10 ms·

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.

by 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
        It doesn't have to be a successful currency to be a successful distributed peer to peer payment network that extracts it's value from eliminating the likes of Western Union for international payment processing. Bitcoin is better seen IMHO as a utility rather than a currency. It can function along side official currency as a means of exchanging wealth online globally for relatively little in fees with the risk or trust required by credit cards. As a commodity, it's infinitely divisible to any number of people, so while it's value with always slowly deflate, it doesn't really matter.
        kaonashi 13y ago
        > it's infinitely divisible to any number of people, so while it's value with always slowly deflate, it doesn't really matter. The problems with deflation have nothing to do with lack of divisibility.
        gnaritas 13y ago
- krrrh 13y ago
  Bitcoin partisans seem to have an overly categorical approach to the concept of first-mover advantage and network effects. These effects are real, but it's a matter of degree. Creating a viable new credit card for instance, would require dozens of billions of up front dollars invested in marketing, incentives, and infrastructure rollout. It would still be a risky bet that customers would see a need. These are network effects and first mover advantages in extremis. Creating a viable crypto-currency only requires a funny picture of a dog, and/or a good story. For all the hype, the spread of bitcoin into the real world economy is a rounding error. For the 99.999% of the world population that has never held any crypto-currency, who's to say that any of them should prefer bitcoin over any other? If the benefits of bitcoin are every bit as disruptive as supporters claim, then what makes bitcoin immune from the disruptive effects of new improved crypto-currencies, or for that matter innovations in nation-state-backed currencies? What makes anyone think that 99.999% of the world's population will hand over a portion of their wealth to 100,000 cool nerds, because those cool nerds decided for everyone else that bitcoin was their one and only?
  - gnaritas 13y ago
    > What makes anyone think that 99.999% of the world's population will hand over a portion of their wealth to 100,000 cool nerds, because those cool nerds decided for everyone else that bitcoin was their one and only? A fair question, because bitcoin has the network capacity to work securely and is less vulnerable to attack than all other coins by virtue of its sheer size. 51% attack on Bitcoin is much less likely than with any other coin. Payment processing requires using the best available network, Bitcoin wins.
    - krrrh 13y ago
      I agree that's one of the strongest arguments in its favour. All the now useless ASIC devices out there also make any new coin that uses SHA-256 vulnerable to attack. It's likely that only one blockchain/coin per algorithm can ultimately succeed.
      - gnaritas 13y ago
- acdha 13y ago
  Bitcoin is extremely likely to be replaced by design: it's a deflationary currency with a wicked value curve which makes pets.com look stable. In practice, this means that anyone who buys into Bitcoin now is giving huge amounts of money to the early adopters. Speculators were buying in for the kind of returns you normally see on penny stocks and pre-IPO options rackets. That's not what anyone sane wants in a currency and it's a particularly tough sell when it's so easy to setup a competitor.
  - gnaritas 13y ago
    You're wrong, it's not easy, the value is not in the code, it's in the network, and no one has shown they can replicate the power of the bitcoin network. All alt coins combined are but a fraction of bitcoin. Also, early investors always get rewarded disproportionately, that's compensation for taking the risk, it's not something wrong, it's something right; they should be rewarded for giving you a peer to peer distributed payment system that's better than western union and better than credit cards for online use.
    - acdha 13y ago
      > You're wrong, it's not easy, the value is not in the code, it's in the network What is that network, though? It's a few stores which accept many forms of payment and a bunch of people who use a little bitcoin but not for anything vital. Every party involved can switch to a new system in minutes and these days it's very fast to bootstrap networks using mobile devices and existing social networks. The reason the alt coins haven't seen rapid uptake is that most of the speculation is happening in Bitcoin while everyone waits to see whether the concept will get significant mainstream acceptance If Apple, Google, Facebook, Amazon, PayPal, etc. launched a payment system it'd have more users than Bitcoin on the day it launched. If someone like Square did it, they'd have more stores accepting payment by multiple orders of magnitude and far more credibility in the business community with a proven track record on things like support and fraud prevention. > Also, early investors always get rewarded disproportionately, that's compensation for taking the risk Again, you're talking about Bitcoin like it's a stock — which is exactly the problem, because people have different requirements for currencies than stocks. In particular, holding a stock waiting for the value to go up is fine for a company but disastrous for a currency.
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%

by lmg643 13y ago

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
      It doesn't have to be a successful currency to be a successful distributed peer to peer payment network that extracts it's value from eliminating the likes of Western Union for international payment processing. Bitcoin is better seen IMHO as a utility rather than a currency. It can function along side official currency as a means of exchanging wealth online globally for relatively little in fees with the risk or trust required by credit cards. As a commodity, it's infinitely divisible to any number of people, so while it's value with always slowly deflate, it doesn't really matter.
      - kaonashi 13y ago
        > it's infinitely divisible to any number of people, so while it's value with always slowly deflate, it doesn't really matter. The problems with deflation have nothing to do with lack of divisibility.
        gnaritas 13y ago
krrrh 13y ago
Bitcoin partisans seem to have an overly categorical approach to the concept of first-mover advantage and network effects. These effects are real, but it's a matter of degree. Creating a viable new credit card for instance, would require dozens of billions of up front dollars invested in marketing, incentives, and infrastructure rollout. It would still be a risky bet that customers would see a need. These are network effects and first mover advantages in extremis. Creating a viable crypto-currency only requires a funny picture of a dog, and/or a good story. For all the hype, the spread of bitcoin into the real world economy is a rounding error. For the 99.999% of the world population that has never held any crypto-currency, who's to say that any of them should prefer bitcoin over any other? If the benefits of bitcoin are every bit as disruptive as supporters claim, then what makes bitcoin immune from the disruptive effects of new improved crypto-currencies, or for that matter innovations in nation-state-backed currencies? What makes anyone think that 99.999% of the world's population will hand over a portion of their wealth to 100,000 cool nerds, because those cool nerds decided for everyone else that bitcoin was their one and only?
- gnaritas 13y ago
  > What makes anyone think that 99.999% of the world's population will hand over a portion of their wealth to 100,000 cool nerds, because those cool nerds decided for everyone else that bitcoin was their one and only? A fair question, because bitcoin has the network capacity to work securely and is less vulnerable to attack than all other coins by virtue of its sheer size. 51% attack on Bitcoin is much less likely than with any other coin. Payment processing requires using the best available network, Bitcoin wins.
  - krrrh 13y ago
    I agree that's one of the strongest arguments in its favour. All the now useless ASIC devices out there also make any new coin that uses SHA-256 vulnerable to attack. It's likely that only one blockchain/coin per algorithm can ultimately succeed.
    - gnaritas 13y ago
acdha 13y ago
Bitcoin is extremely likely to be replaced by design: it's a deflationary currency with a wicked value curve which makes pets.com look stable. In practice, this means that anyone who buys into Bitcoin now is giving huge amounts of money to the early adopters. Speculators were buying in for the kind of returns you normally see on penny stocks and pre-IPO options rackets. That's not what anyone sane wants in a currency and it's a particularly tough sell when it's so easy to setup a competitor.
- gnaritas 13y ago
  You're wrong, it's not easy, the value is not in the code, it's in the network, and no one has shown they can replicate the power of the bitcoin network. All alt coins combined are but a fraction of bitcoin. Also, early investors always get rewarded disproportionately, that's compensation for taking the risk, it's not something wrong, it's something right; they should be rewarded for giving you a peer to peer distributed payment system that's better than western union and better than credit cards for online use.
  - acdha 13y ago
    > You're wrong, it's not easy, the value is not in the code, it's in the network What is that network, though? It's a few stores which accept many forms of payment and a bunch of people who use a little bitcoin but not for anything vital. Every party involved can switch to a new system in minutes and these days it's very fast to bootstrap networks using mobile devices and existing social networks. The reason the alt coins haven't seen rapid uptake is that most of the speculation is happening in Bitcoin while everyone waits to see whether the concept will get significant mainstream acceptance If Apple, Google, Facebook, Amazon, PayPal, etc. launched a payment system it'd have more users than Bitcoin on the day it launched. If someone like Square did it, they'd have more stores accepting payment by multiple orders of magnitude and far more credibility in the business community with a proven track record on things like support and fraud prevention. > Also, early investors always get rewarded disproportionately, that's compensation for taking the risk Again, you're talking about Bitcoin like it's a stock — which is exactly the problem, because people have different requirements for currencies than stocks. In particular, holding a stock waiting for the value to go up is fine for a company but disastrous for a currency.

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%