A direct (i.e. not based on third party credit, regulations, etc.) transfer of wealth of this magnitude between two entities usually consists of a heavily guarded, insured, physical shipment of cash or gold. Depending how safely you want to make the transfer, and how far the entities are on the globe, it can cost hundreds of thousands to millions of dollars.
Bitcoin has real value. It solves problems on an incredible scale. I wish I realized this months ago.
Err, life isn't a james bond movie. For money transfer like this we use bank wires. We dont buy gold and ship it on gunships anymore.
edit: unrelated, someone should make an index of how many Bitcoin threads hit the front page of HN per day.
I don't understand how so many sites can't use password hash generation to secure the private keys, or something to keep it more secure. The first link you posted was a site run by an 18 year old.
Pinkie Pie won his first $50k award by creating a 0-day sandbox escape on Chrome, by chaining 10 different vulnerabilities. He was 19 (now almost 21). Two years before, at 17, he released jailbreakme.com, all by himself, which was a 0-day able to jailbreak all iOS models shipped to date by just visiting a website.
Age means nothing by itself, but the point is correct. The problem is that we don't know how much we can trust bitcoin site owners, as most of them are relatively new with no history to inspect, closed source, and sometimes even run by anonymous users whose experience we can't inspect.
But do you know _anybody_ who would deposit money in a bank run exclusively by an 18 year old?
Coding skills can be created and honed by highschoolers - business, legal, and commercial experience - very much less so.
But I think it's extremely rare in the cases you mentioned.
Think of them as like keeping your change on the bar - the security relies _purely_ on social conventions encouraging the bar owner, bar staff, other customers, and your friends to not take your money.
You would no more store your weekly pay, your rent money, or your new car savings on the counter at a bar - why the hell are people storing those sorts of values of bitcoin in other people's webservices?
Sure, online wallets might be _useful_, but anyone keeping any more value than they can afford to lose in one is insane (or, less critically, very poorly informed).
I may be wrong here - but is the private key only required to send the money? So, if the user kept the key and it wasn't recorded on the server...or if they use some type of password hash for encrypting it, then there wouldn't be hundreds or thousands of wallets stolen at once. The user would enter their password when they want to transfer funds, the hash is calculated, private key decrypted, transaction made, and the private key is never recorded anywhere.
But, this would require the user to NEVER forget their password, or else they lose their money.
The advantage, however, is you don't have to worry nearly as much about the security of a transaction (moving it from one place to another)
1) gold can be stolen due to mistakes
2) bitcoin can be stolen due to mistakes
but this does not mean that it is impossible to avoid having either stolen.
I agree that long term storage of both of these can be done very securely, but the risk for both is when trading or using them. Additionally, Bitcoin does require a lot of worry about security - how many people do you think have airgapped wallets?
Aren't the facts that you shouldn't store Bitcoin at exchanges, should use an airgapped storage mechanism, and are otherwise out of luck if your computer is compromised, enough to demonstrate that you also have to worry a lot about the security of Bitcoin transactions? Your stack of gold ingots won't vanish if you take one from the pile in your safe, but your Bitcoins can if you don't take stringent precautions.
If you view a Bitcoin transaction as only what happens on the blockchain, you're missing the context of where it occurs - which gives both gold and Bitcoin risk.
But since Bitcoin is digital, its maximum security is far, far higher. Your private keys can be encrypted and safely stored with any desired level of redundancy. Paper wallets are a big step backwards.
Also, if secret sharing is used, Bitcoins cannot be stolen unless the attacker gets to k of the n involved parties.
It's just much harder compared to doing comparable or greater value destruction to a bitcoin address, especially accidentally.
Hardware wallets should help immensely as well.
Adding a BTC to a transaction doesn't really require any additional infrastructure. But once you've packed your first tanker with gold, you kind of have to hire a second boat.
Given the way each scales, it seems that BTC transfers are easier, at least at some values.
All I was saying was that physical stores of value increase in awkwardness (principally through weight and volume) when you increase their number, not so for digital.
Challenges in movement of large sums of gold:
Here's what $300 Billion in gold looks like:
(Note that it would be harder to transport, than, say, the amount of gold one can fit in a pocket.)
As with _all_ security, there's a tradeoff between security and convenience. Inline wallets are spectacularly convenient - and guess what that implies security-wise?
Paper wallets are much more hassle. But a paper wallet in a bank vault is arguably up there with the most secure bitcoin storage techniques.
As the stored value of your bitcoin varies - so should your security requirements. If I need to keep under $100USD available to pay for my anonymous vpn or my torrent-box vps - an online wallet (who's operator could make off with my half or quarter of a bitcoin at any time) might be a sensible choice. If I'd been mining bitcoin at a reasonable rate since 2009 and was sitting on a house-worth of bitcoins, I'd make a _very_ different choice.
Consider the value of your wallet(s) - if they were piles of $50 notes, how much would you spend securing that? Would you leave it in your pocket? Hide it under you mattress? Buy a lockbox or a safe for your home? Rent a safe deposit box? At what stage is a never-internet-connected laptop a perfectly sensible expense to incur? I'd suggest a lot of people I see posting in forums about how much they lost in onine-wallet-hack-de-jour who should be kicking themselves for not having a dedicated $300 laptop fr storing their wallets on.
Something like that: http://influxdb.org/blog/visualizing_bitcoin_post_frequency_... ?
The equivalent commodity value in BTC can be stored on a tiny rom, and transferred anywhere in the world for free from anywhere with network access.
I hate to be cynical, because the ideals behind this currency seem nobel -- but I can't help but feel dread that it is only a matter of time before bad things start happening here.
Is this outlook too negative?
Corporations and individuals generally do not move wealth via physical assets.
Off the top of my head, I am thinking of ...
- A deep, pervasive culture of gold hoarding and gold wealth transfer for dowries (yes, even in 2013) for Indians.
- Persians/Iranians who have a deep cultural link to carpets as a store of value that can be used in day to day life, but also transported and stored as value.
How about any middle american over the age of 50 who counts his or her "vehicle" as an asset and shops/deals in used cars every 12-18 months. A lot of people think about cars this way.
As for corporations just consider casino counting rooms and exxon tankers full of crude oil.
Like the first google result for payments volume yeilds this: http://www.gfmag.com/component/content/article/119-economic-... As you can see, credit transfers dwarf everything. It's worth noting that all of these payment types are cleared electronically (including checks).
I sincerely doubt gold bugs and Persian carpet fans are trading at total volumes of 100's of trillions of fucking dollars globally.
If someone in Argentina wanted to buy something from anywhere else in the world in 2000, for example, they'd basically have to trade natural resources or gold for access to foreign currency, and then spend that.
They need to fill documents to officially ask the government, which will likely refuse you the right if it is for a huge amount (remember, this 'non-change' policy is exactly for that, avoid flights of capitals).
In an interesting validation of basic economy, the black market rates are much closer to the official ones in rurual tourist hotspots, presumably due to the much bigger supply of foreign currencies.
The political class here is crazy corrupt and rich like in every third world country, and they are known for using piles of 500 euros bills to stay out of the bank system because euros have more wealth density than dollars.
In fact, here we are ranked right under (20th) the US (19th) in terms of transparency:
Argentina is ranked 102:
In all of Latin America, the closest countries to Chile in that transparency ranking are Costa Rica, with the 48th place, then Cuba 58th and then Brazil 69th.
Edit: added justification data with links / I'm proud of Chile
There should be a term for "third-world country that's probably going to stay third-world for the forseeable future, excepting a revolutionary change of government." Maybe... dystopia? Argentina is a dystopia.
Sorry, I don't think so. Chile is doing good nowadays but basically their only export is copper. Copper is a semi-precious metal right now and thats why that country suddenly has so much wealth, but the difference between rich and poor is abysmal and their economy is tied to the price a single non-renewable resource.
Compared to Chile, Argentina still has a huge tech industry capable of exporting value-added products like cars.
Yes, copper is selling very well, and it takes up a large proportion of the country's exports, but you are mistaken to think that this is the driving cause of the country's increase in wealth over the last 20 years.
The increase in wealth comes from the fact that incentives now exist for people to create wealth. Where wealth is created, there is more wealth. It's the same principle we have seen working throughout history.
for 15-20 years, third world in military terms at least, meant the signatory of NAM movement. fourth world was anyone left after that.
with Bitcoin, fees are optional
Everyone just keeps (a huge portion of) their gold in a single vault. A gold transfer involves carrying gold bars from one compartment of the vault to a second compartment in the same vault.
Yeah and there is a fee involved too, right?
The same is true of any foreign currency. I could send $150 million in Russian rubles to my sister, and she wouldn't be able to do jack with it until she finds someone willing to give her dollars for it. With the amount of money involved, getting it all converted at once would be extremely difficult.
That doesn't mean that what's transferred doesn't have real value. Just that the assets involved aren't terribly liquid.
That's exactly the point. If you had $150 million in rubles, you could transfer it for only a nominal fee ($20 for my bank, although you can get a lot cheaper if you regularly did transfers like that) to any account in the world that could hold rubles. Exactly the same with bitcoin.
The only real cost in transferring sums of money is either extreme convenience, transferring to a country with an extremely poor banking service or exchanging currencies. None of which bitcoin solves yet.
I have no counterproof, but I find this hard to believe.
Source: Someone I trust who works in Private Client Services at JP Morgan (not sure if other banks offer free wires, but I'd be surprised if they don't).
Telegraphic Transfer (TT) Request $20.00 per transaction or item
Pretty sure that would be fine up to ~$1 million. Anecdotally I know TT happen for sums in the range of $10-$100 million (there was a case where ~$150 million was stolen by a rogue TT in Australia to overseas bank accounts).
False. Last summer, I ate at EVR, a bar/restaurant in New York City accepting Bitcoin. I paid in bitcoins and their processor (BitPay) only charged a 1% fee.
Fees from Bitcoin payment processors are actually quite good compared to credit card fees.
A lot of people who are claiming that you will need to pay a large % in fees in order to spend your coins are missing the point.... as bitcoin gains traction, you wont need to convert it to USD first.
I can't afford a sub-orbital tour in USD, let alone bitcoin. Is there any leading supermarket that accepts bitcoin? Literally allowing me to use bitcoin to put food on the table?
Here's a picture of the food on our table, paid with Bitcoin:
Assuming I can pay for Amazon Fresh with a gift card. :-)
If you meant in terms of escrowing to make sure one party doesn't back out, then I agree that comparison wouldn't apply.
Sorry about the fencepost error. (Perhaps I was originally intending to say "inflationary finance"?)
Whether it is in bitcoin, CHF, EUR, USD, gold, platinum, Amazon Coins, Zorkmids, yams or sheep skins, insuring a transaction will depend on those factors.
In the meantime, the $150 million is in limbo.
I believe it also requires that you put your assets one of their accounts if you're going to use it, so you're relying on the credit of the U.S. government (which is pretty good, but still adds risk, and subject to U.S. laws) until you withdraw your funds. And there's probably a lengthy process to deposit and withdraw funds.
I'm tempted to conclude this is something that happens so rarely you may as well count the times it happens as a rounding error.
It's a bit like saying government will just work if we only vote for the right candidate.
Everyone's tempted to conclude things like that, but there's a subtle fallacy happening when we do. Generally speaking, we notice government programs of all stripes when they get in our way. When they don't get in our way, we don't. It's very easy for someone paying attention to the news to be able to rattle off incidents where the FDA and FEMA and the SEC screwed up, because the screw-ups are in the news. But when they do their job correctly we never hear about it. Basically, the dataset we carry around in our heads about How Well Government Works is substantially biased toward instances of failure.
The only way to really measure how useful a regulation is or isn't is to determine what it is the regulation is supposed to address and examine a substantial set of "before and after" data points; trotting out vivid but essentially anecdotal examples of WHEN REGULATORS GO BAD makes for great editorializing, but it doesn't actually tell us very much.
I guess, not from you. Is that the reason to question it?
"Was tax paid?"
What makes you think that this money supposed to be taxed?
SWIFT transfers usually are not: SWIFT is a way to communicate messages about transfers between banks, but they would still need a way to do the actual settlement. This could be very fast in the case of two large banks in different countries: if you are a customer in bank A, which has a correspondent account with B, and the recipient is also a customer with bank B. Then bank A can use SWIFT to say “please transfer $1 trillion from our account to the recipient’s account”, and that could happen instantly. (It usually doesn’t.)
But if the final recipient is actually a customer at bank C, then the money needs to get from B to C somehow. That could happen in the recipient country’s RTGS—Fedwire if it’s the United States—but it might also be slower, through ACH or an equivalent.
One problem with fast transfers is that many banks don’t have straight through processing for RTGS. This means that the money can get instantly from bank A to bank B, but may not get posted to the recipient’s account with bank B until a clerk gets around to verifying and booking the transaction.
You can login to your bank, transfer money to someone elses bank, they'll login, and see the money.
Aren't Bitcoin transaction times generally in minutes?
And even if it won't be mined, the worst case scenario is that you would keep your Bitcoins and can try re-sending them later, they won't disappear to anywhere.
That is the justification Satoshi Naakamoto gave in the original paper for waiting for 6 blocks for a full confirmation.
No they did not. Mathematics is about proofs; Bitcoin does not even have the rigorous definitions needed for that.
To put it another way, what you said is the equivalent of saying that Hacker News gives you mathematical guarantees of security because it happens to use TLS.
That's not how it works, sorry. If you don't double spend your transaction and you attach a proper fee it's going to get in the chain, period.
You can see the fee amount further down the page. If he had paid a fee, 0.0001 BTC, or $0.04 worth of BTC, would have been enough to ensure the transaction was included in the next block.
Until I can use the millions in coins to pay off my house, buy a car easily, pay my taxes and go out to eat with them, or hassle free convert them to cash in my bank, it is still funny money.
Unless you provide me a way to realize bitcoin to actual USD in non trivial amounts with the same amount of effort it would take to convert my stocks or bonds, it is as useful a currency for real life as is my current GTA V Online bank account.
So it's either as easy as stocks or it's useless?
I think you're overstating your case a wee bit there.
Those cable "invest in gold" deals are exactly this but worse - they sell you gold more expensive then the commercial market that can never be redeemed for that price.
But it has a real cost of production that represents its relative industrial worth.
Bitcoin is valueless though. Created Bitcoins do not have any industrial value - you can't use them for anything else, even though they have a cost to create. There's no reason, if they lose value, for anyone to buy them from you - whereas with gold if you sit on it long enough, it will become valuable when someone needs gold for some type of industry at minimum.
Bitcoin is not. No one is obliged to accept Bitcoin as a currency for settling debts anywhere in the world, it has to be converted to something else. Similarly to gold - you don't have to accept gold as payment for debt, but you do have to accept USD.
This is where the problem lies: BTC acts like a commodity, not a fiat currency - and people are treating it like one buying into it. The problem is it has no value as a commodity other then being Bitcoin.
You can at least buy a Ford.
I doubt you can pay your car with stocks alone.
I doubt you can pay taxes with option derivatives alone.
I doubt a lot of people call those funny money.
Bitcoin on the other hand can be made completely useless if some critical flaw is found, or the wealth is too concentrated in a few users and the majority decides to switch to a newer crypto-currency.
"Legitimate" uses of a commodity that trades more for its properties as money should be thought more of a really crappy put option, that is it sets a low price floor.
For example, it's been estimated that gold's industrial uses would only allow it to be traded in the low double digits per ounce if people didn't desire it for other reasons.
It's just in the case of something that isn't physical and isn't "backed" by any alternative uses, the floor is 0% of the current price instead of 1%, or similar.
It has a lot of other potential uses that other industries avoid because it is so expensive. If the price ever falls it will be kept up by those uses.
People have been using gold in some form for thousands of years - I don't see that changing anytime soon.
In the USA, gold was demonetized (1933) before silver (1965) in the currency when used in the USA. The dollar was convertible into gold internationally however.
The international gold window was closed by Nixon in 1971.
Gold's magickal role is largely cultural bias. There's lots of metals that are rarer and pricier than gold, but you don't hear about scandium-bugs or rhodium-bugs.
Almost all the value is because it's shiny, yellow, and traditional.
Gold asteroid mining isn't too implausible, either.
More plausible than some hacker news post 'bitcoin 2.0 is here - look it's shinier!', though? Or 'new crypto currency approved by the US govt?' You think people won't reinvent this wheel to death?
Sure, you could also synthesize gold from some nuclear reaction, or mine it from space... You pays your money (and you takes your chances)
Not that $350 would have meant much - your point stands and is well taken. I was convinced of this money transmission use case as the most important when I was writing up something on Bitcoin a while back and talked with a few experts. They were all psyched about this kind of thing, not about "you can buy your groceries with a bitcoin card" stuff, which will have better solutions than this. Global liquidity is what it adds, really.
Every bitcoin is controlled by a private key. The private key can be put in 'cold storage', but if I hand you the USB key with a private key stored in a text file on it, you have no way of being sure that I didn't keep a copy elsewhere and in a few minutes will make a transaction sending it to some other private key (which you don't have). So unless you trusted me an extraordinary amount, you would immediately want to make a transaction transferring from the private key on the USB to a new private key you generated just that moment.
A transaction like this is invisible to the bitcoin network. This would be equivalent to me handing you a 20 USD bill, no one but us (well, there is surveillance, but you get the point) knows what happened. Unlike handing over 20 USD, if I had you a USB drive with a wallet containing 20 BTC, you need to move that money from that wallet to another, because you can't trust it's my only copy. If I have another copy of the private key somewhere I can take that money back at any point by announcing a transaction before you do.
So exchanges like this are done via the bitcoin network by specifying a from address and a to address (simplified, other more detailed explanations are out there detailing the actual cryptographic tools and protocols) and an amount. So you provide me an address, I use my private key to encode a transaction from an address containing my 20 BTC to your address. Everyone knows about this, though they may not know who we are as the addresses are pseudonyms and the connection to our real identities may be virtually non-existent. Now, you control that 20 BTC and its spending, and my 20 BTC are gone from my address, I can't spend them again (legitimately at least). Supposing that address now has less than 20 BTC. If I try to spend 20 BTC again the network will consider it an invalid transaction since I can't spend BTC I don't have.
It could be beneficial to banks to move money more rapidly and make some coin just like funds they have do with their holdings even though it strikes the core of the business model.
If used right it could be helpful like torrent is to distribution, cheaper, faster ways to move things. It would be nice one day when regular bank transfers don't take 3-5 business days or a fee for same day.
But this was likely just moving money around to own accounts.
There were also statements in some previous comments that this transfer was made for free. It is true enough that a Bitcoin transfer doesn't inherently incur a processing charge from a merchant payment processor, but as merchants learned back in the Middle Ages when charging interest was formally illegal, the price of a transaction can hide financing and processing costs. We don't know what was agreed with whom by whom to make this transfer happen. The transfer may have occurred at a higher than list price for something that was bought, to make up for the ongoing inconvenience of receiving a payment using the new Bitcoin payment mechanism.
 One example, among many: http://www.consumerfinance.gov/remittances-transfer-rule-ame...
1) The feds have finally cracked wallet(s) used by Silk Road, or he managed to give his keys to someone (he had a bail hearing today - it's an odd coincidence);
2) Drug cartels are now accepting BTC for major payments; or
3) Macau-based junket operators, that provide casino credit to Chinese gamblers because they cannot easily move money out of China, have begun accepting it for payment.
Personally, I think it was just one of the exchanges moving some money internally.
If someone gave me a copy of a private key, corresponding to some bitcoins, I wouldn't consider it payment, as they still have the private key as well (meaning they could still spend the bitcoins at any time).
It's more like a "shared account" at that point.
I suppose if you try to extract the secret key and the token destroys it, it's pretty secure. Of course, you just lost all your money. I can't think of a non-destructive test.
Here’s who (probably) did that massive $150,000,000 Bitcoin transaction (washingtonpost.com)
From the article: "Who was responsible for the transaction? I asked Sarah Meiklejohn, a computer scientist at the University of California, San Diego, for her thoughts. She's the author of a recent paper demonstrating that sophisticated analysis can reveal a lot of information about who is responsible for Bitcoin transactions. She has combined a large database of Bitcoin addresses tagged with their likely owners."
Link to the paper is provided.
In other words, the only way you get to have the money is if you never spend it, except in minuscule amounts.
As Silk Road (and hundreds of years of cash-based money transfers) shows, the fact that BTC is hard to trace hardly makes laws unenforceable.
Gates built an empire. Yet the Winklevoss' will eclipse his wealth if BTC goes up just a few factors.
I don't begrudge people their gains, I'm just thinking about the seismic shift in power.
The original social network.
Perhaps you could be a little less specific?
>And considering there probably aren't many (if any) things one can buy with that many bitcoins, theft seems to be most likely scenario.
You could buy a lot of something from a private entity who really values Bitcoin.
Could a contract enforce a bitcoin transfer?
Anonymity is a choice. CoinJoin  and other trustless mixing software projects are aiming to make anonymity a push of a button. This is being implemented into DarkWallet  where mixing happens automatically in the background.
Thing about mixing is, since any person (or autonomous process) can generate wallets and send BTC to those on the fly, how do you prove that you used a tumbling service and not that you gave coins to a guy who gave coins to a guy who split them up into separate wallets who each gave coins to a guy, etc etc etc.
As Bitcoin picks up steam, this problem only gets harder. Remember that the block chain only consists of hashes and signatures. Proving who owns those is a much more difficult process.
Either way you now have enough evidence to raid their PC to check for further laundered funds and generally make their lives miserable. When people complain just find a fraction of a BTC that was used at some point in the past to fund the social demon of the day (child porn, terrorism, drugs, sex trafficking, etc.) to justify it.
Someone mines coins and gives coins to a guy who gives coins to a guy who gives coins to a guy (repeat n times) who gives coins to you, and every link in the chain is following best practices by generating new wallets for each transaction, how would the adversary prove that you're doing something untoward (and since we're discussing law at this point, beyond a reasonable doubt?)
But it's not like that won't stop them from trying. Probably via a bunch of high-profile "busts" to keep the law enforcement agencies financed.
e.g. if I ask you to pay in bitcoin and you do, can I put any link in your wallet, something like https://openid.somethng.com/id/92856293 ?
The main way to get out of that wallet though is money laundering. Convert the BTC to some real asset, and slowly (and untraceably) funnel to a variety of places.