Banks 2 0

Just a brain dump after a conversation with a friend:

Friend: How widespread do  you think this will become? Friend: i.e., in our 60's, do you think we'll be able to buy  groceries with BTC ? Friend: or something similar Mike : bitcoin will die in a year or two... something else will replace it... Friend: you think!? Mike : the problem with BTC as it stands is that it is being hyped too much... Mike : it is a bubble... Mike : but you can't tell when it will burst Friend: i'll agree Mike : it might be tomorrow... it might be a year from now... Mike : but it is paving the way for what will come afterwards... Friend: just getting really tired of USD Mike : and it will usher in a new world where many virtual currencies all co-exist... Mike : where the actual currency it is stored in is transparent to you, since your bank balances them... buying and selling to try to make the best return for you... Friend: i doubt that..the bank would never give you anything good...but i'm cynical about banking Mike : you will probably see a single value... a USD equiv most likely... that you own... Mike : which will fluctuate day to day as exchange rates change and banks buy and sell your currencies in the background Mike : these aren't traditional banks... these are banks 2.0

Will there be risk? Yes, we are talking about systems where people can game them, where hacking will be a serious risk, where anonymity is valued.

We are also talking about a system that the traditional banks will want to avoid; that they will pressure governments to oppose and regulate.

I believe that there will be at least two categories of these banks.

• Banks in the real world, with regulations and government cooperation - your money will be mostly protected, but also tied to your identity. You can't hide from tax here...
• Virtual Banks; Completely online. Nothing ties them to the real world directly. No hard currency is present. They simply balance the virtual currencies received and sent with the virtual currencies elsewhere. They balance risk around the virtual banking network based on their own tolerances of risk with their own policies. Their reputation is built over time and you can choose not to do business with them if you choose - but we do need to build a workable reputation system, or support escrow payments between currencies (multiparty transactions in bitcoin are a good starting point).

By making these virtual banks small - probably just a few users, the risk itself is reduced. This is nothing like a real world bank crash - think Iceland or the recent bailouts, but there is risk. This risk needs to be minimised, but there is nothing stopping you spreading your cash around. Your wallet software should help here.

We need to get this conversation started. What am I missing? Anyone interested in working towards this long term? Thoughts?

 

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