Internal FBI risk assessment of Bitcoin network [pdf]

Having a static, fixed supply and independence from central control makes something valuable to you, not so much to me.

>If the supply of BTC was infinite, it would have essentially no value

But there are many other circumstances that could result in BTC having no value, regardless of scarcity. For instance if people stopped using it, at all. There would be no value in being the only one with bitcoin, regardless of how scarce they are.

edit: Probably not the best example, but either way, value is a perception.

It's pretty hard for someone to hijack your wallet with a Trojan and if they do get into your bank account that way then the police and the bank might take an interest.

I know this is a meme in the BTC community - any criticism of BTC as a payment method is met with the claim that "it's just like cash" and any criticism of weaknesses of BTC as a currency is met with the claim that "it's a payment method and a commodity". To me it pretty much fails at all of the above.

There's no doubting it's good for purchasing contraband though.

I did some research on anonymity (mentioned in that document); I find it hard to project how private Bitcoin will be in future.

Our impression was that currently many users were careless, and that many identities (in the form of publicly disclosed Bitcoin address ownerships) were linked to meaningful transactions; such that with basic network analysis it was possible to passively observe semantically meaningful transactions, like "the person who owns this twitter account, which seems to be a real person, donated to wikileaks" or "this account which is a public organisation donation address is linked to an address that transferred bitcoins to that other organisation".

We speculated that if Bitcoin became widely used, without changes in usage patterns, then a large e-commerce site (someone like Amazon accepting payments in Bitcoin - leaving questions of scalability aside) could passively observe much of what was going on on the network, because they had so many known identity-address pairs to start with (e.g. shipping addresses).

But the other argument is that its probably relatively easy for usage patterns to change.

I think you have to assume that end-users will always be careless. We see this in almost every security setting. So it doesn't matter whether its possible for sophisticated users to guard their privacy, if you don't get privacy by default.

But people could build overlay systems which are backed onto Bitcoin. A lot of the wallet services are like this already, and are not readily amenable to the blockchain level analysis (although of course you then you are trusting your wallet service with your privacy and money). Alternatively core or client developers could add protocol-level or low-level Bitcoin mixing (again, with an overhead cost, so there might be scalability concerns), or develop client interfaces which encourage more privacy by default.

Its too early to tell how observable/analyzable it'll be in steady state, if it builds traction. I think its possible the system will end up much more observable, for casual users, than cash or even credit cards currently are, but I don't think that's inevitable.

Estimated to be 20% to 25% of GDP compared to an average of 15% to 20% in the neighborhood.

Edit: as an extra fact, "we" (I've never seen one) hold most of 500€ bills that have been printed.