6 ms·

Consider this a reminder that while Bitcoin may be an interesting technological achievement, as a tradable asset it is still basically a toy. Crappy exchange te

by minimax 13y ago

Consider this a reminder that while Bitcoin may be an interesting technological achievement, as a tradable asset it is still basically a toy. Crappy exchange technology combined with low liquidity is a perfect recipe for this kind of volatility.

jessedhillon 13y ago
I'd sooner consider your comment a reminder that people will apply whatever possible interpretation to the facts is necessary in order to appear right. It's hard to even understand what it is you think you're contributing to the conversation. A dad-from-Growing-Pains-style chat on where to put our money? Reminding us that Mtgox -- which has a story on HN about them every other day -- is a clunky Rube Goldberg machine? This comment really seems like poorly disguised crowing and nothing more. Not a reminder, certainly. Maybe a reminder of your great prognosticatory abilities -- you took the default position on 99% of new technologies, products and innovations. Where do you find the courage?
- minimax 13y ago
  Sorry I hurt your feelings. Did you lose money or something?
  - jessedhillon 13y ago
    No. It's really not obvious what it is you think you're adding to the conversation.
logicallee 13y ago
The interesting thing about bitcoin is that you can just trade your friends for some p2p, you don't need a central exchange. You don't need a bank account to send someone bitcoins or to get some. You can just hand someone $20 and your address and they can send it to you p2p. No banking infrastructure involved. That boggles the mind. It is impossible for bitcoin to become fully illiquid as long as people believe it has value, because there is no infrastructure to approve transactions. The approval happens p2p.
- ohashi 13y ago
  Funny enough, I can just give my friends cash and it works pretty well too.
  - logicallee 13y ago
    That is exactly my point, of course. That it is still cash-like even without centralized exchanges, if for whatever reason such exchanges aren't very accessible (or don't exist.)
- pistle 13y ago
  Everything can be traded as long as people believe in its value. Currencies are proxies. Proxies function best with stability in value and wide awareness of relative values for goods and against other currencies. Bitcoin and its ilk are going to repeat the issues the US had when small and regional banks all printed their own bills. Their info infrastructure were large books, updated monthly that provided info to determine exchange rates/values. People didn't like getting burned everywhere on transaction costs and their value going poof when unsavory characters ran the underlying banks into the ground or rumors about the stability of far off banks were spread. Centralized. government-backed fiat currencies solve many issues that most Bitbugs are coming to grips with the hard way. It's those issues which are exposed publicly and quickly which will keep it the most amazing speculative financial invention to a group of fiercely, independently minded folks who have the skills and means to gloss over all the failings of such a device being a proxy for fiat currency. It's just another layer of abstraction, not a replacement. And it's a leaky abstraction.
  - chipotle_coyote 13y ago
    All currencies involve a level of trust: a gold-backed currency unregulated by a central bank still requires you to trust the bank that printed the bills. Bitcoin requires you to trust the mechanisms by which it's traded and stored -- not the algorithms involved as much as the mediums through which you're exchanging them. As Glenn Fleishman noted, Bitcoin addresses the problem of counterfeiting, but it doesn't prevent fraud. I suspect regulation of various kinds will come to Bitcoin not through authoritarian government fiat (see what I did there?) but the way most regulation actually comes to pass: the public calls for greater regulation and transparency. It's possible that Bitcoin markets will accomplish this with minimal government intrusion, and I'm sure that's what they'll all aim for, given the underlying philosophy. I'm just not sure it'll happen.
kyleblarson 13y ago
I would imagine that similar things happened in the early days of online equities brokerages.
- RyanZAG 13y ago
  Not even just the early days - Microsoft's fairly recent attempt at providing software for the London Stock Exchange met with disaster and frequent downtime [1]. This from a major tech giant, not just a card game exchange. Running a real exchange is a very difficult thing to do once the scale starts to ramp up. [1] http://www.telegraph.co.uk/finance/markets/4676369/Seven-hour-LSE-blackout-caused-by-double-glitch.html http://www.telegraph.co.uk/finance/markets/4676369/Seven-hou...
  - minimax 13y ago
    It wasn't Microsoft providing the software. It was software running on Windows. The actual software was an in-house developed matching engine called Tradelect. LSE eventually switched away to a 3rd party matching engine with their acquisition of MilleniumIT.
    - RyanZAG 13y ago
      True, but Microsoft had a big role in it. "The new technology platform has been developed using the Microsoft .NET Framework, with support from Microsoft and Accenture, and marks the final phase of the Exchange's four-year Technology Road Map project. "[1] I was also told that there were Microsoft engineers on site doing training and review through the project. Either way, my point is that building a trading platform is extremely difficult even with top talent and enormous investment. [1] http://www.onwindows.com/Articles/LSE-TradElect-system-goes-live/843/Default.aspx http://www.onwindows.com/Articles/LSE-TradElect-system-goes-...
      - minimax 13y ago
        Good points. The only other Windows based matching engine I know of is Direct Edge in the US, and I think even they are going to switch over using BATS' Linux-based matching engine once the BATS-DE merger completes.
koliber 13y ago
While I am in no position to predict the future of bitcoins, all new markets have these problems. At an early point in their history, stocks also had low liquidity and crappy technology. Both of these conditions will improve as an asset becomes more popular. It is a chicken-and-egg problem.
- deleted 13y ago
  [deleted]
- Stubb 13y ago
  There's also the question of where the money will come from to improve the technology. One of the benefits of BTC is the low transaction cost. But it might be that those transaction costs are exactly what's needed to fund exchange development.
  - RyanZAG 13y ago
    I think you've hit the nail on the head here - scaling up a real exchange is incredibly difficult and the kind of talent you need to hire probably has a price tag hugely in excess of the revenue of all BTC exchanges combined. These guys are probably struggling to even understand the problems they're experiencing, so it should come as no surprise that they're having technical difficulties. I bet they're having even more legal difficulties though, as just running a regular share exchange requires a team of top notch lawyers to keep abreast of the huge volume of exchange laws. I doubt poor MtGox even has 1 full time qualified lawyer and they're dealing with entirely new legal ground.
    - jessedhillon 13y ago
      There are plenty of talented people who believe in BTC enough that they would work to get in on the ground floor of an exchange. Who do you think are designing custom ASICs for mining?
      - RyanZAG 13y ago
        As far as I know, the guys making custom ASICs for mining are selling them to miners for real dollars. I don't think that helps your point much.
downandout 13y ago
This is more about a crappy exchange that has been crappy for most of its existence than about Bitcoin itself. The sky is not falling. MtGox may fall after this, but IMO that would be a good thing.
- slg 13y ago
  No, this is more about the freedom (and naivety) of the Bitcoin community. When you don't have any type of regulation or oversight in place, you get this type of free market free for all. There is no one single authority out there that can force Mt.Gox to clean ups it act. The only people with any power over the exchanges are their customers. But the customers aren't pushing for change for a variety of reasons. They either lack knowledge of these issues, knowledge about how these technical issues can cause problems, or have a vested enough interest in Bitcoin to overlook (or even down play) these issues.
- srdev 13y ago
  I don't think his statement was with regards to Bitcoin itself. Calling it "a real tradeable asset" implies more about the market around buying, selling, and storing Bitcoin than the Bitcoin protocol. And its hard to argue that market is anything but immature.

by minimax 13y ago

jessedhillon 13y ago

I'd sooner consider your comment a reminder that people will apply whatever possible interpretation to the facts is necessary in order to appear right. It's hard to even understand what it is you think you're contributing to the conversation. A dad-from-Growing-Pains-style chat on where to put our money? Reminding us that Mtgox -- which has a story on HN about them every other day -- is a clunky Rube Goldberg machine? This comment really seems like poorly disguised crowing and nothing more. Not a reminder, certainly. Maybe a reminder of your great prognosticatory abilities -- you took the default position on 99% of new technologies, products and innovations. Where do you find the courage?

minimax 13y ago
Sorry I hurt your feelings. Did you lose money or something?
- jessedhillon 13y ago
  No. It's really not obvious what it is you think you're adding to the conversation.

logicallee 13y ago

The interesting thing about bitcoin is that you can just trade your friends for some p2p, you don't need a central exchange. You don't need a bank account to send someone bitcoins or to get some. You can just hand someone $20 and your address and they can send it to you p2p. No banking infrastructure involved. That boggles the mind. It is impossible for bitcoin to become fully illiquid as long as people believe it has value, because there is no infrastructure to approve transactions. The approval happens p2p.

ohashi 13y ago
Funny enough, I can just give my friends cash and it works pretty well too.
- logicallee 13y ago
  That is exactly my point, of course. That it is still cash-like even without centralized exchanges, if for whatever reason such exchanges aren't very accessible (or don't exist.)
pistle 13y ago
Everything can be traded as long as people believe in its value. Currencies are proxies. Proxies function best with stability in value and wide awareness of relative values for goods and against other currencies. Bitcoin and its ilk are going to repeat the issues the US had when small and regional banks all printed their own bills. Their info infrastructure were large books, updated monthly that provided info to determine exchange rates/values. People didn't like getting burned everywhere on transaction costs and their value going poof when unsavory characters ran the underlying banks into the ground or rumors about the stability of far off banks were spread. Centralized. government-backed fiat currencies solve many issues that most Bitbugs are coming to grips with the hard way. It's those issues which are exposed publicly and quickly which will keep it the most amazing speculative financial invention to a group of fiercely, independently minded folks who have the skills and means to gloss over all the failings of such a device being a proxy for fiat currency. It's just another layer of abstraction, not a replacement. And it's a leaky abstraction.
- chipotle_coyote 13y ago
  All currencies involve a level of trust: a gold-backed currency unregulated by a central bank still requires you to trust the bank that printed the bills. Bitcoin requires you to trust the mechanisms by which it's traded and stored -- not the algorithms involved as much as the mediums through which you're exchanging them. As Glenn Fleishman noted, Bitcoin addresses the problem of counterfeiting, but it doesn't prevent fraud. I suspect regulation of various kinds will come to Bitcoin not through authoritarian government fiat (see what I did there?) but the way most regulation actually comes to pass: the public calls for greater regulation and transparency. It's possible that Bitcoin markets will accomplish this with minimal government intrusion, and I'm sure that's what they'll all aim for, given the underlying philosophy. I'm just not sure it'll happen.

kyleblarson 13y ago

I would imagine that similar things happened in the early days of online equities brokerages.

RyanZAG 13y ago
Not even just the early days - Microsoft's fairly recent attempt at providing software for the London Stock Exchange met with disaster and frequent downtime [1]. This from a major tech giant, not just a card game exchange. Running a real exchange is a very difficult thing to do once the scale starts to ramp up. [1] http://www.telegraph.co.uk/finance/markets/4676369/Seven-hour-LSE-blackout-caused-by-double-glitch.html http://www.telegraph.co.uk/finance/markets/4676369/Seven-hou...
- minimax 13y ago
  It wasn't Microsoft providing the software. It was software running on Windows. The actual software was an in-house developed matching engine called Tradelect. LSE eventually switched away to a 3rd party matching engine with their acquisition of MilleniumIT.
  - RyanZAG 13y ago
    True, but Microsoft had a big role in it. "The new technology platform has been developed using the Microsoft .NET Framework, with support from Microsoft and Accenture, and marks the final phase of the Exchange's four-year Technology Road Map project. "[1] I was also told that there were Microsoft engineers on site doing training and review through the project. Either way, my point is that building a trading platform is extremely difficult even with top talent and enormous investment. [1] http://www.onwindows.com/Articles/LSE-TradElect-system-goes-live/843/Default.aspx http://www.onwindows.com/Articles/LSE-TradElect-system-goes-...
    - minimax 13y ago
      Good points. The only other Windows based matching engine I know of is Direct Edge in the US, and I think even they are going to switch over using BATS' Linux-based matching engine once the BATS-DE merger completes.

koliber 13y ago

While I am in no position to predict the future of bitcoins, all new markets have these problems. At an early point in their history, stocks also had low liquidity and crappy technology. Both of these conditions will improve as an asset becomes more popular. It is a chicken-and-egg problem.

deleted 13y ago
[deleted]
Stubb 13y ago
There's also the question of where the money will come from to improve the technology. One of the benefits of BTC is the low transaction cost. But it might be that those transaction costs are exactly what's needed to fund exchange development.
- RyanZAG 13y ago
  I think you've hit the nail on the head here - scaling up a real exchange is incredibly difficult and the kind of talent you need to hire probably has a price tag hugely in excess of the revenue of all BTC exchanges combined. These guys are probably struggling to even understand the problems they're experiencing, so it should come as no surprise that they're having technical difficulties. I bet they're having even more legal difficulties though, as just running a regular share exchange requires a team of top notch lawyers to keep abreast of the huge volume of exchange laws. I doubt poor MtGox even has 1 full time qualified lawyer and they're dealing with entirely new legal ground.
  - jessedhillon 13y ago
    There are plenty of talented people who believe in BTC enough that they would work to get in on the ground floor of an exchange. Who do you think are designing custom ASICs for mining?
    - RyanZAG 13y ago
      As far as I know, the guys making custom ASICs for mining are selling them to miners for real dollars. I don't think that helps your point much.

downandout 13y ago

This is more about a crappy exchange that has been crappy for most of its existence than about Bitcoin itself. The sky is not falling. MtGox may fall after this, but IMO that would be a good thing.

slg 13y ago
No, this is more about the freedom (and naivety) of the Bitcoin community. When you don't have any type of regulation or oversight in place, you get this type of free market free for all. There is no one single authority out there that can force Mt.Gox to clean ups it act. The only people with any power over the exchanges are their customers. But the customers aren't pushing for change for a variety of reasons. They either lack knowledge of these issues, knowledge about how these technical issues can cause problems, or have a vested enough interest in Bitcoin to overlook (or even down play) these issues.
srdev 13y ago
I don't think his statement was with regards to Bitcoin itself. Calling it "a real tradeable asset" implies more about the market around buying, selling, and storing Bitcoin than the Bitcoin protocol. And its hard to argue that market is anything but immature.