» How to Counterfeit Bitcoins?
1) Governments have perilously tenuous grips at controlling counterfeiting operations.
2) A single successful counterfeiting operation can wreak havoc and destabilize even the most developed western economy.
In 2000, self-taught Wesley Weber was so successful at forging the Canadian 100 dollar bill that many stores simply stopped accepting the notes.
To show you what I mean, in 2005 Anatasios Arnaouti was arrested in the UK with a counterfeiting operation capable of producing tens of thousands of individual notes each day. In the BBC, a representative for the National Crime Squad reported “These were good quality banknotes, good quality travellers’ cheques which could have had a very significant undermining effect on those economies.” He also reported, “The potential to undermine the economy of the UK and US was very significant.”
Separately, in the year 2000 a self-taught counterfeiter Wesley Weber was so successful at forging the Canadian 100 dollar bill that many stores across the entire country simply stopped accepting the notes.
In order to curb counterfeiting extreme measures have been in place. Throughout history and as late at the 18th Century, counterfeiting in the UK was punishable by death. Currently advanced technical and chemical methods are used to thwart counterfeiting but with limited success. Technological advances have helped counterfeiters maybe as much as or even more than the enforcers. The tide may be turning.
As exemplified by the previous two cases, the cash exchanges of our society are in great risk. If you’re a merchant, the last thing you want to do is to accept a counterfeit bill. A merchant can easily lose 50+ times the profit they would make by a single legitimate sale by accepting a counterfeit bill. Many are inclined to see this as a reason to move to a cash free society. To most users, credit card purchases are just as convenient as using cash and sometimes more so. To merchants however, cash is king.
This type of fraud is so common, it is impossible often for merchants to turn a profit (or even not operate at a huge loss) if they are selling something at cost to themselves to users in another country and not using a high priced escrow service.
Transacting in cash is more profitable and many businesses could not exist and many services could not be provided if we were to let go of cash. This is also the premier thing which has held back commerce across the internet, because, of course, you cannot accept cash online. Chargebacks and credit card costs have meant that, unless the merchant is providing something at negligible or no cost to themselves (such as an mp3) or they are able to verify the identity of their customer upon delivery (such as with hotel reservations or flights) they cannot fight chargebacks. Deliverable items can get a legal signature but still the more resellable an item is, the more likely the purchase will result in fraud or friendly fraud. Friendly fraud is when a user purchases an item with his or her own card and then claims that the card was stolen. This type of fraud is so common, it is impossible often for merchants to turn a profit (or even not operate at a huge loss) if they are selling something at cost to themselves to users in another country and not using a high priced escrow service.
Moving back to physical currency, the amount of paper money or change in existence is a small percentage of the amount of money that exists. Cash is recycled and reused for many decades and most of our money is now housed electronically somewhere in the expanse of cyberspace. This is how it can be rationalised (although maybe still not the most efficient strategy) that a US penny costs more than 7 cents to manufacture.
But think about it, you have maybe 10, 50 or 200 dollars worth of cash on your person however, chances are, you have more online. You sign into your bank account and a number glares across, appearing to you on the screen. What is interesting is the often overlooked uneasy and ambiguous relationship between physical cash and money. High caliber counterfeiters can and have threatened to destroy some of the most real and developed economies. Their limited success can be attributed only to our luck. Eventually a not so rare event, certainly not a black swan, will come to fruition and upset the fragile ecosystem with potentially devastating effects.
As of December 2010, in the U.S around 10 percent of the money supply is represented as coins and paper money. A creation then of 1% of the money in physical form would increase the amount of physical cash in supply by around 10%. If this was done artificially via counterfeiting, there would be a resulting inflation in the physical supply while electronic dollars would relatively gain value. As most end merchants do not make a 10% profit on the items that they sell almost all cash based commerce would quickly cease to exist. A loss of confidence would further hurt the integrity and the real value of cash. Merchants who are lucky enough to theoretically still profit would need to have a very high profit margin even if the societal confidence in paper money remained. Accepting a counterfeit bill costs the merchant the entire cost of the bill minus the nominal profit of the item purchased.
There is no real resolution. There is no way to solve this problem. The only solution is a dramatic change. As a system, bitcoin is counterfeit-proof. It is also cash. It can be exchanged online or in person (if online connectivity is available) and the transactions are not reversible. There are no extraneous details required such as your address and other personal information. This is literally one-click shopping. I can’t imagine paying for a hot dog on a street corner with a credit card. I want to reach into my pocket pull out two little green pieces of paper and be done. My phone works equally well. That’s what bitcoin is, a seamless easy transaction.
The tough part is getting your hands on bitcoins. If you are a merchant accepting bitcoins for your product or services it can be easy. But bitcoins cannot be bought by creditcard or payment gateways like Paypal. Resellers of bitcoin depend on the irreversible nature of their payments. Accepting credit cards, Paypal and other ‘modern’ payment gateways with the ability to chargeback is similar to accepting large amounts of counterfeit bills. For this reason most bitcoin resellers only accept irreversible bank wires.