Bitcoins

[Jason14h]

However, an unverified document called "Crisis Strategy Draft" that is being circulated online claims Mt.Gox has lost 744,408 of its users' bitcoins, worth nearly $367 million. It also claims Mt.Gox is planning to rebrand itself as Gox.

From CNN

[Thor]

http://www.huffingtonpost.ca/2014/02...n_4851417.html

[chemgear]

http://money.cnn.com/2014/02/25/tech...gox/index.html

The shutdown of Mt.Gox -- one of the world's largest bitcoin exchanges -- and the potential loss of more than $400 million worth of bitcoins is the result of abysmal mismanagement at the company.

Mt.Gox is blaming a costly computer hack for its current troubles. But in reality, the company was in dire financial straits long before that. Cash flow issues are to blame, as the exchange balanced a tiny revenue stream with a giant burning hole in its pocket.

The fact that Mt.Gox's management potentially lost all of its customers' deposits to theft is nothing short of gross incompetence. The cyberthieves would have needed to trick Mt.Gox repeatedly -- withdrawing money, faking a receipt and demanding yet another withdrawal. Now imagine doing that for a prolonged period -- unnoticed -- to the tune of millions of dollars and emptying the company's accounts.

The lack of transparency is also astounding. A company with millions of dollars is staying silent about what's going on. At most, it offers the occasional cryptic message assuring customers it's "closely monitoring the situation and will react accordingly."

U.S. officials like New York State's top financial regulator, Benjamin Lawsky, jumped at the opportunity to say this is exactly why more government regulation is necessary. U.S. Senator Tom Carper, who heads the homeland security committee, called it a lesson for policymakers.

Mark Williams, a former Federal Reserve bank examiner, said Mt.Gox's failure shows the risk inherent in sending your cash to Bitcoin exchanges -- most of which are located abroad in places like Slovenia and Hong Kong. There's little assurance you'll ever get that money back.

"The problems at Mt.Gox -- lack of strong controls and tight regulation -- are systemic to the Bitcoin industry. The reputational damage will spread," Williams said. "What was the largest exchange is now a collapsed tower of toxic sludge."

[edslunch]

Wow. Who didn't see that coming?

[PsYcNeT]

Originally Posted by edslunch

Wow. Who didn't see that coming?

A bunch of libertarians, apparently.

[Azure]

Originally Posted by PsYcNeT

A bunch of libertarians, apparently.

Anyone with half a brain saw it coming.

But nice shot at those of us who see the value in something like BTC.

[MarchHare]

Originally Posted by PsYcNeT

A bunch of libertarians, apparently.

Paraphrasing a comment I saw elsewhere:

Bitcoin will teach libertarians -- the hard way -- exactly why we need the government to regulate currencies.

[corporatejay]

Originally Posted by Azure

Anyone with half a brain saw it coming.

But nice shot at those of us who see the value in something like BTC.

Honestly Azure, and I don't mean this as an insult, but what the hell is the value in something like BTC?

[Rathji]

The value in BTC is that you can trade it for goods or services.

If you can't see the value in that, then why do you go to work every day and get dollars that you can do something useless like trade for goods or services.

I could see your point if you couldn't buy things, or get money for BTC, but the fact that you can, gives it value. To argue otherwise seems a little foolish to me.

[PsYcNeT]

But what makes it more necessary than any of the existing fiat currencies?

Instead of governments, a bunch of nerds with 30 video cards control it?

[Rathji]

Originally Posted by PsYcNeT

But what makes it more necessary than any of the existing fiat currencies?

Instead of governments, a bunch of nerds with 30 video cards control it?

It isn't any more necessary than any fiat currency, but that doesn't make it less necessary. It is simply a currency for a different situation, better in some instances, worse in others. Just like Euros are not less necessary than CAD$ because you would have a much harder time spending them in Canada than you would in Europe.

The fact that your first post in this thread referred to the neckbeard site ops for bitcoin shows you really are missing some of the point to the currency. I won't try and educate you, because you have clearly decided already, a long time ago, that it wasn't worth your time.

[Azure]

Well that is exactly the point. Not controlled by a central bank. Lots of people see value in that.

The whole digital part of everything is where I see value.

[MarchHare]

Originally Posted by Rathji

The value in BTC is that you can trade it for goods or services.

If you can't see the value in that, then why do you go to work every day and get dollars that you can do something useless like trade for goods or services.

I could see your point if you couldn't buy things, or get money for BTC, but the fact that you can, gives it value. To argue otherwise seems a little foolish to me.

Aside from the criminal underground who use Bitcoins for money laundering purposes, who exactly is exchanging BTC for goods and services? According to published research*, virtually nobody is using BTC like a currency. And why would they, when its value fluctuates so wildly?

*Source 1: http://www.businessinsider.com/why-b...charts-2013-12

Why would anyone use their bitcoins to buy things when those bitcoins might double in value in a day—or hour—or two?

They wouldn't. Researchers found that 64 percent of bitcoins are in accounts that have never been used. And the ones that are being used aren't being used more. You can see that in the chart below from Jason Kuznicki, which looks at the dollar value of all bitcoin transactions each day divided by the dollar value of all bitcoins each day. It's hard to see any pattern here—and that's the point. If people were using bitcoins more, this ratio would be going up. It's not.

Bitcoin won't work as a currency as long as it's so deflationary. Why spend bitcoins today when they might be worth much more tomorrow? The only reason would be to buy or do things online that you can't buy or do with dollars (or euros or yuan)—something illegal. Now, black markets can be big markets, especially when it comes to evading capital controls, but not so big that Bitcoin would ever become more than a niche "currency."

*Source 2: http://www.theatlantic.com/business/...rrency/281625/

What's revolutionary is that it's a payments system with no third-party, like a credit card company, standing in between buyers and sellers. See, any time you buy something, it's a minor leap of faith. You choose to believe that the seller will deliver as promised—and if they don't, you want your money back. That's where financial intermediaries like credit card companies and Paypal come in. They make sure buyers and sellers are both trustworthy, and handle any disputes.

Now, it's nice to be able to get your money back if things go wrong, but that's not free. The middlemen take their cut. Bitcoin, though, has no middlemen. It's just a decentralized peer-to-peer system. So you can't get your bitcoins back if things go wrong, but there won't be any transaction fees. The question is whether non-enthusiasts will think this trade-off is worth it.

Actually, the question is whether anyone will actually use bitcoins to buy things at all. It's not clear why they would when its value can go from $500 to $900 in a matter of hours. Nor when so many people treat it as an inflation hedge. They think of Bitcoin more as an investment than as money. Indeed, researchers from the University of California-San Diego and George Mason University found that 64 percent of all bitcoins are being hoarded in accounts that have never been spent. And of the bitcoins that are being spent, a full 60 percent are on the gambling site Satoshi Dice.

[Rathji]

Originally Posted by MarchHare

Aside from the criminal underground who use Bitcoins for money laundering purposes, who is exactly is exchanging BTC for goods and services? According to published research*, virtually nobody is actually using BTC like a currency. And why would they, when its value fluctuates so wildly?

I can take them and spend them on things, and I do. I get real tangible goods that would otherwise have cost me CAD$. I exchange them for real money that ends up in my bank account.

[Azure]

Just because the majority of transactions are currently on illegal items doesn't mean that the idea of digital currency is such a bad one.

[corporatejay]

Originally Posted by Azure

Just because the majority of transactions are currently on illegal items doesn't mean that the idea of digital currency is such a bad one.

Isn't paypal a way to use "real" currency, digitally?

[MarchHare]

Originally Posted by corporatejay

Isn't paypal a way to use "real" currency digitally?

You don't even need a system like PayPal to use filthy fiat currency digitally. Practically 100% of my financial transactions occur digitally. My employer pays me via direct deposit, and I spend my money (both online and IRL) using only debit/credit cards or direct digital transfers from my bank account. I haven't had any reason to use cash in years.

[PsYcNeT]

Originally Posted by MarchHare

You don't even need a system like PayPal to use filthy fiat currency digitally. Practically 100% of my financial transactions occur digitally. My employer pays me via direct deposit, and I spend my money (both online and IRL) using only debit/credit cards or direct digital transfers from my bank account. I haven't had any reason to use cash in years.

Well yeah but you can't get behind TOR, access the DeepWeb and buy a bathtub full of PCP delivered by your new Cambodian boy-slave with USD.

[nfotiu]

Originally Posted by Rathji

I can take them and spend them on things, and I do. I get real tangible goods that would otherwise have cost me CAD$. I exchange them for real money that ends up in my bank account.

What is the advantage of using bitcoins to buy legal items, instead of using Canadian dollars? I can think of lots of disadvantages, but have a hard time seeing the value? Just because you can, doesn't mean you should.

[corporatejay]

Originally Posted by MarchHare

You don't even need a system like PayPal to use filthy fiat currency digitally. Practically 100% of my financial transactions occur digitally. My employer pays me via direct deposit, and I spend my money (both online and IRL) using only debit/credit cards or direct digital transfers from my bank account. I haven't had any reason to use cash in years.

I do the same locally but sending money internationally can be a bit trickier. I guess what I mean was that paypal provides like a digital international wallet, presumably like bitcoin.