Could Bitcoin Go Legit?

Velcroman1 writes "On May 15, the Department of Homeland Security seized a digital bank account used by 'MtGox,' the world's largest exchange, where people buy and sell bitcoins. DHS alleged, and a judge agreed, that there is 'probable cause' that MtGox is an 'unlicensed money service business.' If proven, the penalty for operating such a business is a fine and up to 5 years in jail. FoxNews.com caught up with several bitcoin exchanges, including CampBX, MtGox, CoinLab and more, to ask them how they've navigated the regulatory waters — and how to go legit." In other shady bitcoin news, it appears the demise of Liberty Reserve has caused hackers to find a new alternative. twoheadedboy writes "Despite suggestions Bitcoin might be the ideal currency for dealers on the dark web, it appears Perfect Money, a Panama-based operation, is proving the most popular alternative to the now-defunct Liberty Reserve. A source working the underground forums told TechWeekEurope that, for now, fraudsters are rapidly migrating to Perfect Money. Many vendors have started accepting it, having previously primarily used Liberty Reserve, which was shut down following the arrest of its founder and four other members this past week. Internet fraudsters might be interested in Perfect Money as it has distanced itself from the U.S., cutting off all new American registrations. However, one forum user said he was turned down by Perfect Money as their 'type of activity is not welcome.' Other currencies may yet win out."

Comments

Bitcoin is already legit

[Anonymous Coward]

Bitcoin, whether you are a believer in government funny money or not, is a legitimate currency, like any other currency that is used as a substitution or a value representation for goods and services.

Also, the economic impact of Bitcoin is huge. People are spending millions developing ASICs to mine what bitcoins remain, even though more than half of them have already been awarded and it endeavors to be a scarce new resource. And, it's still barely profitable to mine with GPUs, so that is also a thriving industry.

I, for one, am waiting for the Bitcoin GPU bust when the ASICs come out in volume and used GPUs flood the market for cheap as people scramble to buy ASICs.

Like it or not, there are people who accept BTC as payment for goods and services, and there is a somewhat thriving market for them. That is legitimacy.

Re:Feathercoin - Bitcoin Alternative

[Anonymous Coward]

http://forum.feathercoin.com/index.php?topic=1059.0

[IMMEDIATE ACTION NEEDED] Post some Feathercoin Love over at Slashdot

Looks like crypto-currencies are to be the new pyramid scheme/multi-level marketing. BitCoin has a chance because it was the first of it's kind, so people were all going to choice it. A million new crypto-currencies will never take off.

Offshore

[LordLucless]

"Legit" is a meaningless qualifier. If a currency is legitimate when it can be exchanged for goods and services, then Bitcoin is already legit. If a currency is legitimate when it's approved of by your government of choice, then no, Bitcoin will never be "legitimate". If that's your definition, though, the real question is "why is legitimacy necessary?"

What will happen is probably what has already happened to other areas that have been persecuted by the US government at the behest of incumbent industries: they'll just move off-shore.

Re:Offshore

[UnknownSoldier]

> > If that's your definition, though, the real question is "why is legitimacy necessary?"

That's exactly the root of the problem!

Why do we need a government to decide what is Legitimate Digital Currency?

In many countries citizens ARE allowed to use a local currency:
      http://en.wikipedia.org/wiki/Local_currency

It seems to me that governments are trying to hold onto an archaic model of control based on fear. People need to stand up and tell the government to literally "But Out" of their business. The same shit happened with encryption before the government got a clue stick and realized that they have absolutely NO business trying to regulate how people use Math.

It seems to me that the design of Bitcoins is designed for both accountability and authority. I've yet to see a better digital design. What are _valid_ criticism of bitcoins?

Re:Offshore

[girlintraining]

"why is legitimacy necessary?"

Because money laundering operations, like drugs and other black market trade, is one of the ways terrorists fund their activities. That's the short answer. The longer answer is more complicated. The problem with draconian enforcement options like this is it drives things underground. Organized crime got its start in this country due to the Prohibition; By making a popular activity illegal and driving it underground, they forced people to turn to the underground. Cigarettes and other "sin products" are showing similar trends; Where I live, trucks are now arriving from Canada carrying nothing but cartons of cigarettes because the tax rates have become so high that some people have started turning to the black market to purchase them. The historical 'Boston tea party' incident was another such reaction to this -- while the mantra at the time was 'no taxation without representation,' what it was really about was an overly burdensome tax, and people started seeking out alternatives, as well as publicly venting their frustration. File sharing is another example -- the product has become so grossly-overpriced that it has fueled all kinds of technologies dedicated to getting around what could be termed the 'RIAA/MPAA tax'.

I forget the name, but in Macroeconomics, there's a theory that suggests that whenever you raise the tax rate, you get diminishing returns because more people look for ways to avoid the tax. Beyond a certain point, a higher tax rate actually results in less tax collected. To paraphrase a US Supreme Court Justice, "The power to tax is the power to destroy."

But what does all this have to do with Bitcoin and making it legitimate? When you have currencies not controlled by the government like Bitcoin, taxes aren't being collected. Yes, there may also be criminal activity associated with the currency, but that's only because criminal activity is like water -- it seeks the lowest point, the most efficient path. Government creates resistance in market forces for both legal and illegal, legitimate and illegitimate goods and services alike. In the 60s, numerous grass-roots efforts were made to create alternative currencies, and all of them were aggressively attacked by the FBI and Secret Service, for the same reasons Bitcoin is being hit today. There is an old saying; Don't believe what they tell you, follow the money.

Now, all that said, these government actions have the effect of driving things underground where they can't be tracked. The problem is though that the guy who wants to buy a dime sack of weed is not really a threat to anyone; but the guy who wants to buy shoulder-mounted missiles and bomb components is. But when you drive the hundreds of thousands of people who just want a dime sack underground, it gives the terrorists a place to hide. That's the problem with the black market: When it targets something that's popular, socially acceptable, or whatever, for political reasons rather than as a reflection of the people's will, you create an area for undesireable elements to flourish.

Take file sharing; All of this encryption and peer to peer networking would never have arisen if the government hadn't started punishing grandmas and college kids for doing it. The response was so disproportionate to the harm to society, and it was against commonly-held values by the general public, that it resulted in an immediate creation of a digital underground. And within a few years, the technologies developed to fend off the government found their way into the hands of "cyber" criminals; witness the rise of advanced persistent threats, botnets, and nation-funded espionage and sabotage, much of which uses the same technology created for a much less nefarious purpose: People just wanted to listen to music. Now our power grid, hospitals, dams, and other industrial infrastructure is at risk.

And now we have a real big problem. The government is correct: Bitcoin does attract the criminal element. In large numbers. What they

Re:Do your part to kill it

[Anonymous Coward]

You do realize that is exactly what people who mine BitCoin want you to do, right? They make 0.0005 BTC (currently 6.5 cents) each time you move money. If you elect not to include the transaction fee, miners will typically drop your transaction on the floor.

I know I won't stop you, but then again, I mine BitCoins and could use your money. Have fun!

BTW: Weird you got a +1 for your dumb idea. Typical slashdot retard moderators.

Re:Could Bitcoin Go Legit?

[xenoc_1]

Right, and e-gold before it. Only criminals and terrorists have any need for an alternative, secure, somewhat anonymous, non-government-controlled (really non-Corporatocracy Bankster-controlling-government-controlled) currency. Think of the children. Think of the Homeland! Do the right thing, Citizen!

Re:Could Bitcoin Go Legit?

[gmuslera]

The main reason is that laws will keep moving to outlaw all companies behind it at all cost. The ones that control the law don't want anything looking like a currency outside their control.

What makes Bitcoin different

[dkleinsc]

The key thing to understand about government-backed currency is this: You have to pay your taxes in them. If you don't, said government can and will force you to do so. The government may also force a creditor to accept your currency to pay whatever debt you may have. In other words, it's backed up by the long arm of the law, and has value because if you choose to ignore its value guys with guns will show up to help explain the situation to you.

By contrast, Bitcoin is backed by absolutely nothing. It has no inherent value, and unlike government-backed currencies there's no use of force to back it up. In Hyper-inflation World that many Bitcoin enthusiasts think is America's future, you still have the guys with guns to demand that you use dollars to pay for certain things. By contrast, if Bitcoin goes belly-up, you have nothing except a bunch of bits that are of no use to anyone.

A question to the community

[Okian Warrior]

I'm curious about something, maybe the community here can point out an answer.

There's a sizeable audience of slashdot readers that are interested in the technical aspects of digital currency, the economic aspects of using such currency, the legal aspects of such currency, the social effects of using such currency, and it's importance in combating tyrrany (the political aspects of such currency).

It would appear that some techies realized that currency control is a tool to unjustly oppress people, and decided to do something about it. The engineering (ie math) seem to be solid, the economic rationale is logically sound (more so than standard economic mantras such as "a little inflation is good"), and the potential to protect human rights is enormous.

What we have here is a rare example of people recognizing a problem and doing something about it.

Despite this, all early posts are negative. Paraphrasing, "Oh, look, it's the weekly Bitcoin post", "Bitcoins will never rise to the status of a real currency", "it'll never work because you will never be able to pay US taxes in bitcoins", "it's a joke", "it's a scam", and so on.

So far (relatively early) there are about a dozen dismissive articles, all by anonymous coward.

What's with BitCoin? Why all the negative press? I've seen no named commenter put forth a rational argument as to why it won't work - that can stand up to logical scrutiny. All arguments so far have been handily shot down by subsequent responses. (You're welcome to try, though.)

Does the government hire astroturfers to guide discussions on this site for selected topics or something? (I'm not saying that there is - I'm asking if this is a well-known fact and I missed it.)

Why all the unfounded dismissive posts about BitCoin?

Re:A question to the community

[tftp]

It would appear that some techies realized that currency control is a tool to unjustly oppress people

All money issuers were using money to oppress people, to some extent. Why was the privilege of minting coins given only to the top aristocracy? Gold coins often were the sole privilege of the king. Lacking some advantage, why would aristocracy bother with a metalworking business?

The engineering (ie math) seem to be solid

The crypto scheme appears to be reasonably well done. However in practice there are several attack vectors, and they are possible to execute if you want to. It will cost you, but governments can do that already. It's just the matter of commitment and resources. BTC also has several usability problems, like the long time to clear a transaction (with 6 recommended confirmations, it's between 15 and 30 minutes.) Are you willing to stand in limbo at the grocery store for that much? There are no trusted BTC terminals; and if they were, they could be subverted because BTC depends on access to the network to calculate hashes - and the merchant does not control the network. Plug this merchant's network cable into your own router, run a hundred pet peers, and you can confirm any transaction you want. (On an open Internet you need to subvert the majority of hosts.)

the economic rationale is logically sound

It is debatable, and that's what is always debated in every article about BTC. In essence, there is no rationale that would work for pretty much anyone except Silk Road users. BTC transactions are not even free; but a Visa c/c pays me for using it. Why would I want to pay in BTC?

"it's a scam"

Scam or not, but early miners mined millions of BTCs when mining was good. Where are those BTCs? If the exchange rate of one BTC goes to $10K, for example, those early miners will become richer than Bill Gates. Will that be fair? I think not. Those guys (still anonymous!) may have done good for the society, but the society cannot value the formula (that doesn't even save lives!) that high. BG's Windows does save lives, as part of many computers.

Re:Feathercoin - Bitcoin Alternative

[Anonymous Coward]

The pattern of these alternative bitcoin forks has been to fork bitcoin (or in your case, litecoin), mine a bunch of coins for the founders, then generate a lot of buzz, including spamming Slashdot (which you and your buddies are doing), let the price go up for a while, then at some point people will see the project isn't going anywhere and flee, and the founders will cash out their XYZ-coins before the entire currency devalues to nothingness.

I don't know that your bitcoin fork falls into this category but given how much you guys are spamming and shilling, it sure isn't looking good. I'm going to stay the hell away from it.

Re:Feathercoin - Bitcoin Alternative

[Entropius]

That is exactly the biggest weakness of these things. The goal of an electronic currency isn't to "make money mining"; it's to create a medium of exchange.

Re:Could Bitcoin Go Legit?

[pla]

Only criminals and terrorists have any need for an alternative, secure, somewhat anonymous, non-government-controlled
"Need" has nothing to do with it.

I count as neither a criminal[*] nor a terrorist, but recognize the ongoing dilution of US currency by (currently) 83 billion dollars a month (and that just from a single source!). I recognize that the government acts only in slightly better faith than the likes of Paypal, randomly seizing the assets of anyone it deems big enough to bother but weak enough not to fight back. I recognize that today's donations to a group of brave "freedom fighters" (c.1980, Taliban-vs-Soviets) becomes tomorrow's financial support for a "terrorist organization" (c.Now, half the planet including PETA).

People have a million and one reason to use an anonymous non-nationally-controlled currency. They have only corporatocratic protectionist laws against doing exactly that as a reason not to do so. And if that makes me a tinfoil-hat wearer, well, hand me my complimentary beanie, because GS' pet Geithner has the Aluminum-foil market cowering in Detroit begging for mercy.


* Insomuch as any of us can make that claim, given that we have a legal structure designed such that any of us, at any given time, have committed some crime TPTB can use to make us disappear for a very, very long time.

Re:Feathercoin - Bitcoin Alternative

[Kjella]

I want to make sure I understand your thought process.

1. Create new crypto mining scheme
2. Mine lots of early, practicially free coins
3. Increase mining complexity
4. Convince everyone this is the next big thing
5. Watch dollar value soar
6. Cash out your free coin for real money
7. Leave suckers with worthless bits nobody wants for anything

Or in short, why be a peon in BitCoin when you can be king of a new currency?