Halfway through Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money
Correct me if I am wrong, but a site such as Ashley Madison doesn’t need to know the real names or addresses of any users other than to bill credit cards. If so, had the users paid with a dedicated Bitcoin wallet there would be no interesting data for hackers to steal? (If you keep your Bitcoin with a single public/private key pair anyone from whom you buy something can also see everything else that you’ve ever bought (bitcoin.org).) Or does Bitcoin actually make things worse because the people who sell Bitcoin need to keep a record of who bought what and therefore if the Bitcoin currency trader gets hacked, a la Mt. Gox, then the people who obtain that database can see everything that people have bought across a wide range of merchants?
What do readers think? Would a “Bitcoin-only” payment policy have resulted in more or less privacy? Will the publicity around this latest breach give Bitcoin a significant lift?
Was Mt Gox really hacked, or were those “stolen” bitcoins actually the same bitcoins seized by the Feds when Silk Road’s Ross Ulbritcht was taken down? Ulbricht claims he was the 2nd Dread Pirate Roberts (operator of Silk Road), the first being Mt Gox’s enigmatic ceo Mark Karpeles, and that Mt Gox was just a ruse created by Karpeles to launder Silk Road’s profits.
It’s becoming clear that the internet is really the OPPOSITE of anonymity. The very nature of computers is that they record everything. Now that record may be encrypted or protected by layers of security, but these are all vulnerable. Bitcoin is no solution because ultimately you need to either (a) pay for bitcoins using your real identity or (b) take physical delivery of goods or services purchased on bitcoin.
There is a way to buy things anonymously. It is called “cash”.
When considering the question of Bitcoin’s privacy and what it means for the future of online business,* it’s imperative to recall – and if not to recall then to take into the most humble consideration, ideally over a glass of wine followed by a restful night’s sleep, and then perhaps a long meditative walk the next morning – that there’s no such thing as taint. It’s sort of a big deal.
*That is, businesses that want to be online in the future.
Anyone who is using sites like Ashley Madison their brain is already 50% shut off such that they lie to on-self and make believe that they are anonymized. No matter how much protection they put around themselves, sooner or later they will be exposed because they will slip no matter what. Have a look at top secrets that eventually get exposed even when a team of professionals are involved.
That said, back to your Bitcoin question. A better choice would be money Gift Cards (Visa, Mastercard, etc.) that you can buy from your local Walmart, CVS, etc. payable in cash.
Izzie L.: And that’s why “they” will get rid of it entirely, eventually. Probably sooner rather than later, but I’ll admit that getting rid of actual paper dollars will be a monumental task.
George A.:
Why would having a physical card locked to a bank and its policies be better than something that can be spent globally without any third party involvement?
Dave – the reason is that when you buy a gift card for cash you are starting out anonymously (putting aside the security cameras at the CVS and the potential for face recognition) and so no matter who or what gets hacked, there is no record of your identity. You are leveraging off the inherent anonymity of a bearer instrument (cash).
David K. – as you know, “they” have reduced the largest bill in circulation to $100 , so “they” are already going in that direction. In the past, when a $1 was worth much more than it is now, there were $500 and $1,000 bills in circulation and after adjusting for inflation, the largest bill now is equivalent to a $10 bill in the ’30s. “They” don’t want to make it easy for you to make expensive purchases anonymously. “They” probably love bitcoin because if they can compromise it, “they” can bring it down all at once – look what happened to Silk Road.
There is plenty of precedent for governments declaring paper money to worthless unless exchanged for a new currency – this allows the government to flush out hidden money. Either you come forward or you lose it. That’s why some people keep precious metals instead of paper – there’s nothing the government can do to eliminate their value.
This is one thing I’ve never really understood: doesn’t bitcoin leave an irrefutable, cryptographically-signed trail of every transaction? What kind of plan for anonymity is that?
@SuperMike It’s possible to mix your bitcoins with others’ in order to confuse the trail: https://en.bitcoin.it/wiki/CoinJoin
Dan – coinjoin doesn’t strike me as a complete solution or even close to one unless it was developed much further and on a much larger and more automatic scale (and even then there might be ways to work backward to demuddle the trail).
Yes, Bitcoin is not really anonymous. As George A. said, you are much better off buying a prepaid card at the drug store.
@SuperMike, George, Dan, Izzie L., et al. : Apparently my earlier comment was insufficiently clear, but I shan’t give up.
The technical traceability of Bitcoin transactions, or rather the in praxis lack thereof, is an essential point and one that bears repeating because it’s this singular element that grants Bitcoin its staggeringly disruptive fungibility. To quote the thought leader in the space :
Pete, I believe you and everyone else who says that there is no bitcoin taint, but that doesn’t mean that everything is great. Sure, if you and I just send each other bitcoins we’re in great shape and maybe in some future world all transactions will be denominated in bitcoin, but in the world we live in, at some point I either have (A) buy bitcoins using dollars (or some other currency) or (B) convert bitcoins back into $, and these are completely vulnerable.
Also the idea that no one holds “title” to any bitcoin doesn’t exactly give me a warm and fuzzy feeling. Your Romanian buddy considers this a “feature” because it means that no government can seize your “title” but if you look at it another way, it means you don’t “own” the bitcoin in the 1st place. His arguments remind me of the guys who claim that the Federal government has no power to tax their income and they make some elaborate internally logical argument for why that is, and then the Federal judge says “sorry, I don’t buy it” and gives them 5 to 10.
Izzie, as far as the fiat-bitcoin interface is concerned, I agree that there are challenges, but I disagree if you mean to imply that they are insurmountable. Exchanging bitcoin for cash and vice versa with a local broker, preferably an established one (eg. via localbitcoins), is accessible to most everyone in North America and Europe, which is likely the overwhelming majority of people reading this conversation.
As to your feelings about titles, if ownership is predicated on one’s ability to destroy the thing in question, as I would argue is precisely the case, you can demonstrably own bitcoin to an extent that you cannot possibly “own” your own home. Try setting fire to your petite abode and see if you’re charged with arson. My guess is yes. Now try the same with your bitcoin private key, be it held on a USB key or a paper wallet. Now who’s gonna call the cops on that one ?
Additionally, “titles” as framed here are in reference to the “authorised” pieces of paper granted by centralised authorities. Bitcoin has no centralised authority from which to derive such arbitrary legal constructs, nor has it any need of such, so be careful about comparing apples and armadillos. In particular, your example about income taxes falls short as what ownership of bitcoin means, primarily because this ownership is neither a logical nor a theoretical consideration up for some debate by some supposed higher authority, but a practical consideration that is or is not. As such, no Federal Judge nor soi-dissant politician of any stripe or any creed may lay claim to the bitcoin that you own, for he has no means with which to “go over your head” as it were, by, for example, freezing your bank account, leaving only far more expensive and admittedly less pleasant methods of confiscation, the sorts that the current powers that be have neither the stomachs nor the pocketbooks for.
Suffice to say that Bitcoin isn’t for everyone, but then again, nothing worthwhile ever is.