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It's worse than that - a single exchange, Mt. Gox, has 98% of the bitcoin trading volume. The exchange operator(s) have access to all information about orders p

It's worse than that - a single exchange, Mt. Gox, has 98% of the bitcoin trading volume. The exchange operator(s) have access to all information about orders placed - and also have bitcoin holdings themselves. The potential for manipulation here is unlimited. I do not mean to accuse them of anything - there is no information. But this is not a healthy situation, given, as others have said, absolutely no legal protection. EDIT: I want to strengthen the statement that I'm not accusing the operator of manipulation. He's well-respected by bitcoin forum participants, and he is probably an upstanding guy. But in the world of finance, it is customary to have more than just that to guarantee the soundness of a central exchange. Add to this the fact that Mt. Gox is taking deposits totaling in the millions of dollars without having any license to operate as a financial institution, and that it apparently hold around 10% of all existing bitcoins (someone traced a 470,000 bitcoin movement to a Mt. Gox account), and I have a strong feeling that this will soon end in tears.

nikcub 15y ago
known as front running, and happens often on other exchanges
- yaakov34 15y ago
  I know. My point is not so much about the possibility of front running, but about exchanges, and especially Mt. Gox, as the point of failure for bitcoin. Let's face it, 99% of the excitement about bitcoin lately is not along the lines of "hey, this is a great use of peer-to-peer principles and a fascinating economic experiment with a decentralized currency". No, it is along the lines of "hey, this thing is making tons of money for people! fortunes out of next to nothing!". Take one look at the bitcoin forums. A failure of a major exchange (and right now, there is exactly one major exchange) would damage the project severely. What's more, the focus on trading at exchanges is making the whole project look a lot less decentralized - yeah, the bitcoins themselves are peer-to-peer, but exchanges are sure not, and if what people really want to do is trade at exchanges, then that's what matters.
  - rms 15y ago
    There's always #bitcoin-otc.
    - yaakov34 15y ago
      I absolutely agree, the bitcoins themselves can't be taken away and neither can person-to-person trade in them. But you do agree that Mt. Gox sitting there with several million euros frozen in its accounts (for whatever reason) and with its bitcoin accounts inaccessible (even just for a while) will be pretty damaging to the project? And even more damaging to the people who, unlike, say, me, are NOT just playing or experimenting with this concept anymore? The pure person-to-person volume is tiny; if it could easily be scaled, then exchanges would not have arisen.
rb2k_ 15y ago
There are some new exchanges that will probably take a share of the market. One of the more promising ones is tradehill.com. They offer a nicely polished interface, offer dwolla payments/withdrawls and have a "viral" component by giving a 10% rebate on fees for people singing up using a referral link. In addition, they charge less than mtgox. p.s. I was told that posting a direct link is frowned upon and I understand that. But since not using a ref id will lead to a 10% penalty on fees, I feel bad not leaving one: TH-R11089 Discussion about tradehill: http://forum.bitcoin.org/index.php?topic=14010.0 http://forum.bitcoin.org/index.php?topic=14010.0 (You can find other referal ids on the bitcoin.org forums too)
- yaakov34 15y ago
  And does /that/ one have a license to take deposits? And is it backed by anything more than 4 stars next to someone's nic on the forum? Bitcoins are a serious investment for some people now. They've put their savings into this. This is not just funny money. It's a lot of fun to play with, and I will keep doing that myself, but the people who are not just playing anymore have an immense potential to get hurt by these exchange swings. By the way, I am nobody here on HN, but I do know that this is not the forum to post your affiliate links. My friendly advice would be to get rid of that.
  - rb2k_ 15y ago
    You are right in that Tradehill isn't necessarily 'better' or 'more secure' than mtgox. I just wanted to say that there are more exchanges coming up and that the situation will at least ease up in that direction. As for the 'investment': Honestly, the people that invested their savings into Bitcoins should be fully aware of the risk they're getting themselves into. As with everything that might give return your investments manyfold, there is a proportionally high risk. I don't think it's a good idea to make large investments into Bitcoin unless somebody doesn't need the money and thinks the personal joy he gets out of gambling is worth it. I know I have a lot of fun with small amounts :) As for the link, I'll remove the directly clickable one. But since signing up without a referal will lead to 10% higher fees, I'd at least leave the code for people that are interested. I was kind of uncertain but didn't find anything when skimming the FAQ or guidelines. I hope that is ok. (If not, somebody please respond and I'll kick that one too)

nikcub 15y ago

known as front running, and happens often on other exchanges

yaakov34 15y ago
I know. My point is not so much about the possibility of front running, but about exchanges, and especially Mt. Gox, as the point of failure for bitcoin. Let's face it, 99% of the excitement about bitcoin lately is not along the lines of "hey, this is a great use of peer-to-peer principles and a fascinating economic experiment with a decentralized currency". No, it is along the lines of "hey, this thing is making tons of money for people! fortunes out of next to nothing!". Take one look at the bitcoin forums. A failure of a major exchange (and right now, there is exactly one major exchange) would damage the project severely. What's more, the focus on trading at exchanges is making the whole project look a lot less decentralized - yeah, the bitcoins themselves are peer-to-peer, but exchanges are sure not, and if what people really want to do is trade at exchanges, then that's what matters.
- rms 15y ago
  There's always #bitcoin-otc.
  - yaakov34 15y ago
    I absolutely agree, the bitcoins themselves can't be taken away and neither can person-to-person trade in them. But you do agree that Mt. Gox sitting there with several million euros frozen in its accounts (for whatever reason) and with its bitcoin accounts inaccessible (even just for a while) will be pretty damaging to the project? And even more damaging to the people who, unlike, say, me, are NOT just playing or experimenting with this concept anymore? The pure person-to-person volume is tiny; if it could easily be scaled, then exchanges would not have arisen.

rb2k_ 15y ago

There are some new exchanges that will probably take a share of the market. One of the more promising ones is tradehill.com. They offer a nicely polished interface, offer dwolla payments/withdrawls and have a "viral" component by giving a 10% rebate on fees for people singing up using a referral link. In addition, they charge less than mtgox. p.s. I was told that posting a direct link is frowned upon and I understand that. But since not using a ref id will lead to a 10% penalty on fees, I feel bad not leaving one: TH-R11089 Discussion about tradehill: http://forum.bitcoin.org/index.php?topic=14010.0 http://forum.bitcoin.org/index.php?topic=14010.0 (You can find other referal ids on the bitcoin.org forums too)

yaakov34 15y ago
And does /that/ one have a license to take deposits? And is it backed by anything more than 4 stars next to someone's nic on the forum? Bitcoins are a serious investment for some people now. They've put their savings into this. This is not just funny money. It's a lot of fun to play with, and I will keep doing that myself, but the people who are not just playing anymore have an immense potential to get hurt by these exchange swings. By the way, I am nobody here on HN, but I do know that this is not the forum to post your affiliate links. My friendly advice would be to get rid of that.
- rb2k_ 15y ago
  You are right in that Tradehill isn't necessarily 'better' or 'more secure' than mtgox. I just wanted to say that there are more exchanges coming up and that the situation will at least ease up in that direction. As for the 'investment': Honestly, the people that invested their savings into Bitcoins should be fully aware of the risk they're getting themselves into. As with everything that might give return your investments manyfold, there is a proportionally high risk. I don't think it's a good idea to make large investments into Bitcoin unless somebody doesn't need the money and thinks the personal joy he gets out of gambling is worth it. I know I have a lot of fun with small amounts :) As for the link, I'll remove the directly clickable one. But since signing up without a referal will lead to 10% higher fees, I'd at least leave the code for people that are interested. I was kind of uncertain but didn't find anything when skimming the FAQ or guidelines. I hope that is ok. (If not, somebody please respond and I'll kick that one too)