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Yeah it's funny how the technical perspective of this post swung rapidly to economic ideology at the end. Having confirmed that it was complete amateur hour ov

Yeah it's funny how the technical perspective of this post swung rapidly to economic ideology at the end. Having confirmed that it was complete amateur hour over at MtGox, how can a critical thinking person make the huge leap that only bureaucratically controlled government currencies are viable. All it maybe shows (and this remains to be seen) is that Bitcoin is the wild west where people will steal from you and generally not face legal repercussions, but that is the social layer on top of Bitcoin and has nothing to do with its fundamental viability. When this story repeats with more professional operations and more savvy users then we'll start to get a more realistic view of whether Bitcoin can ever cross the chasm or if it's fundamentally lacking the ability to generate the trust necessary to stabilize its economy.

jbooth 13y ago
The wild-west factor has everything to do with its viability. If bitcoin is ever going to outgrow its dutch tulip mania phase and actually be a medium of exchange for legal goods, people need to feel (and be!) at least as secure as with USD in a big dumb bank.
- yummyfajitas 13y ago
  True - right now they are only as secure as paper money with a vendor on the road. And as we all know, no one transacts with paper money.
  - jbooth 13y ago
    A bit of a mixed metaphor given that we're talking about an exchange collapse, here. You don't deposit your paycheck in cash with a dude in a streetcart. Anyways, the thing with transformative new products is you have to be notably better in order to get people to switch. "Just as good" isn't good enough. "Less good but you get a lot of ideological satisfaction if that's your thing" is certainly not good enough. So far, BTC is a speculation vehicle, not currency.
    - yummyfajitas 13y ago
      I don't care much about distinctions between "currency" and "not currency". But I don't think this incident changes the fundamentals of BTC. I don't understand those fundamentals well enough to speculate, but I don't think the collapse of a single exchange alters them much in the long term. If anything, my views are learning towards BTC being a widely used medium of exchange (not necessarily a medium of account) but a poor speculation vehicle. Demand for BTC is (sublinearly) proportional to transaction costs and the size of the BTC economy - I can easily envision scenarios where transaction costs go sufficiently low that BTC demand remains low. I do some math here if you are interested: http://www.chrisstucchio.com/blog/2014/demand_for_bitcoins.html http://www.chrisstucchio.com/blog/2014/demand_for_bitcoins.h...
      - jbooth 13y ago
        That's a really neat post, thanks for sharing. I'd agree that this doesn't change the fundamentals of BTC, actually. If enough speculators didn't know that this could happen, maybe this changes perception enough to doom BTC, but it would have been doomed anyways in that case. I'm not convinced that it's possible for BTC to become a widely used medium of exchange without also being a medium of account -- it's just too much friction for your average retail user to convert to BTC in order to buy something while holding most of their wealth in dollars or whatever. Why not just buy in dollars? If the only utility is to mask shady purchases, it might have a future in that niche, I guess, but that implies a small BTC economy in the long run. I guess I can see a place for a crypto currency with a stable exchange rate to other currencies, as long as the crypto part holds up and the volatility mellows out, there's real utility there for people who want untraceable purchases. But BTC as "god's currency for true believers, going to take over the world because we have an unrelated ideological beef" doesn't really impress me.
        yummyfajitas 13y ago
        The way I envision BTC being used is via apps that connect individual users to individual exchanges. What I envision: I take an auto and the driver tells me the fare is 100rs - 60rs meter + 40rs because fuck you it's Bangalore. He gives me a BTC wallet. My phone goes to an exchange, converts $1.65 or so into BTC and transmits to the drivers wallet. His phone then converts the BTC into rs. I'm generally viewing BTC as a medium of exchange for cases that would otherwise require a bank transfer or currency conversion. There are a lot of these.
- dasil003 13y ago
  You might notice that many Americans now live safely in what was formerly the wild west.
  - smacktoward 13y ago
    Yes, because the Wild West stopped being wild. Governments organized, police departments and fire brigades and schools were set up. Roads were paved, water and sewer lines installed. All the appurtenances of civilization, in other words. And you can't install the appurtenances of civilization without installing civilization with them.
    - dasil003 13y ago
      Yes, obviously. Both you and jbooth seem to be missing my point, you perhaps a bit more painfully, so I'll spell it out in plain English: Just because Bitcoin is unregulated and uncontrolled today does not mean it always will be. And to my original point: MtGox incompetence is not much of a data point either way, other than that MtGox couldn't have come into existence in a more mature landscape.
bertil 13y ago
> Having confirmed that it was complete amateur hour over at MtGox, how can a critical thinking person make the huge leap that only bureaucratically controlled government currencies are viable. Can’t speak for the author (who’s actively commenting here) but I believe the idea (common in Transaction Cost economy) is that whether Mt.Gox were amateur was hard to determine without knowing how to operate for yourself the kind of service that they provided; not necessarily at their scale, but well enough to go without them. This means that most folks who were interested in their service were presumably not able to sort them from the other: lots of assumption there, but imagine shill-ridden forums, cross-accusation of cluelessness, the FBI presumably involved, them being in Japan… This is not a new problem, far from it: I would recommend Avner Greif’s ‘Magrihbi traders’ and the reappraising discussions by its author. A casual reader could leap the century of nepotism-based boating, and the local fairs in Europe to conclude that the invention of currency, concomitant with the Nation-State, were both a way to empower trade. A less casual reader (like me) would love to send Greif, (the now late) Coase & Oliver E. Williamson to Japan and on-line to investigate what went wrong. Once you have a State, why an inflating bureaucracy is also a classic result of transaction cost theory and an issue in organisational incentive — but I don't think that part is mysterious to you.

jbooth 13y ago

The wild-west factor has everything to do with its viability. If bitcoin is ever going to outgrow its dutch tulip mania phase and actually be a medium of exchange for legal goods, people need to feel (and be!) at least as secure as with USD in a big dumb bank.

yummyfajitas 13y ago
True - right now they are only as secure as paper money with a vendor on the road. And as we all know, no one transacts with paper money.
- jbooth 13y ago
  A bit of a mixed metaphor given that we're talking about an exchange collapse, here. You don't deposit your paycheck in cash with a dude in a streetcart. Anyways, the thing with transformative new products is you have to be notably better in order to get people to switch. "Just as good" isn't good enough. "Less good but you get a lot of ideological satisfaction if that's your thing" is certainly not good enough. So far, BTC is a speculation vehicle, not currency.
  - yummyfajitas 13y ago
    I don't care much about distinctions between "currency" and "not currency". But I don't think this incident changes the fundamentals of BTC. I don't understand those fundamentals well enough to speculate, but I don't think the collapse of a single exchange alters them much in the long term. If anything, my views are learning towards BTC being a widely used medium of exchange (not necessarily a medium of account) but a poor speculation vehicle. Demand for BTC is (sublinearly) proportional to transaction costs and the size of the BTC economy - I can easily envision scenarios where transaction costs go sufficiently low that BTC demand remains low. I do some math here if you are interested: http://www.chrisstucchio.com/blog/2014/demand_for_bitcoins.html http://www.chrisstucchio.com/blog/2014/demand_for_bitcoins.h...
    - jbooth 13y ago
      That's a really neat post, thanks for sharing. I'd agree that this doesn't change the fundamentals of BTC, actually. If enough speculators didn't know that this could happen, maybe this changes perception enough to doom BTC, but it would have been doomed anyways in that case. I'm not convinced that it's possible for BTC to become a widely used medium of exchange without also being a medium of account -- it's just too much friction for your average retail user to convert to BTC in order to buy something while holding most of their wealth in dollars or whatever. Why not just buy in dollars? If the only utility is to mask shady purchases, it might have a future in that niche, I guess, but that implies a small BTC economy in the long run. I guess I can see a place for a crypto currency with a stable exchange rate to other currencies, as long as the crypto part holds up and the volatility mellows out, there's real utility there for people who want untraceable purchases. But BTC as "god's currency for true believers, going to take over the world because we have an unrelated ideological beef" doesn't really impress me.
      - yummyfajitas 13y ago
        The way I envision BTC being used is via apps that connect individual users to individual exchanges. What I envision: I take an auto and the driver tells me the fare is 100rs - 60rs meter + 40rs because fuck you it's Bangalore. He gives me a BTC wallet. My phone goes to an exchange, converts $1.65 or so into BTC and transmits to the drivers wallet. His phone then converts the BTC into rs. I'm generally viewing BTC as a medium of exchange for cases that would otherwise require a bank transfer or currency conversion. There are a lot of these.
dasil003 13y ago
You might notice that many Americans now live safely in what was formerly the wild west.
- smacktoward 13y ago
  Yes, because the Wild West stopped being wild. Governments organized, police departments and fire brigades and schools were set up. Roads were paved, water and sewer lines installed. All the appurtenances of civilization, in other words. And you can't install the appurtenances of civilization without installing civilization with them.
  - dasil003 13y ago
    Yes, obviously. Both you and jbooth seem to be missing my point, you perhaps a bit more painfully, so I'll spell it out in plain English: Just because Bitcoin is unregulated and uncontrolled today does not mean it always will be. And to my original point: MtGox incompetence is not much of a data point either way, other than that MtGox couldn't have come into existence in a more mature landscape.

bertil 13y ago

> Having confirmed that it was complete amateur hour over at MtGox, how can a critical thinking person make the huge leap that only bureaucratically controlled government currencies are viable. Can’t speak for the author (who’s actively commenting here) but I believe the idea (common in Transaction Cost economy) is that whether Mt.Gox were amateur was hard to determine without knowing how to operate for yourself the kind of service that they provided; not necessarily at their scale, but well enough to go without them. This means that most folks who were interested in their service were presumably not able to sort them from the other: lots of assumption there, but imagine shill-ridden forums, cross-accusation of cluelessness, the FBI presumably involved, them being in Japan… This is not a new problem, far from it: I would recommend Avner Greif’s ‘Magrihbi traders’ and the reappraising discussions by its author. A casual reader could leap the century of nepotism-based boating, and the local fairs in Europe to conclude that the invention of currency, concomitant with the Nation-State, were both a way to empower trade. A less casual reader (like me) would love to send Greif, (the now late) Coase & Oliver E. Williamson to Japan and on-line to investigate what went wrong. Once you have a State, why an inflating bureaucracy is also a classic result of transaction cost theory and an issue in organisational incentive — but I don't think that part is mysterious to you.