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This article is correct in stating that trust and reputation is a serious problem for Bitcoin. But I don't think the article diagnoses exactly what is causing

This article is correct in stating that trust and reputation is a serious problem for Bitcoin. But I don't think the article diagnoses exactly what is causing it. After all - there is nothing in all these negative headlines that give you a strong reason to believe that the Bitcoin ecosystem is less reliable overall than more traditional institutions. For every Bitcoin related scandal you can find an enormous number relating to the traditional financial system. The Bernie Madoff ponzi scheme alone was six times the size of the entire Bitcoin market cap at the moment. Yet every Bitcoin related scandal is interpreted by commentators as a sign of the anarchic failure of its central premise; while every scandal relating to the traditional sector does nothing at all to impede its reputation as the default way of doing business. I presume the explanation for this bias than a deep and abiding fear of distributed consensus - not just in the authorities and institutions that would lose their power; but in the culture at large. What else could it be? I don't know what you should do to combat that - but it's clear to me that this is the fundamental idea that needs to be targeted.

jacquesm 12y ago
Any kind of new monetary device will attract good and bad people, bitcoin has had a number of very high profile versions of the latter but what seems to be the problem here is that instead of attributing that to the people it is wrongly attributed to bitcoin as an institution. At this point in time even though there isn't anything wrong in particular with bitcoin it is still safe to say the brand has been damaged.
Nursie 12y ago
>> The Bernie Madoff ponzi scheme alone People who invest tons of cash in schemes like this, or in fact make investments at all, should be doing a lot of due diligence. Investment is not something that Joe Average thinks about much, if he can help it. He doesn't have millions of dollars, he probably has small-scale retirement funds managed by companies he didn't even choose by himself, just some default adopted at some point. Any cash he's sitting on is managed by other people as well, and is protected and insured in a variety of ways. Joe looks at Bitcoin and sees there have been scams and hacks by the dozen, and that when they happen there is little to no comeback, legal or otherwise. Some of the perps were the people running the services. He's probably also heard about the Silk Road. When it comes down to it he probably doesn't have a clue about computer security so there's no way in hell he's going to keep his cash on his own computer in a file he could lose with a hard-drive crash, that a hacker could steal from an infected machine. And if he's going to trust a third party with his money, why a bitcoin third party? There's no compelling reason to use bitcoin anyway when he has a credit card, and the credit card has the insurance and chargeback facilities that make Joe feel comparatively safe. I realise that from a technology standpoint most of this stuff is not specific to bitcoin. But where money is concerned I doubt the technically-correct* standpoint is going to win. I think the fear of distributed consensus might well be there too, but it's probably waaaay down the list of concerns, if most people even have any idea what it is. (*the best kind of correct!)
- logicallee 12y ago
  madoff's scheme worked precisely because people did do due dilligence. they shouldn't. they should have just asked him how he got the returns, and rejected his offer when he didn't have a compelling answer. EDIT: someone asked why the paragraphs aren't contradictory. The thing about due dilligence is that to me it sounds like looking into past investors and other things, doing reference checks. The thing about ponzi schemes is that until they crash, they produce lots of high-quality references. In the case of Madoff, people who have received reasonable returns from him for 20 years. He also managed charities' money, as well as contributed civicly. None of these stuff matters, though, because despite the stellar references (which is what makes ponzi schemes work) there is no underlying way to actually generate returns.
  - maxerickson 12y ago
    Now explain how those paragraphs aren't contradictory. Your second paragraph is certainly a reasonable step in a comprehensive appraisal. edit: Due diligence means understanding the thing you are investing in. For something like investing millions of dollars with Madoff, that includes more than asking his other customers what their returns were.
  - Nursie 12y ago
    That's not enough due diligence then. Further I guess I didn't make things clear - Joe Average (hell, let's say it's me) sees investments, particularly rich-people investments, as a separate class of transaction from his day to day use of money. There is risk involved. You have to take care of what you're doing. The idea that someone might just run off with his bank account, either through operator fraud or through hacking of a service or his own machine, and there not being much anyone can do about it, is pretty terrifying.
- grovulent 12y ago
  I think you're not quite seeing my point. I agree that something like what you wrote is likely descriptive (very roughly) of the conscious thoughts of the average punter - but what we need here is an explanation of WHY this is going through the average punter's head. And such an explanation is not necessarily going to be something that is included on their conscious list of concerns (though it might). What you have reiterated here is just what the article has already said. We already know facts like: - Punter hears about silk road, associates Bitcoin with illegal drug markets. What we want to know is why hearing such a fact causes such an association. Now you might think that there is no explanation here that is needed beyond how reputations are assigned generally by human societies. You might just think that - well, it's natural to associate a low reputation score to a system when you hear headlines about Silk Road style marketplaces, and so there is nothing more to say here. I'm saying - no, there is something more going on here than just standard reputation assignment. Why? Well - as I said before - because for every negative headline that is supposed to prove Bitcoin's low reputation, we can produce a fact about the traditional system that completely trumps the negative bitcoin headline. As another example since you mentioned Silk Road. What is the financial instrument used overwhelmingly by the world's drug dealers to exchange value? It is the U.S. 100 dollar bill. But is the reputation of the U.S. dollar impacted by this? Not at all. The even greater irony is that while the Bitcoin ecosystem overall gets branded as the province of nutbar libertarians that love drug dealers - the U.S. government is renown the world over for fighting the war on drugs. Except the U.S. has done nothing to remove the hundred dollar bills that drug dealers love to use. There is no greater single act the U.S. government could do to fight the drug cartels. It doesn't do it. So the reputation assignments here are odd to say the least. They certainly aren't consistent. This is something that cries out for explanation.

jacquesm 12y ago

Any kind of new monetary device will attract good and bad people, bitcoin has had a number of very high profile versions of the latter but what seems to be the problem here is that instead of attributing that to the people it is wrongly attributed to bitcoin as an institution. At this point in time even though there isn't anything wrong in particular with bitcoin it is still safe to say the brand has been damaged.

Nursie 12y ago

>> The Bernie Madoff ponzi scheme alone People who invest tons of cash in schemes like this, or in fact make investments at all, should be doing a lot of due diligence. Investment is not something that Joe Average thinks about much, if he can help it. He doesn't have millions of dollars, he probably has small-scale retirement funds managed by companies he didn't even choose by himself, just some default adopted at some point. Any cash he's sitting on is managed by other people as well, and is protected and insured in a variety of ways. Joe looks at Bitcoin and sees there have been scams and hacks by the dozen, and that when they happen there is little to no comeback, legal or otherwise. Some of the perps were the people running the services. He's probably also heard about the Silk Road. When it comes down to it he probably doesn't have a clue about computer security so there's no way in hell he's going to keep his cash on his own computer in a file he could lose with a hard-drive crash, that a hacker could steal from an infected machine. And if he's going to trust a third party with his money, why a bitcoin third party? There's no compelling reason to use bitcoin anyway when he has a credit card, and the credit card has the insurance and chargeback facilities that make Joe feel comparatively safe. I realise that from a technology standpoint most of this stuff is not specific to bitcoin. But where money is concerned I doubt the technically-correct* standpoint is going to win. I think the fear of distributed consensus might well be there too, but it's probably waaaay down the list of concerns, if most people even have any idea what it is. (*the best kind of correct!)

logicallee 12y ago
madoff's scheme worked precisely because people did do due dilligence. they shouldn't. they should have just asked him how he got the returns, and rejected his offer when he didn't have a compelling answer. EDIT: someone asked why the paragraphs aren't contradictory. The thing about due dilligence is that to me it sounds like looking into past investors and other things, doing reference checks. The thing about ponzi schemes is that until they crash, they produce lots of high-quality references. In the case of Madoff, people who have received reasonable returns from him for 20 years. He also managed charities' money, as well as contributed civicly. None of these stuff matters, though, because despite the stellar references (which is what makes ponzi schemes work) there is no underlying way to actually generate returns.
- maxerickson 12y ago
  Now explain how those paragraphs aren't contradictory. Your second paragraph is certainly a reasonable step in a comprehensive appraisal. edit: Due diligence means understanding the thing you are investing in. For something like investing millions of dollars with Madoff, that includes more than asking his other customers what their returns were.
- Nursie 12y ago
  That's not enough due diligence then. Further I guess I didn't make things clear - Joe Average (hell, let's say it's me) sees investments, particularly rich-people investments, as a separate class of transaction from his day to day use of money. There is risk involved. You have to take care of what you're doing. The idea that someone might just run off with his bank account, either through operator fraud or through hacking of a service or his own machine, and there not being much anyone can do about it, is pretty terrifying.
grovulent 12y ago
I think you're not quite seeing my point. I agree that something like what you wrote is likely descriptive (very roughly) of the conscious thoughts of the average punter - but what we need here is an explanation of WHY this is going through the average punter's head. And such an explanation is not necessarily going to be something that is included on their conscious list of concerns (though it might). What you have reiterated here is just what the article has already said. We already know facts like: - Punter hears about silk road, associates Bitcoin with illegal drug markets. What we want to know is why hearing such a fact causes such an association. Now you might think that there is no explanation here that is needed beyond how reputations are assigned generally by human societies. You might just think that - well, it's natural to associate a low reputation score to a system when you hear headlines about Silk Road style marketplaces, and so there is nothing more to say here. I'm saying - no, there is something more going on here than just standard reputation assignment. Why? Well - as I said before - because for every negative headline that is supposed to prove Bitcoin's low reputation, we can produce a fact about the traditional system that completely trumps the negative bitcoin headline. As another example since you mentioned Silk Road. What is the financial instrument used overwhelmingly by the world's drug dealers to exchange value? It is the U.S. 100 dollar bill. But is the reputation of the U.S. dollar impacted by this? Not at all. The even greater irony is that while the Bitcoin ecosystem overall gets branded as the province of nutbar libertarians that love drug dealers - the U.S. government is renown the world over for fighting the war on drugs. Except the U.S. has done nothing to remove the hundred dollar bills that drug dealers love to use. There is no greater single act the U.S. government could do to fight the drug cartels. It doesn't do it. So the reputation assignments here are odd to say the least. They certainly aren't consistent. This is something that cries out for explanation.