12 ms·

Winklevoss Twins Aim to Take Bitcoin Mainstream with a Regulated Exchange

203 points by jvoorhis 12y ago

largote 12y ago
Hasn't this been known for months now?
- jvoorhis 12y ago
  Not to be confused with the forthcoming ETF [1], Gemini [2] is the first US-regulated bitcoin exchange. [1] http://www.sec.gov/Archives/edgar/data/1579346/000119312514457552/d721187ds1a.htm http://www.sec.gov/Archives/edgar/data/1579346/0001193125144... [2] https://gemini.com/ https://gemini.com/
  - ForHackernews 12y ago
    I think it's widely assumed that the ETF is a way for the Winklevii to cash out their bitcoin holdings. Also: http://www.reddit.com/r/Buttcoin/comments/2rv44y/the_winklevoss_sec_filing_is_an_absolute_comedy/ http://www.reddit.com/r/Buttcoin/comments/2rv44y/the_winklev...
    - toomim 12y ago
      No it's not.
bduerst 12y ago
What competitive advantages does a bitcoin-based exchange in the U.S. have over other [U.S. or otherwise] exchanges?
- GigabyteCoin 12y ago
  It's easier to hold any fraudulant owners accountable if you are an American account holder, for one. Also some clients feel safer knowing that financial regulators of some kind are overlooking the accounts and transactions of the business they are working with.
  - bduerst 12y ago
    I guess I should have been more specific. Other U.S. exchanges already have this, so what competitive advantage does bitcoins give an exchange?
    - corin_ 12y ago
      If I'm reading you correctly: it gives the advantage that you can buy or sell bitcoins... which if you're someone wanting to do that is a significant advantage over exchanges that don't.
- rtpg 12y ago
  less risk of collapsing, maybe lower security risks (due to paying attention to regulations, but debatable). It's probably easier to get faster payouts and the like as well, since banks will have less issue openly (snark intended) with a regulated exchange than money launderers.
snitko 12y ago
>"Our philosophy is to ask for permission, not forgiveness", Cameron Winklevoss said. So, a complete opposite of what Bitcoin philosophy is. Gotcha.
- obstinate 12y ago
  One could easily argue in response that there's no such thing as bitcoin "philosophy." There's only what you can and can't do with the protocol. If they can implement their ideals under the strictures of what the protocol allows, that's their prerogative.
  - jsprogrammer 12y ago
    Which is why this exchange is a bit strange. The problems are purely technical, not political. A completely open exchange (open code, open infrastructure) is all that is needed. A politically "regulated" exchange is just MBA masturbation.
  - jedunnigan 12y ago
    So one might argue that that is a philosophy in and of itself. An agnostic one that is founded on technical specification, not moral imperative.
    - colordrops 12y ago
      No, not really. The entire purpose of bitcoin network's design is to reduce or completely remove the need for trust amongst participants. It was designed so that it operates in the same fashion regardless of the moral, political and regulatory climate surrounding it. That is not philosophy, but fact.
      - logn 12y ago
        And fiat-BTC exchanges aren't part of the spec, so regulation can be helpful. I seriously question the necessity or utility of centralized wallets, but regulated exchanges make perfect sense.
deleted 12y ago
[deleted]
ForHackernews 12y ago
Wait, I thought bitcoin-loving libertarians hated regulations? What about our freedoms?
- mkautzm 12y ago
  Regulations are great for libertarians, but only if it makes them richer! If it makes anyone who's not in the rich people's club richer, than it's 'redistributing wealth' and 'big government getting in the way of innovation'.
  - sjcsjc 12y ago
    I don't doubt that your point applies to some people who call themselves libertarians. But not everyone's views of right and wrong are based on what benefits them. As a small example, in the UK it's now illegal to smoke in pubs. I benefit quite a lot from that regulation. But I view the law as morally wrong. The non-aggression axiom [1] is a philosophical principle. I suggest that people who choose to apply it only when it benefits themselves are not really libertarians. [1] http://en.wikipedia.org/wiki/Non-aggression_principle http://en.wikipedia.org/wiki/Non-aggression_principle
    - RemoteWorker 12y ago
      How is that law morally wrong? Couldn't they forcing you to breathe smoke be seen as an aggression? The same way they blasting you with very loud noise would be an aggression. Just because it's invisible or not solid it doesn't mean it's not violence. Let alone the danger of literally playing with fire in a closed space.
      - sjcsjc 12y ago
        You can choose not to frequent the bar in question. Another bar could (freely) choose not to permit smoking. I'd go there instead.
        12y ago
sillysaurus3 12y ago
This may be tangential, but it's been on my mind for awhile, so I was hoping to get your thoughts. If it's slightly offtopic, I apologize. It doesn't seem like you can regulate BTC, and the reason is because of something unexpected: arbitrage. (To be clear, you can create a regulated exchange, but that doesn't really help you. I'll explain why.) When exchange A's price is different from exchange B's, that represents an opportunity. As the difference grows, that opportunity becomes more lucrative. That's why, at any given time, all exchanges are at roughly the same price. But that means if one exchange is playing by some bad rules, or is acting in a shady way, like the behavior described in https://willyreport.wordpress.com/ https://willyreport.wordpress.com/, then that directly affects every other exchange. So unless all exchanges are playing by the same rules, having a single "safe" exchange won't save you. One exchange's shadiness will always affect every other exchange. Whether this is a fatal flaw is a separate question. I don't think it is, but it seems hard to know. What do you think? It seems true, but perhaps I'm overlooking something obvious. Also, this is strictly about price manipulation. It's probably true that no amount of bad behavior at exchange A can result in a catastrophic failure of exchange B. But one question I've been trying to figure out the answer to is: does price manipulation even matter?
- ForHackernews 12y ago
  You can try to arbitrage on an unregulated exchange, but then you're assuming the greater risk of getting Goxxed. There are plenty of examples in financial markets where lower risk is correlated with lower returns, and this may be another.
- rtpg 12y ago
  The issue with shady exchanges, they all seem to have the issue of collapsing overnight. So even if not playing by the rules will raise the prices, that might be counteracted by the major risk of you losing everything on the exchange. Or having everything seized by some gov't. There's a reason they're called pyramid schemes
  - jafaku 12y ago
    > There's a reason they're called pyramid schemes Just because someone call something a pyramid scheme, it doesn't mean it is one.
hueving 12y ago
After the losses they must have taken with the price decline this is probably a desperate attempt to boost the price.
- laichzeit0 12y ago
  Well, if I remember correctly, all the Winkelvii Bitcoins were bought for under $70, I'd say the average price is around $35-40, so no, they're still trading at 300-400% above what they bought them for. Not bad for a 2 year investment.
  - justincormack 12y ago
    Unsaleable in volume while maintaining that price though. Thats why they are concocting these schemes to actually get an exit eventually.
    - laichzeit0 12y ago
      I think if they were in it for a quick buck, they'd have exited during the run up to $1200. But they didn't. Actually when they were buying Bitcoins it ran up to $250 over the course of a few weeks, then crashed down to $75. That's my recollection of events.
  - hnnewguy 12y ago
    >Well, if I remember correctly, all the Winkelvii Bitcoins were bought for under $70, I'd say the average price is around $35-40, so no I read far too many investing sites. Whenever a run-up and crash occurs in some fad stock, the proponents of said stock never seem to lose money. They always seem to be "still in the green". Amazing, really.
DigitalSea 12y ago
Considering just how much Bitcoin the Winklevoss twins own, it is in their best interests to do right by Bitcoin holders and create a secure and accountable exchange. Historically every bad thing that has happened to Bitcoin mostly indirectly has affected its price which from an existing investment perspective obviously sucks, but is great for new buyers to get into the market. I have no doubt if they can pull this off that it'll be a successful venture, especially after the horrible year of 2014 which saw tonnes of cryptocoin exchanges (including Mt. Gox) get hacked and disappear, driving down the price each time. They have a bit of competition in the space, I think overcoming the regulation issues and having actual proper accountability will help bolster the credibility of the exchange.
- hnnewguy 12y ago
  >Considering just how much Bitcoin the Winklevoss twins own, it is in their best interests to do right by Bitcoin holders and create a secure and accountable exchange. The executives in pretty much every corporate scandal, ever, held vast numbers of company shares.
- drzaiusapelord 12y ago
  >get hacked and disappear Is this the accepted narrative? It seems overly generous to bitcoin and the various exchange operators. A lot of these exchanges were shutdown by their owners so they could, with impunity, steal the coins of their customers and other dirty dealings. Hacker attacks, which are often used as cover for these criminal activities, seem to have been the least of bitcoin's problems. > I think overcoming the regulation issues and having actual proper accountability will help bolster the credibility of the exchange. If I wanted to use an easy and stable regulated currency why not the USD? I can trivially pay using a variety of sources: my own bank, paypal, my credit cards, direct deposit, wire, etc. If bitcoin gets turned into a strongly controlled and regulated currency then I don't see its competitive advantage outside of very, very narrow use cases (darknet purchases, investing, ransomware, illegal activities, etc).
Ologn 12y ago
Warren Buffett said Bitcoins are a mirage and I agree. They are worthless hashes. Why do they have any value? The answer is they have no value. I said so here when they were worth over twice what they are now. If there is any sign of a bubble in tech, it would be Bitcoin market cap. Which is $3 billion at the moment. Who are the fools who exchange cash for them? Why do they have any value? Some people say you can use them as currency. You can use dollars as currency. Or gold. Some say it can transfer money, but so can wire transfers. Perhaps it is decentralized (who cares? Not I. Wire transfers work for me) etc. But gold has value, while Bitcoin has nothing. I remember during the dot bomb days when there were commercials for Flooz and Beenz. The leaders in the Bitcoin community are being sued and jailed for fraud, the price has gone from $1100 to $230, yet suckers are still bamboozled to trade cash for these worthless hashes. It will go to $115, then $57, then eventually $0. I doubt all those who already lost money or who are being jailed will learn anything.
- balladeer 12y ago
  Yes. I mean I would never put my own money into something that is more volatile than the share market. At least in share market I can see it coming, except rate crashes and when that happens everything goes down not just my own holding. It Bitcoin it can be a bug, a hack, or just many Bitcoin holders dumping Bitcoins. Also it never made sense to me that I could have been richer if I had access to those fancy super-fast CPUs to "mine" the Bitcoins. Maybe I missed the gold rush but then again I don't want to encourage another absurdly overpriced commodity which really have no meaning (or rather say "value") in real world except some overenthusiastic people and the "hoarders" trying to push it up.
  - jafaku 12y ago
    "Also it never made sense to me that I could have been richer if I had access to those fancy super-fast CPUs to "mine" the Bitcoins." So that's where your hate comes from. I see...
    - balladeer 12y ago
      > I see... No, you don't see. You are just being casually snarky.
logn 12y ago
What's the motivation for the twins to hold so much bitcoin? They're already taking on a lot of risk with their BTC business investments. Is it just to show faith in themselves and the coin? Or are they so confident that it makes sense to them? Personally I'd want to diversify.
- Synaesthesia 12y ago
  They bought a lot of bitcoin before the late 2013 bubble. I think they're quite diversified - they're just Bitcoin proponents who are taking a chance, kind of like venture capitalism.
  - deleted 12y ago
    [deleted]
wmf 12y ago
Wasn't CampBX the first US Bitcoin exchange? And then TradeHill and then Coinsetter and then Digital Currency Group? And then there's LedgerX...
Animats 12y ago
The regulated exchange thing is interesting, but I want to see the details. The expected way to do this would be to register with the SEC as a broker/dealer, like every stockbroker does. That gets SIPC insurance protection (for which the broker pays), and means FINRA enforcement and audits, background checks on the principals, and such. It also eliminates the need for state by state approvals. So far, no Bitcoin exchange has done this. Over half of them have gone bust, often taking the customers' funds with them. This is not a coincidence. There's a lot of big talk about how some exchange is safe. Coinbase doesn't have a real business address and has "it's not our fault if we lose your money" terms of service. Most of the others are worse. After seeing the terms of the Winkelvoss EFT, which are awful (if they lose the Bitcoins, they're not responsible), I suspect this new exchange may be equally sleazy.
- IkmoIkmo 12y ago
  In fairness, Coinbase has 1) A multi-sig product, meaning you can store money using their product purely as a software layer. You control the private keys and you have full autonomy. If they disappear or go bankrupt your money is still as safe as you kept it. 2) USD wallets are kept in an FDIC insured bank account. As a money transmitter without the proper licenses they're not allowed to invest custodial funds or use them to finance business operations. 3) They're pretty reputable. Fred Ersham is one of their principle agents and on their board, just like Chris Dixon. They've got a great legal team, guys from big startups like Facebook or AirBnb as well as big finance firms like Goldman Sachs and Visa. They've received $106m in funding at close to half a billion in valuation and partner with Paypal and process payments for fortune 100 companies worth tens of billions of dollars, their investors include top VC firms, the New York Stock Exchange, a megabank and one of Japan's largest telecom companies. they're registered with Fincen and have licenses in 15+ states. That may not protect them from tech failures, but these aren't the type of people who operate an anonymous company that's super shady and will disappear and leave you with no recourse. 4) They store the vast majority of funds in cold storage. I can't argue how safe this is as not much is disclosed. But I do know that cold storage is pretty easy to set up and that their basic descriptions include a lot of redundancy and distributed trust. The gist of it is that keys never hit any network (not hackable) and are stored physically, encrypted, in locked vaults in the same banks we've trusted with storage of value, and require multiple people in different geographical locations to unlock funds. No system is perfect but this is a very secure system. 97% of funds are stored in this way, you can read a bit about it here: https://www.coinbase.com/security https://www.coinbase.com/security 5) Their bitcoin funds are insured. The insurance includes cyber security, accidental loss and employees going rogue. Insurance is through Aon ($11b revenue in insurance premiums) and they claim only to use A+ underwriters according to S&P ratings. Again, they're not perfect and there are certainly issues I can point out and more details I'd want to receive more information on. But if I could make a bet on (or an investment into) Coinbase I'd be very comfortable making it. I do share the sentiment that many exchanges and bitcoin services just aren't anywhere close to bank-grade security. That's just a function of a new and nascent ecosystem. It happens in every industry and it takes a long time to get up to speed. The problem is that bitcoin is extremely sensitive because it's about carte-blance value tokens essentially, it's an extremely sensitive industry for this reason, so there's not much room for amateur-hour. But I think Coinbase, and the likes of say Xapo or Circle, and potentially Gemini, show that we're seeing an entirely different class of entrepreneurs from the likes of say last year's Mt. Gox, already. Completely holding judgement on Gemini. I know the twins are going to strive for complete regulatory compliance, and that they're already rich and want to build a solid long-term reputable business, not a get-rich-quick scheme, and that they've got the funds to hire the right people and besides financial capital have some human capital in the VC/Tech space in their networks. So there's certainly the potential for this to work out, but we'll have to see.
stream_fusion 12y ago
They should carefully consider the possibility of creating a decentralized exchange (like bitshares or nubits) and not merely a new centralized exchange for a decentralized currency (bitcoin). There will be a future for blockchain technology that can eliminate MtGox type events.
- RemoteWorker 12y ago
  Why would they want that? You know they aren't working ad honorem, right?
- wcoenen 12y ago
  Decentralized exchanges are problematic when you are exchanging with traditional currencies. The traditional currencies have to sit in some bank account, so either you trust some third party to hold it for the traders during the transactions (e.g. escrow or a centralized exchange) or you introduce counter party risk. Bitshares is a decentralized ledger for equity. Nubits is a system that attempts to stabilize the price at 1 nubit = 1 USD. Neither solves this problem of having to trust someone when you exchange for traditional currencies.
cb18 12y ago
The twins say none of this has dented their faith in the promise of the technology — they say they continue to hold every Bitcoin they ever purchased This is a common refrain seen around /r/bitcoin as well. If few people use it as a currency now, and the majority of people that buy it simply sit on it hoping it will appreciate, why do people think lots of people will want to use it as a currency in the future? If cryptocurrencies were to become significantly more user friendly in the future and there was an economic niche revealed where their use made sense for lots of people, wouldn't people be more likely to choose a cryptocurrency that didn't come with a built in rentier class of people who have piled up large amounts of the cryptocoin while praying that a vapor future demand be made manifest? The twins have placed themselves firmly in the camp of those who believe that Bitcoin will survive only if it has regulatory oversight. At present bitcoin's two main use cases seem to be buying recreational drugs[0](which I have no problem with) and paying for things related to computer fraud(which I think is a destructive waste of time by misguided minds.) Both of these things are presumably things that regulators would like to regulate out of existence as best they could. So if they are even partially successful in doing that, what is going to drive the demand for bitcoin?(tell me something other than remittances, or if you insist on remittances then please explain why if it is not a suitable option for many now, how it could become one in the future.) - - - - [0] As a side note on this, bitcoin does seem to be very well suited to the online drug trade, it of course has already proven itself in this area, but from my outside perspective it seems current or potential future problem areas are the on and off ramps, the exchange between fiat and crypto. But imagine if the loop could be closed between the drug buyers and sellers. So after a drug dealer has accumulated a large amount of crypto, he'll need to convert it to a more widely accepted currency to pay for the cultivation/production of more drugs, food, housing, etc. I guess the current method is to use a mixer then cash out at Bitstamp or btc-e or something, but say that bitcoin becomes regulated to the point that this becomes much more difficult to manage. So to close the loop, using bitcoin or another crypto, the drug dealer with the accumulated crypto sells to a network of crypto dealers, these crypto dealers then sell to a smaller hub in the network and on and on until the drug buyer instead of going over to the neighborhood weed dealer, goes over to the neighborhood crypto dealer, then buys his weed online with the crypto. There would likely need to be some profit incentive in this, so maybe the drug dealer would sell their cryptocoin to large hubs in the crypto dealing network at a discount in exchange for not dealing with more onerous regulated off-ramps, that discount then gradually being reduced as the crypto radiated out through the network. Of course with the way drug laws are being re-developed, hopefully all of this becomes moot in the not to distant future.
cyphar 12y ago
I don't understand why you would want to have a regulated exchange for a currency that's designed to be deregulated. That seems counter-productive for the entire BitCoin community.
- beaner 12y ago
  "deregulation" isn't a religion. Just because there are options to use it in a way outside of regulation, does not mean all uses have to fall under it. Forcing that is like forcing anything else, and would be more statist than libertarian. Bitcoin provides the option to remove yourself from the system if you decide that for you, in your personal context, it is the right thing to do. It's the option that matters, not just doing it for the sake of it to follow someone else's concept of what's important.
kolev 12y ago
No news here. They keep high hopes that if they pull this off, they can save their huge investment in Bitcoin, but a legit marketplace does not equate to an evergrowing price.
digital-rubber 12y ago
Is there already a company that tied the 'donated' cpu power to a real product with revenue/profit to a crypto currency? I mean all these hashes are nice and all, but the little magic math hash.. is about as valuable as a painting. Whatever the idiot gives for it. Imho, if there is a real product developed with the donated cpu power in exchange for crypto coins which stand for a money value in relation to the developed product/medicine etc. Like combining distributed computing, crypto currency and a product (e.g. medicine) which we could all benefit from. And those miners aren't simply wasting electricity. Yes i consider bitcoin, and sort in current form, mining a waste of electricity.
- jafaku 12y ago
  The hashes are not being "wasted", it's the cost of Proof of Work. By definition, it can't be useful for something else. It has to be "wasted". I can't understand how you can see that it's being used to secure the first decentralized digital currency ever, that people all over the world are already using, and at the same time say it's being wasted.
  - digital-rubber 12y ago
    Hell yes :) Bitcoin is similar to a pyramid scheme. Started mining early? You are rich! Started mining yesterday? you are screwed. And the more people get interest, the more fopping rich (i still think bitcoins have zero value), increasing value their mined coins will have. Don't be so naive please.
    - deleted 12y ago
      [deleted]
    - jafaku 12y ago
      Do you realize what you just said applies to every successful investment? If you started investing in Apple early, you would be rich too. Does that make Apple a "pyramid scheme"? Or maybe, just maybe, it's just that riskier investments have bigger rewards? Don't be so stubborn please.
nly 12y ago
I don't see the lack of a regulated exchange as a show-stopper for mainstream adoption. I remember when people were generally uncomfortable with PayPal because the whole idea of an online wallet that wasn't provided by a bank just seemed unsafe. It was pull of eBay, the killer use case, that overcame that in the minds of everyday people, not regulation coming along and making it safer. Online wallets added value. Imho, Bitcoin is and will continue to be an interesting niche until someone comes up with something truly compelling to do with it that you can't do with traditional currency or banking. A regulated exchange is nice for traders and financiers, but it's still just a boring old exchange... another friction ordinary consumers have to overcome to walk the blockchain life.
- ssharp 12y ago
  I've never been that bullish on Bitcoin because I don't see why the mainstream, developed world would have much demand for it. It certainly has it's uses, but they are limited. I suspect the number of people transacting in Bitcoin are far out-numbered by the people who are mostly hoarding Bitcoin, which illustrates it's lack of valid use-cases.
  - minthd 12y ago
    I once thought that bitcoin's usage as a secure decentralized database, not as a currency, would be the source of some major use. But there are no big results here, so now, not so sure.
    - nly 12y ago
      Namecoin is promising but then whoever can afford the most ASICs will just buy up all the popular names.
YesThatTom2 12y ago
While I hope Bitcoin ultimately succeeds I know the early investors will lose millions building infrastructure that gets thrown away when late arrivers come and blow away the early adopters. It couldn't happen to a more deserving set of twins.
cpwright 12y ago
I found it interesting that they chose Gemini as a name for an exchange; given that the ISE runs already runs an options exchange named Gemini.

203 points by jvoorhis 12y ago

largote 12y ago

Hasn't this been known for months now?

jvoorhis 12y ago
Not to be confused with the forthcoming ETF [1], Gemini [2] is the first US-regulated bitcoin exchange. [1] http://www.sec.gov/Archives/edgar/data/1579346/000119312514457552/d721187ds1a.htm http://www.sec.gov/Archives/edgar/data/1579346/0001193125144... [2] https://gemini.com/ https://gemini.com/
- ForHackernews 12y ago
  I think it's widely assumed that the ETF is a way for the Winklevii to cash out their bitcoin holdings. Also: http://www.reddit.com/r/Buttcoin/comments/2rv44y/the_winklevoss_sec_filing_is_an_absolute_comedy/ http://www.reddit.com/r/Buttcoin/comments/2rv44y/the_winklev...
  - toomim 12y ago
    No it's not.

bduerst 12y ago

What competitive advantages does a bitcoin-based exchange in the U.S. have over other [U.S. or otherwise] exchanges?

GigabyteCoin 12y ago
It's easier to hold any fraudulant owners accountable if you are an American account holder, for one. Also some clients feel safer knowing that financial regulators of some kind are overlooking the accounts and transactions of the business they are working with.
- bduerst 12y ago
  I guess I should have been more specific. Other U.S. exchanges already have this, so what competitive advantage does bitcoins give an exchange?
  - corin_ 12y ago
    If I'm reading you correctly: it gives the advantage that you can buy or sell bitcoins... which if you're someone wanting to do that is a significant advantage over exchanges that don't.
rtpg 12y ago
less risk of collapsing, maybe lower security risks (due to paying attention to regulations, but debatable). It's probably easier to get faster payouts and the like as well, since banks will have less issue openly (snark intended) with a regulated exchange than money launderers.

snitko 12y ago

>"Our philosophy is to ask for permission, not forgiveness", Cameron Winklevoss said. So, a complete opposite of what Bitcoin philosophy is. Gotcha.

obstinate 12y ago
One could easily argue in response that there's no such thing as bitcoin "philosophy." There's only what you can and can't do with the protocol. If they can implement their ideals under the strictures of what the protocol allows, that's their prerogative.
- jsprogrammer 12y ago
  Which is why this exchange is a bit strange. The problems are purely technical, not political. A completely open exchange (open code, open infrastructure) is all that is needed. A politically "regulated" exchange is just MBA masturbation.
- jedunnigan 12y ago
  So one might argue that that is a philosophy in and of itself. An agnostic one that is founded on technical specification, not moral imperative.
  - colordrops 12y ago
    No, not really. The entire purpose of bitcoin network's design is to reduce or completely remove the need for trust amongst participants. It was designed so that it operates in the same fashion regardless of the moral, political and regulatory climate surrounding it. That is not philosophy, but fact.
    - logn 12y ago
      And fiat-BTC exchanges aren't part of the spec, so regulation can be helpful. I seriously question the necessity or utility of centralized wallets, but regulated exchanges make perfect sense.

deleted 12y ago

[deleted]

ForHackernews 12y ago

Wait, I thought bitcoin-loving libertarians hated regulations? What about our freedoms?

mkautzm 12y ago
Regulations are great for libertarians, but only if it makes them richer! If it makes anyone who's not in the rich people's club richer, than it's 'redistributing wealth' and 'big government getting in the way of innovation'.
- sjcsjc 12y ago
  I don't doubt that your point applies to some people who call themselves libertarians. But not everyone's views of right and wrong are based on what benefits them. As a small example, in the UK it's now illegal to smoke in pubs. I benefit quite a lot from that regulation. But I view the law as morally wrong. The non-aggression axiom [1] is a philosophical principle. I suggest that people who choose to apply it only when it benefits themselves are not really libertarians. [1] http://en.wikipedia.org/wiki/Non-aggression_principle http://en.wikipedia.org/wiki/Non-aggression_principle
  - RemoteWorker 12y ago
    How is that law morally wrong? Couldn't they forcing you to breathe smoke be seen as an aggression? The same way they blasting you with very loud noise would be an aggression. Just because it's invisible or not solid it doesn't mean it's not violence. Let alone the danger of literally playing with fire in a closed space.
    - sjcsjc 12y ago
      You can choose not to frequent the bar in question. Another bar could (freely) choose not to permit smoking. I'd go there instead.
      - 12y ago

sillysaurus3 12y ago

This may be tangential, but it's been on my mind for awhile, so I was hoping to get your thoughts. If it's slightly offtopic, I apologize. It doesn't seem like you can regulate BTC, and the reason is because of something unexpected: arbitrage. (To be clear, you can create a regulated exchange, but that doesn't really help you. I'll explain why.) When exchange A's price is different from exchange B's, that represents an opportunity. As the difference grows, that opportunity becomes more lucrative. That's why, at any given time, all exchanges are at roughly the same price. But that means if one exchange is playing by some bad rules, or is acting in a shady way, like the behavior described in https://willyreport.wordpress.com/ https://willyreport.wordpress.com/, then that directly affects every other exchange. So unless all exchanges are playing by the same rules, having a single "safe" exchange won't save you. One exchange's shadiness will always affect every other exchange. Whether this is a fatal flaw is a separate question. I don't think it is, but it seems hard to know. What do you think? It seems true, but perhaps I'm overlooking something obvious. Also, this is strictly about price manipulation. It's probably true that no amount of bad behavior at exchange A can result in a catastrophic failure of exchange B. But one question I've been trying to figure out the answer to is: does price manipulation even matter?

ForHackernews 12y ago
You can try to arbitrage on an unregulated exchange, but then you're assuming the greater risk of getting Goxxed. There are plenty of examples in financial markets where lower risk is correlated with lower returns, and this may be another.
rtpg 12y ago
The issue with shady exchanges, they all seem to have the issue of collapsing overnight. So even if not playing by the rules will raise the prices, that might be counteracted by the major risk of you losing everything on the exchange. Or having everything seized by some gov't. There's a reason they're called pyramid schemes
- jafaku 12y ago
  > There's a reason they're called pyramid schemes Just because someone call something a pyramid scheme, it doesn't mean it is one.

hueving 12y ago

After the losses they must have taken with the price decline this is probably a desperate attempt to boost the price.

laichzeit0 12y ago
Well, if I remember correctly, all the Winkelvii Bitcoins were bought for under $70, I'd say the average price is around $35-40, so no, they're still trading at 300-400% above what they bought them for. Not bad for a 2 year investment.
- justincormack 12y ago
  Unsaleable in volume while maintaining that price though. Thats why they are concocting these schemes to actually get an exit eventually.
  - laichzeit0 12y ago
    I think if they were in it for a quick buck, they'd have exited during the run up to $1200. But they didn't. Actually when they were buying Bitcoins it ran up to $250 over the course of a few weeks, then crashed down to $75. That's my recollection of events.
- hnnewguy 12y ago
  >Well, if I remember correctly, all the Winkelvii Bitcoins were bought for under $70, I'd say the average price is around $35-40, so no I read far too many investing sites. Whenever a run-up and crash occurs in some fad stock, the proponents of said stock never seem to lose money. They always seem to be "still in the green". Amazing, really.

DigitalSea 12y ago

Considering just how much Bitcoin the Winklevoss twins own, it is in their best interests to do right by Bitcoin holders and create a secure and accountable exchange. Historically every bad thing that has happened to Bitcoin mostly indirectly has affected its price which from an existing investment perspective obviously sucks, but is great for new buyers to get into the market. I have no doubt if they can pull this off that it'll be a successful venture, especially after the horrible year of 2014 which saw tonnes of cryptocoin exchanges (including Mt. Gox) get hacked and disappear, driving down the price each time. They have a bit of competition in the space, I think overcoming the regulation issues and having actual proper accountability will help bolster the credibility of the exchange.

hnnewguy 12y ago
>Considering just how much Bitcoin the Winklevoss twins own, it is in their best interests to do right by Bitcoin holders and create a secure and accountable exchange. The executives in pretty much every corporate scandal, ever, held vast numbers of company shares.
drzaiusapelord 12y ago
>get hacked and disappear Is this the accepted narrative? It seems overly generous to bitcoin and the various exchange operators. A lot of these exchanges were shutdown by their owners so they could, with impunity, steal the coins of their customers and other dirty dealings. Hacker attacks, which are often used as cover for these criminal activities, seem to have been the least of bitcoin's problems. > I think overcoming the regulation issues and having actual proper accountability will help bolster the credibility of the exchange. If I wanted to use an easy and stable regulated currency why not the USD? I can trivially pay using a variety of sources: my own bank, paypal, my credit cards, direct deposit, wire, etc. If bitcoin gets turned into a strongly controlled and regulated currency then I don't see its competitive advantage outside of very, very narrow use cases (darknet purchases, investing, ransomware, illegal activities, etc).

Ologn 12y ago

Warren Buffett said Bitcoins are a mirage and I agree. They are worthless hashes. Why do they have any value? The answer is they have no value. I said so here when they were worth over twice what they are now. If there is any sign of a bubble in tech, it would be Bitcoin market cap. Which is $3 billion at the moment. Who are the fools who exchange cash for them? Why do they have any value? Some people say you can use them as currency. You can use dollars as currency. Or gold. Some say it can transfer money, but so can wire transfers. Perhaps it is decentralized (who cares? Not I. Wire transfers work for me) etc. But gold has value, while Bitcoin has nothing. I remember during the dot bomb days when there were commercials for Flooz and Beenz. The leaders in the Bitcoin community are being sued and jailed for fraud, the price has gone from $1100 to $230, yet suckers are still bamboozled to trade cash for these worthless hashes. It will go to $115, then $57, then eventually $0. I doubt all those who already lost money or who are being jailed will learn anything.

balladeer 12y ago
Yes. I mean I would never put my own money into something that is more volatile than the share market. At least in share market I can see it coming, except rate crashes and when that happens everything goes down not just my own holding. It Bitcoin it can be a bug, a hack, or just many Bitcoin holders dumping Bitcoins. Also it never made sense to me that I could have been richer if I had access to those fancy super-fast CPUs to "mine" the Bitcoins. Maybe I missed the gold rush but then again I don't want to encourage another absurdly overpriced commodity which really have no meaning (or rather say "value") in real world except some overenthusiastic people and the "hoarders" trying to push it up.
- jafaku 12y ago
  "Also it never made sense to me that I could have been richer if I had access to those fancy super-fast CPUs to "mine" the Bitcoins." So that's where your hate comes from. I see...
  - balladeer 12y ago
    > I see... No, you don't see. You are just being casually snarky.

logn 12y ago

What's the motivation for the twins to hold so much bitcoin? They're already taking on a lot of risk with their BTC business investments. Is it just to show faith in themselves and the coin? Or are they so confident that it makes sense to them? Personally I'd want to diversify.

Synaesthesia 12y ago
They bought a lot of bitcoin before the late 2013 bubble. I think they're quite diversified - they're just Bitcoin proponents who are taking a chance, kind of like venture capitalism.
- deleted 12y ago
  [deleted]

wmf 12y ago

Wasn't CampBX the first US Bitcoin exchange? And then TradeHill and then Coinsetter and then Digital Currency Group? And then there's LedgerX...

Animats 12y ago

The regulated exchange thing is interesting, but I want to see the details. The expected way to do this would be to register with the SEC as a broker/dealer, like every stockbroker does. That gets SIPC insurance protection (for which the broker pays), and means FINRA enforcement and audits, background checks on the principals, and such. It also eliminates the need for state by state approvals. So far, no Bitcoin exchange has done this. Over half of them have gone bust, often taking the customers' funds with them. This is not a coincidence. There's a lot of big talk about how some exchange is safe. Coinbase doesn't have a real business address and has "it's not our fault if we lose your money" terms of service. Most of the others are worse. After seeing the terms of the Winkelvoss EFT, which are awful (if they lose the Bitcoins, they're not responsible), I suspect this new exchange may be equally sleazy.

IkmoIkmo 12y ago
In fairness, Coinbase has 1) A multi-sig product, meaning you can store money using their product purely as a software layer. You control the private keys and you have full autonomy. If they disappear or go bankrupt your money is still as safe as you kept it. 2) USD wallets are kept in an FDIC insured bank account. As a money transmitter without the proper licenses they're not allowed to invest custodial funds or use them to finance business operations. 3) They're pretty reputable. Fred Ersham is one of their principle agents and on their board, just like Chris Dixon. They've got a great legal team, guys from big startups like Facebook or AirBnb as well as big finance firms like Goldman Sachs and Visa. They've received $106m in funding at close to half a billion in valuation and partner with Paypal and process payments for fortune 100 companies worth tens of billions of dollars, their investors include top VC firms, the New York Stock Exchange, a megabank and one of Japan's largest telecom companies. they're registered with Fincen and have licenses in 15+ states. That may not protect them from tech failures, but these aren't the type of people who operate an anonymous company that's super shady and will disappear and leave you with no recourse. 4) They store the vast majority of funds in cold storage. I can't argue how safe this is as not much is disclosed. But I do know that cold storage is pretty easy to set up and that their basic descriptions include a lot of redundancy and distributed trust. The gist of it is that keys never hit any network (not hackable) and are stored physically, encrypted, in locked vaults in the same banks we've trusted with storage of value, and require multiple people in different geographical locations to unlock funds. No system is perfect but this is a very secure system. 97% of funds are stored in this way, you can read a bit about it here: https://www.coinbase.com/security https://www.coinbase.com/security 5) Their bitcoin funds are insured. The insurance includes cyber security, accidental loss and employees going rogue. Insurance is through Aon ($11b revenue in insurance premiums) and they claim only to use A+ underwriters according to S&P ratings. Again, they're not perfect and there are certainly issues I can point out and more details I'd want to receive more information on. But if I could make a bet on (or an investment into) Coinbase I'd be very comfortable making it. I do share the sentiment that many exchanges and bitcoin services just aren't anywhere close to bank-grade security. That's just a function of a new and nascent ecosystem. It happens in every industry and it takes a long time to get up to speed. The problem is that bitcoin is extremely sensitive because it's about carte-blance value tokens essentially, it's an extremely sensitive industry for this reason, so there's not much room for amateur-hour. But I think Coinbase, and the likes of say Xapo or Circle, and potentially Gemini, show that we're seeing an entirely different class of entrepreneurs from the likes of say last year's Mt. Gox, already. Completely holding judgement on Gemini. I know the twins are going to strive for complete regulatory compliance, and that they're already rich and want to build a solid long-term reputable business, not a get-rich-quick scheme, and that they've got the funds to hire the right people and besides financial capital have some human capital in the VC/Tech space in their networks. So there's certainly the potential for this to work out, but we'll have to see.

stream_fusion 12y ago

They should carefully consider the possibility of creating a decentralized exchange (like bitshares or nubits) and not merely a new centralized exchange for a decentralized currency (bitcoin). There will be a future for blockchain technology that can eliminate MtGox type events.

RemoteWorker 12y ago
Why would they want that? You know they aren't working ad honorem, right?
wcoenen 12y ago
Decentralized exchanges are problematic when you are exchanging with traditional currencies. The traditional currencies have to sit in some bank account, so either you trust some third party to hold it for the traders during the transactions (e.g. escrow or a centralized exchange) or you introduce counter party risk. Bitshares is a decentralized ledger for equity. Nubits is a system that attempts to stabilize the price at 1 nubit = 1 USD. Neither solves this problem of having to trust someone when you exchange for traditional currencies.

cb18 12y ago

The twins say none of this has dented their faith in the promise of the technology — they say they continue to hold every Bitcoin they ever purchased This is a common refrain seen around /r/bitcoin as well. If few people use it as a currency now, and the majority of people that buy it simply sit on it hoping it will appreciate, why do people think lots of people will want to use it as a currency in the future? If cryptocurrencies were to become significantly more user friendly in the future and there was an economic niche revealed where their use made sense for lots of people, wouldn't people be more likely to choose a cryptocurrency that didn't come with a built in rentier class of people who have piled up large amounts of the cryptocoin while praying that a vapor future demand be made manifest? The twins have placed themselves firmly in the camp of those who believe that Bitcoin will survive only if it has regulatory oversight. At present bitcoin's two main use cases seem to be buying recreational drugs[0](which I have no problem with) and paying for things related to computer fraud(which I think is a destructive waste of time by misguided minds.) Both of these things are presumably things that regulators would like to regulate out of existence as best they could. So if they are even partially successful in doing that, what is going to drive the demand for bitcoin?(tell me something other than remittances, or if you insist on remittances then please explain why if it is not a suitable option for many now, how it could become one in the future.) - - - - [0] As a side note on this, bitcoin does seem to be very well suited to the online drug trade, it of course has already proven itself in this area, but from my outside perspective it seems current or potential future problem areas are the on and off ramps, the exchange between fiat and crypto. But imagine if the loop could be closed between the drug buyers and sellers. So after a drug dealer has accumulated a large amount of crypto, he'll need to convert it to a more widely accepted currency to pay for the cultivation/production of more drugs, food, housing, etc. I guess the current method is to use a mixer then cash out at Bitstamp or btc-e or something, but say that bitcoin becomes regulated to the point that this becomes much more difficult to manage. So to close the loop, using bitcoin or another crypto, the drug dealer with the accumulated crypto sells to a network of crypto dealers, these crypto dealers then sell to a smaller hub in the network and on and on until the drug buyer instead of going over to the neighborhood weed dealer, goes over to the neighborhood crypto dealer, then buys his weed online with the crypto. There would likely need to be some profit incentive in this, so maybe the drug dealer would sell their cryptocoin to large hubs in the crypto dealing network at a discount in exchange for not dealing with more onerous regulated off-ramps, that discount then gradually being reduced as the crypto radiated out through the network. Of course with the way drug laws are being re-developed, hopefully all of this becomes moot in the not to distant future.

cyphar 12y ago

I don't understand why you would want to have a regulated exchange for a currency that's designed to be deregulated. That seems counter-productive for the entire BitCoin community.

beaner 12y ago
"deregulation" isn't a religion. Just because there are options to use it in a way outside of regulation, does not mean all uses have to fall under it. Forcing that is like forcing anything else, and would be more statist than libertarian. Bitcoin provides the option to remove yourself from the system if you decide that for you, in your personal context, it is the right thing to do. It's the option that matters, not just doing it for the sake of it to follow someone else's concept of what's important.

kolev 12y ago

No news here. They keep high hopes that if they pull this off, they can save their huge investment in Bitcoin, but a legit marketplace does not equate to an evergrowing price.

digital-rubber 12y ago

Is there already a company that tied the 'donated' cpu power to a real product with revenue/profit to a crypto currency? I mean all these hashes are nice and all, but the little magic math hash.. is about as valuable as a painting. Whatever the idiot gives for it. Imho, if there is a real product developed with the donated cpu power in exchange for crypto coins which stand for a money value in relation to the developed product/medicine etc. Like combining distributed computing, crypto currency and a product (e.g. medicine) which we could all benefit from. And those miners aren't simply wasting electricity. Yes i consider bitcoin, and sort in current form, mining a waste of electricity.

jafaku 12y ago
The hashes are not being "wasted", it's the cost of Proof of Work. By definition, it can't be useful for something else. It has to be "wasted". I can't understand how you can see that it's being used to secure the first decentralized digital currency ever, that people all over the world are already using, and at the same time say it's being wasted.
- digital-rubber 12y ago
  Hell yes :) Bitcoin is similar to a pyramid scheme. Started mining early? You are rich! Started mining yesterday? you are screwed. And the more people get interest, the more fopping rich (i still think bitcoins have zero value), increasing value their mined coins will have. Don't be so naive please.
  - deleted 12y ago
    [deleted]
  - jafaku 12y ago
    Do you realize what you just said applies to every successful investment? If you started investing in Apple early, you would be rich too. Does that make Apple a "pyramid scheme"? Or maybe, just maybe, it's just that riskier investments have bigger rewards? Don't be so stubborn please.

nly 12y ago

I don't see the lack of a regulated exchange as a show-stopper for mainstream adoption. I remember when people were generally uncomfortable with PayPal because the whole idea of an online wallet that wasn't provided by a bank just seemed unsafe. It was pull of eBay, the killer use case, that overcame that in the minds of everyday people, not regulation coming along and making it safer. Online wallets added value. Imho, Bitcoin is and will continue to be an interesting niche until someone comes up with something truly compelling to do with it that you can't do with traditional currency or banking. A regulated exchange is nice for traders and financiers, but it's still just a boring old exchange... another friction ordinary consumers have to overcome to walk the blockchain life.

ssharp 12y ago
I've never been that bullish on Bitcoin because I don't see why the mainstream, developed world would have much demand for it. It certainly has it's uses, but they are limited. I suspect the number of people transacting in Bitcoin are far out-numbered by the people who are mostly hoarding Bitcoin, which illustrates it's lack of valid use-cases.
- minthd 12y ago
  I once thought that bitcoin's usage as a secure decentralized database, not as a currency, would be the source of some major use. But there are no big results here, so now, not so sure.
  - nly 12y ago
    Namecoin is promising but then whoever can afford the most ASICs will just buy up all the popular names.

YesThatTom2 12y ago

While I hope Bitcoin ultimately succeeds I know the early investors will lose millions building infrastructure that gets thrown away when late arrivers come and blow away the early adopters. It couldn't happen to a more deserving set of twins.

cpwright 12y ago

I found it interesting that they chose Gemini as a name for an exchange; given that the ISE runs already runs an options exchange named Gemini.