Another day, another Bitcoin burglary as Bitcash.cz goes titsup Bitcoin's again in the spotlight after another repository for the crypto-currency was burgled, then shuttered. Czech site bitcash.cz/, once home to over 4,000 Bitcoin wallets, is now offering nothing more than the following text: “Server Bitcash.cz was attacked by hackers. On 11.11. in the evening was broken by server …
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I'm watching the progress of BitCoin with great interest, especially stories like this. Unlike "real" currencies, BitCoin is essentially a closed system and so burglaries like this are really just the coins moving around that system.
If confidence in BTC crashes (which I'm inclined to think it will eventually) then such burglaries suddenly become non-burglaries, since the item stolen would then be worthless. The final fate of BitCoin may be for the majority of them to end up in the hands of criminals who then find that all they are holding is a few bytes of computer code that they can no longer convert to cash because there is no longer a market.
After all, if you steal something that has no value, have you actually committed a crime?
I'm not sure how it's different to existing currencies - theft of money may be just "moving around that system", but it's still theft. (In normal currencies, central banks can print more money, but I don't see why that's an important distinction here?)
Care to put a timeframe on that "eventually"? I mean yes, the currency may well be gone in 1,000 years time, but if in the meantime it becomes mainstream at 100x the current value, I'm not sure that would prove you right.
Bitcoin does have value, and I would have thought courts would see it as theft (though getting police to track it down may be another matter). Most currencies today have no intrinsic value; and even for physical goods, in many cases the cost is governed by supply and demand rather than an "intrinsic" worth.
I don't have any solid evidence for my belief that Bitcoin will eventually crash and burn, just a gut feeling. It seems to incredibly vulnerable to rampant inflation, you only have to look on eBay to see the silly money that people are bidding. I mean, $1200 for 2 BTC? It's possible that the increase in market value over the last few weeks is due in no small part to the spread of Cryptolocker ransomware, which demands your payment in either $300 of MoneyPak or 2BTC, whichever is the cheapest. However I believe that MoneyPak can only be purchased if you hold a US credit card, leaving anyone outside the US with BitCoin as their only payment option. When the malware first surfaced 2 BTC did equate to about $300, but that price has now doubled .
The optimism of a few years ago that soon every online retailer would accept Bitcoin doesn't seem to have borne fruit. Even if you do trade commodities for Bitcoin I can't see how you can run a business with the currency the way it is at present. There's less and less incentive for anyone to sell their Bitcoins since you'll get double your money if you hold out for another month....or quadruple. Imagine what would happen to a country's economy if the value of its currency doubled every few weeks?
The thing about Bitcoin however seems to be that it is capable of crashing every 6 months or so and then recovering again. So it may well last 10 years (though I'd personally give it another year for various reasons), but I can't see it becoming mainstream.
"I don't have any solid evidence for my belief that Bitcoin will eventually crash and burn, just a gut feeling."
As I say, without any kind of timescale, it's not much of prediction - I believe that Bitcoin will _eventually_ crash and burn, but that could be anything from tomorrow to 100 years, or the end of the Universe :)
Do you think it's going to crash and burn (i.e., going to zero, or at least a tiny fraction of today's value) say, within the next 5 years? Or sooner, even?
"It seems to incredibly vulnerable to rampant inflation, you only have to look on eBay to see the silly money that people are bidding. I mean, $1200 for 2 BTC?"
There's nothing special about the price of "1" bitcoin, so there's no intrinsic reason why a Bitcoin at $600 should be expensive or cheap (note that the price on exchanges is around $400 - if people are paying more on ebay, that does seem odd). From the point of view of bitcoin as a currency, it has the curious property of having deflation (I mean, if the value of UKP drops so that prices for us go up, we call that inflation, even though it becomes cheaper for someone to buy UKP with USD).
"The optimism of a few years ago that soon every online retailer would accept Bitcoin doesn't seem to have borne fruit."
Again it's a question of timescale - neither has the prediction that Bitcoin would crash and burn come true. It has grown, and more places accept Bitcoin. Personally I think it's still way too early for mainstream use, but there's still lots of potential for growth. I don't think this will happen very soon (next year or two), but in 10 years, who knows. I think more exchanges are needed as a first step - currently many people (including in the UK) have to do an international transfer to buy/sell Bitcoin, which usually incurs fees, meaning you get lumbered with the worst aspects of ordinary currency, and negating one of the best potential uses of Bitcoin (if I could buy Bitcoin in the UK, I could then trivially send via Bitcoin anywhere in the world without any fees or 3rd parties, and the recipient could then transfer back to their local currency if they choose - there would be the cost of the Bitcoin exchange, but this would be typically far less than currency exchange rate costs, international Bank transfers or Paypal costs; also if Bitcoin was more commonly used, people wouldn't have to transfer to/from other currency).
I think that as people get richer, they start to spend some of their coins to cash in - someone who buys now won't want to spend anything; someone who's seen a 10x increase might decide to at least spend 10%, to recoop their investment. As Bitcoin becomes more mature, presumably the growth will then start to slow.
Also for businesses, the uncertainty over Bitcoin (as well as needing to spend the money) is a reason to sell coins - if a businesses receives payment as Bitcoins, they would presumably convert them to their usual currency to work with the rest of their business operations (a chain of pubs that accepts bitcoins in the UK operates this way - they accept Bitcoin, but these are sold on rather than hoarded). Business owners might decide they want to invest in Bitcoin, but that would be a separate decision for their savings, just like anyone else - people would be less willing to risk their business on it.
I think that a lot of the pros of Bitcoin (especially the potential to completely sideline existing currency transfer systems) are seen as threats by Banks and Governments. This already gives them a reason to want to suppress Bitcoin, and so I think that one day soon laws will be passed to make Exchanges and Bitcoin transactions essentially illegal, to the point where retailers will no longer take the currency, and without any way of using it to buy products, or convert it to cash, it will be strangled out of existence.
They will do this with the full co-operation and agreement of their assorted populace, the majority of whom do not understand Bitcoin and currently have no use for it. The various cons of Bitcoin (spate of burglaries, involvement in the Silk Road, relation to malware) will be trotted out as reasons why this evil virtual currency should be got rid of, the masses will agree, and that will be that.
Well in Amsterdam, one Bitcoin was all it cost last week to buy a hyacinth bulb. But now that Delft has set a new record of 2 BTC for a single daffodil, and Utrecht is open for business with something called "tulips", it's becoming very difficult for even the most experienced speculator to decide whether to risk a punt on Bitcoins or Dutch bulbs. Me, I'm thinking seriously about ground nuts.
Firstly, never store your bitcoins on hosted wallet (big amounts) Secondly, It's always best practice to have a offline wallet and paper backup until this new currency is perfected.
I believe that all this hacking business is Government sponsored acts in order to harm Bitcoin's reputation as a solid alternative currency.
-Or- that this is deliberately done in order to bring down the value of Bitcoin so they can purchase much cheaper and make a killing in currency exchange profits once it soars again.
These sorts of shenannigans were commonplace back when banks were small and unregulated. You put your money in, some crooks took your money out, and the bank suddenly wasn't there any more. No "too big to fail", no government guarantee, just a safe that oddly did not contain the gold that it was supposed to contain, and some bankers whose whereabouts could suddenly no longer be assertained.
Or you could hoard your gold in the privacy of your own home, and fall victim to a different class of robber or a different sort of trusted partner.
There's nothing new under the sun?
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