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Related, but on my mind: How could we ever know how many bots are transacting on the blockchain? It seems that it is ripe for manipulation by those that benefi

Related, but on my mind: How could we ever know how many bots are transacting on the blockchain? It seems that it is ripe for manipulation by those that benefit from higher transaction numbers. Are exchanges audited to ensure they aren't artificially inflating the price by using artificial buyers and sellers? It seems like there is every incentive to keep the price high, and it seems like doing so maliciously would be quite straightforward.

jstanley 9y ago
1.) Transacting on the blockchain costs fees. It would be very expensive to fake bitcoin transaction volume. Even if you're a miner, your fake volume would be displacing real volume that would be paying real fees. 2.) Transactions on exchanges never hit the blockchain, so exchange volume and blockchain volume are unrelated. Furthermore, keeping the price high would not be "quite straightforward". What method do you have in mind? The only way to artificially keep the price high long-term is to place infinitely-large buy orders at the minimum price you want. This will obviously cost you unbounded amounts of money and would be financial suicide.
- vinchuco 9y ago
  > It would be very expensive Even for early miners? Edit: I should have written early buyers, since those wouldn't mind paying extra after their asset appreciating 10000x
  - jstanley 9y ago
    > Even if you're a miner, your fake volume would be displacing real volume that would be paying real fees. You'd be missing out on mining revenue. And given that the marginal cost of mining tends towards the marginal reward for mining, missing out on revenue is almost as bad as making a loss. There would have to be a substantial incentive to fake transaction volume in order to make it worth it. Additionally, given that blocks are full these days, there's not very much scope for increasing the apparent transaction volume anyway. The best you could do is replace large "real" transactions with a larger number of smaller "fake" transactions. I just don't think it's likely to be happening.
  - shawabawa3 9y ago
    > Even for early miners? What does "early miners" mean? Nobody has any inherent advantage in mining bitcoins. The costs are the same for everyone Some people may have an advantage by having cheaper electricity costs or better mining hardware, but they would still be missing out on significant amounts of fees by not mining legit transactions
- twayamznacct 9y ago
  For your question in (2)... Wash trading? Some of the exchanges have zero fees for high enough volume on some trading pairs... and if an exchange themselves are running wash trades it's not like they'd be paying their own fees anyways.
  - jstanley 9y ago
    And how does that increase the price?
    - twayamznacct 9y ago
      I was going to be smarmy and post a lmgtfy link with the contents "Wash trading price increase" but decided against it. There's a reason why wash trading is regulated against.

jstanley 9y ago

1.) Transacting on the blockchain costs fees. It would be very expensive to fake bitcoin transaction volume. Even if you're a miner, your fake volume would be displacing real volume that would be paying real fees. 2.) Transactions on exchanges never hit the blockchain, so exchange volume and blockchain volume are unrelated. Furthermore, keeping the price high would not be "quite straightforward". What method do you have in mind? The only way to artificially keep the price high long-term is to place infinitely-large buy orders at the minimum price you want. This will obviously cost you unbounded amounts of money and would be financial suicide.

vinchuco 9y ago
> It would be very expensive Even for early miners? Edit: I should have written early buyers, since those wouldn't mind paying extra after their asset appreciating 10000x
- jstanley 9y ago
  > Even if you're a miner, your fake volume would be displacing real volume that would be paying real fees. You'd be missing out on mining revenue. And given that the marginal cost of mining tends towards the marginal reward for mining, missing out on revenue is almost as bad as making a loss. There would have to be a substantial incentive to fake transaction volume in order to make it worth it. Additionally, given that blocks are full these days, there's not very much scope for increasing the apparent transaction volume anyway. The best you could do is replace large "real" transactions with a larger number of smaller "fake" transactions. I just don't think it's likely to be happening.
- shawabawa3 9y ago
  > Even for early miners? What does "early miners" mean? Nobody has any inherent advantage in mining bitcoins. The costs are the same for everyone Some people may have an advantage by having cheaper electricity costs or better mining hardware, but they would still be missing out on significant amounts of fees by not mining legit transactions
twayamznacct 9y ago
For your question in (2)... Wash trading? Some of the exchanges have zero fees for high enough volume on some trading pairs... and if an exchange themselves are running wash trades it's not like they'd be paying their own fees anyways.
- jstanley 9y ago
  And how does that increase the price?
  - twayamznacct 9y ago
    I was going to be smarmy and post a lmgtfy link with the contents "Wash trading price increase" but decided against it. There's a reason why wash trading is regulated against.