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When things like this happen, I try to explain to the skeptics why I will always have faith in Bitcoin. Suppose you make a Bitcoin service where they print you

When things like this happen, I try to explain to the skeptics why I will always have faith in Bitcoin. Suppose you make a Bitcoin service where they print your keys onto pieces of paper and store them in a big vault. When people want to withdraw coins, they must visit the vault location and take money out, where the transaction is verified by a physically present person. The owner of the vault could also release an API to allow trusted third parties to conduct transactions on behalf of the people who deposited Bitcoins in the vault. We wouldn't need to worry about hackers, and if the vault is strong enough we wouldn't need to worry about thieves. But we would have to worry about the banker. The owner of the vault can devise ways to increase the apparent value of his vault, through financial mechanisms like derivatives and credit default swaps. To prevent this from happening, we could get a big organization with lots of guns and power to regulate the actions of the banker. But then again, the banker controls all your Bitcoins, so he can just use your money to pay off the people with all the guns and power. Nowadays, everything is for sale, everything can be stolen, and nothing is what it seems. That's why I have a lot of faith in Bitcoin. Even though we haven't figured out how to make a good vault, there's no real place for crooked bankers and powerful organizations.

tbb 13y ago
We already do have such vaults. At least most traditional banks in Europe have storage vaults for their clients. e.g. you can lend 1 usually quite cheaply, e.g. 60eur / year. A bank teller is always present while you're making a withdrawal, and you need 2 keys to open your vault. 1 key from the teller, and 1 key from you. The chances of this kind of vault getting robbed is very, very slim. If you're worried about that, you can BIP38 encrypt your paper wallet's private keys, so its impossible to use them even if paper itself is stolen. There is also some chance that the vault will be struck by a flood, earthquake etc. For that, I recommend using a USB as a back-up, where the keys are encrpyted using truecrpyt etc, and the physical drive itself being kept in a very secret location, ideally located in a different city than the bank vault itself, so that the chances of being affected by the same disaster as your vault is minimized. This is almost a failproof setup in my opinion (you can worry about loosing your Bip38 or truecrypt encryption keys, or what happens if you die etc -- there are good ideas about how to deal with these kind of circumstances as well, e.g. write a hint for BIP38 key which only you or your family may understand on the paper wallet). So best place to store your wallet might very well be your good old bank, ironic enough.
- Cthulhu_ 13y ago
  And to use paper money (USD, EUR, etc), which are much more stable in their value than BTC and the like are.
fauigerzigerk 13y ago
That's a very weak argument. We just had the biggest financial crisis since the 1930s and not a single saver in the U.S lost their funds in a regular bank account. Here's the secret: Deposit insurance. Bitcoin related organizations are well advised to start copying some of the good parts of the traditional financial system instead of just pointing at its weaknesses. Some have already started: http://www.bbc.com/news/technology-25680016 http://www.bbc.com/news/technology-25680016
- maxerickson 13y ago
  That's not strictly true, people lose money above the insurance limit all the time. The reports here frequently discuss it: http://www.fdic.gov/bank/individual/failed/banklist.html http://www.fdic.gov/bank/individual/failed/banklist.html If you go here, you see depositors not being made whole: http://www2.fdic.gov/divweb/index.asp#bottom http://www2.fdic.gov/divweb/index.asp#bottom But $250,000 of insurance for each account is much better than none.
  - pjc50 13y ago
    Neither of those two citations actually list or enumerate people losing any value of their deposits. They just describe the process by which it would happen. (That's a lot of banks! The US system seems quite fragmented?)
    - maxerickson 13y ago
      If you select "All Banks" in the drop down at the bottom and run a report, you see a bunch of "Final" dividends where the percent paid is less than 100%. I'm pretty sure that's people losing value of their deposits. (remember, those are 'dividends to claimants' and the claimant listed is almost always 'depositors')
      - ars 13y ago
        If you have more than $250,000 and didn't use one of these services[1] then you were really negligent with your money. [1]http://www.bankrate.com/finance/savings/6-ways-to-insure-excess-deposits.aspx http://www.bankrate.com/finance/savings/6-ways-to-insure-exc... Basically there are banks that will divide your money amongst a bunch of independent banks, and let you access the money as if it were all in one bank.
Perdition 13y ago
Those guys with all the guns and power will still make sure you pay your taxes, to do so you will need to exchange your bitcoin for fiat, and the crooked bankers will just insert themselves in the exchange process. Bitcoin as a solution to human greed and corruption will work as well as Communism did.
pron 13y ago
Oh, dear Lord. It's comments like this that make people skeptical about Bitcoin in the first place, because it demonstrates that BTC supporters don't understand what the economy, or even money, is. Ok, when I studied history many years ago, I took a class in early modern Europe (think 15-16th centuries). That was when modern capitalism first gradually appeared. The most important thing to understand about the origins of modern capitalism is the change in society it required. That change was the transition from a face-to-face society (where you personally knew all the people you transacted with) to a society of strangers, where you had to put faith not only in complete strangers, but in people whom you'd never met and never would meet. Most importantly, you had to put faith in institutions. That was when the first institutions started, modeled after the oldest institution of all, the Roman Catholic Church. There was a time when there were no institutions (well, other than the church). People couldn't even understand the concept of an institution: they knew there was a guy named John and a guy named Paul, but what the hell is a group of people that has an identity of its own, and lasts more than its members? Anyway, modern capitalism required institutions, most important among which were banks and insurers. Insurers reduced risks and encouraged investment while bankers lent money to support such investments. Now, when you put your money in the bank, it has to be loaned to others, otherwise the economy will come to a standstill. You have to put faith in the bank to get the money back to you. Same with insurance. You have to have faith in the insurer to pay your claim, or, at the very least, faith in the court to compel the insurer to pay up. The way you look at BTC, disconnects money, a central instrument in the economy, from the economy at large. That doesn't make sense, and even if no one ever steals your money, your money won't "work", because there will be no economy to use it in. A modern economy is built on trust. Trust that in the long run, most people will be honest because that's what's best for them, and they know it. If we don't have trust in institutions, there will be no economy to speak of, or, rather, there will be a very primitive one (only, this time, with computers). In that case, I suggest you take good care of your machine, because in your utopia there will be no new models coming out. Sheesh, how some people, in time of crisis, cling to their laptops and algorithms.
- jnbiche 13y ago
  Argh! It's comments like this that make me wonder if you history buffs out there will ever understand that we're entering a new phase of economic history: a trustless one. All of these spectacular exchange failures out there have nothing to do with Bitcoin itself. Go read up on trustless cryptographic systems, and understand that we're entering a different era. The failures that occur around the periphery of Bitcoin are nothing more than a fault line between the old system (trust in failing institutions) to a new one (trustless). Signed, A humanities major back in college (yeah, I studied economic history, too)

tbb 13y ago

We already do have such vaults. At least most traditional banks in Europe have storage vaults for their clients. e.g. you can lend 1 usually quite cheaply, e.g. 60eur / year. A bank teller is always present while you're making a withdrawal, and you need 2 keys to open your vault. 1 key from the teller, and 1 key from you. The chances of this kind of vault getting robbed is very, very slim. If you're worried about that, you can BIP38 encrypt your paper wallet's private keys, so its impossible to use them even if paper itself is stolen. There is also some chance that the vault will be struck by a flood, earthquake etc. For that, I recommend using a USB as a back-up, where the keys are encrpyted using truecrpyt etc, and the physical drive itself being kept in a very secret location, ideally located in a different city than the bank vault itself, so that the chances of being affected by the same disaster as your vault is minimized. This is almost a failproof setup in my opinion (you can worry about loosing your Bip38 or truecrypt encryption keys, or what happens if you die etc -- there are good ideas about how to deal with these kind of circumstances as well, e.g. write a hint for BIP38 key which only you or your family may understand on the paper wallet). So best place to store your wallet might very well be your good old bank, ironic enough.

Cthulhu_ 13y ago
And to use paper money (USD, EUR, etc), which are much more stable in their value than BTC and the like are.

fauigerzigerk 13y ago

That's a very weak argument. We just had the biggest financial crisis since the 1930s and not a single saver in the U.S lost their funds in a regular bank account. Here's the secret: Deposit insurance. Bitcoin related organizations are well advised to start copying some of the good parts of the traditional financial system instead of just pointing at its weaknesses. Some have already started: http://www.bbc.com/news/technology-25680016 http://www.bbc.com/news/technology-25680016

maxerickson 13y ago
That's not strictly true, people lose money above the insurance limit all the time. The reports here frequently discuss it: http://www.fdic.gov/bank/individual/failed/banklist.html http://www.fdic.gov/bank/individual/failed/banklist.html If you go here, you see depositors not being made whole: http://www2.fdic.gov/divweb/index.asp#bottom http://www2.fdic.gov/divweb/index.asp#bottom But $250,000 of insurance for each account is much better than none.
- pjc50 13y ago
  Neither of those two citations actually list or enumerate people losing any value of their deposits. They just describe the process by which it would happen. (That's a lot of banks! The US system seems quite fragmented?)
  - maxerickson 13y ago
    If you select "All Banks" in the drop down at the bottom and run a report, you see a bunch of "Final" dividends where the percent paid is less than 100%. I'm pretty sure that's people losing value of their deposits. (remember, those are 'dividends to claimants' and the claimant listed is almost always 'depositors')
    - ars 13y ago
      If you have more than $250,000 and didn't use one of these services[1] then you were really negligent with your money. [1]http://www.bankrate.com/finance/savings/6-ways-to-insure-excess-deposits.aspx http://www.bankrate.com/finance/savings/6-ways-to-insure-exc... Basically there are banks that will divide your money amongst a bunch of independent banks, and let you access the money as if it were all in one bank.

Perdition 13y ago

Those guys with all the guns and power will still make sure you pay your taxes, to do so you will need to exchange your bitcoin for fiat, and the crooked bankers will just insert themselves in the exchange process. Bitcoin as a solution to human greed and corruption will work as well as Communism did.

pron 13y ago

Oh, dear Lord. It's comments like this that make people skeptical about Bitcoin in the first place, because it demonstrates that BTC supporters don't understand what the economy, or even money, is. Ok, when I studied history many years ago, I took a class in early modern Europe (think 15-16th centuries). That was when modern capitalism first gradually appeared. The most important thing to understand about the origins of modern capitalism is the change in society it required. That change was the transition from a face-to-face society (where you personally knew all the people you transacted with) to a society of strangers, where you had to put faith not only in complete strangers, but in people whom you'd never met and never would meet. Most importantly, you had to put faith in institutions. That was when the first institutions started, modeled after the oldest institution of all, the Roman Catholic Church. There was a time when there were no institutions (well, other than the church). People couldn't even understand the concept of an institution: they knew there was a guy named John and a guy named Paul, but what the hell is a group of people that has an identity of its own, and lasts more than its members? Anyway, modern capitalism required institutions, most important among which were banks and insurers. Insurers reduced risks and encouraged investment while bankers lent money to support such investments. Now, when you put your money in the bank, it has to be loaned to others, otherwise the economy will come to a standstill. You have to put faith in the bank to get the money back to you. Same with insurance. You have to have faith in the insurer to pay your claim, or, at the very least, faith in the court to compel the insurer to pay up. The way you look at BTC, disconnects money, a central instrument in the economy, from the economy at large. That doesn't make sense, and even if no one ever steals your money, your money won't "work", because there will be no economy to use it in. A modern economy is built on trust. Trust that in the long run, most people will be honest because that's what's best for them, and they know it. If we don't have trust in institutions, there will be no economy to speak of, or, rather, there will be a very primitive one (only, this time, with computers). In that case, I suggest you take good care of your machine, because in your utopia there will be no new models coming out. Sheesh, how some people, in time of crisis, cling to their laptops and algorithms.

jnbiche 13y ago
Argh! It's comments like this that make me wonder if you history buffs out there will ever understand that we're entering a new phase of economic history: a trustless one. All of these spectacular exchange failures out there have nothing to do with Bitcoin itself. Go read up on trustless cryptographic systems, and understand that we're entering a different era. The failures that occur around the periphery of Bitcoin are nothing more than a fault line between the old system (trust in failing institutions) to a new one (trustless). Signed, A humanities major back in college (yeah, I studied economic history, too)