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It solves a problem very well, many would say a little too well. What happens is that once this problem is solved a little too well in that it does the following:

1. Provides no way of reversing transactions.

2. Has a large enough mass that the currency is trusted.

3. Has a large enough mass that non-nerds can easily use the system.

The feds come in and want to shut it down because it provides a great avenue for the criminal element and con-artists. eGold is the prime example of this.



eGold was a centralised service. Once bitcoin becomes a major success, that's it, genies out of the bottle.

Also what you have just said applies to cash. In reality merchants who are not thieves will follow consumer regulations that all stores do.




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