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Major Bitcoin Exchange Ceases Operation
First time accepted submitter Sabbetus writes "On Monday the CEO of prominent Bitcoin exchange Tradehill announced that they are shutting down. Ars Technica ran a story on this stating that 'After Monday's news, the currency's value fell from $5.50 to $4.40, a decline of 20 percent.' Tradehill is returning all funds and meanwhile their competitors are fighting over who gets Tradehill's customers."
I disagree. As long as an exchange keeps identity records for all of its business and for all of the address endpoints it creates, it'd probably be able to comply with US Treasury Department regulations. Bitcoin isn't anonymous. Things only start to get murky once you are moving bitcoins around off an exchange, but that's not the exchange's problem.
Don't blame me, I voted for Baltar.
Technically true but in practice any institution that touches dollars ends up being bound to obey US law if it wants access to the international financial system.
The loss of Tradehill and the security breaches of other exchanges disrupted the confidence in using Bitcoin, but the protocols remained intact. I see this as a testament to the design of the system, even though a fundamental quality for any currency is the confidence of its users.
As a Bitcoin lurker (I've never owned anything more than 2 BTC), I've been intensely fascinated in the potential of this "currency." Without belaboring the great qualities of a decentralized currency, it has attracted a speculative class of users that have rushed into centralized exchanges using nervous money transmission providers. The irony is not lost on me.
Tradehill's departure and what I believe will be an eventual international agreement hobbling Bitcoin's biggest exchange Mt. Gox in Japan (a la UBS in Switzerland), due to tax evasion, ought to serve as a cautionary note to Bitcoin users. Money transmission is a confiscatorially regulated practice. Bitcoin's best hope ought to be transactions as decentralized as the protocol it uses.
Lurkers such as I can only hope of an ecosystem or application so widespread, so diversified, secure enough, and easy to use before Bitcoin can be considered useful to most internet users. I dream of a decentralized Facebook knock-off (e.g. diaspora*, etc.) with a Bitcoin client built in, making currency transmission as simple as tossing a dollar to a friend to buy a cup of coffee. Perhaps even at a coffee shop with patrons casually swapping US$ and BTC as they play chess or read.
Many of them. The US dollar is traded on all international currency markets and for a small scale, any bank will convert them. If it weren't, it wouldn't be very useful. If I pay someone in Europe in US dollars they are ok with that because they can convert them to Euros, which is what they need to do their business. If they couldn't, if US dollars were non-convertible, they'd be non-useful.
Also you have the problem that next to nobody accepts and deals in bitcoins directly. It isn't a functional currency. The US Dollar, the Euro, the Yen, these are all functional currencies because a lot of people will accept them as such. You can buy goods with them, pay taxes with them, etc. I cannot name a single thing I'd want to buy, a single place I shop at, that takes bitcoins. As such if they aren't convertible, they are worthless.