9 ms·

Defending Bitcoin, Andreessen Says Mt. Gox Is 'Like MF Global'

42 points by rajbala 13y ago

lmg643 13y ago
it's not much like MF global when you think about it, other than a financial institution failing. MF global collapsed due to risky behavior by management team. left a lot of assets, and operates in a regulated sphere where principals are known and subject to courts. the scandal of MF global was that the former governor of new jersey, and goldman sachs bigwig, was so arrogant that he though he could prop trade with customer funds...and lost. Gox collapsed due to incompetent security procedures, if i understand the story correctly. a bank robbery of a sort. outside of the jurisdiction of many of the victims. we now know that something around 6-7% of the total bitcoins in circulation are now owned through theft. that's a staggering amount. in any normal currency - the heist of a millennium. there's no court system to adjudicate this or try and recover assets for those who lost money. we know who is responsible for MF global and we know where to go to recover assets. John Corzine might be politically connected, and the folks who lost money might have a hard time overcoming "the system" to get funds, but they know where to go. And - quick google search - there was $1.5bn in missing funds, which apparently will be recovered: http://dealbook.nytimes.com/2013/11/05/mf-global-customers-will-recover-all-they-lost/ http://dealbook.nytimes.com/2013/11/05/mf-global-customers-w... With Gox? Tough luck I guess. (I lost a token sum, FWIW). It's enough to make you wonder - if digital currencies are now well understood, flaws analyzed and hacked... and we are starting to know enough to say - digital currency is awesome... Maybe we should start over with another alt-coin. i'm not particularly thrilled about putting real money or time behind a coin which now has a large chunk of it owned through theft.
- gnaritas 13y ago
  You're talking as if it's possible for "we" to make a decision to start over; it isn't, the very nature of distributed means any talk of what should be is pointless. There is only what happens, no one is in charge. Bitcoin has the first mover advantage and has gained the network effect, it's extremely unlikely to be replaced by an alt no matter how good the alt is.
  - dragonwriter 13y ago
    > You're talking as if it's possible for "we" to make a decision to start over; it isn't, the very nature of distributed means any talk of what should be is pointless. There is only what happens, no one is in charge. Even in the absence of authority, discussion of what should be can influence what people do, which then changes what happens. So while "there is only what happens, no one is in charge" is, in a sense, true, "talk of what shoul dbe is pointless" is not.
    - gnaritas 13y ago
      This presumes there's agreement on what "should" be, but there isn't and won't be. Talking about what Bitcoin should be is as useless and unproductive as talking about what political views you "should" have because people are going to be on every side of the issue; there simply is no "should", there's what is and what isn't.
  - kaonashi 13y ago
    The capacity of Bitcoin is capped.
    - gnaritas 13y ago
      Care to elaborate? That's not really enough to continue a discussion.
      - kaonashi 13y ago
        My thinking on this issue continues to evolve, but roughly: The number of Bitcoins is capped. For it to have any semblance of price stability, the amount of users would be roughly fixed. Without price stability, the number of users would decline. So either an equilibrium amount of users, or constantly rising until scarcity makes the price unstable, at which point people stop using it until the point at which it becomes stable again.
        gnaritas 13y ago
- rayiner 13y ago
  > we now know that something around 6-7% of the total bitcoins in circulation are now owned through theft. that's a staggering amount. in any normal currency - the heist of a millennium. there's no court system to adjudicate this or try and recover assets for those who lost money. You say that like it's a problem. Who cares if some people lose their Bitcoins? Nobody is holding Bitcoin involuntarily, after all. Not having a court system to adjudicate this or recover the assets is part of the point of Bitcoin! It's an experiment in anarcholibertarianism, and at least in theory, measures should arise organically in the Bitcoin community to prevent something like this from happening again. The stable price of Bitcoin suggests that the community is optimistic.
  - analog31 13y ago
    Though I have no interest in owning bitcoins, I agree with this. On with the experiment!
  - Crito 13y ago
    I don't see any particular reason why bitcoin thief could not be dealt with using existing legal systems. Yeah, you've got the "find the thief" problem, but that is nothing fundamentally new. I mean, the US legal system seems to be handling the "bitcoin drugdealer" problem fairly well.
    - dragonwriter 13y ago
      > I mean, the US legal system seems to be handling the "bitcoin drugdealer" problem fairly well. The SEC is also prosecuting the "bitcoin ponzi scheme" problem, as well.
    - rayiner 13y ago
      I see drug dealing using Bitcoin different than theft of Bitcoin. Silk Road involves using Bitcoin to subvert meat space laws. Stealing Bitcoin doesn't, any more than killing someone and taking their gold in an online game. In a narrow sense, the point of Bitcoin is that you don't need a centralized power issuing currency. But in a larger sense, the community embraces the idea that you don't need centralized power to make markets viable, in general. To validate those ideas, we should let Bitcoin evolve in a way where the government doesn't use its monopoly on violence to protect interests denominated in Bitcoin.
- fnordfnordfnord 13y ago
  > there's no court system to adjudicate this or try and recover assets for those who lost money. Umm, why isn't there? Just because Bitcoin "isn't regulated" does not make it a free for all. Theft is theft.
  - Tuna-Fish 13y ago
    If they can catch the perpetrators, then there is. However, btc can be laundered rather efficiently and all contact with the exchanges can be done through tor. Have fun bringing the perps to justice...
    - fnordfnordfnord 13y ago
      >However, btc can be laundered rather efficiently Can they? I think that remains an open question, and is rather unlikely to be strictly true. >and all contact with the exchanges can be done through tor. That's a lot of money to spend, and a lot of people are looking for it.
  - thinkcomp 13y ago
    Actually, it is regulated. People like Andreessen and his portfolio companies (Coinbase, Dwolla) just like to pretend that it isn't.
- nickbauman 13y ago
  Img643, exactly correct. Except I take it one step further. An aspect of Bitcoin's fundamental design (transparent transaction records) was supposed to prevent _exactly_ the sort of thing that happened with Mt. Gox. History shows that states create markets. And that markets require states. This is true because only states, organizations which have monopoly control over the legitimate use of force, can effectively provide police protection for transactions to be consistent, reliable and trustworthy. Bitcoin's transparent transaction record, designed to make states obsolete in this traditional role, was not enough to fix the problem. It became too tempting to subvert this design, because there's no one who will handcuff you if you try. Consider, perhaps Mt. Gox _itself_ was the perpetrator of this theft. There's no way to prove me wrong!
- oroup 13y ago
  Idle question - what % of gold (or USD for that matter) do you think is owned through theft? I suppose we quickly get into the murky question of trying to define "theft" but even by the strictest definition I wouldn't be surprised if 6% of gold and USD are held off books and a direct result of illegal activity.
- harryh 13y ago
  What's the back of the envelope math on that 6-7% number? I'm super curious...
  - lmg643 13y ago
    774,000 / 12,000,000 = 6.45%
panarky 13y ago
Andreessen: "Mt. Gox has been obviously broken and possibly outright crooked for months."
cstrat 13y ago
I don't understand why Mt Gox isn't able to pursue the thieves. You can only withdraw funds if you have a verified account. For verified accounts they would have proven the users identity. It must be possible to work out which accounts have withdrawn more money than deposited. Obviously the people who did this would have covered their tracks. However that being said, there should be ways that they can account for which user accounts stole coins. Go from there.
- dustcoin 13y ago
  >You can only withdraw funds if you have a verified account. This wasn't always the case for small amounts. On top of this, forged documents can be purchased on the black market.
- corresation 13y ago
  Are there even thieves? I mean, the whole story makes zero sense. Supposedly the root of this was multiple withdrawals over the period of months. How is it remotely possible that Gox didn't have a real-time, if not at worst case daily, comparison between their wallet holdings, as reflected in the blockchain, and their outstanding "deposits"? How could that possibly be? I just cannot buy that story. Saying "they were incompetent" doesn't explain it. The multi-withdrawal thing only makes sense if it was a mass exploit in a short period of time.
  - lutusp 13y ago
    > How is it remotely possible that Gox didn't have a real-time, if not at worst case daily, comparison between their wallet holdings, as reflected in the blockchain, and their outstanding "deposits"? How could that possibly be? Not to defend Mt. Gox, but they weren't the only company to be cyber-robbed recently: http://www.ibtimes.co.uk/silk-road-2-0-pledges-repay-1-7-million-users-after-bitcoin-theft-1436890 http://www.ibtimes.co.uk/silk-road-2-0-pledges-repay-1-7-mil... Apparently, in virtual currency dealings it's possible to be robbed blind and not see it. Pun intended. :)

42 points by rajbala 13y ago

it's not much like MF global when you think about it, other than a financial institution failing. MF global collapsed due to risky behavior by management team. left a lot of assets, and operates in a regulated sphere where principals are known and subject to courts. the scandal of MF global was that the former governor of new jersey, and goldman sachs bigwig, was so arrogant that he though he could prop trade with customer funds...and lost. Gox collapsed due to incompetent security procedures, if i understand the story correctly. a bank robbery of a sort. outside of the jurisdiction of many of the victims. we now know that something around 6-7% of the total bitcoins in circulation are now owned through theft. that's a staggering amount. in any normal currency - the heist of a millennium. there's no court system to adjudicate this or try and recover assets for those who lost money. we know who is responsible for MF global and we know where to go to recover assets. John Corzine might be politically connected, and the folks who lost money might have a hard time overcoming "the system" to get funds, but they know where to go. And - quick google search - there was $1.5bn in missing funds, which apparently will be recovered: http://dealbook.nytimes.com/2013/11/05/mf-global-customers-will-recover-all-they-lost/ http://dealbook.nytimes.com/2013/11/05/mf-global-customers-w... With Gox? Tough luck I guess. (I lost a token sum, FWIW). It's enough to make you wonder - if digital currencies are now well understood, flaws analyzed and hacked... and we are starting to know enough to say - digital currency is awesome... Maybe we should start over with another alt-coin. i'm not particularly thrilled about putting real money or time behind a coin which now has a large chunk of it owned through theft.

gnaritas 13y ago
You're talking as if it's possible for "we" to make a decision to start over; it isn't, the very nature of distributed means any talk of what should be is pointless. There is only what happens, no one is in charge. Bitcoin has the first mover advantage and has gained the network effect, it's extremely unlikely to be replaced by an alt no matter how good the alt is.
- dragonwriter 13y ago
  > You're talking as if it's possible for "we" to make a decision to start over; it isn't, the very nature of distributed means any talk of what should be is pointless. There is only what happens, no one is in charge. Even in the absence of authority, discussion of what should be can influence what people do, which then changes what happens. So while "there is only what happens, no one is in charge" is, in a sense, true, "talk of what shoul dbe is pointless" is not.
  - gnaritas 13y ago
    This presumes there's agreement on what "should" be, but there isn't and won't be. Talking about what Bitcoin should be is as useless and unproductive as talking about what political views you "should" have because people are going to be on every side of the issue; there simply is no "should", there's what is and what isn't.
- kaonashi 13y ago
  The capacity of Bitcoin is capped.
  - gnaritas 13y ago
    Care to elaborate? That's not really enough to continue a discussion.
    - kaonashi 13y ago
      My thinking on this issue continues to evolve, but roughly: The number of Bitcoins is capped. For it to have any semblance of price stability, the amount of users would be roughly fixed. Without price stability, the number of users would decline. So either an equilibrium amount of users, or constantly rising until scarcity makes the price unstable, at which point people stop using it until the point at which it becomes stable again.
      - gnaritas 13y ago
rayiner 13y ago
> we now know that something around 6-7% of the total bitcoins in circulation are now owned through theft. that's a staggering amount. in any normal currency - the heist of a millennium. there's no court system to adjudicate this or try and recover assets for those who lost money. You say that like it's a problem. Who cares if some people lose their Bitcoins? Nobody is holding Bitcoin involuntarily, after all. Not having a court system to adjudicate this or recover the assets is part of the point of Bitcoin! It's an experiment in anarcholibertarianism, and at least in theory, measures should arise organically in the Bitcoin community to prevent something like this from happening again. The stable price of Bitcoin suggests that the community is optimistic.
- analog31 13y ago
  Though I have no interest in owning bitcoins, I agree with this. On with the experiment!
- Crito 13y ago
  I don't see any particular reason why bitcoin thief could not be dealt with using existing legal systems. Yeah, you've got the "find the thief" problem, but that is nothing fundamentally new. I mean, the US legal system seems to be handling the "bitcoin drugdealer" problem fairly well.
  - dragonwriter 13y ago
    > I mean, the US legal system seems to be handling the "bitcoin drugdealer" problem fairly well. The SEC is also prosecuting the "bitcoin ponzi scheme" problem, as well.
  - rayiner 13y ago
    I see drug dealing using Bitcoin different than theft of Bitcoin. Silk Road involves using Bitcoin to subvert meat space laws. Stealing Bitcoin doesn't, any more than killing someone and taking their gold in an online game. In a narrow sense, the point of Bitcoin is that you don't need a centralized power issuing currency. But in a larger sense, the community embraces the idea that you don't need centralized power to make markets viable, in general. To validate those ideas, we should let Bitcoin evolve in a way where the government doesn't use its monopoly on violence to protect interests denominated in Bitcoin.
fnordfnordfnord 13y ago
> there's no court system to adjudicate this or try and recover assets for those who lost money. Umm, why isn't there? Just because Bitcoin "isn't regulated" does not make it a free for all. Theft is theft.
- Tuna-Fish 13y ago
  If they can catch the perpetrators, then there is. However, btc can be laundered rather efficiently and all contact with the exchanges can be done through tor. Have fun bringing the perps to justice...
  - fnordfnordfnord 13y ago
    >However, btc can be laundered rather efficiently Can they? I think that remains an open question, and is rather unlikely to be strictly true. >and all contact with the exchanges can be done through tor. That's a lot of money to spend, and a lot of people are looking for it.
- thinkcomp 13y ago
  Actually, it is regulated. People like Andreessen and his portfolio companies (Coinbase, Dwolla) just like to pretend that it isn't.
nickbauman 13y ago
Img643, exactly correct. Except I take it one step further. An aspect of Bitcoin's fundamental design (transparent transaction records) was supposed to prevent _exactly_ the sort of thing that happened with Mt. Gox. History shows that states create markets. And that markets require states. This is true because only states, organizations which have monopoly control over the legitimate use of force, can effectively provide police protection for transactions to be consistent, reliable and trustworthy. Bitcoin's transparent transaction record, designed to make states obsolete in this traditional role, was not enough to fix the problem. It became too tempting to subvert this design, because there's no one who will handcuff you if you try. Consider, perhaps Mt. Gox _itself_ was the perpetrator of this theft. There's no way to prove me wrong!
oroup 13y ago
Idle question - what % of gold (or USD for that matter) do you think is owned through theft? I suppose we quickly get into the murky question of trying to define "theft" but even by the strictest definition I wouldn't be surprised if 6% of gold and USD are held off books and a direct result of illegal activity.
harryh 13y ago
What's the back of the envelope math on that 6-7% number? I'm super curious...
- lmg643 13y ago
  774,000 / 12,000,000 = 6.45%

panarky 13y ago

Andreessen: "Mt. Gox has been obviously broken and possibly outright crooked for months."

cstrat 13y ago

I don't understand why Mt Gox isn't able to pursue the thieves. You can only withdraw funds if you have a verified account. For verified accounts they would have proven the users identity. It must be possible to work out which accounts have withdrawn more money than deposited. Obviously the people who did this would have covered their tracks. However that being said, there should be ways that they can account for which user accounts stole coins. Go from there.

dustcoin 13y ago
>You can only withdraw funds if you have a verified account. This wasn't always the case for small amounts. On top of this, forged documents can be purchased on the black market.
corresation 13y ago
Are there even thieves? I mean, the whole story makes zero sense. Supposedly the root of this was multiple withdrawals over the period of months. How is it remotely possible that Gox didn't have a real-time, if not at worst case daily, comparison between their wallet holdings, as reflected in the blockchain, and their outstanding "deposits"? How could that possibly be? I just cannot buy that story. Saying "they were incompetent" doesn't explain it. The multi-withdrawal thing only makes sense if it was a mass exploit in a short period of time.
- lutusp 13y ago
  > How is it remotely possible that Gox didn't have a real-time, if not at worst case daily, comparison between their wallet holdings, as reflected in the blockchain, and their outstanding "deposits"? How could that possibly be? Not to defend Mt. Gox, but they weren't the only company to be cyber-robbed recently: http://www.ibtimes.co.uk/silk-road-2-0-pledges-repay-1-7-million-users-after-bitcoin-theft-1436890 http://www.ibtimes.co.uk/silk-road-2-0-pledges-repay-1-7-mil... Apparently, in virtual currency dealings it's possible to be robbed blind and not see it. Pun intended. :)