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Does bitcoin have a future?
December 1, 2013 8:54 PM   Subscribe

Joe Weisenthal at Business Insider gives one of the most fair minded assessments on the internet: "First of all, it's wrong to say that Bitcoin has no value. There's prima facie evidence that this is untrue. If you want to buy weed on the Internet, Bitcoin serves a useful purpose.... Two other arguments against Bitcoin, which I've stated in the past, are that the currency is too volatile to be a useful medium of exchange. And that it's also deflationary in the sense that if you assume the price is going to keep going up, then you have no incentive to ever spend your bitcoins, thus preventing the Bitcoin economy from becoming a vibrant thing. But both of these counter-arguments have flaws." Also: Tyler Cowen discusses how China's tight capital controls have increased the value of bitcoin, and the Economist gives a good overview of the history of the cryptocurrency to date and a discussion of technical challenges regarding the increasing size of the blockchain, ensuring security and anonymity, and the computational arms race to mine bitcoins.
posted by bookman117 (177 comments total) 25 users marked this as a favorite

 
Two days ago, Bitcoin hit a high of $1242... I just checked and it's down to $1020 (no, wait, here's another source that says $1070). Anything else that dropped in price 12-16% in two days (on a weekend) would have caused a PANIC. Good luck with your Bits.
posted by oneswellfoop at 9:04 PM on December 1, 2013 [7 favorites]




My X-Men #262 will never decrease in value, so long as it is backed by the full faith and credit of the Republic of China!
posted by Blazecock Pileon at 9:14 PM on December 1, 2013 [9 favorites]


Oh man, on Thursday I fell into the rabbit hole reading about Bitcoin, and it's quite something. The story of Bitcoin mining is like capitalism x10. Half a year ago you could make a nice profit mining Bitcoins with your computer. Then the masses moved in and you needed a special double GPU rig to get ahead, and after that you needed dedicated hardware ordered from overseas. Now the only profit (if there is any) is being made by people with lots of special hardware and cheap electricity.
posted by Kevin Street at 9:17 PM on December 1, 2013


Man, Bitcoin articles are everywhere lately. It's going to crash hard, and soon.
posted by TrialByMedia at 9:21 PM on December 1, 2013 [13 favorites]


doesn't bitcoin depend on the miners to maintain the integrity of the blockchain and its record of transactions, and when mining becomes uneconomical for the most highly capitalized miner, who then will perform this function?
posted by bruce at 9:23 PM on December 1, 2013 [3 favorites]


Everybody seems to have a vehement opinion on bitcoin, either that it is some sort of libertarian salvation from the tyranny of fiat currencies, or that it is an obvious crock with no intrinsic value. I am neither pro- nor anti-bitcoin, but the best point I've seen made is that, if it is to be taken seriously as a means of exchange (as opposed to simply a vehicle for speculation), it needs to get more boring in a hurry. Imagine a transaction in bitcoin; if the value of bitcoins explodes after the transaction, the buyer got screwed because he got insufficient value for his payment. If instead it collapses, the seller got screwed because he gave up too much value for the payment. The means of exchange can't always be screwing one side or other of a transaction - market exchanges are already flawed enough without that.

That said, bitcoin sure seems to have a lot of indicia of a price bubble right now - asymptotic price increase, huge price volatility, now this "capitulating" change of heart from a skeptic, and finally, everyone and his brother wanting to get in on the game. I think there have been 2 questions on "should I / how can I get into bitcoins" on AskMe just since Thanksgiving. I mean... yikes.
posted by Joey Buttafoucault at 9:24 PM on December 1, 2013 [14 favorites]


One interesting question is where the supply of bitcoins actually is. Only a fraction of the fixed number of bitcoins is in circulations - some people suggest that Satoshi has a huge number of bitcoins. And this guy claims to have thown out 7,500 of them by accident.

So it's also sort of weird in that I don't think it's clear what the actual monetary supply of bitcoins really is.
posted by GuyZero at 9:30 PM on December 1, 2013


"The means of exchange can't always be screwing one side or other of a transaction - market exchanges are already flawed enough without that."

That's why other digital currencies have been invented, like Litecoin - supposedly it's supposed to be more stable. But all the Bitcoin imitators are undergoing tremendous inflation right now too.
posted by Kevin Street at 9:32 PM on December 1, 2013


So it's a great, big, money-laundering scheme?
posted by Chocolate Pickle at 9:34 PM on December 1, 2013


Bitcoin has a transactions per second limit of 7 Bitcoin transactions per second. It's limited by its very structure to being small-scale.
posted by Pope Guilty at 9:37 PM on December 1, 2013 [1 favorite]


I buy all my tulip bulbs with bitcoin.
posted by GuyZero at 9:37 PM on December 1, 2013 [41 favorites]


Well, they call it the Currency of the Libertarian Future, so, that leans toward 'yep'.
posted by oneswellfoop at 9:37 PM on December 1, 2013 [1 favorite]


"doesn't bitcoin depend on the miners to maintain the integrity of the blockchain and its record of transactions, and when mining becomes uneconomical for the most highly capitalized miner, who then will perform this function?"

The exchanges (like Mt Gox) might take over if the market for mining totally collapses. But that presupposes a capacity for forward planning that may not exist in the current bubble situation.
posted by Kevin Street at 9:38 PM on December 1, 2013


Also: Tyler Cowen discusses how China's tight capital controls have increased the value of bitcoin

Also, that's a very.. selective.. reading. Here's a pull-quote that is perhaps a bit more reflective of the overall content of the piece:

If Beijing shuts down BTC China, the main broker, which by the way accounts for about 1/3 of all Bitcoin transactions in the world, the value of Bitcoin very likely will fall. A lot. You will recall that the Chinese government shut down the virtual currency QQ in 2009; admittedly stopping Bitcoin could prove harder but still they could thwart or limit it.
posted by Blazecock Pileon at 9:39 PM on December 1, 2013


I know nothing of these things - other than you can get what people will pay. The recent price increase in bitcoin strikes me as a speculative bubble. On the other hand I've read some credible stories about people who have become wealthy mining bitcoins and Anshe Chung became a millionaire from work done in Second Life.

I was out of the game before I knew it had begun.
posted by vapidave at 9:40 PM on December 1, 2013


That's why I just sold all my bitcoins and put the money into TeamFortress 2 keys.
posted by laconic skeuomorph at 9:42 PM on December 1, 2013 [2 favorites]


For a currency to retain its value, there needs to be something it can always be used for.

The reason the US Dollar retains value is because the US government will only accept dollars in payment for taxes. (That's why we don't need a gold standard or a silver standard.) Because a lot of people need to pay taxes, they need to acquire dollars to do it. That means they're willing to provide services or products in exchange for dollars, and that's what props the dollar up.

It is, of course, still possible to crash a currency, but if it's based entirely on a fiction, the only thing that holds it up is a speculative bubble.

I don't believe that "buying dope online" is enough to hold up bitcoin. What differentiates this from a speculative bubble?
posted by Chocolate Pickle at 9:42 PM on December 1, 2013


I don't believe that "buying dope online" is enough to hold up bitcoin.
Silk Road drug market handled $1.2 billion of transactions in 2.5 years before FBI seizure
Believe it all you want. There's a black market for it out there.
posted by Talez at 9:50 PM on December 1, 2013 [1 favorite]


I'm convinced that bitcoin will not escape obsolescence. Its value is in its use, and perhaps some modicum of cool (early adopters and later nostalgics). Why wouldn't a cryptocurrency with more substantially more bells and whistles emerge in, say, the next ten years? Perhaps a country, or some corporation backs new digital monies. With no long-term future, I have no doubt that bitcoin will add another page to the history of bubbles.

That said, I think there's a chance that the basket of digital currencies (however they may evolve) can supplant gold and such as stores of value in the long-run. The use of computation to generate both scarcity and security is fascinating.
posted by helot at 9:51 PM on December 1, 2013 [1 favorite]


kevin street, if blockchain maintenance is taken over by mt. gox, 1) they will charge transaction fees, and 2) no dope dealer with an IQ above 80 is going to transact through a central exchange which our uncle sam can rip right through the backside of with his mighty subpoena power.
posted by bruce at 10:00 PM on December 1, 2013 [1 favorite]


I recommend the FT Alphaville blog's excellent series of skeptical posts on Bitcoinmania (all posts are free to read, but you may have to register)
posted by Bwithh at 10:03 PM on December 1, 2013 [1 favorite]


I'm not saying the mining will stop, because somebody is still making money doing it. This is from the Economist link above:
...Mining has become increasingly commercial and professional, he says. Server farms with endless racks of ASIC cards have already sprung up. But as part of Bitcoin’s design, the reward for mining a block halves every 210,000 blocks, or roughly every four years. Sometime in 2017, at the current rate, it will drop to 12.5 Bitcoins. If the returns from mining decline, who will verify the integrity of the block chain?

To head off this problem, a market-based mechanism is in the works which will raise the current voluntary fees paid by users (around five cents per transaction) in return for verification. “Nodes in the peer-to-peer network will try to estimate the minimum fee needed to get the transaction confirmed,” says Mr Hearn.
posted by Kevin Street at 10:12 PM on December 1, 2013 [1 favorite]


I've heard people saying Bitcoin's about to crash ever since it got to $50.

I do believe any easy profit is over now that it's actually difficult to mine, but as something that seems to be doing quite well functioning to buy illegal materials I'm not going to place any sort of predictions about what's going to happen to it at this point. When things start get shut down, I'll see.

Amusingly, I found 0.17 on somebody's computer. Should probably sell that while the bubble's around.
posted by solarion at 10:12 PM on December 1, 2013


I don't believe that "buying dope online" is enough to hold up bitcoin. What differentiates this from a speculative bubble?

You forgot "paying ransoms to hackers". And "buying child pornography online", for which I think I'll not try to find a link, thanks.

Seriously, though, things like this are part of the reason Bitcoin is untenable. Bubbles lead to crashes, market manipulation leads to crashes, there's no stability. I'm surprised libertarians are often big fans of bitcoins, given that it is as fiat a currency as could ever exist. The value per coin today was $1082 at 5pm GMT, $1000 at 6pm, $863 at 7pm, $1030 at 8pm, $944 at 9pm. Something that can gain or lose a tenth of its value back and forth, every hour, is not a place to put money.

That's really the thing about bitcoin. It's not money. It's a method to bank or transfer money, like buying stocks or suchlike, but it's not really a currency for tender. Bitcoins have value in that they are traded for dollars. Outside of Silk Road and the like, the only way to pay for things with Bitcoins is to find someone who will accept Bitcoins in exchange for dollars, and then purchasing what you want with those dollars. It's all well and good to say that Bitcoins are $1075 as of this writing, when traded on Mt. Gox - despite their US offices being shut down and US holdings being seized back in May, for violating laws against money laundering - but that means a very different thing in the real world. Especially when it's one where Mt.Gox flat out won't let you withdraw money - people are talking about having been on a waiting list to get cash out of them for weeks, and the site requiring identity-theft levels of personal information to approve a transfer of funds out. Here's a series of comments on the Something Awful Bitcoin thread, about someone who accumulated a pile of bitcoins back in 2010 trying to sell them for actual money now. As he repeatedly says, "Bitcoin is supposed to be worth 800+ according to mt gox, yet getting someone to pay even half of that value in real life is apparently too difficult."
posted by kafziel at 10:39 PM on December 1, 2013 [13 favorites]


Bitcoin bubbles like fiat cash.
posted by Mblue at 10:40 PM on December 1, 2013


Snowden will reveal soon enough that it's a giant NSA/DEA honeypot.
posted by benzenedream at 10:46 PM on December 1, 2013 [2 favorites]


Looks like you have to be a Something Awful member to see that page, but it's a good point. Who says these exchanges even have the money to redeem all the Bitcoins they trade? It's not like they're regulated or anything.
posted by Kevin Street at 10:47 PM on December 1, 2013 [2 favorites]


Who says these exchanges even have the money to redeem all the Bitcoins they trade?

Who says the exchanges are even a reasonably safe place to conduct transactions?

In an important sense, bitcoins are the worst of all possible worlds: all the tranacational portability of bearer bonds or gold, with none of the physical limitations of them that make them securable or subject to an advanced banking industry subject to national laws and insurance regimes covering loss or at least making risk quantifiable.

When the safety of your millions in bitcoins is subject to the coder behind a website for Magic: The Gathering making sure that register_globals is off in php.ini, you're fucked.
posted by fatbird at 11:04 PM on December 1, 2013 [9 favorites]


Bitcoin is something but at the moment it's not a currency.

Any BTC user should look at the flow of BTC into China and start to feel concerned.
posted by PenDevil at 11:11 PM on December 1, 2013


PenDevil: Why concerned?
posted by Leon at 11:19 PM on December 1, 2013


Because the price and usage of Bitcoin (as a currency or, as it's currently used, a commodity) is in the hands of what I would categorise as an irrational actor.
posted by PenDevil at 11:24 PM on December 1, 2013


PenDevil: The entire premise is based on irrationality. I don't see why you need to single out Chinese buyers.
posted by Leon at 11:45 PM on December 1, 2013


"doesn't bitcoin depend on the miners to maintain the integrity of the blockchain and its record of transactions, and when mining becomes uneconomical for the most highly capitalized miner, who then will perform this function?"


If people stop mining, the difficulty automatically decreases, and then it will become profitable again.
posted by memebake at 11:47 PM on December 1, 2013 [1 favorite]


Would you buy stock in a company with 0 employees, $0 assets, $0 revenue, $0 profit, $0 dividends, and 21 million shares outstanding solely on the basis of how its shares are transacted?

OK, maybe you would if it were 1999 and its name ended in .com.
posted by 0xFCAF at 12:05 AM on December 2, 2013 [3 favorites]


Would you buy stock in a company with 0 employees, $0 assets, $0 revenue, $0 profit, $0 dividends, and 21 million shares outstanding solely on the basis of how its shares are transacted?

Apparently, you would if you think Rand Paul is some kind of visionary.
posted by TrialByMedia at 12:18 AM on December 2, 2013 [3 favorites]


The owner of Sheep Marketplace, a Silk Road alternative, recently made off with 96,000 BTC. That's roughly $100 million. Here's the reddit thread where someone follows him as he tries to launder the coins.
posted by Valued Customer at 12:23 AM on December 2, 2013 [7 favorites]


Would you buy stock in a company with 0 employees, $0 assets, $0 revenue, $0 profit, $0 dividends, and 21 million shares outstanding solely on the basis of how its shares are transacted?

If people were beating down doors for it and I could pick it off the ground, then yes. The market-clearing price commands a certain level of respect. As much as bitcoin is a bubble, I'd gladly buy large quantities right now at, say, $10. Of course, it's fair to say that they will eventually become worthless. So my bid price depends on how I view that risk.
posted by helot at 12:28 AM on December 2, 2013 [1 favorite]


There's a bitcoin ATM in Vancouver, BC. No doubt it exists solely to launder drug money.
posted by five fresh fish at 12:29 AM on December 2, 2013 [1 favorite]


For some fantastic pearls of Bitcoin wisdom, you can't go past @bitcoin_txt for comments from various Bitcoin fora;
BitCoin is a "CURE" because it heals the world financial system. BitCoin is a "divine" solution and benefits everyone.
My guess for the end of 2014 is $10,000+ per bitcoin. It could go massively higher than $10k, but I'll be safe call it $10k.
I tried asking my currency broker if they could supply me with some bitcoins. It didn't go down well. My business is going elsewhere!
posted by Jimbob at 12:45 AM on December 2, 2013 [6 favorites]


if it is to be taken seriously as a means of exchange (as opposed to simply a vehicle for speculation), it needs to get more boring in a hurry.

This has been my opinion all along - it's so volatile that there's no point trying to price products in Bitcoin. Instead, you have to price them in USD (or whatever), and then calculate an exchange rate, minute by minute, to Bitcoin for your customers. Which means that those Bitcoins are basically backed in...fiat currency!

And as for mining, well, if the mining hardware various businesses are selling is actually capable of making money, why don't they just hang on to it and plug it in, rather than sell it? It's like selling the golden goose, surely?
posted by Jimbob at 12:50 AM on December 2, 2013 [2 favorites]


They did hang onto them. Companies like Butterfly Labs that sell ASIC Bitcoin miners have (or maybe had, I'm not sure) a six month waiting list for delivery of their machines. That was so they could profit by using the miners when the difficulty was lower (and profits higher) before eventually shipping them to customers.
posted by Kevin Street at 1:20 AM on December 2, 2013 [2 favorites]


Here's the Something Awful post kafziel mentioned, quoted on a site called "Buttcoin." It's surprisingly safe for work, except for one drawing of a butt.
posted by Kevin Street at 1:32 AM on December 2, 2013 [2 favorites]


What about its value to merchants? If you don't have a credit card that's internationally accepted, buying things online is a major hassle or impossible. For a merchant who doesn't have a bank account or other services, getting international payments is also a huge hassle. Buying bitcoin to purchase something online is already only a small degree more difficult than buying a bank draft or postal order, and it has the potential to become as easy as a credit card and much more flexible.

I don't think bitcoin has much use now inside the US except for illegal activities, but outside for international purchases, especially for the millions of people who have no bank accounts, it has potential. We use Western Union to send money to a tiny village in Vietnam to someone who is barely literate, can't get a legal bank account and has an old dumbphone. However, there is an internet cafe near the Western Union (an hour by boat in the bigger town) and I can definitely see a day coming when I'll be able to send money directly by facebook and bitcoin or some other interface.

And I really look forward to the death of paypal.
posted by viggorlijah at 1:44 AM on December 2, 2013 [3 favorites]


However, there is an internet cafe near the Western Union (an hour by boat in the bigger town) and I can definitely see a day coming when I'll be able to send money directly by facebook and bitcoin or some other interface.

At least the Western Union will hand over some actual cash - as has been pointed out in this thread, exchanges make it real easy to turn your cash to Bitcoins; turning the Bitcoins back into cash can take literally months.
posted by Jimbob at 1:55 AM on December 2, 2013


The owner of Sheep Marketplace, a Silk Road alternative, recently made off with 96,000 BTC. That's roughly $100 million. Here's the reddit thread where someone follows him as he tries to launder the coins.

This is pants pissingly funny to me for some reason. What do they think they can do to this guy? what real consequences could he ever face? it's already been shown that going to the cops and going "THEY STOLE MY INTERNETS FUNNY MONEY" is marginally less useless than telling them they stole your weed in utah.

Why do they care if they catch him? they can't do anything if they do. The posts like "Yeah I don't imagine this fucker is going to be getting much sleep over the next few weeks/months." ARE HILARIOUS.

Why would he be afraid? are a bunch of neckbeards going to go to his house and beat him up?

seriously, powerlulz

They did hang onto them. Companies like Butterfly Labs that sell ASIC Bitcoin miners have (or maybe had, I'm not sure) a six month waiting list for delivery of their machines. That was so they could profit by using the miners when the difficulty was lower (and profits higher) before eventually shipping them to customers.

I called this the instant they were introduced. I have a serious suspicious that they did the exact same thing with the gpu mining software not being publicly released for a while as well.

The whole thing has been utterly corrupt all along, and everyone whining about it was completely powerless to do anything. How is that not a completely broken system?

Also, i find the argument that there's "two sides to this" hilarious. It's like the news stations trying to pretend there were two sides to the senate shutdown. One side is utterly insane, and the other side is saying "look at this, this is utterly insane". It isn't two sets of monkeys flinging poo at each other even though the rhetoric can get a bit heated. It's the emperor and his cohorts, and the people saying the emperor has no clothes.

Representing it as some kind of equally worth everyones time "two sides to every coin" sort of job is fairly disingenuous.
posted by emptythought at 2:03 AM on December 2, 2013 [16 favorites]


I read the Reddit thread, but I came away with more questions than answers. Could somebody please explain what sheeproadreloaded2 is doing to try to track the owner down, and the significance of sending tiny fractions of bitcoins to large wallets?

If it's true that somebody stole $100 million in bitcoins, that's fascinating.
posted by Georgina at 2:30 AM on December 2, 2013


This is pants pissingly funny to me for some reason. What do they think they can do to this guy? what real consequences could he ever face? it's already been shown that going to the cops and going "THEY STOLE MY INTERNETS FUNNY MONEY" is marginally less useless than telling them they stole your weed in utah.

I don't know, a $100m securities embezzlement case sounds like a reasonable potential feather in the cap.
posted by jaduncan at 3:15 AM on December 2, 2013 [1 favorite]


Sure, right now, you can't exchange bitcoin for cash without a lot of problems, but you can exchange it for goods and services, so if in a couple of years she can exchange bitcoins for phone cards (already used as a sort of currency) or to buy things at small merchants willing to take bitcoins, that makes a huge difference.
posted by viggorlijah at 3:16 AM on December 2, 2013


Every Bitcoin will be worth five British pounds. That is the exchange rate that the bank of England will implement after I kidnap their queen.
posted by XQUZYPHYR at 3:29 AM on December 2, 2013 [5 favorites]


Also, to be fair, I can't just dismiss bitcoin off the top. Yes, it's clearly in its infancy and, in that infancy, at best appears to be a gigantic libertarian pyramid scheme, combined with the usual caveat that a Bitcoin is only actually "worth" a thousand dollars if there's anyone actually willing to PAY $1000 for one, and I don't really see that many people, meaning in a short time we'll be seeing the inevitable stories of how these collections ended up with the same investment fidelity of Pogs and Beanie Babies.

But that all said, the CEO of the largest online commerce site in the world just announced he wants to ship books and DVDs via flying robots. So shine on, you crazy bitcoins.
posted by XQUZYPHYR at 3:35 AM on December 2, 2013 [6 favorites]


A fiat currency mostly useful for tax evasion and money laundering and illegal transactions, without a military or police force, lol.

How long do you suppose the Chinese or US governments will continue to allow it, unless they created it as a means of economic warfare?
posted by spitbull at 3:48 AM on December 2, 2013


I'm not sure which is more fascinating: the creation and growth of a byzantine-tolerant distributed merkle tree or people's reactions to it.

The regulatory question is a fascinating one. One one hand, cryptolocker, kiddie porn and violating attempts to fix currency prices would seem to argue against big states like the US and China doing anything particularly nice. Yet it's kind of surprising that not only have we not seen any enforcement action but some fairly rosy talk from regulatory bodies. I guess it's the "all transactions are recorded" property that makes this different from other e-gold schemes and possibly the lack of a single controlling entity to just prosecute into oblivion and maybe big financials seeing a market and wanting to play.

A year ago it was libertarian masturbation. Right now I think it's a combination of ponzi scheme and Chinese currency evasion. What it'll be a year from now? No idea.
posted by Skorgu at 4:06 AM on December 2, 2013 [1 favorite]


I don't know, a $100m securities embezzlement case sounds like a reasonable potential feather in the cap.

I'm having serious issues not reading this in some kind of "i'm gonna call the internet police on you!" tone.

I mean, i know you're serious, but at the same time this is close to someone stealing a bunch of WoW gold and running from a guild or something. Except here there's even less chance of any non-government intervention because there's no one to "ban" this guy involved in the system. Seriously. That can be exchanged for real money, does that suddenly make it a securities and embezzlement case?

He has what's today, BTC worth 100m if he could exchange it. Tomorrow it could be worth half that. In a week it could be worth nothing. It's impossible to tell.

I would say it would be like someone going to the cops and saying someone else stole their extremely high value collection of magic cards or something, but there's no real life property component here.

I'm not saying there's no case, but he "stole" something that doesn't physically exist, and isn't directly a good really. I can't think of a closer analog than in game currency in a large MMO that can be exchanged for various negotiable currency. Can you?

And when you get to there, i have never ever heard a case of someone even being brought up on charges for fraud for ripping someone off of some amount of a virtual currency like that.

What i have heard, is a lot of nerds saying they're calling TEH FBI because someone stole some obscene amount of EVE currency, ships, an entire corporation worth of stuff. Or some massive fraud in WoW, or whatever.

And you know what came out of all of those situations? A great SA thread, a bunch of nerd rage, and fuckall.

It will be the beginning of a new era if any movement is made to prosecute anyone on anything with relation to this theft. It would blow my goddamn mind. And honestly, how is it in the US governments interest to do that and lend any kind of legitimacy to this? If they do that, it's bringing up to an unprecedented level of realness. If they don't, it's another huge destabilizing action within the whole ecosystem that damages it's reputation a bit even among it's supporters of the whole thing being a big hive of scum and villainy and backstabbing.

I'm getting a little conspiracy theory-ish at the end there, but can you not see where i'm coming from in that thought process? The simplest answer here seems to be "let it burn itself out" not "try and game it or try and make a weird groundbreaking case out of some cybertheft of virtual stuff that isn't real currency from any country"
posted by emptythought at 4:47 AM on December 2, 2013 [4 favorites]


Re:magic cards. Someone stole my magic collection in 1996. I not only filed a police report, but an insurance claim, and managed to pay off my car with it. So police and insurance companies do take collectible prices seriously. But those are still physical objects. I don't know how you can prosecute someone for taking imaginary Internet money from someone who asked you to do something illegal with it.
posted by empath at 5:05 AM on December 2, 2013 [2 favorites]


I'm having serious issues not reading this in some kind of "i'm gonna call the internet police on you!" tone.

Thanks for that patronising tone.

I mean, i know you're serious, but at the same time this is close to someone stealing a bunch of WoW gold and running from a guild or something. Except here there's even less chance of any non-government intervention because there's no one to "ban" this guy involved in the system. Seriously. That can be exchanged for real money, does that suddenly make it a securities and embezzlement case?

Yes. The SEC are already getting involved in a Bitcoin Ponzi scheme, which is straight up fraud using only bitcoins. I'm unsure why you think this isn't just a standard embezzlement/fraud case. The SEC certainly do.

Sample: SEC Charges Texas Man With Running Bitcoin-Denominated Ponzi Scheme
Washington D.C., July 23, 2013 — The Securities and Exchange Commission today charged a Texas man and his company with defrauding investors in a Ponzi scheme involving Bitcoin, a virtual currency traded on online exchanges for conventional currencies like the U.S. dollar or used to purchase goods or services online.

The SEC alleges that Trendon T. Shavers, who is the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.” Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold. Today the value of 700,000 Bitcoin exceeds $60 million.
But yeah, I'm sure that the SEC is all LOL internet police and not to be taken seriously, go back to your basement etc.

It will be the beginning of a new era if any movement is made to prosecute anyone on anything with relation to this theft. It would blow my goddamn mind.

Consider your mind preemptively blown, given that enforcement actions are already being taken. The relevant law is quite well developed I'm afraid.

What i have heard, is a lot of nerds saying they're calling TEH FBI because someone stole some obscene amount of EVE currency, ships, an entire corporation worth of stuff. Or some massive fraud in WoW, or whatever.

Both EVE and WoW set out in the EULA that items are not to be traded and that in-game transactions are for amusement purposes only.

I'm getting a little conspiracy theory-ish at the end there

No, you're just wrong because you're too lazy to bother doing any research before having a strong opinion.
posted by jaduncan at 5:05 AM on December 2, 2013 [8 favorites]


some cybertheft of virtual stuff that isn't real currency from any country"

I think this is the key point - not from any country! You can have your little unregulated, international virtual currency. But don't go crying for justice and law enforcement intervention - it's unregulated, remember? If people want justice, maybe they need to stick to their libertarian principles and go fund a private police force to go after them.
posted by Jimbob at 5:07 AM on December 2, 2013 [2 favorites]


If you want an even more obvious clue in that article that it's securities law that would apply:
“Fraudsters are not beyond the reach of the SEC just because they use Bitcoin or another virtual currency to mislead investors and violate the federal securities laws,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office
Or continue to be patronising, that appears to be working for you so far.
posted by jaduncan at 5:12 AM on December 2, 2013 [2 favorites]


From your linked post on SEC.gov

Shavers also diverted investors’ Bitcoin for day trading in his account on a Bitcoin currency exchange, and exchanged investors’ Bitcoin for U.S. dollars to pay his personal expenses. ... Shavers suffered a net loss from his day trading, but realized net proceeds of $164,758 from his sales of 86,202 Bitcoin. Shavers transferred $147,102 from his personal account at the online Bitcoin currency exchange to accounts he controlled at an online payment processor as well as his personal checking account. He used this money to pay his rent, utilities, and car-related expenses as well as for food and retail purchases and gambling.

I feel like, tax evasion taking down mobsters style, the importance of this bit is downplayed. It really doesn't seem like the major crime here is that he conned people but that he conned them and then made a profit in USD off of it, likely without paying any taxes.

It really seems that like a lot of criminals big and small what he ended up getting busted for was trying to cash out.

I mean, what do i know, i'm just some asshole on the internet. But i re-read that twice and really looked at what was emphasized. They essentially go over that part twice while just outlining everything else.

You really don't need to double down on your point here and rub the puppies nose in the turd. I get what you're point is. You didn't need to double post. I just don't really think that what he did if he just runs away with the BTC and does nothing else with it is something they actually would, or potentially even could go after.

Whats to stop this guy from just not? or for only directly exchanging this BTC for goods, or for foreign currency from an exchange that has nothing to do with the US, and depositing it in an offshore account? The doofus from the SEC post was completely flaunting it and spending tens of thousands on rent and partying. A bunch of chest-puffing that "no one can outrun the long dick of the law!" from the SEC doesn't really convince me that these cases are as similar as they seem.

And i'm really trying my hardest not to be a dick here, sorry. I'm honestly just curious how this will play out and extremely skeptical of a lot of arguments for and declarations of the seriousness of the whole thing and how the law will handle it. I'd absolutely LOVE to read a good blog post or writeup by someone with a legal background on how they foresee cases like this playing out.
posted by emptythought at 5:19 AM on December 2, 2013


Because it's a security as far as the SEC are concerned. Read securities law.
posted by jaduncan at 5:20 AM on December 2, 2013 [1 favorite]


OK. Essentially, you can think of a security as a tangible thing. The SEC is saying that this is a tradable thing of value. They are not saying it is a method of legal tender, so you can think of them as actual physical medallions if you wish for a hypothetical.

If I take many people's medallions and then run away with them, it's theft. It's theft at the moment of abstraction, rather than at the moment of sale. If I promise to give them three medallions a week for each hundred they store with me but give them other people's medallions rather than storing their medallions, it's fraud (and a Ponzi scheme). Likewise, the fraud here is claiming to be holding enough BTC to pay interest but actually doing it out of the deposited BTC. The straight up theft is just the icing on the cake, and wouldn't be required to bring a charge of fraud for the original Ponzi scheme. See Bernie Madoff for how this goes with other holdings.

There's not much complex about it. The SEC say it's a security, so therefore you can breach various specific and non-specific laws that affect securities. One might expect a defence argument that BTC aren't securities, but frankly if the defendant is a Ponzi scheme operator arguing that they should be let off because BTC aren't securities and the defrauded victims and the SEC are saying it is I doubt the judge will be very sympathetic to the Ponzi scheme operator.

Suggestion: It's almost like they are setting up a very unsympathetic defendant for one of the first test cases or something. This would suggest that the SEC are very clear about their desired outcome and ability to demonstrate their ability to regulate, which might well come in useful later in more complex criminal cases.
posted by jaduncan at 5:28 AM on December 2, 2013


Special bonus here is that the defendant probably won't have all that much unfrozen money that he can openly spend on lawyers.
posted by jaduncan at 5:32 AM on December 2, 2013


And, indeed, on looking further at that specific case it would indeed go as predicted [Reuters]:
U.S. regulators got the green light from a federal judge to proceed with their lawsuit against a Texas man accused of running a Ponzi scheme using Bitcoin, the virtual online money system.

Trendon Shavers of Bitcoin Savings & Trust had challenged the Securities and Exchange Commission's case against him, saying the regulator had no jurisdiction to sue him because the Bitcoin investments he offered are not securities or subject to any U.S. regulation.

But U.S. Magistrate Judge Amos L. Mazzant in the Eastern District of Texas ruled on Tuesday that his Bitcoin investments "meet the definition of investment contract, and as such, are securities."
[SNIP]
Shavers had asserted that his Bitcoin investments are not securities because Bitcoin is not money, but the SEC countered that they constituted both investment contracts and notes.

"It is clear that Bitcoin can be used as money," the judge wrote. "It can be used to purchase goods or services."
Legal detail:
The Securities Act of 1933 defines a “security” as “any note, stock, treasury stock, security future, security-based swap, bond…[or] investment contract…” 15 U.S.C. § 77b. An “investment contract” is considered to be a catch-all category for products that do not meet the exact contours of a note, stock, or other specified form of indebtedness. As federal securities laws have remained largely unchanged since their enactment in the 1930s and 1940s, courts have increasingly had to determine whether a product constituted an investment contract. The seminal case on this subject is S.E.C. v. W.J. Howey Co., 328 U.S. 293 (1946). In Howey, the U.S. Supreme Court set forth a three-part test to answer this question, holding that
An investment contract is any contract, transaction, or scheme involving (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived from the efforts of the promoter or a third party.
In analyzing the Howey factors, Judge Mazzant first found that the BTCST investments constituted an investment of money, noting that Bitcoins could not only be used as money to buy goods and services but also could be exchanged for conventional currencies. Next Next, Judge Mazzant determined that there existed a common enterprise since the investors were dependent on Shavers’ purported expertise in Bitcoin markets and local connections, and investors were promised a substantial return from these efforts. Finally, there was clearly an expectation that profits would be derived through Shavers’ efforts, as investors were induced to invest through the promise of the astronomical returns. In short, Judge Mazzant concluded that Bitcoins satisfied the Howey test and could be considered securities.
This is pretty much settled.
posted by jaduncan at 5:43 AM on December 2, 2013 [1 favorite]


Does this mean the next Blade movie is going to be delayed?
posted by srboisvert at 6:08 AM on December 2, 2013


What about bitcoin clones? We might be seeing a bubble for lack of competition, but it is coming. And short-selling one currency against another will be standard. This is where the intrinsic value argument was based. Then there are these comments by Richard Stallman.
posted by Brian B. at 6:16 AM on December 2, 2013


some cybertheft of virtual stuff that isn't real currency from any country"

I think this is the key point - not from any country! You can have your little unregulated, international virtual currency. But don't go crying for justice and law enforcement intervention - it's unregulated, remember? If people want justice, maybe they need to stick to their libertarian principles and go fund a private police force to go after them.


This is not really how laws around theft/contract disputes/etc. work. You can't just get circumvent all of those laws by using something other than government-backed money as a medium of exchange. Bitcoin is not an official government currency but neither are store gift cards, concert tickets, software licenses, or many other things that people sue over or get prosecuted over every day.
posted by burnmp3s at 6:22 AM on December 2, 2013 [1 favorite]


offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.”

Jesus, people, if you must buy bitcoins, DO NOT BUY BITCOINS FROM JIMMY BUFFET IMPERSONATORS.
posted by octobersurprise at 6:33 AM on December 2, 2013 [4 favorites]


This is pretty much settled.

I appreciate all the info you have been sharing in the thread, and I don't have a stake in this either way, but just because a district court judge says something doesn't mean that it's settled. It could still be overturned by a circuit court on appeal, or the supreme court if they decide to take it.
posted by ultraviolet catastrophe at 6:49 AM on December 2, 2013


I just took a 30 second research foray into BTC FX trading. Yes, it's as MMF-ridden as you might expect. My brain hurts now.
posted by scruss at 6:58 AM on December 2, 2013


Inside a Bitcoin mining operation. Featuring: rows upon rows of FPGAs or ASICs, custom interconnects, bubbling immersion-cooling fluid, and, of course, Hong Kong. Best of luck, guys.
posted by fatllama at 7:02 AM on December 2, 2013 [1 favorite]


I happened to see a post on Facebook last week that can be summed up as follows:
  • investing in Bitcoin has been a great decision for me
  • if you don't own any Bitcoin right now, you probably should buy some
  • economic fundamentals point to a rise in the price of Bitcoin
  • Chinese money is flowing into Bitcoin, driving up its price
  • Bitcoin can only increase in popularity
  • therefore, it is a mistake not to own Bitcoin right now
If you replace "Bitcoin" in that post with "real estate," it sounds eerily like what people were saying in the U.S. in 2007 or in Canada last week. And we know where that mentality leads.
posted by one more dead town's last parade at 7:03 AM on December 2, 2013 [6 favorites]


It could still be overturned by a circuit court on appeal, or the supreme court if they decide to take it.

Yeah, that's theoretically possible. It would be a big, big decision to change the interpretation of the Howey test though, because of how much it would change regarding other securities. Their best chance would be challenging the money question again, but there's a ecosystem that demonstrates that it can be used for purchases. I meant that the legal questions are so well defined that it's hard to see it going a different way, but I should have been clearer there.
posted by jaduncan at 7:13 AM on December 2, 2013


Let's talk more about the buying weed on the internet part.
posted by goatdog at 7:18 AM on December 2, 2013 [3 favorites]


Shortly after I moved to New York in 2009 I met a guy at a party who told me about bitcoins. That it was some sort of money-of-the-future, but that there were a couple of weirdo places in Bushwick that would sell you a beer or a hotdog for a couple bitcoins. I considered taking one of my paychecks and sinking it into bitcoins, because it's one paycheck, and who knows. But ultimately, I decided not to because currency speculation is hard to do well. I bought one bitcoin as a novelty.

Anyway, fast forward a couple of years. The guy who I was talking to at that party started a company making mining ASICs, and regardless of what you think of bitcoins, nobody ever went broke selling shovels in a gold rush. Meanwhile, the company I was working for, which was nearly as old as I was, went bankrupt. My one bitcoin is, for the moment at least, worth more than all the company stock I bought with 10% of every paycheck from the years I was working there.

It just goes to show, sometimes terrible decisions pay off big, and sound decisions will flush your money away.
posted by GameDesignerBen at 7:19 AM on December 2, 2013 [12 favorites]


Looking forward to the correction so that we can get on with using Bitcoin as a tool, rather than all this focus on speculation and investing.
posted by the jam at 8:48 AM on December 2, 2013 [2 favorites]


Only a fraction of the fixed number of bitcoins is in circulations - some people suggest that Satoshi has a huge number of bitcoins.

I think this Satoshi needs to become the Bitcoin central bank and start performing open market operations to stabilize his currency's exchange rate.
posted by cosmic.osmo at 8:59 AM on December 2, 2013 [2 favorites]


> we can get on with using Bitcoin as a tool

Don't a lot of tools already use Bitcoin?
(I'm not calling you a tool, the jam …)
posted by scruss at 9:41 AM on December 2, 2013 [1 favorite]




So I recently found out that there are a lot of crypocurrencies, apparently all of which at the moment are derived from Bitcoin's source code and protocol in some way, varying only in the proof-of-work function or block interval.

My favorite so far is Primecoin, which uses as its proof-of-work function chains of prime numbers with certain properties known as Cunningham Chains. I find it very doubtful whether there is any immediate scientific value in this, but I like the idea of producing some giant database of primes with this property for some grad student to sift through.
posted by jcreigh at 10:09 AM on December 2, 2013 [4 favorites]


"Now that I have a huge stash of bit coins [...]

Pre-e-e-etty sure that user is just trolling right now. I hope. I HOPE. Another recent comment by them:
I'm not too worried about this since you can be pretty sure the aggrieved will probably be able to track down the thief by examining the block chain. That is one nice thing about bit coin: it exists outside financial regulation and so penalties for transgressions like this can be handled extrajudicially. My paycheck comes today and I'm really upset I have to pay rent and not just invest the whole thing in more bit coins.
So yeah.
posted by tychotesla at 10:39 AM on December 2, 2013 [2 favorites]


I think this Satoshi needs to become the Bitcoin central bank and start performing open market operations to stabilize his currency's exchange rate.

That is a really good point. Because the whole idea of Bitcoin is that it's P2P, it's decentralized, you don't have to trust anybody.

But the structure of the protocol gives a huge amount of the bitcoins to the early adopters and originators of the system. Satoshi supposedly has something like a million bitcoins. If that's true, he could easily start acting like a central bank and controlling the price of Bitcoins by buying and selling Bitcoins relative to some other commodity, the most obvious choice being USD.

Bitcoin lovers don't trust central banks, which is not entirely misguided. But they're placing an awful lot of trust in a totally anonymous programmer.
posted by jcreigh at 11:02 AM on December 2, 2013 [1 favorite]


I don't claim to know where Bitcoin is going as a currency. I think the far more interesting point is how the whole setup has vastly cranked up the profit incentive to develop processing power. Is Moore's law accelerating? To what use will humanity put all that power once the Bitcoin thing is passe? What actual real world problems (tornado forecasting?) might be solved were we to use our new found power for things other than making money? Probably just ever more realistic point-and-shoot games I suppose.
posted by jetsetsc at 11:15 AM on December 2, 2013


Asics aren't a boost in processing power. They're useless for general purpose computing, but I guess they could be put to use later to generate rainbow tables for hackers.
posted by empath at 11:21 AM on December 2, 2013


Why I Haven't Changed My Mind About Bitcoin
That's not to say Bitcoin is a "bubble" or Bitcoin prices will inevitably tumble or everyone who buys Bitcoin is a fool. Plenty of people have made money at different times by buying gold.

But Bitcoin's other properties aren't particularly impressive. It is being used right now by Chinese people as a means of evading that country's exchange-rate controls. That's clever. But it's really something that only works if the Chinese government keeps tolerating it. And there are any number of loopholes that work as long as they're tolerated... But eventually we'll either get liberalization (in which case Bitcoin-as-loophole stops being useful), or else we'll get a reversal of policy in which case we'll get a crackdown.

Black-market transactions are a thing, though. And Bitcoins are more portable than either suitcases full of $100 bills or diamonds. So there's some use there. And even though I think inflation paranoia is dumb, it's certainly a real phenomenon. And anything gold can do Bitcoin can do better. In essence you've combined the smuggling utility of pieces of paper with pictures of Ben Franklin on them with the inflation hedging properties of gold. That's a decent achievement. But it's not going to set the world on fire. And to the extent that it becomes more popular as a means of conducting illegal transactions, it's going to tend to get squeezed out of legitimate uses by government crackdowns.
posted by tonycpsu at 11:26 AM on December 2, 2013 [2 favorites]


Bitcoin lovers don't trust central banks, which is not entirely misguided. But they're placing an awful lot of trust in a totally anonymous programmer.

I think you might find this blog post interesting: On the fact that Bitcoin has a Kill Switch; and how to disconnect it.

It's ironic that Bitcoin is turning into an illustration of why a central bank might not be such a bad idea after all.

but I guess they could be put to use later to generate rainbow tables for hackers.

I don't think they're even useful for that. I've read that at least one model just plain isn't setup to do the IO you'd need to build a rainbow table, since it's not feature needed for mining Bitcoins and having it would reduce mining performance. The others are probably made a similar tradeoff for similar reasons.
posted by cosmic.osmo at 11:31 AM on December 2, 2013 [6 favorites]


I think this Satoshi needs to become the Bitcoin central bank

AFAIK, there is no evidence that Satoshi is a real person.
posted by benzenedream at 11:45 AM on December 2, 2013


Repost from last weeks bitcoin thread:

I'll try and explain myself better. There's a lot of derision for bitcoin in this thread, which I guess is a valid reaction to the swarms of pro-bitcoin trolls that seem to be everywhere these days. But if you ignore them and look at bitcoin as a piece of engineering it is phenominal. From nothing they have built an open-source peer-to-peer transaction processing engine that can process transactions globally with very low transaction fees. I think its success is built on a modern internet engineering philosophy of open source and continuous improvement and development. Seeing what works and tweaking the bits that dont.

For me the killer application for Bitcoin is in developing areas like Africa. Lets say you're a startup in Rwanda, selling some service via a web site. What chance have you got in Rwanda to be approved as a Visa merchant (to receive payment)? Whereas with Bitcoin you can just get stuff done. This is the core idea of bitcoin - removal of the need for a trusted central authority makes everything more efficient.

By all means you should view bitcoin as a risky investment. But to write it off as snake oil is to miss the point: Bitcoin works, it is processing transactions in a reliable manner right now, and from what I've seen of the engineering community around it, it will continue to do so.
posted by memebake at 11:52 AM on December 2, 2013 [4 favorites]


What actual real world problems (tornado forecasting?) might be solved were we to use our new found power for things other than making money?

What problems might have been solved, beforehand? Making Bitcoins isn't free — that energy comes from some finite supply out of the ground, somewhere — much less the hardware, power, and HVAC infrastructure used to calculate them. All the waste heat goes into the Earth's environment. What an extravagance, perhaps, to throw massive amounts of usable energy at the equivalent of a bubble market for digital comic books.
posted by Blazecock Pileon at 12:22 PM on December 2, 2013 [3 favorites]


What chance have you got in Rwanda to be approved as a Visa merchant (to receive payment)? Whereas with Bitcoin you can just get stuff done

There may be legitimate reasons for difficulty in becoming approved as a Visa merchant in some places, although I agree on the whole it's probably a shitty thing. However another "feature" of Bitcoin is that chargebacks are impossible. Great for people selling stuff. Great for scammers ripping people off. But as a customer, why would I want that?
posted by Jimbob at 12:29 PM on December 2, 2013 [4 favorites]


"By all means you should view bitcoin as a risky investment. But to write it off as snake oil is to miss the point: Bitcoin works, it is processing transactions in a reliable manner right now, and from what I've seen of the engineering community around it, it will continue to do so."

I think the idea behind Bitcoin is absolutely fascinating: a currency that's tied to no nation or institution, with transaction fees that are generated through some kind of market derived process. (Not quite sure how that works.) It's closer to the ideal of a pure invisible hand than anything that exists in the real world.

But it's still buggy as heck. The concept needs a lot more road testing before it's ready for mass adoption, and all this bubble mania might turn people off of digital currencies altogether if it busts too hard.
posted by Kevin Street at 12:33 PM on December 2, 2013




So, it's in reality impossible to exchange what a bitcoin is "worth" for any other currency, or even just at all, and the only thing you can buy with it is drugs (assuming the new silkroad isn't just a giant honeypot).

Oh but it's theoretically good for Africa and Vietnam.

Bitcoin may not be the cryptocurrency we want, but it is truly the one we deserve.
posted by danny the boy at 1:13 PM on December 2, 2013 [5 favorites]


five fresh fish: "There's a bitcoin ATM in Vancouver, BC. No doubt it exists solely to launder drug money."

A street cam would make an interesting feed there...
posted by IAmBroom at 1:16 PM on December 2, 2013


Kenya already has something a little like Bitcoin with M-Pesa, but it's closely tied to specific phone companies and the texts aren't themselves currency.
posted by Kevin Street at 1:17 PM on December 2, 2013 [1 favorite]


emptythought: "Why do they care if they catch him? they can't do anything if they do. The posts like "Yeah I don't imagine this fucker is going to be getting much sleep over the next few weeks/months." ARE HILARIOUS.

Why would he be afraid? are a bunch of neckbeards going to go to his house and beat him u
"

You've got some powerful delusions going on about the kind of people who lose $100 Million in drug money. I'm not saying there's no chance they like Cheetohs, GTA, and Pabst beer; I'm just saying they can employ people who use firepower to express displeasure.

If that $100 M represents one million $10 purchases to one million separate buyers, he's probably safe. But that's one big "if".
posted by IAmBroom at 1:23 PM on December 2, 2013


M-Pesa sounds like what all the technologists dream about when they talk about a mobile wallet. Nothing in the states comes close, as you have to tie everything to a real bank account.
posted by stoneweaver at 1:25 PM on December 2, 2013


one more dead town's last parade: "I happened to see a post on Facebook last week that can be summed up as follows:

investing in Bitcoin has been a great decision for me
if you don't own any Bitcoin right now, you probably should buy some
economic fundamentals point to a rise in the price of Bitcoin
Chinese money is flowing into Bitcoin, driving up its price
Bitcoin can only increase in popularity
therefore, it is a mistake not to own Bitcoin right now

If you replace "Bitcoin" in that post with "real estate," it sounds eerily like what people were saying in the U.S. in 2007 or in Canada last week. And we know where that mentality leads.
"

You are actually describing a classic "pump and dump" sales pitch. Go to any popular investment forum, and you can find a penny-stock investor doing just that.
posted by IAmBroom at 1:42 PM on December 2, 2013 [4 favorites]


I started mining bitcoins on my person VPS machine almost immediately after the first ycombinator post. I don't know how many I eventually mined, as I lost the wallet about 6 months ago after migrating to another server. I think it was somewhere in between 20-100 BTC. Poof. Gone. Should I buy in now at $1k+? Dunno. Inherently, due to the fixed total supply of bitcoin, it is a deflationary currency.
posted by Freen at 2:24 PM on December 2, 2013


Inherently, due to the fixed total supply of bitcoin, it is a deflationary currency.

And deflationary currencies never get spent on goods, so I don't know how it can possibly be the basis of a fluid online transaction system.
posted by Jimbob at 2:35 PM on December 2, 2013


Jimbob: Precisely. This is, as far as I can tell, miners selling to hoarders with a few people doing other extra-curricular financial activities on top of it. Such activities including laundering and moving money out of repressive regimes, etc.
posted by Freen at 2:38 PM on December 2, 2013 [1 favorite]


So, it's in reality impossible to exchange what a bitcoin is "worth" for any other currency, or even just at all ...

Look, there are some real problems with bitcoin, but that isn't one of them. Its true the exchanges have historically been flakiest part of the ecosystem, but if it really was "impossible" to exchange bitcoin for other currency, as you posit, then there would not be a market at all. Seems there's a lot more people who have opinions about bitcoin than there are people that actually understand it.

My post above should have had a hyperlink to this, but it got stripped out by my phone: Nyaruke - Bitcoin's Bottom Billion - its about Bitcoin from the perspective of a startup in Rwanda, and it also talks about what M-pesa can and can't do.

Another new aspect of bitcoin that I discovered recently is its scriptable transactions - a feature that isn't turned on yet, but could be one day.
Bitcoin has a scripting language which enables more than a “send money from X to Y” transaction. A Bitcoin transaction can require M of N parties to approve a transaction. Imagine Wills that automatically unlock when most of the heirs agree that their parent has passed, no lawyer required. Or business accounts that require two of any three trusted signatures to approve an expenditure. Or wire escrows that go through when any arbiter agrees that the supplier sent the goods to the buyer. Or wallets that are socially secured by your friends and family. Or an allowance account accessible by the child and either of two parents. Or a crowdfunding of a Kickstarter project that pays out on milestones, based on the majority of the backers approving the next payment. The escrow in each case can be locked so that the arbiters can’t take the money themselves – only approve or deny the transaction.
posted by memebake at 2:54 PM on December 2, 2013 [3 favorites]


This is, as far as I can tell, miners selling to hoarders with a few people doing other extra-curricular financial activities on top of it. Such activities including laundering and moving money out of repressive regimes, etc.

The US Govt sees it quite a bit more positively than that. The recent senate hearings is one of the reasons why it broke the $1000 barrier.

BERNANKE: Bitcoin 'May Hold Long-Term Promise'
U.S. Agencies to Say Bitcoins Offer Legitimate Benefits (Bloomberg)
Regulators See Value in Bitcoin, and Investors Hasten to Agree
“Cash is still probably the best means for laundering money.” - Jennifer Shasky Calvery, director of the Treasury Department’s financial crimes office
posted by memebake at 3:02 PM on December 2, 2013


And deflationary currencies never get spent on goods

Its not really as simple as that. Why buy an iPhone 5s today when it will be cheaper in 12 months time? Still, I notice a few people seem to think they are worth buying.
posted by memebake at 3:05 PM on December 2, 2013


Bitcoin has a transactions per second limit of 7 Bitcoin transactions per second. It's limited by its very structure to being small-scale.

Did you actually read the sentence you had linked to? The 7tps limit can be lifted anytime the community decides it wants to.
posted by memebake at 3:10 PM on December 2, 2013


memebake: " Its not really as simple as that. Why buy an iPhone 5s today when it will be cheaper in 12 months time? Still, I notice a few people seem to think they are worth buying."

That's a ridiculous argument that conflates inflation with depreciation, and negates the value of having the iPhone now instead of having it in twelve months.
posted by tonycpsu at 3:10 PM on December 2, 2013 [4 favorites]


Eh, that was probably too harsh, and depreciation probably isn't the right word for "an iPhone 5 will not be as desirable (and therefore not as valuable) when the iPhone 6 is out."
posted by tonycpsu at 3:13 PM on December 2, 2013 [1 favorite]


memebake: "Look, there are some real problems with bitcoin, but that isn't one of them. Its true the exchanges have historically been flakiest part of the ecosystem, but if it really was "impossible" to exchange bitcoin for other currency, as you posit, then there would not be a market at all."

Oh? How many bitcoins have you exchanged for currency? What percentage of the "trading" price did you get? I've only ever heard reports to the contrary. Your data point would be appreciated.
posted by danny the boy at 3:17 PM on December 2, 2013


I agree that there is a debate to be had about the delfationary aspect, buts its not as cut and dried as "deflationary = never gets spent" or "deflationary = never works". Economics is not as straightforward as economists like to pretend, and bitcoin is sufficiently different to anything we've experience of that its not clear how things will pan out. For example: the implications of infinite divisibilty.
posted by memebake at 3:18 PM on December 2, 2013


Inherently, due to the fixed total supply of bitcoin, it is a deflationary currency.

I don't think it will really work out that way. While it's technically true that each bitcoin-style cryptocurrency is deflationary, there can be an infinite number of them. As long as there are exchanges there's no real reason to favor any particular one. I could see capital-B Bitcoin, losing it's current favor (and therefore purchasing power) in favor of an alternative.
posted by cosmic.osmo at 3:24 PM on December 2, 2013


First SheepExchange, now WeExchange has made millions of dollars of BitCoins disappear. Yep, it's the perfect Libertarian currency of the future BECAUSE ITS SO EASY TO STEAL with no consequences because, Freedom, right?
posted by oneswellfoop at 3:30 PM on December 2, 2013 [1 favorite]


The US Govt sees it quite a bit more positively than that.

...after the US Govt came into possession of how many hundreds of thousands of Bitcoins from the Silk Road bust?
posted by Jimbob at 3:34 PM on December 2, 2013 [1 favorite]


The most bubbly-looking thing about bitcoins is the sudden rise in price of several bitcoin wannabes over the past week. There are over 40 different cryptocoin variants listed on this page alone, and probably dozens more out there. Can you believe all of the "QuarkCoin" in existence is apparently worth $50 million? All of the "BBQCoin" is worth $5 Million?

One of the classic signs of a bubble is when people start bidding for anything that is even remotely related to the original thing - whether it be tulips, dotcom stocks, or crypto coins. In a year from now, I can see bitcoin still existing, but I have a hard time seeing all 40 of those coin variants being worth more than $0. My guess is the creators of the wannabe coins are selling their own coins they mined for "free" as fast as they can.

I do think there is some place for an electronic payment system that doesn't involve paying the credit card companies transaction fees, or waiting an arbitrary 3 days for your bank to release funds, or having your Paypal account frozen for no reason. But I don't think the correct solution is to make a new currency that you convert into to do your transactions. It only makes sense to receive bitcoins if you can pay off your costs (taxes, food, lodging, etc.) in bitcoin, which despite bitcoin enthusiasts' claims, is nowhere near a realistic possibility right now. If your taxes and your living expenses are in USD, you're simply taking massive FX risk by accepting bitcoins. You are also taking credit risk to the exchange when you sell the BTC for USD, because there is the risk they just close down, never give you your money, and claim they were "hacked." And then you still have to deal with all the nonsense of the banking system for the $USD to clear to your bank account from the exchange.
posted by pravit at 3:36 PM on December 2, 2013 [1 favorite]


membake's link to that Nyaruke blog is really worth reading, because it concisely lays out the potential that makes Bitcoin so fascinating.

Basically, Bitcoin can make participating in the digital economy possible for millions of people in the developing world (not to mention the West) who are currently shut out of the system, because they can't get credit cards or use Paypal. It could massively expand the scope of online commerce, and make it much easier to move money in and out of developing economies. And yes, that's good for corrupt politicians, but it's also good for people living on $2 a day.
posted by Kevin Street at 4:05 PM on December 2, 2013


Oh? How many bitcoins have you exchanged for currency? What percentage of the "trading" price did you get? I've only ever heard reports to the contrary. Your data point would be appreciated.

I'll bite. I know a couple people who are pretty deep into this(as i mentioned in an AskMe comment recently). Sites like mtgox have had downtime, but do work. Various people are superstitious about various sites, but there's plenty out there that do tons of exchange a day. You lose a couple percent, generally 5 or less in the exchange process. It can be even lower.

The people i know were in when you could mine it with readily available consumer hardware, and put cash in when it was under $10 or even under $1. As far as i know, since they're super cagey about it now, they cashed out at least a couple when it was in the $200 range to buy some random stuff.

I can't speak from personal experience, but i can say that the exchanges are real and you can absolutely use them. It's not impossible, and i've only heard random isolated stories on the intertubes of it failing or being super hard. Some exchanges get screwed, some sites run away with peoples money, no one has EVER gotten busted for that besides the pyramid scheme guy. It's pretty wild west, but you can get your money in and out.

If that $100 M represents one million $10 purchases to one million separate buyers, he's probably safe. But that's one big "if".

This was also, essentially, a retail operation however. And he wasn't holding any stock. The site was the equivalent of ebay+paypal, or a drop shipping amazon seller or something. Thinking he would be holding anything but $10-100 payments from a bunch of random customers is laughable. It was a site like silkroad, no one was going on there and ordering their next 5 kilos of coke or something. I'd be fucking amazed if anyone walked away from this being owed more than four figures in USD worth of bitcoins. I have nothing to base that on obviously besides idle speculation, but it just sounds like bullshit to imagine people sending millions worth over a retail site.

Suggestion: It's almost like they are setting up a very unsympathetic defendant for one of the first test cases or something. This would suggest that the SEC are very clear about their desired outcome and ability to demonstrate their ability to regulate, which might well come in useful later in more complex criminal cases.

You like... quintuple posted after i did as if to shout me down or something, but while you were belaboring your point a bit i think i have a fairly good understanding now.

But this, this paragraph is something i can absolutely get behind. They know they're not playing a home game here, so they chose the absolute easiest, scummiest, and least sympathetic target who had done some stuff outside the BTC system that absolutely reeked of criminal activity. As i said, i think the big thing he did here that they'll jackhammer on in court since it sounds like classic ponzi scheme stuff is pulling money out to party and live on. But linking that activity to theoretically criminal bitcoin activity would be a major first step towards setting a precedent and doing what they want to do.

I have mixed feelings about the whole "pick a super unsympathetic shithead to rail first and set a precedent" thing since that almost sounds like war on drugs stuff to me, but i get it now.

I agree with the comments below your posts that this isn't settled, but i think the wind is certainly blowing a certain direction quite strongly. I never thought it would be an unfair argument to say that anyone trying to pretend these aren't at least being represented as securities by a lot of people was being disingenuous and trying to skirt the system, it was just my understanding that up until now the government had just gone "lol world of warcraft funny money" which they had.

This isn't a slam dunk yet, but it certainly looks like this will be the door stop used to jam any attempt to claim that it isn't a security going forward.

What i wonder though, is what effect this will have on other digital currencies and the type of MMO currency fraud i'm talking about? Seeing as how that's something that can be traded for real currency, where will the line be drawn? If this case goes through and this guy goes down(which seems probable to me, for the reasons you stated and i restated about him being an unsympathetic defendant) it seems like it will have SWAT team style kicked the door in to let pretty much anyone who got fucked over in virtual currency at the very least sue for civil damages, if not attempt to get someone to press criminal charges.

It will be the beginning of a big shitstorm, but i could also see the legitimacy that would lend that the government has your back if someone rips of you off just like any other currency/security/good/etc driving the value up even more.

heh.

And sorry if i came off as flip or an ass before, i think we ended up pretty much approaching the same conclusion but both kinda came at it with our swords out simply because of how we were approaching it. That's the internet though.
posted by emptythought at 4:23 PM on December 2, 2013


> For a currency to retain its value, there needs to be something it can always be used for.

Flat. Round. Chocolate. Wrap 'em in foil and you've got BiteCoin.
posted by jfuller at 4:28 PM on December 2, 2013


Basically, Bitcoin can make participating in the digital economy possible for millions of people in the developing world (not to mention the West) who are currently shut out of the system, because they can't get credit cards or use Paypal.

It would if they could purchase them using cash on the street (this may be possible), hold on to them in a secure setting where they won't suddenly be "hacked" and stolen (not at all certain at the moment, given the jerks who run the online wallets and exchanges), and trade them back for cash (seemingly impossible, given the kind of ID you require to cash out Bitcoins seems more excessive than for Paypal).

I guess it can improve, but at the moment there's no reason to trust the fedora-clad speculative jerks who control the system.
posted by Jimbob at 4:38 PM on December 2, 2013 [2 favorites]


emptythought: "I'll bite. I know a couple people who are pretty deep into this(as i mentioned in an AskMe comment recently). Sites like mtgox have had downtime, but do work. Various people are superstitious about various sites, but there's plenty out there that do tons of exchange a day. You lose a couple percent, generally 5 or less in the exchange process. It can be even lower. "

It wasn't a "gotcha" question, it was a real legitimate question. Because upthread we have a first-hand account of a guy being mostly unsuccessful at selling his bitcoins for the past two weeks--and still is on a waiting list to get his money out of an exchange. What he HAS been able to get has been less than 50% of the exchange price, and an enormous amount of people trying to scam him.

I still haven't heard any first person accounts of something trying to sell NOW. Back when it was only $200 sure... but not now with the astronomical prices. What good is it if you're a millionaire on paper but can't actually realize it?

I'm being assured here by memebake that yes, you can actually sell bitcoins for how much they're listed for, but without much to back that assertion up?
posted by danny the boy at 4:43 PM on December 2, 2013


That's true, Jimbob. And it's what I meant when I said Bitcoin was buggy as heck. The idea of digital cash is wonderful, but the reality isn't working too well right now. Given time and continued development it could get much better. But I worry that the current bubble mania and all the problems discussed in this thread could turn people off and tar the concept for years.
posted by Kevin Street at 4:44 PM on December 2, 2013 [1 favorite]


Yeah. I got heated and posted rapidly. My apologies.
posted by jaduncan at 4:45 PM on December 2, 2013


I'm being assured here by memebake that yes, you can actually sell bitcoins for how much they're listed for, but without much to back that assertion up?

I made over €2500 and cashed it out on Kraken. YMMV.
posted by jaduncan at 4:47 PM on December 2, 2013


Cool. Can you tell us when? And was there a waiting period?
posted by danny the boy at 4:49 PM on December 2, 2013


Oh and what was the bid-ask spread? (Not fees)
posted by danny the boy at 4:51 PM on December 2, 2013


Last week via SEPA, spread was about €15 maybe? Below 2%, anyhow. They have strict ID requirements, so I'm not sure how it would be for a US national. I should start up a cashing service, I hear Mt Gox is a clusterfuck to get actual cash from.
posted by jaduncan at 5:51 PM on December 2, 2013


Wait time was just 6 confirmations plus SEPA delay, fee was something stupidly low. Below a euro. Not tried it save via SEPA though.
posted by jaduncan at 5:55 PM on December 2, 2013


MTGOX is like 2 months right now, IIRC.
posted by Pope Guilty at 6:08 PM on December 2, 2013 [1 favorite]


I read recently about some physical BitCoins being minted. I figured it was just for fun, and that they could never have any real world value by nature of their very existence. The fact that they found a way to trade the physical BitCoin is pretty indicative of peoples willingness to carry this new money as far as they can.

Of course, when I read about the physical BitCoins and how he was having to cease taking orders for them due to "regulatory concerns" I started laughing and with much futility attempting to explain why this was hilarious.
posted by mediocre at 6:21 PM on December 2, 2013 [1 favorite]


The high (and expandable) divisibility of Bitcoin strikes me as its killer app for pumping up the price.

Think of it this way:

I can get excited reading about how much a tech giant's stock (like Google's) will go up when they release their new product, but on my income, it's not a trivial decision to buy a ~$1000 stock. I'm not going to toss that much money into that unless I'm confident it'll grow in value, or at least not fall so much that I lose money I needed.

Bitcoin doesn't have that effect. Once you're cleared to buy bitcoin (easier than you'd think), you can buy any unit of a bitcoin above .00000001 bitcoin (or more practically, as small as an exchange will sell to you). While most bubbles and ponzi schemes have a point where they're so expensive, people stop buying in, but you are never priced out of Bitcoin. This is why you have people looking at the exponential growth charts (put on a log scale to look less bubblish), who then decide they'll wager $10-100 on Bitcoin keeping the growth up. As the bubble approaches its peak, smaller and smaller volumes of bitcoin can be traded for small amounts of money, and people who hold Bitcoin will keep demanding higher prices as they see the price rise.

I predict the most issues will come to Bitcoin either via technical issues or saturation amoung techies and speculators. The tech issues could include fees getting out of control as Bitcoin's deflation rushes but the default fees in software fail to adjust. (Right now, it's .0001 btc for prompt processing of most transactions, or 10 cents.) Or the transaction rate could rise faster than the devs work around a major limit of bitcoin, the block size limit. If more than an average of 7 transactions per second occur, Bitcoin's network will fail to keep up with transactions and probably just favor processing transactions with large fees, if I understand it right. Bitcoin is currently 1/4 the way there. It's fixable, but it's not an easy fix and it has to be done in a way that most miners accept it. When not all miners take an update, the blockchain forks and some transactions are lost, as happened earlier this year.

But the non-nerdy way for bitcoin to fail, in my opinion, is if it doesn't get user-friendly and safe by the time they can no longer get techies and speculators to adopt. Right now, Bitcoin is not as easy as most banking. Too many web wallet sites get "hacked," so the best practice among bitcoiners is to use "cold storage" for large amounts of money. This is where the wallet is generated on an offline computer, and bitcoins are sent to the public address of that wallet. When it's time to spend, the offline computer can either produce a transaction message that you bring to a networked computer via an SD card or whatever (which still guarantees the wallet is safe), or you can bring the computer online, risking the chance of getting hacked, meaning you do your transaction and send it to another cold storage wallet. And if you lose your cold storage documents, whether they're on paper or digital storage, the bitcoins are lost to humanity forever. With Bitcoin, you get to be your own bank, but you also have to be your own bank security, and the strategies for being your own bank in a land with no chargebacks are remarkably similar to burying a can of money where you hope nobody will look. Insured banks and/or dedicated hardware for offline Bitcoin wallets (like this) would make it easier, but I feel like by the time these things get polished, the banks will have had tons of time to improve their services while Bitcoin struggles to be used in a big way outside of shops that cater to nerdier clientele.
posted by mccarty.tim at 6:30 PM on December 2, 2013


Mediocre, those coins actually have picked up numismatic value, particularly a run that had an error in the printing, just like real currency. Some types are actually worth several times their value in BTC, IIRC.

On the other hand, I would have trouble trusting wallets minted by somebody else. It's been remarkably easy for online exchanges, wallets, and services to run off with money, and there's no way to prove the person who created those wallets didn't keep the private keys. Add in the poorly regulated nature of Bitcoin meaning it'd be difficult to get any recourse if they stole the coins, and I'd probably convert them to digital coins on a trusted wallet right away (assuming I didn't have the foresight they'd be collectible).

Further, without network connectivity, a paper or minted wallet is just a dubious IOU. You'd need to scan the code to check it on the blockchain, and then you might as well transfer it to a wallet only you know. I've not really read about a good offline solution for trading bitcoins.
posted by mccarty.tim at 6:38 PM on December 2, 2013


You are actually describing a classic "pump and dump" sales pitch. Go to any popular investment forum, and you can find a penny-stock investor doing just that.

Given how relatively illiquid it is, and how many true believers it attracts (i.e., it's different here and/or this investment is unlike any other because of reasons), I'd still say it's closer to real-estate speculation than penny-stock speculation.
posted by one more dead town's last parade at 8:34 PM on December 2, 2013 [4 favorites]


those coins actually have picked up numismatic value, particularly a run that had an error in the printing, just like real currency. Some types are actually worth several times their value in BTC, IIRC.

That's insane. Are newsmagazines fighting over the limited supply?
posted by cosmic.osmo at 8:41 PM on December 2, 2013


So whoever made out with 96,000 BTC from "Sheep Marketplace"...this is the blockchain.info log for their account, apparently. Most of it is people sending the person 0.0001 BTC and leaving comments like:
Public Note: I am a Chinese college students, I have a loving father, but I can not help him, he needs to do heart bypass surgery, I can not help him, because the cost of 100,000 or so needed, please help me, lifelong You pray Thank you!
Public Note: Toss me 2 or 3 BTC please... need a new bass amp...
Public Note: I'm not an Asian college student. My dad doesn't have cancer. I am a regular struggling single parent trying to make ends meet. I'm looking for any help I can get, so my little girl will have a better Christmas than last year's. Thanks.
posted by Jimbob at 8:50 PM on December 2, 2013 [1 favorite]


I guess it goes to show buying drugs on an anonymous exchange with semi-anonymous money doesn't give you much accountability from the people you're dealing with.

I get the feeling whatever Silk Road clone lasts the longest is probably a FBI honeypot.
posted by mccarty.tim at 8:55 PM on December 2, 2013


I can get excited reading about how much a tech giant's stock (like Google's) will go up when they release their new product, but on my income, it's not a trivial decision to buy a ~$1000 stock. I'm not going to toss that much money into that unless I'm confident it'll grow in value, or at least not fall so much that I lose money I needed.

You're basically talking about stock splits, and that doesn't have much impact on price up or down, but it does increase liquidity, making it more likely that the market will find the 'true' value through a higher volume of trades.
posted by empath at 9:13 PM on December 2, 2013 [2 favorites]


MTGOX is like 2 months right now, IIRC.

Yeah its true that getting USD out of MtGox takes a long time (which is why the price differential between Gox and the other exchanges is big). BitStamp seem to be generally reliable at this point.

The problem with the exchanges is that the small ones may well be cowboys and fraudsters. And then the big ones take all the strain, and then when there's a big rise or a big fall, which is fairly often, they get overloaded. If you're running something like MtGox or Bitstamp you have to contend with:
- regulators (doing their job, to be fair) who will want to investigate/shut you down because of money laundering regs (e.g. establishing ID of all customers you send traditional money to)
- hackers trying to break in and steal the coins. Like, really _good_ hackers.
- employees trying to steal the coins or traditional currency
- people DDOSing the exchange to effect price swings
- sudden peaks in traffic, attention and complains when prices move fast
- banks and other financial services refusing to deal with you, or placing limits on your transactions, because they've also got the regulators asking them questions

I believe the last one is the problem MtGox are currently having - they're looking for new banks to work with all the time, but basically no-one wants to handle the USD flowing in and out of Gox. People laugh at MtGox but the way they've continued to exist despite numerous challenges is actually pretty remarkable.

On the other hand if you run a successful exchange you'll make a lot of money. I think the rewards vs the challenges mean that its much easier to be a thief than an honest exchange. Everyone seems to equate Bitcoin with libertarianism but I think there's a large mainstream who are hoping a bit of government regulation could make the whole system of exchanges run more smoothly by providing a more predictable operating environment for the exchanges.
posted by memebake at 12:38 AM on December 3, 2013


If Dorit Ron and Adi Shamir are correct, most Bitcoins are probably being hoarded by one or more founders, who could presumably dump their holdings at any time. I don't suppose that they'd do this without a good reason, but the possibility is there - particularly if their hoard ends up in government hands.
posted by Joe in Australia at 12:45 AM on December 3, 2013 [1 favorite]


...The problem with the exchanges is that the small ones may well be cowboys and fraudsters. And then the big ones take all the strain, and then when there's a big rise or a big fall, which is fairly often, they get overloaded. If you're running something like MtGox or Bitstamp you have to contend with...

You know, reading this post made me realize that regardless of how this whole thing plays out, i really want to see some kind of documentary or dramatized movie made out of the whole thing, and especially focusing on the big exchanges.

Because this seriously sounds like some William Gibson novel, Hackers/The Net kinda shit. Ghost in the shell. There's a lot of this i hadn't even considered, and it's all such great fodder for a movie that would have sounded like completely corny fiction just a couple years ago.

I tried to write a faux IMDB summary sarcastically but i'm too tired. But, no, seriously. The silk road thing, the sheep road thing, the entire history of bitcoin thus far. that freaking shot of the crazy datacenter with the boiling cooling fluid. Go back and look at that shit, it practically looks like a corny set of practical effects to be a computer core on a space ship in an 80s or 90s scifi movie, or like the core of the robots in the matrix or something.

But yea, set all that up and then have it be a heist movie that's like hackers meets oceans 11. They try and rob one of the big exchanges and fail, and then are tipped off that the sheep road guy got away with all this and decide to rob him. Queue chase through the block chain cornified up all hackers/the net style. Throw in subtle references to those films and ones of their ilk. They keep trying to break in to his personal machine once they find him somewhere and he just barely gets away every time, bests them, pulls the plug, etc. He throws the wallet on a truecrypt volume and goes in to hiding, and they have to track him down "file of all the spies" in skyfall style but less moronic. But the guys wanted for fraud and INTERPOL is close behind both the mystery man and the team of hackers.

This shit writes itself.
posted by emptythought at 5:10 AM on December 3, 2013


I love crypto-currencies, governments need competition for control over the money, banks need competition for electronic transactions, etc. Ain't such a fan of BitCoin however. First, Dorit Ron and Adi Shamir showed that almost all the BitCoins are owned by one group, likely BitCoin's founders, that's spectacularly bad. Second, BitCoin cannot make necessary improvements to the protocol anymore, which presents problems.

I'd imagine that BitCoin should eventually be replaced by better crypto-currencies, imho ideally one with permanent fixed inflation and truly anonymous digital cash systems, hey new technologies have short shelf lives. It's conceivable however that BitCoin's hoarder founders might buy off government officials to ensure BitCoin's success over rivals, say by making US taxes payable in BTC. Very bad.
posted by jeffburdges at 5:33 AM on December 3, 2013


jeffburdges: "I'd imagine that BitCoin should eventually be replaced by better crypto-currencies, imho ideally one with permanent fixed inflation"

Problem is, if you try to include fixed inflation, you'll lose the GOOGLE RON PAUL crowd that makes up a substantial percentage of the vocal proponents that would help get such a crypto-currency off the ground.

In any event, I can't think of any way to hit an inflation target with any kind of hard-coded increase in the money supply, because there are many other factors that go into inflation other than the amount of currency in circulation.
posted by tonycpsu at 7:05 AM on December 3, 2013 [5 favorites]


Yes, early adopters need an ideological incentive, but BitCoin has openned the door for other crypto-currencies, thus allowing other ideologies.

Is GWU Econ Prof. Nick Szabo Satoshi Nakamoto?
posted by jeffburdges at 9:05 AM on December 3, 2013 [2 favorites]


It's conceivable however that BitCoin's hoarder founders might buy off government officials to ensure BitCoin's success over rivals, say by making US taxes payable in BTC.

The taxes thing is not conceivable; it would essentially put the Fed out of business if it ever happened. Bitcoin's success over rivals will be plain old fashioned network effects/first-mover advantages - a la Microsoft Windows.
posted by moorooka at 11:33 AM on December 3, 2013


Yeah, US taxes won't happen, but here is something more plausible-- OPEC.

It seems to me that a crypto currency would be ideal as a reserve currency (it has many, many advantages over gold), but the chances of governments adopting bitcoin for that purpose seem vanishingly small. And more-over, if they designed a new currency explicitly for that purpose, it would dismantle the bitcoin network overnight.

If a crypto currency is inevitable, and it very well may be, I feel like it's going to have to be decided on by a standards committee, with political input, not just everyone rallying around the first product out of the gate.
posted by empath at 11:47 AM on December 3, 2013 [2 favorites]


Jimbob: "The US Govt sees it quite a bit more positively than that.

...after the US Govt came into possession of how many hundreds of thousands of Bitcoins from the Silk Road bust?
"

The US govt makes $2.5T a year in taxes (and spends nearly twice that). That's the equivalent of me finding a quarter on the sidewalk. I wouldn't even bother to change my walking habits in the hope of finding another.
posted by IAmBroom at 12:14 PM on December 3, 2013 [1 favorite]


Microsoft Windows wasn't first, moorooka, they exploited IBM. About the only tech company that ever succeeded by being first was Google. And that's only because Sergey Brin's idea to model browsing the web as a Markov chain lay beyond what the businessmen and computer geeks elsewhere understood. And obviously they weren't first if you compare them with search engines not based on the Markov chain model.

Interestingly, if you control the oil then creating an Oilcoin might let you engage in market manipulation that exchanges dislike, empath, potentially quite profitable.
posted by jeffburdges at 1:09 PM on December 3, 2013


Huh. Read Nick Szabo's blog post from 2008: Bit gold. Hat tip to Jeffburdges.
posted by Joe in Australia at 1:29 PM on December 3, 2013 [4 favorites]


Didn't mean that windows was the 'first' OS, just the first to take off on a big enough scale that it couldn't be displaced by anything technically better. The altcoins seem to be technically better versions of bitcoins, but where value is derived from popularity and popularity is derived from value (more true of currency than anything else) it just seems unlikely that they'll catch up. I could be completely wrong of course - if I didn't have a track record of being wrong about bitcoin I would now be wealthy.
posted by moorooka at 10:35 PM on December 3, 2013


Any chance bitcoin is a product of the NSA or CIA? Or even a narco cartel?
posted by five fresh fish at 10:53 PM on December 3, 2013


Apparently nobody knows who's behind it except its creator(s). If it was the NSA or CIA, though, would they have tolerated the Silk Road thing for so long?
posted by Joe in Australia at 12:02 AM on December 4, 2013


It's conceivable however that BitCoin's hoarder founders might buy off government officials to ensure BitCoin's success over rivals, say by making US taxes payable in BTC. Very bad.

This entire concept is the most lollerskate college freshmen libertarian concept i've heard in a really long time. Why would they ever do this? It would be one thing if you were saying they'd exchange some the massive amount of BTC they have for cash and make a payment, but no, you had to go for the hail mary and say that hey maybe they'll get the government to accept it as direct payment! Nothing will ever be accepted besides good old USD for that sort of thing while we're alive.

Seriously, i'm trying my hardest not to be an asshole, but it's just completely hilarious. JPL would build a laser to carve a giant dick in to the moon before this would ever happen.

Apparently nobody knows who's behind it except its creator(s). If it was the NSA or CIA, though, would they have tolerated the Silk Road thing for so long?

If you wanna get really tinfoil hat, what's to say that whole thing wasn't a honeypot? I don't disbelieve the guy who got arrested created it, but it does harken back to a classic case like this one.

But what if it went deeper? what if they've been involved since the very beginning, or very shortly after BTC was created, and then just waited for something like silk road to pop up and did exactly what they did with cardersmarket. Just sock-puppeting someone as the "leader" and collecting info all the while.

It doesn't really fail the plausibility filter, especially if you've read several accounts of similar things in the past like that wired expose i linked(and really, go read that, it's like mr toads wild ride)
posted by emptythought at 4:38 AM on December 4, 2013 [1 favorite]




Mmm.... Bitcake.
posted by tonycpsu at 8:35 AM on December 4, 2013


That bitcoin real-time theft link really needs to be a new thread - it's like we're living in a Neal Stephenson novel.
posted by longdaysjourney at 11:03 AM on December 4, 2013


Joe in Australia: "Apparently nobody knows who's behind it except its creator(s). If it was the NSA or CIA, though, would they have tolerated the Silk Road thing for so long?"

Without even blinking. "Allegedly".
posted by IAmBroom at 1:48 PM on December 4, 2013 [3 favorites]


China just banned financial institutions from using BTC. The effect on the market is not pretty.
posted by PenDevil at 12:55 AM on December 5, 2013


bitcoins have been flat for about a week already. Once the easy profits are gone, I have to imagine a lot of people are going to look to cash out.
posted by empath at 2:12 AM on December 5, 2013


Bitcoin is totally a legit currency! Other currencies gain or lose 30+% of their value in half an hour ALL THE TIME!
posted by Pope Guilty at 3:06 AM on December 5, 2013 [2 favorites]


The very first bitcoin thread on metafilter, back in May 2011, makes interesting reading. No snark was left unsnarked.
posted by memebake at 7:01 AM on December 5, 2013




China Restricts Banks’ Use of Bitcoin

Although the Chinese government do say its fine for individuals - "Ordinary members of the public have the freedom to participate in Bitcoin transactions as a kind of commodity trading activity on the Internet, provided they assume the risks themselves,” the statement said. "

Whoever wrote that NYTimes article perhaps isn't that used to bitcoin's volatility, as they wrote:
It dropped more than $100 on Thursday, according to the Mt.Gox exchange ...
... as if a 10% shift in one day is noteable. Well, its sortof noteable. *shrugs*
posted by memebake at 9:12 AM on December 5, 2013


A 10% shift in value in one day is only unremarkable for Bitcoin because Bitcoin is incredibly volatile in ways very few things are. Buttcoiners think it's unremarkable because they've become used to a very silly state of affairs.
posted by Pope Guilty at 1:33 PM on December 5, 2013 [1 favorite]


Yes.
posted by memebake at 5:14 PM on December 5, 2013


Buttcoiners? Whether accidental or deliberate, I hope this term catches on.
posted by five fresh fish at 7:39 PM on December 5, 2013 [2 favorites]


lol buttcoins
posted by Blazecock Pileon at 12:43 AM on December 6, 2013 [1 favorite]


Oh wow, if you haven't seen buttcoin.org you really should.
posted by Pope Guilty at 12:55 AM on December 6, 2013 [2 favorites]


holy shit that video is totally cringeworthy
posted by Blazecock Pileon at 9:42 AM on December 6, 2013


And..... Mt Gox has a meltdown and the US price is getting crushed.
posted by PenDevil at 11:41 AM on December 6, 2013 [1 favorite]


Mtgox hasn't updated in an hour.
posted by empath at 11:57 AM on December 6, 2013


It's looping the last 5 min transactions over and over again to all the market watchers.
posted by PenDevil at 11:59 AM on December 6, 2013


I think this is crash protection rolling back orders and a bot continuously putting in the same big sell order. They're going to have to let the trade go through eventually. This kind of market manipulation has to be illegal, right?
posted by empath at 12:11 PM on December 6, 2013


This kind of market manipulation has to be illegal, right?

Bwahaahahahaa.

hahaha

ha

"Forget it, empath, it's Buttcoin."
posted by tonycpsu at 12:22 PM on December 6, 2013 [4 favorites]


empath: "I think this is crash protection rolling back orders and a bot continuously putting in the same big sell order. They're going to have to let the trade go through eventually. This kind of market manipulation has to be illegal, right?"

Well played.
posted by IAmBroom at 12:59 PM on December 6, 2013


Laws? Where we're going we don't need laws.

*cue music*
posted by Kevin Street at 3:46 PM on December 6, 2013


BTC is down 30% in the last 24 hours.

Currency of the future!
posted by tonycpsu at 9:35 PM on December 6, 2013


There are some interesting impediments in front of bitcoin that weren't noticed until recently. First, it is evident that the founding ideas are American, of the libertarian strain (with unwavering loyalty to the Austrian school when any explanations are offered). This will not help matters in countries that see this as a form of American imperialism. Secondly, there are structural faults in the deflationary aspects of the currency that tend to save rather than spend, increasing fraud and zombie coins along the way. Third, if central banks move to stop money laundering and cash transfers, then bitcoin will invite scrutiny if used for traveling, which is a key advantage turned disadvantage. Last, if bitcoin is mainly used by "unstoppable" illegal drug markets, then governments will target their money supply, and we will see a whole new dimension where governments will become the fraud agents using bitcoin, by court order and invisible special ops, combined with the predictable results of when cash is seized.
posted by Brian B. at 11:32 AM on December 8, 2013


fraud and zombie coins

What type of fraud, and what do you mean by zombie coins?
posted by jaduncan at 5:07 PM on December 8, 2013


You're referring to the Bitter to Better — How to Make Bitcoin a Better Currency paper?
posted by jaduncan at 5:11 PM on December 8, 2013 [1 favorite]


Recovering stolen bitcoin: a digital wild goose chase

Pretty good Guardian article about attempts to trace the money stolen from silk road competitor Sheep Marketplace.
posted by memebake at 10:27 AM on December 9, 2013


BTC is down 30% in the last 24 hours.

Relevant thread.
posted by homunculus at 12:00 PM on December 17, 2013


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