What nerd doesn't love the idea of virtual currency?
But, it seems like all of the exchanges have closed or are temporarily closed to new registrations. This seems problematic, and means the only realistic way in or out is dealing directly with other people and businesses who believe in this particular currency. I spent some time reading the list of people and companies accepting Bitcoin payments, and was extremely underwhelmed. Lots of pyramid schemes, random low-rent affiliate crap like phone cards, etc. No actually useful goods or services. And, a lot of the websites that are talking about this stuff have a definite "get rich quick" vibe about them.
Basically, it's all extremely flaky seeming stuff. This brings me to the thing that makes me worry more: Who developed the code for Bitcoins? How do I know it is secure? The people that seem to be most involved in Bitcoin discussions seem to be...well, kinda dumb. I don't trust dumb people to build strong encryption (I don't even trust smart people to build strong encryption, unless they're talking it over with lots of other smart people). Reading the FAQ at Bitcoin.org doesn't do much to alleviate my concerns. There's another FAQ in the wiki that mentions SHA and a few other reassuring things, but I'm not having much luck finding the real meat of the thing, and names of people responsible for the security of the system.
In short, if this is a serious virtual currency implementation by people who understand the security implications of such, I'm unable to find strong evidence of that fact. And, so, I worry about dealing with it.
MtGox.com is a good site to use. However, MtGox is only site worth using. All others are not as convenient. That being said, paypal aren't used on almost all site because paypal can do chargeback.
Bitcoin is open source. You can inspect the source code if you want.
"Bitcoin is open source. You can inspect the source code if you want."
While being Open Source is definitely on the "must have" list of items I'd want to see in a virtual currency system...I know that I'm not capable of determining the security of such a system. My understanding of cryptography is much too weak for me to have any understanding of the finer points of what's happening in this system. And, it only takes one flaw to bring the whole system crashing down.
If people I knew to be competent security and cryptography professionals (such as our friends tptacek and cpercival here at HN) were involved and willing to put their name and reputation on the code and the project, I might be more inclined to trust it. But, I couldn't find even a single real name in my search of the wiki and bitcoin.org. The bitcoin draft "specification" has no names on it, which makes it among the oddest specifications I've ever met.
The web of trust that would make a virtual currency work requires trusted parties, at least providing some assurance of the security of the system itself, if not providing any evidence of value in the currency. I don't trust completely anonymous people on the Internet with my labor, my computation, or my dollars. Maybe I'm a crazy paranoid old-timer, but I'm not putting money into a system that is surrounded by credulous morons, get-rich quick schemers, and driven by seemingly wholly anonymous developers. Maybe bitcoin has great and well-known people involved and the tech is well-tested by competent people, but I couldn't find evidence of that.
In short, being Open Source is no assurance of it being correct, strong, or secure.
Which means that when (I can't bring myself to say "if" in this situation) holes are found, everyone with bitcoins will be SOL.
That said, after more digging, I note that a name I know and trust and have worked with in the past (Jeff Garzik), seems to actually be heavily involved in bitcoin, which lends it quite a bit more credibility in my mind. I don't know him as a security or cryptography guy, but I do know him as a really smart and competent developer. The project really shouldn't make it so hard to figure out who is writing the code and the standards (I still don't actually know what Jeff has to do with bitcoin, I just see his name a lot in the forums).
My basic problem with them is question three in the FAQ (http://www.bitcoin.org/faq). In a nutshell, "What backs BitCoins? Nothing." It is true that a currency that is accepted by people is by definition valuable at the point in time where they accept it, but that does not mean you can create a backless-currency and have it all just magically work, nor that it will necessarily work across time. A dollar is accepted because you can use it to pay your debts to the US Government. Inductively, another economic entity will accept them for another good or service because they also have that value for a dollar, and further inductively because they know they can then use it for some other good or service, until the inductive net spans the globe. But they're trying to skip the base case. That doesn't work.
(And I suspect even if you could magic wand it into existence it would still be very vulnerable. Take any fiat currency today of your choice. Remove the government backing. How long does it last? Probably not zero, but it probably crumbles at the next crisis at the latest. It would only take one metaphorical bank run to demolish the entire currency in a heartbeat. And it would only take a small nucleus of savvy people to prompt such a bank run, too, and such savvy people definitely exist.)
And in startup parlance, this is just about the worst possible "boil the ocean" plan possible. Virtual currencies will eventually happen and I'd even bet within a century you could live entirely off non-government-backed currencies, but it'll happen organically, not by fiat. And, no joke, it'll probably be some form of MMORPG cash, because those are by far the best seed I can think of for this sort of system to crystallize around, though probably some future MMORPG that makes today's look like tinkertoys.
We could imbues bitcoin with intrinsic value if we use bitcoin as a notarization database.
The problem with that is the use of bitcoin as a notarization service will erode bitcoin as a form of money. You would need to pay higher fee to prioritize bitcoin over big documents such as DNS record and contracts. That become inconvenient real fast for those who transact in bitcoin.
BitCoin is not backed by the trust of a government, correct. However it is supposed to be computationally hard to generate them. So its bales by your faith that someone hadn't made a big breakthrough in computer science.
But, it seems like all of the exchanges have closed or are temporarily closed to new registrations. This seems problematic, and means the only realistic way in or out is dealing directly with other people and businesses who believe in this particular currency. I spent some time reading the list of people and companies accepting Bitcoin payments, and was extremely underwhelmed. Lots of pyramid schemes, random low-rent affiliate crap like phone cards, etc. No actually useful goods or services. And, a lot of the websites that are talking about this stuff have a definite "get rich quick" vibe about them.
Basically, it's all extremely flaky seeming stuff. This brings me to the thing that makes me worry more: Who developed the code for Bitcoins? How do I know it is secure? The people that seem to be most involved in Bitcoin discussions seem to be...well, kinda dumb. I don't trust dumb people to build strong encryption (I don't even trust smart people to build strong encryption, unless they're talking it over with lots of other smart people). Reading the FAQ at Bitcoin.org doesn't do much to alleviate my concerns. There's another FAQ in the wiki that mentions SHA and a few other reassuring things, but I'm not having much luck finding the real meat of the thing, and names of people responsible for the security of the system.
In short, if this is a serious virtual currency implementation by people who understand the security implications of such, I'm unable to find strong evidence of that fact. And, so, I worry about dealing with it.