Topic: If Banks started to accept bitcoins, would you trust them with yours? (Read 3488 times)

I see you're new here. Of course Bitcoin has a control mechanism. Just have a look: http://bitcoin.sipa.be/ The automatic difficulty adjustments make bitcoin behave like a finite resource with an extremely well-controlled supply: http://blockchain.info/charts/total-bitcoins

Investment banks are already eyeing bitcoin.
(Commercial banks? Not so much.)

Do these banks have to be specially anointed by the Pope to be allowed to use the bank label? Or do the organisations that already host banks of e-wallets count?

The crash was caused more by artificially low interest rates that allowed the economy to grow too fast causing supply to outpace demand and then causing prices to drop.

And to answer the OP; No I wouldn't trust banks with bitcoins.  Banks are highly regulated by the government and it would be counter to the advantages of bitcoins to do that.  In truth, bitcoins are best suited as a means of transferring wealth (possibly as an international standard of exchange) and not as a store of wealth.  It is interesting to see the recent price stability but the price is mostly speculation driven. The US currency money supply and interest rates are controlled by the Fed to minimize inflation and wild changes in prices, even to the point of allowing big increases in unemployment.  Bitcoin has no control mechanism, actually large mining pools could exert some control with changes in fee rules but there would be a huge backlash from that.  The Fed is independent from the normal governmental institutions so they can make unpopular, but necessary, changes, much like how the Supreme Court is unelected.

As a libertarian, I have absolutely no problem with banks per se. I don't even have a problem with fractional reserve (banks should be able to set whatever terms they wish). I  simply have a problem with forced fiat currency, and with taxpayer-subsidized bank insurance (FDIC). Enable a free market in money and if banks occur then great!

This fractional lending is the tool used by banks to cause the recent crash. Because eventually, you've lent $1000 out, and sold that debt, but only have $100, and realize the $1000 can't be collected, making the debt worthless.

"Natural selection" and "Survival of the fittest" would deem that your organization fall, and in a BTC economy, you'd need real BTC to bail you out. In the current setting however, the reserve just prints more money, diluting the existing value of the $ as a whole, and the bank continues to run its scam.

So I guess a more focused question would be, would the world as a whole be better served by a currency like BTC, where the network doesn't care if your economy collapses due to a shortage of reserves?

Hahaha.    That is the real question!

The Satoshi = Bernanke theory comes to mind for some reason. 

Banks lend a theoretically limitless supply of money into existence using a debt-based mechanism that would never mathematically work (compound interest) with a finite number of currency units, such as bitcoin. The only way banks could utilize bitcoins under their present and historical lending architecture would be to use bitcoin as a reserve currency unit upon which notes would be fractionally lent–––like issuing 2 MtGox btc codes for every 1 btc on reserve. Double spending is a nonissue as long as people spend the MtGox codes in lieu of actual bitcoins and never redeem them. Banks once similarly lent gold certificates based upon physical gold reserves, yet these certificates devolved into the purely fiat money we use today. Cent-per-cent gold convertibility or bitcoin convertibility of notes may seem fine and may appease people for some time, but it's a slippery slope towards centralized money. But why use a proxy for bitcoins, when one can use actual bitcoins?

I would trust banks with my bitcoin if they allowed me to use a debit card to withdrawal purchases anywhere and use my bitcoin as a funding source, that would be sweet!!!!

On the other hand, Bitcoin offers some good reasons to not to use banks at all.


You don't need to let third parties in control of your information. You could hide the information from yourself and set a time for it to be released, using the timestamp. Time is your bank.

I don't know how nLockTime works, but if it does what it says...


Somehow this could be automated.

+1

An "abduction pin" would have helped in this case.  Too bad the banks don't offer this.

Put in the pin and the cops are silently notified.  Balance could be reported as overdrawn or allow access to a subset of funds.

Ty to the both of you for your time writing up those answers. I kind sorta already had the feeling what the answers to my questions were I just wasn't sure but I agree with both of you.

I think one thing we should think about is making sure the blockchain is always freely available to be downloaded by anyone, meaning if the voluntary centralization reaches so far that there are only a few nodes with the entire blockchain, we should make sure those few nodes after they're the only ones with the entire blockchain can't make it private and inaccessible to everyone

Well, I guess you're asking a few questions:

1) Is a world where many users use ewallets/ebanks more centralized than a world where everyone uses their own client software?  Answer: yes.

2) Isn't that increased centralization a problem? Answer: not necessarily.

People need to distinguish between coercive centralization and voluntarily centralization. Centralization of government power, for example, is bad, because people are being coerced into doing what they'd otherwise not do - this is problematic morally, but also can lead to harmful real-world consequences. BUT, this is wholly different than voluntary centralization.

Take the example of Walmart (huge mega-retailer here in the US). Walmart has centralized the distribution of products, and you can find anything you want inside the store. So is this harmful in the same way that coercive government centralization is harmful? I don't think so. If centralization is occurring, but it's occurring voluntarily based on market signals, then that should be taken as a sign that efficiencies and value are being created by that centralization. When the centralization is forced, however, it is unlikely that efficiencies and value are being created (if they were, then the centralization would have occured voluntarily anyway), and thus such coercion should be fought against and resisted.

Bitcoiners are happy to fight against the coercive centralization in the realm of money (vis-a-vis central banks and fiat currency), but sometimes that justified antagonism spills over into also fighting against voluntary centralization, which is problematic.

Centralization can be good or bad, and it typically depends on whether it's occurring under coercion or by choice. If Bitcoiners in the future tend to centralize funds held via ebanks, then so be it. A) there's nothing you can morally do to stop it (other than pleading with people) and B) it likely represents efficiency and value gains which ought not be interfered with anyway.  

Does this make Bitcoin less "safe" or less "secure" with voluntary centralization? I'm not sure... it's possible that if safety/security is handled largely by professional private institutions, we'd see a safer and happier blockchain than if it could not be centralized in such a way. Admittedly, some degree of decentralization is lost in this process, but security gains from other dynamics may compensate for this. Also, perfect security is only achievable by spending infinite funds... thus there is always a tradeoff between security and efficiency. The marketplace might discover that the optimal balance means most funds are held by ebanks (but again, you always have a choice to hold your own!)

If all Bitcoins were held at a handful of large US banks, then I'd be worried. But that will never happen, and thus I am not bothered by some marginal or even significant voluntary centralization short of that occurrence.

You can't force people not to use a service.
The point is the option will always exist.

Forcing users to use the satoshi client and only the satoshi client from now till the end of time is hardly decentralization either.

If it is possible for higher level services to be built on top of the Bitcoin network then they will.  If providers of those services break the public trust then users will move to other services or back down the "blockchain level".

But isn't this a problem? Doesn't this remove the decentralized resilience of Bitcoin we often claim is comparable to bittorrent?  Doesn't this make it a lot easier to change the rules by someone?

I've asked this question in a couple of other threads and I don't think I received a satisfying answer yet. I'm not trying to spread FUD, I'm obviously very bullish about Bitcoin's future but still it's something that I think we should ask ourselves and find the right answers in order to avoid potential bad future outcomes.

Agreed!  Though hopefully there will be more net users running the client than today, but it will be a small fraction of overall userbase. Personally, I'll always run the client forever on every computer I own.

+1 on everything.  The bolded part (my emphasis) is the most powerful thing about Bitcoin.  No grandma is going to learn how mining works, and confirmations, and various strengths of ciphers and 50% brute force solution time against encrypted wallet.  Bitcoin is a "platform" that will (hopefully) give rise to a whole host of higher level solutions. Some may (at least initially) be very similar to existing banks and some will be completely new.  I would imagine if Bitcoin continues to expand in 20 years very few users will be running a "satoshi style" wallet and connecting directly to the blockchain.

In Central America, that's called the Millionaire's Vacation.  If it's any consolation, that actually happens a lot (enough that there's a blithe term for it).

Long term, I've always thought the average human will store his Bitcoins not on his computer but instead with a trusted ebank/ewallet. Securing coins requires technical know-how and resources, and thus it is more efficient to aggregate those costs into a specialist ebank.

The trick is that an established, trustworthy brand needs to take up the call and create such an ebank. If this bank insures itself, and perhaps pays interest on deposits, then it seems quite reasonable for people to hold coins there. Perhaps these ebanks will be Bank of America and Chase, or perhaps they'll be new brands, or both, but in any case capital tends to accumulate in pools (for good reason) and thus long term Bitcoin is probably no exception.

What IS an exception, however, is that we all have the option to hold the coins ourselves if we so choose. This puts immense competitive pressure on banks who wish to hold our funds for us, and returns the power of one's money to oneself. A formal bank account then becomes a convenient option or luxury, instead of a necessity.