As for fractional reserve banking, I commented on this here already:

http://www.libertariannews.org/2012/03/09/fractional-reserve-banking-with-bitcoins/

That’s one of the reasons I look forward ti BitInstant’s vaunted debit card offering. :3

If I can hold bitcoin, in my wallet on my watch under my terms and protected from USD inflation, and then spend that through a debit card into USD accepted by any merchant in the united states with negligible delay and negligible fees, then I am in a very real sense “spending bitcoins to get coffee”.

Granted, and others have made this point, it’s not the same as the merchant flat-out accepting the bitcoins from me. Doing that would be cheaper for everyone involved but would require the merchant to have faith in the currency, too. But acceptance is a chicken-and-egg problem, and steps like bitcoin debit card I think are great at breaking that ice.

I do guarantee that, once that comes out and meets it’s performance promises, that will become how I buy my groceries, tyvm.

Namely, eWallet service can keep it’s own transactions public just like the blockchain does. Customers can confirm their transactions are listed properly with their wallet “addresses” passing virtual money about between their accounts and others, you can see the real bitcoin entering and leaving the system via the regular blockchain and then track it’s progress within the system, as well as confirm that the “asset” balances remain solvent at all times.

That would be impossible to audit with gold without hurting security by allowing customers to make spot inspections of the vaults. ;3

If you are confident in using truecrypt and your wits to fend off malware and offline attacks http://xkcd.com/538/ alike, then you may have yourself a nice security system for your bitcoins. But saying that has a price tag of “a couple of bucks” is disingenuous unless you’re going to offer to guarantee the security of any other computer newbies with a similar approach for no more than “a couple of bucks” a pop. You skip over the implied value of your computer literacy and security acumen which you either have or convince yourself you have, right up until you’re hacked (bitfloor.jpg) or mugged.

> It is impossible to have fractional reserve lending because the stock of coins is what is used to make payouts. They can’t issue receipts for bitcoins because they have to issue actual bitcoins to borrowers.

https://en.bitcoin.it/wiki/MtGox#Redeemable_Code_.28Currency.29

Allow me to introduce you to the MtGox Voucher. You hold a Mt. Gox balance, create a voucher, give to another Mt Gox user, the balance transfers to them.

No bitcoins withdrawn, no blockchain accessed, no transactions out of the aforementioned 6000/hr limit consumed, no fees paid to miners, ad no direct proof Gox has the bitcoins to back up the digital paper money.

Still impossible to counterfeit without Mt.Gox’ involvement. Person A gives voucher to person B. B logs into their mtgox account (or resses up a throw-away account if they wish; no overhead needed) to redeem and verify the voucher, now has BTC on file (or any other currency). B starts the process again by passing vouchers to C, D, and E.

Having said this, there are two important points to make.

First, historically, gold has been used to settle trade imbalances between countries. When one country has a trade deficit and another one has a trade surplus, gold is transported to settle the difference. The same could be used between eWallet services: as long as there are enough eWallet services, such that enough eWallet-Bitcoins are exchanged among those services and regular settlements through the blockchain occur, dishonest eWallet services might face trouble. But they can go on and on as long as no more blockchain-Bitcoins are withdrawn as there are present in the eWallet service.

Second, both with gold and with Bitcoin anybody is capable of holding the “true” stuff. When you decide to hold gold, you can also decide on holding physical gold (including taking care of security) or holding a certificate or IOU. When choosing the latter option, because it’s easier or cheaper, you expose yourself to the risk of what you call counterfeiting. But if you care about your assets, you can always decide to hold physical gold. The same is true with Bitcoin. You may decide to hold Bitcoin in eWallet services for the sake of easy usage, lower transactions fees or whatever reason; with Bitcoin you’re still in the position to transfer blockchain-Bitcoins into an address for which you keep the private key in an offline and secure location.

So, if (or some people believe when) the gold counterfeiting bubble bursts, the gold certificates may be worthless, but the impact on people holding physical gold is different. The same is true for Bitcoin. As long as the general public doesn’t know or understand this, Bitcoin isn’t the solution to the fundamental problem.

Having said this, there are two important points to make.

First, historically, gold has been used to settle trade imbalances between countries. When one country has a trade deficit and another one has a trade surplus, gold is transported to settle the difference. The same could be used between eWallet services: as long as there are enough eWallet services, such that enough eWallet-Bitcoins are exchanged among those services and regular settlements through the blockchain occur, dishonest eWallet services might face trouble. But they can go on and on as long as no more blockchain-Bitcoins are withdrawn as there are present in the eWallet service.

Second, both with gold and with Bitcoin anybody is capable of holding the “true” stuff. When you decide to hold gold, you can also decide on holding physical gold (including taking care of security) or holding a certificate or IOU. When choosing the latter option, because it’s easier or cheaper, you expose yourself to the risk of what you call counterfeiting. But if you care about your assets, you can always decide to hold physical gold. The same is true with Bitcoin. You may decide to hold Bitcoin in eWallet services for the sake of easy usage, lower transactions fees or whatever reason; with Bitcoin you’re still in the position to transfer blockchain-Bitcoins into an address for which you keep the private key in an offline and secure location.

So, if (or some people believe when) the gold counterfeiting bubble bursts, the gold certificates may be worthless, but the impact on people holding physical gold is different. The same is true for Bitcoin. As long as the general public doesn’t know or understand this, Bitcoin isn’t the solution to the fundamental problem.

many companies, an entire industry and governments have tried to stop the bittorrent protocol but they can not.

The bitcoin network is even stronger because supporters of the network can profit directly in bitcoins in supporting. It is global, meaning a co-ordinated global attack would be necessary to even attempt to disrupt it. It is currently virtually impossible that enough compatational power could be co-ordinated by even the US government to hijack the bitcoin blockchain (this would not destroy bitcoins or the network, just temporarily steal the accounting of the network allowing the attacker to double spend his own bitcoins).

The only way to destroy the bitcoin network would be to turn the internet off (impossible) and prevent a similar netork from being created (almost as impossible).