The end of Bitcoin or take over by Big Money

[macgyver]

With the fallout of GOX, one of our brilliant Senators (Joe Manchin [D]) called for the govt to 'ban' bitcoin and all digital currencies in an open letter.

He got a response from the fed chair Janet Yellen today saying they have no authority in the matter. This is at least encouraging.

In response to a letter sent yesterday from West Virginia Senator Joe Manchin [D] (which warned that Bitcoin could be used by criminals and could also disrupt the U.S. economy), Chair of the Board of Governors of the Federal Reserve System Janet Yellen has responded: and the long and short of it is that the Federal Reserve can’t really do anything about it.“Bitcoin is a payment innovation that’s taking place outside the banking industry. To the best of my knowledge there’s no intersection at all, in any way, between Bitcoin and banks that the Federal Reserve has the ability to supervise and regulate. So the fed doesn’t have authority to supervise or regulate Bitcoin in anyway,” she wrote.
Yellen said that the Treasury’s Financial Crimes Enforcement Network (FinCEN) “has indicated their money laundering statutes are adequate to meet enforcement needs.”
On the topic of whether the U.S. is legging behind other governments in regulating and/or issuing warning, Yellen reiterated that “The Fed doesn’t have authority with respect to Bitcoin.”
“But certainly it would be appropriate for Congress to ask questions about what the right legal structure would be for digital currencies…My understanding is Bitcoin doesn’t touch banks [in the US].”
“It’s not so easy to regulate Bitcoin because there’s no central issuer or network operator. This is a decentralized, global [system].”
Yellen did conclude that the Fed is looking at the digital currency — but for now, it doesn’t seem as if Manchin will be getting what he wants. [source: Business Insider]

 

[prime]

Manchin is out of touch. But JP Morgan is his 2nd largest contributor so he's just parroting what JP wants.

 

[graniteman]

Not counterfeiting. The system releases 25 bitcoin into the network every 10 minutes. It's more akin to a lottery where your computer works to solve and if it finds a solution to the block, it wins the prize.

The first 4 years of bitcoin it released 50 coin, second 4 years, it will release 25 coin, then 12.5 coin, and so on. It will take about 140 years to mine the last coin.

It's what email is to the snail mail as what bitcoin is to fiat. The fact alone that you cannot print money on a whim(like the USA has been doing) and dilute existing money is huge. The banks have you on an inflationary system. It's why a house was $5000 50 years ago and now $250,000 for an equivalent house today. The debt based system in place ensures that you can never pay back all the debt because no money would exist if it was paid off. With bitcoin, this type of inflation cannot occur. Instead, as more value enters the network, it cost less bitcoin to buy things because the fixed amount must be used to spread the wealth = like a virtual gold.

My concerns are with the trust you put in the boldened above. Who controls the ''system'' and what's to stop them from releasing more or less? While the ''inflation'' may or may not happen this system seems it could easily be overwhelmed by the rich and wealthy Nations even hackers could wreak havoc. As you said 'the little guy can never mine enough, they usually pool together.
I understand the thought but thats the problem , it's a made up system. The value is worse than our paper system, in the end there is absolutely nothing backing it. No bank or Govt

 

[Gstacker]

Prolly better off with no bank or govt backing it lol...
if the govt wasn't allowed to borrow money and Fort Knox had enough gold to cover every note would we be better off?

 

[macgyver]

My concerns are with the trust you put in the boldened above. Who controls the ''system'' and what's to stop them from releasing more or less? While the ''inflation'' may or may not happen this system seems it could easily be overwhelmed by the rich and wealthy Nations even hackers could wreak havoc. As you said 'the little guy can never mine enough, they usually pool together.
I understand the thought but thats the problem , it's a made up system. The value is worse than our paper system, in the end there is absolutely nothing backing it. No bank or Govt

The 'network' is completely transparent. When you download a 'wallet', it knows of each and every block in network, where it came from and where it belongs. Transactions are completely anonymous, BUT completely trackable. This is why you cant counterfeit them. You would not just have to hack 1 computer, but millions on the network. It is totally de-centralized. You can go on the web and see the creation of each block and track to addresses where they go. Same with transactions.

Again...you can create (and they recommend you do) multiple 'addresses' for payment and receiving goods. The 'network' can see that "x" bitcoin went from this address to that....but you dont know who holds the wallet.

It really is the ultimate in anonymity. Surprised more people who want 100% secure and anonymous instant transactions do not take advantage of this system.

 

[Lizard King]

So Mt. Gox was hacked and someone swiped $500M from them. Where did this virtual money go, how can you put your trust in a "currency" that can disappear with the use of a computer? I don't get it.

 

[macgyver]

So Mt. Gox was hacked and someone swiped $500M from them. Where did this virtual money go, how can you put your trust in a "currency" that can disappear with the use of a computer? I don't get it.

No. Gox was an exchange. (a poorly run one). Bad accounting practices and terrible internet security. They eventually figured out they were insolvent. (they had less in deposits then they owed). They tried to blame it on something about the bitcoin network. But, it was actually that they allowed themselves to be hacked for years and money siphoned out.

This has nothing to do with bitcoin....it was a very poorly run business. Reminiscent of other banking tumbles though.... Nothing really new. Just because there is a new medium, (bitcoin) does not mean some of the same patterns we see in the financial industry wont be repeated.

The recourse is the transactions CAN actually be tracked and fixed over time by the network and money restored. You may not be able to catch who took them, but they can be returned to their rightful place.

 

[prime]

I was under the impression that transaction malleability did not affect the delivery of coin just was able to change the id and confuse gox into thinking it never sent payment so they reissued coin again.

 

[macgyver]

I was under the impression that transaction malleability did not affect the delivery of coin just was able to change the id and confuse gox into thinking it never sent payment so they reissued coin again.

I dont know that anyone has real confirmed info on where GOX screwed up. There is all kinds of speculation. Everything from intentional mishandling of funds, down to an inside job, to just plain incompetence. It will get sorted out in the end....but it is giving a black eye to bitcoin, even though 'bitcoin' itself has very little to do with this. This is similar to a bank imploding due to mishandling funds and then people blaming the currency involved.

 

[prime]

Probably all of the above.

 

[macgyver]

For all those that thought the MtGox fiasco was the beginning of the end for Bitcoin,.....think again. It has rallied 20% since then. Now bumping 700 again only a few weeks later.

http://www.cnbc.com/id/101461632

 

[Dex]

You seem like you want us all to agree with you so you can feel better about your investment.

FYI Warren Buffet said to stay away from Bitcoin. Are you smarter than WB? I know I'm not