fundamentally bitcoin really just is cash and not a speculative instrument. And just like cash (as in, like, paper money), there's a huge amount of risk whenever a nontrivial amount of your net worth is tied up in it.
What about the other side of regulation? Not from customers demanding safety but from governments demanding reporting? (E.g. anti-money laundering, tax-evasion laws, commodity markets laws)
I don't know nearly enough about the mechanics of bitcoin to say anything remotely meaningful, but it seems like there is no way that bitcoin won't be regulated like any other commodity. At least in the US, the CFTC will absolutely regulate it by criminalizing anyone for not registering their holdings. Or, even outside of commodities, you could get something like FACTA that forces people/banks to report stores of value in offshore centers where US citizens are involved. This is all US-centric, sure, but why wouldn't it be like this generally? Or, rather, do the mechanics of bitcoin mean you could stay anonymous while not becoming a criminal under the regulation that is going to come?
I disagree. Anyone using bitcoin to he anonymous is doing it wrong; all their transactions are public. Bitcoin is a fine replacement for traditional banking, because there is no way to add ridiculous fees and no way to freeze your assets.
Only if the buyer is willing to commit fraud. If I've got a trading platform, and I'm holding $1M but I charge no fees, then my business is not generating any revenue or profit so it's worth very little. The $1M in "storage" is worth more if I steal it.
That's why Wells Fargo has a market cap of $225BN but has assets over a trillion, right?
> That's why Wells Fargo has a market cap of $225BN but has assets over a trillion, right?
Banks are in an unusual position. They have cash, but it's not theirs. Depending on the report and reporting rules, it might be reported as either an asset or a liability.
Assets are matched with liabilities. E.g. I may have an asset worth $1M - namely, my house (I don't, but a man can dream :). Now am I rich or not? It depends. If I owe nothing on the house, I'm in a pretty good shape. If I have a liability of $1.5M mortgage, I'm deeply in the red.
If the other party is anonymous or there is an overwhelming multitude of new 'others' arriving, then it doesn't work as the repeated prisoner's dilemma, but the ordinary one.
Cash implies a much higher degree of accountability, to do transactions involving cash, you need to be physically present. Whereas you can hid behind 7 proxies on the internet. Cash transactions are also much harder to scale (thus lower volume), limiting the potential damage an "attacker" can cause.
Me. I'd been slowly weaning off credit cards due to the potential for purchase profiling and then two years ago Visa and MC both started in double-talking about selling "anonymized" purchase histories for online ad targeting -- as if you can anonymously target specific individuals.[1] That obvious prevarication was enough to convince me it was now open season on customer privacy so I cut my usage down to the bare minimum necessary to maintain one account for emergency use.
For me, $100 bills are the new credit card. I get a stack from the teller at my credit union about once every 6 months (careful to stay under the $10K mandatory government terrorist hysteria snitching limit[2]) and spend as necessary. It took a little getting used to, but it quickly became quite normal. I'm confident that my CU does not participate in any schemes to correlate serial numbers on bills with purchases. At least not any non-government schemes.
That is an unhelpful response. If you have more to add than what the wikipedia article spells out regarding reporting requirements for under $10K transactions, I would very much like to hear it.
Exactly this. Algorithms have moved well beyond a simple "> 10000", and banks are interested in enforcing this, since the penalties are very signficiant (vastly outweighing any profit to be made looking the other way), and the modern anti-terrorism/anti-money laundering treaties are fairly non-gamable (in that they set outcomes and high-level behavious which are expected, rather than giving a precise set of criteria and rules that can be gamed).
Unless regulations relax, there will be an ongoing profitable business for people who sell software that does behavioural analysis on compliance-related cash behaviours for the finance sector.
ARghh... my mother in law carries her money around in $100 bills. It's a total PITA. Cashiers have to call managers to make change, or they just say "I can't break that." $20 bills are much more convenient, if a bit bulkier.
I don't really give a damn about the ads. It is the database behind the ad targeting that I have a problem with.
Best case it is really no one's business where, when and how I spend my money. Worst case the info could be used to directly harm me, maybe through blackmail, maybe to enable some other crime against me or maybe even to falsely implicate me in a crime that I would then have to spend time and money to defend myself against in court.
As for the change - my credit union has a coin counter, I bring in a bucket of change, they give me dollar bills in return.
The U.S. has an extreme obsession with credit (and debit) cards, but cash is still much more common in many other countries.
Some of this is probably just due to historical accident, but some of it is also due to differences in the tradeoffs between the various payment methods in different countries.
In Japan, for instance, (1) cash is both easier to deal with in many cases (e.g. ATMs will happily give you very large quantities of it, a lesser crime rate makes using it safer, vending machine bill readers are much more accurate, shops are much more willing to deal with large bills, etc), (2) the presence of other mechanisms like very easy/cheap bank transfers replace some of the use-cases of credit cards in the U.S., and (3) credit cards are more restrictive (e.g. by default you have to pay your entire balance every month).
Also I think credit cards started their climb in the U.S. by replacing checks (which were in many ways very inconvenient), and that gave them enough familiarity and infrastructure to continue from there; in Japan, on the other hand, checks were never really used at all, so credit cards never had that "in."
As a New Zealander, I found the US to be obsessed with cash when I visited for tips, payments, transport etc. In NZ I was recently given a $20 note by a colleague who owed me some money, and I spent it. I commented to a cashier how small our 50c coin is - they looked at me funny and told me it had been like that for 5 or so years. I don't use cash. Never do. I don't have a wallet that holds anything more than 2 cards. I try to avoid cash and never have it on me. I can't remember finding this inconvenient in NZ as we don't tip and everything takes cards.
I had a similar experience as an Australian tourist in the USA. Suddenly I needed a bunch of 1s, 5s and 10s just to handle tipping. It was very annoying.
So, in actual fact, there's two layers of annoying wastefulness at work.
Basically I used the small notes when my total was close to a round figure. I could leave a $1.39 tip on a $20 meal or I could add a few $1 notes.
Most of the time I used my card (which is another story) so I could do this more easily, but sometimes you're in a hurry and the extra steps involved in US dining are a pain in the posterior. Hence: carrying small bills to allow tipping flexibility.
Huh... only in the US I guess. There are many countries where cash is the main way of exchanging money, or even the only accepted way. Look at Japan: it's a cash loving country.
In Germany paying by credit card isnt very common. Many people pay with debit cards but still a lot of stores/restaurants and even McDonalds etc dont accept any cards at all. Something like Square would never take off here, but i wish it would.
Here in Australia, we still have numerous retailers who don't accept credit cards or have minimum purchase amounts - due to, I presume, the cost of accepting credit and debit cards here.
I don't know whether costs are reduced for PayPass (tap to pay), but it seems anecdotally that any place supporting PayPass has removed credit card minimums.
PayPass is used by high volume merchants where the cost is low and absorbed. The retailers who have minimums on EFTPOS are using expensive PSTN units that cost up to a dollar per transaction.
I haven't carried cash in months due to PayPass (and discovering my debit card actually had it). I still don't like the "always on NFC" nature of it (I want a button on the card to turn it on), but it's quick and seems to go through a lot faster then the old PIN systems.
Nearly every single consumer goods purchase in Japan is done with cash. Most people have around $300 on them at all times. Card readers are becoming more common but still prefer cash
When my car was shipped cross country, the trucker demanded a cash payment. That was $800 -- not massive but quite a lot of cash to hand over. I have also heard of people spending thousands of dollars in cash on a mattress or on appliances.
Here is some data on transaction types for a few countries. Page 446 shows the number (millions) of transactions for credit cards. Should give you an idea of how people are using credit cards.
