Is Bitcoin a Legitimate Currency or a Potential Scam?

[BenVitale]

It is not clear to me why anyone would buy bitcoin. Is it a scam?

Find out what is a bitcoin: http://bitcoinme.com/

 

[Evo]

I would agree with the people saying it's a Ponzi Scheme. Imaginary money that only exists in a computer?

 

[BenVitale]

MIT's Technology Review reports that Bitcoin is booming and makes the peer-to-peer currency secure and anonymous

http://www.technologyreview.com/computing/37619/page1/

 

[talk2glenn]

I would agree with the people saying it's a Ponzi Scheme. Imaginary money that only exists in a computer?

This is different from dollars, how? I'm going to guess most of your dollars only exist on computer. Indeed, you don't even posess the digital bits themselves - they're likely held in trust on your banks servers. At least in the case of bitcoins you have rights to the digital property itself, if I'm understanding the concept correctly.

It is not clear to me why anyone would buy bitcoin.

I suppose one would buy bitcoins for the same reason one might buy any currency: store of value, medium of exchange, investment instrument.

Whether it is a scam or not probably depends on how able one would be to find people willing to trade bitcoins on demand in the market. If you can readily buy them, but not sell them, then you're probably getting screwed. Of course, the same thing can be said for any currency.

The private currency market is far less "alien" to citizens of developing countries, where the public finance system is often woefully ineffcieint and underdeveloped outside main urban areas. I've heard that in some African countries, for example, private digital currency tradeable via cell phone text message is a more popular store of value than the official currency outside the main cities. This only seems exotic and/or redundant to you because westerns have strong, public institutions to handle this market function. You probably aren't the intended customer.

 

[chingkui]

There is a paper on SSRN that address some of the issues:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817857

 

[Greg Bernhardt]

Homeland Security cuts off Dwolla bitcoin transfers

http://news.cnet.com/8301-13578_3-57584511-38/homeland-security-cuts-off-dwolla-bitcoin-transfers/

 

[Digitalism]

Not to be negative, but probably some illicit transactions are taking place using bitcoin. The black market needs trustworthy currency as well. Alternatively, the federal government may be cracking down partially to limit piracy, human trafficking, the drug trade, sale of human organs, etc (stated purpose) and partially because it creates an alternative power structure to (their) legitimate one.

 

[Ryan_m_b]

You're spot on Digitalism, just look up Silk Road. It's a website shipping all sorts of illegal products and it runs with bitcoin.

 

[Curious3141]

Bitcoin has always been (rightly) perceived as a threat to the establishment since it became popular. The banks and governments of the world cannot control (or "regulate", to put it euphemistically) a decentralised currency. Loss of control is loss of power, and this is something they fear above all else.

The US government is shutting down Bitcoin to protect its own narrow, selfish interest. It has nothing to do with protecting the interests of the people. I've never trusted the US government (I mistrust all governments on general principle, but the US government has given me a lot more reason to mistrust it), so this takedown by the DHS was a foregone conclusion to my mind.

Yes, The Silk Road provides access to illegal services. The Feds have probably had a devil of a time trying to shut it down, without success - because of the decentralised nature of the deep web on which The Silk Road resides. They can't shut down the principal currency either: BitCoin is also protected by its decentralisation. However, they can (and now have) gone after the soft target - the point at which BitCoin is exchanged into "common" currency - the US dollar. That's always been the one vulnerability in the whole system.

If people stop using "common currency" and switch over entirely to BitCoin or similar decentralised cryptocurrency, the governments of the world would completely lose their stranglehold over time.

 

[ModusPwnd]

The US government is shutting down Bitcoin to protect its own narrow, selfish interest.

Huh? I don't think so. Do you have a source?

 

[Curious3141]

Huh? I don't think so. Do you have a source?

Hmm...I kinda knew that was coming on this site (which is why polarising social topics are probably a bad idea here). Claims like this are naturally difficult to source. Surely you don't expect the US government to issue such a declaration, do you?

A news source is the best I can do. See:



I'm referring to the part at 1:14, where the reporter says "This, of course, threatens the long held grip that governments and banks have had on currency regulation and interest rate manipulation."

I'd say that falls under the umbrella of governmental "narrow, selfish interest", wouldn't you?

Now, if you want the reporter/news program to cite *its* sources, you're welcome to go ahead and ask them.

 

[ModusPwnd]

Meh, that's old news. Bitcoin is not "shutting down". Not by the govt or anyone.

I like bitcoin. I have been profitably mining for almost 2 years. Certainly people do have issues in converting to cash like you mentioned. I used a service that bought my coins and they stopped because of money transfer issues and a online bullion retailer I used also got dropped by their bank. These types of issues are to be expected but are not a sign of bitcoin being "shut down". They are a sign of the innovative, new and murky legal context that bitcoin is in. Banks and congress wrote the laws for mainstream and older style financing.

But there is still plenty of demand and use of bitcoin going on. Even without these online exchanges, I cannot keep up with demand selling mine locally for cash through Craigslist. Bitcoin is thriving, not being shut down. For now at least.

Check out my miners;
http://i.imgur.com/231wf.jpg

 

[Curious3141]

Meh, that's old news. Bitcoin is not "shutting down". Not by the govt or anyone.

I like bitcoin. I have been profitably mining for almost 2 years. Certainly people do have issues in converting to cash like you mentioned. I used a service that bought my coins and they stopped because of money transfer issues and a online bullion retailer I used also got dropped by their bank. These types of issues are to be expected but are not a sign of bitcoin being "shut down". They are a sign of the innovative, new and murky legal context that bitcoin is in. Banks and congress wrote the laws for mainstream and older style financing.

But there is still plenty of demand and use of bitcoin going on. Even without these online exchanges, I cannot keep up with demand selling mine locally for cash through Craigslist. Bitcoin is thriving, not being shut down. For now at least.

Check out my miners;
http://i.imgur.com/231wf.jpg

Sure, I never intended to mean that BitCoin was shutting down completely. And while I agree with you that BitCoin is not in immediate danger from this, I will say that if the US government keeps up the "persecution" and basically freezes *all* exchanges of BitCoin into USD, then the situation will definitely come to a head.

What will happen then is quite uncertain. People who are BTC rich will have only three options: do nothing and hope things change (a futile hope), or try to barter for services with their existing BTC (but will others be willing to accept them?), or finally cash out into another common currency.

The last possibility is the most intriguing. If another fairly stable country decides it is going to make it much easier to exchange between BTC and its own currency, it has an excellent chance of gaining a leg up on the USD as a (possibly *the*) major world currency.

What do you think about LiteCoin, by the way?

EDIT: Also, where does the power for your mining rig come from? I think I've seen calculations to the effect that if you're paying for the power usage, mining is simply not profitable (or only very marginally so).

 

[ModusPwnd]

Also, where does the power for your mining rig come from? I think I've seen calculations to the effect that if you're paying for the power usage, mining is simply not profitable (or only very marginally so).

Its a home setup. It is using 4 circuits. My wife has to blow dry her hair in the living room because the bathroom circuit is one of them.

I have some of the cheapest electricity in the country and live in a fairly cool climate. My hardware is becoming obsolete very fast, but it still manages to be profitable for now.

 

[Curious3141]

Its a home setup. It is using 4 circuits. My wife has to blow dry her hair in the living room because the bathroom circuit is one of them.

I have some of the cheapest electricity in the country and live in a fairly cool climate. My hardware is becoming obsolete very fast, but it still manages to be profitable for now.

Ah, lucky you - cheap power.

Anyway, it doesn't matter if BTC mining is not super profitable. As long as one doesn't make a loss, I think it's quite satisfying to "mint" your own money (legally).

 

[DavidSnider]

Interesting turn of events:
http://www.businessinsider.com/ben-bernanke-on-bitcoin-2013-11

http://www.usatoday.com/story/onpol...onations-federal-election-commission/3474777/

http://www.bloomberg.com/news/2013-11-18/u-s-agencies-to-say-bitcoins-offer-legitimate-benefits.html

 

[Greg Bernhardt]

Someone just bought a Tesla with Bitcoins
http://www.businessweek.com/news/2013-12-06/bitcoin-meets-tesla-in-california-dealership-model-s-transaction

 

[AlephZero]

Someone just bought a Tesla with Bitcoins

Is that the first BOGOF (buy one get one free) offer on financial bubbles?

Still, he has something to show for his virtual money - unlike this guy:
http://www.bbc.co.uk/news/uk-wales-south-east-wales-25134289

 

[Pythagorean]

Untraceable anonymous currency. I don't think one needs to explain why their would be a demand. I don't see BitCoin going away anytime soon. Kind of scary, though.

 

[Digitalism]

Now with e-wallets and some of them being hacked etc how are people going to secure their holdings?

 

[Pythagorean]

I don't know the details, but accounts get hacked all the time, BitCoin or not. Does it happen more in BitCoin or is it just more attractive for media to write about? I don't know. But anecdotally, I have friends that trade BitCoin and don't have any problems (they work with holding companies, a third party that ensures secure transactions).

On the other end, I also know someone who get ripped off trying to buy archaic gaming technology from an obscure website with BitCoin. So it probably depends on who you're doing business with more than the currency you're using (just like with real money). Obscure website = shady back alley.

 

[ModusPwnd]

Now with e-wallets and some of them being hacked etc how are people going to secure their holdings?

Easy, don't use the e-wallet ;) Generate your private keys off line and never put them online. You can't hack an encrypted USB drive sitting in a safe, not plugged in.

 

[Pythagorean]

Bitcoin just lost 50% of it's value due to an exchange block by China:

http://www.theguardian.com/technolo...ina-payment-processors-digital-cryptocurrency

The top thread in the /r/bitcoin subreddit is now a number to the suicide hotline (seriously):

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

I don't even want to call my friend up and ask how he's doing. I might strike a nerve.

 

[cpscdave]

As I recall I don't think this would be the first time that BitCoin has had a massive drop in value.

Something just seems off to me about the whole bit-coin dealio. I sure wouldn't put any money into it :D

 

[Pythagorean]

Yeah, it's volatile. But that's also why people make lots of money off of it. It's a good example of high-risk/high-reward.

 

[phinds]

Yeah, it's volatile. But that's also why people make lots of money off of it. It's a good example of high-risk/high-reward.

Yes, and drug dealers may feel that half the money is still worth the ability to be anonymous. It's a form of money laundering and that isn't always cheap.

 

[Pythagorean]

Drug dealers among other professional criminals (the possibilities are frightening!). I was thinking more of people legally trading it like stock, though.

 

[TylerH]

Yes, and drug dealers may feel that half the money is still worth the ability to be anonymous. It's a form of money laundering and that isn't always cheap.

On Silk Road, transactions where hedged. As in, if you sold your drugs for $50 worth of BTC, you get $50 worth of BTC at the end of the transaction. (There was significant delay between the sell and the end of the transaction because SR had an escrow system.) I don't know how all the smaller replacements do it, but SR effectively removed that concern for the sellers.

 

[TylerH]

Drug dealers among other professional criminals (the possibilities are frightening!). I was thinking more of people legally trading it like stock, though.

That is where most of the trading comes from. I mean, look at the volume (http://bitcoinwisdom.com/markets/btce/btcusd). Surely drug dealers and buyers aren't buying and selling BTC at around 5 transactions per minute. And at the exchange I frequent, there's consistently over 5,000 people on, trading.

 

[phinds]

On Silk Road, transactions where hedged. As in, if you sold your drugs for $50 worth of BTC, you get $50 worth of BTC at the end of the transaction. (There was significant delay between the sell and the end of the transaction because SR had an escrow system.) I don't know how all the smaller replacements do it, but SR effectively removed that concern for the sellers.

I don't get how you see this as "hedging". Hedging would be if you got your DOLLARS worth of bitcoins at the end of the transaction. If you did a transaction and the value of bitcoins halved, as it has done, then you end up with half your expected payment. That can hardly be considered hedging.

 

[TylerH]

phinds, I used dollar signs didn't I? Or am I missing some meaning in the way you worded that?

 

[ModusPwnd]

I don't get how you see this as "hedging". Hedging would be if you got your DOLLARS worth of bitcoins at the end of the transaction. If you did a transaction and the value of bitcoins halved, as it has done, then you end up with half your expected payment. That can hardly be considered hedging.

Did you read what you quoted? It is exactly hedging and exactly what you describe. If the bitcoin value halves while your coins are hedged you get twice the coins.

"if you sold your drugs for $50 worth of BTC, you get $50 worth of BTC at the end of the transaction."

^^ This is hedging.

 

[phinds]

phinds, I used dollar signs didn't I? Or am I missing some meaning in the way you worded that?

OOPS ... my bad.

 

[phinds]

Did you read what you quoted?

I did but I have a very minor form of dyslexia that bites me in the *** like this sometimes. My mouth or my eyes are doing one thing and my brain is doing something else. My worse offense on this forum is that a couple of times my fingers have typed "proton" while I THOUGH my brain was telling it to type "photon".

 

[Pythagorean]

"Bitcoin Becomes a Real Job and Wall Street Is Hiring"
http://motherboard.vice.com/en_ca/blog/bitcoin-becomes-a-real-job-and-wall-street-is-hiring

 

[TylerH]

Overstock.com plans to begin accepting BTC in 2014. http://www.forbes.com/sites/amitcho...stock-com-is-going-to-accept-bitcoin-in-2014/

Here's to hoping Amazon will follow. That'll cause a spike like never before.

 

[lendav_rott]

I mined these things for a few months - end result, my video card fried and with the profits I made, I bought a new card and kept about 80€.

There are so many discussions Everywhere how this imaginary currency will take over and blabla.. it's not going to happen. Can't even actually get by a day at work without someone pointing out how "bitcoin will take over". It's just some little fun to have trying how your setup could handle the mining. Were it to take over, why are we measuring its value in actual currency in the first place?

 

[Pythagorean]

Bitcoins have little to do with mining anymore. While I agree that it won't take over, its apparent that it's becoming more accepted by mainstream economy and it does serve a unique niche.

 

[wigglywoogly]

I've tried - with little success - to find an average energy cost per bitcoin. I'm not talking about the amount of money you pay to your energy supplier for your mining setup, but the actual number of watts expended by a computer in solving enough cryptography problems to mine a coin. Presumably this is an increasing function of the 'hardness' parameter (that itself is always increasing), so maybe someone knows what the average energy cost was at various times in the past.

I suppose the answer I'm looking for is of the form: 'In November 2013, the average energy expended to mine a bitcoin was X.'

Sorry if that's a dumb question.

 

[phinds]

I've tried - with little success - to find an average energy cost per bitcoin. I'm not talking about the amount of money you pay to your energy supplier for your mining setup, but the actual number of watts expended by a computer in solving enough cryptography problems to mine a coin. Presumably this is an increasing function of the 'hardness' parameter (that itself is always increasing), so maybe someone knows what the average energy cost was at various times in the past.

I suppose the answer I'm looking for is of the form: 'In November 2013, the average energy expended to mine a bitcoin was X.'

Sorry if that's a dumb question.

It's not a dumb question, but it's not likely to have a specific answer since it will depend greatly on the energy efficiency of the machine(s) being used.

 

[wigglywoogly]

I see that. But X (as I called it) would have some kind of distribution with a mean, unless I'm very much mistaken. I can see how it would be nigh on impossible to calculate accurately though.

This interests me because I like concepts like 'Energy Returned Over Energy Invested' and I was thinking - what externatlities does bitcoin mining produce? Hashing monopoly money might not be such a great idea if we piss away all our energy reserves to do it!

(I am an economics student but my first love is physics)

 

[DavidSnider]

I see that. But X (as I called it) would have some kind of distribution with a mean, unless I'm very much mistaken. I can see how it would be nigh on impossible to calculate accurately though.

This interests me because I like concepts like 'Energy Returned Over Energy Invested' and I was thinking - what externatlities does bitcoin mining produce? Hashing monopoly money might not be such a great idea if we piss away all our energy reserves to do it!

(I am an economics student but my first love is physics)

I have trouble imagining it is more wasteful than digging up gold, melting it, transporting it and burying it underground again.

 

[TylerH]

I see that. But X (as I called it) would have some kind of distribution with a mean, unless I'm very much mistaken. I can see how it would be nigh on impossible to calculate accurately though.

This interests me because I like concepts like 'Energy Returned Over Energy Invested' and I was thinking - what externatlities does bitcoin mining produce? Hashing monopoly money might not be such a great idea if we piss away all our energy reserves to do it!

(I am an economics student but my first love is physics)

You should look into peercoin. It's one of many cryptos that have a hybrid proof of work and proof of stake minting scheme. The idea is that mining will generate initial amounts and when it losses profitability, then users will generate coins using proof of stake. Proof of stake works like interest at a bank, you get it without any significant energy expenditure.

 

[Pythagorean]

Major Silk Road 2.0 hack costs bitcoin users millions of dollars:

While Ulbricht awaited trial on charges including murder-for-hire and narcotics trafficking the Silk Road was relaunched. Yet the site's future was put into doubt again on Thursday when an administrator who identified himself as “Defcon” explained on the site's forums what had happened.

“I am sweating as I write this...I must utter words all too familiar to this scarred community: We have been hacked,” he wrote. “Our initial investigations indicate that a vendor exploited a recently discovered vulnerability in the bitcoin protocol known as 'transaction malleability' to repeatedly withdraw coins from our system until it was completely empty.”

Defcon did not disclose the exact number of bitcoin that was stolen yet Nicholas Weaver, a researcher at the International Computer Science Institute, told Forbes that approximately 4,400 coins were taken, equaling about $2.6 million.

Since the initial Silk Road was shut down in October, a number of former competitors rushed in fill the void. Administrators for at least three of those sites disappeared after stealing users' bitcoin and another two voluntarily closed down after they were hacked.

One site, known as Sheep Marketplace, was victimized to the tune of $6 million in bitcoin by one administrator who said he found a weakness in the site's security. Similarly, Black Market Reloaded announced that it was unable to accommodate the massive influx of ex-Silk Road users.

http://rt.com/usa/silk-road-hack-bitcoin-millions-947/

 

[Adderall]

interesting paper on the topic on arXiv.org : Bitcoin: a Money-like Informational Commodity

Jan A. Bergstra, Peter Weijland
(Submitted on 19 Feb 2014)
The question "what is Bitcoin" allows for many answers depending on the objectives aimed at when providing such answers. The question addressed in this paper is to determine a top-level classification, or type, for Bitcoin. We will classify Bitcoin as a system of type money-like informational commodity (MLIC).

 

[qspeechc]

Most of the posts seem quite negative about bitcoin. I don't know much about it, but I tried to find articles with a positive view of it, or at least look at both sides of the argument, and they do in fact exist, which you would never have guessed from reading this thread:

http://mobile.nytimes.com/blogs/dealbook/2014/01/21/why-bitcoin-matters/?_php=true&_type=blogs&_r=0&utm_content=bufferab534&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

https://medium.com/money-banking/2b5ef79482cb

http://www.coindesk.com/pros-cons-bitcoin-merchants-view/

http://bitcoinviews.com/bitcoin-101-what-is-the-bitcoin-revolution-part-1-transparency-on-steroids/



http://www.henrymakow.com/bitcoins.html

http://www.easternprogress.com/2014/01/23/bitcoin-forum-examines-pros-and-cons-of-new-digital-currency/

http://bitcoinvista.com/2014/03/02/bitcoin-the-pros-and-cons-for-consumers-and-merchants/

 

[nsaspook]

IMO the current problem with Bitcoin is not the concept but the implementation. The Bitcoin network doesn't rely on 'trust' but the people who take your cash to run it must be 'trustworthy'. The current system is based on speculation with a minefield of exchanges that can vanish overnight with seemingly no recourse for those with lost money. The theoretical antifraud and safety advantages of Bitcoin are based on trust in the 'faith and credit' of the operators of the network to do the right with the fruits of your life when bad stuff happens. The track record so far has been dismal.

Like 'corn' it's currently really a commodity being manipulated for profit not currency and like corn without controls it's doomed to deflate in value if it becomes too popular due to a speculative bubble.

 

[qspeechc]

IMO the current problem with Bitcoin is not the concept but the implementation. The Bitcoin network doesn't rely on 'trust' but the people who take your cash to run it must be 'trustworthy'. The current system is based on speculation with a minefield of exchanges that can vanish overnight with seemingly no recourse for those with lost money. The theoretical antifraud and safety advantages of Bitcoin are based on trust in the 'faith and credit' of the operators of the network to do the right with the fruits of your life when bad stuff happens. The track record so far has been dismal.

Like 'corn' it's currently really a commodity being manipulated for profit not currency and like corn without controls it's doomed to deflate in value if it becomes too popular due to a speculative bubble.

It's funny you should mention that, I read something about it in some of the articles I linked above:

The practical consequence of solving this problem is that Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.

And there's more about that in the http://mobile.nytimes.com/blogs/dealbook/2014/01/21/why-bitcoin-matters/?_php=true&_type=blogs&_r=0&utm_content=bufferab534&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

And here:

Still, for the time being, bitcoin is in many ways the best and cleanest payments mechanism the world has ever seen.
[...]
The source code for bitcoin is free and public, which means that just about every hacker and cryptographer in the world has had a crack at it. And they’ve all come to the same conclusion: it really works.
[...]
Such people, including Satoshi Nakamoto, are far from unique in their mistrust of all existing financial institutions. What sets Nakamoto apart is that he turned that mistrust into a philosophy, the most important driving force behind the bitcoin project. When he introduced bitcoin to the world in February 2009, Nakamoto boasted that his new currency was “completely decentralized, with no trusted parties”. And he explained in some detail what he saw as the problem in need of a solution:

"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts."
[...]
If you hold dollars, you’re trusting the US government not to destroy your wealth. Bitcoin, by contrast, is based on mistrust — it’s specifically designed so that it’s every man for himself.

 

[nsaspook]

'every man for himself'

-- I'm a student and this is almost all of my money I have left (I actually have a lot of debt, which I intended to pay back with that money). I'm really panicking right now and not sure what to do!

-- I'm in Tokyo as well and I lost ~8 BTC and 500,000 in JPY. Please let me know how your case progresses and whether at any time you think it would be possible to get others involved. I really hope I can get at least some of that money back. I need it.

-- Hey, I'd like to get involved in this as well. Gox has yet to deliver a withdrawal of funds from late last year and currently has all my coins locked up because of their withdrawal lock. Email is below, let me know if you need any other info. Thanks

-- (originally I tried to withdraw $30,000.00, but Mt.Gox canceled my withdraw and asked me to change to GBP. Funds never arrived--> Mt.Gox confirmed they were unable to wire funds, but funds are not re-instated to my account. Mt.Gox admits in the e-mail funds are mine.)

-- I found your post just today after the Gox closed the site. I had 10,200 USD with them, which I traded just last week for gox coin. I initially deposited USD from bank account on November 2013, and traded on Gox just about 2 weeks ago, not knowing there was a trouble to withdraw any BTC from them. I do have screen shots from last week from trading and all my history since November 2013. My initial deposits in November have been 8000 USD and 2200 USD, so whatever trading I did in last weeks was for vain since gox did not let any BTC out of the site. Current standing on my account is about 27 BTC and around 2200 USD but since gox coin was never a real BTC, as I just learned recently, I consider Gox owing me 10200 USD which I initially deposited.

... on and on...

https://bitcointalk.org/index.php?topic=476535.msg5255853

I'm sure that everyone is aware that MtGox declared bankruptcy yesterday. As such, our lawsuit is off and we, like everyone, will be filing a claim in bankruptcy court. Words cannot express my (our) disappointment in this whole debacle. Over the last week I have spoken to people from all around the world, many of whom are now facing financial catastrophe - and it is heartbreaking. It is especially disheartening given the noble endeavor we had set out to achieve. To create a financial system based on open source principals that would level the playing field for people around the world and liberate them from the various corrupt central banks sabotaging their success and financial freedom. Yet here we are, betrayed by a trust system similar to what we sought to avoid. Ultimately, I still believe in cryptocurrency technology and how it will revolutionize the financial world; but it is clear that still has a lot of growing up to do - both the protocol and the service ecosystem. As a testament to the REAL PEOPLE who've been left in the wake of this lesson, I'd like to share with you a small sample of the personal messages I received

Don't confuse untrusted Bitcoin transaction security with the trust need for safe commerce from service providers. Some of these people were stupid but they still don't deserve to get robbed.

 

[Tosh5457]

IMO the current problem with Bitcoin is not the concept but the implementation. The Bitcoin network doesn't rely on 'trust' but the people who take your cash to run it must be 'trustworthy'. The current system is based on speculation with a minefield of exchanges that can vanish overnight with seemingly no recourse for those with lost money. The theoretical antifraud and safety advantages of Bitcoin are based on trust in the 'faith and credit' of the operators of the network to do the right with the fruits of your life when bad stuff happens. The track record so far has been dismal.

Like 'corn' it's currently really a commodity being manipulated for profit not currency and like corn without controls it's doomed to deflate in value if it becomes too popular due to a speculative bubble.

I agree, sometimes people use these thefts to discredit bitcoins, but that's like using credit card thefts or PayPal thefts to discredit the major currencies. Any online company that deals with money, either it deals with Bitcoins, US dollars or whatever, is in risk of this happening to them. For example a recent credit card theft scandal at a major US retailer.

Though there is one big difference between major currencies and Bitcoins, which also motivates hackers to steal Bitcoins instead of any other currency: the hackers who steal Bitcoins can much more easily launder it than with other currencies, in part because it's not recognized as a real currency, so authorities won't even try to find the hackers who steal Bitcoins. And like nsa said, even the financial services providers, like Bitcoins exchanges, can disappear with all the money and won't even get investigated. The anti money laundering and anti-theft measures that are today in place don't apply to Bitcoins: the lack of any regulation isn't helping the Bitcoins market.