Silk Road forums

Discussion => Newbie discussion => Topic started by: Finomatic on September 06, 2013, 06:56 am

Title: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: Finomatic on September 06, 2013, 06:56 am
Hello Forum User - I pretty much stumbled into this Bitcoin and Silk Road topic by coincidence, and since I am in financial research I thought I start a thread on the future of Bitcoin, summarizing my current (limited) knowledge on the topic. Happy to hear comments and taking this further.
Title: Re: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: Finomatic on September 06, 2013, 07:01 am
The Future of Bitcoin

Bitcoin is a decentralized crypto-currency. The key benefit is that the trust (necessary for any currency) is not provided by a central, hence government body - but rather its underlying algorithms and the supporting peer-to-peer network.

The exchange of Bitcoins from one wallet to another is safe, irreversible and - unless the owner of any of the bitcoin wallets involved is identified -  anonymous. As such, it has the same advantages of old-style cash exchanging from hand to hand, plus being able to be transacted around the globe almost instantaneously. It thus facilitates the efficient, uncontrolled exchange of goods and services across boundaries and legislations.

Here is where big government comes in. The Bitcoin-enabled economy prevents the state authorities from tracking, tracing and taxing any move by their uber-controlled citizens.

Since, given its decentralized nature, they cannot really shut down the Bitcoin system itself, they are simply going after its link to the monetary system of currencies, which they control.

From their perspective, in order to dry out Bitcoin they simply have to force any and all major Bitcoin exchanges (where you can exchange Bitcoins against other, so-called fiat currencies like the US Dollar, the Euro etc.) out of business.

Second, they have to control any money flows between the Bitcoin system and the government supervised and controlled global banking system.

And this is how they act:

Any effort is and will be undertaken to link the Bitcoin exchanges to illicit activities, in particular child pornography, terrorism financing, drug trafficking, tax evasion, etc., which resonates well with the general, uninformed public.

Any effort will be undertaken to scare any and all financial institutions from transacting "real" currencies with Bitcoin exchanges and holders.

Any and all effort will be undertaken to force wallet and Bitcoin access providers to disclose the identity of its users, otherwise threatening the closure of their operations.

Given the current status of things, over time big government will prevail. And the weakest link at this stage is the conversion of fiat, i.e. "real" currencies into Bitcoins and vice versa.

Here is where I believe the initiative to counteract that intention should start. As I will show, the key weapons, as with Bitcoin itself, are decentralization and peer-to-peer transactions. The solution, as in the dark ages at the beginning of a civilization, is the money exchanger, in our world, the "Bitcoin Exchanger".

In order to survive and flourish Bitcoin needs thousands and thousands of decentralized, local individuals who exchange real cash against Bitcoins.

The Bitcoin Exchanger will most likely be a merchant who runs a shop or some other small cash-based business. If an individual needs Bitcoins, he will go to to the Bitcoin Exchanger with say USD 250 in cash and a mobile phone with a Bitcoin wallet stored on it (or the details of his online wallet). The Bitcoin Exchanger receives the cash, takes a commission or a buy/sell spread and credits the customers Bitcoin wallet. The same principle applies obviously the other way round and would also work with wire transfers to and from the merchants bank account.

Since the Bitcoin Exchange is just a part of the other activities of the merchant (and he is more than happy to take payments in Bitcoins) it will take a long way to deem the business as a bank, money exchange, money transmitter or other to be regulated activity. In particular if it is a grass-roots movement involving ten thousands and thousands of businesses and individuals.

Hence, in order for Bitcoin to survive and thrive the community should foster a global, decentralized, unregulated grass roots movement of Bitcoin Exchangers, along the lines of a decentralized Western Union and MoneyGram to give the system enough gravity not to be stopped.

(The endgame may and potentially will be that the G-20 or similar body will declare Bitcoin - or other non-government issued cyber-currencies - a "controlled substance", the simple possession of which will be deemed illegal and put under penalties. By then hopefully the global Bitcoin user community will be strong enough as voters and citizens to prevent that from happening.)

As I believe, the governments can easily shut down Mt Gox and all the other larger exchanges. But they cannot close thousands mom-and-pop shops that make a bit of additional money by exchanging Bitcoins against cash.

(By the way. the global money remittance business is actually the biggest opportunity for Bitcoin to become a "consumer" brand and become to big to ignore or "prohibit".)

In essence, if the Bitcoin community creates easy-to-use tools and systems for small merchants to buy and sell Bitcoins and mobile phone wallets or anonymus smart cards with a wallet which are safe but understood even by my grandmother, then in my humble opinion the future is Bitcoin's. If the Bitcoin exchanging is limited to a few larger exchanges, those will be attacked and closed down by big government over time.

So let's hope that thousands and thousands local Bitcoin Exchanger are enabled and pop up over the next couple of months.

Title: Re: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: lifesucks on September 06, 2013, 08:09 am
One thing that will strengthen Bitcoin will be its wider acceptance in mainstream ecommerce. As more and more 'regular' outlets accept it it will no longer be just associated with illegal activities, plus, once its acceptance spreads into all sectors of the mainstream, the necessity of exchanging it into hard currency will no longer be as important. Once your local supermarket, convenience store and bar accepts Bitcoin why exchange it? I learned today that Amazon accepts Bitcoin (FBA only so far) so that's a significant start.
Title: Re: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: Finomatic on September 06, 2013, 08:28 am
Fully in agreement and I hope that wide-spread acceptance happens soon.

The question is though whether by doing so, Bitcoin will be allowed to remain as anonymous as cash. If by making it "mainstream" the authorities insist on being able to track the origin of any Bitcoin exchange transaction to a bank account / ID supported cash deposit/withdrawal, and hence to an individual, Bitcoin will become just another fully traceable "credit-card like" virtual, non-cash payment system. The question remains whether Bitcoin can be made strong and so wide-spread in its current, effectively non-traceable use that the global regulating bodies simply have to accept that there is a global payment system without government control and oversight.
Title: Re: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: lifesucks on September 06, 2013, 08:59 am
If I understand correctly BTC is inherently untraceable, and the only point at which a user could be traced (and then only insofar as a purchaser of BTC, not what for) is when buying from an exchange? I think the big headache for the authorities will be in taxing transactions.
Title: Re: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: Finomatic on September 06, 2013, 09:46 am
Not sure whether taxing itself is so important  ;) - taxing comes automatically with tracing.

As far as I understand any and every Bitcoin transaction is logged, saved and registered in the system

But I also understand it the way you do, i.e. that you do not know what it is for and who is the owner of the wallet where it goes to or comes from. So as I see it, governments want to know the owner of the wallets, as they want to know the identity of the holder of a bank account or a credit card.

Given that the exchanges like Mt Gox or Bitstamp are the conduits from the existing monetary world into the Bitcoin system authorities will rightly focus fully on them. If there are only 8-10 major exchanges they can easily force them to disclose the individuals who are behind an initial Bitcoin purchasing and sale transaction against normal currencies, giving them full info about who owned that wallet, at least initially.

So in my opinion, the key question is whether governments manage to enforce on the Bitcoin system that they know the beneficial owner of a Bitcoin wallet or not. If the conduit in and out of Bitcoin is decentralized (like the Bitcoin system itself) - through what I referred to as local "Bitcoin Exchangers" that will be almost impossible to achieve. The more centralized it gets, the easier it will be to ultimately get rid of anonymous transactions, and e.g. all the more interesting trades which happen here on Silk Road ...
Title: Re: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: TestUser on September 06, 2013, 02:12 pm
Checkout "localbitcoins.com"

You can trade anonymously via direct Cash or any other method from person to person with or without escrow - or just use it to contact possible trade partners.

And you can easiely set up an acc via TOR.

A lot of people here seem to use it, with great success.

greetings
Title: Re: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: stankbot supreme on September 07, 2013, 01:53 pm
the time is now to invest and to collect them before they are regulated if not fully in more ways than now evwen if the coin itsself cant be easily regulated there are other steps along the way foward or backward that i am sure are ripe for the piclking....we are loving in a special time and we are involved in a very secial aspecrt of history one that i think will have a very big importance and influance on history and possibly finance i know i would love to see the prediction of a coin worth 500 by 2014 come true even though at the same time it would probably be the death nail for it although i am sure for the conditions to be right for this to happen more regulation would have already happened
Title: Re: The Future of Bitcoin - how exchanging cash against Bitcoins could be organized
Post by: Finomatic on September 08, 2013, 07:02 pm
@TestUser - Thanks for the tip re localbitcoins.com - seems like a well run platfrom - will join and report how it works