Bruce Wagner and the Bitcoin Scam
September 1, 2011 1:37 PM Subscribe

Has Bruce Wagner pulled off a massive scam on the bitcoin community? Bruce Wagner was for a time the public face of the new electronic currency. He was the go-to guy for journalists looking for insight into bitcoin. He even began running his own online TV network which attracted multiple sponsors. Now, things have begun to unravel for Wagner. MyBitcoin was a bitcoin bank Wagner had heavily promoted on his shows. One day, it vanished from the Internet. When it returned, MyBitcoin claimed to have been hacked and that it was only able to refund 49% of deposits. Wagner's early promotion and history of involvement in equity stripping mortgage scams has led to suspicion that he is somehow involved in MyBitcoin, despite claiming to be one of the biggest victims.

Angry posters on the bitcoin forums Wagner frequents have begun to spread even worse rumors about Wagner's past.

The viability of the currency itself remains in question as it has never matched the all time highs achieved during the bitcoin media blitz. The exchanges such as Mt.Gox which handle converting bitcoins into real money have faced repeated security challenges which have left the bitcoin market in chaos.

Criminal uses for the anonymous currency may save it, but for now it has lost one of its best spokesmen.

(via Reddit and SomethingAwful)

posted by furiousxgeorge (437 comments total) 16 users marked this as a favorite

Not really surprising. The entire BitCoin thing sounded like a scam in the first place, so if you felt putting your money into imaginary gold was safe then you pretty-much deserved to lose it. I'm sure we wouldn't get the same type/level of horror if everyone that's sunk money into WoW characters and items suddenly lost them.

what's the saying? pig..poke... you get the idea.
posted by zombieApoc at 1:50 PM on September 1, 2011 [3 favorites]

Only in the world of bitcoin would getting back 49% of your assets lead to more trust. On the other hand, the entire project has provided an entire summer of entertainment as the value of a bitcoin continues to decline.
posted by fifteen schnitzengruben is my limit at 1:52 PM on September 1, 2011

*shocked face*
posted by symbioid at 1:54 PM on September 1, 2011 [1 favorite]

BitCoin is like something out of an especially silly paragraph from a Steve Aylett novel. I can't wait for it to fail, further and even more, in even more spectacular ways.
posted by Sticherbeast at 1:59 PM on September 1, 2011 [1 favorite]

That's pretty convincing, symbioid.

*nods convincingly*
posted by jabberjaw at 1:59 PM on September 1, 2011 [4 favorites]

I mean, I think BitCoin is pretty sketchy, but I can't understand why it inspires so much gleeful hate.
posted by vogon_poet at 2:03 PM on September 1, 2011 [2 favorites]

For those of us not familiar with Bitcoin, I just found that The Economist has a good article about "the world's first decentralized digital currency."
posted by ericb at 2:07 PM on September 1, 2011 [5 favorites]

I mean, I think BitCoin is pretty sketchy, but I can't understand why it inspires so much gleeful hate.

Because it's the financial equivalent of "Ow! My Balls".
posted by Sticherbeast at 2:07 PM on September 1, 2011 [42 favorites]

I mean, I think BitCoin is pretty sketchy, but I can't understand why it inspires so much gleeful hate.

As a concept it's pretty damn neat. The backlash is directed more at the libertarian craziness that has grown around it and the potential money laundering and scamming that has been enabled by treating it as a legitimate investment opportunity.

CNN: Oates, 30, read about Bitcoins on a tech forum and asked his parents to invest with him two weeks ago. He converted about $2,000 and is letting it sit. He likes that the currency can't be forged, that each Bitcoin has a public transaction chain, and that "it encourages saving instead of spending."

Boy does that kind of paragraph set off my scam alarm.
posted by furiousxgeorge at 2:09 PM on September 1, 2011 [5 favorites]

The viability of the currency itself remains in question as it has never matched the all time highs achieved during the bitcoin media blitz.

Since it bubbled up to $30, the value of Bitcoin has remained in the range of $7-$13 for months now. It is unclear to me how this is evidence of its non-viability. I'm not saying it won't plunge tomorrow, I'm just saying that its recent stability is in its favor as a form of currency.
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 2:09 PM on September 1, 2011 [3 favorites]

Gleeful Hate is a bull market.
posted by It's Raining Florence Henderson at 2:09 PM on September 1, 2011 [8 favorites]

The BitCoin saga is an excellent demonstration that the government supported monetary system that fringe Libertarians rail against is helpful and necessary.
posted by chrchr at 2:09 PM on September 1, 2011 [8 favorites]

Somebody besides papal has to come up with something in this needspace. Bank of America just launched something? Not them either thanks. Did Google ever beta some financial transaction system?
posted by yesster at 2:10 PM on September 1, 2011

It's ironic that a "bank" existed at all for BitCoins, as the whole point of it is to get rid of the need for bankers, and their theft by inflation of our money.

Bitcoin is not anonymous, and every single transaction is recorded by all the clients, thus it is fairly trivial to track the "money" flows to and from a single address, present or past.

It would be interesting to see where all the coins went.
posted by MikeWarot at 2:13 PM on September 1, 2011

so if you felt putting your money into imaginary gold was safe then you pretty-much deserved to lose it.

A lot of people think putting their money in to real gold is safe too. But then I see those kiosks in the mall buying used gold and it's obvious that on-line scams are just mirrors of meatspace.
posted by three blind mice at 2:13 PM on September 1, 2011 [2 favorites]

I mean, I think BitCoin is pretty sketchy, but I can't understand why it inspires so much gleeful hate.

Because it's the product of a kind of idealism that ignores practical concerns. It's a kissing cousin of the "back to the gold standard!" nuttiness that feels that all we need to do is get back to first principles and everything will work fine. It's not just harmless eccentricity, it actually gets in the way of doing the hard work of finding real, workable solutions.
posted by fatbird at 2:15 PM on September 1, 2011 [17 favorites]

I mean, I think BitCoin is pretty sketchy, but I can't understand why it inspires so much gleeful hate.

It's attitudes like this in the Bitcoin community that inspires my gleeful hate.
posted by Jimbob at 2:15 PM on September 1, 2011 [34 favorites]

the value of Bitcoin has remained in the range of $7-$13 for months now.

Ahh yeah, good point. Does show it isn't that super an investment opportunity though.

Bitcoin is not anonymous, and every single transaction is recorded by all the clients, thus it is fairly trivial to track the "money" flows to and from a single address, present or past.

As I understand it, you can see what is happening at the address but unless you link that address to something in the real world you can stay anonymous. Something like, say, a bank or currency exchange.
posted by furiousxgeorge at 2:18 PM on September 1, 2011

It's attitudes like this in the Bitcoin community that inspires my gleeful hate.

Don't you get it? BitCoin is so revolutionary, Joey Dangerous had to get a pseudonym to publish these things so the man doesn't know who he is.
posted by griphus at 2:30 PM on September 1, 2011 [3 favorites]

It's a kissing cousin of the "back to the gold standard!" nuttiness

Really? I think the people who glommed on to it definitely fit that description, but the initial concept seemed to be the very opposite of a return to the Gold Standard.
posted by yerfatma at 2:32 PM on September 1, 2011

Not really. Bitcoin is designed to mimic the scarcity of gold, but digitally. This is done by making it progressively harder to create new Bitcoins as the amount in circulation increases. There's a hard upper limit of the amount of Bitcoin possible.
posted by wuwei at 2:42 PM on September 1, 2011 [3 favorites]

There's a hard upper limit of the amount of Bitcoin possible.

And this is what always confused me - say Bitcoin takes off, and gets extremely popular. If I recall, there are only a few tens-of-millions of Bitcoins able to be produced. Say 30 million people are in on it - that makes about one Bitcoin per person, say? The extreme deflation that would be involved makes it difficult to understand how it could possibly be viable...
posted by Jimbob at 2:46 PM on September 1, 2011

As if millions of geeks suddenly cried out in terror and were suddenly silenced...
posted by Thorzdad at 2:46 PM on September 1, 2011 [1 favorite]

It's attitudes like this in the Bitcoin community that inspires my gleeful hate.

This is like Poe's Law plus that optical illusion with the rabbit and the duck. Depending on how you look at it, it's either clearly satire or sincere and unbelievably stupid. And if you just stretch your brain a little bit you can make it shift back and forth at will.
posted by vogon_poet at 2:53 PM on September 1, 2011 [21 favorites]

Jimbob: "The extreme deflation that would be involved makes it difficult to understand how it could possibly be viable..."

I really don't know how this works, but apparently bitcoins are divisible down to 12 decimal places. So the liquidity part won't be a problem, leaving just the normal deflationary pressure of people losing their wallet and algorithmic design.
posted by pwnguin at 2:58 PM on September 1, 2011

This would be a good time for Neal Stephenson to revisit his story, "The Great Simoleon Caper."
posted by Halloween Jack at 3:27 PM on September 1, 2011 [3 favorites]

And if you just stretch your brain a little bit you can make it shift back and forth at will.

I will be heartbroken if Joey Dangerous isn't actually Tom Tomorrow.
posted by Horace Rumpole at 3:29 PM on September 1, 2011 [1 favorite]

Told you so.
posted by anigbrowl at 3:30 PM on September 1, 2011

the value of Bitcoin has remained in the range of $7-$13 for months now.

According to whom? Could you even offload ten thousand of these things and get cash for them if you wanted to? Last I checked, this wasn't the case.
posted by ODiV at 3:30 PM on September 1, 2011

MikeWarot : It's ironic that a "bank" existed at all for BitCoins

Agreed. On the one hand, BitCoins have an annoying "local" property, in the sense that you need access to your wallet file to do anything with them; so putting them into a convenient online repository makes a bit of sense. On the other, though... Exactly what you said. Their entire raison d'etre involves the fact that you don't need banks and governments to manage them or give them value.

furiousxgeorge : Does show it isn't that super an investment opportunity though.

They shouldn't count as a good "investment opportunity", any more than you keep USD or Euros as an "investment". They exist to use, not as a tool for speculating in virtual currency markets.

As I understand it, you can see what is happening at the address but unless you link that address to something in the real world you can stay anonymous. Something like, say, a bank or currency exchange.

The conceptual problem here comes from thinking of a BitCoin address as somehow belonging to or identifying an actual person. More accurately, an address works like a locker in a bus terminal^*. You grab the key, leave a note on a bulletin board saying simply "A-27", your trading partner drops a stack of $20s in the appropriate locker, and at any time in the future the possessor of that key can retrieve the funds.

More importantly, "that" address doesn't so much link back to you, as it links back to a specific transaction. You use a new address for every single transaction you make - I have a Gox account linked to Dwolla linked to a real live US bank account; and although Gox could identify my based on any of the addresses from which I've funded my account with BTC, those addresses may as well no longer exist, because you'll never see them appear in another transaction, ever.

* The kind where you put in your quarters, take out the key, and it locks the first time you open-and-close the locker after that.
posted by pla at 3:37 PM on September 1, 2011

Gee, this unregulated unpoliced currency has some fraud problems. Who'd have guessed? Part of the lulz here is MyBitcoin was the wallet that many people recommended you launder your BitCoins through to achieve anonymity.

How did Mt. Gox manage to recover from their fiasco in June? I'd think after being offline for days and demonstrating they had no contingency plan for problems, everyone would flee them in droves. But they're back to being the biggest exchange by far. The other markets are at most 20% of their volume, combined.
posted by Nelson at 3:37 PM on September 1, 2011

This would be a good time for Neal Stephenson to revisit his story, "The Great Simoleon Caper."

I like to imagine that in Neal Stephenson's universe, CryptoCredits actually did displace US dollars and lead to the collapse of nation-states into libertarian anarchy, but then computing power advanced and the CryptoCredits got cracked and we're left with the world of Snow Crash.
posted by vogon_poet at 3:43 PM on September 1, 2011 [2 favorites]

According to whom? Could you even offload ten thousand of these things and get cash for them if you wanted to? Last I checked, this wasn't the case.

You can use the exchanges but they have a withdraw limit and could disappear like MyBitcoin any day. You could also sell them direct to anyone who wanted to buy them, but that sounds like a recipe for getting scammed too.
posted by furiousxgeorge at 3:43 PM on September 1, 2011

Nelson, why wouldn't you trust Magic the Gathering Online Exchange with your money?
posted by furiousxgeorge at 3:44 PM on September 1, 2011 [3 favorites]

ODiV : Could you even offload ten thousand of these things and get cash for them if you wanted to? Last I checked, this wasn't the case.

Short answer - Yes. Gox currently has BTC20K in open bids, and USD240k in open asks; dumping 10k right this second would push the market down just a little over a dollar per BTC.

furiousxgeorge : You can use the exchanges but they have a withdraw limit and could disappear like MyBitcoin any day.

False. Gox has automatic withdrawal limits. You can manually arrange to withdraw as much as you want (kinda like how an ATM won't give you $80k in $20s, but you can close your entire USD-denominated bank account if you do it in person at your local branch).

As for vanishing... Yes, I suppose they could. But at 0.6% per trade, I'd call them complete idiots it they did so. Simple greedy self-interest tells me that until several major world governments outright outlaw BTC, Gox will do its damnedest to stay up and legit.
posted by pla at 3:52 PM on September 1, 2011

You can use the exchanges but they have a withdraw limit and could disappear like MyBitcoin any day. You could also sell them direct to anyone who wanted to buy them, but that sounds like a recipe for getting scammed too.
posted by furiousxgeorge at 3:43 PM on September 1 [+] [!]

There was also the Dwolla charge back scam that happened, where people bought thousands of bitcoins using credit cards, got the bitcoins into their wallets, and then had the credit card companies refund them the money they paid for the coins. Because there's few ways to get the coins back after that, Dwolla ended up getting hosed pretty hard.

(I may be getting my facts wrong, and I can't tell if TradeHill, the other bitcoin exchange, was the one getting hosed by Dwolla, but the concept is the same.)

People (read: Something Awful) are speculating that Bruce has his hands in this one too.
posted by gc at 3:52 PM on September 1, 2011 [1 favorite]

furiousxgeorge : Nelson, why wouldn't you trust Magic the Gathering Online Exchange with your money?

Unintentionally true. "Magic the Gathering Online Exchange" has a longer history of doing right by their users than a good number of FDIC-insured banks.

gc : There was also the Dwolla charge back scam that happened, where people bought thousands of bitcoins using credit cards, got the bitcoins into their wallets, and then had the credit card companies refund them the money they paid for the coins.

You've just described why Gox doesn't accept PayPal transactions. Dwolla doesn't accept credit cards.
posted by pla at 3:58 PM on September 1, 2011 [2 favorites]

Reading that rumors thread made me feel like I made a wrong turn into a weird alley on the Internet.

Virtual currencies, international (child) prostitution, mortgage fraud, wild accusations, wilder defenses, and computer hacking all stirred into one weird pot.
posted by smitt at 3:58 PM on September 1, 2011

Unintentionally true. "Magic the Gathering Online Exchange" has a longer history of doing right by their users than a good number of FDIC-insured banks.

And a not so great record of getting hacked into the ground. I'll stick with the FDIC. :P
posted by furiousxgeorge at 4:03 PM on September 1, 2011 [2 favorites]

Nelson, why wouldn't you trust Magic the Gathering Online Exchange with your money?

Because then the girls of Gawker won't date me.
posted by klangklangston at 4:04 PM on September 1, 2011 [14 favorites]

Can anyone point me to mtgox's T&C? I can't find any useful information on their site.
posted by ODiV at 4:06 PM on September 1, 2011

BitCoin, to me, seems like a pyramid scheme without a pyramid. Like a flat line scheme. I don't get how it's different from people just going "Hey, this made-up thing is now money!"

Of course, real currency works from people just going "Hey, this made-up thing is now money!" also. Which makes me not understand money at all.

That's pretty much exactly it. Money is magic: the fact that you can exchange bits of paper at the store for food and other valuables should not be possible. It makes no sense. And yet the power of belief makes it so.

If you think of BitCoin as digital cash, and then try to imagine engineering a system to anonymously exchange regular paper cash money, a lot of the problems and scams become obvious. But since the math is good (even skeptics generally acknowledge this), I think BitCoin will stay around as long as people have reasons to use it. Whether that will be the case is questionable, especially if people keep getting scammed and legitimate businesses don't start accepting it.
posted by vogon_poet at 4:09 PM on September 1, 2011 [2 favorites]

so if you felt putting your money into imaginary gold was safe then you pretty-much deserved to lose it.

All gold is basically imaginary gold in that sense, though; there's no inherent reason for it to be our medium of exchange (or the medium of exchange that our current medium of exchange is based on) other than it's pretty and doesn't rust. Which is why we can use paper to represent it just as well. And nowadays, it's electronic representations of paper representations of gold. Money's just a game we've all agreed to play because it makes it easier to exchange goods. A game enforced and protected by people with guns.

Bitcoin had no guns, and so got bumped out of the game.
posted by emjaybee at 4:16 PM on September 1, 2011

Bruce Wagner is going to be shocked when he checks his Whuffie balance.
posted by vidur at 4:23 PM on September 1, 2011 [2 favorites]

If these guys had read Graeber's book they would know: FIRST you have debts. LATER you have money.

Obviously you first have to exchange goods like chunks of codes and files with music and videos and so forth and then after you have a bunch of people owing some nebulous quantity of goods that needs to get quantified so that we can keep on keeping track and exchanging goods money will naturally mystically follow on!

Also I read a fantastic thing a couple weeks ago about a guy buying dope off a website called Silk Road with bitcoins.

But: what I really want to know is when the assassination market for $slimey_politician gets going and we can all catapault into internet libertopia.
posted by bukvich at 4:24 PM on September 1, 2011

emjaybee : Bitcoin had no guns, and so got bumped out of the game.

Strange assertion to make about a purely imaginary currency that trades at 800% of par with the USD. ;)
posted by pla at 4:27 PM on September 1, 2011

I'm gonna create a new currency named KiloBitcoins. It's gonna trade at 800,000% of par with the USD!
posted by Nelson at 4:37 PM on September 1, 2011

There's already a BitCoin replacement - SolidCoin!

And don't worry - I'm sure you can trust them since their website claims MyBitcoin lost over 1.5 trillion dollars!
posted by edd at 4:43 PM on September 1, 2011 [2 favorites]

You may have noticed my Something Awful link in the FPP isn't working now, allow me to explain.
posted by furiousxgeorge at 4:48 PM on September 1, 2011 [3 favorites]

What's my incentive to report a security hole in Bitcoin? I can just print my own money or take it. I mean theoretically.
posted by humanfont at 4:54 PM on September 1, 2011

You may have noticed my Something Awful link in the FPP isn't working now, allow me to explain.
posted by furiousxgeorge at 4:48 PM on September 1 [+] [!]

Damnit! I've been following this thread for months! Literally since the last MeFi bitcoin thread. Why did the Masons do this to me, George?! Why?
posted by gc at 4:58 PM on September 1, 2011

The Freemasons.../facepalm
posted by Xoebe at 5:01 PM on September 1, 2011 [1 favorite]

furiousxgeorge : And a not so great record of getting hacked into the ground. I'll stick with the FDIC.

You realize, of course, that digital "bank robberies" cost the US BILLIONS of dollars each year, and they don't even flinch but merely write that off as the cost of doing business?

Nelson : I'm gonna create a new currency named KiloBitcoins. It's gonna trade at 800,000% of par with the USD!

Okay... Care to elaborate on how you plan to get anyone to accept those in trade for USD?

Saying that "imaginary" BTC trade at 800% of equally-"imaginary" USD doesn't just mean someone made up a number and published it. It describes the center of the current bid/ask spread , meaning that you can actually trade tens of thousands of BTC or hundreds of thousands of USD for each other.

Make no mistake, I don't defend BitCoin here because I particularly care about it (though the anarchist in me would like to see it succeed), but rather, because as both a user and a coder, I find it tiresome to read the same already-refuted complaints of people who clearly have no clue bashing it. It has its flaws, make no mistake. You, however, couldn't pick them out of a lineup. Don't mock what you clearly don't understand.

humanfont : What's my incentive to report a security hole in Bitcoin? I can just print my own money or take it. I mean theoretically.

The same as your incentive to report a security hole in the US economy. If you can make trillions of dollars, the act of doing so would raise the price of a loaf of bread into the billions. You may destroy everyone else, but at your own expense (and you'd best pray that no one ever discovers that you personally destroyed them, or death will sound like a nice alternative).
posted by pla at 5:04 PM on September 1, 2011 [1 favorite]

You can think of bitcoin, paypal, even the U.S. dollar as communications protocols. There are various levels of protocol, and, with some looking at it you can see why bitcoin is at best more anonymous paypal, and at worst, ripe for scamming. Bitcoin really appeals to the hardcore, I-can't-handle-relationships-with-others type of libertarians. Also, you can think of the basic level protocols as something you have to have if you want to do business in a certain ring-fenced economic zone (physical or otherwise).

The U.S. dollar, yen and euro are all low level payment protocols, we can think of them as fundamental communications protocols. In fact, the USD and JPY are basic protocols because they are not based on anything other than the taxing authority of the respective governments of the US and Japan. The euro is a little different because although it is based on the taxing authority of the respective EU member states, since the EU government passes its taxes collected on to the members states. A currency such as the HK dollar is actually not a fundamental protocol because its value is pegged against other protocols.

One step higher than the dollar, yen, and euro are the various transfer services such as Paypal or the credit card systems. For example, Visa, Mastercard and AmEx all maintain private, closed networks over which participants can transfer money in the lower level protocols of national currencies, or the pegged currencies. But none of those systems create their own currency, they're just a conduit for others.

Bitcoin is trying to become a fundamental payment protocol, in that they are creating their own currency units. Also, WoW gold is a fundamental payment protocol-- its value isn't based/pegged against another item. Realistically you can think of WoW gold as a low level protocol like the US dollar because it is necessary to get it if you want to play WoW, just like dollars are necessary if you want to play in the USA.

Now, okay, you can look at these protocols as necessary to play in a particular economic zone, i.e. the U.S., Europe, etc. You need HKD if you want to play in HK, but the _value_of the HKD isn't set by the number of people that want to play in HK, as much as it is set against the peg which is maintained by the HK government currency organization.

Bitcoin is trying to derive its value from scarcity, and, since its introduction there is now a "Bitcoin bloc" , i.e. a group of people that are doing business in Bitcoin. So let's say the Bitcoin bloc keeps growing. Great, no problems. Logically, however, since the Bitcoin has finite value, someone or someones will realize that they can, in one way or the other "corner the market" on Bitcoin. When that happens, it will be similar to what happens in online games like WoW when a few players control all the currency units. Namely, those players will be able to dictate to others what happens. Of course there is no accountability under this system-- technically it's "the market", i.e. the universal God, that's supposed to prevent this but in practice I have my doubts. Technically a community-backed currency (like the USD or WoW gold) has ways to deal with the situation where one small group monopolizes all the currency-- but Bitcoin, by design, lacks this.

Someone is going to say "look fuck you wuwei, governments aren't even accountable to their people so what difference does it make." I'll agree that a lot of national governments have accountability issues (mine sure does) but the difference is in the idea of a common good. The idea of government is to have a common good that binds everyone inside of the economically and geographically bordered community. When you don't have that, ultimately, you end up with the kind of dispersed society that is the default for humanity-- clan behavior, and one level up from there, fictional kinship. Fictional kinship can come from organizations that try to create family bonds between the members, things like guilds, organized crime 'families,' and religions. We've got a whole lot of people in the United States who don't even believe in the collective good anymore, they don't think such a thing exists, mostly because they don't want to have to live in the same community with people who look different.

As I wrote previously, that is the kind of world that the Bitcoin libertarians, who love John Locke, Ayn Rand and "freedom" can't handle, because it's a world where no one gives a shit about abstract rights-- it's all about personal relationships, blood debts and honor. Even WoW gold is connected to a community of people who come together to play a video game and blow off some steam, but Bitcoin isn't. Bitcoin is all about shitting on the idea of a community and living in some minarchist fantasy land where you, your immediate family and some AR15s are the MOTHERFUCKING SOLE SOVEREIGN over your immediate surroundings, living well off your TOTALLY AWESOME L33T SK1LLZ and learning how to microfabricate everything you need to live and trading with other awesome microfabricators who also have l33t sk1lllz and open carry their cocked and locked 1911s everywhere. But there's a little problem with this. Stuff like precision medical supplies definitely need a large degree of cooperation, process, control long lead times and surprise, regulation, otherwise they don't tend to work.

Memo to the Bitcoin guys: you can build a community that has some cool microfabricated steam engines and open source software. But the first time your grandma need a pacemaker, or blood pressure pills and dies, and when your neighbors decide to just use squatholes for shitters and there's a cholera outbreak which leads to your clan leader finding out about that girl you like from the Smith clan, which your clan hates and clan integrity is the only thing protecting you from a cruel world, and the only person who would have spoken up from you was your grandmother, and then the boiler of that micro-fab steam engine you built that didn't need those commie government regulations explodes and kills half your clan members, and that cute girl, and then your clan leaders excommunicate you and put your sorry ass naked out in the street, bleeding, with a latent head trauma that only an MRI could diagnose and only a neurosurgeon in a sterile ER could fix, then you'll miss the common good. Right before you bleed out.

But it'll be too late because you and your fellow traveller community-haters will have destroyed everything that made it possible, including the idea of a common good.

So, rather than continuing to destroy the social fabric of America, I'd prefer that you all get the fuck out now. Thanks.
posted by wuwei at 5:07 PM on September 1, 2011 [73 favorites]

You realize, of course, that digital "bank robberies" cost the US BILLIONS of dollars each year, and they don't even flinch but merely write that off as the cost of doing business?

The difference with MtGox is that it's impossible to tell if they can actually afford to write anything off and the government won't help the customers if they can't.
posted by furiousxgeorge at 5:24 PM on September 1, 2011

Edit:
The euro is a little different because although it is based on the taxing authority of the respective EU member states, the EU government passes its taxes collected on to the members states ,and the member states can't create euros, only the European Central Bank can do that. A currency such as the HK dollar is actually not a fundamental protocol because its value is pegged against other protocols.
posted by wuwei at 5:28 PM on September 1, 2011

Not really surprising. The entire BitCoin thing sounded like a scam in the first place

It's possible that MyBitcoin.com was a scam, but there's nothing wrong with the underlying system itself. The problem is essentially that people built systems on top of the bitcoin system that were really just personal projects to work with a toy currency. MyBitcoin apparently started in 2009 or something, when bitcoin was hardly worth anything.

So you end up with systems that didn't need to be secure suddenly holding upwards of hundreds of millions of dollars worth of digital files, that could be easily transferred.

But it's interesting how many people say "Bitcoin is a scam!" without any explanation other then that it "sounds like one!" The underlying system is pretty complicated. But if you can understand hashing and digital signatures as black boxes you should be able to make sense of it. There's no practical way to 'hack' the underlying system.

The problem with MtGox and MyBitcoin is that people tried to make things easier by routing around the built in security. That's always a risk with security systems. It's like using the same password everywhere. It makes your life easier, but it also makes you more vulnerable.

If there was something wrong with the technology, why would the price still be so stable? Wouldn't someone have figured out how to hack it by now?

The BitCoin saga is an excellent demonstration that the government supported monetary system that fringe Libertarians rail against is helpful and necessary.

Far more money has been stolen in real currency since bitcoin has been around. A few months ago people lose real money to hackers from time to time as well.

Huang immediately denounced the charges as unauthorized and fraudulent. The bank was subsequently able to stop payment on the second draft for $99,100, but the other $50,000 already had been paid to the Croatian bank and the money had been withdrawn. When Bao asked for the money back, Bank of America told him the missing $50,000 wasn’t their problem.

I've heard of even larger thefts done the same way. The FDIC protects individuals, but that doesn't apply to company accounts.

It's important to point out that all the hacks have involved third parties It's like if you buy gold online and leave it in the care of some anonymous third party to keep in their vault. Then one day the website disappears. That doesn't mean that gold itself isn't a valid way of storing value.

A lot of the critics don't seem to understand how the system works at all.

And this is what always confused me - say Bitcoin takes off, and gets extremely popular. If I recall, there are only a few tens-of-millions of Bitcoins able to be produced. Say 30 million people are in on it - that makes about one Bitcoin per person, say? The extreme deflation that would be involved makes it difficult to understand how it could possibly be viable...

Bitcoins can be divided up to 10^-8 or so. There are actually trillions of indivisible units. Mostly people who use bitcoin denominate things in dollars anyway, rather then a fixed price in bitcoins.

---

I agree that libertarian morons who seem attracted to bitcoin is annoying. But you don't need to buy into their ideals in order to use the system.

According to whom? Could you even offload ten thousand of these things and get cash for them if you wanted to? Last I checked, this wasn't the case.

Daily volume on MtGox is in the tens of thousands per day, so yes you can sell that many if you want too. It might be enough to move the market though. But tens of thousands of coins are bought and sold every day.

How did Mt. Gox manage to recover from their fiasco in June? I'd think after being offline for days and demonstrating they had no contingency plan for problems

People got their money back.

There was also the Dwolla charge back scam that happened, where people bought thousands of bitcoins using credit cards, got the bitcoins into their wallets, and then had the credit card companies refund them the money they paid for the coins. Because there's few ways to get the coins back after that, Dwolla ended up getting hosed pretty hard.

Well, what happened is that Dwolla just took the money back from TradeHill, basically screwing them. Ironically this shows the problems and risks involved with transferring real dollars online. There's always a risk of a reversal or chargeback. That's good for the consumer, but bad for the seller. Bitcoin makes irreversible micropayments possible, but at the same time transfers risk from the seller to the buyer.
posted by delmoi at 5:31 PM on September 1, 2011 [3 favorites]

Far more money has been stolen in real currency since bitcoin has been around.

Per transaction?
posted by furiousxgeorge at 5:43 PM on September 1, 2011

The difference with MtGox is that it's impossible to tell if they can actually afford to write anything off and the government won't help the customers if they can't.

I don't think they claim that they'll be able to recover your coins if you get hacked. But a few months ago pitomat.pl, which was a polish exchange lost the primary wallet.dat file, which means that the bitcions it held became unrecoverable. This was about 17,000 bitcoins or about $170,000 worth at the time. You know what happened? MtGox bought the company and agreed to reimburse everyone who's bit coins were lost.

Also it makes no sense to say that bitcoin is "800% as valuable" any more then it makes sense to say that the USD is "10000% more valuable then the Yen" because they are just denominated differently. What you look at is the change in value. Bitcoin has been going down in value vs. the dollar lately

_{Memo to the Bitcoin guys: you can build a community that has some cool microfabricated steam engines and open source software. But the first time your grandma need a pacemaker, or blood pressure pills and dies, and when your neighbors decide to just use squatholes for shitters and there's a cholera outbreak which leads to your clan leader finding out about that girl you like from the Smith clan, which your clan hates and clan integrity is the only thing protecting you from a cruel world, and the only person who would have spoken up from you was your grandmother, and then the boiler of that micro-fab steam engine you built that didn't need those commie government regulations explodes and kills half your clan members, and that cute girl, and then your clan leaders excommunicate you and put your sorry ass naked out in the street, bleeding, with a latent head trauma that only an MRI could diagnose and only a neurosurgeon in a sterile ER could fix, then you'll miss the common good. Right before you bleed out.}

Ugh. It's true that there are a bunch of annoying libertarians who use bitcoin, but bitcoin isn't dependant on a libertarian worldview being 'correct' in order to work. It's ideologically independent. As long as the math work, bitcoin works.

Bitcoin does not compete with the U.S government. Not really, it competes with private companies like paypal and the credit card companies which suck. You can look at bitcoin through a socialist system as well. Rather then paying for profit corporations to handle financial transfers, the community works together to manage it for itself.

_{So, rather than continuing to destroy the social fabric of America, I'd prefer that you all get the fuck out now. Thanks.}

This is some seriously paranoid nonsense.
posted by delmoi at 5:46 PM on September 1, 2011 [1 favorite]

Pla: Strange assertion to make about a purely imaginary currency that trades at 800% of par with the USD.

Nelson : I'm gonna create a new currency named KiloBitcoins. It's gonna trade at 800,000% of par with the USD!

Pla: Okay... Care to elaborate on how you plan to get anyone to accept those in trade for USD?

Pla, I think you're missing the joke here. (And forgive me if I was just missing your humor as I over-explain what is likely obvious.) You were touting the 800% figure as something meaningful. Like: wow, 800% the value of the US dollar; that's a strongly trading currency.

Nelson was pointing out that if you change your units to KiloBitcoins -- i.e., 1000 bitcoins -- you've got an 800,000% value. Super-wow! Likewise, that points out, if you're looking at MicroBitcoins, your 800% figure goes way down to something completely unimpressive. So he was simply undercutting the 800% figure as meaningless.
posted by nobody at 5:48 PM on September 1, 2011 [4 favorites]

Far more money has been stolen in real currency since bitcoin has been around.

Per transaction?

Well, there's no way to know, right? Not all theft is reported, there's no way to measure all real money transactions, and so on. There are lots of people who consider the 2008 bailouts to be a kind of theft, and that was $700 billion, almost 10% of the M2 money supply.

(and while the banks paid it back, they did it by borrowing from the FED and then lending it to the Treasury, basically acting as middle men between two branches of the government and taking the difference in profit.)
posted by delmoi at 5:53 PM on September 1, 2011

Oh yeah, and this mashup was going around the bitcoin community when wagner lost all his money. Pretty funny.
posted by delmoi at 5:54 PM on September 1, 2011

delmoi: "Not all theft is reported"

but all theft is property
posted by subbes at 5:56 PM on September 1, 2011

no, hang on, I think I got that mixed up
posted by subbes at 5:56 PM on September 1, 2011 [1 favorite]

Well, there's no way to know, right?

Right, my point is the fact that more real money has been stolen is meaningless because real money is actually used by the population of the Earth.
posted by furiousxgeorge at 5:58 PM on September 1, 2011

Right, my point is the fact that more real money has been stolen is meaningless because real money is actually used by the population of the Earth.

What are you talking about? I assume your point is that bitcoin somehow isn't? There have been about 326,700.58 bitcoins sent in the past 24 hours, that's about $3 million dollars worth.

Are you like, not paying attention or something? The problems with MyBitcoin and MtGox happened because people built systems designed to trade a currency who's total value was a few tens of thousands of dollars, except that became worth hundreds of millions of dollars over the space of a few months. People didn't take security as seriously as they should have.

My point was, people get money stolen all the time. If you're a corporation, rather then a person you don't always get the same kinds of protections against having money taken out of your bank account by 'hackers'.

But honestly you're not really making any sense. I thought your point was that you're more likely to get scammed in bitcoin then you are in dollars. The problem with that statement is that while there have been high profile bitcoin heists in the news lately, there have also been lots of "real money" thefts and scams as well, but those are so common they don't make the news.

Then you some how claim that "bitcoin isn't being used" even though it is, but if it wasn't, then why would it matter if it got stolen?

So you don't seem to be making any kind of point that I can respond too... your comments don't make any coherent sense when taken together.
posted by delmoi at 6:21 PM on September 1, 2011

Like, the WHOLE population! Billions of people. Trillions of dollars. Even the people who use bitcoin.

It's impossible to get numbers, but since there are very few legal things to actually spend bitcoin on most of the transactions are speculation and scamming and laundering and silk road. In the event of theft, there are no legal entities to protect you.
posted by furiousxgeorge at 6:26 PM on September 1, 2011

I wish bitcoin luck because paypal is evil. I have no problem with some goldbug-like speculators being whipped out by the libertarian rhetoric. Any opinions on Ripple?
posted by jeffburdges at 6:26 PM on September 1, 2011

delmoi, a currency is only as useful as the institutions that trade it. If my money has to go through MyBitcoin or MtGox to trade BitCoin that means that BitCoin is only as good as those services. I'm not saying that the Fed system is perfect, but man I have a lot more faith in the conventional banking system than I do in these services that were "built to trade a currency whose total value was a few tens of thousands of dollars".
posted by chrchr at 6:28 PM on September 1, 2011

Bitcoin is not anonymous, and every single transaction is recorded by all the clients, thus it is fairly trivial to track the "money" flows to and from a single address, present or past.

Not really true, because anyone can make as many BitCoin addresses as they like. If you're proper paranoid you should make a new one for every transaction.
posted by LogicalDash at 6:49 PM on September 1, 2011

delmoi, a currency is only as useful as the institutions that trade it. If my money has to go through MyBitcoin or MtGox to trade BitCoin that means that BitCoin is only as good as those services.

chrchr the whole point of bitcoin is that it's decentralized Everyone keeps a complete list of all transactions on their own computers to ensure that the money isn't double spent. That's it. You can send and receive bitcoin with anyone you want without involving any third parties.

There was never any need for a service like MyBitcoin in the first place. All it did was make it easier for non-technical users to use it. It was also run anonymously. It might have made sense when bitcoin was hardly worth anything, but you would have to be pretty stupid to trust hundreds of thousands of dollars worth of virtual currency with a totally anonymous website run out of the cayman islands.

MtGox is a site that handles "real" money so that you can trade bitcoin for USD. That's something that adds a lot of utility, but it's important to point out that they didn't lose anyone's money when they were hacked. Banks and 'real' financial institutions get hacked all the time, but no one says you can't trust a bank after it's been hacked. Again, MtGox got hacked, but no one lost their money. The big problem was that people's password hashes got leaked, so people with weak passwords probably had them cracked. That's about it. No one lost money, as far as I know.

If you don't want to trust it, you don't have too. You can load money/bitcoins in, exchange them, and transfer out right away if you want too.

---
Finally, here's an exchange called CampBX that's new. It was started as a 'serious' business in the US with security in mind. They have daily security scans done by McAfee. The problem is though that they don't have the same volume as MtGox. But there are alternatives to MtGox.
posted by delmoi at 6:52 PM on September 1, 2011 [1 favorite]

There was money lost, it's just that MtGox absorbed the losses. The problem will come if another hack exceeds their ability to cover the losses or if they feel like just closing up shop like MyBitcoins. The "got hacked" exit strategy is already out there if someone wants to run a long con, and nobody is even close to cracking the Mybitcoin situation.
posted by furiousxgeorge at 7:09 PM on September 1, 2011

People, people. Bitcoin is to reality as Filthy Lucre is to Kingdom of Loathing. It has little purpose and is gained arbitrarily, aside from dealing with a few shady people.
posted by mccarty.tim at 7:26 PM on September 1, 2011

My point is, we should go back to the meat standard.
posted by mccarty.tim at 7:27 PM on September 1, 2011 [2 favorites]

I've had nothing but good experiences with Google Checkout as a consumer, mostly because it acts as speedy, low-margin escrow rather than a pseudobank, IIRC. Why hasn't that caught on?
posted by mccarty.tim at 7:29 PM on September 1, 2011

There was money lost, it's just that MtGox absorbed the losses. The problem will come if another hack exceeds their ability to cover the losses or if they feel like just closing up shop like MyBitcoins. The "got hacked" exit strategy is already out there if someone wants to run a long con, and nobody is even close to cracking the Mybitcoin situation.

The FBI was at least taking cursory interest in the MyBitcoin thing. Doing that would be just as illegal as ripping off a bank. Yes, it's true that bitcoin banks aren't regulated but the whole point of bitcoin is that they are unnecessary, you don't need to store bitcoin anywhere but on your computer (which carries it's own risks)

So ultimately I'm still sure I understand what your argument against bitcoin actually is. If you hand off rare comics or gold or something to the bank to put in a safety deposit box and they get robbed, then they're just as gone as if a bitcoin storage site is hacked. Bitcoins are like cash or like gold.

If I buy the GLD ETF on the stock market, I'm trusting that some company called State Street Global Advisors is actually managing the gold and ensuring that it's all accounted for. They could claim to get robbed some day if they wanted too. But the fund is worth $75 billion. Obviously people trust it.

However, unlike gold, bitcoin is easy to transfer and easy for anyone to store. All you need is a regular computer.

And again, just in case anyone here doesn't get it: you don't need to trust any third party to use bitcoin.
posted by delmoi at 8:02 PM on September 1, 2011

The FBI was at least taking cursory interest in the MyBitcoin thing.

Did they? Because as far as I am aware the original source for that claim is...Bruce Wagner. You are not dealing with a physical object, you are dealing with an electronic object specifically designed to be hard for people like law enforcement to trace. You are trusting it to banks/exchanges with no accountability to anyone across national borders, not the local deposit box. If you can't understand why this makes it fundamentally unsafe, I don't know what to tell you.
posted by furiousxgeorge at 8:08 PM on September 1, 2011

I actually know of a few goons who are also mefites and use the same username on both sites. One of them IS a Mason, which is starting to make me wonder about this whole thing...
posted by Biblio at 8:10 PM on September 1, 2011 [1 favorite]

Far more money has been stolen in real currency since bitcoin has been around.

Is this true in any terms other than raw value? If not, it seems like an absurdly unfair way of framing the issue, as there is a whole lot more value in "real currency" than there is value in bitcoins.

Percentage stolen would seem like a much fairer comparison.
posted by Flunkie at 8:33 PM on September 1, 2011 [1 favorite]

Fake money was a scam?

GTFO!
posted by bardic at 8:37 PM on September 1, 2011

Funny how the folks who talk about the US Dollar as a ponzi scheme who have been taken in this actual ponzi scheme. Yes I know there are members here who have made money processing blocks and mining. Ponzi schemes always payout some of the people. One way to work this would be to setup a kind of "bank" where people keep their money in the system rather than demanding their return immediately. Because transactions are anonymous you can even make it appear that there are lots of actual coins being circulated, when in fact it is just fake traffic. If you owned an exchange you could even manipulate the market by settling lots of bogus transactions with yourself creating an illusion of liquidity. Carefully run this thing could keep going for years.

And this is before some math prodigies get going on cracking the system.
posted by humanfont at 9:04 PM on September 1, 2011 [1 favorite]

You are trusting it to banks/exchanges with no accountability to anyone across national borders,

No, you are not. How many times do I have to repeat this. bitcoin does not require you to trust anyone at all. You can use it from your computer, without using any third parties at all.

not the local deposit box. If you can't understand why this makes it fundamentally unsafe, I don't know what to tell you.

Are you not even reading what I'm writing or do you have some kind of reading comprehension problem? Here is what I said in another comment:

Yes, it's true that bitcoin banks aren't regulated but the whole point of bitcoin is that they are unnecessary, you don't need to store bitcoin anywhere but on your computer (which carries it's own risks)

In fact, you absolutely can store bitcoin in a safety deposit box if you want too. Just put the wallet.dat file on a USB stick, take the USB stick to your bank and stick in a box. Done. If you don't have any other backups, then no one can ever spend those coins without that flash drive.

furiousxgeorge: do you still, seriously not understand that bitcoin doesn't require you to trust any third parties? If you want to buy BTC for cash then using a site like MtGox is an easy way to do it. The reason it's hard for me to 'understand' what you're saying is that it seems to be based on a mis-perception of how bitcoin works.

Finally, exchanges like CampBX were specifically setup to be less 'shady'. The are registered corporations in the US, they're no more shady then any other online financial services (like Paypal, Dowlla, Obopay, etc).

(The interesting thing is that paypal actually does run off with people's money from time to time, and people still trust it. Unwisely IMO)

Finally, I never claimed that Bitcoins are as safe as cash or gold in a safety deposit box. They are less safe. But they are fairly safe. I would say they are probably as safe as buying stocks on the stock market. It could turn out the company you invested in was pulling a massive fraud and the value of the stock might crash. That doesn't mean that the stock market as a whole is invalid somehow.

Bitcoin as an online medium of exchange is very safe. Safer then using credit cards or paypal from the perspective of the seller.
posted by delmoi at 9:06 PM on September 1, 2011

Dude, I'm aware of the technical aspects of it. I'm talking about the functional reality, it's useless currency if you don't switch it back to dollars at some point.
posted by furiousxgeorge at 9:09 PM on September 1, 2011 [2 favorites]

(or buy in with dollars)
posted by furiousxgeorge at 9:11 PM on September 1, 2011

Dude, I'm aware of the technical aspects of it. I'm talking about the functional reality, it's useless currency if you don't switch it back to dollars at some point.

*any company involved in bitcoin is shady.
* In order to convert bitcoin back and forth you need to deal with a company involved in bitcoin
*Therefore, order to use bitcoin, you have to deal with a shady company

But that's completely circular logic. What exactly is it that you think makes MtGox "shady"? What about CampBX, which is a U.S company. Lots of websites get hacked. RSA which makes those one time use password fobs got hacked. Lots of banks get hacked. It happens all the time.

Funny how the folks who talk about the US Dollar as a ponzi scheme who have been taken in this actual ponzi scheme. Yes I know there are members here who have made money processing blocks and mining. Ponzi schemes always payout some of the people. One way to work this would be to setup a kind of "bank" where people keep their money in the system rather than demanding their return immediately.

Bitcoin isn't a Ponzi scheme. There's no requirement to use any kind of "bank" with bitcoin, and if you want to access your money from multiple computers you can keep your wallet encrypted on dropbox or S3 or something.

MyBitcoin.com was totally separate from the main bitcoin system. It's just a website some random person setup. It was totally superfluous to the operation of the system as a whole.

So the idea that Bitcoin is a Ponzi scheme makes little sense. It's possible that the value of bitcoin could crash, if everyone decides sell all they would be worthless. It's no different then holding stock in a company. If the company goes bankrupt, the stock is worthless.

So I don't really understand why anyone who understands how bitcoin works could view it as a ponzi scheme. There isn't anyone 'holding' the money for anyone else. Bitcoin doesn't require more people to sign up in order to keep going, and more then that it doesn't promise growing returns. The only promise is that if you have five bitcoins, you'll have those five bitcoins until you spend them (so long as your hard drive doesn't crash and all your backups fail)

So I don't understand what you think bitcoin has in common with a Ponzi scheme.

Fake money was a scam?

GTFO!

No.
posted by delmoi at 9:50 PM on September 1, 2011 [1 favorite]

Ugh. It's true that there are a bunch of annoying libertarians who use bitcoin, but bitcoin isn't dependant on a libertarian worldview being 'correct' in order to work. It's ideologically independent. As long as the math work, bitcoin works.
And that's your error, Delmoi. The math doesn't work. Let me break this down for you:
1. The supply of Bitcoins is limited. Although they are divisible out to 8 decimal places, this is not the same as an infinite supply. If you remember your mathematics, you'll remember that no matter how large (absolute value terms) a number is, it is always infinitely far from infinite.
2. This subjects Bitcoins to the same problem as any scarcity based currency, such as a gold or silver backed currency. Namely, 1) individuals or small groups can corner the market in the scarcity based currency, and this causes a failure of aggregate demand within the currency zone and 2) there is no central way of resolving the issue. You haven't responded substantively to my previous comment about this, other than to dismiss it as "paranoid" and invoke math. As discussed above, the math is the problem with Bitcoin. Being stateless isn't the issue either-- Blizzard manages WoW and Diablo, but it has the tools to do it, namely the ability to tax as well as spend. Bitcoin lacks that mechanism.
3. No, Bitcoin is not like Paypal. You appear to be ignoring the point of my post, namely, that the various payment protocols have different levels. Paypal is a higher level protocol than the dollar-- it allows you to transact in dollars, yen, euro and a host of other currencies. Paypal does not force me to buy "paypals" to do business over its protocol. Regarding shadiness, Paypal is subject to a variety of anti-money laundering controls that I guarantee you Mt Gox has not implemented.

Look dude, currencies are difficult. The saving grace is that we have thousands of years of prior art to sift through and shape up to fit todays world. My biggest problem with Bitcoin is that the proponents of it appear to think that just because the can use forum boards, IRC and write some code, that they can be totally ahistorical and settle for pat answers about how a payment protocol actually works in practice. It's like saying fuck it, I don't need to look at any civil engineering textbook, or talk to civil engineers or look at a thousand years of prior art, I can write code and I took high school physics and one semester of kinematics at uni, so fuck it let's go build the Golden Gate Bridge from scratch.

Go for it dudes, just don't expect me to drive my car over your bridge. And don't get pissed off if I laugh at you when the bridge falls down.
posted by wuwei at 9:50 PM on September 1, 2011 [9 favorites]

I'd agree with delmoi here, bitcoin and gold are both currently bubbles, but neither qualifies as a ponzi scheme. There might be ponzi schemes that claim they invest in either of course.
posted by jeffburdges at 9:53 PM on September 1, 2011

And you realize people do this all the time, right? Yes, right now it means trusting a Japanese company if you want to use the highest volume exchange. But how is that any different then trusting a smaller PayPal competitor like Obopay, Dowlla, or other small online transfer companies? The people who run MtGox aren't secret.

You seem to be opperating based on a sort of tautology: Like:
*any company involved in bitcoin is shady.

I'm...what? What I am telling you is unregulated banks on the other side of the world backed by no deposit insurance are a bad place to park any of your money, especially based on their history of scamming and hacking in regards to bitcoin, nothing more, nothing less.

Further, I am telling you that without these systems bitcoin is currently worthless in the real world. I am at a loss to figure out how you can change this situation without compromising the untraceable anonymity that makes bitcoin attractive in the first place.
posted by furiousxgeorge at 10:01 PM on September 1, 2011

I believe this will turn out to be the exact definition of a ponzi scheme. A fake financial vehicle is created (i.e. the bitcoin). Simulated returns are created to draw in speculators. Early participants become evangelists for the scam after receiving some payout. Eventually the fakers will vanish with a lot of cash.
posted by humanfont at 10:07 PM on September 1, 2011

You seem to be opperating based on a sort of tautology: Like:

*any company involved in bitcoin is shady.
* In order to convert bitcoin back and forth you need to deal with a company involved in bitcoin
*Therefore, order to use bitcoin, you have to deal with a shady company

But that's completely circular logic.

In what way is that "circular logic"? It doesn't look circular at all to me. Nor does it look tautological (at least not in the formal logic sense of the word).

In fact, it looks like perfectly valid logic to me (well, if you change "in order to use bitcoin" to "in order to convert bitcoin back and forth").

It may not be true, but if so that's due to one or more of its premises being incorrect, not due to a flaw (such as circularity) in the logic itself.
posted by Flunkie at 10:36 PM on September 1, 2011

I'm...what? What I am telling you is unregulated banks on the other side of the world backed by no deposit insurance are a bad place to park any of your money, especially based on their history of scamming and hacking in regards to bitcoin, nothing more, nothing less.

Yes, and it's very bizarre for you to point that out since it doesn't really have anything to do with bitcoin.

As far as I can tell you're saying that in order use bitcoin you have to deal with a company that

1) Is unregulated. -- except that's not true. CampBX is subject to all US laws and MtGox is subject to Japanese laws. It isn't like Japan is known for lax financial oversight or anything. The whole 'pitch' of CampBX is that it follows all US laws and regulations. You can sue them, just like any other US company.

2) on the other side of the world -- not true. CampBX is in the US.

3) has a history of hacking -- Do you mean being hacked? MtGox was hacked, once. And since then they've paid a lot more attention to security. A company that has been hacked and recovered is probably one that's going to pay a lot more attention to security. And then there's CampBX which has it's web security checked by McAfee every day. They take security very seriously, specifically because of the MtGox thing.

4) has a history of scamming -- this is also not true. One site, MyBitcoin was suspected of being a scam, but was never required. It didn't allow you to exchange bitcoins and real money all it did was hold on to bitcoins for you. Again (for what, the seventh time?) MyBitcoin was never needed for any purpose, ever It was just a convenience, and a really poorly thought one. You didn't need it to convert BTC to USD.

And finally, for the millionth time YOU DON'T NEED TO 'PARK' YOUR MONEY WITH ANY THIRD PARTY. You buy bitcoin on MtGox, and you transfer it to your own computer. The money only needs to stay on the site for a few minutes if you want. Once you have it you can transfer it to anyone you like, without using any third parties. Finally, if you want to sell your bitcoin, you transfer it to the site, sell them, and transfer the money to you Dwolla, which is a paypal competitor.

Further, I am telling you that without these systems bitcoin is currently worthless in the real world. I am at a loss to figure out how you can change this situation without compromising the untraceable anonymity that makes bitcoin attractive in the first place.

Bitcoin is not untraceable or anonymous, and using sites like MtGox actually tie your bitcoins directly to your name and IP as far as the government is concerned. They actually make it less anonymous.

And finally, there are no 'systems' that even fit the above description that you need to use to use bitcoin.

I don't understand how you can say sites like TradeHill or CampBX -- U.S. based sites which have never been hacked much less hacked anyone else or have ever scammed anyone have been

Again this goes back to the circular logic I was talking about. You are just assuming that any company involved in bitcoin must be shady because they are involved with bitcoin. And therefore, in order to deal with bitcoin, you must deal with a shady company.

In what way is that "circular logic"? It doesn't look circular at all to me. Nor does it look tautological (at least not in the formal logic sense of the word).

According to furiousxgeorge every company involved with buying and selling bitcoin is an "unregulated bank" with a "history of scamming and hacking in regards to bitcoin". Except as I've said, those things aren't all true for any existing bitcoin companies. So I guess yeah, the problem is that there's no support for the premise that all bitcoin companies are shady.

It seems circular because it assumes that any company getting involved in bitcoin is shady. Why? Because all bitcoin companies are shady.

It's driving me nuts because he keeps repeating things that simply aren't true, unless you assume that all bitcoin companies are all actually secret branches of a hidden organization, which is obviously pretty paranoid.

I believe this will turn out to be the exact definition of a ponzi scheme. A fake financial vehicle is created (i.e. the bitcoin). Simulated returns are created to draw in speculators.

How exactly would you "simulate" a return with bitcoin? You can't create fake bitcoins, that's the whole point of the system.

---

wuwei. Your argument sounds a lot like the arguments from people who claim the whole monetary system is a scam or whatever. You didn't do any 'math' you just threw out some numbers? How much money do you think it would actually cost to 'corner' the market in bitcons? And once they did, so what exactly? They buy the entire supply, then prevent anyone from using them, so that people stop using them and they become worthless?

In order for that to happen, everyone who currently owns bitcoins would have to have sold them for whatever price they are willing to sell them for, which is hardly a problem for the people who currently own them.
posted by delmoi at 11:01 PM on September 1, 2011

Delmoi: you're not engaging with arguments here. I did do math, I talked about infinity and limits-- subjects covered in the first year of calculus in any college level science and math program. You're clearly engaging in sophistry here and throwing out word salad. We're done.
posted by wuwei at 11:16 PM on September 1, 2011 [2 favorites]

I did do math, I talked about infinity and limits--

"talking about" infinity and limits isn't the same as actually using those concepts mathematically.

Again, lets see the actual numbers and actual formulas you're using. How much money would it actually take to corner the market in bitcoin? What % of bitcoin would they actually have to own to prevent people from using it? (if that's what you're saying will happen)

And furthermore, as I said, in order for someone to buy all the bitcoin, or so much that people can't even get a 10^-8 piece of it, everyone who currently owns any bitcoins would have to have sold theirs for whatever price they want. That's obviously not a problem for the people who currently own bitcoin.

Again the idea that "talking about" mathematical concepts is the same as "doing math" is ridiculous.
posted by delmoi at 11:25 PM on September 1, 2011

How is Bitcoin superior to United States Dollars?
posted by dirigibleman at 11:34 PM on September 1, 2011

While the security concept behind bitcoin seems sound, the bitcoin supply model seems awfully wrong in my eyes. The problem with finite supply of currency is that the goods and services which the currency represents and is traded for are not finite. When the currency supply runs slower than the supply of goods and services you have deflation, which may sound great at first sight ("My money is worth more every day. Yay!"), but it's a disaster in practice. Why? Well, the economically illiterate youngster cited upthread unwittingly nails it: it encourages saving and discourages spending. The trouble is that transactions (aka spending your money) are the whole point of a currency. There is thus an adjective for a currency that, by design, discourages transactions: useless.

Now, we have a currency with an elegant mathematical security model, but an absurd economic one. Who does that attract? Naive geeks, who are, in my experience, the easiest mark a scam artist can hope for. And, no matter how elegant the underlying security model, scam artists are masters at circumventing such security by concentrating on the weakest link: the human factor.
posted by Skeptic at 11:36 PM on September 1, 2011 [5 favorites]

Actually, here's my qestion(s).

Can I pay my rent in Bitcoins (I'm pretty sure my landlady will laugh in my face if I ask this).

Can I pay for food with Bitcoins?

If I convert my dollars to Bitcoins, and do the savings-to-flash-drive thing, and my flash drive gets corrupted for some reason, is there some way for me to get my Bitcoins back?

Is there anything like the FDIC/NCUA for Bitcoins?
posted by dirigibleman at 11:41 PM on September 1, 2011

How is Bitcoin superior to United States Dollars?

You can send them over the internet to anyone in the world, instantly, with no risk of being lost in the mail (which is what would happen if you tried to mail dollars). If you look at credit cards, paypal, bank transfers, western union or whatever then you're not really looking at "Dollars". The all have various downsides and upsides. But sending money western union takes a while and costs a ton. Using paypal has risks and bank transfers aren't necessarily international. Right now credit cards don't let you send money to individuals at all, unless they own a CC gateway.

Can I pay for food with Bitcoins?

There are a couple of restaurants that will take bitcoin. here's a partial list of products and services you can buy with bitcoin.

If I convert my dollars to Bitcoins, and do the savings-to-flash-drive thing, and my flash drive gets corrupted for some reason, is there some way for me to get my Bitcoins back?

Nope. It's like cash. If you had a large amount of cash in your house and it caught fire, you would lose it.

Is there anything like the FDIC/NCUA for Bitcoins?

Not yet. I think that's one problem with the bitcoin 'economy' so far. And hopefully one that will be solved. If someone had a large amount of USD they could offer to secure people's bitcons (for a fee), along with the guarantee that if they got hacked, they would cover you at $x/bitcoin.

But yeah, it's not there yet. Currently if you want to use bitcoin, you either need to keep it on a site like MtGox and hope their security improved, or you need to take responsibility for keeping your wallet.dat file secure and backed up. (The best way to do this is to encrypt it with truecrypt, and then stash that file in lots of places, including online)
posted by delmoi at 12:44 AM on September 2, 2011

While the security concept behind bitcoin seems sound, the bitcoin supply model seems awfully wrong in my eyes. The problem with finite supply of currency is that the goods and services which the currency represents and is traded for are not finite. When the currency supply runs slower than the supply of goods and services you have deflation, which may sound great at first sight ("My money is worth more every day. Yay!"), but it's a disaster in practice.

I think most people involved in bitcoin wouldn't be too upset if they became too valuable to be used. The thing is, though that they can be divided up up to 10^-8. So even if bitcoins became worth a million dollars a piece, you could still use them for for transaction on the scale of a penny.
posted by delmoi at 2:27 AM on September 2, 2011

Can I pay for food with Bitcoins?
Would you want to? I just checked out a bunch of prices and everything priced in bitcoins was the same price or more expensive than at the equivalent dollar price (and some times much more, like twice as much more, compared to the Amazon price) at the current exchange rates. (And sur eyou could buy some web design cheap , but if they were really any good at it why would they not just do it for actual money and buy bitcoins, cos after all there are a lot more things you can buy with actual cash).

And here, surely, is why it smells like a scam. For all the talk of it being a currency, I don't believe for one moment, that anyone is getting into it to actually but anything, except for fringe case like buying drugs, they are getting into it because they believe make them money. Now if things were to fall in bit coin price compared to the dollar so its cheaper to buy in bitcoins (so you might want to to use it to buy things) it means either people have cut their bitcoin prices for their goods and are inexplicably loosing money compared to selling in dollars or the bitcoin has lost value so you get fewer dollars for the same amount of bitcoins which probably isn't going to make people who brought bitcoins (most everybody) very happy. Either way somebody is going to be sad unless they really, really wanted alpacca socks*. Rather everybody (even people mining them) want the opposite to actually happen (as opposed to what they might say they want) they want the value to rise so they can buy more things in actual, useful, money (cos bitcoin stuff just got more expensive, relatively) or just be rich, for free. At this point it's not looking a lot like an actual currency (something you use to buy things) rather that something that's the opposite and it all starts to smell fishy (unless you believe in special libertarian crypto magic).

* Or there's lots of arbitrage and it corrects itself and you are with something that costs about the same in either currency but one will allow you to buy a lot more things.
posted by tallus at 2:35 AM on September 2, 2011 [1 favorite]

web security checked by McAfee every day

That little McAfee badge isn't worth much more than the "5-Star Shareware!" badges you find littering crappy download sites.
posted by robtoo at 2:42 AM on September 2, 2011 [2 favorites]

This whole thing sounds like it could have happened on Eve. BitCoin players have wallet files, and they start corporations and exchange markets and "online banks". Then the players hack each other. The main difference seems to be that BitCoin players don't realize that they are playing a game.
posted by cotterpin at 3:34 AM on September 2, 2011 [1 favorite]

nobody : Pla, I think you're missing the joke here.

Ah, alas, in the hindsight of morning-induced lack of zeal, I now see the joke.

Sorry, Nathan.

That said...

humanfont : Funny how the folks who talk about the US Dollar as a ponzi scheme who have been taken in this actual ponzi scheme.

You and I have discussed this very topic previously on the Blue, even in relation to BitCoin. You don't have to completely agree with me, but you also can't just ignore facts. A "Ponzi scheme", either in the technical or the historical sense, doesn't just mean "get rich quick scheme" (not that BTC even meets that weak criterion). It means a very particular kind of scheme which, no matter how much you refuse to admit it, the SSA meets and BitCoin (as a whole) does not.

If you insist on referring to it as some flavor of scam, can you at least just use a more generic term so we can merely disagree, instead of a specific one making you outright wrong?
posted by pla at 3:39 AM on September 2, 2011

I'm neutral on BitCoin. I don't know enough to comment on it, either way, but I will point this out: it seems awfully strange that the people gleefully ragging on it as being a fraud because it's unpoliced use our current system as an example of a properly policed (?) fraud-proof (?) system.

So far, it looks like BitCoin is at least a bit better than our current system.
posted by luke1249 at 4:13 AM on September 2, 2011 [1 favorite]

And here, surely, is why it smells like a scam. For all the talk of it being a currency, I don't believe for one moment, that anyone is getting into it to actually but anything, except for fringe case like buying drugs, they are getting into it because they believe make them money.

How does that make it a scam? Who is the scammer and how do they make money? Bitcoin may be in a speculative bubble, but that's different from a scam.

This whole thing sounds like it could have happened on Eve. BitCoin players have wallet files, and they start corporations and exchange markets and "online banks". Then the players hack each other. The main difference seems to be that BitCoin players don't realize that they are playing a game.

It's very "late cyberpunk", for sure. But those things also happen with real money, on a much larger scale.

It means a very particular kind of scheme which, no matter how much you refuse to admit it, the SSA meets and BitCoin (as a whole) does not.

Social Security is not a Ponzi Scheme. Unlike a Ponzi scheme, Social Security does not promise returns in excess of ordinary investments. It's true that early entrants are paid by payments from the new entrants, but because Social Security payments are tied to the wage level, if for some reason new entrant's wages go down, so would Social Security payments _{^{(at least according to the rules. Obviously it's likely that the government, when faced with actual deflation would avoid making actual cuts Social Security. But that money would not come from Social Security itself, but rather from the general fund)}}

So in other words, unlike a true Ponzi scheme, Social Security does not promise payouts that it can't afford to pay in principle. There is a minor actuarial imbalance such that SS will have to pay out more then it takes in by like 2050 or something, but that can be fixed with some minor tweaks, such as raising the cap on income that's eligible for the tax.

Social Security is no more a Ponzi Scheme then an ordinary bank, which also pays old users with money deposited by new users. The key difference is that the bank, and social security only pay out what they can actually afford too, based on loans (for the bank) or economic and population growth (for Social Security)
posted by delmoi at 4:40 AM on September 2, 2011 [1 favorite]

A defining characteristic of any arguments about the viability of bitcoins is some serious lack of knowledge about the very definition of money. Please do go to the Graeber post and read up on what money really is. All money is a ponzi scheme the way many in here are defining it, whether it be Chartalist/MMT derived (US Dollar) or Commodity Money (Gold/Bitcoins). They all don't have intrinsic value, all the value of any currency is derived from the economy around it. You must remember that currency is a unit of exchange, it is not at its root a store of value. No one holds dollars and hides it in their mattress, at the most conserative, they buy short-dated US Treasury bills or money market funds (well, you don't do it yourself, the bank does this for you when you put money in your savings account). The primary advantage of the US Dollar is that public debts, i.e. taxes, are paid in dollars if you are a US citizen, but that's nothing innate about that dollar, it's just a very very big merchant that will only accept dollars. -- it cannot be emphasized enough that the value of a currency is derived from the economy around it, not the currency itself.

The fundamental problem of bitcoin is in its community. You have a bunch of reasonable cypherpunks mixed in with a bunch of vocal nutjob randroid teabaggers. An ingenious brilliantly designed system whose vocal advocates are completely bonkers. A lot of the ridicule and hate on bitcoins as a currency, especially from the SA community are directed at the latter (at least the hate that isn't derived from a jealousy from making the unfortunate decision of owning Nvidia cards). This portion of the bitcoin community is far less knowledgeable about the fundamentals of currency than anyone else, which makes this discussion incredibly difficult. You have two parties arguing about money when neither truly understands what's going on.

Bruce Wagner is one of the latter camps which has some serious lack of knowledge about bitcoins, which is unfortunate for bitcoins.

In any case, the viability of bitcoins has already been somewhat established as a currency. It doesn't matter whether bitcoins are worth $0.01 USD or $100 USD. It can still be used in transactions. If you wanted to send someone money, you can acquire bitcoins and send it with lower transaction costs than paypal. If you wanted to send someone $10, the relative exchange rate doesn't matter, assuming the holding time is sufficiently short.

For it to grow, there needs to be a substantial increase in tools for bitcoins that do not yet exist, but I believe will start cropping up within half a year or so. I suspect you'll see point of sale systems which can accept bitcoins and will immediately convert to US Dollars for the merchant and deposit funds into bank accounts with substantially lower fees than visa or mastercard.
posted by amuseDetachment at 5:14 AM on September 2, 2011 [1 favorite]

I think most people involved in bitcoin wouldn't be too upset if they became too valuable to be used. The thing is, though that they can be divided up up to 10-8. So even if bitcoins became worth a million dollars a piece, you could still use them for for transaction on the scale of a penny.

You still don't get the point. At all. You can also divide whichever currency you want if you need looser change. You can also trade dollars and euros to the eighth decimal point and more. Splitting gold and silver coins, for instance, was a common practice when gold and silver currency was in wide circulation. But it isn't anymore. Why? In fact, not just because there isn't enough gold and silver in the world to cover even a small fraction of the world's economic activity.

The problem, you see, is not the absolute value of a currency, but the change in value over time. If you have a currency that keeps increasing in value, not only you have an incentive not to spend it, but also not to invest it. If the increase of value of the currency is already close enough, or even higher, than the yield you can expect from your money, why would you risk your money? Better bury your USB stick in the ground while it keeps increasing in value.

However, that burying your money in the ground is the worst option you can choose was an insight that even the most unlikely of economists made almost 2000 years ago. Deflation not just stops consumption dead in its tracks, but even investment. In fact, it annihilates economic activity while everybody just hoards their money, because it negates the basic purpose of currency, which is to flow.

To understand the actual role of money in the economy, you must see it as the middleman in a barter system. You have a load of carrots, and you may need potatoes, maybe right now, but maybe in the future. So, you hand over your carrots to the middleman (you sell your carrots for money), and he gives you an IOU exchangeable, among other things, for potatoes. If the value of the IOU increases over time (deflation), you, and everybody else, will be very reluctant ever to redeem it. The middleman will end up with all the carrots and potatoes in the world and everybody else will starve. If the value of the IOU falls rapidly (strong inflation), everybody will hoard their own carrots and potatoes and commerce will also grind to a halt, with only some direct bartering, if you just happen to cross somebody with potatoes before your carrots rot. To make the money flow, to make this middleman actually trade, the ideal is a gentle decrease of value of the IOU over time. This light inflation can be seen as a reasonable transaction cost, in exchange of the trading facility the middleman offers.

The basic trouble with bitcoin is that apparently it can't make this mind over whether it wants to be a currency or a speculative investment, like gold and silver today. In principle it could become either, but it can't be both.
posted by Skeptic at 5:20 AM on September 2, 2011 [9 favorites]

I suspect you'll see point of sale systems which can accept bitcoins and will immediately convert to US Dollars for the merchant and deposit funds into bank accounts with substantially lower fees than visa or mastercard.

Block chain processing requirements to ensure transaction completion make this an incredibly risky proposition. Also the volitlity of Bitcoins makes them pretty difficult for a retailer to rely on. Not to mention sales taxes and tax issues.
posted by humanfont at 5:38 AM on September 2, 2011

Skeptic:

I think this is an area that the randroid teabaggers in the bitcoin community will jump on and give you the completely wrong answer, usually involving a rant against Bernanke.

My opinion on this is pure speculation so take this with a grain of salt, but I see transactions as a message, and global transactions are increasing at a substantial rate. With bitcoins making electronic transactions relatively free and incredibly easy, we may see a substantial leap on global transactions per second for the forseeable future.

What does this have to due with your concern of deflation? I see a Moore's Law type paradigm happening with electronic transactions. You begin to see this with what began with electronic markets such as NASDAQ in the 80s to high frequency trading today (you can call it bad, but it's not going away). The amount of transactions per second is only going to increase.

The fundamental aziom of macroeconomics is MV=PQ. The amount of money times the rate at which it exchanges is equal to the summed price of all goods. Traditional macroeconomic policy ensured that we see steady inflation by increasing the money supply. As bitcoins will eventually cap out and reach a static supply of money (no change in M), I am of the opinion that we may see a Moore's Law type situation where the second order derivative of the velocity of money (V) increases to a level where concerns about inflation will no longer be relevant. You will be able to cover the whole economy with 21 million bitcoins today, and tomorrow will be able to cover 21 million bitcoins and then some (slight inflation).

Again, I have no hard science to back this up, it just feels right. If you graph the electronic transactions per second on the stock market over the past 20 years, it far exceeds the rate of inflation. Electronic exchanges can trade the entire float of the stock in one day with fewer shares being traded live (the same shares traded back and forth). We make substantially more business decisions today than we did 20 years ago. Economics moves at a substantially faster pace. The fundamental measurement of MV=PQ is asking the amount of money we need to be able for the optimal amount of exchange to occur. With faster transactions, we can likely achieve more with less money. However, this argument is in essence an argument which is reliant upon steady technological development. It's held for semiconductors, data storage, and information on the internet, I suspect similar principles may apply if you made money purely electronic.
posted by amuseDetachment at 5:39 AM on September 2, 2011

humanfont:

Taxation isn't an issue, it's like any other barter exchange, value it at USD at the time of exchange. I think you'll see tools that will start to exist a couple months from now with more reputable processors to handle the blockchain issue as well. Simply hold less than $100 USD in a reputable online wallet which can act as an intermediary, and there is minor counterparty risk. No real tools like this exist today, but remember, bitcoins started in 2009 and really had any value this year. These things take time to develop (especially if you want to do it right).
posted by amuseDetachment at 5:42 AM on September 2, 2011

Again this goes back to the circular logic I was talking about. You are just assuming that any company involved in bitcoin must be shady because they are involved with bitcoin. And therefore, in order to deal with bitcoin, you must deal with a shady company.

In the end, a company that is dealing with an untraceable currency, so where are your laws? Where is law enforcement for MyBitcoin? I'm not talking about bitcoin theory here, I'm talking about what the current market looks like. There is no way to know who is shady and who is not, that doesn't mean they are all shady, it means you are unnecessarily taking a risk.

How is Bitcoin superior to United States Dollars?
You can send them over the internet to anyone in the world, instantly, with no risk of being lost in the mail (which is what would happen if you tried to mail dollars). If you look at credit cards, paypal, bank transfers, western union or whatever then you're not really looking at "Dollars". The all have various downsides and upsides. But sending money western union takes a while and costs a ton. Using paypal has risks and bank transfers aren't necessarily international. Right now credit cards don't let you send money to individuals at all, unless they own a CC gateway.

And follow me here, unless you are a miner or run one of the very few legitimate bitcoin businesses...how are you getting the bitcoins to send?

CREDIT CARDS, WESTERN UNION, PAYPAL, BANK TRANSFERS and then on to companies like Mt.Gox with security issues or MyBitcoin with scamming issues. What the fuck have you gained? Once again, Delmoi, buddy, I know it works better in theory but that isn't how it works in reality.
posted by furiousxgeorge at 6:06 AM on September 2, 2011

The fundamental aziom of macroeconomics is MV=PQ. The amount of money times the rate at which it exchanges is equal to the summed price of all goods. Traditional macroeconomic policy ensured that we see steady inflation by increasing the money supply. As bitcoins will eventually cap out and reach a static supply of money (no change in M), I am of the opinion that we may see a Moore's Law type situation where the second order derivative of the velocity of money (V) increases to a level where concerns about inflation will no longer be relevant. You will be able to cover the whole economy with 21 million bitcoins today, and tomorrow will be able to cover 21 million bitcoins and then some (slight inflation).

It's an interesting hypothesis. It is, however, unproven, and my main concern about the bitcoin supply is that it is predetermined, leaving no room for correction if it's proven wrong. Over the last 30 years, I've heard already enough claims of technology completely changing the nature of markets to bet my house on them.

Moreover, if you were right, the increase in transaction speed over the last 20 years would already have had a significant inflationary effect, and it does not appear to have been so.
posted by Skeptic at 6:09 AM on September 2, 2011

Gleeful Hate is a bull market.
And a growth industry, to boot!
posted by wenestvedt at 6:30 AM on September 2, 2011

Well there is an alternaive if that theory doesn't hold true. The money supply is also relavant in aggregate as the global money supply (many armchair economists forget this, it's the reason the US is exporting inflation to China). If 21 million bitcoins aren't enough, just start up another blockchain. There is no inherent technological reason why there's only 21 million bitcoins. Just treat it as you would multiple currencies today. It can even have different features such as no 21 million upper limit. You can avoid a disadvantageous Nash equilibrium by only accepting the new block chain for taxation as a public policy as well. I really do think it won't be an issue though. In the as 20 years we've seen a massive second derivative increase in the velocity of money as is, it just hasn't eclipsed the first order derivative of productivity gains from computing and globalization in the past 20 years. Worst case, competing cryptocurrencies increase in value. It's happened before with commodity money, we call it "silver".
posted by amuseDetachment at 6:33 AM on September 2, 2011

The fundamental aziom of macroeconomics is MV=PQ. The amount of money times the rate at which it exchanges is equal to the summed price of all goods.

What units are each of those four variables in? Because in my naive interpretation of your explanative sentence which follows the equation, the left hand of the equation seems to be in different units than the right hand. For example, the left hand might be in "dollars squared per second", while the right hand might be in "dollars".
posted by Flunkie at 6:33 AM on September 2, 2011

The unuts are the same. M and P are dollars. Here's the wikipedia article, it's also probably in the first two chapters of any Macroecon 101 textbook.
posted by amuseDetachment at 6:42 AM on September 2, 2011

Whoops I'm on my phone and linked to the wrong page (really they should be merged on wikipedia). Here's the one you're looking for
posted by amuseDetachment at 6:52 AM on September 2, 2011

And follow me here, unless you are a miner or run one of the very few legitimate bitcoin businesses...how are you getting the bitcoins to send?

CREDIT CARDS, WESTERN UNION, PAYPAL, BANK TRANSFERS and then on to companies like Mt.Gox with security issues or MyBitcoin with scamming issues. What the fuck have you gained? Once again, Delmoi, buddy, I know it works better in theory but that isn't how it works in reality.
posted by furiousxgeorge

There is a big differente between using credit cards, etc, a few times in the context of your choice to order bitcoins, than to have to use credit cards, etc, in all transactions and contexts.

Buddy.
posted by CautionToTheWind at 6:53 AM on September 2, 2011

Sorry let me try again, here's the link
posted by amuseDetachment at 6:54 AM on September 2, 2011

There is a big differente between using credit cards, etc, a few times in the context of your choice to order bitcoins, than to have to use credit cards, etc, in all transactions and contexts.

I understand that. The point is in nearly every bitcoin context you are still in the real money context on both sides of the transaction. The context in which this is an advantage is extremely limited.
posted by furiousxgeorge at 7:04 AM on September 2, 2011

You will get taxed based on the value at time of transaction. You will also get hit by a tax or potential loss based on the difference between the value of your bc at the time of barter and a subsequent gain in value at the time you cash out.
posted by humanfont at 7:06 AM on September 2, 2011

Yet those extremely limited contexts already allowed otherwise impossible markets to appear and grow, like the Silkroad. And it is just the start.

I'm no fanatic for bitcoin, and have never owned a bitcoin or fraction, or traded with it. But the cryptographic foundation looks good, and I like privacy.
posted by CautionToTheWind at 7:07 AM on September 2, 2011 [1 favorite]

Trust me on this, you could get drugs online before Silk Road.
posted by furiousxgeorge at 7:08 AM on September 2, 2011

And in real life too.

Before Ebay, you could also sell your unused stuff online. You could set up a geocities page for your auction.

Not quite the same thing.
posted by CautionToTheWind at 7:10 AM on September 2, 2011

Not to mention, the "illegal transactions" context, as much as I love drugs, is going to include providing cover for some things you really don't want to make any easier.
posted by furiousxgeorge at 7:10 AM on September 2, 2011

humanfont: right, but if you have merchant tools that auto execute immediately (or manage gain/loss) it's a nonissue. Managing the data behind it is trivial.
posted by amuseDetachment at 7:10 AM on September 2, 2011

Pretty much every human advancement makes it easier to do bad things, furiousxgeorge. Bitcoins don't produce child porn, people produce child porn.
posted by CautionToTheWind at 7:13 AM on September 2, 2011

So, not an otherwise impossible market?
posted by furiousxgeorge at 7:15 AM on September 2, 2011

A public, named, easy to find location to buy drugs online and pay anonymously was not possible before Bitcoin and the Tor project. Any publicity would lead law enforcement to it, and they would do their thing, shutting it down. Bitcoin makes the transactions anonymous, and Tor makes the network traffic anonymous.
posted by CautionToTheWind at 7:18 AM on September 2, 2011

So my point would be, it kind of sucks to make that possible for other things. Especially things that can also be electronically delivered as well.
posted by furiousxgeorge at 7:24 AM on September 2, 2011

I understand that, and my rebuttal is we can't stop human progress because someone might make something bad with it. Actually, the bad things I can think of already were happening and being electronically delivered before bitcoin.

So would you say bitcoin has allowed any new type of crime, or would you say it allowed only new types of marketplaces?
posted by CautionToTheWind at 7:26 AM on September 2, 2011

I'm not sure bitcoin qualifies as human progress. :)
posted by furiousxgeorge at 7:31 AM on September 2, 2011

If nothing else, the Silkroad will battle-test the Tor Project. That is useful in so many ways.
posted by CautionToTheWind at 7:34 AM on September 2, 2011

The potential for disintermediating entire swaths of the financial services industry with substatially lower transaction costs isn't progress?
posted by amuseDetachment at 7:35 AM on September 2, 2011

Not if you are intermediating entire swaths of the financial services industry.
posted by CautionToTheWind at 7:36 AM on September 2, 2011 [1 favorite]

If nothing else, the Silkroad will battle-test the Tor Project. That is useful in so many ways.

That would not be my angle of attack, if I was looking to shut them down. If they ever expand beyond novelty size they will be vulnerable to traditional law enforcement when they purchase from wholesalers or manufacture on their own. You would need a cartel behind you to do this on a large scale.
posted by furiousxgeorge at 7:45 AM on September 2, 2011

Since it came up, this is a good read from Brookings:

Shadowy Figures: Tracking Illicit Financial Transactions In the Murky World of Digital Currencies, Peer-to-Peer Networks, and Mobile Device Payments
posted by furiousxgeorge at 7:48 AM on September 2, 2011 [2 favorites]

The thing is, you can nail Silkroad sellers by catching their grow house (etc), investigating their computer and finding out they were selling on Silkroad. But how will you catch the Silkroad owners? Those are the prize, and unless they are sellers (or buyers) too, which would be dumb but somewhat likely, then you need to go trough breaking Tor, which can be done exploiting client-side behaviours.
posted by CautionToTheWind at 7:50 AM on September 2, 2011

I am assuming the Silkroad is like an Ebay of drugs and not the sellers themselves, because that is how I read about it. As much as I like drugs too, the Silkroad is not useful to me.
posted by CautionToTheWind at 7:51 AM on September 2, 2011

Pretty much ebay, yeah, but with anonymous sellers and feedback and even less scam protection. Law enforcement could probably run a sting off it after enough fake transactions.
posted by furiousxgeorge at 8:43 AM on September 2, 2011

What happens when an exchange sends too much money by accident? Nothing, because there are no consequences like with real money.
posted by furiousxgeorge at 9:46 AM on September 2, 2011 [2 favorites]

Dan Kaminsky has a pretty interesting slide deck up on his site about bitcoin - here.
posted by cloax at 9:51 AM on September 2, 2011 [2 favorites]

And follow me here, unless you are a miner or run one of the very few legitimate bitcoin businesses...how are you getting the bitcoins to send?

CREDIT CARDS, WESTERN UNION, PAYPAL, BANK TRANSFERS and then on to companies like Mt.Gox with security issues or MyBitcoin with scamming issues. What the fuck have you gained? -- furiousxgeorge

Man, this is so bizarre. Are you even reading the thread? this comment directly addresses the issue. I said several times in this thread that CampBX doesn't have any of the problems with being hacked that MtGox did. I also mentioned TradeHill.

I also said it in this comment, as well as this one at the very least.

So what exactly are you not understanding? You keep saying you need to use sites " like MtGox or MyBitcoin". To buy bitcoin. But that's like literally nonsensical. For several reasons.

The first reason is that you couldn't buy bitcoins at MyBitcoin. It wasn't an exchange. So MyBitcoin is totally irrelevant to the discussion of converting dollars into bitcoins and vise versa The only reason you seem to want to bring it up is because it might have been a scam -- but it's totally irrelevant. In order to use MyBitcoin, you had to already have bitcoins.

_{And also, MyBitcoin doesn't even exist anymore. They haven't existed since they claimed to be hacked}

I keep saying these things over and over again, and you just keep ignoring it.

Okay, so what about MtGox. Since MyBitcoin is irrelevant, you still have to use MtGox to convert money into bitcoins right?

Well the answer is no. As I said, you can use, , CampBX or TradeHill. Are CampBX or TradeHill "Like" MtGox? In some ways they are, but neither one has been hacked, and they both are based in the U.S. So they are not "Like" MtGox in the way that you claim makes MtGox problematic.

So, furiousxgeorge, seriously, do you understand the following facts:

1) You can buy Bitcoin at CampBX or TradeHill, both of which are in the US and follow US laws, and neither of which have ever been hacked or involved in any scams and

2) MyBitcoin was never involved in the conversion from dollars into bitcoins. Also they no longer exist.

So far all of your comments seem to be based on you not knowing those two things, despite the fact that I have pointed them out over and over again in this thread.

It's very annoying. You keep making comments that seem to ignore those two facts, again and again. Do you understand them or not? If not, why not?

_{Because it's just ridiculous. If one person claims A, B and C and then a second person says no, those are wrong because X, Y and Z in a proper debate you would have to explain why X, Y and Z don't apply. Instead you're just repeating A, B and C over and over again. It really seems like you are either deliberately trolling or are actually unable to comprehend the the difference between buying bitcoin, storing bitcoin, and transferring bitcoin.

Oh and and of course, with regard to the specific comment you were replying too you're totally ignoring the possibility that I might want to send money to someone who doesn't use paypal or in some country where Western Union is expensive. You can buy bitcoin once, and then you can store it on your computer until you need to send it. So if you already have it sitting around, and need to send it overseas you can do so nearly instantly and at very low cost. And to buy the initial bitcoin from MtGox you would only need to pay $0.25 cents to Dwolla and then 0.65% fee to MtGox. That's much less then the fee to send USD through western union, and much quicker and less risky then simply mailing cash. They may live in a country where paypal doesn't operate or bank transfers aren't set up}

_{What happens when an exchange sends too much money by accident? Nothing, because there are no consequences like with real money.}

_{What the hell is this axe-grindy bullshit? Why exactly are you so amped to twist everything to make bitcoin look as bad as possible? When you send bitcoin, it's irreversible. It's like mailing cash. If you send someone real money by accident then they get to keep it as well.

On the other hand, bank transactions can be reversed and it's a huge problem for small retailers when they get scammers doing fake chargebacks. And there absolutely was a consequence. The person who sent the money on accident lost the money.}
posted by delmoi at 11:03 AM on September 2, 2011

You cannot guarantee the accountability of any of these businesses, for the very reason you just posted, the irreversibility. That's not axe grinding, it's attempting to show you my point about how vulnerable the bitcoin economy is to scamming at the moment. This is even worse when combined with the obfuscation and anonymity. Even for the US sites, yes. How is that FBI investigation of MyBitcoin going? Does it exist or was formerly trusted American Bitcoin spokesmen Bruce Wagner lying about that?

There is nothing preventing the exchanges from pulling the same disappearing act with the money/bitcoins in their possession. Even the ones with a good record are not safe compared to an actual bank. I feel I have made these points in different way already, I'm not ignoring your points, I think we just disagree on the level of acceptable risk here.
posted by furiousxgeorge at 11:20 AM on September 2, 2011 [1 favorite]

You can make whatever points you want to about security, anonymity, and trustworthiness, but the fact remains that (aside from fringe cases like illegal pornography and drugs and ill advised speculation) bitcoin is fundamentally worthless in purchasing anything of value, and will continue to remain so until the neckbeards invested in it die of starvation or move on to their next project.
posted by codacorolla at 11:28 AM on September 2, 2011

What exactly makes you think that what CampBX is doing is at all legal? The certifications presented as evidence have already been demonstrated to be meaningless in this thread? They are the very type of things one would present if one were trying to run a scam.
posted by humanfont at 1:28 PM on September 2, 2011

You cannot guarantee the accountability of any of these businesses, for the very reason you just posted, the irreversibility. That's not axe grinding, it's attempting to show you my point about how vulnerable the bitcoin economy is to scamming at the moment. -- furiousxgeorge

What exactly makes you think that what CampBX is doing is at all legal? -- humanfront

Well, there are lots of examples in the 'real world' where you have to trust your counter-party. As a consumer, you get some protection from banks going bad from the FDIC and some protection from transactions that go bad by using chargebacks. But they don't protect you 100%. If you have any investments in the stock market, you're taking a risk that the company isn't fraudulent, like Enron or AIG.

Anyway, if you're so paranoid that you think every business in the world is running a scam and is planning folding up and stealing all the money at some point then all you have to do is buy the coins, then transfer them to your computer. You would only be exposed to risk for a few hours. So it isn't that big of a deal.

If you're so paranoid that you think that every website is just a scam waiting to pull the trap and could do so at any moment and you can't even trust that it will exist for the next two hours that I guess bitcoin isn't for you. But that seems like such a high level of paranoia I don't see how you can operate on a day to day day basis.

Just because something is a theoretical risk doesn't mean that it's a practical risk.

There is an important point here. furiousxgeorge is doing everything he can to make bitcoin look as bad as possible by conflating a lot of different events and companies and websites. But the reality is no major exchange has ever lost anyone's money. So why would you assume off the bat that they are some huge secret conspiracy?

_{Btw, I'd never even heard of Bruce Wagner or this MyBitcoin site until they were hacked. (Although I did listen to the NPR bit that talked to him, I didn't remember his name) I don't think they were as big of a deal, prior to the hack, that furiousxgeorge is trying to make them out to be}
posted by delmoi at 2:14 PM on September 2, 2011

delmoi: One thing I don't understand about the MtGox refund situation - since the bitcoin transactions were irreversable, did MtGox give refunds in bitcoin, or in USD?
posted by murphy slaw at 2:29 PM on September 2, 2011

Well, there are lots of examples in the 'real world' where you have to trust your counter-party.

And in general there are regulations and remedies and enforcement.

Anyway, if you're so paranoid that you think every business in the world

I definitely think there is some risk of that with every business, which is why I like the government involvement in regulating businesses and the accountability involved. Moving into an unregulated currency of questionable value and stability via businesses without these protections is not my idea of safety.

There is an important point here. furiousxgeorge is doing everything he can to make bitcoin look as bad as possible by conflating a lot of different events and companies and websites. But the reality is no major exchange has ever lost anyone's money. So why would you assume off the bat that they are some huge secret conspiracy?

They have lost money, they have covered the losses out of their own funds. MyBitcoin shows the balances people hold at the exchanges are vulnerable.

Should they not be able to cover the losses, as has happened to many a bank, there is no FDIC backup. One of the things CampBX brags about in their FAQ is that they hold their funds in FDIC insured accounts. They do that for obvious reasons, they know it protects them in the case of something going wrong at their bank. There is no such protection for the bitcoins if CampBX itself is the target.

There is a difference between saying something is 100% unsafe and saying something represents a severely increased risk. The bitcoin economy is the latter, at the moment.

Now, if I told you it was risky to do business online with someone in Nigeria, that isn't an ironclad rule. There are plenty of legitimate businesses, but if I told you should be extremely wary because scams are common and your money might vanish into a black hole we aren't going to debate that, right? Unless there is some real, solid advantage to going there you will look for an alternative?

Now delmoi, you are getting close to going personal with the "furiousxgeorge is doing everything he can to make bitcoin look as bad as possible" stuff. Bitcoin itself I think is pretty awesome in a lot of ways, I've been trying to keep the focus purely on the culture of scammyness surrounding it. Scams interest me more than crypto-currency.

I have definitely not been posting the "It's all a big Ponzi scheme" type comments.
posted by furiousxgeorge at 2:42 PM on September 2, 2011

Here is a claim of a loss from a major exchange. There are many other instances reported on various web forums.
posted by humanfont at 2:57 PM on September 2, 2011

delmoi: One thing I don't understand about the MtGox refund situation - since the bitcoin transactions were irreversable, did MtGox give refunds in bitcoin, or in USD?

Well, when the hack occurred, someone created a bunch of fake sell orders, which dropped the price to pennies. One person put in a bid to buy them all for $0.0101, but it wasn't the hacker. MtGox had (and still has) a $1,000 withdraw limit. The person who got the bitcoins said they could have done multiple withdrawals if they were withdrawing bitcoin, but he only did one because he wanted to look "legit". He thought the transaction would be honored.

Then MtGox reversed the transaction and that person who got the coins whined about it on the forum. He ended up with a few $10k worth of bitcoin when the price bounced back.

Then the password file was leaked as well. I'm not sure what the status of all claims people made on message board actually was, whether they were real or just trolls or whatever.

There is a difference between saying something is 100% unsafe and saying something represents a severely increased risk. The bitcoin economy is the latter, at the moment.

Well, you are making a very specific claim. That there is a reasonable probability that bitcoin exchanges are criminal fronts for people who are going to run off with all the bitcoin at some point. As far as I can tell you're not basing that on anything at all other then the fact that it's theoretically possible. But you've never presented any evidence that any of the exchanges actually are run by criminals. All you're doing is bringing up MyBitcoin which was run anonymously in the cayman islands -- very different from MtGox and the US exchanges which are run by real companies in the US and Japan.

I don't think that probably is very reasonable at all. It seems paranoid. How is there a "Severe" risk of MtGox/TradeHill/CampBX being a scam? Simply because bitcoins are irreversible?

Anyway, like I said. If you are that paranoid you can only keep your money on the exchanges for like an hour or so -- once you transfer the money in you can buy bitcoins and then transfer them back out again. You would only be at risk if the company went out of business in that small window. Given that MtGox has been running for years that seems unlikely.

This whole thread you've been trying to associate MtGox with MyBitcoin, for basically no reason as far as I can tell. The fact that MyBitcoin might have been a scam really has no baring on MtGox and other exchanges.

You're taking a theoretical possibility, then basically slandering everyone involved in bitcoin to make it seem like because there is a theoretical possibilty that they could steal your money, and they are involved in the super-shady 'bitcoin' that the theoretical possibility is actually high something that's high probability.
posted by delmoi at 3:18 PM on September 2, 2011

I don't get it. Claims of theft and losses seem pretty easy to discover on Google. Yet you persis in claiming no one has lost money on major exchanges. Is MtGox not considered a major exchange?
posted by humanfont at 3:39 PM on September 2, 2011

Well, you are making a very specific claim. That there is a reasonable probability that bitcoin exchanges are criminal fronts for people who are going to run off with all the bitcoin at some point. As far as I can tell you're not basing that on anything at all other then the fact that it's theoretically possible.

And has been done on a large scale in a similar situation, with MyBitcoin. Done via the excuse of hacking. The next Gox hack could be the same thing, same with any other exchange holding balances. And if this happens there is no government backup. I am not alleging that any of them are run by criminals, what I am telling you is that there is no way to know if they are and there will be no remedy if they are.

Now, let me repeat again, I'm not saying they are all criminals. What I am saying is the lack of oversight means both that scams are more likely and that the damage of the scams is multiplied by having virtually no chance any government is going to be able or willing to recover the lost funds. They will be as gone as a Moneygram to Nigeria.

This level of increased risk and uncertainty gains you...virtually nothing as the currency is used close to nowhere.
posted by furiousxgeorge at 3:42 PM on September 2, 2011

If you're so paranoid that you think that every ~~website~~ currency is just a scam waiting to pull the trap and could do so at any moment and you can't even trust that it will exist for the next two hours that I guess ~~bitcoin~~ regular money isn't for you. But that seems like such a high level of paranoia I don't see how you can operate on a day to day day basis.

Bitcoin is high risk for very little actual benefit. Its sole interesting characteristic is that it's inherently limited, and supposedly immune from inflation by governmental currency manipulation or commodity inflation (eg people discovering new deposits of gold or any other 'solid money' resource). There are three fundamental weaknesses with this viewpoint.

Bitcoin is divisible. Supporters of Bitcoin observe that the limited supply is offset by the fact that Bitcoins can be divided down to the 8th or 12th decimal place or whatever it is, so that it will be practical to trade fractions of a Bitcoin and have adequate liquidity for everyone on the planet for the foreseeable economic future. It seems to have escaped everyone's attention that governments can just impose price controls instead. Oh sure, I can transport Bitcoin through cyberspace without regard to natural borders, and so no one government can force me to pay a particular price...for anything that can likewise be transmitted through cyberspace. Great for movies, music and all sort of other things, but most people's wealth and consumption is in fixed assets and tangible goods. Call me back when there's a matter transporter that lets me bypass whatever price floor or ceiling a government wants to impose on gasoline, bread, water, or cement.

Bitcoin is verifiable. You know it's the real deal because you can download the entire transaction history of the Bitcoin economy and examine the provenance of every single Bitcoin evar! It's anonymous, just like cash, which is a good thing. On the other hand, verifying large transactions basically requires forensic accounting, a bad thing. The more Bitcoin is used and transacted, the bigger the history file gets, and eventually you get back to the trust problem because you either waste your life on transaction costs or you automate the process and hope that your automatic transaction verification software isn't lying to you. Anyway, you'll never eliminate the counterfeit problem because there'll always be the possibility that someone somewhere has a quantum computer and is debasing the currency, just like there's always the possibility that someone will transact successfully with fake gold or dollars and skip town before we realize we've been had.

Bitcoin represents real work. Yes, real computer power and electricity has been used to mine all those numbers, and c'mon, if anyone has a general-purpose quantum computer that they're running in secret then we've probably got bigger worries than currency stability. OK. So Bitcoin is a potlatch currency which represents a fixed amount of wasted energy that cannot be reassigned to any other purpose whatsoever other than acting as a dictionary for crypto attacks. Awesome.

I don't think Bitcoin is evil or even that shady, I just don't see it offering much actual value compared to existing currency. It has significant transaction costs and uncertainties of its own. bitcoin fanatics look a bit deranged to everyone else because it's glaringly obvious that all the people who are feverishly 'mining' Bitcoin is hoping that it will catch on with the masses and that when it does the miners will suddenly find themselves wealthy for a cheap investment in GPU hardware and increased electricity bills. Now, it's true that quite a lot of people did make a great deal money in various gold rushes throughout history. However, they had an additional starting advantage, which was that gold was already agreed to be valuable before they went into the mining business. You and your fellow bitcoin miners are trying to sell everyone on the idea that the value comes from the limited supply, and since population is expanding but the stock of bitcoins is mathematically limited, you think you've slain the dragon of inflation and are mere steps away from feasting on some tasty dragon steak and decorating your house with dragon bones.

What has actually happened is that you've stumbled into an elephant's graveyard and are busy building the digital equivalent of Bartertown.
posted by anigbrowl at 3:48 PM on September 2, 2011 [2 favorites]

anigbrowl:

I think you're arguing against a strawman. The defenders of bitcoin don't see the deflationary aspect as the primary draw. In any case, all of your arguments are also applicable towards gold.

I don't think bitcoins will ever completely replace the US Dollar. The argument in favor of bitcoins is I believe that is a far superior alternative to gold. It's far better for people to be using electricity to ensure the accuracy of the blockchain than digging holes in the ground for a shiny yellow metal. In my eyes, success for bitcoins is it fully replacing the function of gold and the price of gold goes down to 0.

You have to understand that pure Chartalist money has only been in effect for exactly 40 years for the US. Hate on gold all you want, but gold as commodity money has existed for a really long time, the potential for a replacement is a big deal.
posted by amuseDetachment at 4:28 PM on September 2, 2011

Wow, people have really weird and strange fetishes for their current monetary system.

I spent a bit of time looking at the bitcoin protocol. The technology seems legit. I can't conceive. Of any holes in it. People complaining about the number of scams and blatant rip offs that have occurred? Ummm... that's not a bug, that's a feature of a fairly anonymous, P2P, transaction fee free currency.

And wuwei, your rant is pretty abstract and weird but also offensive. Your argument has the same cogency as that of GWB's call of solidarity: "You're either with us, or your against us!" Personally I don't need or spend USD because I don't live in America.

I understand that you are more comfortable paying for things with a monetary unit that rapidly devalues. That's fine. Other's of us are concerned about the fact that inflation is a regressive tax. I literally think it fucking stinks that everyone's wages are worth less every year, while some people's assets are skyrocketing in value. That's inflation, and that is the cost of increasing the money supply. In London the average wage is decreasing, the average cost of living is increasing, and asset prices are also increasing. So rich people get richer, poor people get poorer. Why is this occurring? Largely because of the huge amounts of currency (loans) that are being pumped into the system. I'm not a libertarian and really resent the stupid way that the American political system has somehow conflated the fear of inflation with libertarianism. Everyone who is paid a wage should be scared of inflation, every fucking union in the world should be busting the balls of people that want to inflate. Because every single person who earns a wage, who doesn't sit back and make money from their assets suffers from inflation.

I get so frustrated sometimes listening to American's forget that this is a LABOUR issue. Not a right wing or libertarian issue.

So yeah, Bitcoin might not work out. But whatever replaces it will eventually be better than the situation we have at the moment.

The bit about someone cornering the market? Do you even know how stupid that sounds? An individual spends millions buying every Bitcoin available for sale. Cool... and then what? They sell them back at a reduced rate? Clever. Never mind that there are more divisible units of Bitcoin available than there are atoms in the universe.
posted by aychedee at 4:44 PM on September 2, 2011

Good grief.

Look, gold has one great advantage as commodity money: it's so dense that you can hide a lot of value in a small hole. You can go back and dig it up afterwards and it won't have rusted or reacted with anything. These same chemical properties make it easy to work with tools made from common metals like iron. That's it. That's the whole upside of gold as a currency.

As you point out, commodity money has existed for a long time. So while I agree that digging holes in the ground to extract more gold is a rather wasteful activity, gold is already freely available, transferable, tradeable, and recognizable. If you want something with all the security and cachet of gold, the the ideal solution to your needs is...gold.

Now, it's true that gold can also be confiscated and a great deal of gold is used for conspicuous consumption by people who are poorly educated and only have the most tenuous grasp on economic or monetary concepts. The vast majority of wealthy and powerful people no longer transact business by schlepping sacks of gold to and fro, but use the fiat money infrastructure instead. Gold has some value as a hedge investment, but as a primary store of value it's only really impressive to the financially illiterate.

Unfortunately, you're going to have a very difficult time persuading the financially illiterate, who are numerous, to adopt Bitcoin. Because they're illiterate. They will go along with something like Bitcoin if there is a huge infrastructure and you can use for anything, including crack on the street at 3am. But they're not going to adopt it because they appreciate strong crypto. Among the people who do understand and appreciate strong crypto, a good number of them would just as soon use strong crypto to secure their claim on either fiat money (in bank accounts) or actual useful commodities like oil and minerals (in futures contracts).

Bitcoin would be quite useful if we didn't have any sort of commodity money and we were in desperate need of some substitute good with similar properties to gold. But if all you want is some store of value that can be traded for an equivalent amount of work, then buy oil - you can even work out the amount of work it will do to umpteen decimal places, using Science. If you want something super-portable that you can hide from the government and/or local barbarians, diamonds are famously convenient. And if you want something that's easily divisible, portable, and can be exchanged, assayed, or organized with total anonymity, I invite you to consider the thriving markets for heroin and cocaine.

Look, you've found a way to create something that has some of the desirable properties of money, and you got on it early. If enough people would buy into the idea that it was money, you would be rich, rich, rich. And that would be nice because there are no more continents to explore, no actual dragons to slay, and your chances of stumbling on a fortune in real-life commodities are about zero - the great age of terrestrial exploration is over, and you don't have the funds or the technology to explore the ocean floor or mine asteroids. So, Bitcoin, woohoo - if we all wish hard enough perhaps we can transfer the perception of value to this thing, give our robot a soul. I understand this. I like crypto-currencies as a theory. I applauded the elegant conceptual foundations of Bitcoin when I first encountered it more than 2 years, because I have found alternative currencies and crypto fascinating for a good 20 years.

You are in the grip of an exciting delusion. Enjoy it while it lasts, but please don't lose sight of the opportunity cost, because that's what's going to dictate the quality of your hangover when it wears off.
posted by anigbrowl at 5:09 PM on September 2, 2011 [2 favorites]

And has been done on a large scale in a similar situation, with MyBitcoin. Done via the excuse of hacking. The next Gox hack could be the same thing, same with any other exchange holding balances.

Well, you just keep repeating the same thing. MtGox and MyBitcoin were both based on bitcoin, and it's thought MyBitcoin may have been a scam. But that has nothing to do with MtGox at all.

From the way you're writing, it's like you think every 'real money' transaction is 100% scam proof. That's obviously absurd. Putting your money in an FDIC insured bank is rock solid, but there are lots of other transactions that carry huge risks.

What is the difference between saying "MyBitcoin was a scam, therefore there's a serious risk that all bitcoin companies are scams!" and saying "Madoff was a scam, so there's a serious risk that all hedge funds are scams!" There's no difference.

The idea that people operating with real money never get scammed is completely absurd. Both bitcoin and real money are susceptible to scamming. People scamming using bank transfers just have to make sure that they money is physically moved before their scam is detected.
posted by delmoi at 5:17 PM on September 2, 2011

Never mind that there are more divisible units of Bitcoin available than there are atoms in the universe.

The Bitcoin FAQ tells me that there is a hard limit of about 21 million bitcoins (although it predicts it will take until the year 2140 to actually produce that many), each of which can be divided into 10^8 pieces. So about 2 quadrillion fundamental units.

There are more atoms in a nanogram of water.
posted by Flunkie at 5:22 PM on September 2, 2011

Whoops! Microgram, I mean.
posted by Flunkie at 5:24 PM on September 2, 2011

Well, you just keep repeating the same thing. MtGox and MyBitcoin were both based on bitcoin, and it's thought MyBitcoin may have been a scam. But that has nothing to do with MtGox at all.

What I have said is that Mt.Gox is vulnerable to the exact same type of incident, be it scam or hack. In this case I find it more likely because of the security issues Gox has already faced and the general shadyness present in the bitcoin community. Further, I feel this damage would be more intense than in the normal economy because of a lack of law enforcement ability to adress the problem.

From the way you're writing, it's like you think every 'real money' transaction is 100% scam proof.

The idea that people operating with real money never get scammed is completely absurd.

I have quite directly said otherwise. I think we have sufficiently driven this debate into the ground and I'm not comfortable with your choice to assign absurd strawmans to me. You can have the last word on this if you like.
posted by furiousxgeorge at 5:27 PM on September 2, 2011

_{The more Bitcoin is used and transacted, the bigger the history file gets, and eventually you get back to the trust problem because you either waste your life on transaction costs or you automate the process and hope that your automatic transaction verification software isn't lying to you. Anyway, you'll never eliminate the counterfeit problem because there'll always be the possibility that someone somewhere has a quantum computer and is debasing the currency, just like there's always the possibility that someone will transact successfully with fake gold or dollars and skip town before we realize we've been had.}

Yeah, I'm sure if someone developed a working quantum computer they would keep it secret and use it to make fake bitcoins, instead of collecting their Nobel prize and making billions.

The large blockchain is a problem that will need to be solved in the future.

It seems to have escaped everyone's attention that governments can just impose price controls instead. Oh sure, I can transport Bitcoin through cyberspace without regard to natural borders, and so no one government can force me to pay a particular price...for anything that can likewise be transmitted through cyberspace.

So what, exactly? Does it matter if people don't end up buying gasoline with bitcoin? If bitcoin becomes a viable system for digital goods, that would be great. Bitcoin is, right now, the only realistic micropayment system out there. You can send a fraction of a cent of value with bitcoin today. That's never been feasible across the whole internet before, the whole world even.

I don't really care and I certainly don't expect bitcoin to 'take over' the world. That's ridiculous. I just think it's a useful system for sending money online at a low cost. If someone runs off with a small amount of money for a digital file, it's not really that big of a deal. I don't think bitcoin will be used for large 'legitimate' transactions any time soon.

You and your fellow bitcoin miners are trying to sell everyone on the idea that the value comes from the limited supply,

The value comes from its utility. Once two people are using bitcoin it's very easy to transfer money between them. It can be a pain to fund your account using dollars initially -- I've never had to do that -- but once you have them sending and receiving bitcoin is actually much, much less of a hassle then sending and receiving dollars.

Thing about the difficulty sending and receiving money international between individuals. It's easier to send money to a company then it is to an individual, because they'll have invested the effort in setting up a payment system for you to use. But between individuals, it can be a pain. Bitcoin solves that problem. Bitcoin makes micropayments possible. If anyone thinks bitcoin is going to 'take over' they're delusional.

Not everyone lives in the U.S. by the way. Look at where Bitcoin is most popular on google trends, it's in Russia and former soviet countries. Not everyone lives in the US and has the FDIC backing up their money.

I applauded the elegant conceptual foundations of Bitcoin when I first encountered it more than 2 years, because I have found alternative currencies and crypto fascinating for a good 20 years.

You are in the grip of an exciting delusion. Enjoy it while it lasts, but please don't lose sight of the opportunity cost, because that's what's going to dictate the quality of your hangover when it wears off.

Sounds like sour grapes to me.
posted by delmoi at 5:46 PM on September 2, 2011

angribrowl: All the value from gold is application and arguably bitcoin is far superior in many respects. For the purposes that gold serves, bitcoin does better.

Gold's function is not primarily for the financially illiterate, its function is a currency which does not require a state or private actor as an intermediary. This feature has been of value in many parts of human history. The appeal of bitcoin is merging the lack of a state/private intermediary with the benefits/speed of electronic transactions. If you think the majority of the world's gold is held by the financially illetarate, you are seriously delusional.

I'm not quite sure you understand what money is. Money is a medium exchange, not a store of value. Basing a currency on energy as an example shows a serious lack of knowledge on the implications. Basing money on something that is inherently related to technology and difficult to store. Energy lacks some serious density, and if you wanted to make it financially viable, you need to slow down global production to a ridiculous level. Diamonds lack value as a serious currency because it's not a true commodity. Basing a market on heroin/cocaine is a terrible idea because the true commercial value assuming it were legalized for the currency would be terrible because currency instability would create incredible inflation/instability (it's easy to make more cocaine if it were legal).

Bitcoins are a better gold with the properties which make gold desirable. Currencies not backed by gold are only 40 years old for the US. Advocating bitcoins may be risky, but believing in pure MMT has substantially less history than you think. Please do educate yourself on the history of money. I recommend Debt: The First 5000 Years for a left perspective and The Ascent of Money for a rightwing perspective. The value of fiat money for society is marked by forgiveness of debt (bankruptcy and creative destruction), this value is arguably substantially more significant than the social good from inflation. For the past three years, this social contract has been violated by not putting failed banks into receivership. These costs have now been placed on the greater society to pay off bank debts instead of debt forgiveness. Private equity has been favored over public good. This is the complete opposite of the value of fiat money as a social good. The modern history of money is incredibly short and recent actions has serious implications on the long term success of a currency, as history shows. Bitcoin came into existence after these social failures, not before. The thing the tea partiers randroids don't understand is that this perspective and the underlying implications for something like bitcoin is a lot more left wing than they truly understand.

I'm a lot less delusional than you think, I cannot emphasize enough that money is not a store of value, it's a unit of exchange and accounting.
posted by amuseDetachment at 6:00 PM on September 2, 2011

The value comes from its utility. Once two people are using bitcoin it's very easy to transfer money between them

LOL. It might he easy to send bitcoins between two individuals, but bitcoins are not money. If you are converting them to local currency it is difficult and high cost. Even before you consider the volatility of the market.
posted by humanfont at 6:11 PM on September 2, 2011

How are bitcoins not money? Was the US Dollar a hundred years ago also not money (or arguably as recent as 40 years ago)?

These costs and volatility exist because the market is exceptionally small. All currencies start somewhere. Silver as a currency was historically just as volatile.

Believing that bitcoins are not money implies a certain inability for us to really discuss this topic, much like discussing evolution with someone that believes in creationsim. There's some fundamental disagreements on basic facts.
posted by amuseDetachment at 6:18 PM on September 2, 2011

There are some definitions of money it might apply to and some it might not, I think you would have to agree on a definition first.
posted by furiousxgeorge at 6:24 PM on September 2, 2011

For example, the OED, Merriam-Webster and Wikipedia all prominently feature the words "generally accepted" as parts of their definitions for money. While there are people who accept it, I think it might be a bit of a stretch to say that it's generally accepted.
posted by Flunkie at 6:35 PM on September 2, 2011 [1 favorite]

Flunkie: How are bitcoins not "generally accepted" definitions of money? I'm genuinely curious. I've stated clearly that bitcoins are commodity money. Please explain how it is sufficiently different from gold or gold-backed currencies. Is gold not money? Again, if you believe that gold is not money, there is some serious disagreement on basic facts going on here. Denying that gold is not money would get you laughed out of an economics classroom faster than advocating the philosophical merits Objectivism would get you laughed out of a philosophy classroom.

If you don't think commodity backed currencies are money, then the US Dollar has only really been money for the past 40 years and we have some serious disagreements of incredibly basic definitions. Are we going to get all metaphysical and discuss what the definition of "is" is?
posted by amuseDetachment at 6:52 PM on September 2, 2011

Sorry, I read the wikipedia article. First, I'd say wikipedia/dictionary gives only a cursory shorthand inaccurate explaination of what any complex topic relates to. The defining charactaristic of money is not the "generally accepted" part, that's why it's not part of many definitions of money, e.g. the OAD. The core definition of money is inextricably linked to the definition of a currency. If something is a currency (bitcoins are definitely a currency), then a unit of that currency is money. It's really that simple. I really don't see how you can disagree with that.
posted by amuseDetachment at 7:01 PM on September 2, 2011

Wow, you're really quick to jump to conclusions from little basis. I point out the term "generally accepted", and within one short paragraph I'm suddenly laughed out of the classroom for (apparently) denying that gold-backed currency is money. Within two short paragraphs I am (apparently) questioning the meaning of "is" and getting "all metaphysical".

To answer your question in your first sentence, before you suddenly started going off on strange tangents wherein you ascribe random beliefs to me: I think that it's a bit of a stretch to say that bitcoins are not "generally accepted" because "generally accepted" here is referring to things that you can take into essentially any store and use to purchase essentially any product with essentially zero hassle or even consideration on the part of the merchant, and I don't think that bitcoins fit that bill.
posted by Flunkie at 7:05 PM on September 2, 2011 [1 favorite]

I've been in some pretty remote and distant lands and there ain't nowhere someone won't take the greenbacks printed by Uncle Sam. That's money.
posted by humanfont at 7:12 PM on September 2, 2011 [1 favorite]

Flunkie: no I this is merely a problem of communications, I assumed you referred to the "genereally accepted" definition of money, but then checke and realized that wasn't what you meant.

The reason there is hat confusion is that "generally accepted" I'd not part of the core definition of money.
humanfont: Canadian Dollars are not accepted worldwide, are they money? Is gold money? Money by definition is any currency unit that is a medium of exchange. Just because the market is small doesn't invalidate it as money.

Quite frankly, many in the bitcoin community don't want bitcoins o be called money, and in certain legal definitions it isn't. But the fact remains that bitcoins are a currency and there is a small functional economy around it (albeit very volatile).

The reason you're getting so much pushbaxk is I think you don't really care avout definitions (nobody really does, it's a boring argument to have). By calling it not money, it gives the impression that you want to discredit and belittle it by implying that it is pure fantasy and ha no inherent value, I think that's the real issue at hand.

Bitcoins are a currency whether you like it or not and it is exchanged as money, this is a really silly argument as it deals in basic facts. No is saying the economy is as developed as us dollars or gold (or even WoW gold)
posted by amuseDetachment at 8:23 PM on September 2, 2011

Sorry about the bold, I'll try to respond on my computer from now on, if a moderator can fix that I'd be really appreciative.
posted by amuseDetachment at 8:25 PM on September 2, 2011

Jesus. I never even said it's not money. Now I'm discrediting, belittling, implying it is pure fantasy, blah blah blah, whether I like it or not!

Well OK then.
posted by Flunkie at 8:35 PM on September 2, 2011

LOL. It might he easy to send bitcoins between two individuals, but bitcoins are not money. If you are converting them to local currency it is difficult and high cost. Even before you consider the volatility of the market.

I dont know how you can say it's "High cost". The fees on MtGox are 0.65% per transfer. Dwolla, which is the most popular way to move USD in and out of MtGox costs $0.25 per transaction.

So, in my personal experience it's not expensive at all. It's true that the volitility is a risk factor. CampBX actually allows you to sell BTC short in order to hedge your bets (or at least it's a planned feature)

The cost is less then using paypal I think. WAY less then using Western Union
posted by delmoi at 8:52 PM on September 2, 2011

Flunkie: sorry I just assumed it's what you meant when you brought up "generally accepted", i'll try not to assume what you imply in the future I also concede I came off a little more hostile than I shoul have, sorry!

However I will absolutely defend that bitcoin is money in the way we colloquially call money or academically define money (legal definitions are another mater dependent on the jurisdiction, but "legal money" is not the same as "money"), and I see it as indisputable as evolution or global warming.

delmoi: Alao dint forget if you receive money in bitcoins (e.g. you sell a good or service) and pay in bitcoins that same money, the fees are pretty close to zero for all intents and purposes...
posted by amuseDetachment at 9:04 PM on September 2, 2011

Anyway, just to clarify. I think bitcoins are a great micopayment system for the web. I personally don't think trusting MtGox is any more risky then trusting any startup that's about the same age. It's been hacked, but they recovered and I would imagine they've spent a lot more time on security since then. I don't think they will take over the monetary system or anything like that -- anyone who thinks that is being ridiculous.

If you're super paranoid, you only have to use the exchanges to buy money. You don't need to leave your money there. But ultimately if you're really paranoid about the exchanges being scams then I suppose you can't use bitcoin very easily. It is possible to buy bitcoins directly from people face to face if you want. Check to ensure the transaction is validated before handing over the cash. If you live in a big city, I'm sure you can find someone to sell them directly.

But I would put the risk of using bitcoin as about the same as buying a stock in the stock market. As long as the "bitcoin economy" is going, bitcoins will have value. If the economy dries up, then they'll go down in value. I don't think anyone is claiming they're 100% safe investment right now. Maybe some people who are morons are. I don't think they're going to take over the world.

But once two people are already using them, sending bitcoins between them is more seamless then other transaction systems -- it quick, it's and it there's no third party that can potentially screw up

_{(like with paypal freezing your account Like they did with metafilter and with the author of minecraft. That would suck if you needed the money right away. And you could potentially lose the money for a while)}

delmoi: Alao dint forget if you receive money in bitcoins (e.g. you sell a good or service) and pay in bitcoins that same money, the fees are pretty close to zero for all intents and purposes...

Yup, sending and receiving bitcoin is basically free (I think a 'high priority' transfer might cost 0.01 btc? I'm not actually sure. But it's practically free compared to paypal)
posted by delmoi at 9:07 PM on September 2, 2011

Sounds like sour grapes to me.

How so? It's not like I missed out on the opportunity or anything. I mined some bitcoins for a while, watched the project grow, but decided it was a bust and gave the BTC I'd mined to someone on Hacker News. I just don't see it ever reaching critical mass, but it seems to have been good for sales of GPUs.
posted by anigbrowl at 9:51 PM on September 2, 2011

Well, it's certainly possible that bitcoin won't become all that popular. We'll have to see. Bitcoin network growth has plateaued. For all we know Bitcoin is as bit as it will ever get.

But even now, between two people who use the software, it represents an easy way to send value. For digital goods, it's fantastic and you can do real micropayments right now. I don't buy all the libertarian hype about bitcoin changing the world except for the fact that it's a simple and safe way to send and receive money online. Right now it's easy to send money online, but it's difficult to receive it. There's all kinds of risks of chargebacks and all that other nonsense. Bitcoin solves those problems today
posted by delmoi at 12:36 AM on September 3, 2011

Not everyone lives in the U.S. by the way. Look at where Bitcoin is most popular on google trends, it's in Russia and former soviet countries. Not everyone lives in the US and has the FDIC backing up their money.

Well, then they could adopt Bitcoin. Those of us in the US, where we have stuff like the FDIC could, for once in our fucking lives, maybe not revert to a previous, more bad time just because "liberty" is more important than not going broke when a bank has the runs.
posted by dirigibleman at 12:40 AM on September 3, 2011

If you're keeping substantial amount of cash in a savings account, you're probably not getting a good deal anyway. FDIC insurance is an insurance against fractional reserve banking, which is a non-issue if you hold bitcoins yourself. In any case, if you're holding a substantial amount of cash-equivalents (M0/M1) in normal markets you're doing investing wrong.
posted by amuseDetachment at 1:19 AM on September 3, 2011

In order for this to really work, the bitcoin needs to have an interest rate and have a floating exchange rate on the open currency markets. Otherwise, nobody will ever take it seriously. The other problem is that central banks of the nation which uses the currency sets the interest rate, and the value is largely derived from that nation's economy along with monetary policy. These are transparent and well-defined mechanisms which allow the global currency markets to function in a more or less rational way. A currency with no central bank, no nation, no interest rate or ability to float in the open markets, and a vulnerable electronic exchange mechanism is doomed except maybe for the black market. In that sense it may succeed but will always be particularly vulnerable to hacks and highly volatile in exchange value. There is a reason we have currency markets and central banks backed by nations and their economies.
posted by krinklyfig at 1:51 AM on September 3, 2011

Dirigibleman, there are still benefits to using bitcoin for sending and especially receiving money that you get from bitcoin.

Unlike sending your credit card number, you never have to worry about your credit card number getting leaked and being used by other parties. Now granted, you can always do a chargeback if you catch it within 90s. (and by the way, let's keep in mind that Credit card and bank transfers become irreversible after a certain period).

Now obviously you can argue that the hassle of actually acquiring bitcoins in the first place outweighs savings in hassle of using your credit card. Looking around though there are sites that let you buy them with Google checkout, although at a premium (I'm not linking them because I don't know anything about them)

--
But let's look at the receiving side. That's where bitcoin is a huge improvement over the status quo. Have you ever actually set yourself up to receive money online? It's actually a huge pain. If you use paypal there is a reasonable risk of your account frozen, and people actually recommend you never keep a balance on Paypal. As I said it's happened to metafilter and minecraft and lots and lots of other sites. I bet more people have been screwed by paypal then have been screwed for using bitcoin.

If you want to use another service, it's something of a shot in the dark. But the fact that the biggest service out there is hated ought to be a big red flag.

Then once you get things setup, you still have the risk of chargebacks and other random bullshit. It's actually a huge problem for online merchants.

And of course, it's basically impossible to do true micro-payments any other way, as far as I know.

With bitcoin there are basically three steps from go from nothing to reciving payments online:

1) download, install, and run the software

2) Copy and paste your receiving address from the software and send it to the person you want to receive money from.

3) Wait for the person to send the money. Once they do, the transaction will show up immediately, and will take a while to be authenticated

You'll have the money basically right away.

If you sell your bitcoins on TradeHill, they can actually mail you a physical check for your USD balance if you want. That supposedly takes 5 business days compared to 3 for paypal. And you don't need to give them an of your banking details, just your mailing address.

Are there any other payment systems that are as low cost and convenient?
posted by delmoi at 1:55 AM on September 3, 2011

FDIC insurance is an insurance against fractional reserve banking

Not exactly. It was instituted to ensure relative safety in deposits so as to prevent a run on the banks. People used to withdraw their money in a mob-like frenzy when the economy got bad enough, which compounded problems in a fragile financial system. See: It's a Wonderful Life.
posted by krinklyfig at 1:56 AM on September 3, 2011

But I would put the risk of using bitcoin as about the same as buying a stock in the stock market.

Those risks are not reasonable for a currency. People buy and sell stock for very different reasons than they use currency to exchange for goods and services. There is such a thing as trading and investing in currency, but that can only be done properly on open exchanges. MtGox is not one, nor is it connected to interbank exchanges.
posted by krinklyfig at 2:05 AM on September 3, 2011 [1 favorite]

Are there any other payment systems that are as low cost and convenient?

So, call it what it is, an alternative to PayPal for online payments. It's not a good foundation for a currency.
posted by krinklyfig at 2:08 AM on September 3, 2011

krinklyfig:

People used to withdraw their money in a mob-like frenzy when the economy got bad enough, which compounded problems in a fragile financial system.

Right. There's only that problem because of fractional reserve. And it's that fractional reserve that enalbes a pays out interest. These days this interest payout is effectively zero (because we have far too much liquidity and not enough demand in the system, but that's an entirely different discussion). Banks take your money and lend it out, that's why there's a problem with a run on the bank. Bitcoins are a different matter entirely. I'm only mildly exaggerating when I say with bitcoins you are the bank. Bitcoin transactions occur with substantially fewer intermediaries. You don't have default risk because there is no debt markets. Bitcoins markets favor equity over debt. There's a lot of huge implications for equity financing over debt financing (especially when you do it large-scale), but they're not exactly relevant to your arguments. You have to understand that fractional reserve is a DIRECT cause for the existence of deposit insurance. This is not a matter of opinion.

A currency with no central bank, no nation, no interest rate or ability to float in the open markets, and a vulnerable electronic exchange mechanism is doomed except maybe for the black market.

I cannot emphasize enough that commodity backed currencies (e.g. gold) has been in existence far far longer than the US Dollar in its current incarnation (40 years). Bitcoins, like gold, float on the open market like any other currency. Those arguments are just as valid against gold as it is with bitcoins. You can make arguments that a Chartalist backed currency is better for society, and I'd be willing to have this discussion, but saying commodity money as the basis for currencies is not viable. Whether commodity money is more viable for the foundation of currencies or an IMF ADR situation is an interesting discussion, but I really don't understand why it's not a viable foundation for a currency. It might not be viable enough to encompass the entire global economy, but even if it replaced the market cap of PayPal it would be wildly successful.

So, call it what it is, an alternative to PayPal for online payments. It's not a good foundation for a currency.

What's the difference? Currencies are a medium of transactions. You're doing currency wrong when you hold cash equivalents long-term. Bitcoins are not an investment, that's only for teabaggers, they're a medium for commercial transactions, much like dollars. Nobody holds cash long term.
posted by amuseDetachment at 2:13 AM on September 3, 2011

Ugh. That last comment worked in live preview. That worked in live preview!

In order for this to really work, the bitcoin needs to have an interest rate and have a floating exchange rate on the open currency markets. Otherwise, nobody will ever take it seriously.

Yeah you can't price it based on the same metrics you might use for an ordinary currency but bitcoin does have a 'central bank', one that's defined by the bitcoin software itself. You know exactly what it will do in terms of the money supply. Instead of lending it to banks, it's distributed directly to miners. You could think of that as zero interest loans to miners if you wanted too, except with a fixed amount lent every two weeks or so.

You can also measure the economy itself directly, since all transactions are public.

But I think people have two practical questions: 1) Can I convert bitcoin into my currency and 2) How well will it work as a store of value?

So the question I would ask is, how do your criticisms apply to those two questions? Will the fact that bitcoin has no interest rate or human-run central bank affect people's ability to convert it to USD? How will it affect the value?

So, call it what it is, an alternative to PayPal for online payments. It's not a good foundation for a currency.

Uh, that's fine with me.
posted by delmoi at 2:20 AM on September 3, 2011

Right. There's only that problem because of fractional reserve.

Not precisely .... that happened on a regular basis during recessions and depressions, long before the modern system of fractional reserve banking, when we had currency backed by precious metals and in other systems. It's a very old problem. But if you're referring to banking systems where deposits held could be less than the total deposits, then possibly. Even so, it's more a problem of credit expansion and contraction cycles than fractional reserve banking, per se.

I just pulled this off Wikipedia because it's late and I'm not going to be involved in doing a lot of work right now, but this is easy to reference:

Bank runs first appeared as part of cycles of credit expansion and its subsequent contraction. In the 16th century onwards, English goldsmiths issuing promissory notes suffered severe failures due to bad harvests plummeting parts of the country into famine and unrest. Other examples are the Dutch Tulip manias (1634–1637), the British South Sea Bubble (1717–1719), the French Mississippi Company (1717–1720), the post-Napoleonic depression (1815–1830) and the Great Depression (1929–1939).

Bank runs have also been used to blackmail individuals or governments; for example in 1830 when the British Government under the Duke of Wellington overturned a majority government under the orders of the king, George IV, to prevent reform (the later 1832 Reform Act), he angered reformers and so a run on the banks was threatened under the rallying cry "To stop the Duke go for gold!".

What's the difference?

For one, interbank exchange. That's the only way to have a currency which will last. It requires the mechanisms I described. Do you consider PayPal currency? Nobody who trades or invests in currency does.
posted by krinklyfig at 2:29 AM on September 3, 2011 [1 favorite]

Yeah you can't price it based on the same metrics you might use for an ordinary currency but bitcoin does have a 'central bank', one that's defined by the bitcoin software itself. You know exactly what it will do in terms of the money supply.

The exchange rate doesn't float like global currencies. That's one of the major problems China is facing in their near future. If they don't allow the Renminbi to float on the open exchanges rather than be pegged to the USD, their economy will continue to be too volatile and heavily managed to attract long term investments and beneficial long-term trade agreements. It's a complex problem to be sure, but the best way to ensure your currency is not used on open markets is to use a currency which is not traded on open markets, with no transparent exchange or interest rate. If a bank can't invest in the currency through foreign exchange (forex), if it has no interest rate or national economy to back it, it's not going to be very stable nor trustworthy. If you can't use it to buy goods and services today when people need it on an every day basis, like for rent, gas, food, etc., it's not going to be worthwhile for people to use it, and no bank will ever invest in it.
posted by krinklyfig at 2:38 AM on September 3, 2011

IMF SDRs above (typo).

Also,

People buy and sell stock for very different reasons than they use currency to exchange for goods and services. There is such a thing as trading and investing in currency, but that can only be done properly on open exchanges. MtGox is not one, nor is it connected to interbank exchanges.

I would ascribe that towards the fact that the market is incredibly new and small. Realize that bitcoins were released in 2009 and only really became a currency this year (and really for less than 6 months). This is ridiculously new. A lot of tools don't exist yet. I think you'll see really cool new tools and ways to use bitcoins start coming online especially relating to the more complex transactions in our economy in the coming months, high-margin bank related transactions such as Letters of Credit can be made substantially cheaper with bitcoins, some transaction types even completely disintermediated. This isn't just about buying coffee with bitcoins. The people (I highly doubt it's just one person) that designed bitcoins put in some serious forethought into the system. One look at the way it handles transactions shows some serious thought into it. I'm not exaggerating when I say it can disintermediate entire swaths of the financial services industry.

But if you're referring to banking systems where deposits held could be less than the total deposits, then possibly. Even so, it's more a problem of credit expansion and contraction cycles than fractional reserve banking, per se.

Right but can we agree that without fractional reserve (i.e. the bank lending out money), that it's quite difficult for the money to suddenly disappear? Say I made a bank in USD that just took your money and held it as cash and didn't lend it out. There isn't any substantial default risk. The default risk in banking with USD is entirely derived from fractional reserve, I don't see how this is an argument at all. Credit cycles imply lending by definition. Bank runs cannot be a problem by definition if the bank doesn't lend out the money. Why is this a point of dispute? My point is that a bitcoin economy eliminates the role of banks as a temporary storage of currency, nothing more nothing less. Look the FDIC is an interesting institution, there's been a lot of arguments recently about how the FDIC doesn't charge the banks enough for FDIC insurance, because the long tail risks aren't priced in, and insufficient oversight during the Bush years encouraged moral hazards. The FDIC isn't perfect, there's some serious tradeoffs which really doesn't apply AT ALL to bitcoins.

Do you consider PayPal currency? Nobody who trades or invests in currency does.

No. PayPal is money, it isn't a currency a priori, it's derived from the USD or whatever currency you choose to use. True interbank exchanges don't exist because it's so new and untested. Currencies don't become a global force out of nowhere.

The exchange rate doesn't float like global currencies.

What? The currency is as real of a float as there is. There's no counter you can go up to that will exhcange an exact amount of bitcoins for dollars. It's a true free float currency. There is no Bitcoin Company. There is no bitcoin Central Bank. There is no server that you talk to and no central exchange. It's as much of a float as the gold market. There's no widespread interbank exchange for gold, but there is a healthy market. Bitcoins are the same way. How can you possibly say it doesn't float like global currencies?
posted by amuseDetachment at 2:42 AM on September 3, 2011 [1 favorite]

I would ascribe that towards the fact that the market is incredibly new and small. Realize that bitcoins were released in 2009 and only really became a currency this year (and really for less than 6 months). This is ridiculously new.

Currency is not new. The problems are well understood, because we've been using and trading currency for centuries.

What? The currency is as real of a float as there is.

Not if it's not traded through interbank exchange. MtGox is not exactly trustworthy, and it's insular. What's the interest rate on it? Hmmm. Nothing? Why should I buy some? Because I can't buy anything I need with it today. It's an interesting idea. It's a bit fanciful, though. Good maybe as a PayPal substitute. I can't take it much more seriously than that.

There's no widespread interbank exchange for gold, but there is a healthy market.

Despite what Ron Paul might lead you to believe, gold is not currency. It's a precious metal with little inherent value. If you're investing in it, it's best used as an insurance policy. It's not a good idea to exchange all your currency for gold, nor to invest more than a small percent, certainly not very long term. The value fluctuates in a highly volatile manner and is dependent on many factors, most of them psychological. At any point in an intermediate or even short timeframe it could be worth considerably more or less than what you paid for it. In very weak economies with highly devalued currency, sometimes people do use it in exchange for goods and services. It's still not considered currency. My landlord won't take it. The gas station won't. Nor will the grocery store. I have some money in my mouth in the form of gold caps on a few back molars. Even so, can't get lunch even if I pulled my teeth out.
posted by krinklyfig at 2:52 AM on September 3, 2011

Let me put it this way. If I'm a carry trade investor, which is a conservative, long-term currency investment, I want to borrow some currency with a high interest rate against a short of currency with a low interest rate, with leverage (as high as 200:1, in the US 50:1). If I can't do this with bitcoin, since it has no interest rate and is not traded through forex, why should I invest in it? I'm essentially borrowing against a currency which pays me nothing. No bank is going to be involved in that.
posted by krinklyfig at 2:57 AM on September 3, 2011 [1 favorite]

And btw, banks do invest in gold. None of them consider it currency, however.
posted by krinklyfig at 3:01 AM on September 3, 2011

What is your obsession with interest rates? The Yen has had zero interset rates for a really long time and it's still a viable currency. Interest Rates deals with the time value demand for money itself, I don't see how a discussion for interest rates on commodity money is relevant to this discussion at all.

Despite what Ron Paul might lead you to believe, gold is not currency. It's a precious metal with little inherent value.

I've never been a teabagger and never will be, but if you don't think gold is a currency we have to stop here. If you think money has anything at all to do with inherent value you really need to rexamine what money really is. All money has zero inherent value. Gold's inherent value is zero, and so is the USD. All currencies obtain value from their economy around it. Just because an economy is small and not as many people will accept it does not mean it isn't currency. Canadian dollars are currency but you probably can't buy gas with it. I really don't understand why the size and influence of a currency is relevant to its future viability.

Why are you talking about investment, I've never said it was a good idea to invest in currency. Bitcoins are not an investment. The USD is not an investment, they can be traded, and if you trade there is substantial risk. Buying dollars for the long haul is not an investment strategy, neither should gold or bitcoins.

Again, I'd encourage bitcoin detractors to really think about what money really is. Please, please, please as I suggested above, do read both Debt: The First 5000 Years and The Ascent of Money for a good layman's understanding. There are legitimate greivances against bitcoin, e.g. the deflationary aspects stated above (although I personally think they can be mitigated), but an argument that it isn't a currency or money because it doesn't have inherent value is a completely wrongheaded approach.

If I'm a carry trade investor, which is a conservative, long-term currency investment, I want to borrow some currency with a high interest rate against a short of currency with a low interest rate, with leverage (as high as 200:1, in the US 50:1).
What? This isn't related to bitcoins at all. Just assume bitcoins are any currency that offers 0% interest. The only difference that I was emphasizing was that there wasn't any need for banking because you can conduct transactions without intermediaries. It's like owning a 0% interest rate checking account. You can do all the leveraged carry trades you want if you can find a counterparty. I really don't understand what the problem is. Carry trades are a zero sum game, how is this relevant at all?
posted by amuseDetachment at 3:02 AM on September 3, 2011 [1 favorite]

By the way, to clarify, when I talk about interest rates, I'm talking about overnight rates such as the Fed Funds Rate. Long-dated rates are completely market controlled as with any money. Bitcoins are no different. Technically with commodity money there's slightly different terms (it's usually referred to as the "Lease Rate") and slightly different implications (but largely remain the same). I assume we are talking about the same thing.
posted by amuseDetachment at 3:07 AM on September 3, 2011

What is your obsession with interest rates? The Yen has had zero interset rates for a really long time and it's still a viable currency.

Not exactly. That's the problem. They must let it float eventually, or they will continue to have difficulty in world markets. Right now a lot of serious investors consider Chinese investments in general to be untrustworthy. Their financial system is big but in many ways resembles emerging economies, which are considered high risk. So, they do get some investments but with big caveats not to invest more than you would in any emerging market. Which is to say, might work out but there's a lot of risk involved, so be prepared to lose everything you put in.

What? This isn't related to bitcoins at all

Really? Well, fine if you want to believe that. Good luck.

You can do all the leveraged carry trades you want if you can find a counterparty

Yeah ... Maybe that will work for gaming or OTC exchanges in a grey market. I wouldn't put anything of value in it. But that's me. And the banks.
posted by krinklyfig at 3:11 AM on September 3, 2011

By the way, to clarify, when I talk about interest rates, I'm talking about overnight rates such as the Fed Funds Rate. Long-dated rates are completely market controlled as with any money.

Really? So, what interest rate can I expect if I bought bitcoins today? If I can't find out easily and transparently, and if banks don't use it, and if it's not traded through foreign exchange, it's not worth my time. I know what interest rate I get with USD, AUD, TRY, NZD, etc. Those are worth considering, and they're trustworthy, as much as any world currency.
posted by krinklyfig at 3:15 AM on September 3, 2011 [1 favorite]

Not exactly. That's the problem. They must let it float eventually, or they will continue to have difficulty in world markets.

What? Who are "They"? There is no "they". It's free float. It has been and always will be. This is not an opinion.

Well the fact that a carry trade would be sketchy isn't related to the underlying currency, that's just related to how new the currency is.
posted by amuseDetachment at 3:15 AM on September 3, 2011

What? Who are "They"? There is no "they". It's free float. It has been and always will be. This is not an opinion.

No, there is no way to trade Chinese currency in foreign exchange. The exchange rate is pegged by the Chinese government. That's not a free-floating currency, by definition.
posted by krinklyfig at 3:17 AM on September 3, 2011

Really? So, what interest rate can I expect if I bought bitcoins today? If I can't find out easily and transparently, and if banks don't use it, and if it's not traded through foreign exchange, it's not worth my time.

There is no market currently for long-dated bitcoin bonds, but again it really shouldn't be worth your time to do stuff like that now because there is substantial exchange rate risk (again, new currency, etc.)

Hypothetically, treat a bitcoin bond as you would any Eurodollar transaction. I really don't see where the problem lies from a technical standpoint.

No, there is no way to trade Chinese currency in foreign exchange. The exchange rate is pegged by the Chinese government. That's not a free-floating currency, by definition.

Well the fact that a carry trade would be sketchy isn't related to the underlying currency, that's just related to how new the currency is.

We're talking past each other. What I'm saying is, if the banking system can't trade it like that on open exchanges, they will not be interested in using it. Ergo, it will face considerable difficulty being adopted in any wide scale except in underground markets. It may have success there. It still wouldn't be considered a good investment.
posted by krinklyfig at 3:20 AM on September 3, 2011 [1 favorite]

I'm talking about bitcoins. Bitcoins are free float. There is no "they". If you still disagree you really need to explain who "they", as they would be the party that would be ensuring the fixed exchange rate.

I'm not going to argue about this anymore. You're not getting it. It's OK. No big deal to me, but it's not worth having a conversation with someone who insists their version of reality in the currency markets make sense to anyone who trades seriously in currency. If you can't attract serious investors and don't have interbank exchanges using it, it's not going to get very far.
posted by krinklyfig at 3:24 AM on September 3, 2011 [1 favorite]

Oh there we're in agreement, when we move from theoretical to the practical, yeah there's substantial hurdles, I'll be the first to back anyone that says that for sure!

I really don't see any currency as a long term investment (including bitcoins) beyond a trade. No one with any reasonable understanding of the markets is advocating dumping a substantial portion of their money into bitcoins. If you like it and want to dump less than 1% of your assets into it, whatever, but I do agree that it isn't really an investment per se. I'm looking at it from the perspective of a currency, not as an investment. As a currency, the technological foundations and economic foundations are a lot more sound than people give it credit. Its success relies on other factors as well, and it'll be interesting to see how it fares with that.
posted by amuseDetachment at 3:25 AM on September 3, 2011

I really don't see any currency as a long term investment (including bitcoins) beyond a trade.

Banks do. So do long term investors, fund managers investment firms which create funds which end up in millions of pensions and 401(k) portfolios. OK, that's the last one ... I'm getting kind of tired and may not be all that lucid for much longer ...
posted by krinklyfig at 3:31 AM on September 3, 2011 [1 favorite]

BTW, just to be clear, I'm really not trying to be antagonistic but have a tendency to be a bit argumentative sometimes when it comes to conversations like this. No offense is meant, nothing personal. Bitcoin as a concept is still interesting. But without traditional currency backing investments attached to interest rates and open exchange rates, such as treasury bonds, for instance, hard to see how it's going to work except underground. If we ever do away with paper money or go to completely electronic currency systems, this may become a lot more attractive to people who do not wish to have every transaction tracked. In that sense it may become very viable for that type of exchange. Kinda sounds like something out of a Neal Stephenson novel, though.
posted by krinklyfig at 3:38 AM on September 3, 2011

Yeah, but banks don't hold M0/M1 as an investment, they deal with the time value of money; the demand for money over time. It's certainly possible for such a market to exist in the future, historically all the models for gold lease rates would be directly applicable (the math is pretty much the same).

I really don't think bitcoins are at the point where you'd be interested in it, it may be years before it reaches that point (if it even does at all). The bitcoin market is currently not sophisticated at all, it's really quite the opposite. Basic spot exchanges are still being worked out, figuring out the yield curve is not exactly first priority. 9 months ago, a spot exchange didn't even exist.

You bring up really good points, and they definitely do need to be worked out. It's really funny watching the bitcoin community because many of its advocates (especially the vocal ones) have utterly no idea what they're doing. It really seems to be a small group of people that know what they're talking about (who really impress me with their foresight, I mean look at this), and a much larger community who have no idea what money is and think everything is a government conspiracy (Bernanake, Ron Paul, herp derp), but the latter group is really gung ho and want to "help out" and start building tools/advocacy.

At the very least it's worth some laughs for you as the latter segment works through their lessons from the history of money live through the public failures.
posted by amuseDetachment at 3:44 AM on September 3, 2011 [1 favorite]

Rather, this link is better.
posted by amuseDetachment at 3:45 AM on September 3, 2011 [1 favorite]

Krinklyfig I'm not sure what the point of your argument is. You seem to be going to great lengths to define 'currency' in a way that excludes both bitcoin and gold. But so what? Gold isn't a bad store of wealth and it has been used as a medium of exchange in the past.

If you want to define bitcoin as a digital commodity instead of a digital currency then I guess you can. But how does that pose any practical downsides for people using bitcoin -- other then price instability?

I happen to think gold is way overvalued right now so at the moment I don't think gold is a good store of value. I don't know that over the long term, bitcoin will be a good store of value, but as a medium of exchange (if you don't want to use the word currency) it works well. And the more transactions are done with btc then the more people will need to hold it, and the value will go up. So as long as it's used, it should have some baseline value.

The problem will come in if people stop using it.

So the question is: how does what you're saying make it less likely that people will use bitcoin to transfer money online?
posted by delmoi at 4:09 AM on September 3, 2011

For those that are sufficiently versed in the banking system. The link I provided above gives a method to provide escrow service without having the verification service holding the money. This is technically not possible before the invetion of bitcoins.

Let's say you were shipping some iPhones via shipping containers over the ocean and wanted cash for it. The current method is to deposit the money before it is shipped in a special bank account and get a Letter of Credit from a bank (both parties agree on a bank beforehand). If there's any disputes, your bank has enough of your funds to give the money to the merchant or return the money if the goods aren't delivered.

With bitcoins, you never even need to give any money to the bank/escrow-service. In fact, you can arrage it to be so that the escrow service never even gets contacted until there is a dispute, becuase only 2 out of the 3 parties need to agree in the script, and if both merchant and buyer agree, the escrow service does not need to get involved. If there is a dispute, the escrow service sides with one person and the money held gets moved to the person's ownership. At no point can the escrow service take the money and run, the escrow service is providing a vote inside the blockchain, it does not at any point hold the funds. Obviously you'd still need to trust the escrow service (to make the right decision on who should get the money), but they can't just up and take 100% of the money and run.

This is new. You can't put US Dollars or gold into escrow without the escrow holding the currency (and having the risk of them defaulting on their obligation). This need for escrow happens in the banking system all the time in many different situations. This type of transaction where the escrow service does not come into ownership of the asset temporarily has NEVER been possible before bitcoins. Ever.

There's a lot more crazy neat things you can do with bitcoins that are possible, many which we may not even realize today.

Dan Kaminsky, a top computer security researcher, summed up bitcoins very well when inspecting bitcoin code security that I think applies to bitcoin's economic foundations as well, with normal computer code, it "looks like it might be OK up front" but "scratch the surface, it's actually really bad".
With bitcoin, it "looks really bad up front" but "scratch the surface, it's actually surprisingly good".
At first glance, bitcoin looks crazy. The deeper I look at it from an financial systems perspective, the more I am astounded at the amount of foresight and thought that went into it.
posted by amuseDetachment at 4:38 AM on September 3, 2011 [1 favorite]

Yes, BitCoin's scripts and contracts are way cool. Ideally, the escrow contract could be used to facilitate exchanging bitcoins for real currency without requiring an exchange that holds the money, instead they simply inspect the real world transaction.
posted by jeffburdges at 5:27 AM on September 3, 2011

Micropayments arnt practical unless yup have general accesspability. What yup have is a demonstration technology for micropayments. In order for it to be practical you'd need much more use. However that usage would immediately lead to a ri in fees because of block size limits prioritization. Get a bit coin and try to break it up into billion pieces and send those to individual accounts. Your transactions will sit there for a long long time.
posted by humanfont at 11:14 AM on September 3, 2011

There should eventually be a variety of digital cash systems for which bitcoin might open the floodgate.

You might for-example create an ad serving network for applications where the client interacted with a broker, ad server, and content server. Your client would first negotiating conditions using whatever demographic data the user wishes to share, second serving an ad or issuing a click in exchange for accepting a coin from the ad server, and third anonymizing said coin and exchanging it for content. After that, the service provider would exchange the coins for payment using the client selected broker, but the ad and content servers, and ideally the broker, could not link their records of the client, due to the anonymization factor.

In such a system, coins represent not real money but user actions, which're unverifiable except in aggregate, i.e. brokers reject ad servers they cannot monetize. Yes, this would mean serving penis extension ads to any user who doesn't claim to be female. Ain't progress grand? ;)
posted by jeffburdges at 11:58 AM on September 3, 2011

Speaking on the issue of MtGox and the legal system, the first legal case involving bitcoin has been decided in France, with MtGox as the plaintiff. Apparently a bank tried to shut down MtGox's account (or the account of the company that represents them in France) and MtGox actually took them to court and won, including on appeals.

It seems hard to imagine that if MtGox were all just an illegal scam with no regulation they would be not only actively engaging with the legal system but actually winning cases.

This just underscores how weird the arguments about MtGox not being an ordinary 'legitimate' company.
posted by delmoi at 2:36 PM on September 4, 2011

As I read it they are misrepresenting their business to the court and their 'victory' to their customers. Bitcoins can't just be money when it suits you. If it's money then MtGox and others they are subject to currency trading regulations and laws. Since they are attempting to avoid such regulation, it seems a stretch to call their business legitimate.
posted by humanfont at 4:37 PM on September 4, 2011

Yeah, not to mention when you scratch the surface you see their staff on bitcoin forums defending people like Bruce Wagner from the mortgage fraud allegations. After the MyBitcoin thing I wouldn't exactly be putting my faith in his bitcoin friends.
posted by furiousxgeorge at 4:44 PM on September 4, 2011

As I read it they are misrepresenting their business to the court and their 'victory' to their customers.

Yeah, not to mention when you scratch the surface you see their staff on bitcoin forums defending people like Bruce Wagner from the mortgage fraud allegations. After the MyBitcoin thing I wouldn't exactly be putting my faith in his bitcoin friends.

Oh shit, messageboard drama? Really? Well I had no idea there was message board drama relating to bitcoin! This changes everything!

Sure, it may be that millions of dollars worth of bitcoin transactions happen every day but if there are people on message boards being ridiculous clearly that means bitcoin has no future!

But seriously -- it would be nice if people on the message boards were less ridiculous, but whether or not morons post on a message board isn't going to make a difference.

Finally, what's wrong with defending him from the allegations? Has he been convicted of anything? Just because people on other message boards are accusing him of something doesn't make him guilty. I think he's an idiot and I don't really care either way.

The whole point of bitcoin is that it's not dependent on any individual or group. MtGox is obviously very important right now for converting bitcoin into dollars and back, but it's not the only exchange.

And you don't have any actual dirt at all about them, you're just casting accusations about other people who aren't related and trying to make MtGox and other Exchanges look bad by dint of the fact they're also involved in bitcoin.
posted by delmoi at 5:05 PM on September 4, 2011

Finally, what's wrong with defending him from the allegations? Has he been convicted of anything? Just because people on other message boards are accusing him of something doesn't make him guilty. I think he's an idiot and I don't really care either way.

They were defending him against charges a civil court has already confirmed in the matter of the mortgage fraud, yes. Wagmer claims he was just trying to help people but bit off more than he could chew and that he did manage to help some people. The court said he helped not one single person. This is on the record, but Mt.Gox staffers are on board with claiming otherwise despite a total lack of evidence.

As I have said, I'm not saying they have done anything wrong. I'm saying they are working with a shady community and if something does go wrong there is nothing you will be able to do about it.

I mean, I guess when you hear "catching on in Eastern Europe and Russia" and "Great for sending to individuals!" you hear one thing and I hear another. That is not entirely fair, but you can see where the concern comes from. When you see the Paypal fees and lockouts you see a ripoff and I see fraud protection.
posted by furiousxgeorge at 5:16 PM on September 4, 2011

Oh great, now I have Russian bride banner ads, I hope they take bitcoin.
posted by furiousxgeorge at 5:19 PM on September 4, 2011

And you think the french court and appeals court was just too dumb to figure it out? There are apparently still legal issues to figure out but it comes down to the definition of these terms under french law. It may be the case that bitcoin doesn't fall under those laws for various reasons. That doesn't mean they're misrepresenting anything

Read the decision and the linked thread. The court has yet to rule on many items. It would appear they they have won a couple of motions and not the whole case. Thus my point regarding the deception in play here.

Furthermore the only evidence of millions of dollars worth of bit coin transactions occurring is a public transaction log between disposable and self generated accounts. This could be easily faked by a single individual who wanted to make the market appear larger than it was.
posted by humanfont at 5:40 PM on September 4, 2011

Chrome and Mac - adblock.
posted by furiousxgeorge at 6:03 PM on September 4, 2011

furiousxgeorge: Look, I lurk on SA and the lack of any serious understanding of economics in the bitcoin thread is appalling (it's not quite as bad as the morons on bitcointalk.org, but it's down there). There's an endemic misunderstanding of how financial systems work. The level of groupthink that you participate in over in that thread is seriously hampering you from having a serious discussion about the true potential negative implications of bitcoins. Valid criticisms are made on that thread but they're drowned out by completely ridiculous claims about currency valuation and investments. I think you're confusing the QQ with the libetard morons on bitcointalk with the viability of the underlying currency itself.

Fraud will always happen, and the ability to recover that fraud is tenuous at best (as anyone who has used paypal knows). You must admit that there is a tradeoff with fraud, the tradeoff is NOT privacy vs. security, but rather a fundamental issue with relative control/ownership, as the classic Bruce Schneier analgy shows. It's a valid argument to discuss the relative merits of who should control currency. Advocates of bitcoin believe in code governing currency, advocates of gold believe in the underlying physical scarcity of a metal, and advocates of MMT believe in a nation's taxation. It's an interesting and valid discussion to have, but it's a bit loaded to talk about Russian brides instead of the underlying issue, which is the relative control of currencies. There are many relative benefits to having a currency without absolute state control, as well as many relative benefits towards a state backed currency. Nor are they mutually exclusive.

Will fraud be easier to commit on bitcoins from a technical perspective? Undoubtedly. However, I would argue that people will treat eletronic transactions much more like cash and the amount of fraud and naievete will go down (as well as the ability for people to insure/reduce their risk), fraud is endemic with any new system. However, you must consider all costs as systemic (both technologically and socially), i.e. even if relative fraud increases it may still be a superior system. Currently, eletronic transactions such as paypal charge ~3% -- so long as long run total transaction costs (including fraud) for bitcoin remains substantially below this 3%, it can be said that bitcoins may be a superior alternative. I am of the belief that fraud will not be 3% of total transaction value or anywhere near there, I have no proof of this, but you cannot say it is unreasonable for me to believe this.

TLDR: Stop drinking the buttcoin-hate kool-aid, it really only applies towards the randroid libertards that "invest" in bitcoins.
posted by amuseDetachment at 6:06 PM on September 4, 2011 [1 favorite]

Will fraud be easier to commit on bitcoins from a technical perspective? Undoubtedly.

Yup, combine that with the understanding that scammers are smart and understand this too and welcome to my point! It isn't just the electronic currency that is the problem here, but also the electronic communications medium. Cash shouldn't be used here.
posted by furiousxgeorge at 6:42 PM on September 4, 2011

Fraud will always be possible. It is impossible to mitigate. It's a bit of a red herring to say that removing pure cash from electronic transactions will solve any problem.

At any point along the chain, once any electronic credit is spent, credit can be respent. Removing this ability, i.e. requiring a substantial holding time, will substantially hinder the economy. This slowdown will have larger economic consequences than fraud ever will. This argument is like those railing against Food Stamp fraud, you really have to consider the total systemic cost of preventing fraud (often times, catching additional fraud with low-income social services programs would be higher than the savings). The moment a transaction occurs, fraud can happen, you can use a stolen credit card to buy Warcraft items and sell it later. You can use fraud to buy a whole host of resaleable tokens/goods. Either the merchant or the credit card processor will be out. This results in higher prices or higher fees. Either way you pay with fraud. Stopping fraud is incredibly hard, and there's a good reason that true fraud numbers are kept a tight secret. Preventing credit fraud requires a substantial amount of infrastructure costs (computers number crunching fraud likelihood), it really isn't the panacea you seem to think it is. If you accept credit card transactions and don't deliver as a fraudulent merchant, the only two alternatives is slowing down the economy or higher transaction costs. That's it. If you prevent businesses from withdrawing currency because of a lockdown, many businesses are going to have to get short-term bank financing or the business cycle will be slowed down substantially, and costs will still be paid.

The greatest threat to bitcoin fraud isn't the one you're thinking about, it's straight theft. Stealing encryption keys. The defining difference between all commodity money is that it can be stolen. Everyone knows this as a problems, and there are ways to mitigate it (although it cannot be completely mitigated).

Fundamentally, cash vs credit in any electronic system is irrelevant with respect to fraud. Fraudsters are going to commit fraud. The cost is going to be borne either way.
posted by amuseDetachment at 7:05 PM on September 4, 2011

amuseDetachment a few notes
1-settlement is not assured or instant in bitcoin. There is no guarantee that your transaction will ever be included in a block or that the block will be solved in a particular amount of time. It is recommended that one wait for multiple chains to be processed to ensure the transaction cleared.
2-as Dan K. noted even a small crack in a couple of key algorithms might collapse the whole currency
3-You seem to ignore the risk created by bitcoins volatility. It is very difficult to price services when the currency is so volatile. That's why other commodities have big futures and options markets.
4-any large scale use of micro-payments would overwhelm the public transaction history. As I've noted try even breaking a bitcoin to .0000001 increments and sending through a few million transactions. Your blocks will just sit there.
posted by humanfont at 8:10 PM on September 4, 2011

Stealing encryption keys. The defining difference between all commodity money is that it can be stolen.

Most other commodity money tends to be harder to lift. And yes, you can mitigate fraud, bitcoin is specifically designed not to. The electronic currency that actually will eventually gain wide acceptance will be.
posted by furiousxgeorge at 8:14 PM on September 4, 2011

Yep! Agreed on all those points, humanfont. These are some serious downsides and tradeoffs. On the first point, you can worry a lot less about settlement/fraud if you sent the output keys to be partially escrowed/managed by a 3rd party beforehand as I explained above.
posted by amuseDetachment at 8:18 PM on September 4, 2011

Consider your iPhone example though as a thought experiment. They buyer must get enough btc to make the transaction. If we are in letter of credit territory we are in tens of thousands of dollars, which would mean getting thousands of bitcoins. The volume isn't there for that kind of buy order. You'd have to pay a substantial premium. The seller would also have to accept a discount for the same reason. Then you'd hit the daily withdrawal limits from MtGox and the other exchanges.

So really there is no advantage to this alternate system outside of black market transactions. Sure you might eventually see a btc economy that allows buyers and sellers to reuse their coins for other transactions. You will still need to dollarize those transactions for tax purposes. You'll need dollars to pay the taxes, duties and fees as well.
posted by humanfont at 9:29 PM on September 4, 2011

Yup, combine that with the understanding that scammers are smart and understand this too and welcome to my point! It isn't just the electronic currency that is the problem here, but also the electronic communications medium. Cash shouldn't be used here.

They were defending him against charges a civil court has already confirmed in the matter of the mortgage fraud, yes.

Because people on the SA message boards say so? Like I said, I don't really care either way.

You obviously believe that the future value of bitcoin is dependent on drama between internet message boards and the personal credibility of random people. It's a completely ridiculous metric. The entire basis of your criticism of bitcoin is that 1) It's theoretically possible that exchanges could be scams and 2) since you're apparently involved in some message-board drama you don't like people who post on the bitcoin forums and think they are all terrible people who would definitely scam people if they had the chance.

It's a completely ridiculous.

The real value of bitcoins isn't in making huge transactions to untrusted parties, but in the fact you can make real micropayments with it. You can pay a few BTC to download a video or a song, or play an online game and if the transaction fails it's not the end of the world.

The argument that there are no 'legitimate' companies involved in bitcoin, that they're all scams is based on nothing except bias.
posted by delmoi at 11:23 PM on September 4, 2011

humanfont: Yes, the market is far too small, but if the bitcoin economy were sufficiently large with enough liquidity, making a shipment wouldn't move the market. It's definitely impossible to do today, but it's simply a market cap problem, it is not a technology problem. With US Dollars it is technologically impossible to trade without depositing money into an escrow serve. With bitcoins you can, you can do really neat things that were preiviously impossible to do.

You need to price it in dollars for taxation purposes, but it's really a non-issue in terms of documentation. International transactions involve many currencies anyway. If you deliver in Euros, you need to price it in dollars for domestic taxation. The obsession with currency and taxation is a non-issue, especially when I used an example with international trade. The tools just need to be written to document and compute this, none exist today, but a lot of these conerns are not inherent in the currency.
posted by amuseDetachment at 11:47 PM on September 4, 2011

Yes, the market is far too small, but if the bitcoin economy were sufficiently large with enough liquidity, making a shipment wouldn't move the market. It's definitely impossible to do today, but it's simply a market cap problem, it is not a technology problem. With US Dollars it is technologically impossible to trade without depositing money into an escrow serve. With bitcoins you can, you can do really neat things that were preiviously impossible to do.

Bitcoin as currently deployed can't achieve that liquidity because of transaction limits, bandwidth and hashing time involved in block generation.
posted by humanfont at 5:56 AM on September 5, 2011

humanfont: No, hypothetically if bitcoins were valued at $1000 per bitcoin there wouldn't be a liquidity problem at all for large transactions. (if this disgusts you pretend a new bitcoin blockchain was started or something). Don't forget MV=PQ. I emphasized the size of the economy as the determining factor because it is economy size that dictates currency valuation, not the other way around. Libertarian randroid currency speculators on bitcointalk also seem to have trouble understanding this.

Hashing time, bandwidth and transaction limits are not directly relevant, excluding scaling towards a large economy (this is a HUGE exception, true), but these issues would only crop up well past the point where a multi-million dollar transaction wouldn't move the market (but may probably not be able to cover a multi-billion dollar transaction). Remember that transfering 1000 bitcoins puts as much load on the physical network as 0.001. The relevant factor is not technical infrastructure, but rather the depth of liquidity in the economy, which is an entirely social issue.
posted by amuseDetachment at 6:44 AM on September 5, 2011

Shall we assume the can opener as well amuseDetatchment?
posted by humanfont at 7:18 AM on September 5, 2011

I don't think I'm making major assumptions here. Large economies imply deeper liquidity. I think you'd be hard pressed to find an economy in which this is not true.

If you increased the transactions load by a factor of 100, or perhaps even 1000, it wouldn't cause any scaling problems, the CPU/network load can still be processed by a modest laptop. Several more orders of magnitude would require some significant code modifications, though. It's not unreasonable to say that an increase of the market cap by 100x (7 billion USD) can reasonably handle a 1-day million dollar transaction without moving the market beyond several pips.
posted by amuseDetachment at 8:01 AM on September 5, 2011

You seem to be ignoring the costs of solving a block which scales relative to the size of the network cpu available such that the whole p2p network can't solve more than a block every ten minutes. These limits are what create the market for the miners and transaction processors. Transaction replication requirements between nodes is also problematic as volume rises.
posted by humanfont at 10:07 AM on September 5, 2011

humanfont: please reread how bitcoin works. Blocks are sOlved every 10 minutes no matter the amount of miners. Most miners do not download transactions, only the pools do. The mining economy profitability is a consequence of the quantity of other miners and the exchange rate. The revenue is 50 * exchange rate, every 10 minutes, for the entire system until around 2013. Transaction replication amongst nodes are not a problem for a while. Above 1000x current volume may require a rewrite to support sharding, but as the old saying goes, scaling problems are a desirable result of success.
posted by amuseDetachment at 2:38 PM on September 5, 2011

To be especially clear, if you were mining in a pool, you only download a hash of the pending transactions from the pool. The pool is the entity connected to collect transactions. When a block is solved, the pool communicates with other pools. The data and CPU load for pools is substantially higher communicating with miners than with bitcoin transaction processing. Even if there were 1000, or even 10000 more transactions, I suspect the pool's CPU and network load would be higher connecting to miners. Bitcoin transaction processing will eventually require a rewrite, but it's really not something to worry about for a long while.
posted by amuseDetachment at 2:51 PM on September 5, 2011

You sound like one of those old communists, always eager to tell us how it works in theory. I've seen the code, read the docs.
posted by humanfont at 4:05 PM on September 5, 2011

You sound like one of those old communists, always eager to tell us how it works in theory. I've seen the code, read the docs.

Well, communism failed, so far the bitcoin p2p network hasn't failed, except you say it will for some reason. That means in a way you sound like an "old communist" telling us all how capitalism will fail even though it hasn't.

You haven't actually explained what causes a limitation on the number of transactions. It's true that the network scales the difficulty so that new blocks are generated every 10 minutes, but as far as I know there's no limit on the number of transactions in a block. Are you saying there is? If so, why?
posted by delmoi at 5:12 PM on September 5, 2011

You sound like one of those old communists, always eager to tell us how it works in theory. I've seen the code, read the docs.

Really? Because I've gone through a decent portion of the Satoshi bitcoin C++ implementation myself, especially the transaction scripting parts. I've run private testnet networks with a new test blockchain. Do explain what I'm missing here -- how can bitcoins not scale if transactions increased 100 fold? Why would international shipment example I gave above not work in practice from a network/code perspective if the market were 100 times larger?
posted by amuseDetachment at 7:26 PM on September 5, 2011

There could be scalability problems with either the non-inflationary property, the long pauses between blocks, small players unable to play seriously enough, etc. P2P is hard. A sufficiently serious problem would be resolved by forking the code and establishing a new currency, which creates an interesting risk factor for the gold-bug-like buy & hold speculators.
posted by jeffburdges at 8:11 PM on September 5, 2011

The market isn't 100x larger. It is tiny. It isn't going to get there for the reasons stated above. Did your simulation factor in abandonment, bad actors and multiple networks with competit chai forks.
posted by humanfont at 10:17 PM on September 5, 2011

Yeah that was my point, it can't be done today due to the market cap, but it could if it were 100x larger, which isn't technologically infeasible.

If you have any specific reasons why it isn't feasible in the future, and can give concrete examples, preferably referencing specific part of the protocol, I'd be very, very interested.
posted by amuseDetachment at 10:35 PM on September 5, 2011

There will eventually be a compelling digital cash system that largely replaces the transaction rules underlying our current monitory system. Bitcoin has shown that such a system need not be governed by a few powerful national banks and private companies like Visa. Advancements like that never really die. There will probably be a couple dominant bitcoin forks, or similarly open currency systems, that become major players over the next couple decades.
posted by jeffburdges at 10:43 PM on September 5, 2011

The market isn't 100x larger. It is tiny. It isn't going to get there for the reasons stated above. Did your simulation factor in abandonment, bad actors and multiple networks with competit chai forks.

humanfont: You haven't actually explained why the market couldn't technically scale to 1000x as many transactions. It doesn't matter how large they are, the question is just the number of transactions.
posted by delmoi at 2:10 AM on September 6, 2011

I'll give a hypothetical application for an inflationary bitcoin fork : Imagine that South America wants some benefits of a common currency but only as a second currency, i.e. they don't trust one another's monetary polices, don't wish to give up their own monitory policy, etc. All their national banks could create a common bitcoin network without the 21 million coin limit, but instead regulated the amount of inflation, and impose regulations upon large block issuers, i.e. make sure their based in a participating nation. You could use the currency, contracts, and scripts to simplify large international transactions. And the supplies held by national banks would help stabilize their currencies relative to one another.
posted by jeffburdges at 6:43 AM on September 6, 2011

I don't really think governments would need to mess with anything like bitcoin. If they want a shared currency they would have to trust eachother enough not try something like double spending.

But it would be interesting to try something like a completely automated central bank, using software to decide interest rates and other policies based on an economic model and empirical inputs. That way you could trust it not to bow to political pressure in times of crisis. (maybe every 5 years they could vote on updating the model)

It would also be interesting to see a non-deflationary version of bitcoin. You could have something like, the fewer transactions (i.e. economic slowdown) you generate more coins to create inflation and encourage spending, while pulling back when the number of transactions goes up. The problem, though, is that people could send money back and forth between their own wallets in order to lock out inflation and keep the value of their money (of course, they would leak transaction fees that way)
posted by delmoi at 7:51 AM on September 6, 2011

humanfont: You haven't actually explained why the market couldn't technically scale to 1000x as many transactions. It doesn't matter how large they are, the question is just the number of transactions.

Consider the need for individual mining / tx processing groups to work from a common block header. Each new tx added to a block will adjust the merkle root. This new root and base header must be distributed to the individual systems on the network. Each tx processor also has a different set of criteria for prioritizing transactions based on bounties, membership and the order they received the tx. With multiple tx coming in each second one would start to see a queue because of the need to update the individual systems. How many times during a window do you want to update the block header to your individual systems. There have been a few days when bitcoin has managed to crack a million tx/day, but those have been one day anomalies while typical volume seems to be 40k /day. A 100x increase would be 4 million tx/day sustained with spikes of 120 million. There are also have few rejected transactions and bad actors from what I've seen. The result is a pretty clean set of blocks without a lot of overhead and collisions. I don't think there have been many blocks chains that get dropped by more complex chains forcing whole bunches of tx to recommit. Hardware and changes to the way miners operate may be able to overcome these obstacles but fragmentation and latency in tx confirmation seems like to increase with that kind of usage. Or people may use something like MtGox to transfer between accounts there and not actually move btc until they need to (not a particularly great solution).
posted by humanfont at 7:50 PM on September 6, 2011

Currently, blocks are around ~30KB each. A 100-1000x increase would be between 3MB to 30MB. Calculating the hash every minute or so (we're talking about a several line modification in pushpull for the pool operators) is not a problem at all were the system to scale even higher. In-memory 2x SHA256 of 30MB can probably be done in under a second, if that. Considering that blocks are committed in every 10 minutes on average, this isn't really a big deal. Even with 2 or 3 level deep orphan blocks, the transaction load wouldn't be big enough. It's really only several orders of magnitude past that point that will require some code rewrite.

I'm not completely discounting your point that there will be scaling problems. That is absolutely true. We may have disagreements on when that point will be, but I want to emphasize I am not ignoring this fact. I'm just saying it's a problem that can be dealt with in the future (with more sharding code and network centralization, unlike the libertards I do see centralization/specialization as a necessary feature). Scaling problems are a problem that arises out of massive success. It's far better to have scaling problems than having no users at all. If we ever reach that point, it would assume an incredible level of success has already been reached.
posted by amuseDetachment at 10:39 PM on September 6, 2011 [1 favorite]

By the way, the chart you're looking at is BTC/day. Not tranasctions per day. That's why you get a lot of weird outliers. You can send 100,000 BTC in 1 transaction that's about 300bytes easy.
posted by amuseDetachment at 11:38 PM on September 6, 2011

Isn't it better to take a fixed block of transactions, generate corresponding headers with block overflows such that you can maximize your coverage through the nonce and nonce overflows within the transaction set? Or since the merkle root changes with the nonce overflow does it make more sense to just accept new transactions and recompute the merkle root that way.

Is this really a random lottery or a is it just permutation problem?
posted by humanfont at 9:23 AM on September 7, 2011

You only need to calculate the SHA256 for the transactions once. I think the point you are trying to make is that because the nonce overflows frequently, 30MB worth of transactions will put undue strain on the pool? It really won't. The reason is that transactions are arranged in a hash tree. As a result, the amount of SHA256 calculations from more transactions per block increases linearly, not exponentially. Like I said earlier, you can get 30MB worth in under a second.

The huge load for SHA256 is in calculating the transactions, the ECDSA verification and checking transaction validity which requires reading the blockchain. That's where all the transactions are and where it really matters. The real scaling problem will be in the verification part, which requires some code rewrite (as different parts of the blockchain will be stored on different servers when the blockchain gets sufficiently large, but at this point we're talking something like a hundred billion dollar market cap here, MV=PQ, we're talking about a real small P).

The nonce issue requiring recalculating the merkle root is no big deal. You're not doing SHA256(Transactions+bitcoin stuff), you're doing SHA256(MerkleBranches+bitcoin stuff), which is ridiculously small, calculating the merkle branches should be no different in reality whether there were 1KB worth of transactions or 100MB.

Again this is one of those bitcoin things Dan Kaminsky was referring to "looks really bad up front" but "scratch the surface, it's actually surprisingly good". There is this kind of foresight all over the code, it's really cool to look at, because there's some stuff there where you have NO IDEA why it's there until later when you think up a vulnerability or future problem that may crop up.
posted by amuseDetachment at 3:39 PM on September 7, 2011 [1 favorite]

There are 3 hashing operations during block processing. First is the merkle root which is generated by the hash of all transactions in the block plus any nonce overflow. Then you the hash the header which includes the merkle root, and the nonce (32 bit binary data). That resulting hash is then reshashed to check vs the current difficulty.

A distributed mining pool could assign different mining pool members a range of nonces to permits given a specific header. By permuting over all nonces from 0x0001 to 0xdffff one determines if the hash is solved with an ordinary nonce. Or if it request an overflow. With sufficient capacity one must then determine which strategy is better. Appending overflow nonce data to the transaction list and recomputing the merkle root with a predictable permutation, or adding in new transactions which will create a new merkle root in a less exhaustive fashion.

If you have a very large pool you can precalculate a range of headers from a single transaction set with nonce overflows and assign to nodes accordingly.
posted by humanfont at 4:34 PM on September 7, 2011

Yep, however in practice, IMO it's easier to just have each miner working on their own extraNonce/coinbase, remember each mining thread can hash at around 300Mhash/s, you can run through a 32bit space pretty quick. But as you may notice, it's really not that difficult to give each client a unique merkle root, because a hash of the merkle root + misc data isn't that much trouble, because all the transaction hashing work has already been done. If you want to look at the way pools communicate with miners directly, pretty much all pools use some variant of pushpool.
posted by amuseDetachment at 5:25 PM on September 7, 2011

This is ridiculous. Being able to send the equivalent of cash, without all the fees and uncertainty of existing bank transfers is really useful.

You've obviously never tried to actually sell anything online. Dealing with paypal/credit cards/bank transfers isn't easy. And other then paypal it's actually out of the hands of anyone who's not running a huge business.

Saying "it shouldn't be used" is equivalent to saying only large corporations should be allowed to sell things online.

I have used Paypal, to sell things to individuals and to buy from them, it works fine and has fraud protection features.

Because people on the SA message boards say so?

No. If it doesn't bother you at all that Gox is good friends with a scammer like this that is fine, but don't bury your head in the sand. This type of denial and tribalism (IT MUST HAVE BEEN SA!) is not a good sign for your objectivity on this subject.

You obviously believe that the future value of bitcoin is dependent on drama between internet message boards and the personal credibility of random people. It's a completely ridiculous metric.

I've linked to the civil judgement and linked to a non-SA source in the FPP for the Wagner fraud. Your strawmanning is offensive and ridiculous. If you can't refute my points, please just STFU about it.

The argument that there are no 'legitimate' companies involved in bitcoin, that they're all scams is based on nothing except bias.

Agreed, stop saying I'm claiming otherwise. Look, my argument has been fully backed up and you can do nothing but strawman, it's obvious I am correct on the points I'm actually making so please don't try and lie about my position again.
posted by furiousxgeorge at 10:07 AM on September 8, 2011

amuseDetachment you seem to respond to any concern with either handwaving (we'll solve that eventually), denial (you don't know what your talking about), or simple straw man arguments. It isn't very convincing. I'm sure that you are a smart person, but you really need to understand that there are many smart people here making solid points. Rather than try to beat them all back perhaps you should listen.
posted by humanfont at 10:35 AM on September 8, 2011

I never imagined cryptographic currencies would escape the pages of SF, let alone become a fad. But having seen this conversation in my Recent Activity the past few days dominated by like five people, I think I might pick up a few bitcoins, but only so I can use reminisce about them like Pogs ten years from now, and perhaps try to spend them "ironically."
posted by pwnguin at 11:43 AM on September 8, 2011

humanfont: I am listening, but I'm clearing out points that really aren't valid. I have admitted that there may be scaling issues (past 1000x current load or so) and some economic concerns with the current blockchain (although you can always fork the client with a new economic profile and make your own whatevercoins, of course that may be difficult economically, but is easy technically). However, I don't think I'm handwaving or in denial with anything, I try to explain everything as simply and non-technically as possible (or giving google-able keywords). If there's anything which looks like handwaving, I'd really like to clarify anything that may look like dismissal or head-in-sand ignorance.

I think there is a serious misunderstanding here. SA is taking a siege mentality against bitcoin, because the bitcointalk libertards are stupid and have an openly hostile approach towards SA, which is in line with their crazy paranoia. In my opinion, your real target is that community, and bitcoin as a project is being taken down as collateral damage. While there has been an open call in the SA GBS forum to spread negativity towards bitcoin, an SA member starting a bitcoin post in metafilter and having goons support them makes it incredibly difficult to have a reasonable conversation. I'm not going to question furiousxgeorge here, I assume he made this metafilter post in good faith, even with him participating in the SA thread. I've done my best not to call you guys out, because you may have the best of intentions, after all, the bitcointalk community has attacked you, and I would have the same amount of rage towards anything they associate with. However, bringing this to metafilter will not give you the same groupthink agreement as in SA, there will be people that push back and call you out with reasoned answers. Please understand that I may have a different point of view and I am not making strawman arguments.

I do think my approach to the bitcoin project is a little bit more neutral, I do see there as some serious flaws to overcome, it may even limit the project in the future. However, I do stand by all the points I made, I do see bitcoin as an incredibly interesting project where hardcoded contracts in the currency enables economic activities that were previously impossible and has the potential to enable substantial disintermediation of the financial system -- technologically, it is an incredibly interesting project, warts and all.
posted by amuseDetachment at 5:34 PM on September 8, 2011 [1 favorite]

Umm, it's really weird that you think this is some sort of tribal conflict. I don't follow that SA thread any more closely than anything around here. The main linked article is the highest voted all time on the bitcoin Reddit.

It's extremely bizzare we have to go there instead of just talking about the points in discussion. There was no SA hatred towards Bruce Wagner, they found him amusing until they uncovered what a scammer he is, which in a healthy community would have brought thanks rather than defensiveness.
posted by furiousxgeorge at 5:54 PM on September 8, 2011

The bitcoin "community" is nothing but scammers and suckers. Your hands are waving so fast it looks like you are conducting and orchestra. Now you want us to look over at Redidt or an SA forum as if that somehow taints the arguments here.
posted by humanfont at 6:26 PM on September 8, 2011

Bruce Wagner is a scammer and a thief, sure. The SA conflict with bitcointalk started way before him, though. Reddit really has nothing to do with this situation, don't equate them with SA, they've been as uninvolved as metafilter with this.

Why would I be wrong to think this is a tribal conflict? Two forums are slinging mud at each other, if you read the respective threads in both communities, it's so obviously a tribal conflict. People are advocating in the SA thread to spread this drama far and wide, making implicit suggestions to advocate spreading the message to twitter and blogs. Advocacy is not a problem, but you should not deny that it is absolutely going on. Anyone who has an SA account can see furiousxgeorge's comments. Look, I'm a part of the SA community. I have been for a really long time, back when the filesharing community inside the forum was stronger, I know how it operates. I also know it violates their community mores by posting conversations in a non-public thread, so I'll refrain from doing that, but let me say that I'm being more than charitable with regards to your intentions here on metafilter.

I do think you genuinely believe your arguments, but it's a bit disingenuous to say I've been making handwaving, denial or strawman arguments about bitcoins above. I don't respond in the SA threads because I don't care to have the discussion over there, however if you make claims about bitcoins here, I think I have the right to make well informed reasoned arguments about bitcoins strengths and weaknesses. There may be people that disagree with you, and I think you should respect that. If you think I'm wrong, please do specify why.
posted by amuseDetachment at 6:48 PM on September 8, 2011

By the way, I do think the SA community has done the bitcoin community a lot of good by outing Bruce Wagner. The idiots on bitcointalk are just far too stupid to know any better. I'd be pissed off too if I put in good solid detective and community policing work for another community and instead of getting met with praise/love, receive open hostility by the very community you're helping.
posted by amuseDetachment at 6:56 PM on September 8, 2011

Wagner was actually a focus of the SA thread for a good long while when he was just the goofball with the internet show. Look, the facts of this story are clear and SA were the folks who broke it. That is pretty much the extent of how they are relavent to anything in this discussion.

I think it's odd to try and make this forum v. forum when delmoi is breaking out some of the same denialism as you see over there. This is about a bit of enthusiasm for bitcoin that is overriding common sense at times.
posted by furiousxgeorge at 6:59 PM on September 8, 2011

Yeah, and I realized I didn't give SA enough credit just now, I assumed I had earlier.

This is some delicious internet drama underlying all of this was all I was trying to say.

I think we'd both agree that the largest threat to bitcoin's success is the bitcoin community itself.
posted by amuseDetachment at 7:05 PM on September 8, 2011 [1 favorite]

and freemasons.
posted by furiousxgeorge at 7:10 PM on September 8, 2011

Bitcoin will crash by design after its original seeders cash out. It is ridiculously obvious.
posted by humanfont at 7:14 PM on September 8, 2011

Yes obviously SA is full of freemasons and lizard men. Why else would they hate on Bruce Wagner? ;-)

(for those of you watching on the sidelines, this was a real post on bitcointalk)
posted by amuseDetachment at 7:14 PM on September 8, 2011

humanfont: Yes, like it is right now. I think it's better this crash happens now rather than later. Clean out all the speculators so we can build real tools. Hopefully all the crazies on bitcointalk leave with the crash. Currencies aren't meant to be held, they're meant to be traded. If the currency is used as a medium of exchange it doesn't matter whether the value is $100/BTC or $0.01/BTC, bitcoins still serve its purpose. Exchange rate doesn't matter, market cap does (because it brings price stability). Deflationary commodity currencies by definition are more unstable, so that is a real risk (see the historical prices of gold), there is a very clear argument to create a new blockchain which is long-term inflationary, but this deflation risk really only bears its head (if it does) in 20 years and isn't inherent in bitcoin as an idea and technology.

In my opinion, bitcoins have grown far too quickly to be stable. I think we'd both like to see the price of bitcoins crash now, but for different reasons.
posted by amuseDetachment at 7:21 PM on September 8, 2011

This thread was probably the peak of the freemason storyline. I'm pretty sure the bitrebel dude is just a very dedicated master troll though and also not from SA.
posted by furiousxgeorge at 7:23 PM on September 8, 2011 [1 favorite]

I have used Paypal, to sell things to individuals and to buy from them, it works fine and has fraud protection features.

Hmm, if you wanted to send money to wikileaks tommorow, how would you do it?

Anyway, The argument that paypal causes people problems is well supported. If you think PayPal works perfictly for everyone then you're delusional.

No. If it doesn't bother you at all that Gox is good friends with a scammer like this that is fine

Yeah it doesn't bother me. Are you going to tell me that every single one of your friends has never done anything shady? This is the kind of bullshit we hate in politicians, attacking someone by making insinuations about the people they're friends with -- you saw it with the attacks on Rev. Wright, Rashid Khalidi, Bill Ayers, Rezko, etc. If you dig up dirt on someone and twist it around it's easy to make people look bad. And it's even easier when all you have to do is find some dirt on the people those people are friends with. It's also something that's impossible to argue about, since it's entirely subjective.

I'm not going to defend bruce wagner, since he's a dumbass in the least (Although if he is a scammer, he's very good at faking emotional distress. Of course, that's totally possible). However, if people who do know him want to defend him, that's fine with me.

Now, I never said I didn't belive that people who worked at MtGox are defending wagner. What I said is that I don't really see a reason to worry about that.

My point about SA is that if you spend all your time reading about how some particular people involved in bitcoin are shady, you're prespective is going to get warped -- the same way your perspective about Democrats will get warped if all you listen to is rush limbaugh.

It seems like these people are seriously butthurt over this. But personal smears and character assasination against random people isn't really a reasonable argument against bitcoin itself, nor is the fact that people at MtGox disagree with those smears a reason not to trust MtGox.

I think it's odd to try and make this forum v. forum when delmoi is breaking out some of the same denialism as you see over there.

I'm not denying anything about Wagner. I just don't care, and I think it's irrelevant to the future of bitcoin. There are millions of dollars in transactions eacy day. Bitcoin is bigger then one random guy. If other people are friends of and want to deny various accusations, that's their right. I don't think you can call someone a criminal because they have a different oppinion then you about someone.

---

By the way, people on the bitcoin forum are definitely morons. Ther are lots of threads in /r/Bitcoin making fun of them. But the forums aren't even "official" anymore, they've been moved off bitcoin.org, thankfully. /r/bitcoin is generally pro-bitcoin but without as much idiocy.

Currencies aren't meant to be held, they're meant to be traded. If the currency is used as a medium of exchange it doesn't matter whether the value is $100/BTC or $0.01/BTC, bitcoins still serve its purpose. Exchange rate doesn't matter, market cap does (because it brings price stability).

Right. Even if the price does continue to go down, that doesn't mean the currency itself is a failure, what you have to look at the transaction volume -- hopefully the number of transactions, rather then just the dollar value.
posted by delmoi at 8:11 PM on September 8, 2011

Hmm, if you wanted to send money to wikileaks tommorow, how would you do it?

Bank transfer or postal mail.

Anyway, The argument that paypal causes people problems is well supported. If you think PayPal works perfictly for everyone then you're delusional.

Perfectly? No, of course not. Not bad enough that an entire new currency with its own issues (including worse fraud protection) needs to be brought in to replace it.

Yeah it doesn't bother me. Are you going to tell me that every single one of your friends has never done anything shady?

I'm not a bank and my friends aren't scammers. If my bank was friends with him, yes I would have an issue. If my friend is on drugs I'm keeping him away from my medicine cabinet.

I'm not going to defend bruce wagner, since he's a dumbass in the least (Although if he is a scammer, he's very good at faking emotional distress. Of course, that's totally possible). However, if people who do know him want to defend him, that's fine with me.

Uhh, yeah, scammers are good actors. Yes, you are defending him when you stick the word "if" in there.

My point about SA is that if you spend all your time reading about how some particular people involved in bitcoin are shady, you're prespective is going to get warped -- the same way your perspective about Democrats will get warped if all you listen to is rush limbaugh.

Luckily there are many sources for this info beyond SA, an an unbiased look at it leaves you with the same conclusion. Even your fellow enthusiasts have posted in this thread that the currency lends itself to scammers. In such an environment the scammers come in droves.

I just don't care, and I think it's irrelevant to the future of bitcoin.

It will be very relevant to the legitimacy of bitcoin if something happens to Gox (again) and Wagner is hanging around in the background just like he was with MyBitcoin. If it doesn't strike you as strange that both of those outfits he is close to were "hacked" I don't know what to tell you.

. /r/bitcoin is generally pro-bitcoin but without as much idiocy.

I know, and as I've mentioned we are talking about the highest voted story in the history of that Reddit.
posted by furiousxgeorge at 8:24 PM on September 8, 2011

and Wagner is hanging around in the background just like he was with MyBitcoin.

Hanging around in the background? You mean, by talking about it? That's the extent of his relationship with MyBitcoin, he used the service and talked about it.

Luckily there are many sources for this info beyond SA, an an unbiased look at it leaves you with the same conclusion.

Your only 'conclusions' are innuendo about a specific person, and then extending that companies that employ people who defend him. You don't have any evidence that MtGox is letting Bruce Wagner "in the medicine cabinet" or whatever. You don't have any evidence that they've done anything bad.

Again, let me be clear. I'm not defending Bruce Wagner in any way. I'm not going to bother reading about him because I simply don't care enough to bother. My only point is that it's ridiculous to claim that everyone who disagrees without about him is a criminal, certain to destroy their company and steal all their clients money.

It's very similar to the arguments against Obama that involved attacking people he knew, like Bill Ayers.
posted by delmoi at 8:51 PM on September 8, 2011

^ The issue is that bitcoin doesn't attempt to solve any of the problems that lead to the fraud with other methods, it only makes them worse. The scammers love bitcoin more than you for the same reasons you like it. They don't want to have to receive funds in a bank account, they don't want to have to go to Western Union. People who steal credit cards don't want to have to buy merchandise with them instead of an anonymous currency.

Hanging around in the background? You mean, by talking about it? That's the extent of his relationship with MyBitcoin, he used the service and talked about it.

Yeah, he used it. He was one of the biggest promoters of the service and was in it to the tune of 25,000 coins and claims to be one of the few to actually get a refund. It's shady as fuck.

Your only 'conclusions' are innuendo about a specific person, and then extending that companies that employ people who defend him.

Look, I don't know what to tell you, we've been over Gox and MyBitcoin and those are big deals regardless of Wagner. We also had the third largest exchange delete their coins via incompetence. These are not isolated incidents.

Again, let me be clear. I'm not defending Bruce Wagner in any way. I'm not going to bother reading about him because I simply don't care enough to bother.

If you are going to bury your head in the sand and not look at the clear facts, please STFU instead of continuing to...

it's ridiculous to claim that everyone who disagrees without about him is a criminal,

...pretend you are facing a different argument so you don't have to back down and admit you are wrong.
posted by furiousxgeorge at 9:19 PM on September 8, 2011

If you want to send someone $1000 dollars there are many ways that are vastly superior to bitcoin. The claimed advantages are simply not there. But because of the volatility of the coins and market spreads you end up risking a lot of money in the buying of coins and when your recipient resells them later on.
I think the bitcoin supporters are over focused on one aspect of the transaction, but from an objective business point of view it gains me nothing over the existing framework but additional hassle and uncertainty.
posted by humanfont at 9:36 PM on September 8, 2011 [1 favorite]

People who steal credit cards don't want to have to buy merchandise with them instead of an anonymous currency.

No one who sells bitcoins takes credit cards.

Yeah, he used it. He was one of the biggest promoters of the service and was in it to the tune of 25,000 coins and...

The fact that Wagner was one of the biggest users also meant that he was one of the biggest victims -- if he wasn't in on it.

It seems like you are having trouble understanding the difference between the victim of a crime and the perpitrator. You accused MtGox of having a history of hacking, when in fact they were the victim of the hack. Now you're arguing that somehow Wagner getting ripped off for a lot of money makes him shadier then him getting ripped off for a small amount of money. It doesn't make much sense.

The fact that he was promoting MyBitcoin is the real problem. Even if he wasn't involved, it was an incredibly stupid thing to do. That is an argument that he might have been involved.

But it's ridiculous to claim that any company he uses is also criminal. I'm sure he uses visa and MasterCard too.

Look, I don't know what to tell you, we've been over Gox and MyBitcoin and those are big deals regardless of Wagner. We also had the third largest exchange delete their coins via incompetence. These are not isolated incidents.

No one lost money with the MtGox hack, and no one lost money over pitomat.pl. And they are absolutely isolated incidents.

If you are going to bury your head in the sand and not look at the clear facts, please STFU instead of continuing to...

I don't have an interest in debating the character of one specific person. I think Bruce Wagner is irrelevant, and has zero relevance as to whether or not bitcoin itself is a scam, and little relevance for MtGox.

...pretend you are facing a different argument so you don't have to back down and admit you are wrong.

Well, I have no idea argument actually is. I thought the argument was that the people who run MtGox were criminals or likely to be criminals, just waiting to steal everyone's bitcoin. If that's not the argument, then what is?

If the argument is just that Bruce Wagner is a bad guy, then who cares?

If you argument is that MtGox is shady, what's the evidence for that? Wagner isn't involved with MtGox as anything other then as a customer, and someone who people who work at MtGox are willing to defend online. But it's not a crime to disagree with you.

If you want to send someone $1000 dollars there are many ways that are vastly superior to bitcoin.

What if you want to send ten cents?
posted by delmoi at 9:42 PM on September 8, 2011

Oh also,

...pretend you are facing a different argument so you don't have to back down and admit you are wrong.

What exactly am I wrong about? What is it you believe is both: 1) Not true and 2) something I believe?

Like I said, if you're argument isn't "MtGox will steal your money" then I don't know what it is.
posted by delmoi at 9:44 PM on September 8, 2011

It seems like you are having trouble understanding the difference between the victim of a crime and the perpitrator. You accused MtGox of having a history of hacking, when in fact they were the victim of the hack.

Yeah they keep getting "victimized" by hackers. Great business plan.
posted by humanfont at 9:50 PM on September 8, 2011

No one who sells bitcoins takes credit cards.

The fact that Wagner was one of the biggest users also meant that he was one of the biggest victims -- if he wasn't in on it.

I think one of the reasons we are not communicating well is that you are not at all familiar with how scamming works. "I was a victim just like you!" from a known scammer is not a claim you should lean towards trusting.

You accused MtGox of having a history of hacking, when in fact they were the victim of the hack.

Holy shit you are reaching dude, no that was not what I meant by a history of hacking.

I don't have an interest in debating the character of one specific person. I think Bruce Wagner is irrelevant, and has zero relevance as to whether or not bitcoin itself is a scam, and little relevance for MtGox.

...which you can't possibly judge when you just said you aren't going to read about him.

Well, I have no idea argument actually is.

But it's ridiculous to claim that any company he uses is also criminal.

Listen, I've lost patience with this. This is the biggest example of douchebaggery I have ever encountered on this site.

As I have posted repeatedly in the face of your obstinate refusal to engage me with any level of honesty:

Now, let me repeat again, I'm not saying they are all criminals. What I am saying is the lack of oversight means both that scams are more likely and that the damage of the scams is multiplied by having virtually no chance any government is going to be able or willing to recover the lost funds. They will be as gone as a Moneygram to Nigeria.

This level of increased risk and uncertainty gains you...virtually nothing as the currency is used close to nowhere.

INCREASED RISK OF SCAMS, MORE DAMAGING RESULTS, LITTLE BENEFIT.

NO ---> THEY ARE ALL DEFINITELY CRIMINALS.
posted by furiousxgeorge at 10:00 PM on September 8, 2011

No one lost money with the MtGox hack, and no one lost money over pitomat.pl. And they are absolutely isolated incidents.

Yet many people still claim on forums that they are waiting for their accounts to be fixed after the hacking incidents. Furthermore even if thy didn't lose bitcoins, the value of those coins have dropped more than 50% relative to more widely used currencies from their pre-hack highs. That is a loss.
posted by humanfont at 10:41 PM on September 8, 2011

Yeah they keep getting "victimized" by hackers. Great business plan. -- humanfont

It happened once. Companies get hacked all the time. Suggesting that only illegitimate companies get hacked is ridiculous. And importantly, people didn't lose money. _{(there may be posts complaining online, but those could be trolls or the cases may have been resolved. I'm not aware of any verified cases of users not getting their money back)}

---

Now, let me repeat again, I'm not saying they are all criminals. What I am saying is the lack of oversight means both that scams are more likely and that the damage of the scams is multiplied by having virtually no chance any government is going to be able or willing to recover the lost funds. They will be as gone as a Moneygram to Nigeria.

With bitcoin, you shouldn't send money if you don't trust that the person you are sending it too is going to do what they say. But there are lots and lots of situations where people do trust the person they are sending money too. It could be because you know them, or because you're sending a really small amount. Or it could be that you're making a donation. Or it could be that you're willing to accept the risk on the transaction, just as sellers currently take the risk of a bogus chargebacks when it comes to credit cards.

If your argument was simply that it's easier to scam people out of bitcoin then it is to scam them out of dollars, then you're right. If you're a seller, it's easier to be scammed using credit cards and bogus chargebacks then it is if you accept bitcoin. It transfers risk from receiver to sender.

But that said, you spent a ton of time arguing that that MtGox, specifically, was likely to be a scam. If you argument isn't that MtGox is a scam, why did you spend so much time trying to claim that it was? It seems like it was more then half of your comments. How are people supposed to know what your supposed argument is if you spend all your time making (weak) points that don't relate to it?

I mean, really it seems like most of your comments were character attacks on one person, and then claiming that it also applied to everyone who knew him. If that wasn't your argument, then all of those comments were just a waste of everyone's time. Whether or not people who work for MtGox are sympathetic to Bruce Wagner on internet forums is totally irrelevant to how likely you are to get scammed in bitcoin in general

NO ---> THEY ARE ALL DEFINITELY CRIMINALS.

Not definitely, more likely. You were very clear that you thought it was likely that MtGox was all a huge scam. You said so many times.

Holy shit you are reaching dude, no that was not what I meant by a history of hacking.

If someone had been mugged multiple times, you wouldn't say they have a "history of mugging". You were using misleading language to make them seem more shady then they are.

Listen, I've lost patience with this. This is the biggest example of douchebaggery I have ever encountered on this site.

Sure, the people at MtGox are criminals because they disagree with you about Bruce Wagner. And I'm a douchebag because I disagree with you about MtGox. I don't really know why you're so butthurt about this, but it's not my fault you're bad at making arguments, or seemingly knowing what your own arguments even are.

They will be as gone as a Moneygram to Nigeria.

It seems like most of your comments were based on the premise that using traditional transfer methods were immune from fraud. Now you're saying moneygram transfers can dissapear. Which is it?

By the way, there are over a million Nigerians living in the U.S and they send money home all the time. The total remittance to Nigeria (from all countries) is about 10 billion dollars a year. There are 150 million people living in the country and they're not all fucking scammers.
posted by delmoi at 10:44 PM on September 8, 2011

Now you want to muddle a reference to 419 scams with Nigerian remittances. How do you expect us to react to that line of argument?

MtGox and other similiar businesses appear to be illegal based on my understanding of banking and securities laws, treaties and regulations. If my understanding is correct then they are engaged in a criminal enterprise. The only claims you have that they are operating in compliance with the law are statements from the businesses themselves claiming what they are doing is totally legal because they tell you they are not a bank or currency exchange.
posted by humanfont at 8:19 AM on September 9, 2011

Now you want to muddle a reference to 419 scams with Nigerian remittances. How do you expect us to react to that line of argument?

He didn't say 419 scam, he just said 'money to Nigeria'. It's a sloppy use of language and it's obnoxious.
posted by delmoi at 9:08 AM on September 9, 2011

It is an obvious inference to well established scam. Your response just further harms your credibility.
posted by humanfont at 9:29 AM on September 9, 2011 [1 favorite]

I'm certainly interested if anyone can provide a coherent argument that MtGox is a scam. I haven't seen one here yet, btw. I would not buy bitcoins currently anyways.. except for an immediate transaction with a merchant who's only other payment method was paypal.. or asked nicely for bitcoins. Wuala perhaps, if they tracked the current exchange rate.

There are only two important things in the long run though : First, any weaknesses in the software or protocol must be exposed and corrected. Second, we must learn whether more regulation is necessary, or whether a protocol can provide that force of law.

In particular, the non-inflationary condition might simply be too destabilizing over the long run, requiring a currency fork. I donno, ask a behavioral economist.
posted by jeffburdges at 10:14 AM on September 9, 2011 [1 favorite]

In related news, BTC seems very volatile again. Price is down from $7 USD to $4 USD and there's a whole lot of volume trading today. Another scandal? Another scam? Ordinary panic? Just trading?

One of the biggest threats to Bitcoin as a real commodity is how tiny the market is. This is not the chart of a healthy currency.

(Also, Paul Krugman wrote about Bitcoin.)
posted by Nelson at 10:20 AM on September 9, 2011 [1 favorite]

It is an obvious inference to well established scam. Your response just further harms your credibility.

Credibility on what? This has nothing to do with bitcoin, it's an entirely separate issue from bitcoin. I don't find it particularly credible when people act like sending any money to Nigeria means being involved in a scam. As I said, 150 million people live there, about a million Nigerians live in the US and people send billions of dollars there every year.

If you want to judge my "credibility" on the basis of whether or not I agree with you and furiousxgeorge about some moronic meme, go ahead. I never said I didn't get the reference, I said I thought it was lazy and obnoxious -- you're basically slandering an entire country to make a point. Especially since the Nigerian government cracked down years ago, and many of the "419" scams actually originate from other countries these days anyway.

Another scandal? Another scam? Ordinary panic? Just trading?

Yeah, huge volume as well.
posted by delmoi at 11:23 AM on September 9, 2011

Again pretending my arguments are something they are not will still not magically make it so.

If your argument was simply that it's easier to scam people out of bitcoin then it is to scam them out of dollars, then you're right. If you're a seller, it's easier to be scammed using credit cards and bogus chargebacks then it is if you accept bitcoin. It transfers risk from receiver to sender.

And in the case of scams, that is transferring the risk to the victim and away from scammers. Gee, I wonder why scammers like this!

But that said, you spent a ton of time arguing that that MtGox, specifically, was likely to be a scam.

I have listed examples of potential risk and warning signs, including the hacking they have already suffered and a known scammer they associate with. That makes it more likely, yes. Anything further is you making shit up to try and win an argument you lost days ago. As I have already posted I am talking only about increased risk.

If someone had been mugged multiple times, you wouldn't say they have a "history of mugging". You were using misleading language to make them seem more shady then they are.

No, you are lying, I have no idea why this is so important to you that you are resorting to this. Here is when history came into the discussion:

Unintentionally true. "Magic the Gathering Online Exchange" has a longer history of doing right by their users than a good number of FDIC-insured banks.

And a not so great record of getting hacked into the ground. I'll stick with the FDIC. :P

As you can see, you are wrong. Stop making shit up.

Sure, the people at MtGox are criminals because they disagree with you about Bruce Wagner.
It seems like most of your comments were based on the premise that using traditional transfer methods were immune from fraud.

Why do you feel it necessary to continue to lie about what I'm saying, over and over?

By the way, there are over a million Nigerians living in the U.S and they send money home all the time.

Why do you feel it necessary to try and suggest I am implying things I clearly am not?

ANYWAY,

The Bitcoin forums have just been hacked, with a bunch of Cosby jokes which are a reference to an inside joke on the SA YOSPOS forum.
posted by furiousxgeorge at 1:03 PM on September 9, 2011

Do you still stand by your position that no one has lost money in MTGox?
posted by humanfont at 1:10 PM on September 9, 2011

Again pretending my arguments are something they are not will still not magically make it so.

I have listed examples of potential risk and warning signs

Yes, you've pointed out over and over again that some people who work for them defended a guy on a message board, and that's pretty much it. The rest is innuendo, innuendo that's completely irrelevant to the argument that you claim to be making.

As you can see, you are wrong. Stop making shit up.

First of all, you were quoting yourself replying to pla, not me. I never said MtGox was better then an FDIC insured bank -- Just to clarify in case someone things I wrote that. I didn't (another sloppy use of language on your part)

Secondly, you wrote that MtGox had a "history of hacking." You have to write clearly and you can't expect people to memorize every single comment posted in a 100+ in order to know what you mean 'by context'

You are essentially saying that people should judge your arguments by what you meant, rather then what you actually wrote.

Why do you feel it necessary to try and suggest I am implying things I clearly am not?

Again, it's not my fault you can't express yourself clearly. I'm responding to the words you write, not whatever it is you think you mean.

The Bitcoin forums have just been hacked, with a bunch of Cosby jokes which are a reference to an inside joke on the SA YOSPOS forum.

Well, it looks fine to me (not that I ever go there). All this proves is that 1) SA obviously has some weird issue with bitcoin and 2) You're obviously spending a lot of time on the SA forums if you even heard about it.
posted by delmoi at 1:29 PM on September 9, 2011

Do you still stand by your position that no one has lost money in MTGox?

Well, link to a verified example.
posted by delmoi at 1:30 PM on September 9, 2011

Okay... All I said was that if your argument is that there is an increased risk of scamming in principle, then all your posts about whether or not MtGox is somehow a scam are irrelevant to your argument.

No, it is relavent to illustrate the risk you encounter in the bitcoin economy. At no point did I say they are a scam, only that there is increased risk given their associates and past history of being hacked.

Yes, you've pointed out over and over again that some people who work for them defended a guy on a message board, and that's pretty much it.

And that they got hacked for an amount equaling, IIRC, 1/13th of the entire bitcoin economy at the time. And that Wagner is close enough that he has personally visited them. And that another similar company he associated with also suffered a hack. This is not innuendo, this is not ironclad evidence of criminality, it is simply big red warning signs.

Secondly, you wrote that MtGox had a "history of hacking." You have to write clearly and you can't expect people to memorize every single comment posted in a 100+ in order to know what you mean 'by context'

It is only unclear if you are intentionally looking for the worst possible reading. I was quite clear on this when it first came up. Stop spinning and admit you were factually incorrect in your stupid comment.

I could make your statements imply crazy shit too if I was being a dishonest shill like you are.

It's very similar to the arguments against Obama that involved attacking people he knew, like Bill Ayers.

OMG Why are you saying Gox is similar to Ayers, you are 100% absolutely saying they are terrorists!
posted by furiousxgeorge at 1:46 PM on September 9, 2011

The hack was some sort of flash exploit I think, if you have adblock or something similar going on to block scripts it should be fine. The site is down now.
posted by furiousxgeorge at 1:50 PM on September 9, 2011

MtGox claims to have magically restored everyone's accounts and reversed bad transactions. This on a system using MySQL and php. They did all this without the help of forensic accountants and outside auditors. They can't even produce an independent audit of their current wallet. Trusting them when they face multiple allegations of breach of trust seems a bit crazy. The burden of evidence is mtGox.
posted by humanfont at 2:27 PM on September 9, 2011 [1 favorite]

And that they got hacked for an amount equaling, IIRC, 1/13th of the entire bitcoin economy at the time.

Are you confusing MtGox and MyBitcoin.com again? MtGox only lost a few thousand bitcoins. Another example of a factual mistake on your part.

And that they got hacked for an amount equaling, IIRC, 1/13th of the entire bitcoin economy at the time. And that Wagner is close enough that he has personally visited them. And that another similar company he associated with also suffered a hack.

Another example of innuendo on your part. I asked if you were claiming that you throught MtGox were likely to be criminals because they knew Wager, and you said no. Yet, if that's not what you're trying to imply with this statement, then I have no idea what you are trying to say.

So to clarify, are you trying to say that you think that the people running MtGox are criminals, or more likely to be criminals, or what?

Bruce Wagner was a journalist who had an internet show about bitcoin. It's not surprising at all that he would have made contacts with lots of different bitcoin businesses. He didn't have any (known) financial ties with MyBitcoin and he doesn't have any financial ties with MtGox (other then as a customer). The innuendo here isn't even really worth pushing back on because it's so stupid. Especially since you don't even have the balls to come out and say that you think MtGox is a scam.

_{(And it's not even a 'new' innuendo here, it's the same innuendo you've been making over and over again)}

It is only unclear if you are intentionally looking for the worst possible reading.

It's a direct, literal reading of what you wrote. You can't keep making factual or linguistic errors and then when called on it claim that you meant something else when all of the mistakes that if they were deliberate would be designed to make the "bitcoin community" (or whatever) look worse then it is.

Anyone who follows politics will be familiar with this. You keep making making mistakes, factually or with your language that all serve to make the target look worse then it is people like Rush Limbaugh do this to democrats, and there are plenty of democratic party fanboys who do the same thing in reverse -- or look at the primary when there was all kinds of crazy shit going back and forth between Obama and Hillary supporters.

Trusting them when they face multiple allegations of breach of trust seems a bit crazy. The burden of evidence is mtGox. -- humanfront

Like I said, link to a verified example of someone who lost money. I don't really care what you think about their system from a technical perspective. If someone lost money, it should be easy to prove.
posted by delmoi at 2:31 PM on September 9, 2011

Are you confusing MtGox and MyBitcoin.com again? MtGox only lost a few thousand bitcoins. Another example of a factual mistake on your part.

No, I am referring to the amount reported missing here. I have at no point confused the two, despite your inexplicable lying to the contrary.

Within an hour of the hack, reportedly 100,000 Bitcoins were sold at incredibly cheap rates on Mt. Gox, plunging the market from around $17.50 USD per Bitcoin to just $0.01 per Bitcoin. Meanwhile 400,000 other Bitcoins were reported missing.

That's roughly 1/13th of the total Bitcoins in existence, or about $8.75M USD at the previously market value.

I'm sorry, what other factual errors are you referring to?

I asked if you were claiming that you throught MtGox were likely to be criminals because they knew Wager, and you said no. Yet, if that's not what you're trying to imply with this statement, then I have no idea what you are trying to say.
So to clarify, are you trying to say that you think that the people running MtGox are criminals, or more likely to be criminals, or what?

No matter how many times you lie about what I'm saying, it's not going to change what I'm actually saying. I'm not sure why I even have to repeat at this point that I am talking about increased likelihood and warning signs when you yourself think Gox is run by terrorist Weathermen.

It's a direct, literal reading of what you wrote

When stripped of the context of my directly saying this history I was referring to was them being hacked. Look, I have quoted that statement already, you are free to misread the first time, now that the context has been established you are just being a dishonest asshole.

Erasing the context is what Limbaugh does, the fact that you are using that as a bludgeon while claiming the victim of your spin is the problem is fucking scary. Why is it so important to you that you need to go to these intensely and obviously dishonest lengths?
posted by furiousxgeorge at 2:49 PM on September 9, 2011 [1 favorite]

geez guys, get a room. I am curious about one thing Delmoi says, though, since it speaks to the whole question of Bitcoins, fraud, and trust:

link to a verified example of someone who lost money

What does "verified" mean? Who's going to verify a loss claim? It takes just 5 seconds on Google to find lots of people who claim they've lost money on Mt Gox, or more specifically that it's still locked away and they can't access it. I have no idea if those people are honest or if there problems have been resolved. But what authority does? Financial exchanges without a regulating authority have drawbacks.
posted by Nelson at 3:09 PM on September 9, 2011

No, I am referring to the amount reported missing here.

Yeah, and you're wrong. First of all, that article was written during the event, when most of the facts weren't known. It was updated later, but apparently you didn't read the whole thing or maybe you didn't understand it.

You're confusing bitcoins that were actually transferred out of MtGox's system -- just a handful -- and what happened on the exchange. Someone created a bunch of fake sell orders, so people ended up 'buying' bitcoin on the exchange for about a penny.

Those trades ended up being reversed. One person managed to buy a bunch of bitcoins for a penny each, and transferred out a handful. They were limited by the rules that only allow the withdrawal of $1000 a day (The person who bought the coins said they could have transferred more, but didn't want to do anything against the rules -- he thought he would get to keep the money)

In fact, a lot of that is actually made clear in the article you linked too, if you would bother to read it. Only about 25k coins left MtGox, and the person who bought them wasn't the hacker. The trades that day were rolled back.

And by the way, the same thing happens on the real stock market In that case it was human error/computer rather then a hack, but a bunch of people were able to buy Google stock for $200, only to have those transactions reversed the next day. It's not unheard of.
posted by delmoi at 3:11 PM on September 9, 2011

What does "verified" mean? Who's going to verify a loss claim? It takes just 5 seconds on Google to find lots of people who claim they've lost money on Mt Gox, or more specifically that it's still locked away and they can't access it. I have no idea if those people are honest or if there problems have been resolved. But what authority does? Financial exchanges without a regulating authority have drawbacks.

Right, but the problem is anyone can make that claim. There are obviously people who have a real problem with bitcoin and are obsessed with trolling that message board.
posted by delmoi at 3:13 PM on September 9, 2011

Secondly, you wrote that MtGox had a "history of hacking."

You are also lying about that being a "direct, literal reading" as an actual direct literal reading shows I was talking about "unregulated banks" plural.

I'm...what? What I am telling you is unregulated banks on the other side of the world backed by no deposit insurance are a bad place to park any of your money, especially based on their history of scamming and hacking in regards to bitcoin, nothing more, nothing less.

So you stripped the context where I earlier said Gox was hacked. You stripped the context where I link to a story about them being hacked in the FPP. You lied about what I said to claim it was literally specific to Gox. Jesus Christ, dude.

Yeah, and you're wrong.

Only half wrong. Actual missing coins, no, but the size of what seemed to be missing at the time was 1/13th of the entire economy. Not a small deal when that much is a stake on their obviously flawed security. The exact number is not that important when the key fact is a hacker got into their database. Or did they? Maybe it was an inside job like is suspected for MyBitcoin, we can't prove anything either way.

Now, you were 100% wrong when you said I was confusing it with MyBitcoin so please stop claiming that.
posted by furiousxgeorge at 3:23 PM on September 9, 2011

the problem is anyone can make that claim.

I prefer to manage my finances with currency and institutions that have a claim resolution process. You know: laws and regulations. I suspect most people do.

I also find it pretty astonishing that Mt Gox unilaterally reversed the trades. They basically made up a policy about what proper trading is and how to handle problems, ex post facto. Give them a hundred years of figuring out policy like that and maybe they'll have a commodity market. Oh, wait, that's been done already.
posted by Nelson at 3:26 PM on September 9, 2011 [2 favorites]

You claim it would be easy to verify or refute claim of a loss. How would one do that absent independent audits. MtGox has one wallet for all the coins and a database (notorious for transactional integrity issues) keeping track of who has how many coins. Some % of those coins are owned by MtGox itself. You have no one monitoring reserve ratios or reviewing internal transactions. You don't even know how many of their trades are real trades. There is nothing verifiable about the entire business. Yet you insist that those claiming to have lost money are all liars.

1. Is bitcoin money in your opinion? If so why isn't MtGox a bank or currency exchange? If they are a currency exchange or bank they are operating illegally.

2. What evidence do you have other than MTGox's own word tha all accounts are restored?

3. There are many incentives for MtGox to cheat by posting false trades to create the appearance of volume, exploiting bid/ask information to give themselves preferential pricing, and using a reserve model to earn interest off of their control of so many idle coins. If you can crash the market at any time why wouldn't you just slowly sell as prices rise, then rush a bunch of sell order to create a panic. So long as your customers are mostly not using their coins to do anything other than buy dollars in your exchange you can always cover the withdrawals.

Say you had 30 btc in an account at MtFont. You decide to sell them for dollars. So you post a ask order at $8. As owner of MtFont I can take advantage of any spread and close your tx out while immediately reselling to another party at $8.25. Say you leave your 30 tv in your accout because you think the currency will only rise in value. I can still sell out your btc for 8.25 to the bidder. Now I will need to lose out the open 30 coins at some point. I'll earn something from tx fees, but if I get in trouble I can always crash the market, freeze trading because of a "hack" or simply skip town.
posted by humanfont at 3:48 PM on September 9, 2011 [1 favorite]

I prefer to manage my finances with currency and institutions that have a claim resolution process. -- Nelson

There are other bitcoin exchanges. You can read their policies and see if you agree with them or not. MtGox is just the most popular one. It's also false to say that MtGox didn't have a claim resolution system in place, you can read about it here.

As far as laws and regulations are concerned, no one in this thread has ever given any evidence to suggest that somehow MtGox isn't bound by the law.

I also find it pretty astonishing that Mt Gox unilaterally reversed the trades. -- Nelson

Why? As I said, it happens on the real stock market as well. here's the example I was talking about with respect to Google. Are you equally astonished that those trades were reversed?

2. What evidence do you have other than MTGox's own word tha all accounts are restored?

That's just my impression. If you don't want to believe it, you don't have too. If you're too lazy to do the research needed to prove your point, that's not my problem. Again, as I said, just show me a single proven example of someone who had their money stolen on MtGox.

It's much easier to prove that something exists then that it doesn't exist (that's what people usually mean when they say you "can't prove a negative")

---

Anyway, my point here isn't that MtGox is a perfect company. They obviously had issues with the hack and the response. Earlier I pointed out that there were other bitcoin exchanges you can use if you don't think MtGox responded to the hack appropirately.

The point I'm making is that there's no evidence they are run by criminals just waiting to steal all your money. That seems to be the argument that furiousxgeorge is making, except he's not willing to actually say that -- he just keeps up the innuendo campaign.

---

_{You are also lying about that being a "direct, literal reading" ... So you stripped the context where I earlier said Gox was hacked ... Now, you were 100% wrong when you said I was confusing it with MyBitcoin}

_{It's not my fault if you're a poor communicator.

Now, here, specifically with regard to a "history of hacking" you said:}

_{What I am telling you is unregulated banks on the other side of the world backed by no deposit insurance are a bad place to park any of your money, especially based on their history of scamming and hacking in regards to bitcoin, nothing more, nothing less.}

_{That clearly implies that you think MtGox has a "history of hacking" at the very least. If not a history of hacking and scamming. Anyone who read that, farily, would have to come to the same conclusion. (In fact, you actually pasted the incorrect context earlier.)

With regard to MtGox getting hacked for 1/13th of the economy, you said:}

_{And that they got hacked for an amount equaling, IIRC, 1/13th of the entire bitcoin economy at the time.}

_{Now, I think most people reading that would assume you meant that 1/13th of the economy had been stolen. I think that's what "hacked for" would typically mean in this context.}

_{Now, you were 100% wrong when you said I was confusing it with MyBitcoin so please stop claiming that.}

_{Look, it's not my fault you're making so many factual errors and/or mistakes in your comments. You seemed to say that 1/13th of the entire bitcoin economy was stolen. That was completly wrong. It was so wrong I assumed you had gotten Gox and MyBitcoin confused. Apparently it was just a mistake about what actually happened to MtGox. It's hard to have a debate with someone who keeps making factual errors, because you have to guess about what mistake they are actually making.

That said, people can go back and read the comments for themselves, so arguing about what comment said what is kind of a derail.}

---

Finally you havn't answered my question: Do you actually think it's likely that MtGox is run by criminals, who are just waiting for the chance to steal everyone's money? That's what the innuendo you keep posting about Bruce Wagner and them seems to imply, but so far you havn't been willing to specifically say that that's what you think.
posted by delmoi at 4:31 PM on September 9, 2011

The point I'm making is that there's no evidence they are run by criminals just waiting to steal all your money. That seems to be the argument that furiousxgeorge is making

Look dude, you're the one saying they are terrorists. I haven't said they are criminals at all.

Now, I think most people reading that would assume you meant that 1/13th of the economy had been stolen. I think that's what "hacked for" would typically mean in this context.

I can see how that particular context could be confusing, now that we have clarified the issue however I'm not sure what your continuing issue is? If your exchange is putting 1/13th of the total bitcoins in question because of a hack, you have issues. If I was certain of the exact details I would not have labeled it IIRC.

It's not my fault if you're a poor communicator.

It's not my communication that is the issue when you intentionally strip out the context, it is your dishonesty. Now that the truth of what I have said has been clearly established, why are you still trying to pretend there is an issue here?

That said, people can go back and read the comments for themselves, so arguing about what comment said what is kind of a derail.

I agree, so stop lying about the comments so we have to continue this derail.

Finally you havn't answered my question: Do you actually think it's likely that MtGox is run by criminals, who are just waiting for the chance to steal everyone's money?

I have stated my position like 50 times now dude, I'm not sure what copy and pasting it for you to lie about again is supposed to accomplish.

Now, let me repeat again, I'm not saying they are all criminals. What I am saying is the lack of oversight means both that scams are more likely and that the damage of the scams is multiplied by having virtually no chance any government is going to be able or willing to recover the lost funds. They will be as gone as a Moneygram to Nigeria.

This level of increased risk and uncertainty gains you...virtually nothing as the currency is used close to nowhere.
posted by furiousxgeorge at 4:42 PM on September 9, 2011

MtGox can provide an audited financial statement to refute claims of malfeasance. They don't. Instead they rely on forum posts blaming the negative comments on a campaign against them.

Also you havnt answered my other questions and points above. This I unilaterally declare total thread victory, and request favorites as a means of confirmation.
posted by humanfont at 5:03 PM on September 9, 2011 [1 favorite]

Look dude, you're the one saying they are terrorists.

Okay....
posted by delmoi at 5:41 PM on September 9, 2011 [1 favorite]

I was going to answer the question about why I'm surprised that Mt Gox reversed the trade, but then I realized I'd just be repeating what I already said. "They basically made up a policy about what proper trading is and how to handle problems, ex post facto."

This thread is toxic, I'm done.
posted by Nelson at 6:20 PM on September 9, 2011 [1 favorite]

> "They basically made up a policy about what proper trading is and how to handle problems, ex post facto."

Well, I don't really see what the problem was. They were hacked. Reversals happen all the time on real stock exchanges, so I don't see why it's suprising.
posted by delmoi at 6:30 PM on September 9, 2011

Yeah it's standard on any stock exchange. They generally have a policy on when they can cancel trades, but there are general Act of Gold like causes which lets them weasel any situation to be able to cancel. And good luck trying to dispute any canceled trades by the exchange, there's a dispute process, but nobody ever wins. Tons of trades got reversed during the Flash Crash, which really sucked if you made any hedged bets during the crash, because some people had certain trades get canceled but others right before a certain time not get canceled, which meant if you were putting trades on both sides, you were SOL. People complained about how there weren't any real justification in the rules for a mass cancel, but they did it anyway because it'd be stupid and unfair to let those obviously erroneous trades go through -- if you let those Flash Crash trades last year go through, there's an instant moral hazard to encourage people to crash the market with bots.
posted by amuseDetachment at 6:51 PM on September 9, 2011

Actually I heard about people who bought Google at $200, then sold it again right away for $500 or whatever it was at the time. Their initial trades got reverted, and their subsequent trades got converted into shorts. So they were basically screwed.
posted by delmoi at 10:14 PM on September 9, 2011 [1 favorite]

delmoi : Their initial trades got reverted, and their subsequent trades got converted into shorts.

IANADT/Br/IB, but I don't think it works that way. For the most straightforward reason, you can't short sell without a margin account, which no broker enables by default (because it very literally means they've extended you an unsecured line of credit).

First of all, you were quoting yourself replying to pla, not me.

...And ignoring my actual response between those two comments.
posted by pla at 7:23 AM on September 10, 2011

Entirely irrelevant to delmoi's bizarre suggestion that I was trying to imply Gox was hacking people through a campaign of language manipulation.
posted by furiousxgeorge at 7:38 AM on September 10, 2011

pla: Yes, it exactly worked that way in the aftermath of the flash crash (or anytime a trade is reversed). Pretty much anyone that trades has a margin account, the only time I know of where it's uncommon is a personal retirement account. Pretty much all large funds that got burned in this situation were burned in that exact way. Margin accounts are irrelevant, though, if you didn't HAVE a margin account though, they'd have you taking a negative position as if you had a margin account and automatically closed the position -- whether that's at the beginning or end of the next trading day depends on the broker.
posted by amuseDetachment at 2:45 PM on September 10, 2011

Since this thread has started the exchange rate has gone from $14 to $4.66. Yet in the wake of inflation the system is unable to adjust. It just keeps spamming out 300 new btc/hour.
posted by humanfont at 4:26 PM on September 10, 2011

Exchange rate risk is real in any small economy, no one should be surprised that this happens.

$4 is a substantially more accurate price for bitcoins than $30, although I suspect it's closer to $2 today if I had to guestimate judging by the size of the real bitcoin economy. Again, the only time the exchange rate really matters is in relation to market cap, the exchange rate is entirely derived so it's largely irrelevant. As no currency is meant to be held, it doesn't really matter what the exchange rate is. Currently, we're looking at an M0/M1 of $34 million dollars, so you can easily make any transaction less than around $1000 without moving the market. Anything above that probably isn't a good idea. The lack of stability definitely hurts, but national currencies can make these kinds of movements every so often, e.g. 1997 Asian Financial Crisis. These are really growing pains, the only people being hurt really are speculators. Heavy market dislocations create real economic difficulties for debt markets, but because the debt market for bitcoins are nonexistent, the only people getting hurt are speculators, which may be a very good thing for the long term viability. Hopefully the teabaggers get really dispirited and leave.
posted by amuseDetachment at 4:53 PM on September 10, 2011

Your comments read like every other scammed baghoder and busted gambler. These are not growing pains, they are the death rattle.
posted by humanfont at 5:49 PM on September 10, 2011

I'll take that.
posted by furiousxgeorge at 5:54 PM on September 10, 2011

Don't worry, just subtract the value of the bitcoins from the cash you send me and buy the bitcoins yourself.
posted by furiousxgeorge at 6:09 PM on September 10, 2011

We all know $100 isn't a lot of money but it's foolish to say there is a 0% chance 10BTC won't be trivial a year from now.

Not true. If someone buys 10BTC today, they have made a guaranteed 250% return. You may well come out on the (potentially much) better side of the deal, but anyone taking that bet (and covering it today) has still done pretty damned well by any way you measure ROI.

So yeah, I'll take the third spot in that "bet" (please, promise me you can afford that without flinching - I don't gamble, because even in the absence of a "house", someone still always loses). MeMail me your public key, and I'll cover it right now.
posted by pla at 6:15 PM on September 10, 2011 [1 favorite]

The only way for furiousxgeorge to lose money on this would be if you welched on the bet.
posted by humanfont at 6:16 PM on September 10, 2011

If someone buys 10BTC today, they have made a guaranteed 250% return.

Argh, don't ruin it.
posted by furiousxgeorge at 6:17 PM on September 10, 2011

humanfont: I own fewer than 30 bitcoins (from playing around with mining and spent some). I have never said that buying bitcoins for speculation was ever a good idea, in fact I actively discouraged it in this thread. I really don't understand why you're attacking me with ad hominems (relating my comments to bitcoin speculators) when my reply was very reasonable.

Jenga: A more fair way to do it would be for them to pay you in BTC today, and deliver that value in USD a year from now. Of course, the counterparty risk is pretty big here, I think it'd be more fun to open to binary futures that the bitcoin exchange rate will be above $10/BTC a year from now with a 1:1 payout priced in USD on delivery, priced to make it interesting for both parties. If it's below $10, they pay you $1 per contract, if it's above $10, you pay them $1.
posted by amuseDetachment at 6:36 PM on September 10, 2011

To clarify, 250% return is a little high for something like this.

If you do choose to make it a futures contract (where one party delivers BTC today and the counterparty delivers USD a year from now), I'd recommend talking to some in the bitcoin community to escrow the transaction.

The right way to do this over bitcoins would be to send coins with an output script with an output script which requires the approval of two of 3 parties to spend, as:
2 [JengaSig] [OtherPartySig] [EscrowSig] 3 CHECKMULTISIGVERIFY

One year from now, if bitcoins are valueless, deliver $100 in USD and the transaction is closed.

If bitcoins have value, you can settle in bitcoins if the OtherParty agrees to it (otherwise deliver in USD). This can be achieved by creating another transaction.

In this transaction, there will be one transaction with two inputs and two outputs. The first input would be the old transaction with two signatures (whether it be the escrow and one party, or preferably Jenga and OtherParty, only 2 of 3 needs to sign). The second input would be $100 USD priced in bitcoins. The output would be $100 USD priced in bitcoins to OtherParty's bitcoin address, and the remainder going to Jenga. OtherParty then converts to USD in an exchange (I'm sure anyone would be willing to cover the exchange fees). There's no way to do this automatically, you have to create a manual transaction in the bitcoin code, but it's entirely possible. This allows no one to spend the money held for 1 year and puts the settlement in one single transaction. This is technologically interesting because you can settle held funds in a single transaction.

The net result would be a relatively secure transaction, and if there are no troubles, the escrow wouldn't be contacted. Of course, this doesn't keep Jenga from walking alway, which is a counterparty risk, but if Jenga was not acting in good faith, he would never be able to steal the bitcoins assuming the escrow was honest (it would just turn into a free call).
posted by amuseDetachment at 6:58 PM on September 10, 2011

Yeah, it is really neckbeardy at this point, the tools really need to be written to make this stuff easy.

In any case, I still think 250% is far too high. The premium should realistically be based on Interest Rate Risk + Counterparty Risk when you're dealing with this type of forex derivative (and interest rate risk is pretty close to zero). Realistically, I still think a bet where money only really exchanges hands one year from now is the most practical.
posted by amuseDetachment at 7:07 PM on September 10, 2011

amuseDetachment A more fair way to do it would be for them to pay you in BTC today, and deliver that value in USD a year from now.

Why? Personally, I consider close-to-par a fair USD/BTC valuation; If you had told me six months ago "BTC will hit $30", I would have laughed at you. And yet, with a nowhere-near top-of-the-line mining rig, I've made a damned fine return on my "investment" in a $50 graphics card (which, incidentally, I can use for plenty of things beside BitCoin mining). More than 250%, in fact.

And now, I'll make another $100, for an investment of $40ish. Less than what BitCoin has brought me overall, but I sure as hell won't complain about getting the tip on top of payment for the meal.

Of course, the counterparty risk is pretty big here

What risk? He offered to give me USD$100 for a commitment of USD$40 today. The only "counterparty risk" here involves me dying in the next 365.24.

Jenga : Regardless of whether they hedge with 10BTC bought now or buy it later, they will still have to bear the rise of having whatever 10BTC is worth in a year's time and then just giving it away all to honour a bet.

What a strange way to put it. I pay $40 today for $100 a year from now. The medium doesn't matter, that counts as a damned good rate of return.

Yes, the medium might (though won't) have a value of $40,000 a year from now. It might also have a value of $0.40. I'll see the same rate of return either way.

Put another way - I'll sell you, for $2, as many $1 lottery tickets as you can afford. :D
posted by pla at 7:38 PM on September 10, 2011 [2 favorites]

pla: the counterparty risk was my example of a different structure/payout.
posted by amuseDetachment at 7:43 PM on September 10, 2011

Since this thread has started the exchange rate has gone from $14 to $4.66. Yet in the wake of inflation the system is unable to adjust. It just keeps spamming out 300 new btc/hour.

I see you're joining the furiousxgeorge "make ridiculous factual errors" bandwagon. The price was about $8 when the thread started. It hasn't been $14 since July. Seriously wtf?
posted by delmoi at 10:24 PM on September 10, 2011

I asked for a cite for those multiple errors. So far you you have "did not 100% accurately recall details of article in statement marked with IIRC".
posted by furiousxgeorge at 10:35 PM on September 10, 2011

In this transaction, there will be one transaction with two inputs and two outputs. The first input would be the old transaction with two signatures (whether it be the escrow and one party, or preferably Jenga and OtherParty, only 2 of 3 needs to sign). The second input would be $100 USD priced in bitcoins. The output would be $100 USD priced in bitcoins to OtherParty's bitcoin address, and the remainder going to Jenga. OtherParty then converts to USD in an exchange

The problem here is that there is no way to input the 'exchange rate' in the transaction. I don't think the bitcoin scripts can do any kind of network IO.

So far you you have "did not 100% accurately recall details of article in statement marked with IIRC".

"not 100% accurate" = factual error. That's how it works.
posted by delmoi at 10:51 PM on September 10, 2011

delmoi: There's still counterparty risk, hypothetically it could turn into a free call option if one party could renege, but it wouldn't let them steal the coins. The bitcoins held won't be freed until that amount is exchanged (at worst case under the agreement of the escrow service).
posted by amuseDetachment at 10:55 PM on September 10, 2011

"not 100% accurate" = factual error. That's how it works.

Seems like a bit of a stretch when the IIRC makes it clear to anyone not clinging to a lost argument with the zeal of a fundamentalist religious zealot that the statement is imprecise and open to correction. But even were you to ignore that, as complete assholes desperate to win a lost argument might do, we are still left with the fact that you referenced multiple errors.
posted by furiousxgeorge at 10:58 PM on September 10, 2011

I misread the chart on my tiny screen. Doesn't change much though, the value is dropping rapidly.
posted by humanfont at 5:43 AM on September 11, 2011

I mean, it's been at a high of 12.5 to a low of 4 just in the last 24 hours. It's not exactly easy to keep track of it.
posted by furiousxgeorge at 9:37 AM on September 11, 2011

Oops, 4.6. Sorry delmoi.
posted by furiousxgeorge at 9:45 AM on September 11, 2011

I misread the chart on my tiny screen. Doesn't change much though, the value is dropping rapidly.

Doesn't change much? You claimed that since the thread opened, the value dropped by over 2/3rds, when in fact it dropped by about 40%.

And since then piked back up to actually being about 50% more then where it started, and has so far settled at about $6.3. So, there has been a lot of volitility while this thread was open -- much more so then normal -- but so far the price has stabilized at about 15% less then where it started.

And that said, most of the events that the FPP was about happened about a month ago.
posted by delmoi at 10:29 PM on September 11, 2011

Now your claiming prices have stabilized based on all of two days of trading?
posted by humanfont at 3:06 AM on September 12, 2011

humanfont : Now your claiming prices have stabilized based on all of two days of trading?

And you've chosen to take the first day of high volatility in over a month as evidence of instability? Hate to break it to you, but the NYSE has, by some measures, behaved worse in that same time period. The small size of the overall BitCoin market allows for much wider swings, but as a whole it has behaved quite well in edging down from its former $30 bubble.

But of course, the NYSE has more regulations and auditors and independent ratings agencies, so something like everyone losing their shirt due to rebundling the "toxic assets" of one small niche sector could never happen. ;)

As a note, yesterday's weirdness looks like the result of just one or two very large buys that shot the market to $12, with the rest of it merely the settling back to - yes, I will say it - a stable value.

/ auto tu quoque'ing myself here
posted by pla at 5:25 AM on September 12, 2011

A lot of it is due to the difficulty of getting funds into the system over the weekend. There's substantial autoregression on a weekly basis for the past several months of bitcoin. The signal is historically strong enough to be really profitable if you're using a straight ARIMA model, but I'm not trading it, just saying.
posted by amuseDetachment at 5:35 AM on September 12, 2011

Now your claiming prices have stabilized based on all of two days of trading?

By "Stable" I mean low volume on the exchange. If you look at the chart the 'stable' and 'unstable' periods are pretty obvious.
posted by delmoi at 7:07 AM on September 12, 2011

Oh and I came across this the other day. We had a post about Ordos the other day, a city full of empty housing. The city is still mostly empty, with a few more people. But most of the units have sold.

The video touches on something I realized a while ago about the Chinese housing bubble. In the Chinese economy, empty apartments function somewhat like gold. When you buy gold, it serves no purpose other then just to sit there. It's the same with all these apartments. They almost aren't *meant* to be used. It's pretty crazy.

Unlike mortgages in the U.S. most of these apartments are paid for with cash. People are buying them as 'wealth type' investments. There isn't going to be a huge collapse caused by people losing their mortgage payments.

There will be a lot of angry old people if housing prices tank, but what are they going to do? They can't vote and they'll be way to old to have a revolution. Young people will love have tons of cheap housing. Actually now that I think about it, this presents a pretty brilliant way to stabilize society in the short run, Just steal all the old people's houses and give them to the angry youth in the future. Not needing to pay rent or make mortgage payments will increase their purchasing power by quite a bit.
posted by delmoi at 7:16 AM on September 12, 2011 [1 favorite]

Your latest non-sequitur has come awfully close to answering te age old question about the price of tea in China.

Meanwhile the lower volume "stabilized bitcoin" moved 20% down today from the open.
posted by humanfont at 1:40 PM on September 12, 2011

Staff at the Bitcoin Talk forum are claiming Gox has been compromised again. These are the same people who just had their site hacked by Bill Cosby so who knows why they think they can diagnose other sites, but still anyone with money sitting in an account there might want to be careful.
posted by furiousxgeorge at 7:43 PM on September 12, 2011

I think the fact that bitcoin is forcing people to actually think about computer security is a good thing. People are, for the most part, way to lazy when it comes to computer security because there's nothing really at risk. But, if you're storing bitcoins obviously something is at risk. It makes people think much more seriously about keeping their machines secure.
posted by delmoi at 12:54 AM on September 13, 2011

I took a look at that thread, The OP came back later to say he didn't think that it was MtGox that was hacked they replaced his stolen bitcoins -- not necessarily helpful if the average person gets hacked, though. (It also turns out it was only $60 worth)
posted by delmoi at 1:15 AM on September 13, 2011

I think the fact that bitcoin is forcing people to actually think about computer security is a good thing.

I'm sure manufacturers of locks, gates, and burglar alarms derive economic benefits whenever there's a crime wave, but that doesn't mean crime is a net positive. I feel pretty sure that having the Playstation store go dark for a month stimulated more thinking about computer security among the general population than Bitcoin ever has, or will.
posted by anigbrowl at 1:52 PM on September 13, 2011

His bit coins were eventually replaced. In the meantime the price has fallen quite a bit. So the OP is still out quite a bit of money.
posted by humanfont at 2:08 PM on September 13, 2011

Are you seriously arguing that nobody should be involved in bitcoin? That's insane.

There are enough reasons for switching to a digital currency that one will eventually succeed, if perhaps only by force. We should be happy that someone puts bitcoin through it's paces under real world conditions, complete with real fraud, well before the dollar, euro, visa cards, or whatever goes digital on a large scale. All the academic-ish security analysis bitcoin generates now helps prevent another debacle like the credit card system.

Anyone losing money now should've been vaguely aware how dangerous and speculative the currency is, better their speculation money now, rather than old ladies' life savings later.
posted by jeffburdges at 2:52 PM on September 13, 2011

If the guy who was hacked is telling the truth about who he is and the precautions he took, there isn't too much else your random currency user could be expected to do to try and be secure.
posted by furiousxgeorge at 4:19 PM on September 13, 2011

The dollar is already largely a digital currency. It is backed force. Old ladies already get their money from it. Bitcoin is a high tech fraud designed to sucker you into forking over real cash to early adopters. You might as well set your money on fire or throw it in the trash.
posted by humanfont at 5:48 PM on September 13, 2011

You keep saying that but (a) you haven't demonstrated anything and (b) you're intentionally confusing the software with the loony culture and organizations, i.e. nice FUD.

I honestly don't care whether some bitcoin exchanges like MtGox are fraudulent, well beyond morbid curiosity. It's fairly clear however that the bitcoin software itself will heavily influence the inevitable upcoming digital currency based transaction systems.

In particular, we're gaining confidence that anonymized transaction histories need not dramatically detract from personal privacy, possibly equalizing different nation's abilities to combat the money laundering that effects them directly. Imagine the public/authorities obtaining a major political figure's discarded bitcoin accounts, giving them incredible forensic access.
posted by jeffburdges at 6:52 PM on September 13, 2011

I'm sure manufacturers of locks, gates, and burglar alarms derive economic benefits whenever there's a crime wave, but that doesn't mean crime is a net positive. I feel pretty sure that having the Playstation store go dark for a month stimulated more thinking about computer security among the general population than Bitcoin ever has, or will.

There is a big difference between computer security and home security, for the most part when people's machines are hacked they're not the ones who end up paying. Their machines are used for botnets, or if attackers do get credit cards or bank accounts they can be reimbursed. It's a hassle, but they don't end up paying themselves. On the internet everyone is in the same 'neighborhood' so anyone can be a target.

With bitcoin, people end up with something 'of value' on their computer, which is unusual except for people who have important jobs at corporations.

His bit coins were eventually replaced. In the meantime the price has fallen quite a bit. So the OP is still out quite a bit of money.

Fallen quite a bit? Seriously, what is it with people who can't get their facts straight in this discussion? It's mind boggling just how many errors you guys are making.

It was September 12th when he claimed the coins were gone and September 13th when they were replaced. The price went from $6 to maybe $5.90. So the guy was probably out about $1-2 or so on his $60 worth of bitcoin. And even then only if he was planning on selling in the interim for exactly that market rate
posted by delmoi at 4:59 AM on September 14, 2011

Haha, well at least we have moved on from "Gox never loses their money!" to "only a couple dollars!"
posted by furiousxgeorge at 3:14 PM on September 14, 2011

In particular, we're gaining confidence that anonymized transaction histories need not dramatically detract from personal privacy, possibly equalizing different nation's abilities to combat the money laundering that effects them directly. Imagine the public/authorities obtaining a major political figure's discarded bitcoin accounts, giving them incredible forensic access.

Who is we? You have quite an imagination. Money laundering with bitcoins seems to be one of their principle functions. Given the larger number of unregulated banks and their opaque account politices there is simply no traceability at all. There is no benefit for this pseudo currency over real money.
posted by humanfont at 3:57 PM on September 14, 2011

As I stated before, I think bitcoins (as they stand now) are ridiculous but promising. This article, via The Browser, seems like a well reasoned stance.
posted by codacorolla at 6:56 PM on September 14, 2011 [1 favorite]

Haha, well at least we have moved on from "Gox never loses their money!" to "only a couple dollars!"

Except the developer isn't claiming that Gox lost the money. He thought it was a possibility in the first comment, then said he thought it wasn't later on. He also got reimbursed for his own mistake (getting hacked)
posted by delmoi at 3:53 AM on September 16, 2011

(and he would only have lost money if he had been planning on placing a sell order for less then $6 but more then $5.9 during that 24h period, which is unlikely)
posted by delmoi at 3:55 AM on September 16, 2011

No, as far as I am aware he still believes it is a possibility that Gox was at least partly responsible. They did reimburse the coins after all so it's logical to assume they feel the same way.
posted by furiousxgeorge at 7:36 AM on September 16, 2011

Banks typically reimburse people when money is stolen even if it's their 'fault'. The OP probably doesn't want to admit that he's insecure.
posted by delmoi at 6:19 AM on September 17, 2011

He seems to have been pretty honest throughout the entire thread.
posted by furiousxgeorge at 7:31 AM on September 17, 2011

I'd agree with that article, codacorolla. Deflation is fundamentally more dangerous than inflation.

There should be a serious conversation about ending the 21 million bitcoin limit, replacing it with some constant rate of inflation, one that more closely matches the dollar and euro. In the long run, such a change would simply continue the current state of subsidizing all transactions via an 'inflationary tax' on bitcoin holdings, but you'd effectively throw the goldbugs out on their asses.
posted by jeffburdges at 8:23 AM on September 17, 2011

There should be a serious conversation about ending the 21 million bitcoin limit, replacing it with some constant rate of inflation.

Well, you can always create a new cryptocurrency with your own policies and see if people adopt it. You can even fork the block chain and say everyone who has one bitcoin at block 200000 (or whatever) also has one Jeffcoin.

The problem, though is that if you just go and change things in the 'real' bitcoin it undermines the whole system. What people like about bitcoin is that it's managed by immutable (for the most part) code. If the code ever changes, you lose a fundamentally important property.

That said, the people 'in charge' of bitcoin are really the miners. If you can come up with a change that most miners like, then perhaps you can make a change to the system's "software central bank" Miners overall will have to consider the risk to bitcoin overall vs. the the payouts for mining. Or they could all switch to jeffcoin.

---

Also I was thinking about how to create a "Keynesian" version of bitcoin, with Keynesian economics baked in. One simple idea: have a set amount of transactions you want to see, plus a minimum transaction fee that gets redistributed to miners. If the number of transactions drops, then more mining is allowed to create inflation. If the number of transactions goes up, the miners get the transaction fees. That will encourage people to mine, and spend any coins they get.
posted by delmoi at 1:09 PM on September 17, 2011

Haha:

One can always fork bitcoin...

[Change the limit or reward]

Poof the magical crypto gold disappears in a puff of discrete logic.
posted by humanfont at 3:46 PM on September 17, 2011

Interesting idea, certainly the minors could be given more money when transactions decreased, placing some floor on payments for mining. I'm doubtful that anyone knows enough to correctly model real recessions and apply stimulus however, ala real Keynesian economics.
posted by jeffburdges at 4:56 PM on September 17, 2011

humanfont : Poof the magical crypto gold disappears in a puff of discrete logic.

I know, right? Because, y'know, we don't already have about a dozen BTC variants available in the wild, and of course the BitCoin economy would collapse overnight if one existed.

I can understand why you might choose not to use BitCoin. I really don't understand your blatant hatred for it. You attack every aspect of it you can possibly think of, relentlessly. I don't get it.

Not even like it has any social/political/economic implications at this point in time - As the only way your rabid dislike of it would make sense, you would have to believe that it will basically succeed in all its loftiest goals, and consider those goals some horrible fate that we must avoid at all costs.
posted by pla at 5:18 PM on September 17, 2011 [1 favorite]

I don't see it as any grand revolution in currency, it's just a new twist on the old pyramid scheme. Early members get big payouts and the suckers who come in at the end get screwed. A few in the middle come out slightly ahead and act as evangelists. It reminds me of a number of religious cults that built themselves up on a mashup of real science and some woo-woo garbage. I loathe those as well.

I don't see this as a threat, as I think it will simply collapse on itself. I also predict we will see this scam play out again and again with other btc forks and repeated new crops of new believers comming into the original bitcoin. A bit like we never seem to see these cults go away. Try dot grow beyond their initial burst, but they just keep handing out literature and recruiting a few suckers every year.
posted by humanfont at 7:37 PM on September 17, 2011

humanfont : I don't see it as any grand revolution in currency, it's just a new twist on the old pyramid scheme. Early members get big payouts and the suckers who come in at the end get screwed.

First of all, please stop that? You've had a dozen people in half as many threads explain it to you, and yet you continue to misuse those words. Continuing to call it a "pyramid" or "Ponzi" scheme amounts to nothing more than trolling - You can't even claim ignorance at this point.

Second... What? Can you explain how "the suckers who come in at the end get screwed"?

You realize that don't actually need to pay or buy anything to participate in the BitCoin economy? If you have an even vaguely modern PC (and if you have a gaming rig, consider yourself golden), you can join a mining pool and, within a few days (or weeks, for CPU-only), you'll have a BTC or two to play with.
posted by pla at 8:25 PM on September 17, 2011

Electricity is free now?
posted by furiousxgeorge at 9:23 PM on September 17, 2011

I can understand why you might choose not to use BitCoin. I really don't understand your blatant hatred for it. You attack every aspect of it you can possibly think of, relentlessly. I don't get it.

I know right? They hate bitcoin the way Rush Limbaugh listeners hate Obama, or like Blazecock Pileon hates Microsoft and Google. It's so bizarre. At least with those examples they hate those things because they love something else (the republican party/Apple).

It reminds me of a number of religious cults that built themselves up on a mashup of real science and some woo-woo garbage. I loathe those as well.

Soo... basically you're an idiot who doesn't understand how it works?
posted by delmoi at 12:57 AM on September 18, 2011

furiousxgeorge : Electricity is free now?

Sure, I only mine bitcoins on a machine powered by burning my non-recyclable garbage. ;)

Real numbers: With a Radeon 5850, at $0.098/kWh (the national average, according to the EIA), it will take 6.2 days and cost $1.34 worth of electricity to mine one BitCoin (on average, at the current difficulty).

This gives a very, very simple stop-mining condition that allows even late-adopters to avoid the dreaded "come in at the end get screwed" bogeyman - If the USD:BTC exchange rate drops below 1.34 (adjusted for the current difficulty, for your own local electric rate, and for your own GPU's efficiency), stop mining. Simple as that.
posted by pla at 7:37 AM on September 18, 2011

I understand how it works. I also understand how it doesn't. I'm not stupid just because I disagree with you.
posted by humanfont at 8:36 AM on September 18, 2011

There is a new Google Wallet commercial. Apparently PayPal is suing Google too. I hear the Android bitcoin wallet works fairly well.
posted by jeffburdges at 10:32 AM on September 18, 2011

I know right? They hate bitcoin the way Rush Limbaugh listeners hate Obama, or like Blazecock Pileon hates Microsoft and Google. It's so bizarre.

And the other they loves it like Rush Limbaugh loves Republicans and Blazecock loves Apple.
posted by furiousxgeorge at 3:25 PM on September 18, 2011

Real numbers: With a Radeon 5850, at $0.098/kWh (the national average, according to the EIA), it will take 6.2 days and cost $1.34 worth of electricity to mine one BitCoin (on average, at the current difficulty).

Could you cite all this?
posted by furiousxgeorge at 3:28 PM on September 18, 2011

There hasn't imho been anyone here really 'pumping' bitcoin like Glen Beck pumps gold, furiousxgeorge. Ain't nothing wrong with people being excited about technology.

Ain't nothing wrong with people yelling 'avoid the pyramid scheme' either of course. Yet, I'm fairly wierded out by any full-on anti-technology position though. And humanfont has been unwilling to separate his criticism of the current figures from the underlying digital currency technology, only recently explaining why.
posted by jeffburdges at 5:31 PM on September 18, 2011

I've been following this thread on and off for a while now, and I'm finding I have more sympathy for the anti-bitcoin comments than for the evangelizing comments (see -- even apparent in my phrasing there), and I've been trying to figure out why that may be, since I certainly have no horse in this race.

When it comes down to it, I think I'm put off by the idea that early adopters, by having their computers running some largely meaningless arbitrary calculations, could -- should bitcoin actually take off as a widely used currency -- become absurdly wealthy. And it's especially...offensive, let's say...that this seems to be built in to the system, thanks to the deflationary pressure at the current system's core.

(I think delmoi upthread referred to this sentiment as "sour grapes," which would be the flipside uncharitable interpretation of what I'm getting at.)

This unfairness -- combined with the obvious fact that it's in any early adopter's direct financial interest to convince as many other people as possible of the currency's future prospects -- leads me to naturally feel sympathy for its detractors. (I mean, there's no way to short BTC, right? There's no financial gain to be had from BTC's downfall?)

This also means that I'm seeing the evangelists' comments through a filter of they-are-speaking-in-order-to-protect-their-wealth. I suspect that the detractors here are reading those comments similarly.
posted by nobody at 6:00 PM on September 18, 2011

furiousxgeorge : Could you cite all this?

Sure, if you tell me what you find contentious.

The average price of electricity in the US (incidentally, that link now has June's price, at $0.1023/kWh, a hair higher than May's price of $0.098/kWh)? The current block difficulty (1755425)? The power consumption and mining performance of a 5850 (282.75MH/s at 92.25W)? The expected block completion rate (7407 hours per 50 BTC)?

Nothing in there counts as rocket science. Plug-and-chug.

nobody : This also means that I'm seeing the evangelists' comments through a filter of they-are-speaking-in-order-to-protect-their-wealth.

FWIW, I don't think anyone in this discussion has any real "wealth" of BitCoins. Personally, I have a few hundred bucks worth (with zero USD investment, so not even "out" anything if it crashes) - Really just play-money, nothing I'd bother irrationally defending.
posted by pla at 6:15 PM on September 18, 2011

This unfairness -- combined with the obvious fact that it's in any early adopter's direct financial interest to convince as many other people as possible of the currency's future prospects -- leads me to naturally feel sympathy for its detractors.

Well, without the early adopters the thing never would have gotten started. Same thing as someone who joins a startup and gets stockoptions early on compared to a regular investor who buys at an IPO. Bitcoin might never have gotten popular, or something else might have come along and become more popular. Especially since most of the early adopters were mining -- even CPU mining initially. Without them the network wouldn't have even worked.

And the other they loves it like Rush Limbaugh loves Republicans and Blazecock loves Apple.

There is a big difference between loving something and thinking it's cool. I'm defending bitcoin from your attacks because they've been factually wrong and otherwise delusional. The same way Blazecock Pileon talks about Windows or Android. The question is why someone would get so obsessed with hating bitcoin that they can't even tell reality from fiction the way hardcore 'fanboys' tend to. It's fucking weird.
posted by delmoi at 7:59 PM on September 18, 2011

Keep in mind that the people who created bitcoin could have given themselves a very large horde of coins with little or no work. In fact they would be foolish not to have. One could see this as a typical reward that goes to innovators as demoli noted in his pre-IPO analogy. At the same time it also fits the pattern of a number of financial scams.

The creators win either way. The cost of launching and seeding the network was been very low. With exchanges able to convert bitcoins to dollars they can sell out coins at a steady rate and get real money. So long as there is a balance of new suckers conning in to try to buy a few bitcoins on speculation everything works. Even of a few folks like pla make a few bucks selling as well it has only a minimal effect on their take.

I see it as very unlikely that much of a real market will emerge for bitcoins for reasons stated above. It is difficult to know today how many tx on bitcoin are real vs just guys flipping money between accounts. Absent a real market of btc for goods and services the value on the exchange is driven by speculation. This speculation creates all the money, is another featureless common to scams than real companies.
posted by humanfont at 10:14 PM on September 18, 2011

Christ almighty Delmoi. If there is a Metafilter award for being the most dishonest prick of all time in a thread, you win like all top ten spots for your contributions to this thread.
posted by furiousxgeorge at 11:37 PM on September 18, 2011 [1 favorite]

humanfont : Keep in mind that the people who created bitcoin could have given themselves a very large horde of coins with little or no work.

As I've pointed out to you previously, BitCoin has no controlling authority, no "creators" that could game the system before releasing it to the public. It just makes 50BTC every 10 minutes, you can personally look at the entire history of that and verify it as "fair".

It is difficult to know today how many tx on bitcoin are real vs just guys flipping money between accounts

Well, at least you listened to me about that part... :D

Keep in mind, though, that the exchanges all take their cut, so only fools would trade heavily for the purpose of creating the appearance of volume (yes, I know that "real" companies do exactly that, but they do so essentially for a pittance on top of millions of dollars in churn; MtGox's 0.6%, OTOH, adds up fast if you try to play any HFT or volume games).

Absent a real market of btc for goods and services the value on the exchange is driven by speculation.

You really can buy things (and I don't mean just "Silk Road" here) with BTC, you know. Not a huge market, and unfortunately the speculation affects the exchange rate far more than than the goods-and-services-market does. Perhaps more importantly than physical goods, though, BitCoins have started to appear as a common means of putting out a website "tip jar" - No one would send checks to a random website they liked, and PayPal made microtipping too burdensome. Tossing someone a BitPenny, however, has basically no transactional cost.
posted by pla at 3:40 AM on September 19, 2011

I hold the grand total 0.4 BTC that the faucet gave me, unless I gave it back, I forget. I feel bitcoins' current $5ish valuation still qualifies as a bubble, given the longterm uncertainty, and current creation rate.

Any new transaction system will create winners and losers. Visa, Mastercard, and PayPal have all made billions by building up their systems. I'd be thrilled if BitCoin even slightly reduced PayPal's market share.

There are/were a fair number of hosting, DNS, VoIP, and storage companies that accept BitCoins. Wuala for example.
posted by jeffburdges at 4:52 AM on September 19, 2011

Christ almighty Delmoi. If there is a Metafilter award for being the most dishonest prick of all time in a thread, you win like all top ten spots for your contributions to this thread.

You're the one who's being dishonest here, not me. You're like Blazecock Pileon when he spouts bullshit about how no one ever used the term "smartphone" before the iPhone came out, how windows and android are full of spyware, or how Apple was responsible for USB. He doesn't know it's bullshit, he's just obsessed with something and it's clouding his ability to comprehend things. You're doing the same thing with bitcoin.

You've made lots of factual errors and various little lies in this thread. I've pointed them out. I realize you personally don't believe me but I don't really care.
posted by delmoi at 5:12 AM on September 19, 2011

Consider the following:
1-The original bitcoin software on Sourceforge was developed by a small number of people.
2-This software ran for a long period of time, and allowed miners to extract a large number of coins at extremely low difficulty.
3-By design and via network effects usage grew geometrically at a specific takeoff point (following the slashdot article and wikileaks funding).
4-At this point the early participants with hordes of coins had a mechanism to cash out via the exchanges such as Mt.Gox
5-MtGox is the largest exchange by volume.
6-MtGox holds a large number of coins in a common wallet with
6-Because of the level of difficulty there is an advantage to participating in Mining pools to ensure a steady payout based on your "share" of the pool vs. going it alone.
7-Deepbit is the largest mining pool and controls close to 50% of the mining (sometimes more than 50%).

Does everyone agree on these facts?
posted by humanfont at 7:56 AM on September 19, 2011

Keep in mind, though, that the exchanges all take their cut, so only fools would trade heavily for the purpose of creating the appearance of volume

I think the fear, though, is that it could be the exchanges themselves who are in on the fake trading to increase the appearance of volume, thus bypassing those transaction fees. The exchanges would certainly have a lot to gain by doing so, if their owners were unscrupulous enough. I mean, even a well-meaning exchange owner could justify it to themselves as a necessary evil, a little fraud to help a fledgling currency get up on its feet before crossing over to actual viability so it can eventually change the world for the better, etc. etc.
posted by nobody at 8:02 AM on September 19, 2011

humanfont : Does everyone agree on these facts?

With a few caveats...

2) The "official" genesis block comes from the time of initial release (Jan 3 2009). The current BitCoin block chain doesn't derive from anything used during primary development (and in fact, because the developers wanted to prove to the world they hadn't cheated in the way you imply, they included in the genesis block a reference to a headline from that day: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks").

3) This describes nothing short of a baseless conspiracy theory. It did act as described, but you have the same "designer" as applies to evolution.

4) The exchanges actually appeared quite late in the game (18 months later), and have nothing to do with the original developers.

6) Not true - You actually pay a penalty to mine in a pool, but it means guys like me will see a few BTC trickle in over time rather than waiting 4.5 years to have a 50% chance of mining their own block of 50. Also, see my next point...

7) Partially true - Deepbit represents roughly half of all pooled mining, but considerably less than half of all blocks generated. You've forgotten that most of the Big Boys still mine solo with massive clusters of GPUs and/or FPGAs.
posted by pla at 8:59 AM on September 19, 2011

You've made lots of factual errors and various little lies in this thread. I've pointed them out. I realize you personally don't believe me but I don't really care.

You have been asked to cite that, and you can't, because you are a pure fanboy in spin mode who can't stand that an honest look at your pet does not prove it as awesome as you wish it was. You lied your ass off about my argument so you could pretend to have any sort of a rebuttal and you, like me, are still in this thread past two weeks.

You have no high ground to sanctimoniously preach from.
posted by furiousxgeorge at 10:00 AM on September 19, 2011

Does everyone agree on these facts?

Uh sure, except for the deepbit thing. They don't control that close to 50% and the last time they did get close a bunch of miners switched to prevent them from crossing the 50% mark. Looking at a current chart they have a little over 40%

2-This software ran for a long period of time, and allowed miners to extract a large number of coins at extremely low difficulty.

You make it sound like this was some shadowy conspiracy or something. In reality, the people involved at that stage probably just thought of it as a fun hobby, not something that would reach $30 a bitcoin. Remember the 10,000 bitcoin pizza, that's about $52k today, or even as much as $300k at the peak.

6-MtGox holds a large number of coins in a common wallet with

It's really unlikely they are storing all the coins in a single wallet.dat file. They could be. It's not even clear what this is supposed to signify, exactly.

Anyway, the question is, what exactly is the point? If the early adopters wanted to cash out, they certainly could (to a certain extent) and in fact lots of them probably already have. Why exactly does it matter? I don't think anyone in this thread is claiming that people should go out and buy bitcoins as an investment. What people want is more people using bitcoin to buy and sell things.

---

_{You have been asked to cite that, and you can't}

_{Anyone who wants to can go back and read the whole thread, and in fact if they're reading this comment they've probably already done it. Since you keep repeating the same nonsense, I'd have to keep repeating how you're wrong, which is what I did earlier in the thread. particularly all the nonsense about how you had to 'park' your money with a shady, unregulated third party website hosted on the other side of the world. here's an example

That said, to be specific I did did point out a specific factual error, which you claimed didn't count because you wrote "IIRC" or something.

I'm not really interested in 'meta arguing' or arguing about what has or has not been said in the thread. Because anyone can read it.}
posted by delmoi at 10:14 AM on September 19, 2011

Delmoi, I never said you had to. That is your own distortion. Making shit up is the only way you have found to try and rebut my points this whole time so I can understand why you got caught up in your own web. What I described is the situation as it is in regards to MyBitcoin.

What happened was you made a factually incorrect statement that the FBI was investigating, which they aren't, I pointed out your idiotic error and explained why bitcoins are vulnerable to this sort of thing because they are hard to trace.

That said, to be specific I did did point out a specific factual error, which you claimed didn't count because you wrote "IIRC" or something.

I didn't claim that, Mr.Fucktard, it's what happened. I was happy to provide you with the link for greater context, which still supported my original point that a very large percentage of the bitcoin economy was threatened by the security lapses, something you have utterly failed to disprove.

I'm not really interested in 'meta arguing' or arguing about what has or has not been said in the thread. Because anyone can read it.

By all means then, stop fucking lying about what has been said.
posted by furiousxgeorge at 10:30 AM on September 19, 2011

Consider the bitcoin timeline. Genesis block to pizza was January 2009-May 2010. Difficulty didn't increase until Dec 2009. Would you agree that given the temporary nature of btc addresses it is impossible to know the true distribution of those coins, we can only infer it from the size of the mining pool which is known based on the difficulty level?

Therefore the low difficulty between January and December implies a large number of coins distributed to a small number of folks? (iirc about 2.5 million coins) Can we conclude that early insiders who provided the initial mining rigs held a large number of coins? Can those folks now sell their coins at MtGox or other exchanges at a steady rate (but not so large the market doesn't crash the market)?
posted by humanfont at 10:42 AM on September 19, 2011

Christ almighty Delmoi. If there is a Metafilter award for being the most dishonest prick of all time in a thread, you win like all top ten spots for your contributions to this thread.

Cheer up, there's bound to be another Obama thread within a few days.
posted by anigbrowl at 10:46 AM on September 19, 2011

_{What happened was you made a factually incorrect statement that the FBI was investigating, which they aren't}

_{Yawn. Two quick points: 1) As far as I know, you can't say for certain whether or not the FBI is investigating, and 2) that has nothing to do with this comment which I linked too as an example of me pointing out a factual error on your part.

As I said in this comment I'm not really interested in having a long-drawn out argument about what we said because, as I said, it's all in the thread for anyone to read.}
posted by delmoi at 11:45 AM on September 19, 2011

humanfont: Yes, and everyone involved with bitcoin understands that this is the case. What exactly is your point? That the value of bitcoin could go down? This isn't hidden knowledge.
posted by delmoi at 11:51 AM on September 19, 2011

You really can't see the scam in play here? It isn't totally obvious to you?
1. Give yourself a vast horde of worthless bit coins
2. Promote the "coins" as potentially valuable items to invest or mine. "CyberGold"
3. Use the disposable property of bitcoin addresses to create the impression of an artificial market for BTC.
4. Get enough speculators into the market that there are more coins demanded than produced by the network via mining or sold by other holders of the coins.
5. Slowly sell your supply of coins out to the speculators exploiting this demand.

It is to your advantage to paint the currency as ultimately deflationary in nature as an incentive for speculators to hold their coins. Meanwhile you cash out as quickly as the market allows essentially trading your worthless fools cyber-gold for real dollars. The initial miners have such a fantastic return given the essentially zero cost of acquiring their bitcoins that even at a few dollars a coin they are looking at a substantial profit. They may even anticipate holding a large volume of coins when the system disintegrates.

You should at least be open to this as a possible scenario. The question becomes which is more likely. Based on my analysis of the characters involved, the risk / reward and ultimate viability of the system I think it is far more likely that it is a scam.
posted by humanfont at 1:59 PM on September 19, 2011

How is that a scam?

If you want to say that bitcoin is a bad investment, that's one thing. But being a bad investment doesn't make something a scam. There isn't any hidden secret information -- everyone knows how bitcoin works -- if the early adopters want to cash out, obviously they can.
posted by delmoi at 3:34 PM on September 19, 2011

Oh, and the other problem is that it's actually entirely possible that the early adopters have already cashed out. There is actually more then enough volume on the exchanges for someone or a group of people to have sold 2.5 million bitcoins already
posted by delmoi at 3:38 PM on September 19, 2011

How is that a scam?

They are selling and marketing an unregistered security . The primary value of that security is from cash inflows from speculators who are lead to a false sense of scarcity by virtue of market manipulation techniques. These speculators are also lead to believe in huge potential returns if they hold on to their coins. The 50,000btc Pizza serves to further this myth. Imagine someone paid $300,000 for a pizza. Why only a year ago bitcoins were worth almost nothing and today they have gained a return of almost hundred fold or a thousand fold.

The scam is hidden behind novel uses of cryptography, complex computer operations, game theory and fringe economic theories. it is further obscured by banks and exchanges which shift coins between individuals off the books of the public transaction log and supposed safeguards of the almighty algorithms.

There is a name for this kind of scheme which uses new investors to payout the first movers while generating little or no actual economic value. A scam where balance sheets and transactions are easily forged to create a false sense of scale, volume and return. It is called a Ponzi Scheme. Special plead all you want. That is all it is. One day when the Feds bust MtGox or someone cracks Sha-2 it will all vanish. The original guys will have cashed out some thousands or perhaps millions, and some poor suckers will be left holding the bag.

Like chain letters I predict this will just be the first iteration. We'll see it re-emerge again as again.
posted by humanfont at 6:13 PM on September 19, 2011 [1 favorite]

They are selling and marketing an unregistered security

First of all it's a "security" because it's not a contract. It's just a token. It's no different then selling linden dollars or WoW gold (which is against the rules, but not illegal). Right now it has value because people are willing to buy it. That's it.

Second of all, you've brought up the Ponzi scheme thing again and again and as it has been repeatedly pointed out what you've described isn't a sufficient condition for being a ponzi scheme. People who bought Apple stock in 1996 made a lot more money then people who bought it last month. People who bought gold 5 years ago made a lot more money then people who bought it last month.

The central difference between what a Ponzi scheme is and what bitcoin and everything else that's not a Ponzi scheme is that there is no fake information. Everyone understands that early adopters got a lot of bitcoin, and people understand that they can sell it whenever they want.

In a Ponzi scheme like Madoffs you create a false value that's greater then the actual value of the assets you hold. So for example, Madoff would take in $100 in new investments, then mark up the value of his clients portfolios by $200. Some of his clients would request partial withdraws, and then he would mark down those portfolios by how much they withdrew. So if they took out a total of $50, he would say the portfolios were worth $150 when actually he has only $50 in the bank. If another $51 of redemption comes in, the jig is up.

With bitcoin, nothing like that is possible. There's no way to create 'fake' value. When someone buys bitcoin on MtGox there's no 'fake' value that's created. The value of the assets is 99.47% at the moment they buy it. The price can go up and down, but when they sell it to someone else they get 99.47% of the money from that person.

Now, it's theoretically possible that MtGox itself is a ponzi scheme, but there's no evidence for that claim other then your dislike of bitcoin. It's also really unlikely that the people who started MtGox (which has since been sold to another company) are the ones who wrote the original bitcoin software, as they obviously didn't know as much about writing secure software as the original authors. So even if MtGox is a Ponzi scheme, that wouldn't mean bitcoin itself is a ponzi scheme, anymore then the Madoff scandal indicates that the US dollar is a ponzi scheme.

You seem like one of those people who insist that social security is a Ponzi scheme because old investors are paid with money from new investors. It works the same way. The difference is that there's no 'fake' value being created.
posted by delmoi at 7:31 PM on September 19, 2011 [1 favorite]

Apple has an actual balance sheet with income growth. First you tell kenit isn't a security and then you compare it to Apple stock. Dont you see the contortion in your logic? Gold is a traditional reserve metal and still used as part of the portfolio of most governments hard currency holdings, and is seen as a sfe haven by investors. It is also an industrial metal that is actually consumein the production of goods. Social security is a government program, not an investment vehicle. I'm not the give or of Texas and I actually know what a ponzi scheme is.

There isn't much of a real bitcoin economy. At least WoW and Linden Dollars can buy virtual goods which have some emotional value for the player. Wo is the most successful bitcoin non-black market merchant and what are their bitcoin only revenues? What's the growth rate of merchants who accept and price goods in bitcoins? How big a percentage of their business is bitcoin and what's the growth rate?

With digging one finds that the actual bitcoin economy is insignificant relative to the claimed value.

Your claim about fake information is incorrect. It is trivial to send coins to yourself, heck it is a privacy feature. How many tx per block are just guys sending coins from one disposable address to the next. Setting up thousands of fake transactions would be trivial. Are all the trades and bids and asks on MtGox real? The information would be easy to manipulate. There is no bank auditor showing up to verify reserves and check the books. Finally you have know way of knowing if there is collusion between various parties. It remains an open possibility. It is even possible that there would be multiple scams underway with limited collusion.

When something gets almost all of its value from inflows of new investors rather than an underlying business activity, it is a ponzi scheme. Lots of people get suckered into them all the time and people even unwittingly set them up.

Every objection from tax issues, to settlement, to long term technical uncertainty I've raised onthis thread has been met with dismissals that these problems will be solved when bitcoin gets there. Yet the fact that they are not problems today demonstrates the lack of real usage. It becomes yet more proof that the speculators' cash is the only money involved.

If you make a little money mining or day trading as a game good luck, just know it could vanish in an instant so keep your stakes small. I hope the Feds and/or IRS don't come and knock your door down at 4am either.
posted by humanfont at 8:29 PM on September 19, 2011 [1 favorite]

I can't believe this discussion isn't over yet.

The current state of discussion has already gone in a circle at least three times. Explain how it's a ponzi scheme any more than gold (whose industrial value alone would probably be less than $50 per ounce).

Why not just come back in a year when bitcoins are either substantially more developed, or nonexistent? I'm sure neither side will come to any agreement at this point.

I really don't understand why humanfont and furiousxgeorge are so mad. Look, if it's a lame crazy ponzi scheme that only Ron Paulies are unjustifiably going crazy over, why not sit back and laugh at the coming failure? Why not just sit back and wait for the delicious schadenfreude to come rolling in? I really don't see where this obsessive pathological anger is coming from.
posted by amuseDetachment at 10:28 PM on September 19, 2011 [2 favorites]

Imho, the 'crazy' your seeing from humanfont and furiousxgeorge comes from their inability/unwillingness to separate their underlying arguments. Afaik, these arguments are (a) the major bitcoin players look shady, and (b) bitcoin is an unregulated marketplace, which inherently creates opportunities for pyramid schemes. I donno about point (a) myself, but I didn't plan on trusting them anyways.

I'd agree with point (b) as such, but disagree that it makes bitcoin 'bad'. A priori, I consider all technological progress as inherently 'good', essentially I'm a transhumanist. Yes, humans must adapt to new technology, that's fine. In fact, humanfont's objections have helped clarify for me that we already know how to adapt to bitcoin.

In any case, I'm thrilled that bitcoin has provided such publicity to digital currency and proof-of-work cryptography, which obviously we should've been using for email all along.

See also : internet argument syndrome. ;)
posted by jeffburdges at 4:24 AM on September 20, 2011

humanfont :You really can't see the scam in play here? It isn't totally obvious to you?

Gee, didn't see that one coming from a mile away.

Now go back and read each of my objections again. As the biggest flaw with your argument, no one, not even the early developers of the BitCoin client, not even Satoshi I dare say, expected BitCoins to ever have any serious exchange rate vs the US dollar. I keep bringing up the tip jar because most people expected that as pretty much their only use, a purely-online microcurrency useful as a way of expressing gratitude but with no real purchasing power behind it. As an obvious example, the BitCoin Faucet originally gave away 5BTC at a time - Not out of generosity, but because, as you say, the early adopters had a good number of BitCoins, and nothing to do with them. So they gave them away like candy at a St. Patty's day parade.

Call me crazy, but that doesn't really sound like the Russian Mafia trying to corner an unregistered securities market.

There isn't much of a real bitcoin economy.

You won't care about this answer, because you've ignored everything else pointed out so far, but here you go, roughly a thousand legit merchants (skip past the giant red charts of exchanges at the top) of various types that accept BTC for goods and services. And that doesn't include my previous mention of BitCoins working great for an online tip-jar (which a quick-and-dirty Google search puts at somewhere around 50k sites).

As for the rest of your questions, you know we can't answer them, for the same reason you couldn't tell us what portion of Walmart's sales involve the color yellow - No one aggregates, much less publishes, such stats.

Based on my analysis of the characters involved, the risk / reward and ultimate viability of the system I think it is far more likely that it is a scam.

And you got your degree in forensic psych where, again?

/ And yes, I realize I partially contradict myself three times within this post, because we talk about drastically different eras in the history of BitCoin popularity here. Or put another way, no one tries to corner the pocket lint "market".
posted by pla at 4:33 AM on September 20, 2011

Your claim about fake information is incorrect. It is trivial to send coins to yourself, heck it is a privacy feature. How many tx per block are just guys sending coins from one disposable address to the next.

If people do that, you still have a 1-1 transfer. You also have to pay a (very low) transaction fee, so if you did that too much your money would whittle away (very) slowly.

Are all the trades and bids and asks on MtGox real? The information would be easy to manipulate. There is no bank auditor showing up to verify reserves and check the books.

As I said, it is theoretically possible that MtGox is a ponzi scheme, but that doesn't mean that the underlying system itself is a Ponzi scheme. As I said, I think it's really unlikely that the people who setup bitcoin are running MtGox. Even if MtGox were a Ponzi sceme, it wouldn't mean that the underlying system is itself a ponzi scheme, although it would probably a lot of damage to the bitcoin 'brand'.

Apple has an actual balance sheet with income growth. First you tell kenit isn't a security and then you compare it to Apple stock. Don't you see the contortion in your logic?

Enron and Madoff both had balance sheets. They can be faked, even when the government is (supposed to be) regulating. The only point I was making was that people who invest early on make more money in a growing stock then those who invest later.

That's not a "logical contortion" (whatever the hell that means) there is no "rule" of logic that says you can't compare things that aren't identical.

Gold is a traditional reserve metal and still used as part of the portfolio of most governments hard currency holdings, and is seen as a sfe haven by investors. It is also an industrial metal that is actually consumein the production of goods.

Gold's industrial value isn't $1800 an ounce. Just like bitcoin, almost all of the value you currently see is because people hold gold as a reserve. And just like bitcoin, if those governments decided to sell off gold for cash at some point the price would crash, just like if bitcoin early adopters sold off. But that doesn't make gold a ponzi scheme or a scam. The physical gold would still be there, just like the bitcoins. The price would just go down. no one is saying the price of bitcoin can't go down. In fact, the slow decline we've see is actually good for bitcoin going forward. In a real ponzi scheme the price would have crashed completely by now. But a slow decline proves that it's not going to collapse once people stop seeing huge increases in value.
--

Interestingly the price of bitcoin has gone up about 30% in the past few days. From about $4.80 to $6.20. I wonder what that's about.
posted by delmoi at 6:36 AM on September 20, 2011

There are similarities between Enron, Madoff and Bitcoin. That would seem to argue in favor of my assertion that they are a scam. It is easier for Bitcoin to get away with their tricks because there is zero regulatory oversight. Enron and Madoff had to actually trick / payoff the auditors from time to time.
posted by humanfont at 1:51 PM on September 20, 2011

humanfont : There are similarities between Enron, Madoff and Bitcoin. That would seem to argue in favor of my assertion that they are a scam.

You, uh, kinda can't defend one baseless assertion with another.
posted by pla at 2:06 PM on September 20, 2011

Okay, new thread containing the word "BitCoin". This one can finally end.

And no, we don't reset the "Ponzi scheme" reference count to zero.
posted by pla at 3:49 PM on September 20, 2011

You known, the internet needs a never ending thread remix.
posted by jeffburdges at 4:26 PM on September 20, 2011

There are similarities between Enron, Madoff and Bitcoin. That would seem to argue in favor of my assertion that they are a scam.

Uh what? I mentioned Enron and Madoff because they were 'like apple' in that they had balance sheets and (in the case of Enron) independent auditors and the works. Those scams were closer to Apple or any other legitimate company then they are to Bitcoin. Enron had the form of a major corporation, and Madoff had the form of a Hedge fund. Both are heavily regulated, and clearly regulation doesn't prevent. I don't know what similarity you see between bitcoin and Enron that aren't shared by every financial 'thing' everywhere.

Oh and ironically enough, I just noticed this article on forbes:Feds Call Full Tilt Poker A Massive Ponzi Scheme. It just showed up in the sidebar of the Neil Stephenson article, but I just noticed it as I was writing this post. Presumably Full Tilt Poker had to abide by any regulations of it's host country (in this case France and Alderney, which is a British Crown dependency, but not)

When it comes to doing an actual ponzi scheme using real money works just fine. Real money transactions are reversible, but only for a small period of time. 90 days for credit cards and less for things like bank transfers.

Now you can make the argument that, in theory MtGox is a Ponzi scheme. In theory, any online company that purports to hold money for you might be a Ponzi scheme. Humanfont's only evidence is that they are involved with bitcoin, which he thinks is shady or something like that.

But even if that were true it wouldn't make bitcoin itself a Ponzi scheme. They key factor in whether or not something is a Ponzi scheme is, as with the Full Tilt Poker thing they claim to have more money then they actually do.
posted by delmoi at 4:49 PM on September 20, 2011

Enron was a bunch smart guys who claimed to have developed a new high tech trading platform that let you trade on all kinds of complex derivatives on energy and broadband prices creating products that buyers and sellers didn't understand. They were the smartest guys in the room. If you raised questions, you were called idiot or crazy.

Recognize anything smart guy?
posted by humanfont at 5:08 PM on September 20, 2011

The people who got screwed by Enron were the ones who bought their stock on the stock market, not people who used their trading platform.

People call Steve Jobs a genious and people who criticize Apple get called stupid all the time by Apple Zealots. That doesn't mean they're not making real money.

At this point you're just drawing random parallels for basically no reason. I mean, what are you even saying, that smart people aren't trustworthy? You shouldn't trust anyone smarter then you?

It's not a real argument.
posted by delmoi at 5:23 PM on September 20, 2011

humanfont : Recognize anything smart guy?

Anti-intellectualism for its own sake?
posted by pla at 5:40 PM on September 20, 2011

The people who got screwed by Enron were the ones who bought their stock on the stock market, not people who used their trading platform.

California utilities would disagree. I find your comments hilariously ignorant. I keep wanting to be done with this thread but you just keep making me laugh.
posted by humanfont at 5:50 PM on September 20, 2011

There isn't afaik anything fundamentally new that bitcoins brings to the pyramid or ponzi scheme, humanfont. Isn't that a corollary of your arguments upthread? Enron came along with massive deregulation. I donno if all those utilities might've shot themselves in the foot without Enron, but quite likely.

I'm confident that bitcoin will inspire all manor of wonderful projects. I've personally learned an awful lot about my own life, and formulated two really interesting long term projects, by really considering the tech-linked political events of the past 1.5 years, including bitcoin. I am not the only one either.

May I ask what would you think of BitCoin if you learned that Satoshi Nakamoto was the NSA?
posted by jeffburdges at 6:54 PM on September 20, 2011

It doesn't bring a lot new to the ponzi scheme. The talk if crypto and mining is just patter to recruit the marks. It is like watching a scam play out on Eve online. Except this time someone figured out how to go for higher stakes.

May I ask what would you think of BitCoin if you learned that Satoshi Nakamoto was the NSA

In that case losing a few bucks buying or mining coins is the least of your worries.
posted by humanfont at 7:34 PM on September 20, 2011

It's fairly obvious that bitcoins are a US government project, I mean that really doesn't need to be said, right? There's a really good case for it from a strategic national security standpoint. It's a really good insurance policy against people like China/Venezuela hoarding gold and pushing for the gold standard. It's fairly obvious that there's only two viable solutions in the future without bitcoins, IMF ADRs or Gold. Either leaves the west in a deeply powerless situation. If it's IMF ADRs, the larger economies will dominate, i.e. China and India due to the sheer size of their population. If it's gold, China holds a lot, lot more than you think. Bitcoins are a great way to break down that stranglehold, so long as the west maintains technological dominance. If you think that the talk of shifting reserve currencies is a fantasy, many disagree (Dick Bove is not some random fly-by-night-lunatic).

It's not ridiculous to defend bitcoins from the standpoint as a defense of western values and institutions. The amount of work put into the project right until release makes it clear that there's no other institution that could produce such a work in the way it was released. The paper is obviously written by someone who writes a LOT of papers in the US, but the real evidence is in the way it was constructed. More importantly it's fairly obvious that it's been tested for at least several years in a real live simulated economy and the interdisciplinary depth points to a sizable development team. A team of freelance volunteers would probably have outed themselves by now, or have friends that out them (see: Wikileaks). It's not paranoia to believe that it's a government security team, Occam's Razor pretty much says it's the most likely. This is why I believe that Bitcoins are all about establishing liberal and western values/institutions, in reality it's somewhat more opposed with Randroid/RonPaul values than one would expect.
posted by amuseDetachment at 8:53 PM on September 20, 2011

Sorry, I mean SDRs, again.
posted by amuseDetachment at 8:58 PM on September 20, 2011 [1 favorite]

The California utilities were a secondary aspect to what Enron was doing. It would probably never have even been uncovered if the company went bankrupt.

Anyway, there's no real point in getting into the details of what Enron did here. Your basic argument at this point is 1) The people at Enron were smart, 2) The people who made bitcoin are smart 3) Therefore bitcoin is a scam the same way Enron was. It's not only idiotic it's actually pro-idiot.

You aren't making coherent arguments at all.

May I ask what would you think of BitCoin if you learned that Satoshi Nakamoto was the NSA?

...Directed by M. Night Shyamalan

It's fairly obvious that bitcoins are a US government project, I mean that really doesn't need to be said, right? There's a really good case for it from a strategic national security standpoint. It's a really good insurance policy against people like China/Venezuela hoarding gold and pushing for the gold standard. It's fairly obvious that there's only two viable solutions in the future without bitcoins, IMF ADRs or Gold. Either leaves the west in a deeply powerless situation.

Come on that's ridiculous. First of all, the U.S. has the largest national gold reserves in the world We have 8 times as much as China and 13 times as much as India. We have 80% as much as the entire eurozone.

The U.S and European governments combined (i.e. 'the west') control about 1000 times annual gold production^* more then 10% of all the gold in the entire world*

Furthermore, devaluing the dollar would hurt the Chinese economy (and help ours) by making their exports more expensive.

I don't really think governments are going to be interested in using bitcoin.

But that said, for people living in more corrupt countries, or countries without good financial institutions bitcoin has the potential to be pretty awesome. If you look at the google trends on bitcoin you see it's actually most popular in Russia, followed by Ukraine then western countries like New Zealand and Sweden. South Africa is 5th. And Bitcoin has the potentially to be an incredibly cheap and simple way to send value to the third world.
posted by delmoi at 9:39 PM on September 20, 2011 [1 favorite]

A lot of China's gold holdings are off the books. It's also an explicit strategy by China to increase their holdings to be at a competitive level, more importantly the inclusion of this in a cable shows as relevant information shows important this issue is to the US. In any case, I see SDRs as becoming a larger issue at hand than gold, as there is little doubt that China and India will be the largest economies due to sheer population statistics alone. Larger gold holdings justifies a currency on an international level from the perspective of other national central banks/treasuries. Being the largest economy backed by sizable gold holdings means an increasing voice in the IMF and the ability to become the largest composition in future SDR baskets.
posted by amuseDetachment at 10:17 PM on September 20, 2011 [1 favorite]

Okay, done responding to the blatant trolls and their Ponzi scheme of inflating the number of posts by paying out new posts as nothing but regurgitated bits of previously-made arguments.

Hope you enjoyed the meal.

^{/ And the sad thing about that description, it actually comes closer to a real pyramid scheme than any of the various mental contortions by which you've tried to squeeze BitCoin into that box.}
posted by pla at 3:38 AM on September 21, 2011 [1 favorite]

The NSA Bitcoin vs China conspiracy is crazy nutty stuff.
posted by humanfont at 6:24 PM on September 21, 2011 [2 favorites]

Possibly, it does sound really tinfoil hat, but I do see it as the most plausible explanation though. I can't see any other group which has sufficient ability to release something like this, it's not unreasonable to assume that the NSA is involved with something related to cryptography. Bitcoin has far too many unusual solutions, its choice of certain ways of doing things in the code and picking certain encryption algorithms scream out weird solutions in the same vein as NSA in relation to DES where the reasons for doing so come out years later.

I might be a bit aggressive in saying it's obvious, I should rather be saying that if I had to put money on who Satoshi was, my first guess would be NSA. I'm fairly certain most people would make that same guess.
posted by amuseDetachment at 6:38 PM on September 21, 2011 [1 favorite]

I'm confident that bitcoin is well within the abilities of one lone dedicated clever individual. Any good math PhD thesis has greater conceptual complexity with equal precision. I.e. your DES analogy fails. I'd agree that bitcoin shows considerably more 'maturity' than your average PhD thesis, but middle aged people are dedicated too. We aren't talking about somebody who builds websites for a living of course, but still. Ain't an institutional style of project either.
posted by jeffburdges at 9:15 PM on September 21, 2011 [1 favorite]

jeffburdges: mefimail sent on a specific example in the protocol of an unusual choice in the protocol/code.
posted by amuseDetachment at 10:21 PM on September 21, 2011 [1 favorite]

Why don't you post your evidence here?
posted by humanfont at 4:49 AM on September 22, 2011 [1 favorite]

Yawn. Two quick points: 1) As far as I know, you can't say for certain whether or not the FBI is investigating, and 2) that has nothing to do with this comment which I linked too as an example of me pointing out a factual error on your part.

I can say for certain the original source for your claim is a known scammer and no one else has reported the FBI having any interest, despite a lot of money being stolen.

Look, you let a scammer give you bad information and regurgitated it here, now you are ranting about imaginary factual errors instead. It's very silly.

In the comment you linked to you are replying to my comment about MyBitcoin so of course it is relavent, why do you think continuing to lie is going to get you anywhere?
posted by furiousxgeorge at 10:33 AM on September 22, 2011 [1 favorite]

Massive botnet mines bitcoins

How do you compete with miners who don't pay for their own electricity? Eventually one of thee nets could exceed 50% control and then things are interesting. Cause you really dint want a bunch of unknown criminals controlling the transaction log.
posted by humanfont at 6:39 PM on September 22, 2011 [1 favorite]

Botnets will never work very well, unless those bots manage to infect people with high-end radeon cards. It takes like 100 'average' CPUs to match a $150 graphics card.

jeffburdges: mefimail sent on a specific example in the protocol of an unusual choice in the protocol/code.

Whatever. Post whatever you think is so awesome here in the thread. (or jeffburdges can post it)
posted by delmoi at 9:49 PM on September 24, 2011 [1 favorite]

You don't seem to realize the scale of these botnets or diverse profile of machines that are rooted. There are lots of video game focused PCs out there full of warez downloaded from torrents by idiots.
posted by humanfont at 8:07 PM on September 25, 2011 [1 favorite]

Gox: It is with great regret that we must inform our Australian customers that Technocash has closed the Mt.Gox National Australia Bank account and the Mt.Gox Bank West account.

The account was closed as Technocash was receiving an extremely high number of fraud complaints from Australian customers. It appears that a number of criminal elements were using Technocash as a means of laundering funds obtained through credit card and identity theft through various bitcoin exchanges and then converting any stolen funds into USD for withdrawal internationally.
-
People who steal credit cards don't want to have to buy merchandise with them instead of an anonymous currency.

No one who sells bitcoins takes credit cards.

Oh well I guess pointing out reality was just another one of my factual errors.
posted by furiousxgeorge at 1:30 PM on September 28, 2011 [1 favorite]

Looks like the real banks are closing in on MtGox. So much for your anonymous accounts. HSBC has also stopped transfers.
posted by humanfont at 4:24 PM on September 29, 2011 [1 favorite]

humanfont : Looks like the real banks are closing in on MtGox. So much for your anonymous accounts. HSBC has also stopped transfers.

Awww, trying soooo hard! And look who favorited you...... again. We've got a good ol' fashioned circle... uh... "hugfest"... goin' on here.

Sad news for you - I've just successfully transferred a few BTC and a few USD out of Dwolla. No hassles whatsoever.

You complained about their lack of security, and now you complain when they try to deal with ongoing attacks by requiring users of suspected-compromised accounts verify their existence. That fence? Pick a side plz?
posted by pla at 7:39 PM on September 29, 2011 [1 favorite]

"I've just successfully transferred a few BTC and a few USD out of Dwolla."

Oops, meant "out of Gox", not Dwolla - Though I'll gladly confirm when I move those few bucks out of Dwolla and into a real live USD-denominated FDIC-insured US checking account, if you like.
posted by pla at 7:43 PM on September 29, 2011 [1 favorite]

Wow, you sure disproved his "every Gox account has been frozen!" statement.

Oh wait...
posted by furiousxgeorge at 7:55 PM on September 29, 2011 [1 favorite]

Remember back when frozen accounts in Paypal were a sign of bitcoin superiority?

But let's look at the receiving side. That's where bitcoin is a huge improvement over the status quo. Have you ever actually set yourself up to receive money online? It's actually a huge pain. If you use paypal there is a reasonable risk of your account frozen

Hi guys, welcome to reality. Fraud protection requires some account freezing. To get all this handled on a massive scale requires you to bring in a ton more staff and expertise or leave accounts in limbo.

Yup, sending and receiving bitcoin is basically free (I think a 'high priority' transfer might cost 0.01 btc? I'm not actually sure. But it's practically free compared to paypal)

...and do you know what happens when you bring in more staff and expertise? You have to raise the fees.

(Yes, I know that was Delmoi, just trying to preempt his hug back to you pla)

So now they are going to end up charging higher fees, freezing accounts, and requiring photo ID. What exactly is the benefit over Paypal again?
posted by furiousxgeorge at 8:01 PM on September 29, 2011 [1 favorite]

You complained about their lack of security, and now you complain when they try to deal with ongoing attacks by requiring users of suspected-compromised accounts verify their existence.

MtGox has requested individuals send a copy of government issued ID such as your passport and also a recent utility bill via plain old unsecured email to unlock their accounts. Why would you consider that a security improvement?
posted by humanfont at 8:39 PM on September 29, 2011 [1 favorite]

furiousxgeorge : Yes, I know that was Delmoi, just trying to preempt his hug back to you pla

I noticed that... Creepiest use of favorites ever. Love it, +10 for style! :)

Wow, you sure disproved his "every Gox account has been frozen!" statement.

No, actually, I disproved his "So much for your anonymous accounts" statement. Not quite the same thing, but still phrased as an implied absolute, thus a single counterexample will suffice.

humanfont : Why would you consider that a security improvement?

Can you point out where I called it a security improvement?

That aside, to those of us with reasonably secure accounts (c'mon, the site has daily updates on the status of ongoing attacks and people still use weak passwords or log in from public terminals???), it means, whether or not the ID belongs to the right person, they have someone else's name to add to any lawsuits when someone eventually gets all sue-ey. CYA doesn't equal security, but it does protect the userbase in the sense that it reduces the risk of some random backwater county judge freezing everyone's assets on Gox pending a long and messy (and likely mostly dead-end) investigation.
posted by pla at 3:39 AM on September 30, 2011

No, actually, I disproved his "So much for your anonymous accounts" statement.

Not really, if you get flagged as a false positive for fraud you are going to have to ID. Without any expectation that your anonymity will be continued it's hard to say you are truly anonymous.
posted by furiousxgeorge at 7:00 AM on September 30, 2011

You should realize that the account verification process opens up a tremendous spectrum of attack vectors for identity theft. Unencrypted emails, smtp, unknown recipients.
posted by humanfont at 3:32 PM on September 30, 2011

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