[stevear]

The threat to Bitcoin is it's adoption by nefarious entities-- money laundering, paying for drugs, DDOS extortion, etc. This creates an incentive for the government to step in and disrupt the Bitcoin system.

I would not be surprised to hear that a government project is in place to shut down or otherwise reduce the effectiveness of it.

Bitcoin could have dilluted this problem by really running with the unique strength Bitcoin has: micro-transactions. All of the sudden it was conceivable and somewhat simple to send someone $.05. Instead of focusing on this the Bitcoin community was more interested in creating an anarchic currency that was anonymous and beholden to no-one. I personally like to believe that if they had instead focused on ease of use, wide spread adoption through micro-transactions (tip jars, content that costs less than $0.75, etc) that it would have really gotten a lot more traction with the mainstream.

[runn1ng]

You can use bitcoin for any amount you want. And yet, except for the drug sellers on silkroad, almost no one does.

I, personally, see the biggest disadvantage of bitcoin (1) the price unstability - it jumps up and down like crazy, and (2) the still unclear legality - from the tax endpoint, and the like. And (3) - also its biggest strength - it's as safe as your PC is safe. When someone steals your Microsoft Word documents or your Excel tables, who cares. If someone steals your wallet.dat, you are screwed. Period.

It may seem like a moot point, but both Mt.Gox - the largest exchange of bitcoins - and Slush - second largest miner - has had its servers compromised. And those are the highest end-points. Now think of all the users - the lowest end-points, who have "password" as their PC password. You want THEM to have all their money on their wallet.dat files, on their disks?

Now, drug sellers on silkroad really don't care about the second point, but much of the regular businesses do. On the other hands, the regular users have their lowly secured PCs as the only gateway to their money.

I am not sure if Bitcoin will ever get off, given all these circumstances.

[epscylonb]

1) with enough widespread adoption this would be smoothed out, after all the value of the dollar against other currencies is not static either.

2) yup, this is a problem, though I believe technically it should be a capital gain in most countries.

3) This is also clearly a problem though not an unsurmountable one. The cool thing about bitcoin is that you don't have to run the wallet locally, but you have the choice of doing so if you want to. With widespread adoption I believe you would see banks who host wallets, this is how your average person would interact with bitcoin. The final piece of the puzzle is bitcoin insurance to guard against a nefarious wallet hoster, we don't have this yet but there is no reason why it can't be done.

[rmc]

"the Government" does not need any fancy crypto or network approach to attack BitCoin, they already have the power. They have the ability to ask you to report where you got all tour money, and if they thibk it likely you got it from crime, they can seize it and imprison you. If they think you didn't pay enough in taxes they can imprison you. The government has been dealing with things like this for years. They don't need to "hack" it.

[DennisP]

I've been thinking about some ideas for bitcoin microtransactions, but they imply really high volume if they caught on much at all. And here we are with a transaction network that relies on broadcasting all transactions to everybody.

I've looked at the bitcoin page on scalability, and it says sure, we can get to VISA-level scale, all we have to do is centralize this and decentralize that and we're good. Sure.

Meanwhile, last I heard the bitcoin developers are focusing on features, thinking that will get them the users, leaving scalability until they need it. I think scalability is the feature that will bring users. Nobody wants to use a payment system that might crap out as soon as it really gets popular.

If anyone doubts that scalability is a problem, just go on the bitcoin forum and propose layering some kind of new and potentially high-volume use on top of the blockchain, and see how much people freak out about you flooding the network.

[mckoss]

I would be very surprised if the (US) government were to try to "shut down" Bitcoin. Perhaps regulate it. Perhaps harass an individual entity using Bitcoin.

I believe we have a protected right to use technology like Bitcoin. To make it illegal you would have to deny me the right to:

    1. Free communication/speech.
    2. Identify myself (authentication/digital signatures).
    3. Retain private information (keys).
    4. Trade with other people.

The government has an interest in requiring me to report Income so that they can check if I've paid my taxes. But this is no different than any other cash or barter transaction.

It would require a very restrictive police state to outlaw the use of Bitcoin as a technology.

[DrCatbox]

"The threat to Bitcoin is it's adoption by nefarious entities-- money laundering, paying for drugs, DDOS extortion,"

You forgot to add the most nefarious entity to that list. Government.

[njharman]

micro-transactions are fail. The are a solution looking for a problem. If your technology's killer feature is micro-transactions, you have a worthless technology.