[frisco]

Don't listen to the "it's out of control" or "is very due for a crash because it's rising so quickly" stuff. It comes down to a very simple test: do you think that there are significant reasons Bitcoin would or would not gain acceptance as a mainstream currency?

A few reasons I can think of why it would:

* The current banking system is inherently insecure. If you have an account number and a routing number (written on the bottom of every check), you can pull money. Bitcoin is potentially much more secure.

* It's way too difficult to send money today, especially internationally, and fraud is a huge issue. We shouldn't need something like PayPal. Bitcoin solves this.

* If you don't have faith in banks or central governments, Bitcoin doesn't require trust in any third party to function. You aren't dependent on any bank.

A few reasons it might not:

* It requires too much technical knowledge to use and is unapproachable for mainstream users.

* It's too tied up with illicit interests and won't break out of that image, leading it to an untimely demise in culture. A fax machine is no use if no one else has one.

* There are lurking fatal flaws in the underlying technology. Maybe a blockchain fork is much more possible than currently assumed, or there's found to be an error in the cryptographic scheme.

* Mining power ends up concentrated in the hands of few when ASICs are in full swing and transaction fees aren't enough to keep individuals at it, giving power over the blockchain to a few (potentially malicious) actors. There's no guarantee transaction fees will actually pick up the incentive slack.

If you think that Bitcoin will ultimately be widely adopted, buy now. $50 / btc is very cheap in that world. If you think Bitcoin will fail, then any price is too much. Any mumbling that "it's doubled in a month and therefore is set up to come back down to earth" is just hand waving.

[citricsquid]

> The current banking system is inherently insecure. If you have an account number and a routing number (written on the bottom of every check), you can pull money. Bitcoin is potentially much more secure.

If the company you store your wallet with is hacked you lose everything, if your laptop is stolen or your dropbox account is hacked... it's as safe as keeping cash in your apartment. If your bank fucks up your money is (almost always) insured.

http://arstechnica.com/tech-policy/2012/09/hacker-steals-250... http://arstechnica.com/business/2012/03/bitcoins-worth-22800... http://arstechnica.com/tech-policy/2011/06/bitcoin-price-plu...

> It's way too difficult to send money today, especially internationally, and fraud is a huge issue. We shouldn't need something like PayPal. Bitcoin solves this.

Fraud is a huge issue that Bitcoin does not solve. Send your money over bitcoin and it's gone, forever. Paypal etc. offer protections, they're not bulletproof but they're better than nothing.

[mrb]

"If the company you store your wallet with is hacked you lose everything"

Which is why it is not recommended to store Bitcoin wallets with third parties. Store it and secure it yourself.

"if your laptop is stolen or your dropbox account is hacked... it's as safe as keeping cash in your apartment."

Which is why it is recommended to encrypt your wallet, so that if your laptop is stolen, the attacker has no access to it.

"If your bank fucks up your money is (almost always) insured."

Eventually, if the Bitcoin economy continues to grow, an insurance market will develop itself.

"Fraud is a huge issue that Bitcoin does not solve"

Actually it does solve the biggest fraud issue of today: fraud during purchases. Merchants receiving bitcoins are guaranteed that transactions are irreversible and cannot be charged back.

What you mean, is not that Bitcoin does not solve fraud, it is that Bitcoin is hard to "secure". It is a hassle for a user to encrypt his local Bitcoin wallet with a secure passphrase and to ensure that his computer is not infected by keyloggers/malware attempting to steal the passphrase.

Fortunately, there are efforts from different groups to develop credit-card sized tamper-proof hardware Bitcoin wallets (think about typing a pin code on a small device, which sends a Bitcoin transaction via NFC or via showing a QR code on an e-paper display).

[khuey]

BTC may solve buyer-side fraud, but it creates a giant seller-side fraud problem.

[xur17]

I basically see advantages for the seller (lower fees, fraud protection), but none for the buyer (seller-side fraud potential, no cash-back).

Therefore, why would I, a buyer use this vs a credit card?

[mrb]

Your thinking is too narrow. You are focused on the small subset of transactions where you use credit cards. Bitcoin is a solution to a much larger set of problems where credit cards do not work at all, or well enough.

Firstly, you just cannot use your credit card (or Paypal, or Western Union) to do certain transactions: sending any amount of money to a family member overseas (WU does not operate in many countries, and has limits), making a donation to an organization censored/oppressed by governments (PP blocks donations to Wikileaks), etc.

Secondly, even when you can use the traditional banking system, it is inconvenient: driving 30min to a WU office to receive money, waiting days for wire transfers to complete, etc.

Thirdly, your credit card is tied to an account that your government, bank, or a court can seize for whatever reason (your spouse making fraudulent claims during a divorce going badly, etc). Bitcoin protects you from that. With Bitcoin, you own a purchasing power that no one can regulate or block.

Fourthly, Bitcoin transactions fees are voluntary, hence very low: typically less than 0.01%. This benefits not only sellers, but also buyers. Credit card transactions cost 1-2% (even if you do not see them as a buyer, the seller increase its prices to cover them).

Fifthly, the USD in your account tied to a credit card depreciates over time, because the Federal Reserve prints money continuously (causing long-term inflation). Whereas with Bitcoin your purchasing power is preserved or increased over time, as the maximum number of Bitcoins is capped (causing long-term deflation). Therefore you do not have to resort to various more or less risky investment options to preserve your net worth over your lifetime.

[oleganza]

Since transactions are irreversible, buyers need to fill less forms and have lower prices. Coindl.com sells you stuff with no registration/forms/emails - it shows a QR code and gives you a download button within two seconds after you sent a transaction. And buyer does not need to trust his CC details to new merchants. He only risks the amount to be paid, not the whole bank account.

[neilkumar]

But a compromised credit card doesn't mean you risk your whole bank account. First, at least in the US, there are limits to what you are liable if you are card is compromised -- report within 48 hours, the limit is $50, report within 60 days, the limit is $500. Second, credit cards have a credit limit -- so, worst case scenario, you'd be out to whatever your limit is (which is unlikely to happen as any weird use of your card would probably trigger it for a security review, which wouldn't allow any transactions until someone talks to you). Finally, credit cards (unlike debit cards), are not linked to your bank account.

[rishimoko]

> If the company you store your wallet with is hacked you lose everything, if your laptop is stolen or your dropbox account is hacked... it's as safe as keeping cash in your apartment. If your bank fucks up your money is (almost always) insured.

What unthinking person leaves his bitcoins with a third party or on a computer? Would you leave your RL wallet with a stranger? Would you leave something easily stolen in public?

Store bitcoins in a paper wallet until you need to use them. They'll never get lost or stolen unless one is just as careless with the paper as they might be with their live keys.

[mattbarrie]

Unless you live in Cyprus, or maybe another European country.

[plaguuuuuu]

>Don't listen to the "it's out of control" or "is very due for a crash because it's rising so quickly" stuff. It comes down to a very simple test: do you think that there are significant reasons Bitcoin would or would not gain acceptance as a mainstream currency?

Bit of a strawman.

>If you think that Bitcoin will ultimately be widely adopted, buy now. $50 / btc is very cheap in that world. If you think Bitcoin will fail, then any price is too much. Any mumbling that "it's doubled in a month and therefore is set up to come back down to earth" is just hand waving.

Bitcoin's use as a currency does not depend in any way on its value. A shirt selling for 1 BTC can sell just as easily for 0.5 BTC. In such a case where the government-mandated currency becomes useless and BTC is used as a true currency fallback, if anything it becomes a major problem, but in this present world it's basically just a proxy for sending fiat currency and a speculative asset.

I love BTC. But I don't need to hold on to any amount of it, or depend on any particular value, to use it to buy stuff. When huge corporations deny donations to Wikileaks, or when Paypal randomly freezes assets, having a digital currency is not only desirable but a necessity. Those of us that would use BTC for its intended purpose (assuming it isn't just a massive social engineernig hack from Satoshi loloolololo) don't even care if it crashes.

That said, I see the price as purely speculative at this point.

[josephagoss]

I think the "max block size" issue is one of the biggest ones at the moment. Oh and the censorship of S.Dice sets a terrible precedent too.

[gojomo]

Do you have a reference link about what you mean by censorship of Satoshi Dice?

[dmm]

I'm not the parent but he's probably referring to the opinion of some that SD is the equivalent of a spammer and its transactions should be blocked. You can find lots of threads on bitcointalk.org discussing it: https://bitcointalk.org/index.php?topic=150405.0

SD notifies losers by sending them a very small transaction. Because of this SD generates the majority of BTC transactions and inflates the size of the generated blocks.

[josephagoss]

https://bitcointalk.org/index.php?topic=150405.msg1598258#ms...

https://bitcointalk.org/index.php?topic=150481.0

There were a few more discussions around this time too, a few people including a pool operator want to block all businesses and applications that "abuse" the blockchain. This shows that a few higher ups in the Bitcoin community are short-sighted and very selfish, and also shows the problems Bitcoin will have at getting any larger.

[EvanKelly]

I read a few pages of the forum posts about SD's transaction "spam". Could you clarify the notion in the thread that SD is generating more money for themselves by using these micro-transactions rather than internalized accounting?

[josephagoss]

The spam is the 1 Satoshi (0.00000001 Bitcoin) sent to players to confirm a loss, whereas a win they send a healthy amount back (The winnings)

At the moment Bitcoin cannot handle lots of transactions made with its smallest unit. This is being called spamming the block chain.

[EvanKelly]

I gathered most of that. My confusion was that people on the bitcoin forum were implying that performing loads of 1 Satoshi transactions was financially beneficial for SD somehow, as well as to miners.

[wmf]

I can't think of any way SatoshiDice benefits from the spam it creates. It's almost like a form of trolling. If this spam benefits no one a rule change shouldn't be a big deal.

[panarky]

Thank you, this is the kind of well reasoned argument that makes HN worth it.

I don't pretend to know whether Bitcoin is going to $5,000 or to $0, but I do see a big market opportunity along with some very large risks.

Here are a few more:

* Positive: increasing mainstream interest and investments -- Coinbase, Silicon Valley Bank, Wordpress, Reddit, Mega, Tradehill, etc.

* Positive: greater public awareness of the risks of government monetary systems -- Cyprus confiscating bank deposits, central banks printing money, etc.

* Negative: online exchanges and wallet services frequently compromised.

* Negative: association with conspiracy theorists, fringe media personalities, etc.

Let's have a fact-based discussion. Speculation about exchange rates based only on gut instinct is just noise.

[modeless]

You're missing the biggest risk: Governments are likely to declare Bitcoin illegal as soon as it shows any signs of threatening their control over the global financial system. Of course they can't stop people from trading Bitcoins online, but they can come down hard on the exchanges, which must exist as brick-and-mortar institutions with deep ties to the existing financial system, and thus can't be hidden or decentralized in any practical way. That would cause Bitcoin to crash to 0 overnight, as Bitcoins are worthless if you can't exchange them for other currencies.

[frisco]

While I grant you that this is possible, it's probably risk #971 on my list of Bitcoin risks right now. China has already forbidden buying real things with virtual currencies, but I think it's very unlikely that many Western governments, especially the United States, will do so. It's almost certainly constitutionally protected, though it will trigger complex tax questions. I can't guess what will happen with China, but I don't think that it's a game breaker.

[modeless]

I think "fighting terrorism" in the form of preventing "money laundering" through Bitcoin will be more than enough justification to push a bill through Congress, and even if it is unconstitutional it won't really matter at that point, because Bitcoin will crash long before any constitutional challenge could possibly make it through the courts.

[w-ll]

Just like alcohol use crashed with prohibition, or the drug market? Previous attempts to stop these have resulted in larger market shares of those willing to still do related business and almost always increases demand.

[ufo]

Illegality doesn't increase demand. It just means that the supply gets provided by shady criminals instead of legal business that follow the rules.