How To Use Bitcoin – The Most Important Creation In The History Of Man

[psionl0]

If it is presumed that the author means to say that banks or governments themselves would create a similar system to bitcoin, that fails the test of logical understanding of the bitoin algorithm.

I wouldn't write the idea off entirely. The idea of a "fiatcoin" run along similar lines to bitcoin (with blockchains and miners etc) seems quite attractive. The main difference would be that each time a new block was mined, the miner would automatically transfer the new fiatcoins inside it to a government wallet (so the miner only gets to keep the transaction fees). Of course a fiatcoin blockchain would be several orders of magnitude greater than that of bitcoin so mining software would need to be able to work without a complete blockchain.

We wouldn't want the government to be able to create fiatcoins willy-nilly. Instead there would be some in-built algorithm based on volume and velocity that would keep the creation rate such that only modest inflation would be possible.

With software, blockchains and creation algorithms all open source, we could have a lot of confidence in such a currency.

It is a system that does away with 'trust' and thus with 'trusted intermediaries'. Those include banks and governments. They will not create a system that does away with themselves.

So much for that dream.

 

[remirol]

With off-site storage the it has to updated with every transaction, or it won't be an actual backup. Cloud storage can fail, and actually has. Plus it can be hacked. And if you misplace your keys, bye-bye money. Then there's also the possibility that as technology changes those keys and wallet you stashed away 50 years ago can no longer be accessed with the new technology and software. Relying on external "vaults" run at the present time by shady businesses catering primarily to drug dealers and other criminals has its own unique problems.

Updating it regularly is also a trivial task; dropbox' software monitors a directory and as that changes, the backup is also automatically changed. Similar technology exists for Google Drive and for external USB drives.

Storage media failure: ALL forms of storage can fail, but that's not the point of an offsite backup. The odds of your hard drive failing at the same time your cloud storage goes under and vanishes at the same time your USB drive explodes at the same time your safe deposit box gets broken into are roughly the same as "getting struck by lightning while being mauled by a polar bear". In practice, one external drive and one cloud storage (or two cloud storage) will be more than sufficient.

Being hacked: You should be far more worried about existing financial institutions being hacked than your personal dropbox being brute-forced by someone who has no idea what he's going to find there -- plus without your passphrase, those keys are STILL useless to him. Use a good passphrase when you generate your keypair, and use a strong password that you don't use on any other service and you'll be fine.

Misplacing your keys: Several solutions have already been mentioned for this, and unlike your wallet your keys don't change, so hardcopies _are_ feasible. Simply not an issue in the modern world.

Technology changing: There is always a significant overlap (think a decade or more) between 'new tech' and 'old tech' such that you will have plenty of warning that 'old tech' is going away. I can still access IDE drives from my current, modern machine trivially, and the IDE standard is _ancient_. This is not a practical concern.

As an alternate example, checkbooks are almost totally gone the way of the dodo and ATM machine use is dropping, point-of-sale swiping now being the accepted standard even at fast-food joints (i don't recommend it there, though). During all the new innovations that came with the computerization of the banking industry, it _never_ became more difficult to access money; always easier. Checks are still accepted almost everywhere, and you can even make a check out to "Cash" -- and that's just in 25 years of progress.

This sort of thing is my field. Your concerns are, quite frankly, nothing but Chicken Littling -- the technological aspects of bitcoin are _not_ at issue here.

 

[Tyke]

I'm hardly on the pro-bitcoin side of things, but I can speak to the technological aspect coherently: This is no longer an issue in the modern world for data as small as a bitcoin wallet.

It is possible to have multiple backups of your 'wallet' and your public/private keys in multiple locations in multiple countries _for free_ right now, as I speak.

Have you read about Stefan Thomas? It seems unlikely that it would ever happen, but somehow it still did. Apparently despite 3 backups the poor bloke managed to lose $125,000 worth of Bitcoins.

 

[Tyke]

It's just that it is rare to find anybody from the anti-bitcoin brigade who will admit to making an error. They cling doggedly to their assertion long after it has been proven incorrect.

There's a brigade? Do they get badges?

That said, I'm not sure why you are harping on about the currency conversion aspect. Few would have foreseen the emergence of bitcoin apps for mobile phones nor the development of bitcoin ATMs. The demand is clearly there.

In this thread Bitcoin has been called "the most important creation in the history of man" and describe as having "no equal for transferring large sums of money around the world". I thought it might be sensible to take those claims with a pinch of salt, but I wanted to see what the fuss was about. I'm just trying to find out what the actual experience of using Bitcoin would be like. I don't think it's out of line that I should try and do a bit of research and talk to some people before I get involved in something.

 

[remirol]

Have you read about Stefan Thomas? It seems unlikely that it would ever happen, but somehow it still did. Apparently despite 3 backups the poor bloke managed to lose $125,000 worth of Bitcoins.

I have. A quick google finds this summary:

This next incident is also fairly ancient in Bitcoin terms, taking place in July 2011, illustrates how wallet security can also fail in the other direction. Bitcoin developer Stefan Thomas had three backups of his wallet – an encrypted USB stick, a Dropbox account and a Virtualbox virtual machine. However, he managed to erase two of them and forget the password to the third

I still consider this to be largely operator error, though, as opposed to design defect; none of those services/storage media failed on their own, they all failed because of his action or inaction (assuming the descriptions of what happened are accurate). I think the technology behind Bitcoin is still nowhere near being the primary risk of getting involved with it, though.

(There's probably an argument to be made that the lack of any regulation makes it far more profitable to attempt to steal BTC, since once it's gone it's gone and can't be reverted -- i'll let someone else make that though since again that isn't so much about the technology involved as it is the inherent design in the first place, and my posts were dealing primarily with the technology)

 

[jhunter1163]

As far as I can tell, the primary purpose (in fact, almost the exclusive purpose) of Bitcoins is currency speculation. People aren't buying pizzas with Bitcoins. With such huge swings in price, why would you? That pizza might, in a few months' time, prove to have cost you, say, $400.

 

[Tyke]

And FYI, when I said .... that means ....

This conversation would probably flow a lot better if you just said what you meant in the first place.

Anyone can engage in a transaction with anyone else in the world with btc so there is no "in the US".

You mentioned ACH, I didn't know what that was as I don't live in the US. Presumably it's something like the BACS system in the UK.

A 1% fee is prohibitively expensive compared to what, an international transfer including the currency exchange bite? You kidding, right? At what exchange rates? The official ones? Take a random selection of a dozen countries and think through the implications and costs of that.

Why are you talking to me as if I'm just pulling this out of my backside? Every month for the last couple of years I've sent the equivalent of 1 to 1.5 million USD to various countries in various currencies. I looked back at the records, and losses to currency exchange varied between 0.07% and 0.13% and the transfer fees were less than that.

At around USD1000 or less then yeah, 1% is OK, but that doesn't take into account exchange rates or cost of transferring the Bitcoins into money that most people can actually, you know, spend.

Is a 1% fee high compared to paypal or credit card transactions? No, it's ridiculously lower, even if no currency exchange was involved.

It's true that paypal and credit card are more expensive than that. It's also true that there is more protection for card users.

A system like Bitcoin certainly has advantages for small transactions, but from what I can tell it's not the whizz-bang-whoosh super solution that some proponents make it out to be.

 

[Democracy Simulator]

Where is the backup stored? What if your house burns down?

The occasional loss of Bitcoins through houses burning down pales into comparison with the millions of people that lose money when FRB banks go bust. Ask the Greeks.

 

[Tyke]

I still consider this to be largely operator error, though, as opposed to design defect; ...

No doubt, but I find it a little odd that a system would put so much onus on the user to make sure they don't accidentally destroy all their money, and it's not like Thomas was computer illiterate. A good number of the general population still struggle with passwords, never mind encryption and redundant backups. It definitely seems like it was designed by computer scientists.

As far as I can tell, the primary purpose (in fact, almost the exclusive purpose) of Bitcoins is currency speculation. People aren't buying pizzas with Bitcoins. With such huge swings in price, why would you? That pizza might, in a few months' time, prove to have cost you, say, $400.

I saw an article where senior staff at a Bitcoin services company, who pay in Bitcoins, were just hoarding half their pay and converting the other half straight out to dollars to spend.

It appears that some think more people will use it as currency, just as soon as more people start using it as currency.

 

[mhaze]

The occasional loss of Bitcoins through houses burning down pales into comparison with the millions of people that lose money when FRB banks go bust. Ask the Greeks.

That is a good point because when the 'trusted intermediary' is trusted, that intermediary can, unfortunately, be complicit in stealing the money of millions, as happened in Cyprus.

Then if we eliminate the trusted intermediary, such as by reliance on bitcoin, we lose both the benefits and negatives of that relation.

Bitcoin in its current stage of implementation is not for the dyslexic, and not for someone a few years away from Alheimers. It is in it's current form best understood as electronic cash. Like cash, it can be misplaced. The origin of the 'bank' is in the idea that people could give their cash to the bank for safety and security.

But we are breaking new ground with these issues re bitcoin, and the solutions that provide safety and security will be different than those developed in 15th century Florence.

 

[Democracy Simulator]

The occasional loss of Bitcoins through houses burning down pales into comparison with the millions of people that lose money when FRB banks go bust. Ask the Greeks.

Yes I do mean Greeks Cypriots.

 

[psionl0]

I saw an article where senior staff at a Bitcoin services company, who pay in Bitcoins, were just hoarding half their pay and converting the other half straight out to dollars to spend.

And very wise too. Considering how the price of bitcoins escalates, If I were paid in bitcoins I would cash out the barest minimum I needed to get through the week and keep the rest of my wages in bitcoins too.

It appears that some think more people will use it as currency, just as soon as more people start using it as currency.

That attempt at irony doesn't quite succeed. If the number purchases being paid for with bitcoins is increasing then the use of bitcoin as a currency will gather momentum (the rate of increase will increase). Even if it is not currently increasing, there is no reason to believe that the situation would remain static for very long.

You might find that bitcoin is currently not very useful for your requirements but you can't assume that this is how it will always be.

 

[remirol]

No doubt, but I find it a little odd that a system would put so much onus on the user to make sure they don't accidentally destroy all their money, and it's not like Thomas was computer illiterate. A good number of the general population still struggle with passwords, never mind encryption and redundant backups. It definitely seems like it was designed by computer scientists.

No doubt, but now these are _implementation_ issues, not underlying-technology issues. I believe modern clients now automatically decrypt/encrypt your wallet for you, for example, thus removing one aspect where the user can step on their dick; using shared auto-synced folders removes another.

There's a reason people say 'never buy v1.0', and that's because there are always bugs/design issues/Stuff They Didn't Think Of™ with it. Bitcoin is still very obviously in that v1.0 stage, maybe up to v1.1 these days. But the tech problem to be solved at this point is "make it easy enough for my old blind granny to do it", rather than "prove it's possible and won't fail due to forces outside the user's control".

It appears that some think more people will use it as currency, just as soon as more people start using it as currency.

Not to mention that for people to start accepting/using Bitcoin as more of a currency, they're going to need to see it as something which holds and retains a consistent value over the long term. Right now the day-to-day volatility is ridiculous, and it's currently on such a steep spike that you need to wait to see where it drops back to (take a look at around midnight November 10, where in a couple hours about 25,000 BTC were sold off for what was undoubtedly one heck of a profit)... unless of course you're treating it as a speculator's commodity, in which case Barnum's Law applies, and get in there and mix it up.

 

[catsmate]

OTOH bitcoin has no equal for transferring large sums of money around the world. International transfers involving regular currencies are subject to complex laws and hefty fees from governments and banks on both sides of the border. They can also take a long time to complete. With bitcoin, the transfer can be done in minutes at a cost of only a few mBTC.

Have you ever actually transferred large amounts of money internationally using real banks and currency? This is just silly.

Unless you can read graphs.

Indeed.

No, that graph is quite accurate. It's just damning to the concept that bitcoin is at all useful as a currency, and of course no criticism of bitcoin, no matter how valid, can be left unchallenged -- sort of like the gold bugs.

Absolutely true. Very reminiscent of goldbuggery.

What happens if your media gets corrupted?

Or lost. Oddly I've found three USB thumbdrives on the street this week, and I'm not out and about as much as usual.

Have you read about Stefan Thomas? It seems unlikely that it would ever happen, but somehow it still did. Apparently despite 3 backups the poor bloke managed to lose $125,000 worth of Bitcoins.

 

[psionl0]

Have you ever actually transferred large amounts of money internationally using real banks and currency? This is just silly.

You can pay for overseas purchases with your credit card provided the person at the other end is set up to receive credit card payments.

However, under Australian laws, you can't have money from overseas deposited into your credit card. The last time I collected $200 from someone overseas, it turned out that the only options were a check via snail mail or a "telegraphic" transfer. Either way, the fees associated with that were $40 and to add insult to injury, my local bank charged me $8 on top of that to process the payment. Businesses might have more options when moving money around internationally but not private individuals. Now that's silly.

As for the rest of your silly nonsense, if you have to present information in the most misleading manner possible to make bitcoin look bad then all you end up doing is proving the opposite.

 

[Belz...]

You can pay for overseas purchases with your credit card provided the person at the other end is set up to receive credit card payments.

Also true for Bitcoins.

However, under Australian laws, you can't have money from overseas deposited into your credit card.

But that's not a problem with the currency or the method, but with the law.

 

[psionl0]

Also true for Bitcoins.

The difference is that anybody can set themselves up to receive bitcoin payments within minutes by downloading and installing free software that is readily available.

But that's not a problem with the currency or the method, but with the law.

Yep.

 

[Tyke]

The last time I collected $200 from someone overseas, it turned out that the only options were a check via snail mail or a "telegraphic" transfer. Either way, the fees associated with that were $40 and to add insult to injury, my local bank charged me $8 on top of that to process the payment. Businesses might have more options when moving money around internationally but not private individuals. Now that's silly.

Isn't Western Union cheaper than that? I'm pretty sure there are FX companies that deal with personal customers and are also cheaper.

Doesn't it make sense that businesses are better catered for, considering there's greater demand than from private individuals?

And very wise too. Considering how the price of bitcoins escalates, If I were paid in bitcoins I would cash out the barest minimum I needed to get through the week and keep the rest of my wages in bitcoins too.

It's not a great endorsement if someone who's job it is to advocate Bitcoin as a currency is not using it that way.

That attempt at irony doesn't quite succeed. If the number purchases being paid for with bitcoins is increasing then the use of bitcoin as a currency will gather momentum (the rate of increase will increase). Even if it is not currently increasing, there is no reason to believe that the situation would remain static for very long.

You might find that bitcoin is currently not very useful for your requirements but you can't assume that this is how it will always be.

Then I have to ask - at what point do you think people will start using it like a currency?

It seems there are a few possible outcomes that include Bitcoin succeeding, but I think the people who see it as a way to sidestep government intervention are kidding themselves.

 

[AdMan]

This thing is a joke.

 

[psionl0]

Isn't Western Union cheaper than that? I'm pretty sure there are FX companies that deal with personal customers and are also cheaper.

Doesn't it make sense that businesses are better catered for, considering there's greater demand than from private individuals?

That was the best deal I could get at the time. Western Union can be used to send money overseas but that wasn't what I was trying to do.

If the banks want to treat their bigger customers better than others then that's their prerogative. However, I'm not going to use them if there is a cheaper alternative.

Some might say that there is a risk that the bitcoins might lose value between the time I receive them and the time I cash them in but that's a judgement call. Given the price history to date, that seems like a risk well worth taking.

It's not a great endorsement if someone who's job it is to advocate Bitcoin as a currency is not using it that way.

It's not my "job" to advocate bitcoin as a currency. I merely point out that it there can be some advantages to using it as a currency and the opportunities to do so have increased.

If you have read some of my posts then you will know that I have consistently said that it is better to hold onto them than to spend them.