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Cryptocurrency Exchange Vircurex To Freeze Customer Accounts 357

Posted by timothy
from the experiencing-unusually-heavy-call-volume dept.
Powercntrl (458442) writes "Vircurex, an online exchange for Bitcoin as well as other cryptocurrencies is freezing customer accounts as it battles insolvency. While opinions differ on whether cryptocurrency is the future of cash, a Dutch tulip bubble, a Ponzi scheme, or some varying mixture of all three, the news of yet another exchange in turmoil does not bode well for those banking on the success of Bitcoin or its altcoin brethren, such as Litecoin and Dogecoin."
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Cryptocurrency Exchange Vircurex To Freeze Customer Accounts

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  • by Jmc23 (2353706) on Sunday March 23, 2014 @10:58PM (#46561063) Journal
    are frequently criminals.
    • by GumphMaster (772693) on Sunday March 23, 2014 @11:04PM (#46561091)

      Or day traders, or high frequency traders...

      • by Anonymous Coward on Sunday March 23, 2014 @11:08PM (#46561123)

        Repetitve comment, that.

        • Re: (Score:2, Interesting)

          by MobSwatter (2884921)

          You're not taking into account that since the strength and credibility of the dollar is no longer what it was, the mob and gangs are trading in humans and blood money, this market is one they can fortify by attacking any substitute for the dollar.

      • by ShanghaiBill (739463) on Sunday March 23, 2014 @11:20PM (#46561177)

        Or day traders

        Day trading has never been a way to make a quick buck. At the end of 1999, a brokerage survey found that most day traders had lost money over the previous year, despite the NASDAQ rising a record 85%. The day traders were just eaten alive by the transaction fees.

        or high frequency traders...

        HFT is much less profitable than it used to be. They made money by squeezing inefficiencies out of the system, but once everyone else was doing the same thing, that doesn't work anymore.

        • by dbIII (701233) on Monday March 24, 2014 @01:15AM (#46561549)

          They made money by squeezing inefficiencies out of the system

          Nice euphemism for a timing based man in the middle attack.
          Alice asks for shares. Bob has shares for sale. Speedy buys shares from Bob and sells them to Alice before Bob can get the message that Alice is buying and before Alice can get the message that Bob is selling. Of course it can be argued that it's just a "sharp" business practice, the "American Way you commie" or whatever and that a man in the middle attack that adds zero value to the market is perfectly fine.

          • by Procrasti (459372)

            > Nice euphemism for a timing based man in the middle attack.
            > Alice asks for shares. Bob has shares for sale. Speedy buys shares from Bob and sells them to Alice before Bob can get the message that Alice is buying and before Alice can get the message that Bob is selling. Of course it can be argued that it's just a "sharp" business practice, the "American Way you commie" or whatever and that a man in the middle attack that adds zero value to the market is perfectly fine.

            That's not how it works... unle

            • They are ACTING BEFORE Alice or Bob can which is why it is a TIME BASED man in the middle attack.
              • by Procrasti (459372)

                > They are ACTING BEFORE Alice or Bob can which is why it is a TIME BASED man in the middle attack.

                Everybody is acting before the next order comes in... Kind of the definition of a QUEUE.

                They get to see the state of the order book first and act on it faster because of their colo deals with the stock exchanges --- again, this changes nothing.

                Only if they see Bob's order, then make the order, and it is on the queue before Bob's order, and therefore in the market book before Bob's order, are they doing anyt

          • Great point. The question I always like to ask about HFT is - If we ask ourselves what the economic function of exchange platforms is, what value does it add to the system? I.e., how does it improve the process of the exchange of shares (commodities, etc.) between individuals and organisations? It seems to me that the fact that HFT is possible at all is a bug in the system. It is exploited by nefarious quasi-criminals, destabilising and creating distortions in one of the fundamental tools of our current eco

            • by dbIII (701233)

              there may be some really good value it adds that I haven't thought of

              The house gets a cut to allow those with marked cards to play against the suckers without.

    • by JDAustin (468180)

      People are 3 things: greedy, lazy, and stupid. Those out for a quick buck on the *coin exchanges prove this point.

    • by PopeRatzo (965947)

      are frequently criminals.

      And people involved in "cryptocurrency" are frequently a little questionable themselves.

      http://en.wikipedia.org/wiki/S... [wikipedia.org]

      http://en.wikipedia.org/wiki/S... [wikipedia.org]

      Personally, I've decided to put my money in tulip bulbs. My tulip bulb fortune is the fastest growing in the world. Friday, I had two tulip bulbs and at the close of business today, I have fifty, having cleaned out the local garden shop. That's a 2500% increase in two days!!.

      Clearly, tulip bulbs are the next big thing, since the

  • by oscrivellodds (1124383) on Sunday March 23, 2014 @11:05PM (#46561105)

    It's the people, goddammit!

    • you mean all the criminals that have been arrested recently?
    • by labnet (457441) on Monday March 24, 2014 @12:28AM (#46561413)

      It's the people, goddammit!

      No, It's because Bitcoin is stupid.
      It can't expand and shrink to fit economic use.
      Money is convenient form barter and needs to represent the productive capital of its users and to remain stable for a given capital. (Eg an apple is worth 1 dollar from year to year, not 1 dollar today, then 10 dollars next week)
      As more people use it, scarcity increases its value, making early adopters insanely rich. The crypto bit of bit coin may be sound, but it's economic utility is not.

      • by fnj (64210)

        an apple is worth 1 dollar from year to year, not 1 dollar today, then 10 dollars next week

        Actually, capitalism only works because inflation is built in. An apple that is $1 this year, under GOOD conditions, will be ariund $1.05 next year, $1.10 the year after, year after year after year. There are variations. And sometimes hyperinflation, when there are times an apple is worth $1 this year and $1 million next year. Don't be so sure hyperinflation won't hit your home.

        See if any of these mean anything to you

      • by dnaumov (453672)

        It's the people, goddammit!

        No, It's because Bitcoin is stupid.
        It can't expand and shrink to fit economic use.

        That's a feature, not a bug. A lot of Bitcoin proponents are backing Bitcoin PRECISELY BECAUSE it's a medium of exchange free of government meddling.

    • by Flwyd (607088)

      Bitcoin by itself has no intrinsic value. It only has value because people decide it should.
      Money is just shorthand for people doing stuff [youtube.com].
      Without people, there's no economy. Money is just a useful fiction.

    • People who keep their coins on deposit with an exchange aren't even really Bitcoin users. What they've done is wire money to a company and received an IOU for bitcoins which they then have not exercised. Given that the whole point of the system is that you don't need to trust third parties, it's frustrating to see people turn around and do exactly that (then get burned by exactly the same kind of financial instability that's so common in the existing system).

  • Tiny "Exchange" (Score:5, Informative)

    by Bob9113 (14996) on Sunday March 23, 2014 @11:19PM (#46561169) Homepage

    Vicurex is tiny. They only did US$30,822 of business [bitcoincharts.com] in the past 30 days. The corner pawnbroker is probably a bigger business. The corner gas station definitely is.

    Bitcoin may be a future currency (though I doubt it is The Future of Currency). It may be a very bad high risk investment (though calling it a Ponzi scheme would be giving the players far too much credit). Whichever it is, or wherever in between, it is no more or less what it was in the (nearly imperceptible) wake of Vicurex's failure.

    • by mysidia (191772)

      Vicurex is tiny. They only did US$30,822 of business

      Indeed they are... Why the heck is this even news?

      Is it news because the final Goxing finally came, and Slashdot editors have an agenda to keep bringing up articles on the smallest negative event happening to anyone somehow related to Bitcoin?

      Or is it news, in order to provide the Vircurex with free desperately needed advertising, or what?

      • by dbIII (701233)

        Slashdot editors have an agenda to keep bringing up articles on the smallest negative event happening to anyone somehow related to Bitcoin

        It used to be the smallest event that could be spun positively and it's a chicken or egg argument as to whether that was due to the ads for bitcoin mining rigs here or if the ads came because of the large number of bitcoin stories.
        I think it's perspective - personally I think bitcoin is a disgusting old style ponzi scam with new window dressing to bait it for geek so I no

      • Is it news because the final Goxing finally came, and Slashdot editors have an agenda to keep bringing up articles on the smallest negative event happening to anyone somehow related to Bitcoin?

        The agenda of the slashdot editors is simple. To attract readers and comments. Articles on bitcoin seem to accomplish that agenda.

    • by westlake (615356)

      The corner pawnbroker is probably a bigger business. The corner gas station definitely is.

      and both are more likely to well-managed and solvent,

    • USDBTC is not their main market, their speciality is exchange between various crypto-currencies, e.g. the trade volume of Dogecoin to BTC should have been orders of magnitude larger.
  • Any organization that attempts to provide exchange services between 'hard' currencies and an inflating virtual currency is doomed to insolvency in terms of the hard currency. The operations of such an organization will always amount effectively to a Ponzi scheme when viewed from the hard currency point of view. A little thought experiment: an exchange takes in $100 for 100 v-coins valued at $1 each. The v-coin value inflates to $2 and the investors decide to exchange their v-coins back to dollars ... ho
    • Re:Basic Math (Score:4, Insightful)

      by ghn (2469034) on Sunday March 23, 2014 @11:42PM (#46561263)

      This is an Exchange. They are matching buyers and sellers together. The point where they meet determines the exchange value of the two involved currencies at that point in time.

      The exchange provides services to facilitate the transaction and charges a transaction fee. If the exchange is properly managed, they rake a profit on every transactions and can't loose, no matter how the market sways.

    • by Dagger2 (1177377)

      A little thought experiment: an exchange takes in $100 for 100 v-coins valued at $1 each. The v-coin value inflates to $2 and the investors decide to exchange their v-coins back to dollars ... how many v-coins can be exchanged before the exchange is insolvent? HALF! DUH!

      This is not how exchanges work. Exchanges operate as markets; if somebody decides to sell their v-coins, they need a buyer to sell them to (that is, another user of the exchange, not the exchange itself.) If nobody else on the exchange is w

    • by mysidia (191772)

      Any organization that attempts to provide exchange services between 'hard' currencies and an inflating virtual currency is doomed to insolvency in terms of the hard currency.

      No... that's totally false. A proper exchange always profits from every transaction, once they have build their business.

      The exchange isn't a party to a trade. When two traders enter an order, and the seller's ASK is met (after adding half the exchange fee [spread] to the asking price) by a buyer's BID (after subtracting ha

      • by hey! (33014)

        Well, sure. But if it were the kind of exchange you were talking about, then they wouldn't have any user funds on hand to freeze.

        The fact that they *do* have customer funds to freeze means that even if they call themselves an exchange, they're functioning as a bank. They're taking deposits for customers which then have to be frozen when they lack sufficient reserves to cover current operations. If they accept only crypto currency deposits they can function like a bank without being regulated.

        • by mysidia (191772)

          Well, sure. But if it were the kind of exchange you were talking about, then they wouldn't have any user funds on hand to freeze.

          No.... because the major exchanges are essentially acting as an "escrow" agents as well. Settlement of the trade is "immediate" in that you have to deposit funds to be traded, before you can complete the trade.

          Otherwise; there would be all sorts of abuses, like the seller side of the trade failing to deliver on the trade they agreed to -- when the market shifted into their

    • Vircurex didn't even do USD/BTC on any meaningful scale. Their main purpose was to facilitate conversion between various existing coins - usually from the freshly mined popular coin of the day (LTC, FTC, DOGE etc) to BTC, which was then transferred elsewhere to exchange for USD.

  • Bad Analogy (Score:5, Insightful)

    by SuperKendall (25149) on Sunday March 23, 2014 @11:23PM (#46561185)

    Saying that an exchange like this going going bad means Bitcoin is failing, is like claiming a small corner bank failing means the end of the U.S. dollar is nigh.

    The exchanges dying is good for bitcoin, because the bad ones will be replaced by more solid and upright entities.

    Dogecoin started as a joke, remains a joke, and should be treated as a joke.

    • by ColaMan (37550)

      The exchanges dying is good for bitcoin, because the bad ones will be replaced by more solid and upright entities.

      You hope.

      • by jhol13 (1087781)

        Track record this far is ... can I use enron as an adjective?

        • Track record this far is ... can I use enron as an adjective?

          Perhaps you can, but perhaps not in regard to the Bitcoin. Enron used (and I mean used like a rented mule) accounting firm Arthur Anderson to audit and sign off on their creative bookkeeping to cover $billions (US) in losses to keep their operation afloat. They were able to corrupt a key step in the securities and exchange' system of checks and balances. Without A. Anderson's complicity, that house of cards would've fallen much sooner.

          Bitcoin's strength and popularity rest with it's kinship to virtual

    • by Eskarel (565631)

      If it were just the exchange failing, that might not be a problem, but when the exchanges are, for all intents and purposes, either seizing assets from their customers or losing those assets to theft left right and center, it sure as hell does affect Bitcoin.

      Keeping a private wallets require a degree of know how which is beyond most tech savy people, let alone regular folks, exchanges(banks) are as necessary to the Bitcoin ecosystem as they are to cash. When the banks can't be trusted and can't be prosecute

      • by tlhIngan (30335)

        Keeping a private wallets require a degree of know how which is beyond most tech savy people, let alone regular folks,

        We've hit the third evolution of malware.

        First malware spammed people because spam was highly profitable. Second, malware infected people's computers because hijacking user data such as banking information was highly profitable.

        Now, malware simply scans a computer for a bitcoin wallet. If it finds one, it merely empties it and moves onto the next PC. Because that's highly profitable - mining

    • by Chas (5144)

      The exchanges dying is good for bitcoin, because the bad ones will be replaced by more solid and upright entities.

      Your "faith" is admirable.

      Reality seldom works this way in an unregulated market though.

  • I'd note that the question of the solvency/stability of a Bitcoin exchange has as much bearing on the viability of Bitcoin as a currency as the question of the solvency/stability of say Bank of America has on the viability of the US dollar as a currency. I can keep Bitcoins in my own wallet on my own computer just like I can keep dollars in my own wallet, use both to pay for things, and never be worried about whether any particular exchange or bank will go belly up. And if I choose an unstable institution t

    • by jerquiaga (859470)

      This argument is completely flawed. Using a currency like dollars is inherently safer because it is backed by the government of the United States. Consumer protections exist (in the form of the FDIC) that ensure that if you choose an institution that fails, your deposits are insured and will be returned to you. There is no such protection for Bitcoin, or any other crypto currency that lacks any form of backing. The reason that banks don't deal with crypto currency is that it's too risky. An asset that can g

      • by Todd Knarr (15451)

        So if I store my dollar bills in a jar and it gets destroyed in a fire, I can go to the FDIC and get my money restored by them? No, I can't. That's because the FDIC doesn't insure dollars. It insures deposits (in whatever currency, at it's value in dollars when it was deposited) at institutions that're equivalent to a Bitcoin exchange. As far as gaining/losing value, shall we discuss the bank and financial company bailouts? They were all needed precisely because the banks and financial companies did deal he

  • by fuzzyfuzzyfungus (1223518) on Sunday March 23, 2014 @11:27PM (#46561209) Journal
    It's a trifle astonishing to watch how persistently people line up to make the same mistake with their crytopcurrency-of-the-moment again and again.

    In theory, cryptocurrencies are secure-through-math and don't rely on flyblown banking institutions and so on, (and, in fairness, they have a decent track record as software goes); but their properties only apply if you use them correctly.

    If you give the actual crypto keys that correspond to your cryptocurrency units to me, and I give you an account at First Bank of Fungus with 'X cryptocoins', guess what? From the perspective of all the neat math, I own the coins, and enjoy whatever properties they possess, and you own a not-particularly-distinguished private-label IOU, which offers absolutely no security by design, and probably quite limited security-by-legal-force.

    Basically none of the special properties of cryptocurrencies extend beyond your personal grasp on them, and the surrounding institutions are... dubiously stable.
    • by Slayer (6656)

      These people filling the coffers of fraudulent exchanges are not necessarily clueless people storing their assets there like they would in a regular bank account.

      There has been a large amount of "tidal trading" - where you place buy orders at a low price together with sell orders at a high price, and hope that market volatility will eventually put through both orders with some profit. This way you can profit from rises and falls in exchange rate, well, until yet another a flaky exchange runs with all your a

  • By definition a true exchange should never lose your money. You can lose your money, but they won't. An exchange is a barter system, you trade X for Y. Legitimate exchanges charge for a "seat" on the exchange, a percentage of the transaction, or both. However, they never just take your money. They may require that you put money in escrow to cover your position but this is set aside, usually drawing risk free interest (or as near as you can get to it) unless you specify otherwise.
    No one should be able
  • Used to be, some years ago now, you could go onto Ebay and sell those Wu's Fighting Gauntlets for $4-5. The difference between those gloves and bitcoins is: bitcoins are absolutely useless against giant spiders the size of small huts.
  • by Baldrson (78598) * on Monday March 24, 2014 @12:41AM (#46561463) Homepage Journal

    Cryptocurrency is a platform and the exchanges are an app built on the platform. The security problems have been with the apps built on the platform. The peer to peer architecture is not what is being exploited. Its reckless abandonment of P2P for client server.

  • Bitcoin became popular in no small part because many people believe government-backed currencies are overregulated or poorly managed. Because there was a market demand for a non-government-controlled currency, Bitcoin took off. Other things definitely played bigger roles, but being unregulated was a feature, not a bug.

    To an extent they were right. It's very difficult to handle money electronically without a middleman, and there are few enough middlemen that the costs can be prohibitive. That's just one thin

  • !bank (Score:4, Insightful)

    by Meneth (872868) on Monday March 24, 2014 @05:04AM (#46562059)
    As we have seen, keeping any amount of money at an exchange's account is a recipe for disaster. They can still be used, but only if you take care to move your money out of it as soon as possible.

Aren't you glad you're not getting all the government you pay for now?

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