Bitcoin

Bizarre Financial Innovation "Paper Cash" Insecure, Criminal, Frankly Nuts

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Amusing parody from Ledra Capital: what if government and media looked at paper money the way they do at Bitcoin?

Excerpts, though the whole thing is comedy gold if you are a Bitcoin maven:

Bizarre Shadowy Paper-Based Payment System Being Rolled Out Worldwide

World governments announced a plan today to allow citizens to anonymously carry parts of their wealth on their person and exchange it with others using small pieces of colorful paper printed with nationalistic and Masonic imagery along with numbers that purportedly represent the amount of wealth each piece of paper represents (if the paper is not a counterfeit). These pieces of paper are formally a "note" from each nation's central bank, but they are also called "cash" by many—this is a technical matter that is too complex to cover in our basic primer; Suffice it to say, that it is representative of the complexity and user-unfriendliness of this new system….

In what will come as a surprise to generations who have grown up with calculators and computers, 'bills' only come in fixed denominations, requiring users to maintain a large number of these pieces of paper that must be aggregated to execute a transaction and then re-aggregated to 'make change,' a complex process of returning to the payee the excess of the payment using yet other bills.  (Don't worry if this sounds complex, we had trouble understanding it ourselves at first and it is certainly not ready for the average consumer in its current form.) …

The launch of cash has provoked an immediate reaction from law-enforcement agencies worldwide that universally condemned the development.

"Cash is a 100% anonymous and untraceable payments technology.   It is like a weapon of mass destruction launched against law enforcement," said Mike Smith, the recently confirmed FBI Director.  "It is the perfect payment mechanism for criminals, drug cartels, terrorists, prostitution rings and money launderers….

Banking Superintendent of New York State, Mike Smith had the following to say: "I can't think of any reason that a law-abiding individual would want to use cash. At a bare minimum, we believe there should be a licensing procedure for individuals or businesses that plan to use cash, a 'Cash-License' as it were…."

Others have concerns about forgery and counterfeiting.  "Ultimately, even with all the fancy inks, cash is just a piece of paper.   We fully expect criminal groups and rogue nation states to print fake cash in order to profit or to disrupt the economies of their enemies," said Mike Smith, an analyst at Stratfor.  "In the interim, we are certain that cash will trade a discount in the real-world, given the risk to a counterparty of accepting a forged piece of paper; no doubt cash is a huge step back from the modern cryptography in place throughout our current financial system."…..

Though hard to imagine, cash operates with no consumer protection at all.   If your 'bills' are stolen or lost, they are gone forever….

Sure, some people may market "wallets" that will supposedly protect your cash, but:

But some early adopters have reported that the hardware wallets have security flaws.   "I was out in Bangkok two weeks ago at a bar and I forgot my Gucci wallet there," said Mike Smith, a visiting tourist.    "When I returned the next morning, my wallet was there but my cash was gone!"  We contacted Gucci regarding this hacking attack, but a spokesperson would not comment "about confidential customer financial matters."

Even criminals have not been immune to the risks of cash.   The notorious "Silk Road" drug-dealing marketplace, where vendors and customers left envelopes full of cash (on which they had very clearly written their names) in an anonymous drop-box that managed the exchange, mysteriously closed last week, citing 'theft of the cash due to a bug in the envelope sealing process.' ….'

In what might be most unusual limitation on cash, it only works for payments within 36 inches or less (or the so-called "arm's length transaction" as hackers in the community have colorfully titled it) as it has to be handed from one (human) party to another to execute the transaction.

This requirement is widely thought to be a fatal flaw of cash by traditionalists.

Mike Smith, VP of Retail Banking at Chase said: "A form of payment that cannot be used at a distance, cannot be used for e-commerce, cannot be used by mobile devices, cannot be used for machine based transactions, cannot be scripted or programmed, cannot be thought of as a payment system….

Remarkably, if you attempt to use cash in a different country from the one that issued it, it will categorically be rejected….

Economists are flabbergasted that lawmakers have allowed cash to be adopted….

Environmentalists expressed concerns about the impact of cash on the environment.  "You would have thought that in 2014, we would have moved beyond pesticide and water intensive cotton farming [retracted: cutting down trees], treating the cotton with dangerous inks and transporting it with fossil fuels, only to represent a value like "20" that can be represented electronically at effectively no cost…..

Bonus Bitcoin links: Derek Khanna defends Bitcoin and digital currencies from the hidebound opposition of the likes of paper money mavens Alan Greenspan and Paul Krugman, analogizing them to people opposed to phones in an age of telegraphs; Cathy Reisenwitz on the "social issue" benefits of Bitcoin, when it comes to access to both credit and charity for the world's poor.

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  1. BAN IT.

    /fist

  2. The difference is that I have the US government and all of its guns to force people to accept my dollar. I don’t get that with bitcoin. Worse still, I am a stroke of a pen away from the US government forcing people not to accept my bitcoin.

    In principle they are both fiat currencies. But in practice they are a bit different and the level of risk associated with each vastly different. Putting my wealth in bit coin is like putting it in the paper currency of some tiny besieged nation that is one slip up or bad stretch of luck away from one of its neighbors invading and annexing it.

    In the end, if you are that concerned about inflation, buy a hard asset. And no I don’t mean gold or some commodity the trade and possession of which the government can ban. I mean a real asset like land or machinery or something else people are always going to have a demand for and can be sold easily and the transfer of which the government is unlikely to ban.

    1. buzz killer

    2. Putting my wealth in bit coin is like putting it in the paper currency of some tiny besieged nation that is one slip up or bad stretch of luck away from one of its neighbors invading and annexing it.

      No it isn’t. BTC is a decentralized ledger. There’s no besieged nation. Government can harangue BTC and cryptocurrency in general but they cannot stop it.

      1. Look! The broken clock! It’s right!

        1. But you’re as boring as ever.

      2. The government could in the stroke of a pen make it illegal for a business to accept bit coin. If they ever did that your bit coin would be largely worthless. No amount of “but it’s decentralized” would get anyone except the very stupid or desperate to take it

        It is just like a TNT nation.

        1. The government could do that, and the value of BTC would be damaged, but some would still accept BTC. Worst case scenario, it goes back to being all about drugs and other illicit activities. That didn’t stop BTC from gaining a lot ground.

    3. Worse still, I am a stroke of a pen away from the US government forcing people not to accept my bitcoin.

      They can try, and convince most people not to, and make it very hard to exchange fiat for BTC — but it becomes a rather insane thing to try to enforce it. Even China-style internet censorship wouldn’t stop it.

      Plus, the rest of the world would get those benefits, and the US would get a brain drain.

      One other point: I’d use fiat to mean by force of law rather than “not backed by anything”. It’s given value by by force of law. Sure, both BTC and the USD aren’t backed by anything, but they are categorically different .

      It turns out, when you’re trying to compete with the US government’s monetary policy/devices/etc., not being backed by anything is an advantage. Nothing to seize, no one to arrest.

      1. Sure. Someone will always accept it. But almost no legitimate busness is going to risk th FBI kicking in the door just to accept bit coin. Why would they?

        1. Well, right, but assuming we don’t get to exit visas immediately after that, plenty of people take that as a sign to GTFO.

          Already a huge number of BTC startups are outside the US, and gaining.

          1. And you don’t think they would go after those if they wanted to? Being overseas didn’t save megaupload.

            You are right it would never die. But it’s value would go to shit and the people holding them at the time it went illegal would get fucked.

            1. I think the value of bitcoin for blackmarket transactions can put the value at least 10-15% of the peak value. If you remove speculators and above-ground businesses there still is value in bitcoin, purely as a trustworthy transaction service.

              1. That value is only going to go up, too. We’re probably 6 – 18 months from distributed autonomous corporations. Then you can trustlessly trade stocks in DACs for Bitcoin. And lots of other possibilities open up.

                “Where’s this exchange located?” “In the cloud”

                1. The value is going to go up right up to the moment the powers that be decide to shut it down. I don’t know when or if that will happen. But it can happen.

                  1. Right, just like the powers that be are gonna get rid of all the drugs.

      2. If they wanted an alternative form of medium exchange they would just move to accepting something that the FDA haven’t made illegal to accept and your bit coins would still be rendered worthless.

        1. eh? Where’d the FDA come into this?

          I’m biased on this. May have had too much of the kool-aid. Take what I say with a grain of salt.

          My point on all of this is that BTC (or another crypto-currency) is, at this point, inevitable. I’d go so far as to say it’s unstoppable. It may be slowed by a full-on police state, but that’s about it.

          Think of Napster. It was shutdown, because it was a company, with an office, and servers. But now there’s BitTorrent, and it’s not going anywhere. Nothing short of a full-on police state will stop it.

          Could the US seriously damage BTC in the US? Sure. Could holders of BTC flee with their private key safely in their head across the border to some place welcoming entrepreneurs? Yup.

          1. Could holders of BTC flee with their private key safely in their head across the border to some place welcoming entrepreneurs? Yup.

            And that would work right up until the FBI legal attache put in a call to the local government asking for assistance in arresting them.

            No country anywhere other than maybe North Korea, who will do anything for a buck wants competition for its currency. And even it were neutral on the subject, no country is going to tell t he US to fuck off just so a bunch of bitcoin people can operate in peace.

            As long as bit coin stays small, it is fine. But the moment it gets big enough to be a real alternative, it will get shut down and everyone holding a bitcoin will be left with nothing or worse facing prosecution. That may not be right, but that is how it will work.

            1. See, I’m thinking Bitcoin has already cross the threshold where it could be stopped. I could be wrong on that.

              I’m also thinking that even the Obama administration would blink before imposing the level of police state needed to stop it.

              I’m thinking if the US started thrashing around against it, you’d end up with other countries that stayed quiet and didn’t go along with it. Remember, this thrashing about would be police state level.

              And it would be places like Canada, Germany, Singapore, Hong Kong.

              This could be a boom on the order of the internet, or greater — sooner or later, the PTB in the US will decide they want in on it. Probably before they try to stamp it out.

              1. Why would anyone take it if doing so subjected them to prosecution? I will take dollars or Euros or something rather than risk having the FBI come down on me.

                If the US decides to kill it, the EU and the rest of the world will do the same thing. They don’t like underground currencies anymore than the US does.

  3. Considering I’ve already seen many articles saying cash should be eliminated in favor of debit/credit cards specifically to thwart criminals, I didn’t find this attempt at satire to be all that satirical.

    1. I think one of the Slate retards (either Saleton or Sad Beard) wrote a piece advocating for that. The thought that, deprived of cash, criminals and law abiding alike would just turn to bartering and other alternative forms of currency never occurred to them. Of course once that happened, they would be demanding that any in kind transaction be made illegal. So the road that begins with “lets make sure criminals can’t hide their ill gotten gains in cash” ends with the SWAT team arresting an old lady for paying her neighbors to mow her lawn with vegetables from her garden. And I have no doubt Sad Beard would think such a result right and good, the nasty little retard that he is.

      1. Slate is one of the places that this topic has come up, but not the only one.

        And I think Slate has done it twice (with sadbeard being one of them).

        My children were more rational at 12 than most of these guys are now.

        1. They all make the mistake of assuming that they are going to be nomenklatura in the New Utopia. In fact, I would say that is the defining difference between progressives and libertarians. One expect to be held in the bosom of the new all powerful state and the other expects they will end up under the boot if there is one.

    2. Considering I’ve already seen many articles saying cash should be eliminated in favor of debit/credit cards specifically to thwart criminals

      They’ve been talking about that since I first started paying attention some twenty years ago, and probably before that.

      1. They’ve gotten rid of large bills.

        They’ve proposed redesigning 100’s on a recurring basis and forcing people to exchange old ones for new ones (as has been done in occupation zones) to prevent anyone from accruing a large stash of cash.

        And now that debit/credit cards are reaching a tipping point (many people use no cash at all anymore), they’re clearly interesting in getting rid of all cash (as nearly as possible).

        1. They’ve proposed redesigning 100’s on a recurring basis and forcing people to exchange old ones for new ones (as has been done in occupation zones) to prevent anyone from accruing a large stash of cash.

          Link? I hadn’t heard of that…

          1. No links, just from memory.

            Circa the 90’s and all the pants-shitting related to the Colombian cartels stockpiling pallets of 100-dollar bills.

            The author was talking about how effective the US had been in frustrating criminals during the Vietnam war by remaking the local currency every 60 days or so.

            I’ve read it elsewhere in 00’s as well.

            1. It was kicked around when they redesigned the paper money in the early 2000s that they were going to force a swap (like they did with Vichy money after the war), but I’ve also read that it was a) just a conspiracy theory or b) a reverse conspiracy theory to force horders to spend it before the swap was declared.

              1. The people that control the currency would like to get old bills off the street.

                The people that fight the drug war would like to make it impossible to accrue significant amounts of cash.

                These groups don’t necessary overlap.

              2. The fears of counterfeiting are completely moronic. The economy is so large and there is so much cash in circulation it would be impossible to print enough bills to destroy the value of the currency. Imagine what it would take to counterfeit say hundred billion dollars worth of hundreds. That is a billion bills. If you printed a thousand of them an hour, it would still take you ten million hours or about a hundred years to print them. And even if you could print them, how would you ever put them in circulation. And if you could do that, congratulations, you just equaled the amount of legalized counterfeiting the fed does in less than a month. I am sure the new fed chairman will pat you on the head at your earnest efforts to stimulate the economy.

                The fears about cash is about control and nothing else.

                1. You don’t have to destroy the value of the currency everywhere for all time. All you have to do is make it too risky to, say, accept large amounts of cash in Outer Slobovia _right now_ due to the large amounts of counterfeit currency, in order to drive people to use something else.

                  1. Big fucking deal JD. I am thinking the US can survive losing Bananastan’s reliance on the dollar.

                    1. There’s always money in the Bananastan!

            2. I remember somebody wanting to make oll 100s void for the same reason. Unfortunately, I can’t find any evidence of it.

        2. Link? I hadn’t heard of that…

          Ditto.

          1. The cocksuckers that support the War on Drugs float lots of ideas regardless of how irrational or impractical they might be.

          2. The scary part is that the general acceptance of electronic payments by the general public (using debit/credit cards even in vending machines) is creating an environment where the government could conceivably ban all cash transactions over a token amount and get away with it.

            1. Yup. I’m the only one in my group (20-ish) at the office that regularly uses cash for anything. Or regularly has cash.

              1. I had to start using my debit card to buy groceries last year when the clerk had to go to 5 registers to find a pen so that I could write a check.

                And I fucking hate the people that swipe a card to buy a $1 cup of coffee in the cafeteria at work.

                1. Heh, it’s funny — I’ll use my credit card for groceries (not booze).

                  Just checked. Last paper check I wrote was August.

                  1. It’s becoming more difficult all the time to write a check at a retail store. Some won’t take them at all. A growing number of retail outlets scan the check and run an electronic transfer on the spot, then give you the check back.

                    1. IIRC, the last time I wrote a check at a retail store, they wanted my thumb print. After that, nope, I’m done.

                2. I swipe for coffee, gotta get dem rewards. And it’s not slower than cash.

                  1. Swipe fees run about 50 cents a transaction. So the retailer sells you a $2 cup of coffee for $2.50 to make up the cost of the transaction. The guy behind you pays $2.50 in cash and the retailer makes an extra 50 cents.

                    Dumb fucks that swipe for trivial transactions force those who pay cash to pay more for what they buy.

                    1. I wouldn’t call the people sticking other people with their fees (and getting reward points as a bonus) the dumb ones in that situation kinnath.

                      What is stupid about rationally taking advantage of a situation?

                    2. The cafeteria at work is good case study. The prices of all products have risen dramatically over the last 24-36 months (way beyond inflation) as the percentage of epayments has gone from a small minority to a substantial majority. So the price of everything that everyone buys has gone up, way up. And yes, now that most people pay with plastic, it’s the dinosaurs that that get fucked by not joining the herd and paying with a card.

                      But still everyone pays more for everything to cover the transaction costs that have nothing to do with the value of the product that they actually buying.

                    3. Do we work at the same place?

                    4. Every cafeteria has made the transition; it’s the same all over.

                    5. But still everyone pays more for everything to cover the transaction costs that have nothing to do with the value of the product that they actually buying.

                      But convenience has value. The people using the cards are paying for that.

                    6. But convenience has value.

                      Different value to different people.

                    7. Different value to different people.

                      I would like to see proof that swipe fees are 50 cents – that seems outrageous.

                      Otherwise, I find cash a huge inconvenience now. And coins – holy crap, forget it.

                    8. http://money.cnn.com/2013/07/3…..tml?iid=EL

                      A federal court on Wednesday struck down a Federal Reserve rule that placed a 21-cent cap on fees that banks charge retail stores for each debit card transaction.

                      The ruling is a win for retail stores who had filed the lawsuit charging that the U.S. Federal Reserve’s cap was too high on swipe fees they pay to banks each time a customer uses a debit card. It’s potentially a big loss for banks who will now have to charge lower fees.
                      The U.S. District Court in Washington called the Fed’s cap “arbitrary and capricious.” Judge Richard Leon also suggested in the ruling that the Fed should reconsider earlier staff proposals to lower the fee to 12 cents.

                      The fight over swipe fees stems from new laws enacted after the U.S. financial crisis. They required the Federal Reserve to ensure that fees to process debit card purchases were reasonable. At that time, the average fee per transaction was about 40 cents.

                      I’m not certain where they are now. The Feds capped swipe fees, then the banks imposed other fees directly on consumers.

                    9. the people sticking other people with their fees

                      They are not sticking other people with their fees. They are paying the fees with every purchase they make. And people that pay cash also pay the fees, except the retailer pockets it instead of the fees going to the card issuer.

                      getting reward points as a bonus

                      And simple economics says the bonus points must be worth less than the transaction fees or the card issuer would lose money.

                    10. I fully realize this and yet, what would me not swiping accomplish? If I owned the store I wouldn’t allow petty swiping. Or I would charge a cash price and a credit price. It’s simple enough to do, so why not do it?

                      I have made a bitcoin purchase in person too. It was a little wonky, but in some time crypto point of sale transactions will be as simple as anything.

                    11. what would me not swiping accomplish?

                      Nothing, because it’s too late. The sheep have accepted their fate, and you should just follow along.

                3. And I fucking hate the people that swipe a card to buy a $1 cup of coffee in the cafeteria at work.

                  Depends. If it’s faster, I do it, and I like that others do.

                  In most places it is now faster for everyone.

                  1. Get off my lawn 😉

                    1. Let me sum up why people do it: coins fucking suck!

  4. don’t give them any ideas!

  5. This is not funny. Klein, Yglesias or Maddow could at this very moment be having this piece read to them without the explanation of what satire is, and they will be right on the bandwagon, although without acknowledging Ledra Capital for the idea. And once that happens, literally dozens of oh-so-earnest MSNBC viewers will be repeating these talking points ad nauseum until some asshole in Congress tries to pass something to shut them up.

  6. “Derek Khanna defends Bitcoin and digital currencies from the hidebound opposition of the likes of paper money mavens Alan Greenspan and Paul Krugman, analogizing them to people opposed to phones in an age of telegraphs;”

    Well played 🙂

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