Online Gambling Site Bets On Bitcoin To Avoid U.S. Laws 347
SomePgmr writes with a story about an online gambling site planning to use Bitcoin to sidestep U.S. regulations that effectively ban online gambling. From the article: "Michael Hajduk had sunk one year and about $20,000 into developing his online poker site, Infiniti Poker, when the U.S. online gambling market imploded. On April 15, 2011, a day now known in the industry as Black Friday, the U.S. Department of Justice shut down the three biggest poker sites accessible to players in the U.S., indicting 11 people on charges of bank fraud, money laundering, and illegal gambling. ... Infiniti Poker ... plans to accept Bitcoin when it launches later this month. The online currency may allow American gamblers to avoid running afoul of complex U.S. laws that prevent businesses from knowingly accepting money transfers for Internet gambling purposes. 'Because we're using Bitcoin, we're not using U.S. banks — it's all peer-to-peer,' Hajduk says. 'I don't believe we'll be doing anything wrong.'"
Sweet (Score:4, Informative)
It'll be nice to have an established poker site taking Bitcoins. Not that I want to disparage the current bitcoin poker sites (I like seals with clubs) but they just don't have the polish and finish to which I've become accustomed.
So... It's an Arcade (Score:5, Informative)
The fact that said worthless tokens can be exchanged for things with monetary value is, apparently, non sequitur.
Re:Another idiot (Score:5, Informative)
There is more to online gambling law than that.
There are different laws for making bets, taking bets, facilitating payments (this is what usually gets prosecuted), accepting advertising for gambling, displaying advertising for gambling, and even differences in regulation between types of gambling (sports betting, gambling machines, card games, etc.)
Then there are issues with corruption (throwing the game), and money laundering. For better or worse, organized crime loves gambling because it is easy to casually shift funds from one account to another without a paper trail.
On top of that, the government wants their cut in tax revenue.
Re:Another idiot buying into the bitcoin scam. (Score:5, Informative)
The Rentenmark was backed by land.
Re:Another idiot buying into the bitcoin scam. (Score:5, Informative)
That isn't what backing means. Every single reply to my post has the same issue. Backing does not mean "the issuing authority has assets they can sell" and it doesn't mean "the issuing authority can force me to use their tokens through the barrel of a gun".
To say a currency is backed by something has a very specific meaning, which is that there is an asset literally "behind" the currency. The currency itself is merely a proxy for the backing material, one can be exchanged for the other at a specific rate. The gold standard meant you could, at least in theory, go to a bank or the government, hand in some currency and walk out with gold bars.
So given this clear definition it's meaningless to say a currency is backed by "the authority to tax". That authority might incentivize a large population to obtain these tokens and thus give them some value - but that isn't backing. It's taxation. It's also wrong to say a currency is backed by the ability to sell something like land - OK, so the government sells some land it owns. What does it sell that land for? Oh, right, it sells the land for dollars. So if I lose confidence in the dollar and want to hand them in, in return for the asset that backs them, the government selling land and giving me back more dollars doesn't help. I'd need the actual land itself and there'd need to be an actual somewhat fixed exchange rate between dollars and land. But there isn't.
If you want to argue that dollars have value because the US government taxes its citizens in that way, go right ahead. That argument doesn't lead to "Bitcoins are worthless because no government taxes in them" though. Bitcoins obviously aren't worthless because they started out having no value when they were first created, and obtained value over time as people learned about them. The system is an existence proof that you'd be wrong.
Re:Another idiot buying into the bitcoin scam. (Score:4, Informative)
Only if a debt is created actually. I can offer to sell anything I own for barter, gold, bitcoins, or even euros, and I can, quite legally, refuse any currenct, including US currency...so long as no debt is created. Should a debt be created, then I would have to accept some amount of US currency to settle it (though I am still not required to exclusively accept it).
Re:Another idiot buying into the bitcoin scam. (Score:5, Informative)
I don't get it. What do you have against Bitcoin? Has it killed your dog or something?
Your post is a stream of non-sequiturs. Yes, the primary exchange was hacked ... once ... and it resulted in a minor loss that the exchange covered from their own profits. Users did not lose any money. Yes, very tiny ad-hoc "one man and his dream" exchanges have also been hacked, but hardly anyone used them, so again, impact was very minimal. Do you think US banks never get hacked or robbed? Think again [krebsonsecurity.com].
Many US banks have unbelievably woeful security that results in accounts being routinely emptied. Consumer accounts are insured by the government but business and organizational accounts aren't, yet many of them are protected by nothing more than a password or secret question/answer. That's absurd. Now nothing stops you under-protecting your Bitcoins, but at least you can upgrade to more security if you want. You're not at the mercy of your local bank.
What on earth makes you think that starting a "virtual business is more trivial than a physical business"? Did you step out of a timewarp from the 70s? Do you think competing with Amazon is inherently easier than competing with your local supermarket? Exchanges, as you note, rely heavily on their users trust in their security (as do all financial institutions). That's what stops them "simply reforming under a new identity". They'd be starting from zero and have no advantage over anyone else. And FYI financial regulations do apply to Bitcoin exchanges as they would any other online currency exchange. That's one reason the big ones all demand government issued ID in the same way a bank would.
Feel free to laugh at people who are using a next-generation financial system. It's been many years and Bitcoin is still around and doing fine, so I doubt anyone will care.
I didn't say Inflation led to Depression. (Score:4, Informative)
1) I didn't appeal to authority.
That would have required me mentioning an authority. I said that the designer had no understanding of economics. Not that he/she was ignorant of the writings of this or that particular set of economists or economic theory.
2) I didn't say deflation led to depression.
What I did say is that the use of BitCoins was going to be constrained by their inherently deflationary nature. As in, if acceptance of BitCoins rises, deflation will occur as demand increases. Expectation of that deflation encourages hoarding, which discourages their use, and therefore, acceptance. Geek Translation: BitCoins are stuck in a Deflation/Acceptance/Supply race condition.
3) Credit IS the lifeblood of modern economies.
Improvements in productivity, technology, agriculture, lifestyle, etc., all require access to capital. There are three ways to accrue capital:
A) Save until you can buy it. While this sounds all wholesome and good, it makes, say, the expansion of a business, the research necessary to bring a new drug to market, or the purchase of an automobile required to transport yourself to a better job rather difficult. Puts you in kind of a Chicken and Egg problem without credit. (I can't make money until I buy/build X, but I can't buy/build X until I have money.) Therefore capital spending of all kinds would be reduced drastically.
B) Borrow it. Bonds, banks, your buddy down the street, whatever.
C) Acquire investors. Wow, is that expensive. Even the most brain-addled MBA can explain that selling a portion of your business is usually the most expensive way to raise money. There's a reason that companies rarely execute stock offerings past their IPO... You only sell stock to either execute an IPO (so your other investors can bail) or to raise money you cannot raise by borrowing it.
Just because a bunch of bankers lent out more money than they should have to unworthy borrowers at unsustainable rates does not mean credit is a bad thing.
Re:Another idiot buying into the bitcoin scam. (Score:5, Informative)
Is the US going away tomorrow? No.
Is the US government and banks going to continue to manipulate the US dollar for the foreseeable future? Yes.
Is "A. Random H@X0R" going away tomorrow? It doesn't matter. Bitcoin is a decentralized currency. Bitcoin is not dependent upon "A. Random H@X0R" for it to be trusted.
Where does the trust in bitcoin come from? Well if you don't know anything about bitcoin, you probably shouldn;t trust it. If you know something about computer science and theory of computability, you'd know that bitcoins are actually much harder to acquire than a government issued currency, and is therefore much harder to manipulate (e.g. like gold). A trillion US dollars can be created virtually with a keyboard stroke. The only thing stopping this from happening is the people in charge. What stops a trillion bitcoins from being instantly created is the laws of physics and math.
A lot of currencies have collapsed from rampant inflation exactly because the people in charge could *not* be trusted.
Some people trust government officials more than the laws of physics and math. I personally don't.
Re:Another idiot buying into the bitcoin scam. (Score:3, Informative)
Re:Another idiot buying into the bitcoin scam. (Score:1, Informative)
Bitcoin is backed by trust in math. Specifically, in the algorithms by which they are created and transferred.
Also, the important thing is that you do not actually trust the people that are sending you bitcoins. Once they send them to you, you know they don't have a copy. No trust in one specific person needed.
Contrast this to the USD, where you have to trust that US central bank wont print any more. Good luck with that.