I can't honestly think that anyone is surprised? PayPal plays it safe and this has been proven again and again.
At the end of the day, this Bitcoin hype is getting slightly tiresome. I do apologize for being negative here, but the only thing I take away from this whole spectacle is that investing in energy is a wise move. The amazing thing is, that was news a long, long time ago.
I do not think that this is a hype. It seems to me that a fully decentralized payment system would be of huge value to buyers and sellers.
Don't you agree with this?
Or do you believe that while useful, bitcoin won't be the system that prevails, or that no system like this can prevail because of government and/or special interests?
And on the issue of energy..
The sha256 generation is only to prove that you did invest time into it, and it is not a specific amount of time or energy either, but in relation to the total time spend by ALL miners during the past hours. I'm not saying that you don't know this, but it seems to be a common misconception.
If you make it illegal to accept BC as a business that will deter many websites from using it. And the best way to kill BC is to make sure it doesn't hit critical mass.
The difference between filesharing and BC is that in the former the value is in the files, but BC is only valuable if you can trade them for something you value.
Essentially, Bitcoin generation is tied to energy usage, which means not only do the power companies profit from Bitcoin generation, they can essentially regulate the price of it (until BTC is mined out, anyway).
Power companies can't regulate the price of Bitcoin because they don't control the price of electricity, which is determined by the government and/or the market.
Nobody ever regulates or controls the price of anything, except if they're the only supplier or the government.
Well, if there's only one buyer, then it's a negotiation between the seller and the buyer. The seller has to answer the question, "Where is the cut-off point where it's no longer in the buyer's economic interest to buy from me," and charge right below that. Of course, in such a situation, new sellers will typically emerge.
It's not quite that simple, because you can't just exchange X bitcoins for Y watts.
Let's say you want 1000 BTC. You could get this by investing several thousand dollars in a mining rig, and then waiting a year. In that time, you'll likely succeed in generating your 1000 BTC.
Alternatively, you could buy bitcoins from an exchange for $3000. The current price of bitcoins is several times higher than the cost of the electricity used to generate them, because there's a significant initial cost to mining, in both capital and time.
It's not quite that simple, because you can't just exchange X bitcoins for Y watts.
Well, you can, if you're also willing to pony up some cash to Amazon for some EC2 time. It's more like you can just exchange X bitcoins for Y BogoMIPS, but this also varies over time.
EC2 instances don't have high-end graphics cards, and the payout from CPU-mining is not usually cost effective.
It would be far cheaper to buy bitcoins over an exchange than spend money mining them on a EC2 instance.
There's also a limit to how many coins you can generate per day. Even if your grid of EC2 instances accounted for say, a quarter of all Bitcoin processing power, you'd still only make 15 coins an hour.
So if I'm correct, this is based on the assumption that rarity creates value, correct? (which I am personally not convinced of). You spend energy to create a bitcoin, but you can't take a bitcoin and create energy. This adds value to the energy because it can create bitcoins (assuming bitcoins have any value), but it doesn't do the reverse.
Or is there something about the Bitcoin economy that I missed?
Paypal's arbitrary policies and ability to freeze on whim or even pull money out of your account with no comeback are the reason my latest startup[1] doesn't take Paypal at all. It's just not worth the hassle of dealing with customer (or $deity forbid, your own) paypal problems.
I'd be surprised if PayPal didn't see Bitcoin as some form of competition - so, this is fairly unsurprising. Most companies prefer not to facilitate their competitors.
This seems like a pretty clear-cut case. The Coinpal creator didn't do his homework, and PayPal acted well within its stated policies to protect its business.
The Coinpal creator chose to email Paypal to ask a question that is clearly answered in the company's acceptable use policy. Under Prohibited Activities, Section 3(f): "You may not use the PayPal services for activities that (...) are associated with the following Money Service Business activities: (...) currency exchanges.
Second, the operator expresses in his post that he had kept his agreement to keep chargebacks low, at 0.9%. Consider for a moment that PayPal and the credit card company are splitting somewhere around 3% of the transaction amount to cover all of their expenses and make a profit. Let's assume that, out of 100 transactions for $100, one gets charged back. If it costs the companies $50 to investigate the customer complaint and process the chargeback, then the combined companies are losing 16% of their revenue to cover chargebacks.
> After about two weeks, I received no response to either email. I decided to start operating the site, thinking they wanted to see something working before spending time on a response.
I don't follow the logic here... no response != assume whatever the hell you feel like.
There's only 2 possibilities here - 1. They didn't see the emails or 2. They saw them, but chose to ignore them. Either way, his choice boils down to killing his idea or launching it and seeing what happens.
It would be utterly moronic of him to kill his idea simply because they didn't respond. Might as well leave that decision to them by launching it and seeing how they respond. If they don't shut him down, then his service isn't breaking their rules. If they do, he's no worse off than not launching in the first place.
He did the right thing.
EDIT: HN is not letting me respond to wmf below, so I'm responding here - Where does he say he knew paypal would freeze the account sooner or later? In fact, the whole point of his emails to them was to specifically ask if his service was compliant with their TOS.
Let's stick to facts and not get into subjective arguments. Your idea of 'ordinary' can be completely different from his or anyone else's idea of 'ordinary'. This is why TOSs, FAQs etc exist in the first place. But since he couldn't find an exact answer anywhere, he emailed them.
Hacker News has a timeout for responding to nested comment threads. The idea is to prevent long and drawn-out reply bickering between two people. If you can't reply to one of your comment's children, calm down, take a breath, and wait 5-20 minutes.
There are numerous forms of communication available. Send the email again 3 times asking for escalation to a supervisor. Call them. Send them a letter. Send them a certified letter with return receipt. This is how grown ups conduct business.
I can certainly understand not wanting to abandon a project simply because somebody was lax on responding, but with something like this (large amounts of customer money involved (60,858 BTC), legal issues), he really put a lot at risk here.
Yes, basically that's the unwritten rule. For example in Spanish we've a saying "quien calla, otorga" that translates directly to "silence implies/gives consent".
"CoinCard will be easier to bring back, minus PayPal payments. ... A possible PayPal freeze was one reason I focused on "gift cards" rather than PayPal exclusively.
This whole situation has reminded me once again why distributed, resilient systems like Bitcoin and OTC are so important."
Paypal frustration led Michael to Bitcoin, and his service ended up dependent on it. That was probably not his original intention.
This makes MtGox's integration of (ACH) Dwolla even more important to BTC's liquidity. MtGox is receiving record traffic right now, nearly on the order of a DOS attack.
I'm really interested to see if bitcoin will survive the law. I'm not a lawyer, but my understanding is that creating an alternate currency is strictly illegal. Maybe this is the first indication of the end of bitcoin?
I'm not a lawyer, but my understanding is that creating an alternate currency is strictly illegal.
IANAL either, but I would be interested in a citation on that. My understanding is that say in the US (a) you can't print US dollars (because the Fed has a monopoly on that) and (b) you can't refuse to take US dollars (because they are legal tender). That said, I don't know of a law that says you can't also use an alternative currency. For example if a school had "school money" where "credits" are earned for good grades and are exchanged for lunch or snacks, that is a form of alternate currency that surely is not illegal.
exactly. thats why point B does not work in most government facilities nowadays. try to pay a court case, get drivers license, pay for taxes or your license plate with cash --- a nice clerk will tell you "check, money order or credit card only".
The Federal Reserve does not print US dollars, nor does it have the right or power. The US Mint and the Bureau of Engraving (both part of the Deptartment of the Treasury) produce coinage and print dollars at the advice and counsel of the Federal Reserve, and are the only agencies so empowered.
Each dollar bill has the words "Federal Reserve Note" in big type at the top. That is because they represent debt of the federal reserve. The bureau of printing and engraving prints them for the federal reserve to hand out and is reimbursed for the cost of printing by the federal reserve.
Federal reserve notes have the very handy attribute in that they are the only currency that can be used to settle U.S tax liabilities.
Or casinos. Both with the chips themselves and Player's Cards. Or Frequent Flier miles, which are so much of an alternate currency that the IRS taxes them at a certain point.
Alternative currencies are fine, as long as they are not being represented as US currency. Most of the private currencies, including casino chips, are merely tokens of private contracts between the holder and the issuer.
The issue with alternative currencies is primarily that of tax evasion. Income earned in any currency/denomination is taxable, and most users of alternative currencies underreport or do not report their income. This problem is especially prevalent where the currency's value is not tied 1:1 with the US dollar.
What are the options of stopping bitcoin? It could be banned from paypal and card transactions. But you can't really ban it otherwise. If I want to give you something for bitcoins, we can do the exchange. There's no real trail, so it simply can't be stopped for personal use.
What value are bitcoins if nobody can legally accept or use them? The IRS is not known for being understanding toward things that look like tax evasion.
Multiple identities make this almost impossible to track. You can have a separate wallet for every transaction and then pass the bitcoins through http://doubletrouble.bitcoinbet.com/ if you want to be paranoid. If you verify your bitcoin history, you should be pretty safe from IRS-like companies.
Wasn't this the whole purpose of the distributed system? It was created with such situations in mind where a governments and others try to stop the flow of money through certain areas or to individuals.
Alternate currencies seem to be legal in the US. There's a minor movement of people setting up local currencies to encourage doing business with local merchants.
One guy named Bernard von NotHaus created the "Liberty Dollar" and is now facing a 45 year prison sentence. After a little googling, it's unclear why exactly he is being punished, but this how one article summed it up:
"Congress has exclusive power to coin money in the U.S. and to regulate its value, according to the Treasury Department."
This makes me wonder: is it illegal to use non-US coins for transactions in the US? Like if I use Euro-coins? (I say coins because there seems to be a specific prohibition on issuing "coin" and not other forms of currency unless they resemble US dollar bills.)
Counterfeiting, mostly. The coins he made looked like normal US coins, except that the presidents were swapped out for Ron Paul or other anti-establishment figures.
Paypal is both a credit card processor and an online wallet (stored value, digital cash, etc), both aspects of which complicated their anti-fraud and regulatory efforts.
There exists money in my Paypal account which can be spent or transferred at my direction and which does not exist elsewhere at an account under my control.
But the money in your paypal account is denominated in US Dollars (or Yen, or whatever real world currency), isn't it? Paypal's 'online wallet' is just another way of saying 'checking account'.
I have a checking account which has a stored value that I access via debit card or paper check, and can transfer or spend the money at my direction. The money in that checking account does not exist elsewhere at an account under my control.
This attitude comes up again and again when PayPal is in the news for doing something (ignorant/unpopular), but those who utter such statements fail to understand the power of the network effect.
If you wish to buy something and the seller only accepts PayPal, then good luck with your boycott. In my experience, the larger the retailer, the more infinitesimal the chance that they will "listen to reason" and consider accepting an alternate form of payment.
Oh, and did I mention eBay has this affinity for PayPal?
The larger the retailer, the more likely they will offer payment methods other than/in addition to PayPal. As the retailer, it's in your best interest to give the customer the greatest possible number of ways to give you their money.
It may still be possible to exchange bitcoins through mtgox and then through liberty reserve and bank money orders. Each stage along this route eats up 1-5%. Otherwise, informal transfers through the OTC ( http://bitcoin-otc.com/ ) do work.
Tying too much cash in paypal is a mistake. There is no guarantee that you won't snag on some tripwire in their rules engine. That and all BTC-cash exchanges have so far been shut down by PayPal.
But more fundamentally, Bitcoin is incompatible with the credit card system. CC security is very lax, so CC transactions have to be reversible (the onus is on the merchant rather than the buyer). Banks (and Paypal is a bank) are ill equipped to parse the math and the crypto that go with a proof that a transaction has occured. Not technically, but institutionally they are a different thing.
This is exactly correct. I got seriously down voted for making the same point in less words. Bitcoin and exchanging e-currencies is nothing new. People have been getting screwed over exchanging Paypal and credit cards for other currencies for a long time. That's why Paypal doesn't allow it. But yet, these services keep popping up. Poor business idea, it's been tried many times and it doesn't work.
Seems like a silly idea anyways. There is a good reason why Paypal doesn't allow it. There is also a good reason why most other exchangers don't allow credit cards. In both cases there are too many people running charge backs.
I have worked a lot with exchanging e-currencies for certain niche reasons. Exchanging can be quite a pain. Generally you have to tap into the various exchange communities to figure out your options and lookup reputable exchangers. In these communities you will find that a widely accepted rule is that you don't exchange with currencies which allow charge backs (unless perhaps you personally know that person.) That includes Paypal and credit cards.
Yes, there are people who will exchange for Paypal and credit cards. Yes, there are some services which can start out with low charge back rates. The problem is the scammers will find you as the service grows. This is a business with low margins, eventually you will lose out.
Again, Paypal isn't perfect, but the service has plenty of experience with this issue. Too many people are getting screwed over. Unfortunately this is a lesson that people have to learn over and over again. Do NOT use Paypal for exchange.
I don't understand why I'm getting down voted for this.
At the end of the day, this Bitcoin hype is getting slightly tiresome. I do apologize for being negative here, but the only thing I take away from this whole spectacle is that investing in energy is a wise move. The amazing thing is, that was news a long, long time ago.