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Old 05-16-2011, 07:46 PM   #38
Silverpike
Scooby Newbie
 
Member#: 92399
Join Date: Jul 2005
Location: San Jose, CA
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I have been peripherally involved in Bitcoin since last December, so I will try and answer some of your questions.

Quote:
Originally Posted by Kebo View Post
So it's a closed (in theory) system...other than keeping it secret, how does this benefit the person with the bitcoin? Again, this is basically having WoW money.
Bitcoin provides several key features which make it far more interesting than "WoW money":
  1. It's not controlled by a central authority. "WoW money" is.
  2. "WoW money" requires trust between users to exchange coins. Bitcoin does not.
  3. "WoW money" has no scarcity. It can be produced in arbitrary volumes. Bitcoin's scarcity is precisely determined.
There are many more differences, but these are the big ones.

Quote:
And who cares if you have a currency that can only be used online? And who would use this? Especially if the only way to actually access the money is to exchange (at cost...looks like .65% plus markup/markdown) to actual money.
In this wonderful age of teh internets, many things are bought and sold online. I hear the young kids love it.

Paying a .65% conversion fee from Bitcoins to traditional currencies is very very cheap. When you consider that Visa takes a flat 3% off the top of every credit transaction, Paypal takes 3%, and most other electronic payment systems take several percentage points, a fee of .65% is pretty fantastic.

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It is exactly as 'untraceable' as real currency. If you have a system to validate a legitimate 'bitcoin' from a counterfeit, you can trace it. Not to mention that, again...at this point you still have to convert to actual money somewhere.
There is an element of traceability built into the system. You can observe transactions in the block-chain using simple tools. However, you won't be able to precisely identify who uses a particular sending/receiving address, so narrowing down information to individuals is Hard.

Bitcoin's goal is to make electronic payments as close to cash transactions as possible, so your criticism about anonymity regarding cash is appropriate.

However, it's far more anonymous than all existing electronic payment systems. Most electronic payment systems are heavily tied into the banking infrastructure, which basically monitors your transactions 24/7 due to US government regulations on money laundering. There is already at least one drug dealer taking Bitcoins as payment, and I speculate that a significant portion of the total Bitcoins in circulation are used for drug trafficking. Not the best poster child for Bitcoin, but it's a very powerful example of the level of anonymity afforded.

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As near as I can tell, either:
-Each bitcoin is independently stored and can eventually be copied/reproduced by a hacker.
Absolutely not. This premise is the entire foundation of Bitcoin. Read Satoshi's paper if you want to understand how this is done.
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-Each bitcoin is tracked by some system. This is more likely because they 'know' how much of the currency is in circulation. This means that the Bitcoins are in fact traceable through that system, and that the system can be compromised.
It is "tracked" in the sense that the entire network knows about all transactions. It just doesn't know who corresponds with each transaction.

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And if your bank account shows deposits and withdrawals to a bitcoin exchange...they can't touch you? Not to mention that, in case you haven't seen...the government CAN track P2P services, and your money still has to go in and out somewhere. All you've done is temporarily hide the money at a cost, and in a widely variable exchange-rate currency. Congrats.
Exchanging Bitcoins for traditional currency is the weakest part of the entire economy for sure. This part is still vulnerable to goverment intervention or other targetted attacks. It's a known problem and the Bitcoin community is actively working on better solutions.
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