[skwirl]

Your unregulated financial institutions fail to take basic security measures to protect consumers, they frequently halt withdrawals without warning, your uninsured deposits are sucked into the void, your speculative 'currency' experiences extreme daily deflation and inflation...

Better blame proprietary software. Whatever you do, don't question your assumptions. And under no circumstances should you think about the fact that fiat banks in the US all use proprietary software and rarely experience serious problems (and when they do, consumers' deposits are insured up to a large amount).

[SilasX]

I heard of a cool tech called the dollar so I figured, what the heck, I'll give it a try.

Turns out they try to make you spend it by continually inflating the supply of them out there with no end. In order to keep your head above water, you have to put in a "bank".

Fine, it compensates you for the loss of purchasing power, so no biggie, right? Wrong. They actually lend out the dollars that are supposed to be in your account so when you come to get your dollars out, they might not even be there!

Now, they claim to have this handled, but it's kind of a hacky solution: supposedly what happens is that they'll go to a head honcho and get a temporary loan to be able to pay you, but they only give this privilege those that can get the political connections.

They also have have this system where you money is "insured" so that even if they can't get a loan "your dollars are safe, you'll still be able to get them out!" Kludgy, but it should work, right? Well, it turns out the insurance fund couldn't actually handle everyone pulling their money back out!

So, yeah, kind of hip, but I don't think it can catch on as a serious model, especially once auditors and whatnot get involved.

[RockyMcNuts]

meh ...

"those that can get the political connections" ... if you have the capital and do the paperwork and follow the regs, you can start a bank and get access to the discount window.

"insurance fund couldn't handle yada yada yada" ... the FDIC is implicitly backed by the full faith and credit of the US government. As long as the Treasury exists and has the ability to tax and borrow, your deposit is money good up to FDIC limits.

if you're going to invent new money, makes sense to understand the existing money, and try not to invent something worse.

[Eliezer]

> ... if you have the capital and do the paperwork and follow the regs, you can start a bank and get access to the discount window.

Not true. There's this little extra step where first the regulatory authority gets to decide whether your state needs another bank.

[RockyMcNuts]

sorry, I have no idea WTF you are talking about

http://www.federalreserve.gov/faqs/banking_12779.htm

[SilasX]

>>Before granting a charter, the OCC or state must be able to determine that the applicant bank has a reasonable chance for success

[nerfhammer]

Amount of losses due to depositary institution failure since 1934:

$0.

This is a rather good record compared to bitcoin.

[kordless]

Assuming I can go global, here's an example where you are wrong: http://inequality.org/great-cyprus-bank-robbery/. I'm pretty sure Goldman Sachs got their asses bailed out as well by the taxpayers.

You shouldn't play a shell game with the money and say then say there are "zero losses", but people do. It's called cognitive dissonance and it sucks.

[Eliezer]

Whaaa? Deposits over $100K (now $250K) were uninsured.

[Guvante]

They guarantee up to that amount but so far have been covering the full amount due to the negligible difference overall IIRC.

[BlackDeath3]

Amount of losses of Bitcoin since 2015:

0 BTC.

Not bad!

[davidgerard]

http://www.reddit.com/r/actualmoney/

[BlackDeath3]

Perhaps you might think of it more as a compensation measure. Because things are uninsured and untrusted, OSS may be much more important.

[Xdes]

This is to the point. In a low trust environment transparency and reputation will be the biggest influencers.

[Loughla]

And this, this statement is why I believe that Bitcoin or really any cryptocurrency will never have more than a fraction of a fraction of 1% of any transactions, and will never take off in the mainstream.

The reason that people use fiat currencies is because they can trust the institution/government backing them. They can trust that if they are handed a dollar by a business, it's a dollar, no questions asked.

If folks have to worry about whether or not the person they're exchanging with is being legit, and whether or not the institution handling the transaction will be as well, they're going to be turned off.

Like it or not, most people are lazy; adding one more layer of headache to financial transactions will be a MAJOR turn-off for a vast majority of people.

[Xdes]

>The reason that people use fiat currencies is because they can trust the institution/government backing them.

Bitcoin is a fiat currency and I trust the Bitcoin specification a lot more than I'll trust any central bank. They're notorious for usury, secret bailouts, and inflation.

>They can trust that if they are handed a dollar by a business, it's a dollar, no questions asked.

Well you can trust that if you're sent a Bitcoin then it will end up in your wallet.

>the person they're exchanging with is being legit

This is the same thing that happened with online shopping at the end of the '90 and early '00s. Consumers got used to using their credit cards online and they will get used to the notion of owning, transferring, and protecting digital property.

>adding one more layer of headache to financial transactions

There is no such headache. The software will improve and the banking infrastructure will grow. I expect to see banks that hold their reserves in Bitcoin and give out lines of credit denominated in Bitcoin. Infrastructure will solve this problem, but first capital is needed to meet current regulatory compliance with the archaic legacy system that is currently in place.

[Loughla]

>Bitcoin is a fiat currency and I trust the Bitcoin specification a lot more than I'll trust any central bank. They're notorious for usury, secret bailouts, and inflation.

That's great for you. What about the average consumer?

>This is the same thing that happened with online shopping at the end of the '90 and early '00s. Consumers got used to using their credit cards online and they will get used to the notion of owning, transferring, and protecting digital property.

Except with the vast difference that credit card companies were already well established in mainstream life, and people trust them (right or wrong) to keep their information safe. Pair that with a massive PR campaign on the part of credit card companies, and you've got something.

>There is no such headache. The software will improve and the banking infrastructure will grow. I expect to see banks that hold their reserves in Bitcoin and give out lines of credit denominated in Bitcoin. Infrastructure will solve this problem, but first capital is needed to meet current regulatory compliance with the archaic legacy system that is currently in place.

Yes, yes there is. Imagine, again, being an average suburban housewife. Now, try to cash out your bitcoin. Try to wrap your head around the volatility of the currency.

I genuinely believe you're being a bit too optimistic about how banks and bitcoin will interact. After consulting with large and small banks alike, I've learned they are incredibly risk averse. Something as volatile as bitcoin, and as out of their control, is a red flag from day one. There may come a day when banks exchange in bitcoin, with heavy fees, but I'm not certain that they will hold their reserves in it, or extend lines of credit in it, either.

There's more to this than having a secure currency. There is a lot of politics. There is quite a bit of control that banks want to have. They, generally, want to make sure that any bets they make can be insured. Can they do that with bitcoin?

Cryptocurrency in general, but Bitcoin and dogecoin especially strike me as being marketed as the next big get rich quick scheme, and I'm leery of that, regardless of the technology behind it.

Maybe I'm wrong, who knows; I'm just fascinated to see this develop, and am generally as cynical as possible.

[Xdes]

>am generally as cynical as possible

Then Bitcoin really isn't for you. Bitcoin requires faith in mathematics and humanity.

[dragontamer]

There are rumors of an SEC-approved BTC exchange coming up. Once that happens, it will become possible to trade BTCs with the same level of confidence as trading Stocks, Currencies, or Commodities.

Somewhat unrelated: the Winkelvoss Twins are making an ETF for Bitcoins, and its going through the SEC right now. http://blogs.wsj.com/moneybeat/2014/01/17/lawyer-for-winkelv...

So at very least, SEC approved BTC funds are beginning to be set up. Its only a matter of time before a startup goes for full SEC approval in the BTC Exchange world.

Integration into US Society and Regulations is a good thing, and will give much confidence to the rather scary world that BTC currently is.

[sp332]

What does "legit" mean exactly? You can cryptographically verify every transaction.

[Loughla]

In this instance, it has nothing to do with being able to cryptographically verify anything. It has everything to do with appearances. Take the average suburban housewife; do you believe that she cares that PinkyPie69 can cryptographically verify anything, or will she care that this person is a full grown human who loves a children's show?

Small-mindedness will usually trump technological ability.

[baddox]

You might want to question your own assumptions as well. Couldn't the fact that Bitcoin is less mature in many ways than fiat currencies be a result of the fact that Bitcoin was invented just 5 years ago? There was no involuntary deposit insurance for USD when USD was 5 years old.

[kordless]

Thank you. It is very frustrating to have a conversation with someone expecting a new technology to be fully baked upon delivery. Everything takes time, although in Bitcoin's case, it seems like a rocket ride compared to other technology adoption curves.