I have a leather wallet which holds money as well and I am sure it is not a bank.

You cannot fault the writer of the MIT article for being an "idiot" because it is a total 180 degree shift in paradigm. I learned about Bitcoin roughly 10 days ago and it took me all weekend to understand it. Is it money? Is it the new Paypal? Is it a stock?

These are the points he addresses;
1. medium of exchange - Yes, overstock.com, tigerdirect, Las Vegas hotels, and a growing list of merchants accept it.

2. unit of account - wild price fluctuations prevent it from being a unit of account. This is true but only because bitcoin is so thinly traded due to it being new and most shares of BTC are held by just a few miners. This will change as these large holders of BTC spend their BTC as the dollar price of BTC goes up and as more merchants accept BTC. I suspect that these miners were lacking places to spend their BTC. As more people adopt BTC, these miners could finally unload their BTC without dropping the price too much. A lot of these people who own BTC are privacy freaks and registering under KYC regulations to use an exchange with large quantities of BTC would probably freak these people out. Their only recourse is to spend it, but until recently, there's only so many pizzas you could order online with your BTC millions because nobody accepted BTC until recently. Also, these large holders of BTC would find it impractical to do local bitcoins to cash out. For example, if you were to use localbitcoins and cash out of 1 BTC a day, it would take you 10,000 days to cash out of 10,000 BTC. You generally don't want to do a FTF transaction with more than 1 BTC because that would leave you open to too much robbery risk. Even if you live in certain parts of America where it is legal to carry a gun and bullet proof vest, you could cash out of 10 BTC a day, but that would still take you 1000 days to cash out of 10,000 BTC, so this is impractical if you own a large holding of BTC. However, now that you could buy a car or house with BTC, then it is much easier to cash out of BTC by spending it. As more miners spend their BTC and more people get into it, the wild fluctuations in price would disappear.

3. store of value - BTC cannot be stored in a bank and digital wallets are less secure than a bank. I think the ctiizens of Cypress would beg to differ. Again, this is a change in paradigm. Keylogger viruses are a very real threat to BTC. I've seen others on this very forum lose lots of dough this way. Cybercriminals are very real and very difficult to catch as they're usually in another country not under your law enforcement's jurisdiction. BTC is the wild west. But does this make it inferior to fiat? Maybe, maybe not. This is a matter of opinion.

As a closing knockout blow, the author states that an economy that is deflationary would require workers to take a pay cut every year. Again, this is a change in paradigm that the author fails to understand. With fiat, inflation FORCES you to take a pay cut every year. With BTC, deflation FORCES you to take a pay raise every year. This means with fiat, the employer has to keep giving you empty pay raises to keep up. With BTC, your employer has to keep giving you empty pay cuts to keep up. Neither system is better, but it is a total 180 degree paradigm shift.

Nothing like this has ever been done before on such a grand scale. It's gonna be real interesting where this bitcoin roller coaster takes us. Hang on, it's gonna git rough!  

Banks are "Trusts"... No? You trust your funds will be there.


You are arguing semantics, and failing. A bank is nothing more than a storage location to keep things of value. Next you are going to say that credit unions are not banks... A blood-bank is a bank... Some even pay for blood, exchange blood for money, OMG!

The initial value of BTC came from money spent on assets, and time labored without pay. Debt. The same thing that drives it now. The same thing that gives money its value.

After mining, the miners still have to run, to do the transactions. Us, being the banks, have to depend on them, or buy assets to keep the network moving. The cost is our assets and operation expenses in electricity and time. Our payment is fractions of fees, after mining has stopped.

A bank-note is a check for $1.00 or $5.00 or $10.00 ... ... It is owned by the bank, given/lent to you, and has no actual physical representation as an asset beyond what you "think" it is worth, to you. Banks will not give you anything other than another dollar, for your dollar... Actually less, in most cases.

We stop using dollars, and the thing in your wallet is only of value to you. The bank won't take it, or they will, but you will get nothing for it. They have nothing to give you. They won't even give you the pen at the teller, because they don't want your dollar. It is worthless to them if you don't want it, and if they can't find anyone to use it.

It has happened before, and it will happen again. Banks are an old inefficient dinosaur that can't afford to keep up. It costs them too much of your money to maintain. Currency will be tulip-bulbs in the future. Something like BTC, birthed from BTC, will be the future. (For now, it is the future. FIAT is undoubtedly the past.)

You are right, it is not a "money lender"... That is not the only type of bank. Not all banks lend your money out to strangers or their friends, or themselves. If that is your idea of a bank, then continue to use those places. They are doing you wonders, decreasing the value of your dollar. The one in your wallet. (Wallet is a style name, like purse, or vault, or safe, or pocket. They are all storage containers, and thus, banks. Funny, because most banks keep your money in other peoples wallets. Irony!)

Yawn...

TL;DR

 

You are becoming boring...

Whatever are your arguments, Coinbase is not a bank. Any well informed person know this.

http://www.technologyreview.com/review/524691/marginally-useful/

Marginally Useful
Bitcoin itself may not flourish as a currency, but the underlying technology is beginning to suggest valuable new applications.

By Paul Ford on February 18, 2014

Also featured in:
MIT Technology Review Magazine
March/April 2014
More in this issue »

WHY IT MATTERS

Cryptocurrencies are in their infancy, but more mature versions could be incredibly useful.


Bitcoin, a purely digital currency, is backed by no commodity and governed by no central bank, but it exists because a small number of humans have chosen to believe in its legitimacy.

Its pseudonymous creator (or, more likely, creators) “Satoshi Nakamoto” willed it into existence in 2009, not only describing how the so-called cryptocurrency would work but shipping a full working implementation. The original software had all the hallmarks of a gag or hack: a great, metastasizing practical joke played by clever cyberlibertarian coders upon all who put their faith in fiat (that is, government-backed) currencies.

Then came the believers. Today, there are thousands of people loyal to the ideology and opportunities that Bitcoin represents. They imagine a world where economies are less dependent on banks and governments, and they’re actually using Bitcoin, often in disruptive ways. The currency had a rocky start when it became the medium of exchange for illegal drug transactions on Silk Road, but that huge narcotics marketplace was shut down last October and its founder arrested. Indeed, the currency seems more or less respectable. Since Bitcoin is essentially a kind of transaction log, where past transactions are public and known to the world, it is of great interest to prosecutors, who have called the coins “Prosecution Futures.” Last year, even U.S. Federal Reserve chairman Ben Bernanke gave them his cautious endorsement.

Bitcoin may or may not become a commonly used currency. As a form of money, it is an established medium of exchange; but so far it is a poor store of value. (See “Bitcoin Economics”.) More than 60 percent of the bitcoins created remain unspent: they are being hoarded speculatively. (No wonder: the value of an individual bitcoin, which was less than a dollar in January 2009, was around $932 in early February.) Those unspent coins could flood the market at any time, depressing their value. Even now, the bitcoin’s value fluctuates wildly.

But while it may be wishful thinking to imagine Bitcoin asa true currency, it’s a highly functional and effective technology. Bitcoin’s “block chain protocol” is built atop well-understood, established cryptographic standards and allows perfect certainty about which transactions occurred when. Nakamoto’s original paper is admirably clear. Free and open implementations of software, as we learned from the immense success of the open World Wide Web and Linux, trump everything else.

Money from nothing

What can you do with bitcoins, or with cryptocurrencies in general? You can spend them, of course. You can hold them in a digital “wallet.” But whereas fiat currency is minted by asovereign entity of some sort, you can make new digital money—in fact, it’s the only way currency can be created. The process, called“mining”in the Bitcoin vernacular,involves repeatedly running a computationally intensive mathematical function (called a cryptographic hash function) on a set of randomly seeded inputs until a specific pattern pops up. Many computers all over the world are racing to solve the same function—but typically only one wins. The results are publicized on the Internet for the rest of the Bitcoin network. To create scarcity, the Bitcoin system is designed so that over time the function becomes harder and harder to solve (and therefore requires more computer resources). The number of bitcoins given out as a reward is halved at regular intervals. After 21 million coins have been created, mining stops and no more can be created. For some people, this means Get in now!—often using specialized, expensive “mining rigs.”

There are other ways to participate in the crypto-economy. Some people have built exchanges, and others have built websites that track the entire transaction history of every coin or fraction of a coin. Still others have built gambling websites like Satoshi Dice, which allow punters to gamble in a weird, automated fashion.

If you already feel jaded about Bitcoin, there are alternatives. Litecoin is a version of Bitcoin that can be mined with regular computers. Dogecoin is a variation on the Litecoin idea that was named after an Internet meme featuring a proud Shiba Inu dog. It is trading vigorously; $30,000 in Dogecoin was raised to send the Jamaican bobsled team to the 2014 winter Olympics. Hundreds of such currencies now exist, such as TeslaCoin or ElephantCoin. They differ in the hashing algorithms they use, the number of coins they make available over time, and other details. Each of them hopes to find a sweet spot in the emerging global cryptocurrency marketplace.

Most interestingly, cryptocurrencies can be used for purposes other than those that conventional currencies fulfill. For example, Namecoin is a system used to create and exchange domain names: the coins contain information about the domain names themselves. Recall that the domain name market has about $3 billion in revenue per year: it’s a good example of a weird, scarce digital resource. And Bitmessage is a Bitcoin-inspired messaging platform that allows for anonymous (or at least pseudonymous) communication. What Namecoin and Bitmessage share is that they allow data to be added to the transaction, making the exchange one not just of perceived value but also of information.

Or take digital art. Larry Smith, a partner at the business architecture consultancy The matix and an analyst with long experience in digital advertising and digital finance, asks us to “imagine digital items that can’t be reproduced.” If we attached a coin identifier to a digital image, Smith says, “we could now call that a unique, one-of-a-kind digital entity.” Media on the Internet—where unlimited copying and sharing has become a scourge to rights holders—would suddenly be provably unique, permanently identified, and attached to an unambiguous monetary value.

Smith believes that cryptocurrencies will have wide application across business and culture, including both banking and online advertising. For banks, Bitcoin is “just a new source of money,” he suggests. “Banks are very hungry to advance their value through technology.” It’s easy to imagine, say, HSBCoin, or BarclaysBucks, giving investors who want choice in the currencies they use the services of a trusted financial brand.

And what of the enormous revenue-generating engine of online advertising? Advertisers pay to reach highly valued online audiences; they use a variety of technologies, many surprisingly ineffective, to find these individuals. Could cryptocurrencies help? Smith asks us to consider the following scenario: imagine a brand like Dunkin’ Donuts that wanted to create a loyalty program. Now imagine that brand creating its own currency: DunkinDollars. Finally, imagine an online advertising campaign where people who clicked on an advertisement would be given the virtual coins. Small amounts of money might be distributed without friction. If large brands could create their own currencies and allow individuals to participate in this marketplace, they could create consumers who were truly invested, in every sense.

The entire web of advertising would suddenly become a more interesting place. Before, the ads seemed to hunt you, but now you would have reason to hunt for ads. The coins you earned could then be exchanged for branded goods, but they could also be exchanged on an open market, like a kind of penny stock. “Pay consumers for clicks and acquisitions,” says Smith, defining this new kind of model.

The idea of paying people to look at ads was tried during the last Internet boom (by the startups AllAdvantage—“the dumbest dot.com in the world,” according to CNN Money—and the infamous FreePC). And failed virtual currencies such as Beenz and Flooz preceded the success of Bitcoin. But there might be advantages to trying again with the newer cryptocurrencies: offering more value to consumers might make the idea work this time. Right now, the cookie model of Web tracking is dominant; ads are just media objects. But cryptocurrency-mining software, written in Java-Script, has been demonstrated running in a Web browser; you can break up the task of mining and parallelize it. So an advertiser could treat ads as executable software, creating a multimillion-node supercomputer cluster. By engaging with an ad, the user might earn virtual currency while mining and verifying transactions in the network. Perhaps the future of advertising will involve a new set of activities for consumers, as yet unknown.

A post-scarcity economy

Expand banking, make digital art unique, reinvent online advertising—these are just some of the things Bitcoin might do. In response to the perceived opportunities, the venture capital community has entered a state of hallucinatory excitement about cryptocurrencies, with Marc Andreessen, cofounder of Netscape and the venture firm Andreessen Horowitz, performing as the principal cheerleader.


And yet … these applications seem prosaically narrow in comparison to the more perfervid claims of Bitcoin’s cyberlibertarian enthusiasts. (According to a video on bitcoin.org, “Bitcoin is changing finance the same way the Web changed publishing”—a claim that would recommend itself only to those who have enjoyed the discomfort of traditional media.) But perhaps that’s the point: to succeed, Bitcoin will need to offer real utility to existing markets. The last two decades have suggested a post-scarcity economy, where infinite copies of attractive digital things have a price approaching $0. Maybe that was merely a passing moment that we will look back upon with wonder once limited coins enforce scarcity—once the owner of a piece of digital art can look upon it with satisfaction and know with total, cryptographic certainty that because he paid for it, it belongs to him and no one else.

Of course it can happen, otherwise why would this be a very important security issue? If you think double spend transactions cannot happen then it is time to refresh your understanding of how the Bitcoin networks operate.

The transaction malleability is not double spending attack. Dont be a dick and then show your ignorance like that.

 


And Littleshop is right: Double spend =! duplication. Seem like you dont know how bitcoins work. If duplication is possible, there will be more than 21million bitcoins. Idiot

ugh... its just an opinion of an editor. Not really mean much.

Bitcoin works perfectly fine for me.

I don't know the future of Bitcoin but I know it already has a MASSIVE network and the uses are far beyond a simple currency.

It would take something absolutely revolutionary (positive) or catastrophic (negative) to displace the Bitcoin network...

Since I doubt anything will come along so quickly as to render the blockchain obsolete; I expect it will continue to grow and displace other inferior systems in use around the world.

Bitcoin might not be the best currency for the world; time will tell on that. I do see Bitcoin being superior as a foundation for currencies where they can be backed and more importantly, audited and transferred easily.

I can see property rights, contracts, company shares, all sorts of major uses that will push this technology into the mainstream.

The ride has only just begun; everyone lucky enough to buy Bitcoin now will most likely be rewarded to a mind-boggling extent if they just hold onto it.

Either it'll be revealed that the protocol was flawed from the start and it'll self-destruct into worthlessness, or it'll continue to grow, expand, innovate, and displace until it's taken over several major sectors of the world and be worth a tremendous amount.