HN Theater @HNTheaterMonth

⬐ jdreaver

The chairman asked the panel about the real identity of Satoshi Nakamoto, the pseudonym used by the creator or creators of Bitcoin. When one of the panelists was going to respond, the chair cut him off and said "you don't think it was Al Gore, do you?" The panelist said "well, he hasn't denied it!"

I've never seen decent humor in a Senate hearing haha

⬐ Systemic33

I was really surprised it was this discussed with this positive attitude, and with jokes and Einstein quotes. Interesting to watch coming from EU.

⬐ sliverstorm

The anonymity of Satoshi definitely gives the origins of BTC some mythos. I can picture historical fiction a hundred years from now speculating (assuming BTC takes over)

⬐ jlgreco

I suspect that historians, given free access to a very very wide range of writings (and of course all the works attributed to Satoshi) and whatever the modern analysis techniques will be will make quick work of figuring out who Satoshi was.

Few writings remain truly anonymous if the author also wrote significant amounts non-anonymously (and these days, who doesn't?).

For his sake, I hope he isn't uncovered during his lifetime, but assuming bitcoin remains relevant I greatly suspect that history books will eventually have his name.

⬐ nostromo

It's interesting to watch Jeremy Allaire repeatedly say that only well-funded companies should be trusted to hold consumers' bitcoins.

Companies like, well, his.

⬐ sliverstorm

It's nothing new. You want banks to have considerable reserve capital, and if you are a company whose function is to "hold BTC" you are a bank.

⬐ nostromo

Is fractional lending even possible with bitcoin?

And, if not, why do you need reserve capital?

⬐ None

None

⬐ sliverstorm

Of course it's possible.

Customer A deposits 2 BTC to Bank A

Bank A loans 1 BTC to Customer B

Bank A is now a fractional reserve bank, with 50% of its outstanding debts to Customer A actually on-hand.

⬐ a8da6b0c91d

But it's kind of like going back to using doubloons as the actual currency, as opposed to certificates. I don't think in practice you could get anywhere like the reserve ratios typical now.

⬐ sliverstorm

Banks can't print money, so as far as the day-to-day operations of the bank is concerned, the only practical difference between bank notes and doubloons is notes are much easier to process & store!

⬐ moron4hire

Banks can effectively print money. They can take out loans from the Fed at effectively 0% interest rates, then lend out ten times as much to people. And they can lend to other banks, who they themselves can then lend ten times as much. Banks can print money.

⬐ AnIrishDuck

Sort of. Banks under fractional reserve are limited by a "reserve requirement" [1]. This limits the amount a bank can loan at any time. For example, the reserve requirement imposed on banks in the US today is at most 10% of the bank's liabilities [2].

Bitcoin would impose a 100% reserve requirement that is unheard of (as far as I can tell) in modern banking. I don't believe we can accurately predict the effects of this requirement. I also believe we can't state with any certainty that, given this requirement, a bitcoin banking system would behave at all alike to our current fractional reserve banking system.

Frankly, this appears to be another area where bitcoin doesn't seem suited to handle the economic needs of the modern world.

1. http://en.wikipedia.org/wiki/Reserve_requirement 2. http://www.federalreserve.gov/monetarypolicy/reservereq.htm

⬐ nhaehnle

> Sort of. Banks under fractional reserve are limited by a "reserve requirement" [1]. This limits the amount a bank can loan at any time.

Slightly tangential to the main topic, but this is a common misunderstanding and incorrect. Bank lending is not constrained by the amount of reserves a bank has, because banks can and do lend each other reserves (or sell each other reserves in exchange for other assets).

So banks just make loans regardless of how many reserves they have. Afterwards, a separate department checks whether they satisfy the reserve requirements. If they do and they have too many reserves, they will try to lend those reserves to other banks. If they don't, they will try to borrow reserves from other banks or from the central bank.

Note that banks still cannot make loans willy-nilly. It's just that they're constrained by capital requirements instead, as opposed to what people commonly believe.

Edit: If you are interested in the low-level workings of the system, I recommend reading the corresponding writeups of Modern Monetary Theory economists. A good starting point (though somewhat lengthy) is here: http://neweconomicperspectives.org/p/modern-monetary-theory-...

⬐ iambvk

You are assuming deposits and loans both are done in terms of bitcoins.

In theory, we can design a banking system that accepts deposits in bitcoins and gives out loans in the fiat currency.

⬐ AnIrishDuck

Right, but you no longer have a "pure bitcoin" banking system. You have a dual currency system that is predicated on the trust of (1) the US government and (2) the bitcoin community.

Also, such a system mutes a key feature of current "money multiplier" based systems, which is recursion. Under the current system, when you deposit $100 in a bank, that bank can then lend $10 to nine other people. Who can then each take that $10 and deposit it nine other banks, which can each lend $1 to nine other people...

Without this effect, the money multiplier would probably need to be tweaked pretty drastically.

⬐ a8da6b0c91d

> bitcoin doesn't seem suited to handle the economic needs of the modern world.

There's a school of thought that the expansionary fractional reserve system we've had for the last 100+ years has worked OK because more and more fossil fuel energy was available over that time. It's possible we're in a new era where total energy usage will be essentially static, and the current monetary and banking system won't work.

I'm not necessarily saying I buy the argument.

⬐ saryant

I think the claim that future energy usage will remain static is largely flawed.

For one, a few billion people are currently moving from an annual income of less than $10,000 to closer to $30,000. That's a huge, unprecedented global shift that will lead to a big increase in worldwide energy demand.

Second, I think ingenuity will solve our future energy supply issues. A geologist once said "oil is found in the minds of men" and I think that claim holds true for all sources of energy. Look at shale gas: this is a huge energy source that wasn't even in anyone's radar thirty years ago. Moreover, effeciency increases over the next two decades, both in MPG standards, industry and electronics, could yield a savings equivalent to 13 million barrels of oil per day. That's like adding a new Norway and Russia to world energy supplies.

Daniel Yergin's book The Quest coveres these future challenges quite well, I highly recommend it.

⬐ sliverstorm

In what way does BTC impose a 100% reserve requirement? Unless I'm missing something here, there is nothing stopping a bank from loaning every BTC it takes in deposit, (i.e. 0% reserve requirement) aside from possible federal regulation.

⬐ moron4hire

Because you can't just make up 10 new bitcoin IDs to be able to lend out against your 1 bitcoin. It would require creating bitcoin-backed bank notes. We'd be back to a reserve currency.

Not that I personally think there is anything wrong with a reserve currency, but they tend to significantly curtail the power of governments to wage war, so it's extremely unlikely we'll ever go back to such a system.

⬐ dragontamer

You mean, like how Mt. Gox has virtual BTCs and virtual USDs in your account?

It is far easier to create "virtual currency" than you seem to think.

⬐ moron4hire

So a bitcoin is a cryptographic hash, right? Not much more than a GUID that is truly G and really, really hard to calculate. To make a transaction, you have to check the blockchain of the bitcoin to make sure it hasn't been double-spent, that the person you're receiving the bitcoin from has the right to give you that coin.

How would you fraction a bitcoin, thereby allowing 10x spending? You can't just invent new bitcoin hashes, because the creation of valid bitcoin hashes is the mining process itself, and is designed to be time-consuming.

⬐ dragontamer

Sure you can.

When you transfer USD into Mt. Gox, you can then buy some "virtual" BTC. The BTC that is in your Mt. Gox account is purely virtual. Until you manually transfer it out of Mt. Gox, you don't even know if those BTC exist yet.

I'm not necessarily saying that Mt. Gox is lying to anyone (although they don't strike much confidence in me...). I'm simply stating that the job of lying to the customers is a lot easier than you might think.

Take GPL for instance. It "virtually" held BTC for its customers, and one day... they decided to disappear off the face of the internet. Unless those BTC are exactly in a private, offline wallet, you have NO guarantee that you are actually in full possession of those BTC.

That is why BTC regulation as a currency is a necessary step forward. If institutions are forced to offer guarantees on the promised value of your BTC Accounts, then life will be a lot easier for the BTC consumers.

⬐ phyalow

MF Global...

⬐ AnIrishDuck

You're right, in a way. But the main issue I'm still struggling with is credit and lending, which are core features of fractional reserve banking. And the more I think about it, the less the "fractional reserve" model makes sense when applied to bitcoin.

If memory serves, this is how banking works today (beware, there are gross simplifications in here):

1. Customer A deposits $1 in Bank A

2. Customer B asks Bank A for $9

3. Bank A now needs to borrow $9. It can legally do this because it can prove to the government that its reserves ($1) are greater than 10% of its outstanding liabilities ($9). It first tries other banks, but if all else fails it can borrow from the Fed.

4. Bank A gives $9 to Customer B.

I cannot see how step 3 happens in "bitcoin banking". The whole point is that there's no "central point of trust" and hence no lender of last resort.

Or to restate, one of fractional reserve banking's key purposes is to influence the money supply. But this is clearly impossible under a "pure bitcoin" system, where the money supply is fixed by fiat.

⬐ nhaehnle

> Or to restate, one of fractional reserve banking's key purposes is to influence the money supply.

No. There were experiments with trying to influence the money supply in the past, but it doesn't work. Today, the money supply develops endogenously, that is, it is determined by potential borrowers' willingness to borrow and by banks' determination of the credit-worthiness of said potential borrowers.

The central bank is tasked with making sure that the interbank clearing system works smoothly and with setting the short-term interest rate.

Also, your story about how banking works today is a bit muddled. Whether Bank A can borrow those 9$ has nothing to do with how many reserves they have, but with quality of the bank's assets relative to its capital.

The volume of reserves really does not have a noticeable effect on the behaviour of the banking system, mostly because, as I wrote above, it is endogenous anyway.

⬐ maxerickson

Step 3 doesn't have to happen for money supply expansion to take place. If the bank lends out $0.90 of the $1, people in the economy will be acting like $1.90 of money exists.

⬐ moron4hire

Just to be clear, fractional reserve banking is the bank lending out $10 of the $1. "10% reserves" means they keep all of the deposited money. $1 deposit leads to $11 in "money".

⬐ SkyMarshal

That's not what it means. A 10% Required Reserve Ratio means the bank can lend $9 for every $10 it has on deposit. Eg, it must keep $1 (10%) in reserves.

However, when that effect is multiplied throughout the entire banking system [1], the system as a whole amplifies the base amount of money in the system. A 10% Required Reserve Ratio equates to a maximum potential money multiplier of 10, meaning the system as a whole can turn a $10 deposit into up to $100 in circulation.

[1]: http://en.wikipedia.org/wiki/Fractional_reserve_banking#Exam...

⬐ AnIrishDuck

Right, hence what I said (which is somewhat inaccurate) about a "100% reserve requirement". The bank could lend any amount up to its total deposits, but not above.

This is very different than how banking works today. Banks (in the US) can lend up to 1000% of their current deposits. This is a core feature of the fractional reserve system, and is clearly impossible under a pure bitcoin alternative.

⬐ maxerickson

In practice, they don't. You can compare loans and leases with deposits here (around 75% right now...):

http://www2.fdic.gov/SDI/SOB/

I guess you are saying they do accounting shenanigans with the Federal Reserve to make the deposits larger than they really are?

(I will admit, I am more interested in aggregate practice here than I am in what the more extreme banks are doing)

⬐ AnIrishDuck

I appreciate the link. I haven't taken a macroecon or full-fledged finance class, so take my analysis with a grain of salt.

If I recall correctly, "demand deposits" are the subject of reserve requirements, not total deposits. The vast majority of deposits are subject to strict regulation and can't be withdrawn on demand (hence the "demand deposit" distinction). They are, in essence, another form of credit. Not a cash equivalent.

If we compare demand deposits (1.1T) to securities and net loans and leases (9.63T), we get pretty close to the 10x money multiplier.

Because demand deposits are the only things that need to be backed by cash, the rest of the money is essentially re-invested from another institution in the system. Someone didn't come in to the bank and put cash on the table for those deposits. Instead, they told their bank to exchange their credit with another bank.

In other words, it's just a change in the ledger sheet between two parties. Simplistically referred to as "created money". The Fed lets banks "create" this money as long as they meet certain rules. The most important being reserve requirements.

Getting back to comparison with bitcoin, my original statement ("1000% of deposits") was perhaps an oversimplification. But it's hard to say exactly where bitcoin fits in to a "new banking order". Would it be considered money, e.g. cash equivalent? What then is used as the medium for credit exchange e.g. the other 90% of financial activity?

Or is it the unit of account for EVERYTHING, including credit exchange? If so, then how do parties loan money? Won't 90% of bitcoin sit idle for very long periods of time? And does it really make sense to use a deflationary unit of account for an inherently inflationary activity (lending)?

⬐ maxerickson

I have no idea why you would ignore $8 trillion in interest bearing deposit accounts. To the extent these funds come from other banks, they will show up on the balance sheets of those banks (as loans).

Maybe try working from the assumption that what I am saying is (more in the direction of) correct. The banking system may be set up to work in favor of the establishment and bankers, but it isn't a giant fantasy.

⬐ AnIrishDuck

> I have no idea why you would ignore $8 trillion in interest bearing deposit accounts. To the extent these funds come from other banks, they will show up on the balance sheets of those banks (as loans).

What? I'm not ignoring those deposits, just pointing out that those deposits are "created money". They are made by banks, not issued by the Fed. The only restriction on their creation is the Fed interest rate on one side and the reserve requirements on the other.

In technical terms, they are part of M2, not M0 or M1 [1]. And banks are definitely allowed create M2, though obviously not M0 and M1.

> Maybe try working from the assumption that what I am saying is (more in the direction of) correct. The banking system may be set up to work in favor of the establishment and bankers, but it isn't a giant fantasy.

What exactly are you asserting? Nowhere did I state that the banking establishment is some kind of giant fantasy. I just made the fairly uncontroversial assertion that banks are allowed to issue more credit than they have cash on hand. In a sense, when they do so they are "creating" money (though this "created" money is technically referred to as M2).

1. http://en.wikipedia.org/wiki/Money_supply

⬐ moron4hire

With fractional reserve banking, it's not that the bank has to keep 1% of the money they have on deposit, it's that the bank gets to invent 1000% of the money it has on deposit. And it doesn't have to borrow money from the Fed in order to do it, it gets to make up the money on its own. Steps 2 and 4 should read $10 and Step 3 doesn't exist.

And step 4 should really read "Bank A marks Customer B as having $10". The vast majority of the money in our economy is numbers on ledger sheets. From there, Customer B uses it to pay off a debt of some kind with Customer C, who then pays Customer D, etc., until supposedly the money eventually gets back to Customer B in some way. Except Customer C deposited the money in Bank B, so Bank B can now lend out $100 to Customer E.

That's why pyramid schemes are illegal, the banks hate competition.

So yes, it especially doesn't work for bitcoins, because how do you make a blockchain for fractional bitcoins based on a mined bitcoin? The mined bitcoin is the one that has the blockchain. You can't make a bitcoin transaction without first checking the blockchain for double-spending, say nothing about 10x spending.

⬐ nhaehnle

What matters in the banking system are capital requirements.

The amount of money a bank can lend out is a multiple of the bank's capital, because when a loan defaults, the corresponding amount is subtracted from the bank's capital, i.e. from the net value of the bank (assets minus non-capital liabilities).

We as society want to limit the amount of loans that a bank can make to such an extent that its bank capital won't go negative. Because if bank capital were to go negative, the bank would be in default and would effectively have given money out "for free".

And banks are limited exactly in this way: Loans are limited in terms of the amount of capital that banks owe their owners. You may argue that the capital requirements are too low (and they are...), but qualitatively, the system makes sense.

It actually makes much more sense than this foggy picture of reserve banking that most people have in their heads.

⬐ SkyMarshal

That's not how fractional reserve banking works. An individual bank cannot just "invent 1000% of the money it has on deposit," but the banking system as a whole can create a multiple of the total amount of money on deposit. No need to try to explain when Wikipedia provides a clear explanation and a table showing how this works and how the Money Multiplier effect is calculated from the Required Reserve Ratio:

http://en.wikipedia.org/wiki/Fractional_reserve_banking#Exam...

⬐ AnIrishDuck

> With fractional reserve banking, it's not that the bank has to keep 1% of the money they have on deposit, it's that the bank gets to invent 1000% of the money it has on deposit. And it doesn't have to borrow money from the Fed in order to do it, it gets to make up the money on its own. Steps 2 and 4 should read $10 and Step 3 doesn't exist.

I haven't studied this subject in some time, so can't remember the exact mechanics. This summary sounds accurate. I would like to say that "it gets to make up the money on its own", while correct from one perspective, is another way of saying "other banks can respect its credit (how much money it says it has) if it plays by a certain set of rules".

I don't remember if this mechanically occurs via some kind of direct lending or via the Fed sanctioning "Bank A's" credit as satisfying reserve requirements for a "Bank B". The ultimate result is the same.

> That's why pyramid schemes are illegal, the banks hate competition.

I'm assuming that this is said tongue-in-cheek, but pyramid schemes are an example of perversion of credit and lending on a scale that separates them from banks. In particular, the core feature of pyramid schemes is a rate of return that is unsustainable, and thus requires rapid creation of new customers instead of gradual growth of new wealth.

If fractional reserve banking is indeed really terrible, what is the alternative? I think a massive body of research is required for someone to assert the superiority of such a system.

> So yes, it especially doesn't work for bitcoins, because how do you make a blockchain for fractional bitcoins based on a mined bitcoin? The mined bitcoin is the one that has the blockchain. You can't make a bitcoin transaction without first checking the blockchain for double-spending, say nothing about 10x spending.

This was ultimately my point. The principles behind fractional reserve banking and bitcoin seem fundamentally incompatible. Given that fractional reserve banking has worked for many centuries, any alternatives that are radically different should be approached with caution.

⬐ julespitt

The definition of bank is not an entity that holds currency, otherwise any company or you or I are a bank.

To keep it simple, Banks hold reserves because they lend. Paypal, for instance, is not a bank.

If your tiny Bitcoin startup holds $1000 in bitcoin, and your obligations are $1000, I don't see the problem.

⬐ sliverstorm

The definition of bank is not an entity that holds currency

Ok, you're right, that's an oversimplified view.

⬐ camus2

> Paypal, for instance, is not a bank.

Paypal is a bank in Europe. A paypal account is legally a bank account here.

⬐ genericacct

By the way, is this the same Jeremy Allaire that wrote coldfusion, which was acquired by adobe, and was exploited in the biggest privacy data breach in history?

⬐ lazugod

Why on Earth would that be relevant?

⬐ genericacct

Doesn't seem like the kind of person who can give security lessons to anyone

⬐ Jtsummers

That depends on what he's learned. Not to mention, he hasn't had anything to do with the platform since 2003. I have no idea what he's done or learned in the intervening 10 years, but I'd hate people to judge me today on what I developed 10 years ago without considering what I've learned and developed since.

⬐ dwaltrip

Yeah that kind of pissed me off. It felt like he was promoting the moat that makes it harder for smaller teams to compete. You don't need to start with $10 million in capital to innovate in the bitcoin space. Especially if interfacing with banks is not a key aspect of the business. Accountability is important, however.

⬐ yeukhon

You should. There is a liability. You are thinking self financing with bitcoin, but when regulation comes public consumers will expect some degree of liability. And this needs capital, not 50k from your personal bank to keep your server running.

⬐ sehugg

WSJ: Despite interest in bitcoin, Monday's hearing was attended by only one member of the Senate panel, Sen. Tom Carper (D., Del.), who chairs the committee. Other senators were still en route to Washington after spending the weekend in their home states.

Marketwatch: More than one hour into the hearing, and Sen. Carper is the sole lawmaker to ask questions. It appears no others are there.

Embarassing.

⬐ mindslight

Alright, the market has remained irrational longer than I've remained solvent in resolve. So I'll admit it: This would have been a nice bandwagon to have jumped on.

But hollow disruption porn and worse-is-better are still fucking tragedies.

⬐ peteretep

There's still time to invest.

⬐ chm

> "But hollow disruption porn and worse-is-better are still fucking tragedies."

What do you mean?

⬐ presidentender

Positive attitudes regarding Bitcoin by the powers that be give me pause.

Why would law enforcement be eager to support a technology which, on the face of it, seems to reduce the power of law enforcement?

⬐ crygin

I'm unclear on why everyone seems to think that Bitcoin reduces governmental power. It makes all transactions public -- no more cash deals, hard-to-subpoena international wire transfers, etc. It makes the job of law enforcement much easier.

⬐ bigiain

" It makes the job of law enforcement much easier."

It makes the job of law enforcement _different_. Their existing skills/procedures/relationships/precedents for dealing with cash and banking-industry-mediated finances don't work for Bitcoin - presumably that makes it scary for any change-averse members of the LEO community.

⬐ neilk

Indeed. I think a possible scenario is that governments will legalize Bitcoin as long as you tie your address to your government-issued ID, and you're not on a blacklist. Basically you'll have a Bitcoin license.

This gives them an off-switch for The Terrorists. And, side effect, a way to blockade groups they don't like.

A registry may happen because businesses have an incentive to have creditworthy customers. Sometimes you want to prove you have collateral, that you have cash flow, that you've paid people in the past. Bitcoin does that nicely.

⬐ SwellJoe

I'm not sure that's feasible. At least, not with the current Bitcoin design. Any individual can have as many wallets as they want, and while specific addresses and wallets are traceable, you don't have to make indentifiable transactions from any given wallet. So, for example, one might have a "public" Bitcoin wallet, and a "private" one. The private one you use in the way someone who works for cash and tips might operate today...they don't tell the government about all of it.

So, you've got your public wallet to prove you have money available, for making credit decisions, for deciding whether to sell you a house, etc. And your private wallet because "fuck the police". There's not even a good way to know if a wallet is located in the US or somewhere else.

And, if there are people willing to take coins from people's private wallets, there will likely be a solid economy outside the government's control; as there already is; there's a massive barter and cash economy. Bitcoin makes it slightly technically challenging (like, how do you get and spend bitcoins to and from your private wallet if you can't accept your paycheck there and can't order goods shipped to your house with it).

⬐ samolang

You could carry a billion dollars worth of bitcoins around on a USB drive though. Easier than carrying a billion dollars worth of cash around. Take your wallet offline and you can do physical transactions that have no record. You just need to find a willing party to take the bitcoins offline.

⬐ avar

It doesn't reduce police powers, but in the long term if it pans out it'll reduce the power of fiat currency. That's what people talk about when they say it reduces the power of the government.

⬐ PeterisP

Can't NSA datacenters with specialized crypto chips simply get 51% of bitcoin mining power for some time, if they want? Now that would be 'fiat currency'.

⬐ tlrobinson

51% attacks don't allow you to mine arbitrary amounts of Bitcoin. At worst they could DoS the Bitcoin network and double-spend their funds, but the recipients (their own citizens? other governments?) would find out and be pissed.

⬐ PeterisP

DoS it long enough, and you in effect confiscate/destroy the wealth of all Bitcoin holders, if you wish so; and as they have the most experience in producing specialized crypto-processing hardware on a large scale, it wouldn't be that expensive when compared to the [future] value of Bitcoin network.

Others getting 'pissed'? What are they going to do? The very limited consequences of Snowden-leaks pretty much show that they can do such things and ignore protests, if the government leaders are okay with that.

⬐ moron4hire

The citizenry is already pissed and it means nothing. They do what they want.

⬐ rictic

They could spend a lot of money and gain the ability to double spend and stall any (or all) transactions, but they couldn't create more coins than allowed or seize assets.

⬐ sliverstorm

If they control the network, can't they determine the mining difficulty? Difficulty is a single, unified knob that combined with the miners directly controls the rate of BTC generation.

Also, if they can freeze (stall) certain wallets indefinitely, that's pretty much as good as asset seizure.

⬐ bigiain

I wonder… I've seen a lot these last few weeks about the volume of Chinese Bitcoin transactions. I wonder if the "hobbyist/geek/hacker/early-adopter" Bitcoin miners will end up attempting to "hold the balance of power" while state-backed Chinese and US crypto-clusters fight each other for 51% of the hashrate? So long as "we" can keep a few percent of the global hashrate out of US/Chinese government control, perhaps they'll both escalate at similar-enough rates that a few thousand USB ASICs and a few tens of thousand gaming-rig GPUs might keep everybodies stach of Bitcoin "safe"?

⬐ wmf

It seems unlikely that two parties would try to launch 51% attacks at the same time. And if one party started an attack it would probably take someone else at least 30 days to fab enough chips to respond, by which time the attack would be over one way or the other.

⬐ eof

governments aren't exactly known for their long term outlook

⬐ sliverstorm

Sure, but law enforcement isn't concerned with monetary policy and deficit spending.

⬐ avar

That's why people say it reduces "governmental power", not "law enforcement power". The "government" includes the organization that issues the fiat currency that you use.

You could argue that the increase in law enforcement power would offset the decrease in power from not being able to issue fiat currency, but that would mostly be a silly line of argument to pursue.

⬐ crygin

Not least because governmental power does not derive from the ability to issue fiat currency; it derives from a legal (or socially accepted) monopoly on force. Failure of a sanctioned fiat currency could reduce governmental legitimacy, but law enforcement is the backbone of governmental power.

⬐ avar

Partly yes, but being able to control the macro economy is arguably a much greater power in a western state than the monopoly on coercive force.

Force mostly has to be individually applied, and you can only take it so far before you have massive pushback in the form of civil unrest.

Printing money, to pick a simple example, is much more effective and can be done across the economy as a whole.

Could you imagine police forces breaking into everyone's home and taking half their cash in a matter of days? It's unthinkable that that would happen for logistical reasons alone.

But that's what we've effectively seen some modern western governments do just recently by rapidly deflating their currencies.

Abolishing fiat currency would take away that power, and make no mistake it is an immense power. It's the power to shape entire economies at the stroke of a pen.

⬐ sliverstorm

The original question was:

Why would law enforcement be eager to support a technology which...

⬐ cube13

Because the US already has laws on the books for handling foreign currency, which Bitcoin could also apply? There's noting really different between handling piles of physical cash and bitcoin. In fact, Bitcoins are probably easier to track through the blockchain than $20 bills.

⬐ VMG

Because they don't get it.

⬐ oinksoft

What perpetuates the myth that Bitcoins are anonymous and the stuff of super-spies? Cash is anonymous and reduces the power of law enforcement, not a currency that comes with a public audit trail.

⬐ orblivion

Well, now you can spend cash on the Internet. Is Silk Road a big deal or not? Also, if Zerocoin is added, then it can be fully anon.

⬐ Karunamon

it's pseudo anonymous. I send 1 bitcoin to a wallet. You are law enforcement. Prove the owner of the recipient wallet. good luck with that.

⬐ DanBC

Cash is individually numbered. It's not always that anonymous.

⬐ iand

Cash doesn't leave a publicly available audit trail of every exchange.

⬐ randyrand

The point is so does bitcoin - to respond to a few parent comments above you

⬐ mrb

Cash is a lot more anonymous than Bitcoin. oinksoft's argument is valid.

⬐ AnIrishDuck

If anything, bitcoin is a law enforcement dream. I don't understand why anarchists seem to love it, given the information it will ultimately put in the hands of the government. It's practically the definition of a trojan horse.

⬐ walden42

This might change after enough bitcoin applications implement CoinJoin, a type of mixer.

⬐ ivanca

They have to prove the owner of the recipient wallet, which is already pretty hard, especially if you are using something like Tor.

⬐ est

I kinda feel the same way. In the future, no private pool can hold the whole transaction history, only governments can.

⬐ 3pt14159

No it isn't. Only if you are stupid does it compromise you.

⬐ betterunix

Anarchists love Bitcoin because it is "currency without a central authority." They see that and ignore everything else.

⬐ sjcsjc

"You don't think it was Al Gore, do you?" - quip from the senator running the hearings on the subject of Satoshi's real identity.

⬐ pilom

I'm reminded of a course I took which was co-taught by the CTO at the Department of Homeland Security. He once said that "The criminals will always be better at using cryptography than the people who use them in positive ways."

⬐ dmix

There's always been a fine line between a police officer and a criminal. Now apparently the same applies between intelligence agencies and black-hat hackers.

⬐ rhizome

Except that the NSA and FBI have been defining crypto as suspicious activity, so kind of a double-bind there.

⬐ maxk42

Well it's no wonder: they only use it for suspicious activities.

⬐ EricDeb

The FBI and government have considerable bitcoin holdings, assuming they acquired the silk road wealth + what they already have their total BTC is at least 524,000. src: https://bitcointalk.org/index.php?topic=321265.0

⬐ igravious

Is this the same entity that has ~ $16,000,000,000,000 external debt?

source: a part of the government

https://www.cia.gov/library/publications/the-world-factbook/...

⬐ ademarre

It's refreshing that the overall tone of the hearing is not one of 'we don't understand this cryptocurrency thing, we need to shut it down', but rather, 'this thing is happening, we have some concerns, but we need to adapt so we aren't left behind'.

⬐ namuol

Kicking myself for all eternity...

EDIT: Or not... [1]

[1]: http://imgur.com/cp01D2m

⬐ None

None

⬐ nisa

You are not alone.

⬐ nilkn

Slightly off-topic, but I don't understand how a deflationary currency could be practical. Why would you ever spend it, except begrudgingly, if whatever you buy will be worth less tomorrow (thinking exclusively "in bitcoin," without regard to other currencies)? This is a question, not a criticism.

⬐ darkFunction

Spend when you need or really want something. Maybe the rampant consumerism associated with an inflationary currency is actually wasteful and destructive to the planet.

⬐ SkyMarshal

That's my thought too. Spend either when you really need something, or only things that appreciate rather than depreciate - home/real estate (barring housing bubbles), education, home manufacturing (3D printing), business investments, etc. Less on planned-obsolete cheap junk.

⬐ crystaln

When you want something.

A deflationary currency isn't much different from owning stock. Imagine you own $1000 in stock and want a TV. Would you ever sell to buy? Of course.

⬐ nilkn

It sort of makes sense. I suppose, in my naive understanding, that it would somewhat reverse the current situation. Right now, you invest by buying stocks, bonds, etc., because cash loses value over time and stocks hopefully gain value. If we all used bitcoin, though, then you could viably "invest" by simply saving your bitcoins. The currency itself would be the investment rather than something else. Obviously, though, you'd still have to spend money in order to acquire anything.

I'm really out of my depth economically here, but couldn't this inadvertently lead to a sharp drop in general investment in publicly traded companies?

⬐ gnaritas

> Slightly off-topic, but I don't understand how a deflationary currency could be practical.

It can't.

⬐ randartie

The idea is that it will become stable.

⬐ eurleif

Why would you spend your USD if you can convert it to BTC instead and it will be worth more tomorrow?

⬐ None

None

⬐ vijayboyapati

This sounds very encouraging to me. A number of panelists have talked about how banks aren't allowing btc businesses to setup up basic checking accounts and how this needs to be fixed if the US isn't going to be left behind.

⬐ andy_ppp

Once goods and services are available ubiquitously to buy in bitcoin fiat money will become worthless.

This isn't a bubble IMO, it's just that USD won't hold it's value compared to available currency that has at least has some value.

:-D

⬐ Ellipsis753

Just sold off my bitcoin at $700. Who knows where the price will go next. Hope I won't regret this too much... :)

⬐ jjsz

Where did you sell it?

⬐ Ellipsis753

It's an IRC channel called #bitcoin-otc-uk (they have ones for the usa etc too). I just talked to people and found someone who wanted to buy. They have a little rating system and someone who was online said they'd dealt with them before. So that was good enough for me as they had good reviews and seemed trustworthy. I then transfered the bitcoins and they sent the money by bank transfer. (We made the transaction publicly in the chatroom so that there'd be others to record it.) It wasn't too bad. If you want to buy/sell some I'd recommend this.

⬐ crystaln

Interesting. Seems ripe for a ripoff but I hope that works out for you. It would be nice to have some sort of reliable decentralized escrow.

⬐ jjsz

Nice I got my first .XX BTC from the owner of colored coins. I can wait for the second senate hearing to go on here. I'll ask them for the US site.

⬐ Ellipsis753

Ah cool. When is the next senate hearing? I might consider buying my bitcoin back in case it goes up again for the hearing. :)

⬐ jjsz

Not sure, but I'll be paying attention around the same time today. However, I'm tending to hold out until my father calls me asking about Bitcoin. By then it has gone mainstream.

⬐ asciimo

Congratulations on your massive profit, and thank you for stimulating the Bitcoin economy! However, I think that you will eventually regret this decision.

⬐ Ellipsis753

Hehe. How do you know I made a massive profit. I could have bought it just hours ago. ;) You're correct though, I got mine for $100 dollars a little while back. I may regret it but $700 is not to be sniffed at. I feel that although it may go up massively it could of course go down too. The economy is just too unstable for me at the moment.

⬐ thinkcomp

My comments:

http://www.aarongreenspan.com/writing/20131118.hsgacstatemen...

Jerry Brito's testimony was quite good.

⬐ vinchuco

This is great for those that invested just before the hearings. All the attention given to it will get more people in the US involved. I wonder how much longer can this growth last.

⬐ oxalo

I think that depends on to what extent Bitcoin will replace the current money system. [1] looks into the price of Bitcoin if it becomes as widespread as Bitcoin or PayPal.

[1] http://www.dailyfinance.com/2013/11/17/bitcoin-bubble-or-val...

⬐ hgsigala

As a staffer who works down the hall from this hearing, I am glad to see all the anti-Congress sentiment usually expressed on HN digressed for true discussion of subject matter.

⬐ presty

related: http://www.businessinsider.com/ben-bernanke-on-bitcoin-2013-... BERNANKE: Bitcoin 'May Hold Long-Term Promise'

⬐ shmerl

This looks very positive indeed.

⬐ Zoomla

I heard PATRIOT Act....

⬐ dangrossman

Considering the PATRIOT Act is what established the "know your customer" due-diligence rules for financial institutions (i.e. why your bank wants to see ID when you open an account), there's nothing ominous about the name of that bill coming up.

⬐ sneak

Can't view without Flash, I won't install Flash, therefore I can't view.

⬐ sliverstorm

That's your choice to make. You don't get to whine about it.

⬐ fuqua

Sounds like a personal problem.

⬐ vezzy-fnord

Use a free software alternative like LightSpark.

⬐ voltagex_

http://ussenate-f.akamaihd.net/i/govtaff111813.mp4/master.m3... may work for you in VLC.

⬐ swansw

Aw come on - but you're really missing out.

⬐ peteypao

give me a break

⬐ saraid216

Do the Hacker News thing and spin up a VM with Flash on it, watch, and then delete the VM afterwards.

⬐ idupree

That works for technical reasons but not legal reasons. You can't "virtually" agree to the terms&conditions and then delete your agree-ment along with the VM. (Unless the terms or the law let you do so. Sometimes they do.)

⬐ saraid216

Now I'm curious what part of the T&C makes it problematic to use Flash on a VM. What exactly is it that you're afraid would persist beyond a VM deletion?

⬐ idupree

So, I decided to take a look. It used to be that Flash's terms forbade you from ever working on a competing Flash implementation.

English is on page 87: http://wwwimages.adobe.com/www.adobe.com/content/dam/Adobe/e...

Heh, it might be forbidden to spin it up in cloud VMs, though local VMs are okay as long as you don't run nginx on your laptop? "3.2 Server Use. This agreement does not permit you to install or Use the Software on a computer file server." "4.1 Adobe Runtime Restrictions. You will not Use any Adobe Runtime on any non-PC device or with any embedded or device version of any operating system" ...

This provision is really broad: "9.5 Indemnity. You agree to hold Adobe and any applicable Certification Authority (except as expressly provided in its terms and conditions) harmless from any and all liabilities, losses, actions, damages, or claims (including all reasonable expenses, costs, and attorneys fees) arising out of or relating to any use of, or reliance on, by you or any third party that receives a document from you with a digital certificate, any service of such authority ..."

If you are acting on behalf of a business, you might not want to authorize Adobe to occupy your business's time telling them your business secrets: "15. Compliance with Licenses. If you are a business or organization, you agree that upon request from Adobe or Adobe’s authorized representative, you will, within thirty (30) days, fully document and certify that use of any and all Software at the time of the request is in conformity with your valid licenses from Adobe."

I'm not sure whether this persists: "4.5 No Modification or Reverse Engineering. You shall not modify, adapt, translate, or create derivative works based upon the Software. You shall not reverse engineer, decompile, disassemble, or otherwise attempt to discover the source code of the Software.", where "“Software” means (a) all of the contents of the files (delivered electronically or on physical media), or disk(s) or other media with which this agreement is provided". I'm not sure whether "Software" includes bit-for-bit identical copies of the software obtained by other means at other times (see http://ansuz.sooke.bc.ca/entry/23 ).

⬐ None

None

⬐ saraid216

> It used to be that Flash's terms forbade you from ever working on a competing Flash implementation.

...how have I never heard of that? That seems like a really easy thing to get thrown out in court. Wikipedia gives me something that sounds more reasonable:

> The file format specification document is offered only to developers who agree to a license agreement that permits them to use the specifications only to develop programs that can export to the Flash file format. The license forbids the use of the specifications to create programs that can be used for playback of Flash files.

Which is not an issue of accepting the EULA and running Flash, but of getting specs for Flash and, well, developing a competing product. Asinine, but less insane. That's more in the realm of "IP law, and attitude towards IP, sucks" than "accepting Flash EULA is wrongbad".

The intent of 3.2 sounds like it's to prevent stuff like internal company file servers from keeping a copy of Flash around. I could see it being bent to make the VM spin-up illegal, but that's it.

I could see 4.1 being an issue, since it seems to be a deliberate way to keep Flash from being run on VMs, but I've run Flash on development VMs for the purposes of debugging embeds before and it never came up. My instinct, despite IANAL, is that I'm interpreting it wrong and it has nothing to do with VMs and so is inapplicable.

9.5 isn't relevant unless watching a Livestream over Flash on a VM causes you harm...

15 isn't relevant unless you're a "business or organization", and I strongly doubt that a court would allow that to extend to an individual proprietor of any kind.

4.5 would be a good reason not to do it if you had any intention of ever reverse-engineering Flash. I can see that persisting, but I also have my doubts as to whether that's sneak's reasoning.

So, in short... I am guessing that there's no established precedence to prevent you from accepting a EULA on a VM that disallows running said software on said VM. That would be a fun court case to watch. Thus, the main legal hurdle is the possibility of reverse-engineering Flash.

(And yeah, I'm too lazy to read the T&C myself. Sorry.)

⬐ ywyrd

That's why I never agree to any terms and conditions online.

⬐ gknoy

What are the terms of the Flash EULA that you might violate while spinning up a VM to read something? You're not planning to copy it, publish it, etc, and since you're destroying the VM later you don't care about stability/etc -- outside of the reading event, you are not doing any actions with the product.

I'm genuinely curious. I can understand an argument from principle like RMS might use, but I am unsure what the difference is between agreeing on a VM and agreeing not-on-a-VM.

I'm really trying to see an edge case where doing it on a VM that you destroy later is in any way worse (or even different) than doing it on a laptop that you buy, use, and then later incinerate.

⬐ idupree

My point applies in the same way to a laptop you buy, use, then incinerate. Even after you incinerate it, you are still bound by the terms you agreed to (to the debatable extent to which [1] is enforcable at all, anyway).

[1] The download page states "By clicking the "Download now" button, you acknowledge that you have read and agree to the Adobe Software Licensing Agreement.". That statement is hundreds of pixels away from the actual download button.

⬐ eof

I've been watching since about 20 minutes in; it is overwhelmingly positive.

There seem to be 2 'groups' of testimonies, the first coming from law enforcement and government bodies; the overwhelming consensus was that existing laws are satisfactory to prosecute bad actors using bitcoin.

The second group is still talking; again extremely positive.. analogies to bitcoin being similar to the internet in the mid nineties; its scary but overall good. The lawyer from the bitcoin foundation is really driving home the idea that the main problem right now is that bankers are too scared to give bitcoin business bank accounts.

I see overall nothing negative; and the chairman seems extremely reasonable and open to the notion of bitcoin and brought up the bitcoin-now <-> internet-in-the-nineties analogy himself.

No one is asking for stricter laws, everyone is asking for clarity. Much, much more positive than I expected; only the secret service guy seemed to be very cautious; he never said the word bitcoin and mostly spent his time saying the secret service was awesome.

⬐ mtgx

Perhaps, but I noticed something a little different. It seems that in these hearings, the chair has enormous influence to push the discussion in a certain direction, and even direct those opposing his views to be a lot more "neutral", instead of opposing him, if they truly do disagree with him.

I haven't watched a lot of these hearings, but I know that with SOPA, chaired by the infamous Lamar Smith, the witnesses were 5:1 pro-SOPA, and the NSA hearings, chaired by pro-NSA people, were also NSA circle-jerks.

So it seems the rule of thumb, more than anything, when you want something passed, is to get a chair that strongly supports your view - and then everything else will fall into place.

⬐ fat0wl

I think the reason they're overwhelmingly positive is because they don't care about bubble-bursts and market volatility. They're approaching it from an amoral standpoint & just reviewing the tech. Once they get into the details of mining and supply rules set up by some anonymous benevolent individual I think it may get soured.

⬐ None

None

⬐ crystaln

A benevolent individual who now has $2B in bitcoin.

⬐ ChuckMcM

Don't forget there are uses for a mostly anonymous currency to the governmetn too.

⬐ girvo

Man, that would've made the whole Contra affair a little easier, wouldn't it! ;)

⬐ mnsc

Campaign funding with Bitcoins would be interesting.

⬐ pablovidal85

This is true, but if we take on one side a group of consumers as one entity against the government as another, pseudonymity is way more valuable for the former than for the latter, for practical reasons.

⬐ Varcht

I think a possible reason they're overwhelmingly positive is because the FBI has a pretty good cache of bc.

⬐ doki_pen

All the politicians are thinking "A completely anonymous way to get campaign funds? This sounds incredible!"

⬐ prawn

I think it's because not getting in on the ecosystem now could be regrettable later if other powers do.

⬐ marshray

Or they operate most of the BTC washing services.

⬐ maxerickson

They wouldn't care if those coins were worth $5 billion. The federal budget is silly compared to a few hundred thousand bitcoins. Or maybe that's the other way around.

⬐ Varcht

Maybe... or "The FBI can’t investigate terrorists and fraudsters due to budget cuts" http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/30/t...

The FBI budget iirc is ~8 billion, if they get everything from silk road it could be over 10% of their budget.

⬐ icebraining

The commissions earned by Silk Road were just shy of $80 million over more than two years. Where did you get $800 million from?

⬐ None

None

⬐ eloff

You are aware that the other definition of billion is even larger right?

⬐ dangrossman

There's a way to convey that information without the condescending tone.

⬐ Varcht

By some reports they were looking at 600,000 bitcoins[1], read some headlines today that bc was at $750[2], make more people comfortable with them...

[1]FBI struggles to seize 600,000 Bitcoins from alleged Silk Road founder by Alex Hern http://www.theguardian.com/technology/2013/oct/07/fbi-bitcoi...

[2]Bitcoin hits $750, up 107% in a week By: John Phillips http://www.cnbc.com/id/101205416

⬐ ars_technician

Some coins selling at $750 doesn't mean someone is willing to pay $750 for 600,000 coins.

⬐ Varcht

That's true now but legitimize it and get some real capital guarantees and that could change.

⬐ jarin

The FBI and CIA can use Bitcoin to anonymously pay off foreign informants though

⬐ maxerickson

Do you think that possibility translates into enthusiasm in the Senate?

⬐ TomGullen

We'd see them spend it and ask what they've spent it on.

⬐ Karunamon

Given bitcoin's current quasi-legal status, I don't think they'd be under any obligation to answer that question until the coins become legal tender

⬐ baddox

And they would say "none of your business."

⬐ saraid216

I'd expect the CIA to know how to launder money competently. It seems like a ridiculously obvious thing for them to learn how to do.

⬐ None

None

⬐ derleth

> only the secret service guy seemed to be very cautious; he never said the word bitcoin and mostly spent his time saying the secret service was awesome.

To make it clearer for anyone who doesn't know: The Secret Service is the primary government agency charged with investigating the counterfeiting of American currency. Protecting the President and other dignitaries is minor compared to that. That's probably why they're testifying in the Senate now to begin with.

⬐ yeukhon

That's my feel too. The chair seems to be really really interested in bitcoin and how bitcoin works. They [the panel] repeatably mentioning Tor Foundation, Bitcoin Foundation partnership on dealing on this issue. I think the government, at least from the Senate's perspective, what is absent in regulating virtual concurrency. I am all for government and business regulating if the regulation benefit the public consumer (not deep web consumers) in the long run. They also praise the pros and cons of the bitcoin protocol, history of bitcoin and etc.

Chair: "You don't think it was Al Gore [created the bitcoin], do you?"

laughers

Chair: "I like this quote from Mrs. Einstein: 'I understand the words but not the sentences.' Thanks the panel."

Side note: I thought I saw Snowden... http://imgur.com/IaAPGjx

And the hearing record is only saved for 15 days...

⬐ nateabele

> Side note: I thought I saw Snowden... http://imgur.com/IaAPGjx

I actually thought he looked a lot more like Tucker Carlson (the bow-tie wearing talking head who was verbally bitch-slapped by John Stewart on Carlson's ex-show, Crossfire).

⬐ jlgreco

I think he means the man directly to the left of the man in the foreground of that picture. Blondish, square glasses, no tie.

⬐ yeukhon

Yes the guy in the background. It is actually funny but I am afraid getting downvote for saying that haha :)

⬐ bsgreenb

Haha, that's Ryan Singer https://fedoraproject.org/wiki/User:Ryansinger