Comment by vectorpush | Hacker News Reader

Comment by vectorpush | Hacker News Reader

Notice how all these big "wins" for bitcoin come in the form of services facilitated by a centralized 3rd party. Coinbase, Bitpay, et al are becoming the de facto gatekeepers of bitcoin in business, it's not hard to imagine a future where these companies are the only practical option for real people interacting with the bitcoin economy. We're building a centralized infrastructure around the supposed decentralized currency of the future and these companies have extremely cumbersome KYC procedures; paypal never required me to scan a passport, take a selfie or submit to social graph analysis in order to use their services.

edit:

As some have pointed out, KYC is for buying bitcoin, not for making purchases with bitcoin, this is a fair point, but I think it's still noteworthy to recognize that most people will endure that KYC process to acquire bitcoins since the alternative is something like localbitcoins (scam prone and considerable effort for a newbie). Additionally, it's still true that for most people, the practical utility of bitcoin is a function of the services that these 3rd party companies are willing/able to provide, if some of these big players went bankrupt, suffered from long term DDOS, encounter legal problems or have their coins stolen by hackers, suddenly your average consumer has lost practical use of their bitcoins.

What you're seeing is merchants relying on the expertise of 3rd party payment processors. This is a good thing. Having them all reinvent the wheel would be a security nightmare. You'd be hearing about enormous Bitcoin heists daily.

At the end of the day, these are still Bitcoin transactions and if Coinbase et al started engaging in onerous practices you could very easily switch to another Bitcoin processor without much friction.

Now if you start seeing things like Coinbase only accepting payment from other Coinbase users...

It seems there are obvious parallels between Bitcoin:Coinbase :: SMTP:GMail

XMPP:GChat

~OAuth:Facebook

These analogies are only so accurate, but the centralized service seems to try to lock-in users whereas decentralization forces the opposite way.

It is way easier to "be your own bank", using free software like electrum or the reference Bitcoin client, than trying to "be you own email" by setting up your own email service and whatnot.

Coinbase or Bitpay are optional facilitators, for people who want to buy or accept bitcins. That is not centralisation, that is just providing a service. Lots of people use Coinbase to buy their coins and then withdraw them to their offline-decentralised cold wallts created in electrum.

Except that the situation with email is very much a result of a longer development. It certainly wasn't always difficult to do your own email - in fact, it once was relatively normal.

Is it? If I want to be my own bank I also have to coordinate to sell all income coins on a market rapidly to avoid fluctuations in price. That's a full time job in itself.

Also the risk of failure for a mistake in being my own email service is that some of the mail I send lands in a spam folder. The risk of failure in being my own bank is that I lose all my money.

Coinbase or Bitpay are optional facilitators, for people who want to buy or accept bitcins

Yes, they're optional for merchants, but for average consumers who want to buy the same goods and services they can buy with fiat, it becomes an unavoidable potential point of failure. If these services go down, the consumer cannot spend their coins, they rely on 3rd parties to turn bitcoins into something that businesses actually want to accept in exchange for their products.

Having them all reinvent the wheel would be a security nightmare.

I agree, it absolutely makes sense from a business and security perspective, but at the end of the day what you end up with are a few key players who represent a centralized point of failure for spending your bitcoins on mainstream goods and services. More and more, the community is moving away from decentralization, relying instead on these centralized services to facilitate bitcoin purchases and off-chain transactions. The more companies that jump on board with bitpay and similar services, the bigger the disruption will become when one of these companies inevitably hiccups, fails, or gets hacked.

You are mistaken. You do NOT need to submit to Coinbase KYC procedures to buy something on dell.com and pay in bitcoins! (Just like you do not need to submit to Paypal KYC procedures to pay some vendor via Paypal, because in that case the vendor is the customer of Paypal, not the buyer).

It is only natural for centralized parties to emerge. I'd rather have centralized players with a decentralized back-end versus the banking system we rely on today. With paypal there is no consumer oversight, but because of the block chain, anybody can verify that coinbase acts as it should.

And I'm not going to fault them for using every user authentication mechanism under the sun- it is the responsible way to operate.

It is only natural for centralized parties to emerge. I'd rather have centralized players with a decentralized back-end versus the banking system we rely on today.

What value does the decentralized back-end provide for your average consumer who only interacts with bitcoin through the front-end? It's true that cash-like digital transactions are still possible through bitcoin, but the utility of bitcoin as "money I can use in exchange for services" hinges on the fact that these centralized 3rd parties allow individuals at the company's discretion to spend their bitcoin.

anybody can verify that coin base acts as it should.

Tell that to those who were swindled by mt.gox and the long line of shady/incompetent bitcoin players that have screwed countless bitcoin users.

The design of Bitcoin is such that no one, not even the "average consumer" is ever unable to operate directly in the decentralised backend. All that is required is some open source free-free software, of which there are already several versions.

About your second point. I was one of the people who had coins at Gox. Hundreds of them. I still think the parent is right and you are wrong.

The design of Bitcoin is such that no one, not even the "average consumer" is ever unable to operate directly in the decentralised backend.

Yes, and that's fine if the only place you shop is silkroad, but if you want to make purchases from real companies, these centralized 3rd parties are the only option.

About your second point. I was one of the people who had coins at Gox. Hundreds of them. I still think the parent is right and you are wrong.

Well, you're entitled to that opinion, but I think the catastrophic failure of mt.gox and myriad others pretty clearly demonstrates that the blockchain is not a sufficient defense against scams and incompetence.

Critiques of Bitcoin like this baffle me. First of all, the whole point of a decentralized protocol is such that whoever follows the rules can transact accordingly. Plain and simple.

People are going to scam, they are going to swindle, they are going to get hacked. Its not Bitcoin or it's blockchain's duty to do your due diligence. It simply can't. There will always be a need for trusted entities if someone doesn't want to store the coin themselves. It's a function of vetting those players.

But I agree with you: the level of professionalism needs to be upped in Bitcoin, there is no question about that. But somehow blaming the protocol for the bad actors in the space? Come on....

But somehow blaming the protocol for the bad actors in the space? Come on....

I didn't blame the protocol for anything.

Critiques of Bitcoin like this baffle me.

It's not a critique of bitcoin, it's a critique of the increasing reliance on centralized merchant services. All these companies accepting bitcoin payments only do so by the grace of a few centralized parties that will quickly become "too big to fail" as they continue to aggregate more and more clients. I shouldn't have to rely on coinbase to provide a path to actually spend my decentralized currency.

If Bitcoin becomes big and stable, there's no reason large companies couldn't open BTC accounts at Chase or Wells Fargo and accept them directly. Amazon doesn't convert your CAD into USD immediately when you shop on Amazon.ca.

At least with Bitcoin, anyone can compete as a payment processor because there's no central authority with onerous licensing requirements like Visa/Mastercard.

>there's no reason large companies couldn't open BTC accounts at Chase or Wells Fargo and accept them directly

That strikes me as a rather extraordinary claim.

> What value does the decentralized back-end provide for your average consumer who only interacts with bitcoin through the front-end?

The primary benefit to end users is indirect. Because Bitcoin is a decentralized network, the firms which build centralized services on top of Bitcoin are doing so in a much more competitive market, because it's much more difficult for government's to restrict competition in Bitcoin services than in their own fiat currency. That competitive market is likely to lead to better and cheaper products and services than the alternative.

These companies offer a service that facilitates adoption, but Bitcoin itself does not require the use of any of them. Dell is free to implement their own solution and GUI for their customers, and maybe eventually they will.

As for KYC procedures, YES YOU DID provide a lot of information to Paypal. To open the bank account that you need to use Paypal in the first place, you were required to provide lots of personal info and ID, and sign lots of forms.

On the other hand, to create a Bitcoin wallet you could just throw some dice (or download electrum, among other options), and no one can even ask you any questions. Send coins to that wallet, and you can buy at Dell or wherever you like, with ton more privacy than with Paypal.

The fallacy you just made is basically that you represented the KYC requirements to BUY coins from SOME companies as if it were a property of the whole Bitcoin system. You can absolutely use Coinbase-Dell to SPEND your Bitcoins, and it will have the same privacy as if it were a P2P transaction, no ID required. Source: I have bought stuff from vendors who accept bitcoins via Coinbase.

YES YOU DID provide a lot of information to Paypal.

Never any of the items that I listed in my post.

To open the bank account that you need to use Paypal in the first place, you were required to provide lots of personal info and ID, and sign lots of forms.

Right, and people living in the real world still need a bank account if they want to cash out their bitcoin or spend it without a 3rd party provider cashing it out for them. It is not practical to use bitcoin in the real world without a bank account or a centralized provider's bank account by proxy.

It's really easy to buy BTC in cash on LocalBitcoins in any major city and maintain pretty good anonymity. Also cheaper than the conventional alternative for anonymous online payments, Visa gift cards.

The difference is that the BTC transaction system can operate independently of the incumbent transaction system.

I don't know about you but paypal asked me to send a picture of my id along with a recent picture of me. They froze my account until I did so.

Bitcoin appeared on 2009 and we already have a few payment intermediaries.

VISA was created in 1958, and nowadays there are basically only 3 companies processing credit/debit card payments: VISA, Mastercard and Amex.

The threat is obviously there, but it's still too early to make any judgements. In my opinion, the entry barriers for new payment processing companies is very small, and we will see a huge competition.

> it's not hard to imagine a future where these companies are the only practical option for real people interacting with the bitcoin economy

It actually is hard for me to imagine that. I don't see why having centralized payment processors (which are essentially just online wallets, fiat exchanges, and SaaS providers) makes it less practical to interact with the Bitcoin economy in other ways.

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