Cryptocurrency Exchange Vircurex To Freeze Customer Accounts 357
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."
hmm, people out to make a quick buck (Score:4, Interesting)
Re:hmm, people out to make a quick buck (Score:5, Insightful)
Or day traders, or high frequency traders...
Re:hmm, people out to make a quick buck (Score:5, Insightful)
Repetitve comment, that.
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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.
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Funny how this comment comes up (not by you personally) in every thread about either BTC or the Fed or the economy in general.
You realize, of course, that the very fact that you (and those holding a similar position) even need to make that argument in the first place, means that quite a few people very much do question the strength and credibility of the dollar.
That said, I don't think any of us expect it to vanish overnight in a Zimbabwe-esqu
Re:hmm, people out to make a quick buck (Score:5, Insightful)
And until a hundred years ago, cartels were legal, too. Two hundred years ago, the slave trade was going strong in parts of the USA.
Just goes to show.
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Goes to show that sometimes it takes laws time to catch up.
What value does HFT provide to the economy? Are companies suppose to change direction every 1/100 of a second in response to trades -OR- is it just a method for skimming money?
Urgh (Score:2, Informative)
So I'm not a capitalist or anything, but as I understand it HFT provide a market for people who wan't to buy or sell trades. Back before HFT, people had to go to established market makers, which would be large entities that hold on to large amounts of stock. This would not be held speculatively, but rather to harness the arbitrage opportunities in the difference between selling and buying price. These guys used to "skim" 10% of the price every time people traded, and they were old white guys, established
Re:Urgh (Score:4, Insightful)
hft doesn't provide that. that is a common misconception about hft and one that hft trading companies want you to believe.
in practice hft sits between the buyer and seller who would exist regardless of the hft existing. that is the whole point of hft. the hft skims money from both of those people, they longer term buyer and seller(even if the buyer is going to just hold the stocks for few hours), it would be far simpler for everyone involved if the stock brokerage would just take the cut without the hft sitting in the middle.. it would save resources, electricity etc. only thing it would change would be that certain people(hft trading companies/consultants/people sitting on the approve list for fast pipe access) would not get so much money.
now the broker house cut done through the hft is largely invisible and can't be measured easily... that's why wall street loves it, it gives them a way to skim money from people who want to trade stocks based on their expected values.. it would be really easy to fix the hft arms race, makes sales ticks every 10 secs for example or whatever, to make it so that it didn't matter if your processing had 1ms ping or 250ms ping.. but that would fuck up the very lucrative business of selling the short fast pipe to the stock exchange so they don't want to do that.
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To kill hft, put a 0.001% tax on every transaction especially the cancelled ones. And hft will stop over the next nano second.
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that's what they tell you... HFT is trading large sums very quickly in order to make a little bit off each tiny movement in shareprice - all controlled by computer.
It has nothing to do with electronic trade fulfilment (which is where you get to buy or sell automatically, by computer).
Your trades would still occur if there was a 10 second delay between posting your trade and it going through, but the HFT people could never work with that, as they trade hundreds of times a second.
Short selling.. it is a scam
Re:Urgh (Score:4, Informative)
The idea of a "naked" short doesn't really exist. You have a standing contract with your broker. You don't "create" shares when you sell short, you borrow them from your broker on margin. And, if your broker doesn't consider your position solid enough, they can demand you cover the short at any time.
Short selling has a stigma of negativity around it, but keep in mind that once a company issues stock, it makes little difference what actually happens to that stock on the short term (beyond those few investors who own enough of it to actually have a real voice in shareholder voting). Yes, a short position bets against a company - But that company doesn't win or lose either way. Neither does the lender of the stock you short. Short selling merely serves to increase liquidity of a security that would otherwise have remained uselessly tied up in someone else's portfolio.
Oh, and they still skim 10% off, and they're still old white guys in charge of the exchanges.
Do you have any idea what you talk about here? Who skims 10% off, and how? To give you an idea of the reality of the situation, I reallocated a sizeable chunk of my IRA two weeks ago. "They", including all aggregate parties who could possibly count as "them", skimmed a total of 0.0391% ($7 trade and $0.04 bid/ask spread) from the transaction. Wow, those evil old white bastards! It'll take me at least two hours of my average expected return to cover that!
Short selling is fine per se (Score:4, Interesting)
Short selling.. it is a scam especially 'naked' shots - where you bet on the price before you have the contracts in place.
Short selling is not a scam at all. In fact it is arguably very important to price discovery [wikipedia.org], providing a counterweight to excessive bullishness, ex-ante identification of asset bubbles and providing incentives to find fraud. Short selling in an of itself is just fine. That doesn't mean there aren't practical concerns that have to be addressed but the mere act of short selling certainly is not a scam.
Shorting is simply the act of selling something before you have bought it. Usually people buy something before they sell it but there is no fundamental reason it has to be done that way. In a short transaction you borrow the asset, sell it and then buy it back later and return it to the lender. The second order consequence of selling before you buy is that you tend to do it when you expect the price to fall because you want to sell high and buy low. Stock prices fall almost as often as they rise and there is no principled reason not to allow people to to bet on the directionality of stock prices. In fact when someone ends a long position, very often they are simply betting that the stock is going to fall. It's the same sale for the same reason, the only difference is that the buy occurred in the past instead of the future.
Now there are some practical issues that have to be addressed with short selling in order to have an orderly and reliable market. You are correct that an exchange whose procedures allow naked shorting to occur is asking for trouble because they can easily end up with a transaction that cannot be completed. It also opens a door to certain types of fraud. Naked short selling isn't illegal per-se because in some cases it isn't actually a problem but it's a type of transaction that tends to carry more risk than allowing it is worth.
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Nobody is claiming they are, just that the participants intend to make a quick buck.
Re:hmm, people out to make a quick buck (Score:5, Insightful)
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.
Re:hmm, people out to make a quick buck (Score:5, Interesting)
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.
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> 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
Because the above wasn't clear enough for some (Score:2)
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> 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
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I've traded some "thinly traded" shares in the past - this pretty much describes ALL options today...
Back in the 1990s, and even early 2000s, you could put out a "Bid" for 10,000 shares @ $1.00 per share max and frequently, you'd get a transaction that looked like:
5000 shares @ 0.95
3000 shares @ 0.97
2000 shares @ 1.00
That doesn't happen since HFT - now it's all 10,000 shares @ 1.00 - and since I pay fairly high commissions per transaction, I can't optimize my trade by making a bunch of small ones to match w
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If you have proof they can see the queue of pending orders and the ability to jump those orders in the queue, I would like to see it.
My understanding of HFT is that they have very fast access to the market book, and ability to place orders based on that information very quickly, but don't actually have access to the pending order queues or the ability to have their orders prioritised with in it.
The former is fully legal and expected out of an efficient trader, the second is probably illegal.
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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
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The house gets a cut to allow those with marked cards to play against the suckers without.
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The platoon player seems like it is becoming the next inefficiency to be exploited. You might have a guy that hits .220 against righties, but .312 against lefties. As long as you only put him in against lefties, he's going to be a .300 hitter.
Oh, wait ... my bad. Wrong thread.
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People are 3 things: greedy, lazy, and stupid. Those out for a quick buck on the *coin exchanges prove this point.
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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
But there's nothing wrong with Bitcoin! (Score:3)
It's the people, goddammit!
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Re:But there's nothing wrong with Bitcoin! (Score:5, Insightful)
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.
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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
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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.
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My poop is a limited resource. Only a small amount is produced per day and when I die there won;t be any more of it. Recent developments in the digital currency realm have caused a huge price increase- the going exchange for one day's production of my poop is now 200k BTC plus shipping and handling.
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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.
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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)
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.
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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?
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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
Not complicated (Score:3)
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.
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The corner pawnbroker is probably a bigger business. The corner gas station definitely is.
and both are more likely to well-managed and solvent,
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Basic Math (Score:2)
Re:Basic Math (Score:4, Insightful)
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.
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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
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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
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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.
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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
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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)
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.
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The exchanges dying is good for bitcoin, because the bad ones will be replaced by more solid and upright entities.
You hope.
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Track record this far is ... can I use enron as an adjective?
As in a debacle of Enronian proportions? (Score:3)
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
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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
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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
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Yes, setting up a wallet is really easy. Setting that wallet up in such a way that it doesn't get emptied by malware or lost due to hardware failures is a whole different ball game. That's not even touching on setting it all up so you can do all that while still having the ability to pay for things with bitcoins when your not at your computer.
Keeping a private Bitcoin wallet is exactly like keeping your cash under the mattress in terms of risk, and it's simultaneously less portable. Bitcoin proponents think
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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.
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Dogecoin is different - its not a speculative 'currency' like Bitcoin wants to be.
Dogecoin knows this should not be taken too seriously, it also is an inflationary-based coin, ie you can always mine motre, so anyone who is hoarding coins will find their value falling over time (see bitcoin which was designed to become more expensive over time which encourages hoarding), and as a result means Dogecoins are meant to be spent.
So Dogecoin is the only true virtual currency as they are really used for simply, tiny transactions (eg reddits tip jar). Others like BC are corrupted by people thinking they can make a quick buck, or like NorrisCoin, run by scammers hoping to be top of a ponzi pyramid.
Actually, Dogecoin is still deflationary, just not as bad as all the rest. There are 100M Dogecoin in the first batch and ~5M/year afterwards. Since the number is fixed, the inflation rate goes down- it's 5% the first year, but only 2.5% 20 years from now. The world's GDP growth is running about 3%, so assuming that's constant (yeah, yeah) Dogecoin will turn deflationary in about 15 years and accelerate after that.
Currency vs. bank (Score:2)
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
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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
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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
Mix drinks, not metaphors... (Score:5, Insightful)
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.
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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
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Eh? I was drinking with the executive director of the Foundation and routinely work with Gavin, who is maintainer of the core software. I guess they are the closest you're going to get to "developers and leaders" by your description. Obviously they're concerned about all this. But the alternatives aren't there yet. One Bitcoin developer, Gregory Maxwell, has proposed protocols that allow exchanges to prove solvency - but they're complex and of course, do not address the root problem that large piles of coi
An exchange should never lose money. (Score:2)
No one should be able
In days of yore... (Score:2)
The Exchanges Aren't Cryptocurrency (Score:5, Interesting)
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.
The cost of an unregulated currency (Score:2)
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)
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No! Buy my poop! I make a limited quantity per day and when I die there won't be any more of my brand. It is scarce and will become even more so in time. My poop is worth more than your nothing! You can fertilize plants with my poop! You can play nasty pranks with my poop! You can collect it and exchange it with others! What can your nothing do?
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*Ok, unlike bitcoin gold does have some industrial applications(monster cables notwithstanding), but most people use gold much like they use bitcoin. Maybe if they could make bitcoin bling....
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Westerners are selling gold to Indians and Chinese because many of those people have no banks nor insurance policies for breadwinners; in this context, gold or silver in jewelry form has been a traditional source of security as well as bodily adornment.
In much of Asia, Africa, South America and the Caribbean, it is the custom for one to have gold tooth crowns to be sure to be able to pay for one's own burial.
It can be said, based on population figures, that the total world demand for jewelry/investment gold
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So, basically the same as stock exchanges and future markets.
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So, basically the same as stock exchanges and future markets.
Not really.
Yes, if you buy Bitcoins and then the price goes down you lose money, just like with stocks and futures. However, most of loses with Bitcoin has not been from normal trading activity. Almost all of the losses have been from the Bitcoin exchanges stealing people's money. That's very rare with stocks and futures due to regulation specifically designed to prevent that sort of thing. I'm not saying it never happens, but it's rare.
Re:Ponzi scheme (Score:4, Informative)
Copied and pasted from the Bitcoin FAQ, since the site seems to be broken at the moment:
Is Bitcoin a Ponzi scheme?
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.
A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters, and indeed, society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.
The fact that early adopters benefit more doesn't alone make anything a Ponzi scheme. All good investments in successful companies have this quality.
That's a biased source (Score:2)
Personally I see it as a scam baited for geek - deliberately preying on people like us and those we work with. However I'm biased just as a sheepdog being asked about wolves would be biased.
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I've been directed to that Wikipedia article many times, and the way it describes a Ponzi scheme as working just doesn't match up with how Bitcoin works.
Bitcoin is a payment network. To make a payment, you buy some bitcoins on an exchange, then you send them to someone, who sells them on an exchange. At the end of that, you've paid your $x and the other guy has his $x.
The Wikipedia article on Ponzi schemes describes them as being fraudulent investment operations. Payments in Bitcoin don't involve making inv
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Yes.
You keep on popping up here a lot to recruit more marks with the same old stale sales pitch linking to a biased site and misdirection instead of answering questions so there probably isn't much new blood for you to take advantage of.
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and exactly what is stable about bit coin? Certainly not it's value, and that one fact makes it almost useless as a currency today.
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Not if it's not wrong -- and nobody who has ever said that to me has been able to explain why it was wrong.
Maybe you'll be the first. Can you explain why that FAQ entry is wrong, and explain what it is about Bitcoin that makes it a Ponzi scheme?
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Late adopters, and indeed, society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.
It depends on this sentence being true and so far it does not seem stable nor widely accepted.
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Late adopters, and indeed, society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.
It depends on this sentence being true and so far it does not seem stable nor widely accepted.
interestingly it actually fails all its own tests. It isn't stable, certainly isn't fast or inexpensive and it most definitely isn't widely accepted. and assuming the early people will benefit from rise in value sounds dangerously close to being a Ponzi, the only thing saving them from being one is they aren't making a guarantee on the rise.
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It's actually just about stable enough, but okay... if I make an investment in a company and the company hasn't become successful yet, was I scammed? Personally, I don't think the answer to this question is "it hasn't made me money so far, so yes" -- I think the answer depends more on whether the company was scamming me or not, and just because a particular investment hasn't been profitable so far isn't enough to make it a scam. In fact, even if the investment never becomes profitable, it doesn't necessaril
Re:Ponzi scheme (Score:4, Interesting)
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.
So they're not promising anything, therefore they can't break their promises. This does not affect anything about how the scheme actually works.
A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters, and indeed, society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.
This assumes that the "usefulness" actually exists and is beneficial. So far, Bitcoin hasn't been stable, fast, or widely-accepted, so the win-win scenario they propose isn't actually possible. I can just as easily say that by everyone giving me all of their money, society will benefit because I will donate everybody's money all at once to a charity, reducing the charity's overhead costs.
The fact that early adopters benefit more doesn't alone make anything a Ponzi scheme. All good investments in successful companies have this quality.
This is true, because the FAQ writer doesn't seem to understand what a Ponzi scheme is in the first place. In a Ponzi scheme, the investment capital of latecomers is used to pay the returns of the early investors.
When you invest in a company, your money is pooled with everyone else's to run the company. The company also has a pool of profit, which is often split proportionally for dividends. You can also get a return by selling your stake in the company to someone else who wants to be involved. At no point are investments used to pay out returns to earlier shareholders.
Bitcoin as a whole fits the Ponzi scheme pattern, because at the exchanges the money used to pay off the early miners comes directly from people now buying coins. Since the Bitcoin market is so much smaller than the price of the Bitcoin supply, the main mechanism that external value comes into the Bitcoin economy is by investors trying to get into the scheme for its high (not-guaranteed) returns.
The only real distinction between a Ponzi scheme and Bitcoin is that Bitcoin has no single master, that we know of. Ponzi schemes usually have a single person or small group promoting the investment. Bitcoin doesn't have any organized leadership, but rather relies on the self-sustaining marketing buzz of zealots. That makes it a better fit for an economic bubble, rather than an actual Ponzi scheme.
Re:Ponzi scheme (Score:5, Insightful)
There is another significant distinction between Bitcoin and a Ponzi scheme. In a Ponzi scheme, you put money into it with the expectation of getting more money out than you put in. In Bitcoin, you don't do this -- or rather, nothing in Bitcoin will tell you that you can.
If you can point to the bit of Bitcoin that attempts to give you this expectation, then great: please do so. However, please don't point at a person pulling a scam involving Bitcoin -- that would be like pointing to Charles Ponzi to explain why the US dollar is a scam. Similarly, please don't point to all the speculators: they are essentially the same thing as Wall Street day traders, and they don't make the US dollar a scam either.
Bitcoin is a payment network. To make a payment using Bitcoin, you buy some bitcoins on an exchange, then you send them to the seller, who sells them on an exchange. Where is the scam in all this? You paid your $x, the seller got his $x. That's not a scam, that's mission accomplished.
Re:Ponzi scheme (Score:5, Insightful)
Bitcoin is a payment network. To make a payment using Bitcoin, you buy some bitcoins on an exchange, then you send them to the seller, who sells them on an exchange. Where is the scam in all this? You paid your $x, the seller got his $x. That's not a scam, that's mission accomplished.
Not really. A viable payment system lets you get real money in exchange for something; with Bitcoin there is no assurance you will be able to get anything beyond some bits and bytes. You are at the mercy of the exchange and if they don't have the cash you don't get paid. One huge red flag is the seeming arbitrage opportunities with Bitcoin process varying exchgane to exchange. If Bitcoin were a viable transaction system those opportunities would disappear as people took advantage of the free money. That they don't says a lot about the liquidity, or rather lack of it, in the Bitcoin market. A currency that is touted as being easy to use for transactions anywhere with no transaction costs would quickly erase any arbitrage if it really was that easy to buy and sell.
All this noise about Ponzi Scheme: Yes or No? masks the real issues with Bitcoin. It is an illiquid, volatile commodity that lacks any assurance you will ever be able to get real money for it; as a result almost no one really takes Bitcoin, they simply let you "Pay" in Bitcoin by assuring they can immediately convert them to real money. While that may work for a handful of deals the lack of liquidity makes them unusable as a real payment system to take on PayPal or other electronic payment systems. Unlike Paypal, which mostly just moves money for a fee or holds it in a form that is easily turned back to cash as needed; Bitcoin "exchanges" take short positions that they can't cover since they lack the cash reserves to payout all the withdrawals.
As a result, Bitcoin became a nice place for speculators and people who are hoping to cash in on the "next big thing" and now the bubble is starting to burst. I wouldn't say it is a scam as much as one more chapter in the mass hysteria of crowds.
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Late entrants provide them the money and in so doing lose theirs. ... I suggest getting out of Bitcoin now.
See, this is a misconception that I've been trying to correct in this thread. You don't "get into Bitcoin" by buying up a bunch of bitcoin and sitting on it. You don't "get out of Bitcoin" by selling a bunch of bitcoin that you've been sitting on.
Bitcoin is a payment network. You use it to make payments. You don't buy bitcoin and sit on it; you buy it and then immediately send it to the person you're paying. They then sell it to convert it to whatever their normal currency is. I attempted to explain this in
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Classifying something as a Ponzi scheme, usually involves outright fraud. ie someone is claiming that there is a huge pile of cash somewhere that doesn't actually exist.
There may be individuals committing fraud using bitcoin. And bitcoin may be a speculative asset bubble with very similar outcomes to a Ponzi scheme. But it isn't *technically* a Ponzi scheme.
Re: Ponzi scheme (Score:5, Interesting)
Precisely. The BitBelievers cannot actually defend (and in most cases I am finding, don't actually understand it enough to be able to do so), so they mire down in semantics trying to talk about everything but the facts of the matter.
Just the fact that a pro-BitCoin site has that question up as a FAQ is pretty telling on its own, written with slick marketing tricks, to boot.
I guess we need to start being ultra-specific for the BitBelievers. It is a Ponzi-like scheme. Broken down to its fundamentals, ignored in that FAQ question, a Ponzi scheme is generally understood to be a money making venture that is wholly dependent on new folks coming into the scheme in order to continue to fund the upper levels. If folks stop buying into the bottom, then things dry out all the way back up the chain until it fails.
That is precisely how BitCoin operates. It's just a new twist on it because it masquerades as a currency. Instead of trying to convince you that you are buying into something, it is quite up front about the fact that it's based on nothing. If folks stop bringing in legal currency to the BitCoin system by using it to purchase BitCoins, BitCoins become worthless. While the BitBelievers insist that it can be spent quite readily, it's a joke and everyone knows it - one can spend a dollar at literally millions of places, you can spend BitCoin directly at what, a few hundred? Maybe a thousand? The BitBelievers will then tell you about BitCoin ATMs, which, again, ignores the fact that when you use a BitCoin ATM, you are using it to pull legal tender out in order to be spent. It's worthless if one cannot turn it into legal tender (one way or another).
That's what makes it a Ponzi-like scheme, because if no one continued to exchange legal tender for BitCoin for people who have BitCoin, they have no intrinsic value on their own. It's based on nothingness. That's why that FAQ is so disingenuous - if people stopped trading Apple stock tomorrow, Apple stock is still worth money because people still buy Apple products. You would be stuck with the stock itself but you would collect dividends based on the performance of the company and the percentage of profit you get as a stockholder. BitCoin's only product is itself, and is wholly dependent on the willingness of people to give someone legal tender for the right to own a virtual property. Since BitCoin doesn't produce income aside from more people buying into the scheme, they can wrap it up any way you like, but it's still based on nothingness.
Just look at the curt, pithy replies from BitBelievers - they know this train has gone off the rails, so that's really all they can say. With MtGox they proclaimed that it was just a poorly run business, and their talking points (I swear they must distribute them like Fox News does) were "it hadn't been the go to exchange for quite some time". Now that another one has fallen into insolvency, and another domino has hit the table, it's already becoming harder to defend, hence the growth of childish retorts because it's getting increasingly difficult to deny that the motion behind the fall of MtGox wasn't the start of the domino chain falling, but an isolated incident.
Now it's clear that MtGox may have been the first to go because indeed it was run poorly, but that it didn't fall solely because of how poorly it was run as the BitBelievers would like to think.
I'll be very curious how history looks at this very strange episode - in some ways, it's quite predictable that something like this would happen as it's happened over and over throughout human history (if prostitution is the oldest profession, parting a fool from their money must run a close second), but on the other hand things like this usually target the weak, the old, the infirm, those who are easy prey. In this case, a lot of very educated, erudite folks were taken in - I guess that will just go to show that the lure of a quick buck is more deeply imb
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Just the fact that a pro-BitCoin site has that question up as a FAQ is pretty telling on its own, written with slick marketing tricks, to boot.
What it is telling about is that there are legions of numbnuts running aronud yelling "pozi scheme!!111one!1oneONEleven omglol" without having the faintest idea abut what a ponzi scheme is or what bitcoin is.
What your describing adequately describes not a ponzi scheme, but more or less anything tradable (i.e. anything). Even with gold, if people lose interest and sto
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Amway will tell you Amway isn't a pyramid scheme, too. It's "multi level marketing".
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Do you really think there's no value in being able to move money around? To make payments to people who aren't in the same room as you?
If so, then I disagree; I believe that's useful. A lot of people use services to make payments online, so I don't think popular opinion is with you either.
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Do you really think there's no value in being able to move money around? To make payments to people who aren't in the same room as you?
If so, then I disagree; I believe that's useful. A lot of people use services to make payments online, so I don't think popular opinion is with you either.
and what does bitcoin add that isn't already possible with the existing system? I can do all of that without bitcoins, don't get me wrong I see plenty wrong with the existing monetary systems and the way they are manipulated, but bitcoin adds absolutely nothing while taking away plenty of the benefits and safeguards.
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It's decentralized. There's no controlling entity that can tell you who you can or cannot pay.
Another thing it allows you to do is change which company you use for payments, and yet still make payments to all the same people you could before. If you want to buy something from somebody that uses Paypal to take payments, then you're kinda stuck with using Paypal. With a Bitcoin-based system, you could pay them via a different company.
This is like asking "what's the point of SMTP when we have Gmail?"
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The general population won't interact with the bitcoin network at all. They'll make and receive payments via payment processors.
People will have the same protection from being screwed over by those payment processors as they currently do being screwed over by Paypal. (As I understand it, that's actually not very much protection at all... yet people still use Paypal.)
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Are you attempting to claim that Bitcoin is a scam because there are people pulling scams with it? (In so much as "gambling on something with a volatile price" is a scam.) This is like arguing that US dollars are a scam because Charles Ponzi pulled his eponymous scam using them.
Bitcoins can actually be of any value and Bitcoin will still function just fine. The price is completely irrelevant, which means it doesn't matter if there's hype, speculation or whatever driving the price up (or down). Your $10 tran
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If you said "real money" to mean bank notes or coins: yes, except not really. Giving some notes to somebody on another continent is an expensive business that involves flying over to them. I guess you could mail them through the post, but I don't see many people doing that.
Yeah, you're right, people don't have bitcoins and don't know what they are. That's how things should work; most people won't interact with bitcoins themselves, they'll do so via payment processors. For instance, these guys [bitpay.com] will take paym
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Except in China... it's not just BTC exchanges... banking not so safe [cnbc.com]; it's normal banks [bangkokpost.com] defaulting on their loans, too.
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Could someone explain why people put bitcoins in an exchange? I mean isn't the point of bitcoin that you have a copy of the blockchain on your own computer?
Why do people open an account with a stock broker? You're saying to someone "I want to buy (or sell) X, go find me someone who has X to sell (or who wants to buy it)". The whole point of an exchange, whether it's stocks or Bitcoins, is to do the work of finding buyers and sellers so you don't have to.
And it works reasonably well if the exchanges are honest (or forced to be honest by regulations). Bitcoin exchanges are not regulated in any way so they attract people who are specifically looking to rip you