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Owner claims 99.7 percent of his Bitcoins were stolen before he noticed

Bitcoin enthusiasts are reeling from the collapse of Mt. Gox, once the largest Bitcoin-centric money exchange.  The exchange announced today that it would be shut down, via a short post to its website.  The shutdown leaves many more questions than answers, the biggest of which is simple -- can the cryptocurrency Mt. Gox helped make a global sensation, survive its fall?

I. The Start -- From Napster to Mt. Gox

When Bitcoin -- a cryptography backed "currency" that can be viewed as a digital payment service or a tradeable commodity of sorts -- was conceived back in 2008 a programmer or group of programmers using the pseudonym Satoshi Nakamoto, it was just a novel idea.  Few would have imagined it would explode into the global phenomena it is today.

But over the last half decade Bitcoin slowly grew into a widely used, seemingly credible and secure global digital payment network.  While other cryptocurrencies have since emerged, Bitcoin remains the most prominent with a market value of over $8B USD (as .  Blockchain estimates Bitcoin has roughly 1.2 million users, working out to an average wallet value of around $10,000 USD.

Bitcoin w/ USD
Bitcoins are the world's most popular cryptocurrency, used by over a million people worldwide
[Image Source: Bit-Square]

Bitcoin may have caught on eventually, but few would deny that Mt. Gox was a key force in driving early Bitcoin adoption.

Mt. Gox originally had nothing to do with digital currency.  Its name was an acronym for "Magic: The Gathering Online Exchange" and it was founded by a Jed McCaleb, a man who had already played a pivotal role in one digital revolution.

Magic the Gathering
Mt. Gox started as a trading post for MAGIC: The Gathering collectible cards.
[Image Source: Latino Review]

Born in Little Rock, Arkansas Mr. McCaleb had spent several years living on the west coast as a surfer, having dropped out of the University of Calif., Berkley.  Following in the path of perhaps the most famous Berkeley dropout -- Apple, Inc. (AAPL) co-founder Steve Wozniak -- Mr. McCaleb taught himself to program and in 2001 (at age 26) co-founded MetaMachine, Inc. in New York City's lower Manhattan district. 

Jed McCaleb
Jed McCaleb [Image Source: Ariel Zambelich]

The company would go on to produce the very popular e-Donkey client, which by 2005 was home to 30 to 40 million users, of which on average approximately two to three million of them were online and sharing 500 million to two billion files via 100 to 200 servers at any given time.  And Mr. McCaleb was the lead developer of that awesome effort, earning it a place in the elite rank of peer-to-peer filesharing services, that only a handful of networks/clients, e.g. Limewire, Kazaa, and of course the original -- Napster -- had reached.

For a time MetaMachine was making a substantial sum off adware revenue bundled with its widely used clients -- enough to pay a small team of programmers salaries of around $70,000 USD and up.  But the party would end in 2006 when e-Donkey's developer was felled by a combination of poisoning with fake files via music industry troll Overpeer, Inc. and a separate legal campaign against it spearheaded by the Recording Industry Association of America (RIAA). 

eDonkey 2000
eDonkey was a hot commodity via its large userbase and ad monetization until the RIAA killed it. [Image Source: Mathias Rousseau]

MetaMachine would wind up paying a $30M USD settlement in 2006 and agreeing to abandon development of e-Donkey, which continued to live on in diminshed form for some time via third parties.

MetaMachine's other cofounder -- President Sam Yagan -- would land on his feet, becoming CEO of TheSpark.com, Inc., maker of SparkNotes, and most recently co-founding and serving as CEO of OkayCupid.

Mr. McCaleb packed up and moved to Tokyo, where he looked to launch the small card-trading portal in 2009.  Unemployed, he never had time to develop that site, but he still owned the domain name.

II. Under New Ownership

When Bitcoin came onto his radar in 2010, he took the stale domain and reimagined it, quickly coding a Bitcoin trading hub, which would trade U.S. currency for digital Bitcoins, charging a small fee (~5 percent) on transactions.

Mark Karpeles
Mark "Magical Tux" Karpelès bought Mt. Gox in early 2011.

His early success and the growing buzz arround Bitcoin attracted the interest of  Mark "Magical Tux" Karpelès, a French developer who had worked Fotovista and was currently working in Japan at NEXWAY Comp., Ltd. (an IT firm owned by the INTEC Group, aka IT Holdings Corp. (TYO:3626)).  He blogged in March 2009:

The deal is pretty simple, the company I work for (Nexway) has agreed on taking me in Japan instead of France. This will greatly help for some projects I’m working on within the company, both in terms of access to documentation/skilled people and in terms of motivation.

Mr. Karpelès had just started his own company "Tibanne Comp., Ltd." according to his resume on LinkedIn Corp.'s (LNKD) Japanese portal.  In his LinkedIn profile he writes:

Going to make this young company grow into something big. I will need everyone's support for this!

In a Dec. 2009 blog he writes that he quit his job at NEXWAY to focus on the new hosting firm, writing:

2009: finally, while in Japan, creation of K.K. Tibanne. I believe past experience have taught me many things including (but not limited to):

Working fulltime at the same time is a bad idea, unless there is a point in time where “things must work no matter what”. I resigned from my current work, and still have a few weeks there. I’m a bit sleep deprivated lately (mainly because I’m handling two works at the same time) but things are progressing at a good pace.

Having external investors is a pain, and can become a risk when they start to have their own ideas about how the company should be run while they were silent for the mast months and have no idea of how webhosting works...

Tibanne's first big buy was Mt. Gox, which Mr. McCaleb allegedly parted with for a few hundred thousand dollars. 

MtGox
Mt. Gox, circa 2012

Mt. Gox quickly rocketed to the top, dominating roughly three-quarters of Bitcoin transactions, by late 2011.  But it also suffered a major breach when in June 2011 a hacker used SQL injection to dump Mt. Gox's login database and then proceeded to crack the unsalted "weak" MD5 hashed passwords


Bitcoin drop
The 2011 hack of Mt. Gox triggered a plummet in trading prices. [Image Source: LeanBack.eu]


At the time of the hack Mt. Gox handled nearly 90 percent of the $130M+ USD of existing Bitcoins (in exchange rates of the time).  After the hack Mt. Gox lost some customers, but others stuck with it after it pledged to adopt better security measures.  Between 2012 and 2013 it became a trusted brand, handling Bitcoin accounts cumulatively worth literally hundreds of millions of dollars.

III. Signs of Trouble

But Mr. Karpelès own journal is telling.  In it he writes:

I never finish anyth…
In fact, sometimes, I happen to finish something, but “finishing something” is just too boring. I always do a new version at some point, so nothing is really “finished”. Just tag it with a version number and continue it (already got this thinkgeek tshirt).

Indeed, after ascending from everyday developer into CEO of a digital currency corporation worth millions, the floor began to fall out.

Mark Karpeles
After accumulating a quarter-billion dollar fortune, Mt. Gox CEO has reportedly vanished from the digital doman. [Image Source: Reuters]


In 2013 Mt. Gox began to shut down periodically for "cool off" periods, always claiming some glitch or another.  More troublingly, when customers asked to withdraw their holdings, it would take weeks, months even to repay them.  Some reportedly were never paid at all.  Mt. Gox again blamed computer glitches, and offered a controversial "expedited" withdrawal scheme, if customers would pay it additional processing fees.

Meanwhile Mt. Gox was also facing serious real-world costs.  In May 2013 startup CoinLab filed a $75M USD lawsuit against it in the U.S. for breaching a contract to not compete with CoinLab's licensed Mt. Gox trading portal for the U.S. market.  Later that month the U.S. Department of the Treasury seized an estimated $5M USD in accounts belonging to Mt. Gox's owners.

Mt. Gox card
Mt. Gox was running up a bill it couldn't pay off. [Image Source: CoinDesk]

Some of these funds were reportedly returned by the Financial Crimes Enforcement Network (FinCEN) -- the enforcement arm of the Treasury -- after Mt. Gox registered in June 2013 as a money exchange, agreeing to file paperwork and finally crack down on overt money laundering.

A release to customers at the in December 2013 noted the company had only a million current customers -- less than an eighth of the accounts that were registered with it in 2011.

IV. Mt. Gox and "Malleability"

Despite all those warning signs many continued to trade on the portal, which in January accounted for roughly 19 percent of total Bitcoin traffic, behind only BitStamp and btc-e.  And Mr. Karpelès had a prestigious spot on the Bitcoin Foundation's board, one of only three elected industry members.

On Feb. 7 Mt. Gox halted trading. We were the first major outlet to report this halt for what it was -- a digital bank run.  Mt. Gox was clearly unable to pay its customers, but it wasn't until early this month that it came up with a perhaps plausible explanation of where the money had gone -- malleable transactions.

Bank Run
A bank run in Berlin in 1931 draws a panicked crowd. [Image Source: Biln]

The Bitcoin Foundation Chief Scientist Gavin Andresen discussed this earlier this month, stating:

The issues that Mt. Gox has been experiencing are due to an unfortunate interaction between Mt. Gox’s implementation of their highly customized wallet software, their customer support procedures and their unpreparedness for transaction malleability, a technical detail that allows changes to the way transactions are identified.

This had been first hinted at in August 2013 when Mt. Gox admitted it was in serious financial trouble, saying it had seen "significant losses" from unfulfilled transactions.  Now the details of these issues were growing.

V.  The Empire Falls

This week the bottom of the rotting boat finally fell out.  Mr. Karpelès resigned from the Bitcoin Foundation board post (becoming only the second member of the three person board to do so in the last month).  And Mt. Gox shut down.

Mt. Gox

Ryan Selkis on Monday posted a document leaked from Mt. Gox which seemed to imply that the site lost -- roughly 6 percent of Bitcoins in existence -- nearly 750,000 Bitcoins over the past few years after being victimized by "theft" from users exploiting the transaction malleability.

The document reads:

For several weeks MtGox customers have been affected by bitcoin withdrawal issues that compounded on themselves. Publicly, MtGox declared that “transaction malleability” caused the system to be subject to theft, and that something needed to be done by the core devs to fix it. Gox’s own workaround solution was criticized, and eventually a fix was provided by Blockchain.info. The truth, it turns out, is that the damage had already been done.

At this point 744,408 BTC are missing due to malleability-related theft which went unnoticed for several years.

The cold storage has been wiped out due to a leak in the hot wallet. The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly. At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public.

The document indicates that Mt. Gox has only $22.34M USD in the bank and 2,000 bitcoins in a hot wallet to try to cover the 624,408 Bitcoins (BTC) customers have deposited.  At current exchange rates that indicates a $335M USD worth pool of user coins could be lost -- or at least rendered unusable for a long time, at least -- due to the theft of roughly $400M USD worth of Bitcoins.

MtGox Situation: Crisis Strategy Draft by twobitidiot



The losses allegedly occurred as Mt. Gox wasn't keeping up with changes to the Bitcoin protocol and somehow failed to notice as it slowly lost lost 99.7 percent of its Bitcoins -- virtually all of its digital currency pile.

Amazingly, the document appears to be authentic.

But if Bitcoin investors are hoping for a bailout they're not likely to get one.  Japan's Financial Services Agency (FSA) -- the nation's financial regulatory body -- said this week that it will likely not intervene on Mt. Gox's behalf, as it would for a normal bank.

VI. Mark Karpelès -- a Thief, or Just Reckless and Foolish?

The leaked document has not been confirmed authentic, as Mt. Gox has refused to publicly comment on the issue.  But multiple major outlets have suggested it appears to be the real deal.

As for Mt. Gox, Mr. Karpelès reportedly is preparing to publicly bow out, via some form of mea culpa, such a "Letter from the CEO" ("Hey, about your money... we won't be getting it to you.  Sorry!")  The site is reportedly going to be branded Gox.com -- a URL Mr. Karpelès' Tibanne recently bought.  It will possibly move to another country like Singapore, firing most of its current staff in Japan.  Yet despite all of these superficial changes mentioned in the plan, there's no indication that Mr. Karpelès' Tibanne will relinquish control of the firm.

Mt. Gox
Did Mt. Gox CEO Mark Karpelès
steal peoples Bitcoins?  And why hasn't he offered to put his own money on the line to repay his customers? [Image Source: Reuters]

A post to the site's code, commented:

<!-- put announce for mtgox acq here -->

...but no announcement has yet been posted, raising questions of whether Mt. Gox is simply playing the press.  Even if Mt. Gox is "acquired", it's possible this could simply be some elaborate ploy on Mr. Karpelès' part to retain control via shell companies.

The real question I think everyone should be asking is whether Mr. Karpelès simply exploited the vulnerability he observed to steal all this money himself, leaving his company bankrupt.  Either this savvy coder -- who helped to maintain public PHP tools -- was stunningly stupid when it came to avoid exploitation, or he was the exploiter

Mt. Gox Burning

In October Mr. Karpelès became "CEO" of Shade 3D a startup that is looking to make 3D glasses.  According to Twitter:
Did Mr. Karpelès stealing hundreds of millions from unscrupulous Bitcoin fans?  Or was he too a victim, losing his grasp on a business bigger than he would ever have dreamed of owning?

We may never find out.  But even if Mr. Karpelès did NOT steal customers' Bitcoins, he has yet to put any of his own fortune -- via his Tibanne holdings and his new Shade 3D business -- on the line to try to repay customers.  Even if Mt. Gox was the victim, at best it is reckless and selfish in leaving customers on their own to deal with the losses.

In recent weeks the embattled CEO has been heckled by protesters outside his office in Tokyo.

Mt. Gox protester
[Image Source: Reuters]

 
Mt. Gox protester
Protester confronts Mark Karpelès on his way in to the office. [Image Source: YouTube]



Since then he has reportedly disappeared -- not coming in to work at normal hours.

VII. As Bitcoin Circle Wagons, Mt. Gox's Original Creator Celebrates Rising Star

Somewhere Mr. McCaleb must be taking in the latest development in the rollercoaster of emotions that must have struck ever since he decided to sell Mt. Gox.  After all, he reportedly didn't make that much off the sale and for a time it looked like he missed out on his ticket to fame grandeur.

But with $3M+ USD in venture capital in hand from angel investors, he now has a digital payment system of his own -- Ripple.  Today Ripple is worth $1.7B USD -- more than any other digitial cryptocurrency aside from Bitcoin, with investments from -- among others -- Google Ventures, the venture capital wing of Google Inc. (GOOG). 

And Mr. McCaleb, who has recently gone on to other ventures, is among three-cofounders to hold 1/5th of Ripples (XRP) in existence -- 20B XRP.  That's roughly $270M USD at present.  So Mt. Gox's original founder certainly isn't hurting for cash, and unlike his fallen creation, his reputation is intact.

In a sense Ripple, while encryption protected, isn't a traditional cryptocurrency.  Where as most cryptocurrencies operate on proof of work or proof of stake, Ripple is described as a consensus ledger of trust.  The nature of the implementation makes it harder to place fraudulent transactions than with Bitcoin.

That statement will likely be put to the test, as will the survival ability of the world's largest cryptocurrency -- Bitcoin.

Losing $300M USD?  That's enough to sour even the most die-hard Bitcoin fans to the currency.  Unsurprisingly, the top exchanges have huddled together trying to promise that the currency is reliable and safe.

Bitcoin tragic violation of trust

Sure.  It's easy to say that now. But wait until the next exchange collapses leaving customers guessing whether it was a Ponzi scheme, or simply apallingly reckless. 

Bitcoin fans wanted an unregulated currency free from government intervention?  Well that's what they got.

Sources: The Bitcoin Foundation [1], [2], Mt. Gox, CoinBase



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

Accurate description
By The Von Matrices on 2/25/2014 7:39:09 PM , Rating: 2
Thank you for posting an accurate description of the events. The transaction malleability issue is but a small part of this whole issue, yet in all other articles it gets blown out of proportion. Yes, Mt Gox lost hundreds of thousands of coins, but it was not in one single loss; rather, it was spread over time. Any competent accountant would have noticed that the balance sheets were repeatedly in the negative month after month and raised a red flag long ago. The idea that "they were unaware" is just complete lunacy. There was either a complete lack of management or it was in inside job. Neither one has to do with Bitcoin itself.




RE: Accurate description
By Reclaimer77 on 2/25/2014 7:51:38 PM , Rating: 5
I've been doing a lot of research, and have decided to reverse my position on Bitcoins.

Bitcoin, as well as EVERY current cryptocurrency, is a scam. Sorry, that's the facts.

This isn't to say I don't believe crytocurrency can't be made legitimate. Just that none currently are.

You create a new currency, mint yourself millions of it, get people using it so you can cash in when the value goes up. How convenient!

The biggest red flag is that nobody knows who came up with Bitcoin. Except some nameless person in Japan. Can we say Yakuza? And the biggest Bitcoin exchange, coincidentally based in Japan, just blew up.

Of course they were aware, you're right. Because Bitcoin was always a scam, this was inevitable.


RE: Accurate description
By Belegost on 2/25/2014 8:06:22 PM , Rating: 2
This may be one of the few times I fully agree with you.

This was a get rich quick scheme all around. Draw a bunch of people in on this "cool" idea of a regulation free currency that can be traded easily around the world, build up value and cash out. The very nature of the exponential mining difficulty increase, and the limited total number of coins scream that this was the plan from the beginning.

Cryptocurrency as an idea is fine, but the current implementations are a con.


RE: Accurate description
By Reclaimer77 on 2/25/2014 8:17:41 PM , Rating: 2
Yup. When you peel back the facade on cryptocurrency, you find all of them are pyramid schemes at their core.


RE: Accurate description
By piroroadkill on 2/26/14, Rating: 0
RE: Accurate description
By bsim50 on 2/26/2014 7:47:22 AM , Rating: 2
piroroadkill - "Fiat Currency is a ponzi scheme also, so I'm not sure how cryptocurrency differs."

Two wrongs don't make a right...


RE: Accurate description
By Reclaimer77 on 2/26/2014 9:24:45 AM , Rating: 1
I'm certainly not gonna go out of my way to defend current monetary policy, but you're using platitudes to say its also a ponzi scheme, and there's no differences.


RE: Accurate description
By therealnickdanger on 2/26/2014 9:47:34 AM , Rating: 5
I don't really care what it is, I'm just glad it's imploding. All I ever wanted is to pay normal MSRP for 290 CF. :P


RE: Accurate description
By gamerk2 on 2/26/2014 11:34:46 AM , Rating: 3
All currency is "fiat"; Gold has value because people believe it has value. The USD has value because people believe it has value.

Under your definition, all currencies are, in fact, ponzi schemes.

Why gold continues to be put on its pedestal in this day and age is beyond me...


RE: Accurate description
By Argon18 on 2/26/2014 11:59:09 AM , Rating: 2
"Why gold continues to be put on its pedestal in this day and age is beyond me... "

The number one consumer of Gold globally is the jewelry making industry. People want gold jewelry. It's shiny. So long as there is a demand for gold jewelry...


RE: Accurate description
By therealnickdanger on 2/26/2014 2:13:09 PM , Rating: 4
... in addition to its incredibly unique properties in applications of sciences, medicine, chemistry, and electronics.

At the end of the day, it all comes down to some dude trying to score with a chick that wants gold.


RE: Accurate description
By MrBlastman on 2/26/2014 3:29:27 PM , Rating: 2
And the chick always wins. She gets the gold in the end and the man is left holding his d@ck. :-|


RE: Accurate description
By Mint on 2/26/2014 3:45:14 PM , Rating: 3
We can make shiny stuff functionally and visually identical to gold jewelry at a fraction of the cost with other materials.

Gold's value is almost entirely psychological. We know it's relatively rare, and we think the historical trend of simply having ownership of it will continue for eternity.


RE: Accurate description
By superflex on 2/26/2014 4:24:34 PM , Rating: 2
So are you saying platinum, palladium, rhodium, gold and silver are not worth their value?

What do you think the cost is to mine an ounce of gold or silver?

http://www.zerohedge.com/news/2013-12-02/gold-tumb...

http://www.financialsense.com/contributors/steve-a...

Those prices are only going to continue to rise with shrinking oil supplies (rising fuel costs)and shrinking yields on mined precious metal deposits.

You may hate PMs, but you certainly don't understand the economics of mining or the scarcity of these reserves.

And if you think you can replace gold, silver, platinum, palladium and rhodium in industrial applications, your sadly mistaken. Might as well drop all your electronic devices as silver and gold are required to make them work (ever notice the gold leads on DIMMs and CPUs or the platinum, palladium and rhodium in a catalytic converter).

Keep on stacking. Fiat is for debt monkeys.


RE: Accurate description
By NellyFromMA on 2/28/2014 1:01:27 PM , Rating: 2
You're completely true, except those gains aren't going to be realized in your life time. Maybe not your grand childrens and only possibly under their own.

At that point, there's going to be a whole slew of other problems besides mineral resources.


RE: Accurate description
By superflex on 2/26/2014 5:16:25 PM , Rating: 2
quote:
We can make shiny stuff functionally and visually identical to gold jewelry at a fraction of the cost with other materials.

Care to support that argument?


RE: Accurate description
By Argon18 on 2/27/2014 12:26:51 PM , Rating: 2
"We can make shiny stuff functionally and visually identical to gold jewelry at a fraction of the cost with other materials."

Huh? You've somehow managed to create gold? The riddle that has perplexed alchemists for thousands of years? Doubtful.

But even if we could, it's a fake. not the real thing. Same goes for diamonds. You try giving your girlfriend a cubic zirconia ring set in fake gold. Let us know how that works out, lol.


RE: Accurate description
By Belegost on 2/27/2014 1:37:20 PM , Rating: 2
You know, diamonds are easy to make in a lab. I got my wife a 17 carat diamond pendant (biggest shiniest thing I have ever seen, comically large really) same crystalline carbon as would be pulled out of the ground, minus the threat to the lives of miners and warlords killing to control mines.

So the only difference between "fake" and "real" here is the difference in the minds of people who attribute some artificial value to the source of the item. The fact that the added value for a "real" diamond is essentially how much blood was spilled to bring it to market is a rather morbid commentary on society.


RE: Accurate description
By superflex on 2/26/2014 2:35:23 PM , Rating: 2
You need to understand the difference between currency and money.

One) Gold has been money for over 5000 years. No currency can make that claim.

Two) All currencies eventually go to zero. Not one has ever not gone to zero.
Gold has never gone to zero.

In other words, money is a store of value. Currency, not quite.

Keep stacking.


RE: Accurate description
By Reclaimer77 on 2/26/2014 3:49:45 PM , Rating: 1
What are we, Ferengi? We can't walk into a store and buy things with Gold-Pressed Latinum lol.

Gold isn't money OR currency. It's a commodity.

Barrels of oil have monetary value too. Can I go buy a car with barrels of oil? Of course not. So how are things like Gold and oil "money" exactly in the modern world?

There is NO difference between currency and money. I think the word you're looking for is "commodity".


RE: Accurate description
By superflex on 2/26/2014 4:36:31 PM , Rating: 1
You may want to look at Utah, Texas, Idaho and several other states that have said gold and silver are money and can be exchanged at banks and supporting stores.

"Gold is a commodity" is exactly what the FED wants you to believe.

Good job serf.


RE: Accurate description
By Reclaimer77 on 2/26/14, Rating: 0
RE: Accurate description
By superflex on 2/26/2014 5:27:57 PM , Rating: 3
quote:
Okay sure, so I'll just drive to one of those states at which point Gold becomes "money".

No need. You can drive to your local coin shop and they will gladly pay you fiat for your gold or silver.

quote:
This is kind of why we have a central currency backed by the Federal Government.

The FED is not a government agency.
"The Primary Owners of the Federal Reserve Bank Are:

1. Rothschild's of London and Berlin
2. Lazard Brothers of Paris
3. Israel Moses Seaf of Italy
4. Kuhn, Loeb & Co. of Germany and New York
5. Warburg & Company of Hamburg, Germany
6. Lehman Brothers of New York
7. Goldman, Sachs of New York
8. Rockefeller Brothers of New York

These wonderful people have America's best interest at heart. Don't 'cha know?


RE: Accurate description
By Reclaimer77 on 2/26/2014 5:30:17 PM , Rating: 2
quote:
No need. You can drive to your local coin shop and they will gladly pay you fiat for your gold or silver.


Yes, because it's a commodity. I cannot go to a restaurant and pay for my meal with a chunk of Gold! Sorry, you just can't.

It's.
Not.
Money.


RE: Accurate description
By Belegost on 2/26/2014 8:19:31 PM , Rating: 3
I'm not sure what's hard about that concept.

I can drive to my local sperm bank and get dollars for a cup of swimmers. But I can't walk into Macy's and pay for a new shirt by jerking it on the counter.

Just because something has value (can be traded for something else, generally money) doesn't make it money (can be converted to nearly anything)


RE: Accurate description
By atechfan on 2/27/2014 3:55:14 AM , Rating: 2
Now I want to try that.


RE: Accurate description
By rountad on 2/27/2014 7:55:17 PM , Rating: 2
If you did that at Macy's and accidentally "overpaid", would you ask for your change? :-)


RE: Accurate description
By sorry dog on 2/28/2014 12:04:15 AM , Rating: 2
quote:
1. Rothschild's of London and Berlin 2. Lazard Brothers of Paris 3. Israel Moses Seaf of Italy 4. Kuhn, Loeb & Co. of Germany and New York 5. Warburg & Company of Hamburg, Germany 6. Lehman Brothers of New York 7. Goldman, Sachs of New York 8. Rockefeller Brothers of New York


I have my doubts about that list... especially considering Lehman kinda sorta don't exist no mo'.


RE: Accurate description
By Argon18 on 2/26/2014 11:56:30 AM , Rating: 2
" Fiat Currency is a ponzi scheme also, so I'm not sure how cryptocurrency differs. "

Not really. Fiat currency is backed by two things: the GDP of the population, and the military that protects that population. So long as the population is productive, and protected from harm, the value of the Fiat is ensured.


RE: Accurate description
By Belegost on 2/26/2014 1:45:22 PM , Rating: 2
Fiat currencies also have value because that is only what the government will accept to pay taxes, and it is the form of payment for work rendered to the government.

Further because law requires that any legitimate business accept the currency as payment of all debts - if a business wants to operate in the US they must accept dollars or risk having their right to do business revoked. Replace the US with any other stable country, and dollars with their local currency, and this holds true.

Modern fiat currencies are not just an agreement of value, but a legally enforced agreement of a common payment token. It will take value and stability from the economic strength of the country(ies) using it.


RE: Accurate description
By superflex on 2/26/2014 2:59:47 PM , Rating: 1
Not quite Argon.

The fiat dollar (petro-dollar) is backed by the value of crude oil reserves, which is strictly traded in USD.
Once the US abandoned the Bretton Woods system in 1971, Kissinger and the House of Saud came to an agreement to back the now 100% fiat dollar with the faith of the Saudi petroleum reserves.

Iraq and Lybia most recently tried to trade oil for gold or oil for Euros and look where it got their leaders. One got hung and one got sodomized by the FED henchmen.

Why do you think Iran is on the USA shit list? It aint because of their centrifuges.

You're not going to learn how the fractional reserve banking system works by overclocking your computer and talking smack about nVidia or AMD.


RE: Accurate description
By Argon18 on 2/26/2014 4:19:59 PM , Rating: 2
That's tin-foil hat nonsense. Yes oil is traded in US Dollars, but there's plenty of countries in the world arguing that it should be a basket of currencies. Saudia Arabia is a vocal advocate for keeping the US Dollar as the oil trading currency.

And none of this has anything to do with the value of a fiat currency.

The former leaders of Iraq and Libya were mass murderers. They got what they deserved. Fiat currency not part of that equation.


RE: Accurate description
By superflex on 2/26/2014 4:29:49 PM , Rating: 2
Yes and things are so much better in Iraq and Lybia without those leaders /s
Keep on believing what the media tells you.
You're probably one one the thousands of fools who re-tweeted the phony Sochi toilet pictures as well.
Good job serf.


RE: Accurate description
By Argon18 on 2/27/2014 12:29:43 PM , Rating: 2
Lol u mad bro? Or is your tin-foil hat on crooked today? Ask the Illuminati for guidance my son.


RE: Accurate description
By superflex on 2/26/2014 4:50:41 PM , Rating: 2
Or are you an online spook here to drive opinion for your masters?

http://www.zerohedge.com/news/2014-02-24/conspirac...

Sorry, I give you too much credit. Your just a pathetic Magic, The Gathering/WoW type of guy, right?

Hot Pockets and Capri Sun for everyone.


RE: Accurate description
By atechfan on 2/27/2014 4:09:09 AM , Rating: 2
The reason the US backs people like Hussein and Khadafi is because the areas of the world they live is are still ruled by a backwards, barbaric religion and a murderous dictator is preferable to Islamacist Jihadists any day.


RE: Accurate description
By SPOOFE on 2/25/2014 9:27:34 PM , Rating: 2
quote:
This isn't to say I don't believe crytocurrency can't be made legitimate. Just that none currently are.


Now that is a good assessment of the situation, in my opinion.


RE: Accurate description
By g35fan on 2/25/2014 10:21:08 PM , Rating: 5
The nameless creator of bitcoin is the biggest red flag you say? You sir, fail.

If "Satoshi" identified himself/herself/themselves, either in 2009 or right now, bitcoin wouldn't be what it's become. The press would have a field day digging for dirt on him/her/them. Satoshi got a parking ticket = bitcoin is a scam. Satoshi failed 8th grade math = bitcoin is a scam. Governments and people would sue and pester him every day of his life there is no doubt about that.

The only logical way to avoid this was to take himself out of the equation completely. I'm not 100%, but I think Satoshi has 1 million btc from the very beginning...which have sat in the same account and have never been transferred or spent (even when the price hit $1k USD+). If he did spend it in the future - it would be traceable so I highly doubt that will happen.

So tell me, what "research" have you done? Most of the negative comments on here are clearly from people who don't understand bitcoin...and that's ok...because very people take the time to truly understand what's behind bitcoin and the potential it can bring to the people.

I do agree with your statement that a lot of alt-coins are scams where the creators premine coins and hope to pump and dump. But bitcoin is different, and cannot be lumped in with 99% of the other crypto's out there.

Anyways, a lot of BS comments to this story. People are afraid of what they don't understand and are quick to bash it.

No matter if you agree or disagree with what I say, I encourage everyone to read this short article on CoinDesk titled, "How Cash Would Be Seen by the Media if Invented Today". It's an interesting and fascinating read: http://www.coindesk.com/cash-invented-seen-media-t...



RE: Accurate description
By Reclaimer77 on 2/25/2014 10:49:23 PM , Rating: 2
I'm as anti-Government as you'll find on Daily Tech. Maybe on the entire Internet lol.

But look, Bitcoin is a scam, plain and simple. I used to support it, because I liked the idea of it. But the reality is different from the ideal.

It's a pyramid scheme, in the most pure sense. And just like pyramid schemes, sure, there are people who have made money. That doesn't validate the scheme though.

As far as that website, look, clearly it's an extremely biased pro-Bitcoin website. Preying on peoples ideology and using hyperbole and metaphor, but very thin on facts.

And for the record, I don't feel Bitcoin should be shut down by any Government. People have a right to set items at whatever value they see fit, and barter or trade amongst themselves. However there are laws about frauds and scams, and Bitcoin is probably going to be running afoul of these very soon. As a bunch of people wake up to find their "investments" just went up in a puff of smoke.


RE: Accurate description
By Reclaimer77 on 2/25/2014 10:56:58 PM , Rating: 2
quote:
The press would have a field day digging for dirt on him/her/them. Satoshi got a parking ticket = bitcoin is a scam. Satoshi failed 8th grade math = bitcoin is a scam. Governments and people would sue and pester him every day of his life there is no doubt about that.


And this seems like a really pathetic cop-out. No offense, but people have put themselves out there and launched WAY more controversial things than this.

We know Elon Musk, we know Bill Gates, hell we even know the scumbags running Monsatto!! So why the fu*k don't we know who started Bitcoin???


RE: Accurate description
By Lerianis on 2/25/2014 11:22:50 PM , Rating: 2
Way more controversial? Have to disagree there. Under the sun, the only thing that has been more controversial than Bitcoin is TOR.

Both are things that can be used by criminal organizations to avoid monitoring by the police. Both are things that can be used by the paranoid or just the "Gubmint should not know everything I do!" people to buy things online pseudo-anonymously or actually anonymously.

Should I keep on going?

The fact is that this guy was very smart to keep himself as a nameless, faceless figure up until recently.


RE: Accurate description
By Manch on 2/26/2014 4:49:22 PM , Rating: 2
Umm TOR was developed largely by the US government. Specifically the US Naval Research Center, so why people think its a great way to hide from the gubmint is beyond me.


RE: Accurate description
By superflex on 2/26/2014 4:58:02 PM , Rating: 2
Ding, ding, ding. We have a winner.

BTC (and Satoshi) are NSA creations, but dont tell the techno-dweebs that. They will get their Pokemon undies in a bunch.


RE: Accurate description
By atechfan on 2/27/2014 3:58:10 AM , Rating: 2
How'd you know I have Pokémon undies? Have you been spying on me?


RE: Accurate description
By Argon18 on 2/27/2014 12:31:44 PM , Rating: 2
"BTC (and Satoshi) are NSA creations"

You sure it wasn't aliens? Perhaps Elvis, back from the dead? Remember kids, Al Gore created global warming thousands of years ago so he could profit from it today.


RE: Accurate description
By g35fan on 2/25/2014 11:38:26 PM , Rating: 2
Everyone is entitled to their own opinions, I just didn't agree with your comment regarding the anonymity of the creator(s) of bitcoin being a red flag for the reasons I stated. If you think my reasoning is a cop out then fine, but just think about it, and think about the potential scale if it does one day become adopted by the masses. Satoshi's religion, ethnicity, sexual preferences, everything about him would be attached to bitcoin forever.

I also really don't think the examples you state of knowing who Musk & Gates are is a good comparison in this situation.
I'm not sure what you can compare bitcoin's anonymous creation to...but if bitcoin is legit and is what it claims to be, we're talking about a decentralized internet currency/commodity...and there hasn't been anything similar of this scale to date. Comparing that to a private or publicly traded company with a retail location isn't a good comparison in my mind.

I'm pro government (not a fan of big gov, or spying gov tho) and I'm pro regulation for bitcoin. I think it needs it if there's any chance of more adoption. If bitcoin ends up being squashed by the US government or fails for whatever reason, at the very least I hope it's given the banking industry a wake up call. That includes Visa/MC...

And yes, that article on Coindesk I posted...That site is pro-crypto that's obvious. The article I linked to isn't to be taken too seriously obviously. It made me laugh, and it's just a fun read and fun to think about - especially if you've been keeping tabs on bitcoin news and how ridiculous some of the FUD stories by the media are.


RE: Accurate description
By Reclaimer77 on 2/26/2014 1:20:43 PM , Rating: 2
Uhh if you don't know who came up with it and who's calling the shots, who do you hold responsible when something goes wrong?

Come on this is silly. Its a huge red flag obviously.


RE: Accurate description
By g35fan on 2/26/2014 2:15:06 PM , Rating: 2
I think it would depend on what goes "wrong" to answer your question about who would be held responsible.

Unless a major flaw is discovered in the bitcoin protocol, pretty much the only person who will be responsible for your bitcoin is YOU yourself. You are your own bank and you secure and encrypt your own bitcoins.

Leaving bitcoins on an exchange is a terrible idea obviously. You don't actually own your coins unless you have the password. Some people were just trapped and weren't able/allowed to withdraw from MtGox...and MtGox will deal with the consequences once all the facts come out. MtGox received a subpoena from the US-DOJ and Japan is about to come down hard on them. Something went wrong with MtGox, and someone will be held accountable in this situation. On top of that, people will learn and new, more secure exchanges with transparency will open soon and bitcoin will choo-choo down the tracks regardless if you are for it or against it.

I think it's worth noting that Satoshi said in 2009 that within 10 years (2019), bitcoin will either be widely adopted or will not be used at all. It's just passed 5yrs, the 1/2 way point, and IMO it's looking pretty darn good for bitcoins mass adoption possibility.


RE: Accurate description
By atechfan on 2/27/2014 4:00:52 AM , Rating: 2
Keep telling yourself that. Meanwhile, Bitcoin prices continue to drop, and scandals keep mounting.


RE: Accurate description
By Samus on 2/26/2014 12:41:51 AM , Rating: 2
In the end, it isn't what backs a currency (cryptography, gold) but who backs a currency (government) that matters.


RE: Accurate description
By javiergf on 2/26/2014 2:03:34 AM , Rating: 2
I agree, but if you think about it, any cryptocurrency is as much as a scam as any goverment printed money.
The US dollar used to be a piece of paper that you could use to redeem one ounce of gold, then first in 1913 and then in 1972, it came off the gold standard. Now is just FIAT, so basically is a just something that the goverment says it has some value, but the only real value of the dollar is that for the energy of the world, Oil, is the currency used on the transactions. Same goes for the Euro, Yen, and pretty much anything.
And same goes to who makes the money on this scam, in this case the primary dealer banks, their executives gets all the millions in bonuses.
Want something that will hold value? Buy land, not real state, buy gold, silver and platinum.


RE: Accurate description
By Nagorak on 2/26/2014 2:15:03 AM , Rating: 2
A currency is backed by the economy of the country that prints it. That's more valuable than gold or silver or some other nonsense.

You can use dollars to purchase goods in any part of the United States, and in fact also in many other parts of the world. The dollar has value, because people know that it's accepted as the unit of exchange in the U.S. economy.

It's incredibly ironic that people promote bitcoins with talk about how "paper" currencies are worthless because they aren't backed by anything. Their "solution", bitcoin, is even worse in that regard. It is literally backed by absolutely nothing. Not gold, not silver, not a functioning economy, not military might, nothing.


RE: Accurate description
By BansheeX on 2/26/2014 4:56:09 AM , Rating: 2
Unfortunately, the economy can be adversely affected by overprinting, making fiat a poor choice doomed to failure as evidenced by hyperinflationary episodes throughout history, including the Continental. The power to issue what everyone else has to work for will always be abused and become political. Far better to use an element like gold to eliminate any possibility of that.

The USA is on the verge of a debt crisis as we speak, can't even raise interest rates to normal levels without blowing up our borrow-and-spend "economy". So much for the dollar, unless you believe that we can just hold down rates eternally.


RE: Accurate description
By superflex on 2/26/2014 3:48:34 PM , Rating: 1
The value of the M3 money supply vs the amount of gold "held" in Ft Knox means gold should be around $12,000/oz. That's an amount I'd love to see but that value also removes all the faith in the USD, hence why the FED and their primary dealers suppress the price of silver and gold.

Most of the funny money Benny and the FED have printed over the last 4 years has been exported throughout the world (emerging markets), along with the inflation which comes with increasing the money supply. Remember, inflation is not an increase in consumer prices but an increase in the money supply.

My do you think India, Russia, Brasil, Argentina and Venezuela have such crippling inflation and unrest?

Once those citizens and governments realize the FED is not only fucking us but also them, that money supply comes back home to the US home and inflation here in the states takes a moon shot.

While I am a gold bug, I dont believe a gold standard is the answer. I believe a combination of energy (joules), PMs and possibly the SDR should be the backing for the next reserve currency.

That and ending the FED and hanging all the globalists bankers that perpetrate the debt/money scheme.


RE: Accurate description
By superflex on 2/26/2014 5:07:50 PM , Rating: 2
You pussies have the nerve to junk me but you cant defend you down arrows. Somebody presents a differing opinion to what you're been spoon fed by the media, and you break out the tin foil hat moniker.

The manipulation of the PMs markets by the central banks is a known fact to those who study world economies.

This site is populated with cowards who think overclocking their GPUs and rooting their Google supplied Android spy devices will get them laid.

Pathetic.


RE: Accurate description
By atechfan on 2/27/2014 4:11:27 AM , Rating: 2
The people doing all this money printing know exactly what they are doing. They want the world destabilized. Globalists have this idea they can do better, and want to bring a collapse so they can step in and take over.


RE: Accurate description
By g35fan on 2/26/2014 10:36:51 AM , Rating: 2
Your post doesn't make much sense. The whole premise of bitcoin is that it is decentralized and NOT backed by a government/economy.

Bitcoin is backed by math, by a public ledger, and by the network of people all across the world who use it, mine it, speculate, build businesses and infrastructure around it.


RE: Accurate description
By bsim50 on 2/26/2014 10:54:18 AM , Rating: 2
His post makes perfect sense. In reality, Bitcoin isn't "backed" by anything at all other than being able to calculate a lot of prime numbers which has zero intrinsic everyday value to the average person. Everything else is simply believing it has value purely because others believe it, which is absolutely no different to "evil fiat"...

And being "decentralized" is great for criminals but again - value-less for the average person beyond feel-good Libertarian ideologies. Most people want a currency that's actually stable from day to day.

As pointed out in another post, the absurdity of how intrinsically "value-less" Bitcoins are is that it costs $15m per day / $5.5bn per year in electricity alone to mine new BC's (Dec 2013) whilst the 12.5m Bitcoins in circulation x $400 are only worth $5bn in combined value (after all these years of mining)...


RE: Accurate description
By g35fan on 2/26/2014 3:06:36 PM , Rating: 2
Bitcoin is backed by math, the huge network of people all over the world that is growing every day, and it is backed by the public ledger.

This public ledger, this transparency, it's just unlike anything ever created and you can say this or that, but comparing a traditional currency backed by a government to bitcoin is like comparing apples to oranges.

I won't presume to know what world wide domino effects a crash of the US economy would entail, but if it did crash, and $1 USD is then worth $.10, would you still have that faith? If in 10 years the Yuan is the dominate world currency that everything is based off of, and the US in the same position as the inflating Argentina peso, would you still have that faith?

I think the singular most important backing of the USD is the military force behind it...followed secondly by the complex connections of the US economy to the world economy and the people who run it and have the most to lose will keep that system in place at all costs. I'm not anti-gov at all, I think it would be a disaster if the US economy collapsed...personally I just dislike the trust factor. We have to trust the 1% who have shown time and time again that they are not trustworthy. That's what it comes down to for me.


RE: Accurate description
By bsim50 on 2/26/2014 3:57:43 PM , Rating: 2
"Bitcoin is backed by math" is totally meaningless by itself. It's no different to the Federal Reserve creating $1tn more money on the back of "because 1+1=2" or "Pi = 3.14159...". Money doesn't derive value from how many prime numbers you calculate which has little intrinsic value as a list in itself other than rare huge prime number research projects, zero real-world effect on the average person, and zero relation to the price of everyday goods & services or industry.

Large Prime numbers were calculated long before Bitcoin even started and the $ value utility of a list of larger prime numbers is not much outside of a few university's maths departments. Missouri university calculated prime to 17 million digits as a purely internal project. How much is another research institute going to pay for that list? A few thousand bucks at most. So why should Bitcoin's similar list of prime-numbers be worth several billion dollars simply because "investors" want to believe it?...

Most usable prime numbers are free. 2, 3, 5, 7, 11. There I've given you 5 for nothing. That's $10 each please. How about $1? How about $0.01? LOL. Prime number calculations are so common, they're simply not worth anything as a list of numbers in and of themselves.

"the huge network of people all over the world "

which as explained is nothing more than "other people's faith".

The examples you give that reveal the same stark lack of knowledge of currencies in general as people who pile into Bitcoins on the back of "I hate the Fed".

So "The USD is going to collapse" because the Federal Reserve have printed $11tn USD's, yet the Yuan "will become the world's leading currency" even though China have printed over 112 TRILLION of them?

You sound like one of those people who falsely believes the USA has created the largest quantity of local currency units on the planet out of all proportion to other countries. Not even close:-

Large country's money supplies:-

China - 112tn Yuan
Russia - 29tn Rubles
India - 20tn Rupee
USA - $11tn Dollars
Eurozone - €9.2tn Euro's.

etc, etc. And that's ignoring genuinely hyper-inflated currencies like the Indonesian Rupiah (3,728tn printed) or South Korean Won (2,613tn Won). In terms of "overprinted currencies" as a factor of money supply divided by population or GDP, the USD isn't even in the global top 20.

Bitcoins on the other hand are absurd. The world essentially "pays" more in electricity costs alone EACH YEAR to mine increasingly fewer new coins than the total sum value of the currency of all bitcoins mined over the past 4 years!

That's as utterly stupid as blowing $2tn EACH YEAR on gold mining equipment just to mine $5bn more gold each year to add to global gold bullions reserves that are only around $1.4tn in total (that's taken decades / centuries to cumulatively mine)...


RE: Accurate description
By g35fan on 2/26/2014 5:16:14 PM , Rating: 2
You make some great points, but when I said "backed by math" - I meant more along the lines of the mining of bitcoin being backed by math and the set amount that is created over time/difficulty. I know I wasn't 100% clear about that in my previous post but do you understand what I was trying to say now?

quote:
So "The USD is going to collapse" because the Federal Reserve have printed $11tn USD's, yet the Yuan "will become the world's leading currency" even though China have printed over 112 TRILLION of them?

I didn't say the USD is going to collapse. I used it as an example and as a question that if it did, would you still have faith in it? In the system? If your $10,000 USD was worth $1,000 USD tomorrow. And I was using that example of faith regarding how bitcoin has nothing backing it but the "faith" of those who back it.

I honestly don't know much about real world currencies, like most people I assume. I only really began to become interested and learn more about the subject once I started researching bitcoin. And it really sounds like a delicate mess that could possibly unravel at any time. I don't want that to happen though and I'm not on here saying buy btc, I only said research it for yourself.

I'm not trying to come off as some crazy person here...I'm just surprised that the majority of commenters on this site appear to be anti-bitcoin. I'd have thought that tech geeks are the most likely to know about and to have researched bitcoin and be interested in it. Regardless if bitcoin or some other alt-coin survives or not, you have to admit the technology itself and it's potential for the future is very cool.


RE: Accurate description
By bsim50 on 2/26/2014 6:07:39 PM , Rating: 2
quote:
"You make some great points, but when I said "backed by math" - I meant more along the lines of the mining of bitcoin being backed by math and the set amount that is created over time/difficulty."

Yes I understand what you're saying but it's still entirely based on circular "logic" : Bitcoins have a value because they're 'backed by maths' and yet the maths is entirely self-justifying and solves no real-world problems that have any real-world economic value attached to it other than to justify the existence of the Bitcoin! All the time/difficulty thing does is stop Bitcoin from inflating - it doesn't given existing Bitcoins any intrinsic value any more than 21m bottle-caps which are "proven" to be "valid" via maths & physics...

Ultimately, it's like "backing the US Dollar" with USD bank-note verification machines, which only exist because the USD exists... What you say is "backed" is really just self-verification, not any actual value backing. You can't "back" any currency with itself.

quote:
"I'm just surprised that the majority of commenters on this site appear to be anti-bitcoin. I'd have thought that tech geeks are the most likely to know about and to have researched bitcoin and be interested in it."

Probably because most people understand the "cure" for inflation of an unbacked fiat currency is not perma-deflation of an unbacked digital currency in the middle of a speculative bubble...

Likewise, with a maximum possible 21m Bitcoins, for the USA alone (320m people) that means there'll only ever be enough currency for just 7 cents average per person - which is even more of a problem than the USD inflating as it'll never be liquid enough to be a stable currency or treated like a currency, and is just a gimmick that only works when only a very few geeks use it.

If you tried the same with any national currency you'd simply end up with a permanent liquidity crisis and Great Depression (far, far worse than the 1930's) because there's a lot more to currencies than just "inflation paranoia"...

Right now the Bitcoin community are spending virtually $5.5bn on electricity costs each year in order to mine a tiny fraction of that in new coins. As mentioned previously, it's as dumb as spending $2tn per year on gold mining technologies in order to extract $5bn per year in gold.

It doesn't even pay for itself on a macro level and is probably the dumbest and most wasteful possible way of creating money. Far more efficient to just print 21m banknotes of a new private currency with high-security features, then just completely destroy the printing plates and related designs which will have exactly the same effect of preventing that from inflating without wasting $5bn per year driving up the prices of graphics card & electricity bills... LOL.


RE: Accurate description
By superflex on 2/26/2014 3:09:46 PM , Rating: 2
Someone gets it.
Currency = Debt
Money (gold/silver) = Freedom
Unfortunately real estate is only as good as the property taxes paid on said land. If you dont pay your annual taxes, the land aint yours.
Now's a great time to buy a house says the parasite Realtor.


RE: Accurate description
By Argon18 on 2/27/2014 12:36:00 PM , Rating: 2
I trade only in pork bellies. Traded a dozen pork bellies today for 6 gallons of gas, a ream of paper, and a baguette! Who needs real money! the belly of a pig is all you need! Free yourself!


RE: Accurate description
By TheDoc9 on 2/26/2014 11:04:03 AM , Rating: 2
Yeah I agree, it's a classic pump and dump/ponzi. Hopefully too many people didn't lose their life savings in this.

A lot of times these guys feel a little guilty and act like they're doing everything they can. I'm guessing he'll run eventually though.


RE: Accurate description
By Zak on 2/26/2014 4:14:22 PM , Rating: 2
"You create a new currency, mint yourself millions of it, get people using it so you can cash in when the value goes up. How convenient!" -- yeah, no kidding, most brilliant scam in history. I was always wondering the same thing: you created the currency, so you've mined a crapload first. The whole thing smells of get-rich-quick scheme.


RE: Accurate description
By Reclaimer77 on 2/26/2014 5:13:52 PM , Rating: 1
quote:
"You create a new currency, mint yourself millions of it, get people using it so you can cash in when the value goes up. How convenient!" -- yeah, no kidding, most brilliant scam in history. I was always wondering the same thing: you created the currency, so you've mined a crapload first. The whole thing smells of get-rich-quick scheme.


Exactly. I just don't understand how people see it any other way.

People say it's a "good" thing the creator of Bitcoin is anonymous? Well I tell you one thing, I bet whoever it was is one rich son of a bitch right now.

Not that I mind entrepreneurship. But when the obvious goal is to scam people...


RE: Accurate description
By idiot77 on 2/28/2014 5:11:54 AM , Rating: 2
You cop out. LIBRETAEISM!!!!!oneexcalmationpoint

FREE MARKET ORGY!

Oh wait, none the nonsense you spew makes sense.

Admitting it is the first step.


RE: Accurate description
By EricMartello on 3/3/2014 4:11:00 PM , Rating: 2
The idea of a 'cryptocurrency' as a replacement for physical coins, bills and credit cards is fine - so long as said currency is backed by an entity with both globally recognized authority and an economic foundation that can support the quantity of currency in circulation.

What bitcoin and its copycats attempt to do is create a currency for the sake of creating a currency. It is literally the same as a poker chip - zero value outside of the casino that issued it.

I really feel no sympathy for the gullible idiots that spent real money to by sh1tcoins and now got scammed out of it. They were warned, they chose to cling to beliefs instead of fact so they deserve all they get.


RE: Accurate description
By inperfectdarkness on 2/27/2014 8:08:08 AM , Rating: 2
The fundamental problem with Cryptocurrency is lack of oversight. That in itself makes accounting and review a monumental if not impossible task.

So I have serious doubts if any Cryptocurrency will ever overcome this very significant drawback.


LOL!
By chizow on 2/25/2014 9:02:48 PM , Rating: 4
While I do feel somewhat sorry for some of the suckers who poured (and lost) actually money into this obvious Ponzi scheme, I can't help but say it serves you right. This is what banks are for, and this is why you need a government to back any given currency as LEGAL TENDER. If this idiot tried this with any government backed currency he would be tried for FRAUD plain and simple, and at the very least, creditors could go after his assets.

Instead, you have the equivalent of an online Dbag that ran off with the guild bank. Yep, I said it. Mt. Gox's roots in MTG are apropos as anyone who has played an MMO or any kind of online game, has heard some kind of story about some unscrupulous guild leader running off with their entire guild bank. Except in this case, it's REAL MONEY, and lots of it.

So, to sum it up. Get a real job, invest in the real stock/money markets, and only invest in government backed currencies/securities from politically/economically stable countries.

Also, anyone who spent even one word or sentence legitimizing this Ponzi scheme to friends, peers, family members who lost money owe them an apology. Losing your own money is one thing, adding to the pump/BS surrounding cryptocoins and contributing to the losses of others is another.




RE: LOL!
By Lerianis on 2/25/2014 11:26:36 PM , Rating: 1
No, we don't. The fact is that NUMEROUS organizations and banks fail and we do not say that they are 'ponzi schemes' simply because they fail.

They have to have certain hallmarks and I have yet to have a person point out those hallmarks in Mt.Gox, speaking as a person who owns NO Bitcoins at all.

The bigger thing that will happen here is that people will get smart and government will get smart, insisting on insurance for these exchanges whether they are dealing in Bitcoins or dealing in hard currency.


RE: LOL!
By Nagorak on 2/26/2014 2:33:27 AM , Rating: 3
First of all, people aren't saying Mt.Gox is a ponzi scheme (although it could have been a scam), they're saying that bitcoin is. It certainly fits the pattern, too. Something of value created from nothing. As the price goes up, people come flooding in. The first adopters make a lot of money. Those who came in later make a little bit of money. Then eventually the whole thing collapses, leaving the unlucky majority holding something completely worthless (the stage we're approaching).

As for the rest of what you said, I highly doubt you'll see any sort of insurance, and certainly not promoted by any government. Governments have no reason to help promote "currencies" other than their own, and I have a hard time seeing how they could even write a definition of currency to account for things like bitcoin.

Literally anything can be used as a currency. I could start trying to promote the use of bottle caps as a currency ala Fallout, or bottles of calcium supplements as a currency. In some times and places in the past, sea shells were a currency. As long as a few people agree to use something as a medium of exchange it can act as a currency. The definition has to be so broad to account for things like bitcoin that there's no way a government will be able to identify it as a currency. And, as I noted above, they certainly have no incentive to do so.

What's more, no reputable insurance company (and probably none of ill repute either) will be willing to insure a bitcoin exchange or bitcoin holdings. The risks are completely incalculable. The fact that the site can just be hacked and everything stolen, since it's all just digital to begin with, means that insurance companies will run like hell from getting involved. The value of a bitcoin fluctuates so extremely that they wouldn't even know how much they are potentially on the hook for.

In short, there will be no institutional support for bitcoin or any other digital currencies.


RE: LOL!
By Solandri on 2/26/2014 5:10:29 AM , Rating: 5
quote:
Literally anything can be used as a currency. I could start trying to promote the use of bottle caps as a currency ala Fallout, or bottles of calcium supplements as a currency. In some times and places in the past, sea shells were a currency. As long as a few people agree to use something as a medium of exchange it can act as a currency.

The fundamental currency is productivity. Increasing productivity creates wealth. That's why fiat currencies work. The governments try to scale the amount of the fiat currency proportional to the productivity of their population. Governments which fail to scale appropriately suffer hyperinflation or deflation as the ratio of fiat currency to productivity changes.

That's why gold and bitcoins don't work as a currency. There's very little productive about digging or panning for gold. There's almost nothing productive about burning vast quantities of electricity running racks of computers 24/7 trying to calculate prime numbers.

So yes, anything can be used as a currency. But the ones which work better are the ones which are more closely tied to the fundamental currency - productivity. The ones which aren't tied to productivity subsist on the support of irrational believers.


RE: LOL!
By AllYourBaseAreBelong2Us on 2/26/2014 12:05:03 PM , Rating: 2
Incomplete.
The fundamental currency is Value Added. As long as you have a process that is in some way adding value to a person, a company, a product or service, you are creating wealth. Productivity is just a function of Value Added.
The fiat currency in a given country works as long as that government keeps the monetary mass inline with the potential output of that economy (natural gross domestic product).

Bitcoin miners "add value" to the network by computing crypto hashes that end up confirming the transactions. The market price of a Bitcoin is an entirely different story. It is driven by speculation. Remove the speculation from the equation, or wait long enough and the Bitcoin price will reflect the value added by the miners.


RE: LOL!
By Reclaimer77 on 2/26/2014 1:16:06 PM , Rating: 2
There's no demand for computing cryto hashes though. What value are you adding?

If I go flip burgers or work on a car or sell health insurance, whatever, I'm trading a needed service in exchange for currency. Who is it again that needs my computer to calculate prime freaking numbers?

Its a scam, who convinces suckers that all they need to do to get rich is leave their computer on. All you're really doing is increasing the share value of the millions of coins the creator minted for himself so HE can get rich when the value shoots up.


RE: LOL!
By Belegost on 2/26/2014 1:39:00 PM , Rating: 2
Well the only people who need you to crunch those numbers are the people who are doing transactions with Bitcoins. So it's basically the first tier entrants into the scam using new entrants to compute their transactions, trading massive amounts of current work for the very small amount of work the initial entrants did.

As you say, the only value it creates is in the initial scam entrants bank accounts.

I think the reason a lot of people have a hard time seeing this is that this was a rare case in which the scam was openly collective. Anyone who jumped on the scam wagon early enough could cash in later. This has the psychological effect of making it seem like not a scam, because you can't point to a specific class or group that benefited exclusively. The fact the the creator is unknown helps this as well.

But a collectivist scam is still a scam.


RE: LOL!
By AllYourBaseAreBelong2Us on 2/26/2014 5:22:46 PM , Rating: 2
The demand is not for computing hashes, the demand is for a service that allows people to send payments over the Internet in an affordable and secure way.
Miners collect fees for confirming the transactions and get extra rewards in order to ensure enough miners remain in the network to verify the transactions.
The price of the Bitcoin is another story. It is driven by speculation.


RE: LOL!
By Solandri on 2/26/2014 2:54:31 PM , Rating: 2
quote:
Incomplete.
The fundamental currency is Value Added. As long as you have a process that is in some way adding value to a person, a company, a product or service, you are creating wealth. Productivity is just a function of Value Added.

I disagree with that definition because "value added" is dependent upon people's subjective and often flawed valuation. During the Tulip bubble of 1637, a single tulip increased in value to about 10x what a craftsman could earn in a year. The price got that high because there was value was added to tulips with each trade. However, there was no corresponding productivity increase, which is why it was a bubble. Which is why it eventually collapsed.
http://en.wikipedia.org/wiki/Tulip_mania

Likewise, something which is thought to be non-productive and thus doesn't add value, can turn out to have been very productive and add tremendous value in retrospect. The CEO of IBM in the 1940s thought there was a global market for about 5 computers.

Productivity is the fundamental objective measure. Value added is people's subjective estimate of productivity. Not the other way around.

(This is not to say productivity is an absolute. You can do the exact same thing in two different places or at two different times, and one can be productive and the other not. It all depends on the current and local economic conditions.)


RE: LOL!
By AllYourBaseAreBelong2Us on 2/26/2014 4:54:51 PM , Rating: 2
You are confusing market speculation with the amount of "value added" to a good or service in each stage of its production.

Take a smartphone or tablet for example, if you smash it down to dust, what you've got? few ounces or plastic, glass, metal and other commodities that are not worth more than a couple of bucks in the market.
Still you paid $350 MSRP for it, right?. Was the jump from the $2 bucks in cost of commodities to MSRP value added or speculation?
If demand for these phones and tablets is such that people start speculating and selling them at higher price every time they change hands then, this has nothing to do with "value added" at production. It is just market speculation.


RE: LOL!
By atechfan on 2/27/2014 4:04:44 AM , Rating: 2
The price is a combination of research and development, labour, shipping, storage costs, and profits for the retailer, among other things. The value is the tasks it can perform for the user. Nothing at all like Bitcoin, whose only value is the blind faith that it will go up in value.


RE: LOL!
By g35fan on 2/26/2014 11:06:18 AM , Rating: 2
I'm sorry but that's just an ignorant post on so many levels that I won't even try to debate, I'll just say time will tell and remember your comments 1 year from now.

Bitcoin isn't dead, and the MtGox collapse is GOOD for bitcoin. Gox is like Costanza...a bad seed that you shouldn't be around. The people who got burned made a bad decision in dealing with that company because the warning signs were there over the past 12 months. The #0 rule of bitcoin is that YOU are your own bank. If you leave your bitcoins sitting on some exchange like MtGox or Bitstamp then you DON'T OWN ANY BITCOINS...that company does, not you.

The only "scam" is what MtGox has pulled but they are not getting away with it. The US DOJ has sent him a subpoena and the Japanese gov has commented saying that are gathering all the facts to move forward.


It's all the same
By japlha on 2/26/2014 11:15:41 AM , Rating: 1
As an analogy:
Mt. Gox = Any financial system
Karpelès = The top 1%

Of course governments and banks won't support crypto currencies. Well, unless they find a way to abuse it. Why support something that instantly reduces your power and control?

The problem is not crypto currency or Fiat currency per se. The problem is greedy, unscrupulous people that feel entitled to steal from everyone else. Where there is greed there is a way.

One of the major differences between this situation and our current financial system is most people are unaware of how the government is stealing (taxes, inflation and debt) from its citizens. Or everyone is so used to it that it just doesn't register consciously anymore. Crypto currency is so new that any problems are immediately obvious. Then people jump on their soap boxes and preach how crypto currencies are all scams. Well, the same can be said for our current financial system.

I guess everyone wants to be controlled at the point of a gun by a bunch of sociopaths. Because at least then we can be under the illusion of having a sound and safe financial system. Ignorance is bliss right?




RE: It's all the same
By milktea on 2/26/2014 1:13:20 PM , Rating: 2
wow, such strong anti-gov you posessed.

Our Fiat currency isn't perfect, it has its own flaws. But most importantly, it's a system being insured and protect by some centralized agency. So the problem really is in the centralized vs decentralized part of the currency.

Cryptocurrency being decentralized is bound to be failed. Just think about a state with NO police. Would you want to live in such a place? Everyone for themselves, without backing or protection?


RE: It's all the same
By Reclaimer77 on 2/26/2014 2:15:43 PM , Rating: 2
Wow and I thought I was an anti government "wacko". You Bitcoin guys need to acknowledge some pragmatic realities here.

Greedy people INVENTED the cryptocurrency scam. Hello?

You guys are talking like Bitcoin is a currency. For any currency to function it needs to be inflationary so the supply can grow. Bitcoin is deflationary by design. It was designed to be a pump and dump.

Combine that with complete lack of fraud protection of any kind, no security, no backing by any financial institutions. The only way you can transfer your coins into anything of value is to transfer them to exchanges. Which could be run by outright crooks or idiots who get them "stolen".

And who do you turn to when this happens? Police? A bank? A government? No, you're just fuc#ed.


RE: It's all the same
By japlha on 2/26/2014 2:45:15 PM , Rating: 2
First, I don't own a single bitcoin. But I'm interested in the mathematics behind it so I've been following crypto currencies for a while.

I think you misunderstand what the actual problem is in this whole situation; the exchange Mt. Gox.

Transactions with bitcoins are safe. It's done mathematically so there is no way for someone to steal your bitcoins unless you initiate the transfer yourself.

Mt. Gox is an exchange. A place where people can exchange bitcoins for common currencies. This is the dangerous part. So all Mt. Gox did was hold the transfers or charged fees for people to get their money. This has nothing to do with bitcoins or how bitcoins are transferred between people!This was the scam Mt. Gox pulled. It can be done with any currency or product. I can't stress that this has nothing to do with how these crypto currencies work. An exchange isn't needed to transfer bitcoins between people.

You're blaming the concept of crypto currencies but the real problem is the exchange.

So, if everyone simply used bitcoins and didn't try to exchange it (into a currency that can be exploited) then this problem could not happen. There is no need for fraud protection, security, backing by financial instituations, etc... because they are not needed for bitcoins. You're still thinking like bitcoins are like physical coins. They are not.


RE: It's all the same
By Reclaimer77 on 2/26/2014 4:06:00 PM , Rating: 2
quote:
You're still thinking like bitcoins are like physical coins. They are not.


No I'm not. Physical coins would be far preferable than a file sitting on a computer somewhere.

quote:
Transactions with bitcoins are safe. It's done mathematically so there is no way for someone to steal your bitcoins unless you initiate the transfer yourself.


Uhh there are hundreds, if not thousands, of people who would argue with you on this. It's so goddamn easy to steal Bitcoins it's not even funny.

For the average person, there aren't really any good options to securely store cryptocurrencies.

Anyway it's getting tiring seeing you apologists defend an obvious scam and pyramid scheme.


RE: It's all the same
By japlha on 2/26/2014 4:29:48 PM , Rating: 2
quote:
No I'm not. Physical coins would be far preferable than a file sitting on a computer somewhere.

So all the money you have, all your assets are hard physical currency? Do you have a vault or something? Our money is already digital. Think of what would happen if everyone went to the banks and demanded physical currency. We're already digital but it's based on an old system. We need a digital currency developed with the digital age in mind.

quote:
Uhh there are hundreds, if not thousands, of people who would argue with you on this. It's so goddamn easy to steal Bitcoins it's not even funny.

That might be true. I'd like to see proof of concept first. Maybe some algorithm that demonstrates this? Can you point me to a source?


RE: It's all the same
By Reclaimer77 on 2/26/2014 5:08:30 PM , Rating: 2
quote:
Our money is already digital.


The FDIC guarantees my money, digital or otherwise. The same can't be said of Bitcoin.

quote:
We need a digital currency developed with the digital age in mind.


Hey you know what? I'm not even arguing this point. I'm just saying Bitcoin sure as hell isn't that currency. Not in it's current form, that's for damn sure.

Again the concept isn't what I have an issue with. But you guys need to just accept the pragmatic realities and the problems with the current state of Crytocurrencies.

The way you guys are talking, the world would be just fine switching over to Bitcoin as the primary currency! That's just crazy.


RE: It's all the same
By japlha on 2/27/2014 11:29:24 AM , Rating: 2
quote:
The FDIC guarantees my money, digital or otherwise. The same can't be said of Bitcoin.

Up to a point. If you have over $250,000 or something it isn't insured. But the point is bitcoins don't need insurance. The only way you can lose your bitcoins is if you lose your wallet. Yes, unfortunately the onus is shifted on you to be responsible and backup your stuff. I admit this is one of the problems with bitcoins. Perhaps there will be services to ensure your wallet is safe. Backed up multiple times. Or the algorithm can be changed in such a way to retrieve your bitcoins if you lose your wallet. But again it has nothing to do with the situation with Mt Gox. They exchanged money for bitcoins. Anytime we give someone something of value we can be subject to fraud.

quote:
Hey you know what? I'm not even arguing this point. I'm just saying Bitcoin sure as hell isn't that currency. Not in it's current form, that's for damn sure.

I'm not saying it is or isn't "the" digital currency either. I'm holding judgment until we get more information. This is new territory. But this situation with Mt Gox, again, I can't repeat this enough, has nothing to do with that the concept of digital currencies. People get scammed using normal (insured, government backed) currency all the time. Enron, Madoff, Ponzi schemes...etc. Do people get all their money back? So should we blame the USD currency itself because of scammers?


RE: It's all the same
By g35fan on 2/26/2014 3:54:16 PM , Rating: 2
Reclaimer77, you said you used to be a bitcoin "supporter". What does that mean? Did you once own bitcoins but you don't anymore?

No offense, but it sounds like you were someone who sold before the boom and are disgruntled. You have posted multiple times bashing bitcoin...and I'll listen and debate and respect anyone's opinion but some of the stuff you say just makes it seem like you don't understand bitcoin or are in fact disgruntled. No fraud protection, no security, no backing by financial institutions? Really? Doesn't sound like you've done much research. Read up on 3rd party escrow services and securing your bitcoins and then check out Elliptic in the UK.

quote:
The only way you can transfer your coins into anything of value is to transfer them to exchanges.
Oh really? So if I have bitcoins I can't buy something on Overstock or TigerDirect and get tangible goods or services? Wouldn't that be considered trading bitcoins for something of value? You can also trade btc face to face/in person for goods, services or fiat currencies.

quote:
For any currency to function it needs to be inflationary so the supply can grow.

Yeaaaa....not so sure about that my friend. Why do you say that by the way? Is there some system that's been rock solid and stable and in place for 100's of years that I don't know about that leads you to say that? Bitcoin can be divided down to 8 decimal places (and this can be expanded upon in the future, if needed).


RE: It's all the same
By Reclaimer77 on 2/26/2014 4:21:16 PM , Rating: 2
quote:
Reclaimer77, you said you used to be a bitcoin "supporter". What does that mean? Did you once own bitcoins but you don't anymore? No offense, but it sounds like you were someone who sold before the boom and are disgruntled.


I have never once owned a bitcoin. Nor have I ever mined for them. Or have ever exchanged any goods or services for them.

Why does someone need to be biased or involved to see the plain truth two feet from their face? Cryptorcurrencies are a scam, a pyramid scheme, its' that simple.

NO offense, but it sounds like you guys are the ones doing damage control because you want the value of Bitcoins to stay high. I've never even seen half of your before, yet you're flooding this topic to "set us all straight" on Bitcoin. Come to think of it, I don't even know who YOU are either.

What I was "supporting" was the idea of crytocurrencies. And I still like the idea of them, in theory. However they're all designed as schemes, not valid currencies.

quote:
Is there some system that's been rock solid and stable and in place for 100's of years that I don't know about that leads you to say that?


If the US dollar wildly fluctuated by 30% or more in a short amount of time, all faith in it would be lost and we would be in big trouble. Yet you Bitcoin guys somehow think this is fine, for it to be so volatile.

Yes by comparison, fiat money has been rock solid and stable. The Great Depression was a long time ago, just fyi. And certainly doesn't define our monetary system. Bringing it up at this point is just stupid.


RE: It's all the same
By japlha on 2/26/2014 4:20:42 PM , Rating: 2
quote:
Greedy people INVENTED the cryptocurrency scam. Hello?

Interesting. How did you come to have this knowledge when the creators are anonymous? Or are you just making stuff up?

Bitcoins were not created because of Mt Gox. As if, Mt Gox had a plan to swindle people out of something so they thought of bitcoins.

Anyway, I've tried make a case for my argument in as respectful manner as I can. But if you want to resort to name calling and making stuff up out of thin air (like our governments do with fiat currencies) then I see no point in furthering the discussion with you.

I've read a lot of your posts on DailyTech and I do agree with many things you say. But this time I think people are going insane over the wrong thing.

This situation is like going to one of those money exchange places and wanting to exchange your USD for YEN. And they say, "Oh wait a moment. We'll give you your YEN but it will take a while." Or they come up with other excuses to not complete the transaction. Does it make sense to blame the USD itself because of the practices of the exchange? Or to call the USD currency a scam? This is what people are doing here.

I agree, something needs to be done to hold the Exchanges accountable for what they do. This has nothing to do with bitcoins as a mechanism to facilitate the exchange of goods and services. There are other issues with bitcoins none of which have been addressed here.


RE: It's all the same
By Reclaimer77 on 2/26/2014 4:53:36 PM , Rating: 2
quote:
Anyway, I've tried make a case for my argument in as respectful manner as I can. But if you want to resort to name calling and making stuff up out of thin air


There wasn't a single name-call or insult in my entire post. I AM discussing this in a respectful manner. What the hell guy?

quote:
then I see no point in furthering the discussion with you.


Okay if that's how you want to play it. You think discussing this crazy fantasy money with origins to organized crime in Asia is all that interesting to me?

Go look it up. The first Bitcoin millionaires were those with ties to the Yakuza. The Bitcoin was created by anonymous person or persons in Japan. I'm not Sherlock, but holy crap, wake up! This is nothing but a scam and money laundering scheme for organized crime.

Gee guess what bank Mt. Gox used? A bank busted for being a front for organized crime in Japan.

Come all, all this can't be coincidence.

How in the hell is Bitcoin NOT a pump and dump scam? Early adopters mined huge amounts of bitcoins early on for very little effort, and stood to gain huge amounts of cold, hard, non-virtual cash if they could convince other people the bitcoin was worth something.

Of course for newcomers, it's all but impossible at this point to mine their own Bitcoins in any appreciable amount. So there's no profit at all for them.

Looks a lot like a pyramid to me! People who got in at the ground floor are rich, people who came in a bit later did okay, and people who came in late can just go suck it.


RE: It's all the same
By g35fan on 2/26/2014 5:33:39 PM , Rating: 2
quote:
I agree, something needs to be done to hold the Exchanges accountable for what they do. This has nothing to do with bitcoins as a mechanism to facilitate the exchange of goods and services. There are other issues with bitcoins none of which have been addressed here.


Perfectly put. I enjoy reading commenters opinions on this site but this Reclaimer77 person seems like they has some sort of personal vendetta against bitcoin - talking about the creator being from Japan and the Yakuza and such. Where are you getting this info from? If you don't have some vendetta and that's just your opinion on cryptocurrencies then fine, I'd just offer to agree to disagree and say that only time will tell. Bitcoin may very well disappear but I think the technology and the idea is here to stay.


yup
By Motoman on 2/25/2014 7:33:40 PM , Rating: 5
quote:
Bitcoin fans wanted an unregulated currency free from government intervention? Well that's what they got.


Herein lies the rub...the Bitcoiners, and Mt. Gox, aren't accountable to anyone.

There's no regulation of a banking industry there. No guarantee of the status of the "currency" as being valid tender...anywhere.

For all intents and purposes, Bitcoins have value because, and only because, a group of people decide they have value. And sure...they can trade Bitcoins back and forth between them as transactions in currency all they want. But the only thing holding that tent up is that group of people...and if some or all of those people leave, the tent collapses.

You may as well set up a system whereby Pogs are the currency/commodity. People can rush out and buy Pogs and there can be Pog trading centers and so on and so forth...but at the end of the day, the Pogs are only worth whatever those people say they're worth. And when enough people decide that, hey, these things actually don't have any value at all...well, the Pog market collapses and everyone who put their life savings into Pogs is broke.

And stupid.

At the *very* best you have to view Bitcoins as a collectible commodity...like Pogs were. Beanie Babies. Whatever. But realize that although there's a *real* market there, with "values" that go up and down, ultimately the commodity itself is essentially worthless, and holds value only so long as there's a social consensus that attributes such value to it. When that consensus evaporates...all you have is a pile of twee little teddy bears.




RE: yup
By The Von Matrices on 2/25/14, Rating: -1
RE: yup
By Reclaimer77 on 2/25/2014 8:02:40 PM , Rating: 2
Dude take off the blinders. Why are you defending this obvious con-job and the overall scam that is Bitcoin?

Maybe you're one of the crazies who invested in a huge farming setup hoping to strike it rich. Well, if that's the case, I'm sorry.


RE: yup
By atechfan on 2/25/2014 8:56:57 PM , Rating: 2
Nice to see people finally coming around. I've been trying to tell people for the past 3 or 4 years that Bitcoin was a scam.


RE: yup
By chizow on 2/25/2014 9:04:45 PM , Rating: 2
He's still trying to contribute to the pump/con to try to rope in others, thus hoping to regain the value of his own holdings.

Very definition of Ponzi scheme.


RE: yup
By TSS on 2/26/2014 9:36:45 AM , Rating: 2
Well this looks as good a place as any for me to jump in.

And i'd say; oh come off it. This whole forum is incredibly influenced by the emotion at the time of posting.

If i look at my recent post history there's a post rated down to 0 this month which explains exactly why bitcoin is a ponzi scheme, and the US dollar as well. Guess what happened just weeks later.

Now that Mt.Gox has crashed suddenly people saying the same thing (in less detail mind you) get rated up to 4/5? Even you have changed your stance which, i must say, provides for a cold day in hell indeed!

Ah, but i guess this is the fate of the divergents. As long as you don't say what the majority is saying, you're "crazy". Even if what you're saying is the truth. So all i'm saying is; don't be hatin on people defending bitcoin. They simply differ in oppinion. Isn't that what you not so long ago did?

(which, by the way, also shows the danger of oppinions - once you value the oppinion of a fool the same as the oppinion of a genius, what worth does either have?).


RE: yup
By Reclaimer77 on 2/26/2014 11:49:37 AM , Rating: 2
quote:
Even you have changed your stance which, i must say, provides for a cold day in hell indeed!


I hope you don't think I'm appealing to the crowd or are concerned with being popular.

I tend to lean to the Right on most things. So I liked the idea of Cryptocurrency. I still do. The problem is the execution. They're all scams.

However I didn't really dedicate much time to research it in any detail until recently. Honestly? I've been pondering a Litecoin setup for my own use. So I wanted to get the hardcore facts for myself.

You would be surprised how much you care about an issue when thousands of dollars of your own money is at risk :P


RE: yup
By Motoman on 2/25/2014 9:04:04 PM , Rating: 2
You're missing the point. A couple of them, actually.

1. Mt. Gox isn't a bank. It's a website...and that's about all it is.
2. Bitcoin isn't a currency. It's an electronic trading card...an ethereal collectible.

Granted both of those things, I can guarantee you that there's no such insurance available for such a venture in the first place.


RE: yup
By chripuck on 2/26/2014 11:04:38 AM , Rating: 2
I'm not going to argue over the validity of Bitcoin, but what you describe is exactly the same definition of "valid" currency. Currency is only valid because a Government backs it, nothing more. Bitcoin could be a valid currency tomorrow if the US Government wanted to back it.


RE: yup
By Motoman on 2/26/2014 5:28:26 PM , Rating: 2
quote:
Currency is only valid because a Government backs it, nothing more.


Oh, is that all?

[rolleyes]

Yeah, well, the only reason this planet exists is because it has gravity, nothing more.


RE: yup
By patrickjchase on 2/25/2014 9:34:08 PM , Rating: 2
Putting aside the value judgements for a moment: In a well-developed financial system you can easily hedge against exchange rate risk.

So while it is true that "no bank guarantees that the currency in which it deals will convert to some amount in another currency", it is also true that you can easily buy a put option, which is traded on public exchanges, and that gives you the right to exchange those deposits at a fixed rate at a specified time in the future. If you're worried about the financial health of the counter-party that sold you the put, then you can insure that as well via a collateralized default swap on their debt (preferably a form thereof that's junior to your option).

The point I'm working to here is that the whole digital currency system is woefully undeveloped. There are no enforced banking standards, no deposit insurance, no hedging as described above, etc. A system with those attributes (and particularly no means to hedge risk) is inherently crazy risky.


By bsim50 on 2/26/2014 8:15:36 AM , Rating: 2
Deflationary cryto-currencies (like Bitcoins) are primarily a novelty which has avoided one extreme (inflationary bias by issuing too much money) by wildly swinging to the other extreme (strong deflationary bias = too scarce to function as proper currency and ends up with wild illiqudity based price swings). People seem to be backing "bitcoins" out of reactionary opposition to the way the Federal Reserve has devalued the $ to bail out the banks.

That's fair enough as a belief by itself, but currencies need 3 things to sucessfully function - value, liquidity, trading stability (no short-term price swings) - and not just the first one. And unlike precious metals, etc, they have no more intrinsic value (melted down for jewellery, electronics, etc) than fiat paper currencies. They're more like gift vouchers than currencies.

Due to the strong deflationary bias (it gets increasingly harder for late adopters to make money), the dynamics end up remarkably similar to a pyramid scheme where the true winners are on tier 1 (creators) having made nearly all the early "easy" money, and those who join later are left holding the bag and wasting vast amounts of electricity for little gain.

Bitcoin's $9 to +$1,000 in 4 years is the deflationary equivalent of +180% annual year-on-year price inflation which far exceeds even the worst USD devaluation by the Federal Reserve by a +10x factor. This is precisely why most places that "accept" Bitcoin's don't actually value things in Bitcoins, they price things in USD's then accept the Bitcoin equivalent...

Actually valuing things in Bitcoins is like being a baker and selling a loaf of bread for $1.50 one minute then being forced to sell it at $0.02 the next week whilst the supply cost of ingredients, and demand from customers remains the same. Bitcoin fluctuations are not even remotely representative of price variations of goods & services in general. It's just a giant bubble.

In fact, with "Bitcoin mining" electricity consumption costing $15m per day ($5.5bn per year), and 12.5m Bitcoins in circulation, at $400, 1 years worth of electricity costs for mining Bitcoins already exceeds the total value of all Bitcoins in circulation. If people cannot see the utter absurdity in that I don't know what to say...

Ultimately, heavily deflationary Cryto-Currencies are like the Scientology of currencies:-

"If a man really wanted to make a million dollars, the best way to do it would be start his own religion." - Ron Hubbard




By Belegost on 2/26/2014 1:28:36 PM , Rating: 2
That is one of the best explanations of the situation I have seen to date, and it encapsulates my thoughts on Bitcoin quite well.

Well done.


By milktea on 2/26/2014 3:08:49 PM , Rating: 2
Good analogy with the 'Scientology of currencies'.

More on the pricing fluctuation...
Cryptocurrencies are self-contradictory to begin with. Its prices fluctuates because it's unregulated. But if a group/agency where to put in regulations, it would no longer become decentralized. That would be against its own founding principle. Therefore it's self-conflicting, which means big problems in the long run.


By g35fan on 2/26/2014 4:10:42 PM , Rating: 2
quote:
Its prices fluctuates because it's unregulated.


Just remember that bitcoin is still in it's infancy and that while a government can regulate bitcoin within it's territory, it cannot regulate bitcoin as a whole, thus it will fundamentally stay decentralized.

No doubt a government can regulate, tax, setup KYC/AML laws, etc., but it cannot create/print $85 billion dollars worth of new bitcoin each month like the US does with the USD to try and control the economy. Maybe it's a good thing they do this, maybe not. That's up for debate.


snowshoving driveways
By redhaar on 2/26/2014 1:16:32 PM , Rating: 2
if a bitcoin is worth 400 dollars...
would you rather one 20th of a bitcoin (5% of a bitcoin) or 20 dollars? to shovel a foot thick wet snow covered driveway...
how about a 40th of a bitcoin to mow a lawn. (push mower non gas)

even if you have a snowblower, take the cash!...

when you take an american dollar you don't go and exchange it for another dollar... because it is worth the amount that is printed on it, a bitcoin's problem is that it is worth a variable amount of work... and has not stabilized...




Derp
By RapidDissent on 2/26/2014 2:42:48 PM , Rating: 2
Isn't this why we make our children go to history class? Shouldn't any person who has seen It's a Wonderful Life be able to tell you that putting real currency into an institution which has no Federally backed insurance or any precious metal backing, be able to tell you this is a bad idea?

Sure, Mr. Potter/Karpeles makes out great 'cos he's got $8000 real dollars he can spend as he see's fit, but all you got is a paper with the number 8000 written on it.




By MrBlastman on 2/26/2014 3:27:25 PM , Rating: 2
http://www.youtube.com/watch?v=kJCKwqyR7KY

If I were a Mt. Gox coinhelder... I'd be hunting him down right now for a [insert favorite execution here].




Hackers Stole It All
By coburn_c on 2/28/2014 5:15:07 AM , Rating: 2
Madoff should have thought of that.




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