Topic: Banks are fundamentally unnecessary and actually dangerous for bitcoin - page 3. (Read 4913 times)

If your computer is off, you can't use bitcoin banks either. Sounds to me like his thought would have been insightful for dollars, but not for bitcoins.

no no, what he said is that having your money in the bank gives you so much more opportunity.
the part when he said opportunity value, he means you get the full extent of what it can do by being able to use it at many more places.

for instance, you can't buy a videocard from newegg if the cash is in a safe in your house or even sitting in your pocket.

It's the same idea if your bitcoins only exist on a computer that is turned off, there is zero opportunity to actually use them. It really was a very insightful thought he shared.

even if btc banks are honest, they represent a centralized source for gov't repossession

Agreed, 110%. I'm still a "noob" in the BTC world, but the idea of handing over my meager wallet to a 3rd party immediately seemed stupid to me. It's a shame the wiki and some respectable people in the community recommended such a service. I would feel horrible....


I totally agree with your OP. I was just pointing out the potential benefits of a REPUTABLE bitcoin banking service.

yeah, banks never made sense to me.

Yes! My main reason for using bitcoin is to avoid banks - I want control of my money. Forget the banks.

I'm not sure what all the services were that mybitcoin offered, but they definitely can't change the fundamental characteristics of bitcoin. There is no way they can guarantee instant transfers from external accounts without simultaneously losing the guarantee that your funds are actually 100% available at any moment. They can "guarantee" instant transfers internally from mybitcoin->mybitcoin, but these transactions are reversible, unlike real bitcoin transactions.

They offered a few things. 

Portability. 
Merchant services. 
Instant transfers between members.

To store money in someone elses wallet if you did not need those services is/was a mistake. 

Portability can be solved with smartphone clients for most users.

Correct me if I'm wrong, but don't some bank services, like the infamous mybitcoin.com, offer an instant payment service for it's members? This actually increases the oppurtunity value of your BTC since there's no need to wait for block confirmations.

Having said that, I think what Joel was trying to say (despite the strange wording of the last sentence), is that if a bank gives no benefits (ie. interest, instant transfers/payments to other bank members, etc.), there is no reason to use the service.

I can see these online wallet services go the way of the banks, afterall you are just assuming the btc showing in the account are really backed by what they actually have, if they start handing out loans they can just edit their database to show +100 btc, no matter if they have it or not, unless all people start withdrawing at the same time they should be fine, specially if everybody uses this service anyway instead of bitcoin itself.

I don't understand what you're saying. Your argument seems to imply the exact opposite of your conclusion. You seem to be saying that if you want to be able to use your money at any time, you should let someone else take care of it. But actually, when you do that, you are risking losing access to your money, because they may run off with it, or do something else irresponsible with it and lose it. And you also seem to argue that this is why you shouldn't hold on to your money... because then you can't use it when you want. But exactly the opposite of this is true. It is only when you have it that you can use it when you want.

The opportunity value is decreased, not increased, by storing money in a bank.

bitcoin banks can't work.

A 'normal' bank makes money by pulling it out of its ass.

It will give you a loan from a pool of money that don't really exist nor much less own.

It gives you this loan of money it doesn't have with the expectations that somehow you will be able to pull it out of your own ass yourself.

It charges interest on this money it loaned you, which it never had in the first place, and creates money out of its ass that it never had before for which you now owe.

It's much harder to make a bitcoin bank to give loans because it it much more difficult to pull a bitcoin out of their ass than it it for a bank to pull a dollar out of yours.

Did you just pull some lateral thinking on us?
Valuable insight too, I enjoyed reading your post.

Some of them are, some of them aren't. If you don't store your currency in a bank, the opportunity value of the held currency is forever lost.

Will you give me 100 bitcoins today if I promise to give you 100 bitcoins next year? Of course not -- even if you 100% trust me, you're still giving up the opportunity value of being able to spend those bitcoins within the next year should you choose to do so. There's no reason you should give that up in exchange for nothing. If you hold your bitcoins, that's exactly what you're doing.

Banks originated as goldsmiths who stored people's gold and gave out paper certificates representing the quantity of gold that was stored. This was a valuable service, because storing gold was hard, and paying people with gold was hard. Bitcoins are very different. Storing them is in principle easy, especially if you have a bitcoin-only device as I advocated here, and paying people with them is easy. All of the reasons for putting your gold in the bank are thus irrelevant for bitcoins.

* People can steal your gold out of your house, and thus it is wise to put your gold in a secure bank. Not so with bitcoins, so long as you encrypt them with a password. Criminals could steal your computers and not be able to access them because they wouldn't know the password. Further, if they did steal your encrypted bitcoins, you could have them backed up elsewhere and thus you would not lose them. You have absolutely nothing to gain from storing your bitcoins in a bank in terms of security. You are actually making things less secure by giving 100% access to your money to a third party who can never care about your money as much as you do.

* It is hard to lug gold around to pay people with it. This is completely irrelevant for bitcoins since you can instantly pay anyone anywhere in the world. Nothing is easier to carry around than bitcoins. Especially with smartphone clients. Banks do not in principle make bitcoin transactions easier. If places like MyBitcoin make anything easier, that simply represents the difficulty of using the standard client. But that is not a fundamental problem - it is a problem that can be fixed by making a more user-friendly client. So again, what made sense for gold makes no sense for bitcoins.

Banks are unnecessary for bitcoin. You do not gain anything by giving someone else responsibility for your money. In fact, given the recent MyBitcoin and Bitomat catastrophes, it appears that not only are bitcoin banks unnecessary, they are harmful. Outsourcing your finances will always be a poor financial decision in the same way outsourcing your intelligence will always be stupid. If you opt-out of your responsibility, you are unlikely to come out ahead. Keep your bitcoins as close to you as possible.

(Note that I am not arguing you should never store any of your money in online services. Just that you should only store small quantities that are as small as your level of trust for those services. If they ever have most of your bitcoins, then you are probably making a mistake.)