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The Bitcoin Crash
- rrrazdan 15y agoThis is one of the most balanced coverage of the Bitcoin issue I have seen. "The system has proved popular with online criminals, keen to keep their financial transactions secret, although it has a wider, legitimate, user base." Nicely researched. Kudos to the BBC team. Shows why BBC is still the trusted source for many of us.
- IsaacL 15y agoI'm also surprised that bitcoin is being covered in such a mainstream news source - I was under the impression that it was still only of interest to the techy early adopter crowd.
- sunchild 15y agoI had the opposite reaction. I thought it was poorly-researched, esp. in that it parroted MtGox's explanation for the compromise. I don't think the BBC should be so quick to accept that story, given this information: http://news.ycombinator.com/item?id=2676263 http://news.ycombinator.com/item?id=2676263
- rrrazdan 15y agoThey are quoting an official statement from Mt Gox. Its not like they are accepting this line. But if there is somebody they can quote, its Mt. Gox, not somebody who claims something on a forum. In any case, not mentioning 'toasty' is not really relevant.
- jmilloy 15y agoI see one quote, followed by non-quoted statements that read as facts.
- themal 15y agoAt the very least, the BBC has avoided the BitCoin hype. Lots of other websites mention it every other day, yet this crash was probably the first major event for the technology.
- Tichy 15y agoYour comment is a nice example for people wanting to read what they already believe.
- jgrahamc 15y agoSlightly off topic, but there's a lovely little novel called "The Cryptographer" about an electronic currency set up by a man called "John Law" that runs in parallel to hard currencies (in the book it's referred to as 'soft'). http://www.amazon.co.uk/Cryptographer-Tobias-Hill/dp/0571218377 http://www.amazon.co.uk/Cryptographer-Tobias-Hill/dp/0571218...
- batterseapower 15y agoFrom WP: "John Law was a Scottish economist who believed that money was only a means of exchange that did not constitute wealth in itself and that national wealth depended on trade". Also used as a pseudonym by Mencius Moldbug for his classic piece on gold: http://www.safehaven.com/article/5205/why-the-global-financial-system-is-about-to-collapse http://www.safehaven.com/article/5205/why-the-global-financi...
- thorax 15y agoWhile we're now on this subject, here's Neal Stephenson's scifi tale on cryptocurrencies from 1995: http://www.time.com/time/magazine/article/0,9171,982610-1,00.html http://www.time.com/time/magazine/article/0,9171,982610-1,00...
- wurf 15y agothat's only half the truth, here's the story of the so called "fraudster": http://forum.bitcoin.org/index.php?topic=20207.0 http://forum.bitcoin.org/index.php?topic=20207.0
- perfunctory 15y agoBBC story seem to differ from the one offered by toasty. We might never learn what actually happened.
- personalcompute 15y agoBBC has no story, they are parroting MT Gox's reports.
- sltkr 15y agoNote that there are at least two people involved (excluding Mt Gox): a hacker that managed to gain access to a large amount of bitcoins and started selling them all, and a person that profited of the low price by placing a large buy order at 1.01¢ per coin (so as to outbid sellers at 1¢ but still pay a very low price). Kevin/toasty admitted to be the buyer, but he is not the hacker (at least, he claims he isn't and Mt Gox seems to agree). The article suggests that these two parties were either the same person or were at least in collusion, but there is no proof of that whatsoever.
- niklas_a 15y agoNothing new here. Just the standard speculation of what will happen to BitCoin after the MtGox hack. The truth is, nobody knows where BitCoin is heading. It is still in it's infancy and Gavin, the lead dev, always describes it as an experiment.
- gaius 15y agoFTA: He also questioned the fundamental workings of the currency, saying that its emphasis on anonymity and decentralised nature meant there was little recourse for users when things go wrong So just like... Cash?
- fhars 15y agoCash is actually numbered so you can for example trace bills payed as ransom
- icebraining 15y agoIn Bitcoins all the transactions are publicly logged (by design - it's the public nodes that actually perform and verify the transaction), so you can do the same. See http://blockexplorer.com http://blockexplorer.com
- iwwr 15y agoBitcoins are less anonymous than cash, since all transactions are visible. Anonymous identities may be inferred from known identities in a step-by-step process.
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- Tichy 15y ago"The system has proved popular with online criminals" Citation needed. Are there any stats on where BitCoin are being spent? Everybody says BitCoin could be useful for criminals, but how big is the adoption so far? How much business did Silk Road generate?
- gwern 15y agoThere was a comment on the Silk Road forums (in the context of replying to someone wondering whether buying from a seller with 0 reviews was very risky or not) to the effect that the Gawker article had caused SR to jump from a few hundred accounts to over 9000. A decent number, granted, but likely most of them have not engaged in any transactions and never will. On the other hand, another poster mentioned that there is another Bitcoin+Tor market site by the name of BlackMarket (or something), so SR is only part of the picture.
- smbwrs 15y ago"...from a few hundred accounts to over 9000." I see what you did there.
- gwern 15y agoNo, I was quite serious. I just checked, and the most recent account IDs are actually now in the 15,000 and 16,000s. Seriously people, sometimes 'over 9000' is just a literal statement of truth and not a meme!
- timrosenblatt 15y agoI imagine people thinking that Tony Soprano is sitting in his house, furiously mining BitCoins, while whacking snitches.
- praxeologist 15y agoI have no clue if this one article I happened to pull up is accurate or conspiracy wackiness but it says that banks connected to the CIA pull in $10-15 billion in drug money each year. http://omasiali.wordpress.com/2011/06/08/cia%E2%80%99s-50-years-of-corrupt-drug-trafficking/ http://omasiali.wordpress.com/2011/06/08/cia%E2%80%99s-50-ye... How much do federal/local cops actually steal in drug money each year? Silk Road is a worldwide thing too so it would really have to be compared to the millions that corrupt forces in Mexico and all over the world make each year using the anonymous money system. I think people need to reevaluate who the criminals really are.
- watt 15y agoI really wonder who is the person whose coins were being sold off. I mean, that's the real story here: somebody had many tens of thousands of BTC that were stolen from his MtGox account and were sold off at a very low price. (The story that people were buying BTC at very low prices is a distraction, the real story is that somebody was SELLING at this low price.) The other thing is that MtGox did not suspend trading once market moved 20%. I think if it had such failsafe it could have prevented this fiasco. (Should shut down the marketplace once market moves 20% in any direction to reassess the situation and check if there is technical error or panic, or similar event that requires additional intervention. Any mature market requires such failsafe.)
- thanasop 15y agoThe amount sold was over 500000 BTC - more that all estimated deposits on MtGox. The likely explanation is that these were just virtual BTCs added through SQL injection. The alternatives are that a single person was keeping that much on an exchange rumored to be insecure and used insecure password (easily cracked from leaked md5 hashes), or the person decided to sell half his BTC for $0.01 - an extra $2500 in addition to hundred thousands.
- IsaacL 15y agoThat raises an interesting point. The nature of Bitcoin is supposed to prevent things like fractional reserve banking, since the nature of the system means you can't give people BTC you don't have. It's impossible to create bitcoins in any other way except mining. However, if people are making BTC transactions through a centralized exchange such as Mt. Gox, they are in effect moving numbers around in MtGox's database rather than actually transferring bitcoin. This means banks are able to effectively create BTC as they can with fiat currencies, leading to problems like the current case - problems that Bitcoin was designed to solve.
- alttab 15y agoHow would MtGox effectively "create BTC"? There is a difference between moving coins around in a database and creating new coins. All coins are deposited from users. The only way BTC would be "created" in MtGox is if MtGox was mining on their own. Coins need to be "mined" to be created - so MtGox couldn't even loan coins they didn't have.
- illumin8 15y agoBitcoin will recover, but right now it is going through a liquidity crisis: Only a small percentage of BTC users were using Tradehill, a competitive BTC exchange. People have rushed to create accounts there, however it takes a few days to transfer money in, so right now there are more sellers than buyers, causing prices to go lower. In addition, apparently some people have their money tied up in unreachable MtGox accounts so are unable to trade. MtGox has some serious issues to deal with. Finally yesterday, on the 3rd day after the exchange was brought down, they instituted an account recovery page, where you can provide information about your account and try to prove it is yours. Their support people are manually reviewing account information and will give you access when they feel you have sufficiently verified the info. It looks very fishy, like MtGox is intentionally delaying access to people's accounts in order to prevent a run on the exchange. We don't know exactly how much money or coins were actually stolen from MtGox, but it is entirely possible that someone figured out a way to transfer a large amount of coins or real currency out of there. It might be possible that MtGox cannot make all investors whole again, so they are reenabling accounts just a few at a time and hoping that not everyone withdraws their funds at once. Personally, I never kept a balance of either USD or BTC in MtGox. Their site looked too amateur to trust with money. I would sell my coins and transfer them to Dwolla immediately. Right now, all of the exchanges look sketchy. I would not trust a single VPS running MySQL at all with what could be millions of dollars.
- mathly 15y agoMaybe we shouldn't be so trusting of Bitcoin Exchanges? http://nerdr.com/bitcoin-exchange-scam-bitcoins-are-worthless/ http://nerdr.com/bitcoin-exchange-scam-bitcoins-are-worthles...
- illumin8 15y agoInteresting article. While it is entirely possible to do this, professional traders will soon move in and arbitrage any price differences between exchanges. As competition increases, amateur exchanges that manipulate the price will suffer the consequences, for example, overpaying on the buy side because they've artificially inflated the price. Or traders will just move to another exchange if the spread is too high between bid and ask.