My main problem with bitcoin is that there's no way to buy them. I've tried using Dwolla and Bitinstant and other methods and so far have failed after jumping through all kinds of hoops including entering bank info and uploading pictures of IDs and utility bills to shady websites. And everyone wants their 4% transaction fees, so if you want to buy this $20k car you'll be paying hundreds of dollars in fees. I don't understand how a new economy is supposed to form around it if it's so hard to enter.
Given the appalling lack of basic security across many of the Bitcoin services there is no way on earth I would be trusting them with bank account details.
The only banking details it needs are you routing and account number. Granted, you shouldn't give those out to just anyone, but it's the same info you give out every time you write a check.
If you wanted to be really paranoid, you could set up a checking account just for stuff like bitcoin, and only load small amount of money into it right before making purchases.
The only banking details it needs are you routing and account number. Granted, you shouldn't give those out to just anyone, but it's the same info you give out every time you write a check.
But those are all anyone needs in order to withdraw the entire contents of your account, and they're being stored on someone's presumably-poorly-secured server. At least with paper checks they're, well, paper and are likely physically given to the bank for processing.
If you wanted to be really paranoid, you could set up a checking account just for stuff like bitcoin, and only load small amount of money into it right before making purchases.
My credit card account comes with an online service to generate one-time-use card numbers, for buying things from companies you don't exactly trust. So this suggestion is perhaps not so overly paranoid.
Someone could fraudulently initiate a draft, but ACH drafts can be chargedback, giving you some protection. Obviously this is trickier and more painful than a credit card chargeback because it's your money that's been taken, and not your CC company's.
Since the writing of a Knuth article, checks have become less risky, but they're still more risky than credit cards. [1]
So like I said, don't give your banking info out to just anyone. There's still risk involved. Whether or not you find Coinbase overly risky is up to your own utility curve.
You write a cheque to X.
X hands it to their bank A.
A asks your bank B for the amount on the cheque.
B asks A for the cheque to check its valid.
B sends money to A.
Done. Which is why I thought they take days to be processed.
Used to work that way. Not anymore. Routing number and account and amount are sent electronically to a check clearinghouse and the money is transferred sometimes the same day or even close to real-time. The paper itself gets scanned, and the original shredded.
From what I've seen of their security, it's better than most of the bitcoin services, and in this case, due to YC and some other known investors, I think the risk of insider fraud is far less than with most other bitcoin services (run by pseudonyms).
I really think this is one of the bigger hurdles of bitcoins. Whether it really is secure or not, the infrastructure around bitcoins just doesn't really seem like it is.
localbitcoins.com enables cash-to-bitcoin trades with private people who live near you. It would be difficult to buy $20,000 worth of Bitcoins in one shot for a favorable rate, but you can get significant amounts without going through too much hassle.
It's actually not really optimised for micro transactions.
The popular gambling site satoshidice is responsible for the rapidly increasing size of the blockchain, now around 3GB.
Bitcoin has two main utilities, firstly it is very hard to prevent a bitcoin transaction from taking place, it can potentially be tracked after the fact if you aren't careful though.
Secondly the fixed limit means that it should become a safe store of value, assuming that bitcoin is successful in the longterm.
Bitcoin isn't really designed to scale up to VISA levels of transaction processing, instead it is more suited to be used as a clearing house, to track deposits and withdrawals.
Bitcoin can scale to VISA level transactions[1]. The software is still BETA, the optimizations required for this scalability have not yet been implemented (they are being actively worked on). The primary one is support for pruning the block-chain. This will drastically reduce the current 3GB blockchain size.
You are right though, in it's basic form, Bitcoin will not work for micro-transactions where you want to transfer a few cents a few times a second. However, there are strategies [2] to support some forms of micro-payments.
The pruning stuff looks great, at the moment the time it takes to download the blockchain (and the disk space requirements to a lesser degree) is creating a disincentive to run a full verifying node.
I suspect bitcoin blockchain transactions will never be very useful for micro payments, because of the confirmation delay.
If you use bitcoin as a clearing house though, which means you aren't broadcasting a blockchain transaction for every payment then micro transactions could work very well.
