Let me spare you some trouble. Here's what this article says:
* 10-15% of all transactions are fraudulent. In other words, something like $150Bn-$200bn/yr, or up to 2 times the entire market cap of Cisco Systems, is being lost every year to online fraud.
* Banks are investing in multifactor authentication systems to try to do away with passwords.
* But that won't work, so the only solution is to scrap the entire financial system and start over...
* ... with Bitcoin, for which there is "no payment fraud", "no paper work", "no merchant accounts", and "more privacy".
This argument isn't even coherent enough to be wrong. The types of mainstream attacks modern banking authentication systems are trying to deal with assume customer machines are actually owned up by attackers. They'd be happy just to find a way to make it harder to automatically extract value from accounts using standardized malware. This isn't a problem Bitcoin contemplates.
Banks are investing in multifactor authentication systems to try to do away with passwords.
The bitcoin ecosystem are also converging toward that. Or rather, any serious bitcoin payment processor will also be exploring any real security solution, even if it comes from traditional banks.
This isn't a problem Bitcoin contemplates.
Think of bitcoin technology as the OS which bitcoin banks run on. There are advantages and disadvantage to using bitcoin as cash, or storing bitcoin with your bank, depending on situations you may encounter.
Bitcoin is on the scale of global commerce simply a thought experiment (or, less charitably, a Ponzi scheme).
So, of course, anything the modern banking system doesn't fully accomplish is "coming soon" for Bitcoin, right around the corner.
Never mind the fact that virtually all Bitcoin development is done either as a hobbyist project or by fly-by-night operations that end up getting fully compromised. No, somehow engineering problems that banks can't solve with tens of millions of dollars of dedicated IT security investment are going to be solved by Bitcoin startups for half-pennies on the dollar.
But, at any rate: exasperating though your argument is, it's also a non-sequitor. My point is that banks are dealing with zombie customer machines controlled by malware. Bitcoin falls to that same threat scenario too.
> Never mind the fact that virtually all Bitcoin development is done either as a hobbyist project or by fly-by-night operations that end up getting fully compromised.
The last (and hopefully only) time a critical vulnerability was found in bitcoin was in May '09: it was exploited on the testnet and then patched. The largest bitcoin exchange did have a security breach in July '11 and suffered a loss of 6k bitcoins, but the rest (most of which were in cold storage) remained secure (at least 424k bitcoins). And in the most recent incident, a couple of popular services lost a combined 50k bitcoins (the users were not affected) because Linode was compromised.
Your "fact" is entirely disingenuous.
Bitcoin is certainly not a silver bullet to securely using on a compromised machine (and nobody is claiming that it is). Obviously no system will ever 100% protect stupid/compromised users. But many credit card numbers are compromised mid-stream or at a malicious PoS. The public-key nature of bitcoin protects against those attacks.
I like this argument, which tries to separate the "security" of the Bitcoin protocol/cryptosystem from the security of its implementations, so that the protocol can serve as a sort of inverse straw man to deflect attention from the comically poor security track record of Bitcoin as it actually works in the real world.
The implementations of the protocol (the cross-platform bitcoin daemon) have been securely working in the real world since May '09. This track record is what inspires confidence in the protocol. The security of any particular web app related to bitcoin is not the security "of bitcoin".
The only reason bitcoin-related web apps are so extensively probed is due to the security of the protocol (bitcoins are valuable because the protocol and its most widespread implementation is believed to be secure).
The security track record of any highly targeted industry is generally poor, including banks, fortune 500 companies, credit card processors, and shopping carts. To say that the security of bitcoin-related services is any worse than these is unfair.
Bitcoin is on the scale of global commerce simply a thought experiment (or, less charitably, a Ponzi scheme).
All successful things start small.
Never mind the fact that virtually all Bitcoin development is done either as a hobbyist project or by fly-by-night operations that end up getting fully compromised. No, somehow engineering problems that banks can't solve with tens of millions of dollars of dedicated IT security investment are going to be solved by Bitcoin startups for half-pennies on the dollar.
I don't claim that bitcoin startup solve problems that banks can't solve, just that I am asking you to compare bitcoin banks with banks, not bitcoin to banks.
Once again a Bitcoin advocate asks us to compare a hypothetical fantasy institution with a real-world business,
The biggest company in the arena is currently mtgox, which is admittedly a bitcoin exchange, but they also have a merchant solution and function like paypal in some respect. They have a multi factor authentication scheme.
There is also a company called bit-pay that acts like a regular payment processor.
Also, Gavin is working on adding support for multisignature transaction, which will help everyone in the bitcoin ecosystem.
and, presumably, to plow money into Bitcoin accordingly.
It doesn't matter as long the argument stand or the reason is sound.
it's unfortunate that many of bitcoin's proponents (of which i am one of), are unable to critically explain why bitcoin might be better than regular money.. the result being articles like this one.
however, this does not mean bitcoin isn't actually a pretty useful system, and with some trade-offs from traditional currencies, has some very good benefits.
I would like to see a major player accept bitcoins as a method of payment.
Just imagine for a moment, Google accepting bitcoins as floating currency, to be used in its Google Play service, or with its Android devices with NFC enabled Google Wallet. That would blur the line between digital currency and digital/real goods and services.
As a developer who's been following (albeit not too fastidiously) the progress of Bitcoin since it's emergence, I still have no idea how to accept Bitcoin payments. Is there something like authorize.net (or better yet, Stripe) for this? Bitcoin API bindings for the languages du jour would help adoption I'm sure. Though, maybe there are libs out there already and I'm just not aware of them
Basically it just comes down to generating an address for the customer and checking if a payment comes in.
Personally I wish I could pay for a lot more stuff using bitcoin, so I wouldn't have to keep giving out my credit card number to every website I want to buy something from. (I haven't dealt with paypal in years so I usually end up using my CC directly.)
Problem with btc of course is that once you've sent the money, it's gone, and there's no recourse if there was some kind of transaction problem, or the vendor decides not to acknowledge receipt.
As a developer who's actually implemented this, I can say that the hot frameworks do have good libs for it -- and the bitcoin daemon has a trivial JSON RPC interface for which you could easily write whatever bindings you like.
And as amazing as Stripe is, getting working Bitcoin payments is even easier: generate key, show to your user, and query your daemon for payments.
generating a new wallet for every transaction is a bit wasteful, you can however just create a new payment address, and watch for payments on that.
if you create a few hundred receiving addresses, then you can keep the wallet (and hence private key) offline, as all transactions are public, and minimise the risk of having funds stolen (as we've seen a lot of places lately getting hacked and having their accounts drained..)
I think that Bitcoin payment services hold the most promise in third-world countries where credit cards haven't really become the de facto payment standard for non-cash transactions. Any company that could tie Bitcoin with low-end mobile systems available in these countries would be of great service.
I don't know if emerging markets are the right place for an inherently deflating currency. That is a lot of continuous forecasting for a financially un-sophisticated population to do, let alone one that generally needs to take on debt to jump classes within a generation.
I don't know if emerging markets are the right place for an inherently deflating currency.
I think you mean a stable or predictable currency. What you need is more volume in the bitcoin economy to stabilize the price. Of course, when the economy grow at extreme rate, the expense of that is a predictable currency. But with bitcoin, you can be certain 99% that it will never exceed 21 millions.
let alone one that generally needs to take on debt to jump classes within a generation.
But you don't need debt if you can merely save and jump classes within a generation. If you have saving, you can benefit from extreme growth in the bitcoin economy.
they already have a mobile SIM card that acts as a credit card..this is why Smartphones will take longer to uptake there due to the different SIM card not necessarily the phone device price.
The best example of this is m-pesa by Kenya's Safaricom. In Kenya the banks market share has been totally cannibalized because most people couldn't afford a bank and then when most of the population went to strictly m-pesa so did a majority of the vendors, etc. I wouldn't say bitCoin doesn't have a shot at replacing that, but it's got a long long way to go. http://en.wikipedia.org/wiki/M-Pesa
I feel like the basic premise is right – there is clearly a lack of regard for the threat posed by the potential for disruptive innovation... AND there is clearly a lack of regard for consumers and merchants (both are users of banking products, of course and both are essential for banks to continue).
If not a completely radical solution like Bitcoins, even some low-margin, relatively more secure solution seems to be more of a question of "when", not "if".
* 10-15% of all transactions are fraudulent. In other words, something like $150Bn-$200bn/yr, or up to 2 times the entire market cap of Cisco Systems, is being lost every year to online fraud.
* Banks are investing in multifactor authentication systems to try to do away with passwords.
* But that won't work, so the only solution is to scrap the entire financial system and start over...
* ... with Bitcoin, for which there is "no payment fraud", "no paper work", "no merchant accounts", and "more privacy".
This argument isn't even coherent enough to be wrong. The types of mainstream attacks modern banking authentication systems are trying to deal with assume customer machines are actually owned up by attackers. They'd be happy just to find a way to make it harder to automatically extract value from accounts using standardized malware. This isn't a problem Bitcoin contemplates.