7 ms·

The SEC Shows Why Bitcoin Is Doomed

25 points by MikeCapone 13y ago

ferdo 13y ago
> They invented a very clever peer-to-peer payment system that also happens to enable fraud, tax avoidance, drug dealing and other sordid pursuits that governments won't abide for much longer. This sounds like cash. What's the problem? The status quo is annoyed because Cash 2.0 is better than the swill they're handing out at banks.
- etchalon 13y ago
  Cash is regulated. Bitcoin isn't. Looks like that's gonna change pretty quickly.
  - tlrobinson 13y ago
    US businesses that exchange Bitcoin are already considered money transmitters and thus subject to regulation. FinCEN issued guidelines earlier this year.
  - ferdo 13y ago
    They can't really regulate Bitcoin but they can regulate the people that want to do biz with it in public.
    - deleted 13y ago
      [deleted]
      - etchalon 13y ago
        No one said they could stop it, only that they could regulate it.
  - ihsw 13y ago
    "Bitcoin" encompasses multiple and distinctly separate concepts, namely: a transaction network, a currency, a wallet, and mining operations. Does the wallet in your pocket get regulated? No, that's silly. It's just a container for currency. Do the coins in your pocket get regulated? No, that's silly. It's just coins. Does the generation of money get regulated? Absolutely, it's more tightly controlled than most other activities are in humanity. How will they regulate BTC mining? It's not really possible, but they'll likely engage computer hardware vendors of all stripes and sizes (across the planet) to pool purchase order histories to the government. Do money transactions get regulated? Absolutely, it's another tightly controlled activity. How will they regulate BTC transactions? It's not really possible, but they'll likely engage BTC exchanges of all stripes and sizes (across the planet) to pool transaction histories to the government.
    - dragonwriter 13y ago
      > It's not really possible Both places this is used with regard to regulation, this claim needs to be justified. It seems to me it misunderstands what it means for it to possible to regulate something.
  - beambot 13y ago
    Cash is "regulated" by the Fed... a quasi-governmental agency shrouded in secrecy. How is bitcoin any worse / different?
    - etchalon 13y ago
      Really?
  - dragonwriter 13y ago
    > Cash is regulated. Bitcoin isn't. Bitcoin is covered by lots of existing regulations -- as keeps being demonstrated -- contrary lots of the hype advanced by proponents.
- dnskw 13y ago
  Nothing wrong with tax avoidance, drug dealing and certain other sordid pursuits.
deleted 13y ago
[deleted]
ihsw 13y ago
This article is riddled with factual errors, outright deception, and logical fallacies. It makes a variety of attempts to scare the reader (what if "Bitcoin gets hacked"? utter nonsense). They even make a claim that Bitcoin's anonymity may appeal to users, but it's been stressed repeatedly and constantly that the BTC transaction network is far from anonymous. Here is an excellent 3 minute video summary on Bitcoin: https://www.youtube.com/watch?v=CdVVECKKSXo https://www.youtube.com/watch?v=CdVVECKKSXo Far more informative and far less spin. It's even from Bloomberg -- the same news organization that's affording blog hosting to article's author.
- etchalon 13y ago
  As far as I can tell, nothing in the article is factually inaccurate. Why is it nonsense that Bitcoin _might_ get hacked? It's entirely possible, though perhaps improbable.
  - ihsw 13y ago
    The article writer describes "the system" getting hacked, but links to malware searching for wallet files. It's deceptive at best, and blatant lying at worst.
    - throwaway19047 13y ago
      Never attribute to malice that which is adequately explained by stupidity. This author doesn't know what he's talking about. Another example: He shows how the SEC can regulate the major bitcoin-cash exchanges, but the author never notices that there is a plenty large enough economy just inside the bitcoin network. The SEC can't regulate you if you use an anonymous Internet connection, and never exchange for real-world cash.
      - dragonwriter 13y ago
        > The SEC can't regulate you if you use an anonymous Internet connection, and never exchange for real-world cash. The SEC can regulate you if you do that and still fall within their jurisdiction. You may be meaning to argue that the SEC would have difficulty identifying and prosecuting illegal activity within their regulatory jurisdiction if you do that, but that's a very different argument than "cannot regulate".
codesuela 13y ago
tl:dr > The group of developers who came up with Bitcoin did not produce a viable replacement currency, a revolution or even a particularly wise investment opportunity. They invented a very clever peer-to-peer payment system that also happens to enable fraud, tax avoidance, drug dealing and other sordid pursuits that governments won't abide for much longer. article is basically a smear, little to none informational content
smutticus 13y ago
As long as there are things which can only be purchased with bitcoins they will always be relevant. If people can only buy drugs on the internet in bitcoins then bitcoins will continue to be used. I could possibly say the same about USD. As long as I must pay my taxes in USD the USD will always be relevant and continue to be used. There might be other things which also help to make the USD relevant, but this is its basis, its keystone point to being.
ianstallings 13y ago
The problem with this article is it's a straw man basically. The author argues that BTC appeals to people because of the lack of regulation but I would counter that's not the case, and the advantage is that you separate your currency from central banks and their inherent financial systems. Of course you will always be coupled to real world economies, financial industries, and the regulations that come with it. BTC isn't strictly about hiding your transactions, it's about decoupling from a currency system that many think is flawed.
- bryogenic 13y ago
  ... and to believe that BTC actually 'hides' your transactions in any real way is the naive assumption that just wont go away.
  - ianstallings 13y ago
    I agree. Right now I think the biggest hurdle to BTC truly is FUD. People are nervous when it comes to money. Probably a healthy skepticism. But judgements should be based on the truth. Right now it's hard to get the proverbial fair trial when it comes to BTC and the facts.
bryogenic 13y ago
> The closer Bitcoin gets to being an accepted currency, the less useful it will be as a method of exchange. And the less useful it is as a method of exchange, the harder it is to see why it has any value at all. I really don't understand how they are arriving at this 'contradiction'. Unless you really squint, there is really no support for it in the article. Codifying that virtual currencies have actual real-world value doesn't change anything about how the ecosystem/currency works. Am I missing something here?
- Shamanmuni 13y ago
  The paradox is that as Bitcoin gets more mainstream, in practical terms it will be more and more similar to "real" money. Bitcoin has been off the radar for the SEC, but as it gains notoriety there will certainly be an interest in regulating it. Imagine that tomorrow Bitcoin gets really big, it isn't crazy to think that many people will be worried about having all their money in the computer they use everyday and is connected to the Internet. Then some companies start offering a service which lets you deposit your bitcoins and they assure you that they won't get robbed and if they do, they will be held responsible for that. Oh, and they require you to have a verifiable identity for your account since that helps to prevent fraud. They just ask a monthly fee for the maintenance of your account and a small fee for every transaction you make through them. You have in front of you something similar to a bank. So, if you have to pay bureaucratic costs of regulation, and institutions like banks for Bitcoin, then it's not that different from the money we are used to. The one which also hasn't intrinsic value and for most of us is just a number in a computer anyway.
tlrobinson 13y ago
"so either users will willingly submit to a further deflationary spiral or, more likely, they'll clamor to expand the stock" This doesn't make any sense. Why would users care that their bitcoins are getting more valuable over time (i.e. deflation)? It sounds like the author is throwing around the term "deflationary spiral" without understanding what it actually means. Anyway, it's damn near impossible to "expand the stock". If somehow a majority of miners decide they want a larger reward the users who actually hold bitcoin can decide to ignore their fork. See "economic majority": https://en.bitcoin.it/wiki/Economic_majority https://en.bitcoin.it/wiki/Economic_majority
- Zigurd 13y ago
  Yeah, that line made me wonder about the article's author. He really appears not to know. It makes me suspect a lot of financial writing is like writing about cars. He's throwing stock phrases around.
Groxx 13y ago
>The closer Bitcoin gets to being an accepted currency, the less useful it will be as a method of exchange. Within America, due to taxes, etc.... possibly (marginally, arguably) true. America has many alternatives that are cheap or free and mostly reliable (paypal, google wallet, square, cash). In many other countries, and between countries? More legitimacy is purely a good thing.

25 points by MikeCapone 13y ago

ferdo 13y ago

> They invented a very clever peer-to-peer payment system that also happens to enable fraud, tax avoidance, drug dealing and other sordid pursuits that governments won't abide for much longer. This sounds like cash. What's the problem? The status quo is annoyed because Cash 2.0 is better than the swill they're handing out at banks.

etchalon 13y ago
Cash is regulated. Bitcoin isn't. Looks like that's gonna change pretty quickly.
- tlrobinson 13y ago
  US businesses that exchange Bitcoin are already considered money transmitters and thus subject to regulation. FinCEN issued guidelines earlier this year.
- ferdo 13y ago
  They can't really regulate Bitcoin but they can regulate the people that want to do biz with it in public.
  - deleted 13y ago
    [deleted]
    - etchalon 13y ago
      No one said they could stop it, only that they could regulate it.
- ihsw 13y ago
  "Bitcoin" encompasses multiple and distinctly separate concepts, namely: a transaction network, a currency, a wallet, and mining operations. Does the wallet in your pocket get regulated? No, that's silly. It's just a container for currency. Do the coins in your pocket get regulated? No, that's silly. It's just coins. Does the generation of money get regulated? Absolutely, it's more tightly controlled than most other activities are in humanity. How will they regulate BTC mining? It's not really possible, but they'll likely engage computer hardware vendors of all stripes and sizes (across the planet) to pool purchase order histories to the government. Do money transactions get regulated? Absolutely, it's another tightly controlled activity. How will they regulate BTC transactions? It's not really possible, but they'll likely engage BTC exchanges of all stripes and sizes (across the planet) to pool transaction histories to the government.
  - dragonwriter 13y ago
    > It's not really possible Both places this is used with regard to regulation, this claim needs to be justified. It seems to me it misunderstands what it means for it to possible to regulate something.
- beambot 13y ago
  Cash is "regulated" by the Fed... a quasi-governmental agency shrouded in secrecy. How is bitcoin any worse / different?
  - etchalon 13y ago
    Really?
- dragonwriter 13y ago
  > Cash is regulated. Bitcoin isn't. Bitcoin is covered by lots of existing regulations -- as keeps being demonstrated -- contrary lots of the hype advanced by proponents.
dnskw 13y ago
Nothing wrong with tax avoidance, drug dealing and certain other sordid pursuits.

deleted 13y ago

[deleted]

ihsw 13y ago

This article is riddled with factual errors, outright deception, and logical fallacies. It makes a variety of attempts to scare the reader (what if "Bitcoin gets hacked"? utter nonsense). They even make a claim that Bitcoin's anonymity may appeal to users, but it's been stressed repeatedly and constantly that the BTC transaction network is far from anonymous. Here is an excellent 3 minute video summary on Bitcoin: https://www.youtube.com/watch?v=CdVVECKKSXo https://www.youtube.com/watch?v=CdVVECKKSXo Far more informative and far less spin. It's even from Bloomberg -- the same news organization that's affording blog hosting to article's author.

etchalon 13y ago
As far as I can tell, nothing in the article is factually inaccurate. Why is it nonsense that Bitcoin _might_ get hacked? It's entirely possible, though perhaps improbable.
- ihsw 13y ago
  The article writer describes "the system" getting hacked, but links to malware searching for wallet files. It's deceptive at best, and blatant lying at worst.
  - throwaway19047 13y ago
    Never attribute to malice that which is adequately explained by stupidity. This author doesn't know what he's talking about. Another example: He shows how the SEC can regulate the major bitcoin-cash exchanges, but the author never notices that there is a plenty large enough economy just inside the bitcoin network. The SEC can't regulate you if you use an anonymous Internet connection, and never exchange for real-world cash.
    - dragonwriter 13y ago
      > The SEC can't regulate you if you use an anonymous Internet connection, and never exchange for real-world cash. The SEC can regulate you if you do that and still fall within their jurisdiction. You may be meaning to argue that the SEC would have difficulty identifying and prosecuting illegal activity within their regulatory jurisdiction if you do that, but that's a very different argument than "cannot regulate".

codesuela 13y ago

tl:dr > The group of developers who came up with Bitcoin did not produce a viable replacement currency, a revolution or even a particularly wise investment opportunity. They invented a very clever peer-to-peer payment system that also happens to enable fraud, tax avoidance, drug dealing and other sordid pursuits that governments won't abide for much longer. article is basically a smear, little to none informational content

smutticus 13y ago

As long as there are things which can only be purchased with bitcoins they will always be relevant. If people can only buy drugs on the internet in bitcoins then bitcoins will continue to be used. I could possibly say the same about USD. As long as I must pay my taxes in USD the USD will always be relevant and continue to be used. There might be other things which also help to make the USD relevant, but this is its basis, its keystone point to being.

ianstallings 13y ago

The problem with this article is it's a straw man basically. The author argues that BTC appeals to people because of the lack of regulation but I would counter that's not the case, and the advantage is that you separate your currency from central banks and their inherent financial systems. Of course you will always be coupled to real world economies, financial industries, and the regulations that come with it. BTC isn't strictly about hiding your transactions, it's about decoupling from a currency system that many think is flawed.

bryogenic 13y ago
... and to believe that BTC actually 'hides' your transactions in any real way is the naive assumption that just wont go away.
- ianstallings 13y ago
  I agree. Right now I think the biggest hurdle to BTC truly is FUD. People are nervous when it comes to money. Probably a healthy skepticism. But judgements should be based on the truth. Right now it's hard to get the proverbial fair trial when it comes to BTC and the facts.

bryogenic 13y ago

> The closer Bitcoin gets to being an accepted currency, the less useful it will be as a method of exchange. And the less useful it is as a method of exchange, the harder it is to see why it has any value at all. I really don't understand how they are arriving at this 'contradiction'. Unless you really squint, there is really no support for it in the article. Codifying that virtual currencies have actual real-world value doesn't change anything about how the ecosystem/currency works. Am I missing something here?

Shamanmuni 13y ago
The paradox is that as Bitcoin gets more mainstream, in practical terms it will be more and more similar to "real" money. Bitcoin has been off the radar for the SEC, but as it gains notoriety there will certainly be an interest in regulating it. Imagine that tomorrow Bitcoin gets really big, it isn't crazy to think that many people will be worried about having all their money in the computer they use everyday and is connected to the Internet. Then some companies start offering a service which lets you deposit your bitcoins and they assure you that they won't get robbed and if they do, they will be held responsible for that. Oh, and they require you to have a verifiable identity for your account since that helps to prevent fraud. They just ask a monthly fee for the maintenance of your account and a small fee for every transaction you make through them. You have in front of you something similar to a bank. So, if you have to pay bureaucratic costs of regulation, and institutions like banks for Bitcoin, then it's not that different from the money we are used to. The one which also hasn't intrinsic value and for most of us is just a number in a computer anyway.

tlrobinson 13y ago

"so either users will willingly submit to a further deflationary spiral or, more likely, they'll clamor to expand the stock" This doesn't make any sense. Why would users care that their bitcoins are getting more valuable over time (i.e. deflation)? It sounds like the author is throwing around the term "deflationary spiral" without understanding what it actually means. Anyway, it's damn near impossible to "expand the stock". If somehow a majority of miners decide they want a larger reward the users who actually hold bitcoin can decide to ignore their fork. See "economic majority": https://en.bitcoin.it/wiki/Economic_majority https://en.bitcoin.it/wiki/Economic_majority

Zigurd 13y ago
Yeah, that line made me wonder about the article's author. He really appears not to know. It makes me suspect a lot of financial writing is like writing about cars. He's throwing stock phrases around.

Groxx 13y ago

>The closer Bitcoin gets to being an accepted currency, the less useful it will be as a method of exchange. Within America, due to taxes, etc.... possibly (marginally, arguably) true. America has many alternatives that are cheap or free and mostly reliable (paypal, google wallet, square, cash). In many other countries, and between countries? More legitimacy is purely a good thing.