Sunday, May 15, 2011

Better to give than to take...

Sony recently announced that somebody got into their customer database and got the names and addresses (and maybe credit card numbers) of 100 million of its customers.

Michaels Crafts Stores recently announced that debit card readers in 80 of its stores were hacked to steal customers' bank information and PIN numbers.

There's a problem with the way we pay for things these days. The root cause of the problem is that we're trusting somebody else with the keys to our financial life. We hand over our credit cards or bank account numbers and trust merchants to only charge what we've purchased and to keep our personal information safe. Unless we pay in cash, we're always implicitly authorizing them to take money from our accounts.

It doesn't have to be that way. Businesses could give us their information and ask us to deposit money into their accounts, just like we give them cash which they deposit into their cash registers. If Michaels' cash registers had been hacked and a bunch of money stolen, that would be bad for Michaels but it wouldn't affect their customers at all.

Bitcoin is like cash. Merchants that accept bitcoin ask you to send coins to their address-- you never give them permission to reach into your account and take coins. One of the reasons I think bitcoin could take over the payment world is because that is a much better way to do things, for both the customer and the merchant.

If Sony accepted bitcoin payments from its customers, it might have lost a lot of money by screwing up security and having its private keys stolen. But it wouldn't be facing lawsuits from customers worried about identity theft and future fraudulent credit card charges.


Dave said...

Nice post gavin. It is true I would much rather send sony a bitcoin than a credit card number at this point. I dont know why sony would deserve bitcoins but thats another story.

Unknown said...

IMHO, the Bitcoins are not safe either, I read things like -- lost or deleted wallets and lost bitcoins send to a wrong address and, or address of a receiver who is unable to recall her/his private key :(

Gavin Andresen said...

bdheeman: you're absolutely right. There is a lot that can be done to make bitcoin safer for the average person (there is a reason the latest bitcoin is version 0.3.22 BETA).

The difference is who is in control; with Bitcoin, YOU are. That means you are also responsible for keeping your money safe.