[bduerst]

Hmmm, some of these hypotheticals are wishful thinking.

For example 1, it's a double edged sword. As a seller, no international chargebacks sounds like a wet dream! As a buyer, why would I use bitcoin internationally when I can't reverse my transaction if they don't deliver?

Example 2 seems legit for now. If and when bitcoin becomes more mainstream, you'll see an increased transactional cost from overhead and risk mitigation, so the transactional savings will probably not always be there.

Since we don't gift each other bitcoins, Example 3 isn't a problem.

Example 4 is laughable because in the last week, four Bitcoin exchanges were hacked (or robbed by the owners - still TBD) and people who had their coins in those exchanges lost it all.

Skimming CC numbers is for sure an issue for credit cards, but as someone who has had their credit card skimmed, my issuer locked my account within 2 hours of fraudulent activity, called me, and eventually gave me my money back. How many Mt. Gox users got their money back?

[celticninja]

>...and eventually gave me my money back. How many Mt. Gox users got their money back?

these are not the same situation and I think it is disingenous to act like it is.

A comparable situation is that when you had your card skimmed and locked up you had to go say 3 days without access to your funds until a new card turned up, and again lets be charitable and say your bank refunded you within 2 weeks. so you were inconvenienced for 3 days and out of pocket for 14 days. if you paid with bitcoin you would not be locked out of your wallet or at risk of further loss, or need to call your bank. now when you scale that up to something like the recent hack at target that resulted in 1000's of stolen CC details along with personal info resulting in a lot of potential for identity theft and CC fraud. If those buyer had all paid in BTC there would be no theft or fraud possible, no need to try and attack the organisation as list of BTC addresses and customer names and addresses are of no use. they may seek to steal the companies bitcoins but securing properly one small area of your network is much easier than securing a huge sprawling network that covers a whole host of functions, where sensitive data is liberally spread around, making for a lot of vectors of attack.

Now Mt Gox is comparable to the Bernie Madoff Ponzi scheme, do you know how many of those investors got their money back?

[bduerst]

Both involve theft, except one is insured. You don't insure money that you give to an investor (Madoff), which is why it's disingenuous to compare Mt. Gox to an investment scam.

[celticninja]

why is it disingenous to compare mtgox to madoff? both were run as ponzi schemes in the end which led to losses for investors,whether that was investing in bitcoin or madoffs funds.mtgox money was not insured either.

[bduerst]

Mt. Gox was not a ponzi scheme. It was a legitimate exchange business that became insolvent, and it was the users (not just investors) who got screwed.

Also, the term ponzi scheme get's used a lot in discussion about bitcoin, but many people do not know that it is a very specific type of scam. There have even been actual ponzi schemes involving bitcoins (not Mt. Gox). The people scammed in those were not insured because it was an investment, just as the people involved in the Maddoff scam were not insured. That is why it's disingenuous.

[venaoy_]

It was not a ponzi, but MtGox became insolvent through fraud: Mark Karpeles simulated fake transactions with fake coins and fake dollars using his willy bot.

[bduerst]

Just how many HN accounts do you have? And why?

Insolvency wasn't the question.

[nickodell]

If we're talking about MtGox's decision to keep operating after they'd become insolvent, then it's not disingenuous to compare it to Madoff.

However, comparing them as a whole is disingenuous. MtGox had a legitimate business plan, but screwed up by letting their Bitcoins get stolen. Madoff planned to defraud his investors from the start.

[lmm]

A ponzi scheme actually pays out some interest, at least initially. The only reason that kind of fraud is possible is that investments generally make money. An exchange like mtgox never does that. If you're doing the thing you did at mtgox - just storing your money, not trying to make money through investing - then you put your money in an FDIC-protected account and you're immune to madoff-like frauds.

[venaoy]

> As a buyer, why would I use bitcoin internationally when I can't reverse my transaction if they don't deliver?

Sometimes reversibility just doesn't matter. The merchant might be 100% trustworthy (like Amazon). Or as another example I once rented a VPS for a month from Russia. I paid in bitcoins because it was $3 or $4 so I simply didn't care if the VPS provider didn't deliver (submitting a chargeback request for such a low amount is not worth my time), but at the same time I didn't fully trust the merchant with my credit card info (how securely do they protect/encrypt it? could they be hacked? etc).

> Since we don't gift each other bitcoins, Example 3 isn't a problem.

You completely avoided the main point of my example #3. And that's very stupid for you to say this. I gave some to my family, I could say this proves you wrong. Even Coinbase set up a page to give bitcoins last Christmas because it's common for enthusiasts to give some to friends & family: http://blog.coinbase.com/post/105032873402/give-the-gift-of-...

> Example 4 is laughable because in the last week, four Bitcoin exchanges were hacked (or robbed by the owners - still TBD) and people who had their coins in those exchanges lost it all.

This is completely irrelevant to example #4. My point was that a Bitcoin transaction cryptographically authorizes only the transfer of a specific amount to a specific address, and nothing else. In contrast a CC transaction lets a fraudulent merchant place any charge for any amount at any time. This is a substantial undeniable security advantage that Bitcoin has over credit cards.

> Skimming CC numbers is for sure an issue for credit cards, but as someone who has had their credit card skimmed, my issuer locked my account within 2 hours of fraudulent activity, called me, and eventually gave me my money back.

You were lucky. But your cute story doesn't mean credit card fraud is a solved problem. In many cases the customer has NO RECOURSE for fraud. For example you cannot chargeback a transaction made more than 60 days ago. Some fraudulent merchants pretend to act legitimately but stall shipping (eg. claim delays, issues, etc) for 60 days specifically to exploit this fact and exploit the fact customers don't know about this condition. Or if your PIN code is stolen and a fraudulent transaction is made with the PIN code, you will typically be held liable (check your credit card issuer's fine print, for example: http://www.scotiabank.com/ca/common/pdf/borrowing/revolving_...)

> How many Mt. Gox users got their money back?

Give your money to a fraudster and he will run away with it, no matter if its bitcoins or dollars. How much money was permanently lost to the Bernard Madoff ponzi scheme?

[bduerst]

Spinning a lack of reversible transactions as being a "Benefit" is disingenuous because there is real demand for them. You're can't always do business with trusted merchants like Amazon, especially internationally.

The point for #3 is that "How can I use these bitcoins I've been gifted?" is not a real problem for the majority of people. It's a solution to a problem that many don't have.

I'm glad you found my story cute, but fail to see how pointing out imperfections in credit card insurance policies is supporting bitcoin, because bitcoin doesn't fill those imperfections. In fact, even with imperfections, using credit cards are still better than getting my account hacked on a bitcoin exchange.

Bitcoin transactions are also not immediate as you say they are. The entire world's supply of bitcoin is limited to 2.7 transactions a second, meaning if 10 million people used bitcoin, they would only be able to do 1 transaction every 43 days [1].

I'm not even going to go into why you would compare Mt. Gox to Madoff. Madoff is an uninsured investor and in prison, Mt. Gox is an exchange and the thieves are where?

[1](https://bitcointalk.org/index.php?topic=941331.msg10360199#m...)

[venaoy_]

(I can't log into my venaoy HN account at the moment)

> Spinning a lack of reversible transactions as being a "Benefit" is disingenuous

I argue, through my examples, that reversibility is often not as important as you may think. Another data point: I am a typical American consumer and in 20 years doing probably 5,000+ credit card transactions I have never had to issue a single chargeback at all. So I know for a fact that I would be willing to use Bitcoin for its advantages. Hell, credit card fees which are passed to customers by inflating prices by ~2% probably indirectly cost me north of $20,000 over my 20 years of use. I could have saved $20,000 and I would have been totally fine with the lack of reversibility of Bitcoin. Even if I end up being scammed one day by a non-reversible $1000 Bitcoin transaction, I would still be $19,000 financially ahead with Bitcoin.

> I'm glad you found my story cute, but fail to see how pointing out imperfections in credit card insurance policies is supporting bitcoin, because bitcoin doesn't fill those imperfections

I point out imperfections to show you that even an imperfect system such as credit cards manage to be reasonably successful. So Bitcoin is not perfect either but, similarly, this should not prevent it from being reasonably successful.

> getting my account hacked on a bitcoin exchange

Bitcoin hardware wallets have a huge potential to significantly increase security for consumers.

> The entire world's supply of bitcoin is limited to 2.7 transactions a second

Why do you present this as being a sort of fatal flaw? It's not. A block size increase will solve this. It was not done yet because it's not a problem yet: the average block size is currently still far below the 1MB limit.

> I'm not even going to go into why you would compare Mt. Gox to Madoff. Madoff is an uninsured investor and in prison, Mt. Gox is an exchange and the thieves are where?

I compare the two because both cases are a result of fraud and both cases were/are being investigated by authorities. (MtGox was not robbed, Mark Karpeles committed fraud -- see the willy report -- as a result Karpeles is currently under investigation by the Japanese authorities). You seem to be under the impression the government and authorities are ignoring Bitcoin fraud. They are not. In the US for example the S.E.C. recently prosecuted a Bitcoin ponzi scheme operator: http://www.sec.gov/News/PressRelease/Detail/PressRelease/137...

[bduerst]

Those aren't examples, they're hypothetical stories created purposefully to support bitcoin, and border on No-True-Scotsman (A "true" payment system doesn't need dispute handling, so bitcoin is a true payment system).

Pointing out imperfections in credit card insurance doesn't mean bitcoin will work. I'm sorry but even you have to realize this is not even a logical point you're making.

Again, you completely missed the purpose of insurance. If your bitcoin hardware wallet is stolen, does it have insurance? Was any of the 4 exchanges hacked last week or Mt. Gox insured as your bank and payment processors are? Mt. Gox was not a ponzi scheme because it is not an investor - stop comparing it to one.

>Why do you present 2.7 transactions a second as being a sort of fatal flaw?

Because it is?

Block size can't be increased because bitcoin is decentralized. Each miner, merchant, etc. are rational actors looking out for their own profit, and can't come to the required consensus on any changes (hence how centralized agnostic monetary controls work). It's one of the reasons other cryptocurrencies, with higher xfer rates, have a competitive edge on bitcoin.

Bitcoin can not support more than a couple million users. Is this really news to you? Full disclaimer please: How much have you invested into bitcoin?

[venaoy_]

Coinbase's bitcoins are insured. And Coinbase's dollars are FDIC-insured.

There is nothing inherent to Bitcoin that prevents an exchange from being operated responsibly and covered/insured just as well as traditional financial institutions.

> Block size can't be increased because bitcoin is decentralized.

It is not trivial, but it can be increased. What you don't understand is that all the merchants all the institutions all the individuals utilizing Bitcoins rely on its proper operation to benefit from it. If they more or less all agree that raising the block size is the obvious way to scale up, then they will agree to raise it.

> Bitcoin can not support more than a couple million users.

False. If the block size is increased, it can scale: https://en.bitcoin.it/wiki/Scalability

I invested $0 in Bitcoin. But a coworker gave me 500 BTC for free in 2010 (I never sold any).

[bduerst]

Coinbase is insured by Aon for only if their entire site is hacked, and is not insured for individual accounts as the FDIC does, because it's too expensive (there's you're explanation on why).

Because it's decentralized, Bitcoin suffers from Tragedy of the Commons. The miners, merchants, etc. are all rational actors looking to profit for themselves, even at each other's expense, which is why bitcoin can't get a census to upgrade. You may wish that they will come together under the banner of bitcoin benevolence, but they can't because they're too busy trying to make money off of each other and have competitive alternatives available.

You can't hand wave and say at some point in the far future someone will solve these very real problems for bitcoin, because some very basic economic principles are stopping it right now. Considering you haven't even made a single bitcoin transaction, and didn't even know about the limits until today, you're not really qualified to comment on it.

It's not a technical problem, but a problem with the design and the users - which was exactly what OP's point was to begin with.

[lmm]

> Or as another example I once rented a VPS for a month from Russia. I paid in bitcoins because it was $3 or $4 so I simply didn't care if the VPS provider didn't deliver (submitting a chargeback request for such a low amount is not worth my time)

If this is a real use case (and frankly how often do you want to pay for something that you don't care whether you'll actually get?) you can buy a prepaid credit card (over the internet, from a reputable provider, using your normal credit card) and use that. No reason that couldn't be smoothly automated (indeed I believe some bank accounts will already let you generate an additional card number with a limited amount of funds). I suspect there's just very little demand for it.

> I didn't fully trust the merchant with my credit card info (how securely do they protect/encrypt it? could they be hacked? etc).

Your bank covers you if they are though.

> You completely avoided the main point of my example #3.

If people use bitcoin then people will use bitcoin sure. But that applies to any tradeable object. If enough people start giving each other baseball cards at christmas then people will start paying with baseball cards. What's the specific advantage that would make people want to give bitcoin?

> your cute story doesn't mean credit card fraud is a solved problem. In many cases the customer has NO RECOURSE for fraud. For example you cannot chargeback a transaction made more than 60 days ago. Some fraudulent merchants pretend to act legitimately but stall shipping (eg. claim delays, issues, etc) for 60 days specifically to exploit this fact

Most reputable card issuers will cover you for longer than the contract says. And even if not, 60 days of cover is still much better than the 0 days you get with bitcoin.

> Or if your PIN code is stolen and a fraudulent transaction is made with the PIN code, you will typically be held liable

Again, you're contractually liable but in practice reputable banks cover you at least the first time. Whereas if your bitcoin private keys are stolen, the money is gone and you'll never get it back.

> Give your money to a fraudster and he will run away with it, no matter if its bitcoins or dollars.

What's the non-fraudster option with bitcoin? Who's offering FDIC-protected bitcoin accounts?

[venaoy]

> how often do you want to pay for something that you don't care whether you'll actually get?

It is not that I don't care, but I estimate the probability the merchant is fraudulent is low enough that I don't feel the need to absolutely have the protection of the chargeback mechanism. I think this is true for the majority of the cases: MOST merchants are honest, MOST disputes can be resolved without chargebacks.

> Your bank covers you if they are though.

But it can be a real pain in the butt. I had to have a credit card replaced because the number and billing info of the previous one was stolen. I had to wait days to receive the new credit card. I had to re-set up all the bills I had set up to be automatically paid with the previous card to now be paid by the new card, etc.

> What's the specific advantage that would make people want to give bitcoin?

Bitcoin enthusiasts like to spread the technology, so they give bitcoins away to friends and family. But that's not my main point. My main point is that as Bitcoin is used more and more, it ends up in the hands of more and more people. This gives it organic growth: it gets more accepted, it is more transacted, it gains more value, etc.

> Most reputable card issuers will cover you for longer than the contract says. And even if not, 60 days of cover is still much better than the 0 days you get with bitcoin.

Still, some fraud scenarios are completely eliminated with Bitcoin. I pay a fraudulent restaurant with a CC that gets skimmed, I get to deal with the hassles of having to have the card replaced, potentially having my credit score damaged, etc. I pay a fraudulent restaurant with bitcoins, I know the restaurant can do nothing to steal the bitcoins remaining in my wallet.

Or I pay Dell with bitcoins instead of a credit card, and I don't have to care if their systems get hacked and my CC number stolen.

> Again, you're contractually liable but in practice reputable banks cover you at least the first time. Whereas if your bitcoin private keys are stolen, the money is gone and you'll never get it back.

Private keys can be very well protected and almost impossible to steal if you use a hardware wallet. And Bitcoin completely eliminates other fraud risks (see my examples above). So overall the tradeoffs of Bitcoin are worthwhile.

> Who's offering FDIC-protected bitcoin accounts?

Every day, millions of Americans use financial instruments that are not FDIC insured, yet that doesn't prevent the success of such instruments:

https://www.fdic.gov/deposit/covered/notinsured.html

[lmm]

> I had to wait days to receive the new credit card

That may be a problem with the current implementation, but it doesn't have to be. There's no reason your credit card couldn't be e.g. loaded onto your phone, using NFC to talk to a reader, and then it could be updated instantly if need be.

> I had to re-set up all the bills I had set up to be automatically paid with the previous card to now be paid by the new card, etc.

The only reason this isn't a problem for Bitcoin is that you can't set up bill payments in Bitcoin at all.

> Still, some fraud scenarios are completely eliminated with Bitcoin. I pay a fraudulent restaurant with a CC that gets skimmed, I get to deal with the hassles of having to have the card replaced, potentially having my credit score damaged, etc. I pay a fraudulent restaurant with bitcoins, I know the restaurant can do nothing to steal the bitcoins remaining in my wallet.

It works for a restaurant but that's a very special case - you pay after you already know that what you got was right. More often you're buying something where you won't realise if it's broken until you get it home, in which case much more serious fraud is possible with bitcoin than with credit cards. And even the restaurant case is not a compelling advantage for bitcoin - if your credit card gets skimmed the worst case is really not very bad.

> Private keys can be very well protected and almost impossible to steal

Sure. But the kind of person who gets their credit card PIN stolen (which is what we were comparing to) isn't going to have a well-protected private key.

> Every day, millions of Americans use financial instruments that are not FDIC insured

Sure. But almost everyone gets an FDIC-insured account as a backstop before getting any of those other instruments. And it's convenient to have all your accounts in the same currency.

[venaoy_]

Are you not replying to my main point (most merchants are honest therefore chargebacks are rarely needed) because you agree with it?

> That may be a problem with the current implementation, but it doesn't have to be

I agree. But I highlighted this to show you that credit cards have kinks, as currently implemented, yet are reasonably successful/useful. Therefore for the same reason Bitcoin doesn't have to be perfect to be reasonably successful/useful.

> The only reason this isn't a problem for Bitcoin is that you can't set up bill payments in Bitcoin at all.

Yes it is possible. Some hosted wallets let you set up recurring payments. This is awesome because unlike credit cards, you don't have to give the merchant authorization to debit your money, but you give this authorization only to the wallet hoster. This gives the merchant zero chances to screw you up (eg. continuing to debit your card when you want it to stop, or setting up a recurring payment disclosed in the fine print when you think you are authorizing a one-time payment.)

> It works for a restaurant but that's a very special case

This scenario covers literally ALL in-person transactions. Hardly a "very special case".

> But the kind of person who gets their credit card PIN stolen (which is what we were comparing to) isn't going to have a well-protected private key.

No we were comparing typical users. A security conscious credit card user can STILL get his number stolen and money stolen (eg. a merchant gets hacked). Whereas a security conscious Bitcoin user using a hardware wallet is virtually impervious to being attacked (only highly sophisticated hacks like stealing the hardware wallet and decaping the secure chip to steal the private keys without knowing the PIN).

Some users are so bad with security and detecting scams that they will always get their money stolen (regardless if they use credit cards or bitcoins).

[lmm]

> Are you not replying to my main point (most merchants are honest therefore chargebacks are rarely needed) because you agree with it?

I think there's an at-the-margin effect here. The threat of chargebacks makes actual chargebacks usually unnecessary. Just like having an army can be very valuable even if you only go to war rarely.

> Yes it is possible. Some hosted wallets let you set up recurring payments. This is awesome because unlike credit cards, you don't have to give the merchant authorization to debit your money, but you give this authorization only to the wallet hoster.

With a bank account you can do this as a "standing order". It's safer than most of the bill-payment methods. And surprisingly useless, because most of the time you want to pay a bill that can vary, so you need to give the merchant authorization to tell them how much you need to pay them.

> setting up a recurring payment disclosed in the fine print when you think you are authorizing a one-time payment.

Something you can only stop by making setting up payments less convenient. If bitcoin takes off, it will need a system for seamlessly setting up recurring payments from a website that wants to - and the exact same scams will apply.

> This scenario covers literally ALL in-person transactions. Hardly a "very special case".

No, it only covers cases where you pay after using the thing you bought. If I buy a TV with a credit card, take it home, plug it in and find out it doesn't work, I can if need be make a chargeback; with bitcoin I'm stuffed.

> No we were comparing typical users. A security conscious credit card user can STILL get his number stolen and money stolen (eg. a merchant gets hacked).

If they're security-conscious enough to not get their PIN stolen, then they can't lose any money.