Sell, Mortimer, Sell!
December 6, 2013 12:38 PM Subscribe

Bitcoin is crashing. After reaching a peak of approximately $1150 USD per BTC yesterday, a panic selloff is happening now. The price has dropped below 800USD, a loss of over 30%, and may be lower by the time you read this. Or it could recover and go higher. You can watch realtime charts of the bubble bursting at The Genesis Block and other BTC tracking sites. The panic began when the government of China has banned banks from using Bitcoins. China is the largest Bitcoin market and restrictions have a significant and unpredictable impact. Bitcoin panic selloffs have occurred before, but the price has recovered and increased nearly tenfold.

Previously on MeFi, discussion of security problems, and near the end, links to a hacker's theft of 96,000 BTC and how to watch it being laundered around the internet by "tumbling."

This FPP is a followup, so discussion can continue. It was closed yesterday, just as the BTC situation started heating up. Hey this is my second FPP ever!

posted by charlie don't surf (295 comments total) 22 users marked this as a favorite

Excellent! I have a buy order of $50 worth of BTC when it hits $.05 USD per BTC!
posted by tilde at 12:40 PM on December 6, 2013 [4 favorites]

Earlier this week I read this incredible story of a Canadian trying to sell bitcoin and man, it did not sound good.
posted by mathowie at 12:44 PM on December 6, 2013 [19 favorites]

Metafilter: may be lower by the time you read this. Or it could recover and go higher.
posted by (Arsenio) Hall and (Warren) Oates at 12:45 PM on December 6, 2013 [14 favorites]

So a currency with incredible volatility is crashing today? Seems admittedly not very significant unless the trend continues.
posted by BrotherCaine at 12:46 PM on December 6, 2013 [1 favorite]

I love being able to enjoy EVE Online vicariously through these threads.
posted by Artw at 12:46 PM on December 6, 2013 [113 favorites]

I don't even know what to say about stuff like this. At the very least the Bitcoin Conspiracy Theorists afraid that the Man is keeping Bitcoin down can hang out for a while, because I guess when you tie your currency to drug trafficking and twitchy, paranoid speculation, the volatility makes it utterly useless as big companies like Baidu want nothing to do with it because they have ledgers to maintain. The state doesn't even have to intervene; it's the very people who want this currency to be globally accepted that are making sure it isn't by buying weed and trying to get rich quick.
posted by griphus at 12:46 PM on December 6, 2013 [6 favorites]

In related news, someone bought a Tesla S with bitcoin.
posted by Lutoslawski at 12:47 PM on December 6, 2013 [2 favorites]

I'm not very "in the know," but what is the significance of the tulips tag?
posted by gohabsgo at 12:48 PM on December 6, 2013

gohabsgo: Tulip Mania.
posted by JoeZydeco at 12:49 PM on December 6, 2013 [8 favorites]

(Gohabsgo: http://en.wikipedia.org/wiki/Tulip_mania)
posted by jbickers at 12:49 PM on December 6, 2013 [3 favorites]

Tulip Mania is widely regarded as the first bubble/speculatory crash.
posted by absalom at 12:49 PM on December 6, 2013 [5 favorites]

I dunno, I remember reading a bitcoin thread right after it started and everyone was laughing at them as it crashed. Then it spiked up again. Then it crashed again. Repeat. But it keeps getting higher before the crash. It seems like a self-perpetuating Libertarian bilking machine at this point.
posted by Ghostride The Whip at 12:51 PM on December 6, 2013 [37 favorites]

So I spend actual money on a money abstraction layer & hope to back out of that abstraction layer later at a profit? This whole thing has the smell of Charles Ponzi on it.
posted by Devils Rancher at 12:52 PM on December 6, 2013 [7 favorites]

self-perpetuating Libertarian bilking machine

Pretty sure that's the Vision Statement of every company that sold BitCoin miners with a 6-12 month "backorder" queue.
posted by griphus at 12:54 PM on December 6, 2013 [14 favorites]

Also, Gox shut down for an hour, rendering this lovely chart which just happened to imply they hit bottom at 800. Now it's dead cat bounced to 900.
posted by mccarty.tim at 12:54 PM on December 6, 2013

Boiler Room
posted by Blazecock Pileon at 12:54 PM on December 6, 2013

The more I watch Bitcoiners, the more I'm convinced it's a decentralized, automated pump and dump machine. Except it pumps itself, just waiting for a serious investor to cash out.
posted by mccarty.tim at 12:55 PM on December 6, 2013

It seems like a self-perpetuating Libertarian bilking machine at this point.

For some assholes this might seem like a feature, not a bug.

I am that asshole
posted by MCMikeNamara at 12:56 PM on December 6, 2013 [33 favorites]

I didn't realise it was so hard to sell; I thought there would be a normal exchange like the Lindex, plus independent buyers and sellers. The fact it's so hard to unload makes it very unattractive.
posted by DarlingBri at 12:57 PM on December 6, 2013

I mined 0.05044274 BTC before the difficulty increased so much that it became nearly impossible without specialized hardware. Back then, it was worth less than five bucks. Then it peaked around sixty bucks! I am richhh!!11!ll!1! Now it's back under $45 and falling. Get those brokers back in here! Turn those machines back on!

In unrelated news, Butterfly Labs announced today that it has a limited supply of "Little Single" 25GH miners in stock and ready to ship. You can buy them with BTC, I wonder how many orders were received before the crash. Little Single miners were backordered over a year, and delayed shipment made them completely unprofitable. You can test the breakeven analysis with the Mining Dashboard at The Genesis Block. Even if BTC stayed at 1150USD, it would never break even, and in 6 months, the electricity to run it will cost more than the revenue it generates.
posted by charlie don't surf at 12:57 PM on December 6, 2013 [4 favorites]

I read on SA that there's evidence the Butterfly Labs chips are actually used internally for about a month to "test" them before they are shipped to users after the difficulty falls. Not sure if true, but they're one sketchy shop.
posted by mccarty.tim at 12:59 PM on December 6, 2013 [1 favorite]

We're so happy we can hardly count.
Everybody else is just green,
Have you seen the chart?
It's a helluva start,
It could be made into a monster
If we all pull together as a team.
posted by Blazecock Pileon at 12:59 PM on December 6, 2013 [5 favorites]

The fact it's so hard to unload makes it very unattractive.

THEY'RE EASY TO UNLOAD, PROVIDED THAT ALL YOU DESIRE IN LIFE ARE 4CHAN PASSES AND CREPES FROM O'CREPES
posted by Sticherbeast at 1:00 PM on December 6, 2013 [16 favorites]

It's not quite so drastic when you look at a three month chart.
posted by Rhomboid at 1:00 PM on December 6, 2013 [3 favorites]

Some useful context here that I'm too rushed to source with links. No doubt I've got some details wrong.

The cash currency ⇆ BitCoin exchanges are terribly inefficient and unreliable. People wait weeks to turn BTC into USD via MtGox, for instance. And sometimes the exchanges just go down for awhile, and some of the smaller ones are frauds. As a result BitCoin doesn't really have very efficient pricing. There's been a significant arbitrage opportunity between Chinese Renmimbi and US Dollars via BitCoin, for instance, with prices being off something like 10%. But there's been no convenient way to take advantage of that at any scale because actually buying and selling BitCoin is so difficult.

The other piece of this is that BitCoin jumped from about USD 200 to USD 1200 in the last two months and no one could quite understand why there was this 6x increase in price. Until folks realized it was correlated with a significant increase in trade between Chinese currency and BitCoin. Best guess is someone is using BitCoin as an unregulated way to move money out of China. That's traditionally very difficult, with folks accepting a 50% loss gambling in Macau as one way to get money out of China. Now China has signaled they're going to take a regulatory interest in BitCoin, hence the panic.

BitCoin could be worth $500 tomorrow. Or $1500. It's so volatile it's hard to look at it as a store of value.
posted by Nelson at 1:00 PM on December 6, 2013 [8 favorites]

For some perspective, you need to consider that 800 represented a new high just last week. 30 days ago, bitcoins sold for less than $300 each. So this so-called "crash" still represents a growth rate of 160% in 30 days!
posted by Lame_username at 1:01 PM on December 6, 2013 [4 favorites]

. . . the Chinese search giant issued a statement saying:

Dear acceleration music users: Due to the recent fluctuations in the price of Bitcoin larger unable to protect the interests of users, in response to the risk of state-controlled bitcoin spirit Baidu music accelerate decision to suspend with immediate effect from accepting bitcoin buy accelerate music services.

I don't know what the statement actually said, but I'm like 99.9% sure it didn't say exactly that.
posted by The Bellman at 1:01 PM on December 6, 2013 [1 favorite]

THEY'RE EASY TO UNLOAD, PROVIDED THAT ALL YOU DESIRE IN LIFE ARE 4CHAN PASSES AND CREPES FROM O'CREPES

Does a 4chan pass let you pass on visiting 4chan?
posted by Going To Maine at 1:02 PM on December 6, 2013 [17 favorites]

It's not quite so drastic when you look at a three month chart.

Well that chart doesn't have today's low on it yet. I didn't see those peaks at about 1250 earlier this month. That makes it even more drastic, a drop of over 35% from the peak.
posted by charlie don't surf at 1:07 PM on December 6, 2013

I saw a sign outside a (NYC) SoHo real estate broker 2 weeks ago saying that they were now accepting Bitcoin. I wonder if the sign is still there.
posted by Jahaza at 1:08 PM on December 6, 2013 [2 favorites]

Arguing that if you zoom out from Bitcoin it looks like a clean trend up that is good for consumers is like when Rumsfeld said Afganistan didn't look so bad "high up in a helicopter."

People don't hold on to currency for days until it hits a peak and sell it quickly. They buy stuff as they need it, and so long as bitcoin keeps dipping and rising, the only people who will use it are people using it out of ideology, novelty or for buying drugs or other illicit goods online.
posted by mccarty.tim at 1:10 PM on December 6, 2013 [3 favorites]

Dammit, how am I going to pay for my Lamborghini now?
posted by octothorpe at 1:12 PM on December 6, 2013

I'm not trying to say that it's a winning investment or anything, but rather that a drop from 1300 to 800 is burying the lede when it was sitting at around 125 just a two months ago.
posted by Rhomboid at 1:12 PM on December 6, 2013 [3 favorites]

Rhomboid: "It's not quite so drastic when you look at a three month chart."

Are you being sarcastic?
posted by IAmBroom at 1:13 PM on December 6, 2013 [3 favorites]

For some perspective, you need to consider that 800 represented a new high just last week. 30 days ago, bitcoins sold for less than $300 each. So this so-called "crash" still represents a growth rate of 160% in 30 days!

That sort of volatility makes it useless as stable currency, though, regardless of what dollar amount you can pin to it this week. If the value of your currency lays in people speculating over its value, what good is that as anything but a financial instrument.
posted by griphus at 1:14 PM on December 6, 2013 [7 favorites]

he only people who will use it are people using it out of ideology, novelty or for buying drugs or other illicit goods online.

Or grifters, pumping and dumping.

BTW: Wouldn't you guys like to buy a "seat" on my "airplane?"
posted by Devils Rancher at 1:14 PM on December 6, 2013 [2 favorites]

Also, Gox shut down for an hour, rendering this lovely chart which just happened to imply they hit bottom at 800. Now it's dead cat bounced to 900.

Wait, what? They fabricated that sawtooth bit?
posted by topynate at 1:14 PM on December 6, 2013

Rhomboid, I own a handful of BTC (as in ~$5 now) as a lottery ticket of sorts. But it's not a currency I'm fond of spending or using. Transfers take too long to get confirmed, and if your transaction fee isn't to the mining gods' liking, your transaction can get lost for hours. And I would think I wouldn't need to pay $.10 per transaction for an exchange that involves no banks.

Further, everywhere that sells stuff with Bitcoin has the prices set in fiat currencies, and with Coinbase, it takes ~4 days for my transfer to clear. During that time, the price can move all over the map, and I receive the bitcoin at the rate it was when I bought it (good if it goes up, bad if it goes down). I could much easily just use my debit card, and get consumer protections and less fees.

If you can't use bitcoin as a currency, how is it not a speculative bubble?
posted by mccarty.tim at 1:17 PM on December 6, 2013 [2 favorites]

I just had a vision of the personifaction of BitCoin as a nervously smiling Jerry Lundegaard.
posted by griphus at 1:18 PM on December 6, 2013 [20 favorites]

Of course it's a bubble. It's a break-out-the-popcorn sideshow. My point is that if you want to sell this as libertarians-jumping-out-of-windows event, the price had better actually be in the toilet, not still 5x what it was just a few months ago.
posted by Rhomboid at 1:19 PM on December 6, 2013 [12 favorites]

I wonder how long it will be until we see bitcoin futures as a way to mediate some of the speculative risk.
posted by malocchio at 1:21 PM on December 6, 2013 [1 favorite]

and may be lower by the time you read this. Or it could recover and go higher.

Thanks, Kreskin.
posted by Justinian at 1:21 PM on December 6, 2013 [9 favorites]

Huh, I guess the futures already exist.
posted by malocchio at 1:23 PM on December 6, 2013 [1 favorite]

I think the thing that makes Bitcoin confusing is that it has no clear bottom. There's clearly value and utility in a currency that's difficult to track small to medium transactions in, as evidenced by the fact that ~$100 million was stolen from a bitcoin drug exchange. That money came from somewhere. But with all the libertarians and speculators jumping in and out, the price will not just stop changing by big percentages. And I have trouble following the logic that if Bitcoin hits $X, it'll become the one world currency, as it's usually circular. Often said booster will say the price will rise because of mass adoption.

For personal peer-to-peer transactions, Squarecash is totally eating Bitcoin's lunch.
posted by mccarty.tim at 1:23 PM on December 6, 2013

What will the market do tomorrow? Fluctuate.
posted by empath at 1:24 PM on December 6, 2013 [4 favorites]

Someone on reddit was saying that 30-40% of bitcoins at minimum are lost-- there are apparently a ton of 50 bitcoin wallets (the original mining reward) that haven't been touched in years.
posted by empath at 1:25 PM on December 6, 2013

Most of the online fora I visit are full of people proclaiming the glorious future of Bitcoin. Not MetaFilter, though. I wonder why—$5 keeps pumpers from signing up for multiple sham accounts?
posted by grouse at 1:27 PM on December 6, 2013 [6 favorites]

there are apparently a ton of 50 bitcoin wallets (the original mining reward) that haven't been touched in years.

Like a sunken Spanish galleon full of gold coins or maybe silver or tin foil depending on the day.
posted by griphus at 1:28 PM on December 6, 2013 [13 favorites]

Also, I think that the crash today isn't as big a deal as the larger pattern, which is that the price hasn't touched the all time high in days. Which means that the speculators are going to abandon the market if it stays like that, and some bitcoin millionaires might cash out while they can. I wouldn't be surprised to see it drift down towards $100 over the course of the next few weeks.

I also wouldn't be surprised if it hits 10,000, either, though, because bitcoiners be crazy.
posted by empath at 1:30 PM on December 6, 2013 [6 favorites]

I approve of the title of this post.
posted by Chrysostom at 1:30 PM on December 6, 2013 [8 favorites]

You can sign up a MeFi account with Bitcoin?
posted by Artw at 1:32 PM on December 6, 2013 [3 favorites]

Florida frozen concentrated orange juice (FCOJ) yield forecast for the 2013-2014 season is 1.60 gallons per box at 42.0 degrees Brix, up 1 percent from last season’s final yield of 1.59 gallons per box.

Stick with FCOJ, it's up 0.05 today. Just stay away from Cocoa, that's where my dad got wiped out.
posted by charlie don't surf at 1:33 PM on December 6, 2013 [1 favorite]

78 percent of Bitcoin currency stashed under digital mattress, study finds (from October 2012). Total of about 7 million BTC, or well over $5 billion at today's rates. Whether those coins are lost forever or being slowly liquidated is hard to say. Maybe there's an update?
posted by Nelson at 1:33 PM on December 6, 2013

I agree with empath, it seems like we've been seeing a slow grind down from a $12,000 peak despite a week of mostly BTC positive news. More than a couple hedge fund investors and bank analysts implied it could reach very high prices, especially if it becomes a competitor to Western Union or Paypal, with the big caveat it won't be without sanding away at the rough edges.

And despite all the fluffing and pumping, Bitcoin just can't get the value up.
posted by mccarty.tim at 1:34 PM on December 6, 2013

Lutoslawski: In related news, someone bought a Tesla S with bitcoin.

Nick Jones of Lamborghini Newport Beac told the Daily Dot the car sold for 91.4 Bitcoins, which the buyer delivered via payment service Bitpay.

"Lamborghini Newport Beach is proud to announce that we are fully capable of accepting Bitcoin as legal tender for vehicles," the dealership proclaimed on its blog Wednesday. "We are excited to opening the door to this new currency."

It sold the "pre-owned" Tesla S on December 4th, when 1 Bitcoin roughly equaled $1,100 USD, so that could be around $100k USD for the car, if the dealership converted the Bitcoins to USD really fast. Or if the Bitcoins sat around for a few days, they'd be down to $70k USD, or lower.
posted by filthy light thief at 1:36 PM on December 6, 2013 [2 favorites]

PS: Another interesting trend: There's been a few large dips, but most of the time, it'd really quickly bounce to where it was or higher before the big sell orders. But the past day or two, the bounces have been getting smaller and rather than being bounces, it's more like the reactionary buyers are just slowly bending the curve less downwards.

Between the lack of dip buyers and Mt. Gox having strange issues with big sell orders (hmm) and the media still largely using Gox as their prime USD/BTC price source, there's not really anything to push it into overdrive yet. But if people start migrating their Bitcoin out of Gox (surprisingly hard but not impossible) to sell on more reliable exchanges, we could see a big change.
posted by mccarty.tim at 1:38 PM on December 6, 2013 [1 favorite]

What are the "more reliable exchanges"?
posted by These Premises Are Alarmed at 1:39 PM on December 6, 2013

I'm Literally giggling here over the buttcoin guy referring to Bitcoins constantly as "pogs" and "funbux".
posted by Jimbob at 1:41 PM on December 6, 2013 [14 favorites]

Bitstamp, Coinbase, Kracken, BTC-E.

The market's diversified. Although you still hear of the odd fly-by-night exchange that loses everyone's bitcoin and claims to have been "hacked," although they're often speculated to have taken the money.

They're reliable in that they haven't stolen the money, yet.

I'm in an IRC with the Buttcoin guy. It's a neat blog. Check out the time Reddit tried to give him Bitcoin out of spite.

What's really funny is if a troll rejects the tip, they take it as an insult even when the troll is clearly making fun of Bitcoin. Here's one guy (TW: Stupid "EDGY" rape/child molestation jokes) going ballistic (and getting downvoted for it).
posted by mccarty.tim at 1:45 PM on December 6, 2013 [3 favorites]

Bitpay works by quickly cashing Bitcoins out. If a merchant uses Bitpay, they are not receiving bitcoin but instead receiving the same amount in fiat they would get with a bank transfer/credit card/etc.

If such a "quick cash-out" service exists, then why all the crazy stories of it taking 6 months to sell your Bitcoins? If someone sends me 2Btc, could I go through Bitpay to have the sweet sweet cash immediatly?
posted by Jimbob at 1:46 PM on December 6, 2013

Only if you're a merchant. I'm not sure how they pull it off. Maybe they have an off-the-record deal with an exchange or that one hedge fund trying to buy bitcoins.

Also, small amounts of Bitcoin are easy to cash out, depending on your country. In the USA, you can cash out up to 50 Bitcoins a day with Coinbase, but below exchange value and only with a lot of verification and if you've bought bitcoins from them.
posted by mccarty.tim at 1:49 PM on December 6, 2013

If I'm reading it correctly, this chart seems to be good evidence of Bitcoin being in a bubble.

The daily number of bitcoin transactions has just about doubled over the past year, while their value has increased by a factor of like 100. There's still only around 70,000 bitcoin transactions per day, which doesn't seem like a lot for a currency.
posted by justkevin at 1:52 PM on December 6, 2013

I was thinking about this last night. You know how casinos are awesome for laundering money? Like you walk in with $20000 of dirty money, turn in into chips, sit at a blackjack table for a couple hours and walk out with $19000 and a casino receipt that you can now use to justify your "winnings".

Bitcoins is like ... there's a roulette wheel in a casino that everybody knows is used for money laundering. Gangsters go there, bet on red 16, spin the wheel and leave. Except now the wheel has been landing on red 16 for like 8 straight days. All the hoi polloi look over, see a bunch of people making a bunch of money, and come over and also start betting red 16. And it's going great! Their stacks are getting bigger and bigger! But someday the wheel is going to spin and the little marble is going to drop into black 27.

And when it does, the casino won't care because they will have just eaten up all the money of all the suckers and bandwagoners and hangers-on looking for a cheap win. The gangsters won't care because they will have already extracted all of their value from the mechanism of the casino itself -- everything else is a windfall. And the true believers won't care, because they'll be too busy congratulating themselves on being in on it, on coming over to the roulette wheel so early, that look at how high up they had been at one time, on paper! Let's start betting black 27!

The only people who will care will be the ones who looked up from elsewhere in the casino and came running over and threw all their savings on the table.
posted by penduluum at 2:00 PM on December 6, 2013 [30 favorites]

Louis: Looking good, Billy Ray!
Billy Ray: Feeling good, Louis!
posted by phaedon at 2:10 PM on December 6, 2013 [4 favorites]

First, why don't people use Coinbase? It's well-designed, VC-backed, and seemingly staffed by professionals. I've made a bit on some fun bitcoin speculation using Coinbase alone. I guess it doesn't hurt that I don't mind having my name attached to the transactions, but still.

Second, I don't buy into all the BTC hype from the crazier corners of the internet, but it does seem like it has some value as a payment facilitator. Right now it's essentially the only way to send money instantaneously around the world, making it a natural fit for people evading currency controls, etc. I don't know if it's worth $1200 or anything, but it seems like the ease of money transmission is worth something.
posted by downing street memo at 2:11 PM on December 6, 2013 [1 favorite]

Yeah, basically don't give your money to "Magic the Gathering Online Exchange", folks.
posted by downing street memo at 2:14 PM on December 6, 2013 [14 favorites]

"Think big, think positive, never show any sign of weakness. Always go for the throat. Buy low, sell high. Fear? That's the other guy's problem. Nothing you have ever experienced will prepare you for the absolute carnage you are about to witness. Super Bowl, World Series - they don't know what pressure is. In this building, it's either kill or be killed. You make no friends in the pits and you take no prisoners. One minute you're up half a million in soybeans and the next, boom, your kids don't go to college and they've repossessed your Bentley. Are you with me?"
posted by phaedon at 2:15 PM on December 6, 2013 [2 favorites]

I write about bitcoin an awful lot for my job, and have been following it and writing a series of columns on it for the last couple of months. It's an interesting phenomenon, and may at some point become a viable way for to make international trade easier to facilitate (its biggest advantage, IMO.)

But it is still years away from being a viable currency, and could never, ever, ever, ever replace paper currencies for one key reason: its massive deflationary bias.

Bitcoin is designed to get more valuable as time goes on, as the amount of bitcoins that can ever exist is fixed. Contrast this with paper money, that can be printed ad infinitum.

You actually want the ability to print money, because slight inflation is good. It encourages people to spend money, instead of hoarding it. Which is what you are seeing with bitcoin right now.

Think about it like this. Say one bitcoin could buy a Tesla. Why on earth would you buy that Tesla for one bitcoin when theoretically, that bitcoin could buy two Teslas next week. Everyone at the top of the pyramid is thinking this way, right now. And so the theoretical rich are hoarding their bitcoins, because why not?

The inevitable end game of a deflationary currency is bust and depression. For an illustration of this, look at Japan, who have been suffering heavily from deflation.

I think bitcoin has some future use value as a wealth storage vehicle, same as real estate or gold or fine wines or whatever. But as a viable alternative currency to the major world currencies? Absolutely not.
posted by joechip at 2:25 PM on December 6, 2013 [24 favorites]

Bitcoin is an investment in crime, which usually has pretty good margins if you're not the one taking the risk.

CryptoLocker is the writing on the wall about the future of Bitcoin as a ransom payment tool, and there is seldom a shortage of creative lawbreakers willing to hold things for ransom.
posted by banal evil at 2:25 PM on December 6, 2013 [3 favorites]

Can we just add BTC threads to the list of "things Metafilter doesn't do well" along with I/P and whatever else?
posted by Inkoate at 2:26 PM on December 6, 2013 [3 favorites]

Why on earth would you buy that Tesla for one bitcoin when theoretically, that bitcoin could buy two Teslas next week.

I would gladly pay you Tuesday for a hamburger today.
posted by charlie don't surf at 2:31 PM on December 6, 2013 [12 favorites]

Bitcoin is whatever seems most advantageous at the time. It's been a currency, a future, a threat to the world, a con game, a way to turn lots of money into little money, a payment infrastructure, the clear choice of currency for invading aliens, etc.

Not yet a floor wax and a dessert topping, but it's getting there.
posted by fifteen schnitzengruben is my limit at 2:32 PM on December 6, 2013 [5 favorites]

Can we just add BTC threads to the list of "things Metafilter doesn't do well" along with I/P and whatever else?

Why? From what I can tell this is a completely civil discussion of, among other things, Bitcoin's failed promise to function as a replacement currency. I don't remember the last time I've seen so much consensus in a thread, in fact.
posted by griphus at 2:34 PM on December 6, 2013 [44 favorites]

I have been very negative on Bitcoins on this forum since the first post on the topic. In hindsight my expectations, analysis and predictions about the future of Bitcoin were totally wrong.
posted by humanfont at 2:35 PM on December 6, 2013 [5 favorites]

Can we just add BTC threads to the list of "things Metafilter doesn't do well" along with I/P and whatever else?

Yeah, those Intellectual Property kerfluffles of ought-nine were downright scary.
posted by nevercalm at 2:38 PM on December 6, 2013 [1 favorite]

Can we just add BTC threads to the list of "things Metafilter doesn't do well" along with I/P and whatever else?

Huh, I think Metafilter does Bitcoin threads pretty well, especially compared to, say, Reddit, where saying anything negative / questioning / based on simple economic theory in /r/bitcoin will invoke torrents of abuse.
posted by Jimbob at 2:39 PM on December 6, 2013 [10 favorites]

Why? From what I can tell this is a completely civil discussion

Oh, yes, I think its been very civil, just that we do this every few weeks and everyone comes out and says the same things about bitcoin and I just don't feel like anything new comes of it. Maybe I'm just being curmudgeonly though.
posted by Inkoate at 2:39 PM on December 6, 2013 [1 favorite]

I think this thread has gone pretty pleasantly. Sure people have negative opinions on Bitcoin, but its just a civil disagreement in this particular thread. No vitriol or anger at other Mefites, just a negative outlook on bitcoin.
posted by Twain Device at 2:39 PM on December 6, 2013

It's amazing to see a currency whose biggest holders are those technologically able to create it in the first place, effectively using zero human labour, be born. Is the behaviour of this currency what we'd expect to see of a new currency (not that I can think of any examples beyond green shield stamps and loyalty cards) or how is it - if at all - reflective of its creators and owners? There seems to be a lot of libertarian culture around it, which I see underpinning the technolibertarianism end of development culture.
posted by davemee at 2:43 PM on December 6, 2013

Feel free to add something new to the discussion, Inkoate. I'd love to learn more about the difficulty of exchanging BitCoin for national currencies, for instance. Or more about what's going on with Chinese users. Can you inform us?
posted by Nelson at 2:44 PM on December 6, 2013

I think its greatest strength is its incredible use as a platform for moving money cheaply and efficiently, which has the potential to revolutionize a host of different applications. Its greatest weakness is that it was invented and got its original shot of interest from a bunch of goldbug randians who wouldn't understand deflationary economics if it bit them.

I'm honestly not sure about what's going on with Chinese users. I would have thought that the Yuan was actually a fairly stable currency that wouldn't drive folks to trying on BTC. If we were talking about Argentina on the other hand...
posted by Inkoate at 2:50 PM on December 6, 2013 [3 favorites]

we do this every few weeks and everyone comes out and says the same things about bitcoin

True, this post came pretty close on the heels on the last one.

effectively using zero human labour

I think this is why I find it so awful. Miners think they've got a goose that lays the golden egg - in reality they're spending electricity to earn slightly more than the electricity costs them. A few more difficulty steps, and even the most efficient ASIC miners won't be worth the electricity it costs to run them. For traders it's all about buy low, sell high - ironically they've adopted the most insidious speculative qualities of the financial system they claim bitcoin is the solution to. As an online payment system it's kind of ingenious - and there is the possibility here for exchanging labour for the currency - except no average person is willing to put their money in Bitcoin for online purchases because of the lack of stability. What if, a week ago, I decided to put my cash into 0.5 BTC to do my Christmas shopping online? By now I'd have, what, 30% less to spendm since all the companies I'd be buying off are just pegging the BTC exhange rate to their local national currency anyway. So what, exactly, is the advantage over just using my credit card? Maybe it will stabilize, maybe something will stop it being so deflationary (don't know what). It might be useful then. At the moment, it's basically misplaced ideology and speculation.
posted by Jimbob at 2:51 PM on December 6, 2013 [1 favorite]

Why on earth would you buy that Tesla for one bitcoin when theoretically, that bitcoin could buy two Teslas next week. Everyone at the top of the pyramid is thinking this way, right now.

If only bitcoin had some sort of centralized institution that could control the bitcoin monely supply based on a mandate to insure price stability of a chosen set of consumer goods, targeting a minimal rate of inflation.
posted by Golden Eternity at 2:53 PM on December 6, 2013 [21 favorites]

So what, exactly, is the advantage over just using my credit card?

If the Christmas presents you are looking to buy are only available on the black market there is a considerable advantage in comparison to your credit card, in the simplest sense, you can actually make the transaction.

Its usefulness isn't for buying things in the legitimate economy, it is for laundering money, and transactions of illegal goods.
posted by banal evil at 2:55 PM on December 6, 2013 [7 favorites]

It might be a little early to call the bubble bursting - it's "only" around 30% off its peak, which would be a massive selloff for an actual asset, but, as we all know, it's a virtual currency controlled entirely by speculative retail investors that can't be sold short, which causes market imbalances. This thing has experienced 50% intraday moves. From Nov 29th to Dec 1st it had a selloff of comparable size.

I think the Baidu news is huge, though, and it makes sense. I was amazed that some Chinese companies were ever willing to accept it as payment in the first place. If your costs are in a real currency and you accept a digital currency, you have massive FX risk, not to mention the hassle and transaction cost of turning that digital currency into your base currency.

I'm not sure how big most bitcoin traders are, but I imagine they're pretty small on average. So on one hand you have a bunch of crazy retail investors hoping to make a million from a hundred bucks, and on the other hand you have people trying to cash out their virtual fortunes before it goes to $0. Because losing 30% hurts, it has run up like crazy in the past few weeks, and even the most diehard bitcoin enthusiast must sometimes lie awake at night wondering if tomorrow is the day it really breaks. There are no central banks to step in and protect or debase the currency, no investment flows from one currency to another, just a herd of small-time speculators chasing it to the moon or cashing out as fast as they can. Makes for exciting markets for a day trader, but a horrible means of exchange and questionable store of value.
posted by pravit at 2:56 PM on December 6, 2013 [1 favorite]

LOL, it just occurred to me that bitcoin mining is basically using coal as its gold standard.
posted by spitbull at 2:56 PM on December 6, 2013 [30 favorites]

Its usefulness isn't for buying things in the legitimate economy, it is for laundering money, and transactions of illegal goods.

But the problem is that its absolutely horrible at doing that. You have to work very hard and do nothing wrong at all to make bitcoin a really anonymous currency that can replace paper cash.
posted by Inkoate at 2:56 PM on December 6, 2013

Tiptoe Through the Tulips...
posted by islander at 2:57 PM on December 6, 2013

Bitcoin seems overvalued for the moment, litecoin is the undervalued thing and probably the best way into this boom.
posted by Marquis at 2:58 PM on December 6, 2013 [1 favorite]

I seriously don't understand the "mining" thing. Get people to dedicate computing resources to "find" bitcoins? I will admit that I haven't read much at all because the whole thing baffles me so much that I don't know where to start, but was that an attempt to "gamify" the generation of bitcoin purchases to suck in the Mom's Basement Shut-in crowd?
posted by Devils Rancher at 3:03 PM on December 6, 2013 [1 favorite]

But the problem is that its absolutely horrible at doing that. You have to work very hard and do nothing wrong at all to make bitcoin a really anonymous currency that can replace paper cash.

I don't think it will replace cash, but it will work in tandem.

It allows for the vast demand for black market goods to be met in circumstances where cash won't do. By functioning as a currency in these markets, a base demand is created which legitmates the currency. At that point it becomes a vehicle to launder money at a potentially high margin (remember when they were gaming scratch off lotto to get a 65% return on investmetn)
posted by banal evil at 3:04 PM on December 6, 2013 [1 favorite]

I seriously don't understand the "mining" thing. Get people to dedicate computing resources to "find" bitcoins?

They're not using the computing resources to "find" bitcoins, they're using them as a distributed computer that cryptographically ensures that nobody is allowed to spend their bitcoins more than once. The bitcoin reward is just that... an incentive to get people to do the work to run the system in a distributed fashion.
posted by Inkoate at 3:07 PM on December 6, 2013 [4 favorites]

I'm honestly not sure about what's going on with Chinese users. I would have thought that the Yuan was actually a fairly stable currency that wouldn't drive folks to trying on BTC. If we were talking about Argentina on the other hand...

Capital controls. Difficult to get money out of China. Converting to BTC and from there to whatever other currency is one way to do it.

Bitcoin seems overvalued for the moment, litecoin is the undervalued thing and probably the best way into this boom.

Eh, I dunno...this site has over 40 different crypto-currencies listed. Do we really need 40 different crypto-currencies? Which one is the best? How do you value them relative to each other? Should Litecoin's total market cap be 1/10th that of bitcoin, 1/2, or 1:1? I'm not sure which ones will survive, but I think it's unlikely more than 1 or 2 of them will be worth anything in a year from now.
posted by pravit at 3:08 PM on December 6, 2013 [3 favorites]

I think this is why I find it so awful. Miners think they've got a goose that lays the golden egg - in reality they're spending electricity to earn slightly more than the electricity costs them.

I don't know how problematic that actually is. Have a computer using electricity to compute bitcoins and heat my house, or just run the electric baseboard heat to heat my house - it seems like at least computing Btc promises some return on the investment.
posted by Pogo_Fuzzybutt at 3:09 PM on December 6, 2013

but was that an attempt to "gamify" the generation of bitcoin purchases to suck in the Mom's Basement Shut-in crowd?

From what I understand, mining is what allowed the currency to be generated without a central bank to distribute it. The processing dedicated to that process also ran the system so that, again, no central bank was necessary.

Bitcoin seems overvalued for the moment, litecoin is the undervalued thing and probably the best way into this boom.

But the fact that people are entering the economy because there's a boom means this will just end up happening to litecoin eventually, unless there's a built-in way to regulate the volatility. If there's one thing the incredible volatility is proving it is that 'undervalued' is a meaningless statement when most of the people exchanging your currency are doing so to make a profit off other holders of the currency instead of trading it for goods and services.
posted by griphus at 3:13 PM on December 6, 2013 [1 favorite]

Just to add a personal story, I bought 15 bitcoins about 2 years ago. I sold 5 of them last week by using Coinbase. It took about 10 minutes to connect coinbase with a traditional bank. It took about a day for me to figure out what the bitcoin address was for my coinbase account, and it took a mysterious 3 days to transfer the money from my bitcoin wallet to my coinbase wallet. It then took an additional 3 days to transfer the money to my actual bank account. But it did happen and it was pretty easy.
posted by cell divide at 3:16 PM on December 6, 2013 [4 favorites]

joechip: "But it is still years away from being a viable currency, and could never, ever, ever, ever replace paper currencies for one key reason: its massive deflationary bias.

Bitcoin is designed to get more valuable as time goes on, as the amount of bitcoins that can ever exist is fixed. Contrast this with paper money, that can be printed ad infinitum."

Is there a logical reason Bitcoin was designed like this, or was it just the political preferences of its developers?
posted by Kevin Street at 3:33 PM on December 6, 2013 [2 favorites]

You can sign up a MeFi account with Bitcoin?

no, but if you hurry you can sign up for about 160 mefi accounts with bitcoin.
posted by quonsar II: smock fishpants and the temple of foon at 3:45 PM on December 6, 2013 [3 favorites]

There are roughly 210 000 BTC mined every four years. (1 BTC every 10 minutes)

Every four years the reward is halved.

They started with a 50 BTC reward. 50 + 25 + 12.5 + .... + 1 = 100

100 * 210000 = 21 000 000

This is all decided by gentlemans agreement between the nodes. Which is why there is such handwringing with a single mining pool having more than 51% of the processing power of the network and who can then set the rewards it receives arbitrarily.
posted by PenDevil at 3:45 PM on December 6, 2013

Nobody would consider Bitcoin a viable repository of value if there could potentially be an infinite amount of it. It was designed very much and very deliberately to be as much as possible like gold, and its scarcity is one reason its value is plausible.

At the moment the "crash" seems to have floored around 850 for the last four hours. This is not a particularly worrying move considering how much the price has risen in the last few months. In fact, it would be more worrying if there weren't corrections of this size because it would be very un-market-like.
posted by localroger at 3:45 PM on December 6, 2013

Is there a logical reason Bitcoin was designed like this, or was it just the political preferences of its developers?

I'm not sure if it's causal, but a lot of people who are too stupid to understand why deflation is a bad thing and low-level inflation is a good thing really, really dig bitcoins.
posted by Pope Guilty at 3:49 PM on December 6, 2013 [8 favorites]

I think Bitcoin is proof libertarian cryptographers aren't the best people to consult on monetary policy.

There's also the fact that a computer network that's designed to be hard to game can only take in so many variables. The Federal Reserve can consider the value of the dollar vs. consumer goods and other economies, and make policy based on that. Bitcoin can't. It just keeps churning out Bitcoins at a predetermined rate.

Further, Bitcoin has the issue of miners' fees having no real market system built in yet. When it started, miners' fees were trivial and made debit cards look expensive. Now, it's about 10 cents for a transaction guaranteed to be fast, due to two things: The meteoric rise of Bitcoin's price, and the bitcoin network getting flooded with mixer/tumbler transactions (essentially laundering bitcoins between two addresses by shuffling and mixing BTC amounts in many addresses so it's harder to track) and Satoshi Dice (a gambling website that lets you gamble small amounts of bitcoin iteratively). If Bitcoin rises and developers don't implement a good fix on both the miner and client side, Bitcoin is doomed to expensive fees.

Short term, clients can agree to have smaller default transaction fees. And there's proposals for systems where miners have market incentives to keep prices low. But with Bitcoin's boom or bust pricing, it's just plain hard to set a good fee and stick to it.

And if anyone says "Fork a cryptocurrency from Bitcoin and have market value be an input," consider there's multiple exchanges handling multiple currencies, and as we saw with Mt. Gox shutting down while all the other exchanges kept running, not every exchange plays by the same rules.

The upshot is that hard-to-game decentralized code lacks the ability to set policy easily where human intuition would usually kick in. I think cryptocurrency has some future, just not as the dominant currency of Earth. Rather, it will be like Bitcoin is on a small scale today: a way to move money on the black market and quickly and cheaply between nations against currency controls. Bitcoiners like to call Bitcoin the "email of money," but I think the fairer term is "Bittorrent of money." It's decentralized, semi-anonymous (and nearly fully anonymous if you use the right tricks), and hard to shut down. And it also has legitimate uses, but they're overshadowed by the applications of the previous features.
posted by mccarty.tim at 3:54 PM on December 6, 2013 [2 favorites]

litecoin is the undervalued thing

The best time to join a market hysteria is early!
posted by Nelson at 4:03 PM on December 6, 2013 [3 favorites]

Or Quarkcoins. Where 90% of the coins have already been mined by the guys who created it. Not a pump and dump no sirree.
posted by PenDevil at 4:05 PM on December 6, 2013 [1 favorite]

I thought we'd agreed to call them Dunning-Krugerrands.
posted by straight at 4:06 PM on December 6, 2013 [23 favorites]

I think Bitcoin is proof libertarian cryptographers aren't the best people to consult on monetary policy.

This complaint misses the entire point of why Bitcoin was created and why it is popular with certain people. Of course Libertarians don't care about monetary policy. Bitcoin is designed from the ground up as a giant FUCK YOU to the idea of monetary policy being exercised.

Bitcoin is meant to be a repository of value. The fact that its value fluctuates on the markets for conversion to regular currency is irrelevant. The fact that you have a bitcoin wallet is proof that you have either done a certain amount of computational work, or that you have compensated someone else who has (which is what the "mining" thing is about).

The fact is it is going to be almost impossible to control small transactions (say less than USD$1000) between Btc and normal currency. It may get hard to cash in your old 50 Btc wallet when it's worth ten million dollars, but at that point you will have no worries about being able to buy as much weed as you want or making next month's rent.

In fact, I see an interesting dynamic emerging where Bitcoin may be far more valuable for small transactions than it is if you have such a large wallet. Bitcoin might turn out to have a logarithmic value, being worth less (in usable terms) to you as an individual the more of it you have. That will actually be good for Bitcoin because it will soften the shadows of all those early Btc gazillionaires should 1 Btc ever be trading for a million USD.
posted by localroger at 4:07 PM on December 6, 2013

Bitcoin is crashing.

And not a single fuck was given that day.
posted by Scientist at 4:32 PM on December 6, 2013

I mined Bitcoins for about an hour last week. Now I'm all about the Litecoins. Litecoins!!

PS. I have no idea what I'm doing.
posted by kbanas at 4:34 PM on December 6, 2013 [7 favorites]

I suspect the Chinese government will wait until a critical mass of capital is invested in BTC, then announce a crackdown involving jail terms for money laundering, and ruin the currency in a single afternoon. If BTC wasn't invented by a government (I had thought it was the NSA) to reel in the gullible in one giant honeypot operation, it should have been.
posted by spitbull at 4:36 PM on December 6, 2013 [5 favorites]

I'm currently cornering the market in chocolate money
posted by fearfulsymmetry at 4:36 PM on December 6, 2013 [7 favorites]

The day the FBI liquidates DreadPirateRobert's Silk Road bitcoins will be an interesting day to watch the charts.
posted by mccarty.tim at 4:38 PM on December 6, 2013 [2 favorites]

I'm currently cornering the market in chocolate money

Careful! They get dangerous when cornered.
posted by aubilenon at 4:39 PM on December 6, 2013

> What are the "more reliable exchanges"?

Here's some tips on finding one.
posted by jfuller at 4:43 PM on December 6, 2013 [1 favorite]

This whole thing is totally bananas to me. Whenever something like this happens it makes me think of the history of bubbles recounted in "A Random Walk Down Wall Street". From the sailing companies to tulip mania to the internet bubble and housing bubble, people always think "this time is different". What I don't understand about this bubble, though, is the fact that there is nothing behind it. At least if I'm buying a stock, I am buying part of a company-- it might go up or down in value, but as long as it doesn't go bankrupt, I will continue to own a part of that company. For a currency to have value, people have to trust it enough to accept it for trade-- Other than for illegal transactions where you have no good options, are people really going to continue to trust this currency enough to trade with it?

The major currencies of the world have central banks to keep the value of the currency more or less stable-- I understand that the lack of a central bank is supposed to be a positive aspect of bitcoin, but I guess I disagree with their premise that central banks do more harm than good.

Part of me really wants to think that this crash may convince at least part of the the libertarian/bitcoiner contingent that no, regulation is not all bad, and that there might be something to that whole central bank thing, but I think they'll find a way to tell themselves that it's all China's fault for not letting their banks use bitcoin. It'll be interesting to see what happens, that's for sure.
posted by matcha action at 5:09 PM on December 6, 2013 [2 favorites]

The official excuse behind why Bitcoin isn't a bubble is usually:

A) Bitcoin offers immense value by offering fast transactions with minimal fees. [This ignores that banks offer similar products]

B) The Meteoric Rise of Bitcoin is due to the Network Effect as it gets widely adopted [This ignores the small transaction volumes, which is evidence a lot of people are holding on to their wealth]

C) Have you read the news? Not that news, the real news! The Euro's dying, and the dollar is also sinking! People will need to move to a currency not tied to a government that can't pay its bills! [Despite dick-waving in congress, the US's ability to collect taxes and pay interest on national debt is not at serious risk]

Bitcoin isn't a complete bubble as it does offer some novel uses, but they're mainly anonymous cash-like transactions across the world that are mainly about evading currency controls, selling drugs, and money laundering. It has a bottom above zero, but those uses don't really say to me that Bitcoin will be a currency most people keep a lot of on hand, which would drive the value up.
posted by mccarty.tim at 5:19 PM on December 6, 2013 [1 favorite]

I think I'm going to wait for litecoin's bubble, thanks.
posted by Catblack at 5:30 PM on December 6, 2013

I think Bitcoins are going to absolutely crater when China cracks down on whatever financial shenanigans they're being used for over there. The price barely fluctuated when the Silk Road shut down, which really suggests that all of the non-speculator activity here is absolute peanuts compared for whatever they're being used for other there. And I can't imagine them not cracking down - they're pretty hardcore about controlling and manipulating their currency.

If that doesn't kill them off completely, I think eventually the US will ban or heavily regulate their use. Right now the government doesn't much care because you have to turn them into real money to actually do anything with them, and they can track that, but if they ever start to function as real money, they'll want to track them all the time. It would be too easy to use them for tax evasion, online gambling, money laundering, terrorism, you name it.
posted by Mitrovarr at 5:34 PM on December 6, 2013 [1 favorite]

Go on this chart. The crash is picking up again.
posted by mccarty.tim at 5:41 PM on December 6, 2013

Dollar (USD): Last: $788.00000 ($1 = 0.00127 BTC)
High: $1118.98900
Low: $763.60695
Volume: 56608 BTC
VWAP: $926.97037
Buy: $784.44171
Sell: $787.00000
Updated: 1:44:10 am UTC (37 seconds ago) from Mt.Gox
posted by quonsar II: smock fishpants and the temple of foon at 5:45 PM on December 6, 2013

I feel like I've gone back in time to the bursting of the tulip bubble.

Note to everyone, everywhere, at any time: If you're buying something on the 'greater fool' theory (that even if you pay too much, you'll be able to sell it to a greater fool), you're already too late.
posted by matcha action at 5:47 PM on December 6, 2013 [3 favorites]

All of bitcoin's so-called novel "uses" are against the interest of powerful states. That's the part I never really understand. Why on earth would China or the EU or the US ever tolerate this?

Where's the libertarian military based again? The narco gangs and Russian mobsters and Triad dudes, I presume? That's who has any ability to oppose the state's monopoly on money, and they already do it for diamonds and drugs and bearer bonds and gold.

Bitcoin is only useful for anti-state purposes, most especially tax avoidance. A currency without an Air Force ain't shit.
posted by spitbull at 5:53 PM on December 6, 2013 [4 favorites]

I get the feeling Satoshi intended bitcoin to be a backdoor around those things that would slowly grow. And I think Bitcoiners felt the same way. Early on, Bitcoin was an Anarchist/Libertarian sort of thing, and now they're all about praying the bubble gets bigger. /r/Bitcoin still has people chanting "This is just a correction. Buy the dip, or at least hold."
posted by mccarty.tim at 5:56 PM on December 6, 2013

Bitcoin could have legitimate uses if the value stayed fairly stable. Speaking more generally, a crypto currency of some kind could bridge the digital divide and allow millions of people who don't have credit cards (or bank accounts) onto the Internet. But the deflationary aspect of Bitcoin does make it seem pretty unsuitable as a medium of exchange.
posted by Kevin Street at 6:01 PM on December 6, 2013 [2 favorites]

We are in a freefall, I think. It's at 666 on gox, 690 on Bitstamp.

It was 1100 this morning.
posted by mccarty.tim at 6:04 PM on December 6, 2013 [1 favorite]

Should bottom out soon-ish, I think. I kinda doubt that it goes to 0 in one day. Too many true believers, too much liquidity.
posted by empath at 6:06 PM on December 6, 2013

Okay, pork belly prices have been dropping all morning, which means that everybody is waiting for it to hit rock bottom, so they can buy low. Which means that the people who own the pork belly contracts are saying, "Hey, we're losing all our damn money, and Christmas is around the corner, and I ain't gonna have no money to buy my son the G.I. Joe with the kung-fu grip! And my wife ain't gonna f... my wife ain't gonna make love to me if I got no money!" So they're panicking right now, they're screaming "SELL! SELL!" to get out before the price keeps dropping.
posted by charlie don't surf at 6:10 PM on December 6, 2013 [4 favorites]

(too little liquidity, i meant to say)
posted by empath at 6:13 PM on December 6, 2013

Dead cat bounce!
posted by mccarty.tim at 6:14 PM on December 6, 2013

It's currently 10AM Saturday morning in Beijing. A lot of people who were working before might have time now to fire up the computer and sell their Bitcoins.
posted by Kevin Street at 6:15 PM on December 6, 2013

Shockingly, after the bottom falls out, mtgox stops trading again.
posted by empath at 6:18 PM on December 6, 2013

I've invented my own cryptocurrency, rubikcoin! How it works is... well basically you just use Rubik's Cubes as currency
posted by oulipian at 6:51 PM on December 6, 2013 [4 favorites]

Possibly worth noting, part of Bitcoin's value to certain people is the ability to transfer large amounts of value without restriction from governments. The restrictions put in place to discourage money laundering have made it extremely difficult to do any kind of cash transaction over $10,000, and subject you to a lot of official scrutiny even if you do electronic transfers of that scale. Banks are required to file "suspicious activity reports" without notifying you if you move money around in certain ways.

I can see that the ability to make financial transactions outside of any system of government regulation as valuable to some people, especially criminals.

Bitcoin is meant to be a repository of value. The fact that its value fluctuates on the markets for conversion to regular currency is irrelevant. The fact that you have a bitcoin wallet is proof that you have either done a certain amount of computational work, or that you have compensated someone else who has (which is what the "mining" thing is about).

This seems to be possibly the fatal flaw of Bitcoin, as well explained by this comment on bitcoin's own forum, which I came across at buttcoin.org (well worth checking out).

Bitcoin P2P Crypto-Commodity

OK, so Bitcoin is a medium of exchange. No one can question that. And it seems a very effective medium of exchange.

But is it a currency? Is it money, backed by a store of value to be redeemable from the issuer giving the issuer no option not to accept it to be redeemed? Or is it a secure accounting utility with a user allocated value due to market forces?

Can a Bitcoin site (bitcoin.org) decide individually whether to call Bitcoin a currency or not - because it has a decentralized nature?

Can a Bitcoin site (mtgox.com) decide individually whether to call Bitcoin an internet commodity or not - because it has a decentralized nature?

Can every Bitcoin holder, merchant, trader, etc. decide individually how they interpret Bitcoins?

Does Bitcoin allow for modern day barter transactions between the fairly secure Bitcoin Accounting Utility and a good/service?

See this legal ideas with regards to barter exchange as opposed to virtual currency (Scroll down to the end to Matthew C 's answer):

http://www.linkedin.com/answers/law-legal/corporate-law/finance-securities-law/LAW_COR_FSL/46277-12027705

Can Bitcoin be interpreted as an internet utility which can be bartered for any number of goods/services/other?

Is bitcoin.org 's blatant misrepresentation of Bitcoin not misleading?

"P2P Virtual Currency
Bitcoin is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions. These tasks are managed collectively by the network."

"... no central authority ... tracks transactions ... " - Can anyone not track transactions on the blockchain (provided Bitcoin was not laundered - and laundering Bitcoin would be illegal)?

P2P Virtual Currency - Does a currency not require a store of value backing it?

Does Bitcoin's only value derive from its secure, transferable utility value as an internet commodity described by MtGox? Have we bought an internet commodity that we are bartering for goods/services/other as a medium of exchange? Or have we been issued a virtual currency with a backed store of value - to be redeemed, without option not to accept, from the backing entity on demand?

Would "P2P Crypto Accounting Utility" not be a more aptly description? Would it not be less incriminating to bitcoin.org 's author who identifies his Bitcoins as currency - even though it is not backed, or redeemable from an entity, without option not to accept?

I think bitcoin would make more sense as an anonymous encrypted financial transaction utility than as a currency, as it doesn't really have a store of value outside of its usefulness in that regard. Maybe this could be accomplished better by having an option to lock the value of particular "bitcoins" to another currency or precious metal, or other entity, rather than having an open market currency exchange or whatever.
posted by Golden Eternity at 6:53 PM on December 6, 2013 [2 favorites]

Colored Coins claims it can do fiat transactions, somehow. I don't get the idea at all.
posted by mccarty.tim at 7:04 PM on December 6, 2013

My prediction is that a lot of true believers will come out of this as plain old goldbugs.
posted by mccarty.tim at 7:05 PM on December 6, 2013 [4 favorites]

I'm currently cornering the market in chocolate money

Careful! They get dangerous when cornered.

They don't have any corners. They're round!
posted by Chocolate Pickle at 7:18 PM on December 6, 2013 [3 favorites]

I can see that the ability to make financial transactions outside of any system of government regulation as valuable to some people, especially criminals.

And political dissidents...

The money laundering is both bug and feature and it is highly context dependent.

I don't see bitcoin itself as amounting to a great deal. The flaws in the implementation need to be addressed. But, this the cryptocoin thing seems to be on to something. Even the Fed managed to say as much.
posted by Pogo_Fuzzybutt at 7:19 PM on December 6, 2013 [2 favorites]

you just use Rubik's Cubes as currency

I may actually be able to solve a Rubik's cube in less time than it takes to generate a Bitcoin on a 486.
posted by arcticseal at 7:25 PM on December 6, 2013 [3 favorites]

A few weeks ago, someone was trying to impress me with how popular Bitcoin was getting as a financial instrument; that it was getting big enough to compete with fiat currencies. "It's a billion dollar a year market", they said.

They have no idea how big real markets are.

Individual stocks on the NYSE do single transactions worth tens of millions USD, in microseconds. In 2010, roughly 1% of US GDP was traded on the NYSE daily. Even the world's smaller exchanges like the Peruvian Lima exchange do around $2B USD in average daily trading volume (using 2009 figures).

And that's just stocks, the "little" capital market. The other one, the bond market, is roughly twice the size: $93 trillion worldwide vs $54 trillion in 2010, according to a McKinsey report.

And that is nothing compared to the enormity of the FX (foreign exchange) market, the one which runs all week long without closing, which now does (as of 2010) $3.98 trillion USD average daily trading volume. That's 2.76 billion USD per minute, every minute, twenty four hours a day, five and a half days a week. Over $46 million per second, if you prefer.

Derivative markets also exist for all of the above; the Bank for International Settlements reports $693 trillion USD OTC derivatives are outstanding as of the end of June 2013.

The Bitcoin market is just nowhere near the league that G10 currencies, or the G11 currencies for that matter, operate in. BTC activity is more on par with, say, the yearly secondary RMT market for trading WoW gold, estimated at $880 million in 2005. Or Canadian Tire money, which does over $100 million CAD annual volume and is considerably easier to spend.
posted by ceribus peribus at 7:27 PM on December 6, 2013 [23 favorites]

They have no idea how big real markets are.

I know it's a cliche, and probably mean, but I can't help putting this down to most of the Bitcoin obsessives being either incredibly young, or incredibly stupid. The sort of language used on /r/bitcoin - people complaing that they can't convince their parents to invest in a mining rig, people marvelling over sums of $10,000 like it's a personal fortune, people who've apparently never considered the meaning of concepts like "deflation", people willing to meet dudes in parking lots to sell thousands of dollars worth of coins. These have got to be dumb kids.
posted by Jimbob at 7:37 PM on December 6, 2013 [11 favorites]

I have to agree, Jimbob. The worst is when they're thrilled at the transactions. Bitcoin transactions are slow, and ultimately not as smooth as using a credit card. However, you still see people getting amazed they were able to buy something without handling cash. There was one person who thought Bitcoin could be a great way to pay bills in lieu of writing a check (but most bills are already online), and one person was thrilled that Bitcoin "only" took 3 minutes to donate to Wikileaks. [I know you can't donate to Wikileaks with a credit card]

The whole thing smacks of kids who aren't trusted with debit cards in a lot of cases.
posted by mccarty.tim at 7:42 PM on December 6, 2013 [1 favorite]

Here's a pair of cringe-worthy threads:
Kid wonders if he can get around his parents not letting him get a checking account to buy BTC

30 year old man makes a thread in reaction to it calling the kid out for not trying to talk his parents into it more
posted by mccarty.tim at 7:47 PM on December 6, 2013

Or Canadian Tire money, which does over $100 million CAD annual volume and is considerably easier to spend.

Unlike Bitcoins, I actually accept Canadian Tire money for transactions in my store.
posted by ten pounds of inedita at 8:15 PM on December 6, 2013 [2 favorites]

Oh man, if we're sharing tragicomic Bitcoin Reddit threads, I've got the master: This asshole pissed away most of his and his sister's inheritance, over $400K, gambling on Bitcoins.
posted by Pope Guilty at 8:26 PM on December 6, 2013 [4 favorites]

From that thread:

"But none of those investments are going to get me my money back. What is the average return of a "safe" investment? 1%? 2%? That isn't enough. Bitcoin IS safe, I was just unlucky."

I am begging you to tell me this is not real.
posted by escabeche at 8:36 PM on December 6, 2013 [5 favorites]

The SETI@home website says they're the largest distributed computing project with over three million users, and that probably represents a lot more machines than the Bitcoin miners. So a majority of the spare computing power lying around is currently going to more productive causes.
posted by Kevin Street at 8:58 PM on December 6, 2013 [2 favorites]

I was just unlucky.

I drove the wrong way down a one way street, had a crash, and got a ticket. ~~I used poor judgement~~ I was just unlucky.

-- half of goddam humanity.
posted by Devils Rancher at 9:16 PM on December 6, 2013 [6 favorites]

Can every Bitcoin holder, merchant, trader, etc. decide individually how they interpret Bitcoins?

Does Bitcoin allow for modern day barter transactions between the fairly secure Bitcoin Accounting Utility and a good/service?

See this legal ideas with regards to barter exchange as opposed to virtual currency..

You think I don't know the law? Wasn't it me who wrote it? And I say that this man has broken the law. Right or wrong, we had a deal. And the law says: bust a deal and face the wheel.
posted by charlie don't surf at 9:32 PM on December 6, 2013 [2 favorites]

The worst thing about gamblers is how little regard they hold for family members. Holy fuck.
posted by Blazecock Pileon at 9:38 PM on December 6, 2013 [1 favorite]

The worst thing about gamblers is how little regard they hold for family members.

On a more minor scale, in the last few weeks there have been so many posts like "I want to give my two 2-year old nieces Bitcoins this Christmas - What's the best way to do it?". Yeah, I'm real sure the kid will appreciate that.
posted by Jimbob at 9:42 PM on December 6, 2013 [3 favorites]

I found out about Bitcoin back when you could still CPU mine on a laptop and get something. I was curious, as it seemed like free money (as I wasn't paying for electricity at the place I was at), and looked at what I could get if I mined. Huh. Nothing. I think the best I found was a beef jerky place (Mmmm jerky) but I couldn't even find the bitcoin payment part on the site, so I dismissed it as a bunch of silly people pouring CPU power into something you couldn't use.

I came back when Ars did the article looking at what it was used for (Drugs and nude shows) and looked at it again. At that point in time (1 BTC = $11 or something like that) CPU mining was gone, and GPU mining was getting difficult. Then the only things you could buy with it were server space, web design; that sort of thing. The type of services one enthusiast could offer another. Oh, and that silly site where you could put up something you'd do and a price. Also: Stripcoin. Basically reddit people who noticed that hey, lots of people are willing to take off their cloths in GoneWild for free; so why not try and get some bitcoin for doing the same thing?

Now? There is more, but not much. A comic book shop, OH and game store; wait, that is in the same city I live in, I could just go pay cash. There are a few places, but mostly I could just use my credit card.

However, I could see people using it to pay places they didn't want to give their credit cards to, for fear of them being stolen. I bet stripcoin is doing great! Oh wait, it is 100% dead. Not even the old posts left. (Actually though, I'm surprised porn isn't all over this, or is it?)
posted by Canageek at 10:20 PM on December 6, 2013

A guy I work with got some BTC for some web design work last year. Nothing major and he thought, what the hell.

He cashed all 3 in last week when they were worth 900 something. He's taking his GF to vegas for newyears largely on that.

Also he bought a $100 REI gift card. Apparently REI takes Bitcoins.

Anyway, he made out for a couple hours work.
posted by Pogo_Fuzzybutt at 10:39 PM on December 6, 2013

This asshole pissed away most of his and his sister's inheritance, over $400K, gambling on Bitcoins.

Wow. Reading his comments in that thread. He is the douchiest of bags. He's probably pissed the rest away by now.
posted by dirigibleman at 11:16 PM on December 6, 2013

At current price (614) I wonder how that Tesla dealer feels...
posted by PenDevil at 11:27 PM on December 6, 2013

Pope Guilty: Oh man, if we're sharing tragicomic Bitcoin Reddit threads, I've got the master: This asshole pissed away most of his and his sister's inheritance, over $400K, gambling on Bitcoins.

You ruined the taste of the libertarian tears :(
posted by Mitrovarr at 11:42 PM on December 6, 2013

mathowie: “Earlier this week I read this incredible story of a Canadian trying to sell bitcoin and man, it did not sound good.”

I just kind of presumed there was some rational way to turn bitcoin points into, you know, money. If nobody In Real Life is willing to give you more than half what a bitcoin is "worth" what is its actual value? For all the trouble he had it almost would have been easier to, I dunno, buy hash or something and sell that for cash.

As for the kid who lost his inheritance, how did no enterprising bank V.P. talk him into opening a "wealth management" account? Who lets a 24 year-old walk out of a bank with that kind of cash sitting in a checking account?
posted by ob1quixote at 11:45 PM on December 6, 2013

He says that he paid several investment advisers for their advice and they all told him not to invest in Bitcoin. So that was it for them.
posted by Kevin Street at 12:16 AM on December 7, 2013 [8 favorites]

Huh. It's down to about $500 now. Oh wait it's bouncing back up to $600. Still more than the last BTC I bought but maybe not for long. Glad I didn't bet the farm on it.

Only a few days after bitcoinity's charts switched from displaying USD/BTC to USD/mBTC, too.
posted by egypturnash at 12:22 AM on December 7, 2013

Tbh, as much as I'm a bear on bit coin, I don't think it's over by a long way, and think there is money to be made if you have some money to play with. I think it'll hit around $200 in the next week or so (maybe $150), then start climbing again. I might buy a few coins on my next paycheck, just for giggles.
posted by empath at 1:13 AM on December 7, 2013

United States dollar almost doubles in value in a single day
posted by telstar at 1:19 AM on December 7, 2013 [12 favorites]

I freely admit I don't understand the cryptographic mining process so I know this will sound rather silly, but I wish all that electricity and CPU power was being used for something productive for mankind, like SETI@home or Folding@home calculations. The user whose computer finds the crucial radio signal or cures cancer wins a special bitcoin lottery prize and saves mankind. Yay!

That's already a thing, pretty much: Computing for Good.

It's a scheme where you 'mine' Ripple by joining a team at World Community Grid - i.e., my computer does a bit of work for FightingAIDS@home & Mapping Cancer Markers, and in return I get a tiny wee handful of digital currency every morning.
posted by jack_mo at 2:55 AM on December 7, 2013 [4 favorites]

You know, I just came up with a brilliant plan to save BTC:

Make it the only currency accepted for Kickstarter projects.
posted by spitbull at 5:34 AM on December 7, 2013

/r/Bitcoin was starting to believe Bitcoin would hit $10,000 by Christmas a few weeks ago, but I think they're starting to be a bit more realistic.

Here's my thought re: Will there be a bigger bubble?

This bubble was pumped to hell. Not only did Bitcoin find and lose a real big ticket application (laundering/sending Chinese money against currency controls), but it had about 2-3 weeks of good news pumping it, to a public who largely didn't know the history of Bitcoin. There were even bankers and hedge fund analysts using their credibility to pump it. (Which was funny since Bitcoiners usually say they hate the traditional finance/banking systems but upvoted those stories like crazy)

I think the biggest thing holding it back from more insanity was that the easiest way to invest in Bitcoin is still shady person to person transactions, making a western union/moneygram transfer, or giving away your bank account information in some form to a company you've never heard of. (I signed up with Coinbase, but only after I looked up what I could do if they drained my bank account re: the law and my bank, since bank transfers are much more reversible than cryptobucks) If Bitcoiners can find a way around that (doubtful), such as figuring out some legal loophole to make it possible to set up Bitcoin ATMs in more than a few odd places with not-so-strict money laundering laws, the value could get pumped again as it gets easier to get greater fools in on the game. There's one money transfer service in Russia and Britain, IIRC, planning on letting people buy Bitcoin from convenience store counters, much like you can buy Western Union orders.

However, after the inevitable crash after that boost, I can't see it getting higher. It'll just slowly find a bottom and settle slightly above there as true believers try to recapture that lightening in a bottle.
posted by mccarty.tim at 6:18 AM on December 7, 2013

banal evil: "Its usefulness isn't for buying things in the legitimate economy, it is for laundering money, and transactions of illegal goods."

Bitcoin certainly has utility in the legitimate economy. I just paid for the latest Humble Indie Bundle using Bitcoin. In comparison to conventional methods of payment that I was offered: credit card, Paypal, and Amazon Payments, which all charge merchant fees between 2% and 3%, Coinbase, which is a payment processor that uses Bitcoin, only charges a merchant fee of 1%. That means middle-men are getting a much smaller slice of the pie, and the people I'm intending to pay -- in this case game developers and charities -- are getting a bigger slice of the pie, which they deserve. Know why Coinbase can charge so little? Because they have very little infrastructure to maintain.
posted by tybeet at 6:51 AM on December 7, 2013 [2 favorites]

I think something like bitcoin, with a non-deflationary model and faster confirmation times, and backed by major institutions (corporate, government, academic or standards bodies) has a future.
posted by empath at 7:16 AM on December 7, 2013 [1 favorite]

I guess I just don't get what's wrong with money.
posted by (Arsenio) Hall and (Warren) Oates at 7:18 AM on December 7, 2013 [2 favorites]

tybeet, I don't have any doubts you can buy legitimate things with Bitcoin, and that there aren't that many fees. The problem is that you need to have money in bitcoin to benefit conveniently. If I'm spending $5 on the latest Humble Indie Bundle, I'd rather 3% of those fees be eaten by my bank and the payment processor than wait 4 days to get some bitcoin to spend on that transaction.

And whenever I do get some BTC, it's hard to justify not holding on to it due to the speculation game always threatening to increase the value of that money.

I just don't see much value in it for me, the consumer, over using Paypal or a credit card.
posted by mccarty.tim at 7:19 AM on December 7, 2013 [1 favorite]

I just paid for the latest Humble Indie Bundle using Bitcoin.

Okay, and how much money did you lose/save by doing it when you did and not five minutes later? With Bitcoin values as horribly unstable as they are, how can you have any particular idea what the actual value of what you've paid is?
posted by Pope Guilty at 7:22 AM on December 7, 2013 [1 favorite]

empath: I think cryptocurrencies have some sort of future, but we're not going to be able to plot it out so long as there's a mania going on. They could be the TOR of money, offering both legitimate uses that are a social boon (a backup currency for nations with terrible monetary policy like Zimbabwe, or a way to get political dissidents money under a tyrannical regime), and also enabling really creepy things (drugs, child porn, money laundering for cartels, etc).

Bitcoin is actually kind of a good balance, because the blockchain is public and mixing services can only do so much to obscure the money's trail. So $300 spent on an ounce of weed is obscured, but bigger amounts are more visible.

But to say it'll be the money everyone uses in grocery stores in wealthy western nations is a pipe dream, in my opinion.
posted by mccarty.tim at 7:23 AM on December 7, 2013

But to say it'll be the money everyone uses in grocery stores in wealthy western nations is a pipe dream, in my opinion.

Not least because Bitcoin, being maxed out at seven transactions per second, is barely capable of handling a small town, let alone the world.
posted by Pope Guilty at 7:28 AM on December 7, 2013 [1 favorite]

I guess I just don't get what's wrong with money.

There's all kind of cool things you can do with a distributed transaction model that you can't do with regular currency. There's actually a bunch of stuff that hasn't been implemented in bitcoin that it's capable of doing, like multiparty transactions and escrow, etc. If they can get confirmation times down, it should be cheaper than a credit or debit card for transferring money around.

I don't for a second believe that money is going anywhere, but cryptocurrencies are a very cool concept that have a place in the financial world.
posted by empath at 7:29 AM on December 7, 2013

Not least because Bitcoin, being maxed out at seven transactions per second, is barely capable of handling a small town, let alone the world.

A new paper suggests that can be improved to 200 transactions per second.
posted by empath at 7:30 AM on December 7, 2013 [1 favorite]

Aren't the confirmation times baked in to Bitcoin, though? As in, you can get reasonable confirmation a Bitcoin wasn't double spent via network propagation in less than a minute or 3, but no total guarantee until the next block containing that transaction is processed? Further, if your client or you includes a fee not to the miners' liking, your transaction can end up getting stuck in a long queue with no clear timeframe for when it gets confirmed, and propagation will be really slow, as well.

It'd be okay for a candy bar, but I can't see grocery stores being happy with someone making a $200 order trying to leave before they get some serious confirmations.

The network is designed to adjust to process blocks every 10 minutes. If Bitcoin is taking longer or shorter than that, it will, by design, re-calibrate.

The transaction limit per second is something I think Bitcoin can improve, at the cost of increased centralization as it becomes harder for smaller miners and possibly rising miners' fees.
posted by mccarty.tim at 7:32 AM on December 7, 2013 [2 favorites]

Since HumbleIndieBundle is "pay what you want," why not just pay by credit card and make it 2-3% less than you would otherwise pay to offset transaction charges?

Basically this avoidance of fees business is bullshit. You pay fees to cover actual transaction costs, but also to insure yourself in a transaction.

Bottom line, however, is that no state is going to tolerate anonymous transactions across its sovereign borders for very long without a fight. That's why China just sank the BTC bubble.

The naïveté of the economic libertarians is matched only by their arrogance. Until they control a state and have sovereignty they are spitting into the wind.

I hear Somalia, a libertarian paradise if there ever was one, might be open to a deal.
posted by spitbull at 7:35 AM on December 7, 2013 [1 favorite]

spitbull: "Since HumbleIndieBundle is "pay what you want," why not just pay by credit card and make it 2-3% less than you would otherwise pay to offset transaction charges?"

I think you mean 2-3% more, not less, which begs the question: why should I have to pay more?
posted by tybeet at 7:38 AM on December 7, 2013

Cryptocurrencies may have a place, but not anonymizable ones.

Also, why would the function for escrow accounting not be implemented in BTC? Honest question, but that seems like a huge flaw that guarantees lack of utility vs. government-issued scrip.
posted by spitbull at 7:40 AM on December 7, 2013

No, I mean less -- you set the proffer so include your own transaction costs in what you're willing to pay.

And "why"? To insure that you can contest and reverse the charge when the merchant fails to deliver their end of the deal, and to ensure the governments with an interest in the transaction that the taxes on it get paid.

You may not believe in the state, but buddy, it believes in you. I'm sort of amazed Snowden hasn't yet leaked the news that BTC was created by the NSA and that each coin has a hidden decryption back door. It would make so much logical sense.
posted by spitbull at 7:44 AM on December 7, 2013

I am absolutely shocked.
posted by TrialByMedia at 7:46 AM on December 7, 2013 [1 favorite]

spitbull: "No, I mean less -- you set the proffer so include your own transaction costs in what you're willing to pay.

And "why"? To insure that you can contest and reverse the charge when the merchant fails to deliver their end of the deal, and to ensure the governments with an interest in the transaction that the taxes on it get paid.."

I still don't understand why I should have to pay a middle-man 3% instead of 1%. If I pay less due to the transaction fees, then the people I am paying will receive even less.

There's no reason Coinbase couldn't operate an escrow or insurance service. In fact, Bitcoin escrow services do exist.

I'm also not paying Paypal 3% so they can file taxes, or so I can file taxes. The responsibility for each party to file taxes for the transaction is still there.

You seem to have an underlying assumption that people who use decentralized currencies will somehow magically become anti-statists, or must be already.
posted by tybeet at 7:53 AM on December 7, 2013 [1 favorite]

Also, why would the function for escrow accounting not be implemented in BTC? Honest question, but that seems like a huge flaw that guarantees lack of utility vs. government-issued scrip.

low-trust contracts in bitcoin.
posted by empath at 7:58 AM on December 7, 2013 [1 favorite]

The libertarians' attitudinal bias towards Bitcoins can be pretty amusing, but anti-libertarians' attitudinal bias against is downright hilarious.
posted by save alive nothing that breatheth at 7:59 AM on December 7, 2013 [3 favorites]

think there is money to be made if you have some money to play with

It's easier to just go to your local casino and toss $100 on red. Even better, you can turn the chips the casino gives you into US dollars in just a minute, at the cost of an optional tip. I don't understand how anyone would consider buying Bitcoin with dollars right now knowing it's very difficult to later sell that Bitcoin for dollars.

In fact, Bitcoin escrow services do exist.

Yeah, like Sheep Marketplace holding 96,000 Bitcoin in escrow for transactions of various physical goods.
posted by Nelson at 8:00 AM on December 7, 2013 [1 favorite]

I think the anti-statist impulse need not lie with individuals transacting business in BTC, but in the general capabilities of the currency. Just like the Internet. The NSA has decided unimpeded international correspondence offering anonymity and encryption are intolerable risks to national interest (and I am vehemently opposed to this, just pointing it out). That's without moving capital, just words and images. BTC might be neutral as to ideology or power, but its utilities are a priori threats to state sovereignty.

As for middle-men, we may disagree about how much they charge, but banks are not just parasitic on legitimate commerce any more than taxes are. The view that any external interest in commerce is inimical to liberty and market efficiency is the hallmark of libertarian rhetoric. The counter argument is Because History. More colloquially still, who built the roads? Who invented the Internet? Who defends your community from crime or invasion?
posted by spitbull at 8:20 AM on December 7, 2013 [3 favorites]

The libertarians' attitudinal bias towards Bitcoins can be pretty amusing, but anti-libertarians' attitudinal bias against is downright hilarious

Laughing all the way to the Bitcoin bank!
posted by spitbull at 8:21 AM on December 7, 2013

More colloquially still, who built the roads? Who invented the Internet? Who defends your community from crime or invasion?

We do! We do!
posted by mccarty.tim at 8:22 AM on December 7, 2013

spitbull: "As for middle-men, we may disagree about how much they charge, but banks are not just parasitic on legitimate commerce any more than taxes are."

I would argue, at least in the case of banks, that there might be some degree of parasitism. If the work that banks perform can be performed more efficiently using a different system like Bitcoin or Ripple, then this would demonstrate that it is irrational and a waste of human and economic resources to continue to have the work performed by banks.

As an analogy, consider how warehouses were once (and actually still are most places) stocked and maintained with human labour. Now compare that to Amazon's Kiva system which uses robots instead. If given the choice between the old method and Amazon's Kiva system, choosing the old method would be to unnecessarily drain resources from the economy that could be allocated to other tasks.
posted by tybeet at 8:33 AM on December 7, 2013

The ticker sites are having some trouble under the load, and the price fell under $700 on the major exchanges. Gawk while the gawkin's good.

Bitcoin.Clarkmoody.com and Bitcoinity.org/markets

http://preev.com/btc/usd
posted by mccarty.tim at 8:35 AM on December 7, 2013

FYI: BitcoinWisdom is another great place to watch the markets.
posted by tybeet at 8:43 AM on December 7, 2013 [1 favorite]

I agree that there is of course plenty of parasitism at work in bank-mediated trade, inherent in the way all non-barter transactions are structured and in the definition of fiat currency as such. The financial crash and bailouts of 2008-9 were massive parasitism in action, at a scale BTC could not even imagine reaching. Markets are rarely efficient and always populated by humans willing to be corrupt.

I just don't see how a cryptocurrency not regulated by a state or international treaty framework could possibly hope to be more efficient in the aggregate.

We will see, of course, but this crash, should it continue to spiral down and cost lots of ordinary idiots their "investments" will make the public and powerful governments much more of an obstacle to future cryptocurrency experiments. I just caught a funny exchange on the DailyPaul (a dank fever swamp of libertarian discourse) where they are worrying about the crash becoming a black eye for their movement as a whole in the public debate. Investing and ideological groupthink don't mix well, and capitalism as now constituted is barely recognizable as such to the most ardent champions of market efficiency, who feel alienated and disenfranchised and choose to blame the welfare state for their own ignorance of How Things Really Work.

We'll see, but I predict no significant upswing for BTC, and that it will be trading at under $100 within a week. If I'm wrong, I'll admit it, but I don't see it coming back because I think the bubble was entirely driven by fantasy analysis of how the world works, and once a speculative fever breaks, that tends to be it. Perhaps the next cryptocurrency will be different. But I actually think this episode will spur the creation of crypto versions of major world currencies by states themselves.

Also caught this funny black humor while I was over checking out the Paulite services:

Coiner explaining why no one "gets" bitcoin There are three types of people who get bitcoin - those that can count and those that can't.
posted by spitbull at 8:48 AM on December 7, 2013

empath: "Someone on reddit was saying that 30-40% of bitcoins at minimum are lost-- there are apparently a ton of 50 bitcoin wallets (the original mining reward) that haven't been touched in years."

This seems like an insurmountable problem long term. At some point not only won't the system be able to expand to meet increased need they won't be able to mine new coins to replace those lost to system crashes, people forgetting about them, lack of transfer for whatever reason or just plain old sabotage of clearinghouses/bitcoin banks. One can imagine some point in the future there only being a handleful of coins in active trading.

empath: "A new paper suggests that can be improved to 200 transactions per second. "

That's a laughably small number for a global currency clearinghouse that wants to be relevant. VisaNet for example can handle at least 24,000 transactions per second. And that's just one of the major credit card processors.
posted by Mitheral at 9:29 AM on December 7, 2013

I still don't understand why I should have to pay a middle-man 3% instead of 1%.

The fee you talk about isn't the real cost of the transaction. Bitcoin is not real currency. It only has value when translated from dollars to bitcoin and back again. Your job doesn't pay you in bitcoin. It pays you in dollars. Your vendor doesn't buy his groceries or pay his rent in bitcoin. He pays for them in dollars. So there is a hidden fee, much larger than the transaction fee, which is the spread between buying and selling bitcoin in dollars. You aren't really saving any money by using bitcoin instead of a credit card.
posted by JackFlash at 9:51 AM on December 7, 2013 [1 favorite]

Your job doesn't pay you in bitcoin.

top lel, my friend - you don't know me

(adjusts fedora, takes drag from e-cigarette, pulls down Cyber-Oakleys, winks into camera 4 times in left eye and 5 times in right eye)
posted by Sticherbeast at 9:57 AM on December 7, 2013 [7 favorites]

tybeet: I still don't understand why I should have to pay a middle-man 3% instead of 1%.

Well, one thing to consider is that credit cards have pretty robust consumer protections. Does the bitcoin processor have similar, and has it been around long enough that you trust them? Because in the long term, not having consumer protections in place is a real problem. What are you going to do if you spend a lot of bitcoin on a product, and then the seller doesn't send you anything?

And while there's nothing to prevent someone from setting up a bitcoin processor that does have robust consumer protection, those aren't free. I would be surprised if they didn't take fees on about the same level as existing payment processors.
posted by Mitrovarr at 10:23 AM on December 7, 2013 [1 favorite]

In the last 15 minutes, the value has bounced around with a high of over $900 and a low of under $600. That's insanely unstable.

I think that bitcoins are an interesting idea, but not enough to risk my money on. I don't buy the penny stocks that I get spam emails about, either.
posted by double block and bleed at 10:50 AM on December 7, 2013

Bitcoin is not real currency

"A much more general use of the word currency is anything that is used in any circumstances, as a medium of exchange."

I can't pay my taxes in Pounds Sterling, is that also not a currency ? My grandfather used to get paid in scrip which could be used at the company store - was that not a real currency ? Even clams were once used as currency.

What are you going to do if you spend a lot of bitcoin on a product, and then the seller doesn't send you anything?

Well, that's something too - do I need robust consumer protections for every transaction ? If I drop 12 bucks on a videogame and get ripped off, that sucks - But, I'm likely to care less about that than if I were spending 1500 on a laptop or something. Or, transactions where consumer protections are superfluous - like donations or gifts, for example.
posted by Pogo_Fuzzybutt at 10:52 AM on December 7, 2013 [1 favorite]

Pogo_Fuzzybutt: Well, that's something too - do I need robust consumer protections for every transaction ? If I drop 12 bucks on a videogame and get ripped off, that sucks - But, I'm likely to care less about that than if I were spending 1500 on a laptop or something. Or, transactions where consumer protections are superfluous - like donations or gifts, for example.

Well, do you really care about a 3% fee vs. a 1% fee on a tiny transaction? That's a difference of a quarter. But anyways, I would argue that you kind of need them, even on small purchases. First of all, the consumer protections aren't just there for when you are actively spending money. They're also there to make sure someone doesn't steal your information and go on a spending spree, or sign you up for accounts without your permission, or things like that. And while I don't think you can steal someone's bitcoin information like with a credit card, I'm not sure there's anything preventing someone from hacking your computer and stealing your bitcoin files. I'm not sure they could use them, but they might be able to prevent you from using them either. Plus, if you keep your bitcoins online there's no protection against anyone hacking those accounts.

Also, if we lost consumer protection on small online purchases, that's a huge incentive for scammers to target those. It might render sites like ebay totally useless and make it really hard for new businesses to gain any kind of traction (since people would be afraid to use anything but a trusted buyer). It would also make it easier for people to scam large numbers of people - kickstarter and other projects like these have to be pretty honest in a lot of ways or their payment processors will bail out on them. Imagine if they didn't, and anyone could found a project like that, with no protections at all. The scams would greatly outnumber the legitimate ones.
posted by Mitrovarr at 11:04 AM on December 7, 2013

Bitcoin uses public key cryptography. Each address in the blockchain (which works as a public ledger) has a private key and public key. To send money to an address, you need the private key of the address you're spending from and the public key of the address you're sending to, and the transaction that's generated does not reveal your private key to the other address.

However, if someone gets your private key through any method (hacking, stolen computer, some kind of social engineering, etc), they can empty that address completely. Bitcoin encourages you to use multiple addresses to hide your balances and increase security, but to do that, most clients keep all your private keys in a file called your "wallet." It's best practice to encrypt it. But if a hacker installs a keylogger or you have a weak password, they can get into it anyway.

As a result, many people say the best solution is to never have a computer with your long-term storage wallet online in the first place. You can generate a private key offline really easily, and get the public key from that to send the money to. You can even have your offline computer form the encrypted transaction messages that you can then move to an online machine (say via a QR code or SD card).

Of course, this is all pretty inconvenient, but irreversible transactions means security is your own issue. While millions of people in America do surprisingly well with a weak password to their bank account, bitcoin lacks the customer service and rule of law that can detect and discourage fraudulent transactions. There's some work being done on creating easier-to-use offline wallets, such as this one.
posted by mccarty.tim at 11:30 AM on December 7, 2013

mccarty.tim: Bitcoin uses public key cryptography. Each address in the blockchain (which works as a public ledger) has a private key and public key. To send money to an address, you need the private key of the address you're spending from and the public key of the address you're sending to, and the transaction that's generated does not reveal your private key to the other address.

However, if someone gets your private key through any method (hacking, stolen computer, some kind of social engineering, etc), they can empty that address completely.

So, if someone roots your computer, they can have all of your money. That's insane. Do you know how easy it is to get rootkitted and not even realize it? Do you know how hard it is to reliably prevent it? And that's without a huge monetary incentive to root individual computers!

You can even have your offline computer form the encrypted transaction messages that you can then move to an online machine (say via a QR code or SD card).

Ah. That changes it from 'If someone roots your computer, they get all of your money' to 'If someone steals your computer, they get all of your money'. And it would have to be a portable computer that you carried around. Which would be easy to steal.
posted by Mitrovarr at 11:49 AM on December 7, 2013

Exactly. Bitcoin lets you be your own bank, but you have to also be your own bank security, or trust someone else to do that security with no real rule of law or insurance.

So I really think it's a project for tech savvy people, particularly the type who get network security and cryptography. Which means adoption is pretty limited.
posted by mccarty.tim at 11:55 AM on December 7, 2013

I think the upshot is that for all the fees and annoyences that come with banks and online financial services, you are getting real security and customer service for it, while Bitcoin offers nothing but security beyond where you keep your wallet. No insurance, no chargebacks, your money can disappear if your private key is stolen or you just plain lose it.
posted by mccarty.tim at 11:58 AM on December 7, 2013

Exactly. It's stuffing your money into a mattress, except the mattress is a computer. This does not make it a better idea in any way, and in fact makes it a worse one in several.
posted by Mitrovarr at 12:05 PM on December 7, 2013 [2 favorites]

That changes it from 'If someone roots your computer, they get all of your money' to 'If someone steals your computer, they get all of your money'.

Don't forget "if your computer fails and you have no backups, you lose all of your money".
posted by ceribus peribus at 12:09 PM on December 7, 2013 [2 favorites]

Add in that if your backups get copied in any way, they have your money, so don't keep too many backups and make sure they're encrypted with a key kept separately.

If you forget the key, you lose all your money.

I just read there's a cottage industry of Bitcoin wallet recovery, where you hire somebody to analyse an encrypted wallet file or hard drive and have them try to break in to get your money. This is doable if you tell them a phrase that might have been in your password. But it doesn't always go so easily since encryption is meant to be hard to brute force.

This creates a situation where a wallet recovery job where they find the wallet could go two ways: The wallet recoverer sells the customer the key for less than the money in the wallet. Or, the wallet recoverer finds the wallet's key, takes the money, and reports the wallet was unopenable.

Of course, you'd probably get more recommendations and better public feedback if you solved and gave the funds of more wallets, but if you bilk even a small percentage of wealthy clients, would anyone ever know?
posted by mccarty.tim at 12:15 PM on December 7, 2013 [1 favorite]

So, uh, is there any rhetorical room between credulous r/Bitcoin kids and world-weary snarkers about libertarians and goldbugs? I agree that Bitcoin doesn't meet the characteristics of a stable currency by any means, but it's technically and mathematically interesting, and clearly has some 'natural' value in its role as a facilitator of anonymous, instant transactions.

For now, that means illegitimate things like buying drugs, and evading taxes and currency controls. But I think it's strange that there's a signfiicant overlap between people worried about the surveillance state and people snarking on the idea of cryptocurrencies in general - this is as close as we're going to get to electronic cash.

Anywho, I think Bitcoin is worthy of study - it's the first large-scale experiment with this new kind of currency. Maybe someone else ends up doing it better, but it seems silly to throw the baby out with the libertarian goldbug bathwater.
posted by downing street memo at 12:17 PM on December 7, 2013 [2 favorites]

Missing: hard drive containing Bitcoins worth £4m in Newport landfill site
posted by fearfulsymmetry at 12:19 PM on December 7, 2013 [5 favorites]

Missing: hard drive containing Bitcoins worth £4m in Newport landfill site.
"And he actually took me out in his truck to where the landfill site is, the current ditch they're working on. It's about the size of a football field, and he said something from three or four months ago would be about three or four feet down."

Brings new meaning to the idea of bitcoin mining.
posted by JackFlash at 12:26 PM on December 7, 2013 [2 favorites]

Missing: hard drive containing Bitcoins worth £4m in Newport landfill site

Worth £3.3m now.

Looks like this was a pretty substantial crash (or "correction" as the optimists like to put it). The stats I'm looking at from bitcoinwisdom say the the mtgox peak was 1155USD and then the bottom was 576. That is a 50% drop. It recovered somewhat and is oscillating around a new level at around 730.
posted by charlie don't surf at 12:31 PM on December 7, 2013

Bitcoin hasn't yet gained currency with banks, a surprisingly good SF Chronicle article about the current regulatory status of Bitcoin. Talks about US and Chinese law and how it may have effected recent exchange rates.

Has anyone seen a good article on malware that steals the wallet.dat file, along with a keysniffer to grab the password? I've seen a few references here and there but nothing really solid.
posted by Nelson at 12:36 PM on December 7, 2013

I think Bitcoin's ideas are neat. It created a synthetic commodity out of cryptography. It's a novel idea, and I have no idea how it can be applied.

I just think Bitcoin, the currency, does not work, and if it's made to work, it won't be the bitcoin we see today. It's already getting to the point you can't mine it with consumer hardware. Soon it'll get to the point you can't run custom mining hardware on a home's internet connection, assuming they keep having every miner try to process all transactions in the world and remove the arbitrary 7 transaction per second limit.

And I don't think any altcoins are doing much to resolve it, either. And they lack the recognition to catch on.

If someone were to set up a cryptocoin as a series of networks that contained local transactions and grouped inter-network transactions together, that'd be a start, but it'd be more centralized and less anonymous, like a sort of NAT.

I also like the idea of using Bitcoin-like technologies to move stuff other than money, or create a decentralized public notary (there are some people suggesting putting contract signatures on the existing bitcoin blockchain).

The idea of Primecoin is also neat, in that its proof of work creates something useful to researchers. While Bitcoin intentionally choose to issue rewards based on solving transactions that wouldn't be useful elsewhere, I wonder if the cryptocoin system could essentially create commodity bubbles that encourage the running of simulations that benefit society. Imagine if computers running Folding@Home got dividends for completing protein folding simulations, and interested parties could buy those dividends to either encourage more people to add processing on the network or to simply speculate.

I have no idea how feasible that last one would be. I'm in over my head on that.
posted by mccarty.tim at 12:38 PM on December 7, 2013 [1 favorite]

I've been down the libertarian rabbit hole today in fascination. Turns out they are sharply divided internally on BTC and cryptocurrency more generally, with half of them saying it's fiat currency with no intrinsic value that can't buy bullets to protect your gold when the power goes out, and the other half saying they will get rich while bringing down the federal reserve. Tempers are frayed over the price volatility too.

Fascinating. And then I was led to the story of Bernard Von NotHaus and the Liberty Dollar, great reading!
posted by spitbull at 12:45 PM on December 7, 2013 [1 favorite]

(DowningStreet, the NotHaus case was actually a pretty large scale social experiment, which wound up with NotHaus charged and convicted for counterfeiting construed as seditious terrorism. It's a crazy story. He is, apparently, the "Rosa Parks of the constitutional currency movement.")

In conclusion, libertarian schismogenesis!
posted by spitbull at 12:50 PM on December 7, 2013

Exactly. It's stuffing your money into a mattress, except the mattress is a computer.

Heh, mattress-stuffing is the first thing that comes to mind for me, for deflationary currencies.
posted by Jimbob at 1:26 PM on December 7, 2013

Someone on Reddit lost half their private key.

The analysis from Something Awful's forum YOSPOS [Imgur Album to evade paywall]
posted by mccarty.tim at 1:28 PM on December 7, 2013 [1 favorite]

tybeet: "Know why Coinbase can charge so little? Because they have very little infrastructure to maintain."

No, because fools are losing real money to keep the currency functional despite mining rewards being smaller than the cost of mining now. That and you get zero fraud protection, among other government mandated services that traditional payment services must provide. It's not exactly surprising that someone who can externalize much of the cost of running their business onto third parties can charge smaller fees than those who are (largely) not allowed to do that.

tybeet: "I think you mean 2-3% more, not less, which begs the question: why should I have to pay more?"

Because they are providing a service to you. This is the same reason why you may (at the moment) need to pay transaction fees when sending bitcoin. Bitcoin provides less service than other forms of electronic transactions, so it makes sense that it would cost less. And presently, transaction costs are being borne by miners rather than people transmitting money, but when that party ends, all BTC transactions will require a fee.
posted by wierdo at 3:25 PM on December 7, 2013

Is there a John Waters version of a lump of coal?

The rudest possible gift is a gift card. It means you think the person is stupid and has no interests. The only good gift card is Bitcoin. You practically have to be a hacker to know about it. I want a Bitcoin gift certificate. That’s a glamorous gift card. You can use it to buy hit men or drugs.
posted by Blazecock Pileon at 9:19 PM on December 7, 2013 [3 favorites]

All of bitcoin's so-called novel "uses" are against the interest of powerful states. That's the part I never really understand. Why on earth would China or the EU or the US ever tolerate this?

Yeah, and why wouldn't liberals love it for the same reason? Weird, that. It's like the consensus... veers away, or something, when people start talking about things like this.
posted by This, of course, alludes to you at 12:22 AM on December 8, 2013

This, of course, alludes to you: Yeah, and why wouldn't liberals love it for the same reason? Weird, that. It's like the consensus... veers away, or something, when people start talking about things like this.

Well, the reasons I don't like Bitcoin is that the things it enables, while against the interests of powerful states, are also crappy things that make life worse for the average person. Money laundering, tax evasion, and unregulated international currency transfer are all things that are illegal for good reasons - they make things easier for organized crime, terrorist organizations, and white-collar criminals. The interests of powerful governments are not always aligned with those of the average person, but they're also not always not.
posted by Mitrovarr at 12:39 AM on December 8, 2013

Shorter: powerful states better than gangster oligarchies, although that's a continuum, not a binary choice. I'd rather live in France than Somalia.
posted by spitbull at 4:15 AM on December 8, 2013 [3 favorites]

Dogecoin
posted by Nelson at 7:32 AM on December 8, 2013 [7 favorites]

Yeah, and why wouldn't liberals love it for the same reason? Weird, that.

I don't know, I'm guessing some liberals believe government can actually do a lot of good for people - like provide a stable currency, perhaps.
posted by Golden Eternity at 9:09 AM on December 8, 2013 [7 favorites]

Correct. Liberals, unlike libertarians, don't want to overthrow the state. We want the state to serve the interests of its citizens. Those interests very much include a stable financial system, the prosecution of criminals, the prevention of tax cheating, and so forth. Liberals don't want to bring down the state, so the "consensus" you speak of is imaginary. Libertarians see anarchy as liberty. Liberals see it as just another form of tyranny.

The constitution of the US, along with a large body of settled and court-tested law, delegates the power to mint legal currency to the federal government, and the power to protect the integrity of the nation's financial system as well, and of course the power to tax, all backed up by legal control of the means of violence. No liberal objects to these powers a priori, only to their abuse, which would be either overreach or unequal enforcement.

Libertarians often claim the constitution assures the right if individuals or communities to opt out of the state. But I don't see where it says anything of the sort. It's why I said above "you may not believe in the state, but the state believes in you."

You are of course free to leave the US if you can find a state that will have you. Love it or leave it, as the old right wing saw goes. Somalia awaits you and your gold and bitcoins, but stop using the roads and military and infrastructure we taxpayers pay for if you plan to avoid paying your fair share. Thanks!
posted by spitbull at 10:07 AM on December 8, 2013 [11 favorites]

Libertarians often claim the constitution assures the right if individuals or communities to opt out of the state. But I don't see where it says anything of the sort.

And that was pretty definitively settled by some A Lincoln guy about a hundred and fifty years ago.
posted by me & my monkey at 1:16 PM on December 8, 2013 [3 favorites]

Back over 800. Consult your bubble charts, broker, cyberpunk novellas, and physician.
posted by mccarty.tim at 2:32 PM on December 8, 2013 [2 favorites]

That reminds me, one of my favorite words to come out of the rise of Wikileaks, TOR and Bitcoin is Cypherpunk.
posted by mccarty.tim at 3:06 PM on December 8, 2013

And that was pretty definitively settled by some A Lincoln guy about a hundred and fifty years ago.

At least we *thought* it was. Tell it to the libertarian crowd, who seem quite certain that the US is going to hell sooner rather than later and want out as soon as possible, but of course want their water and electricity and police and roads and all the rest in the meantime. Just no taxes, mind you.
posted by spitbull at 3:18 PM on December 8, 2013 [2 favorites]

one of my favorite words to come out of the rise of Wikileaks, TOR and Bitcoin is Cypherpunk

I think you have the causality backwards. The Cypherpunks movement predates most of those things by 10+ years. In fact, all three are directly traceable to discussions on the Cypherpunks mailing list in the 90s. Bruce Sterling has some of the history in his article The Blast Shack.
posted by Nelson at 3:21 PM on December 8, 2013 [8 favorites]

At least we *thought* it was. Tell it to the libertarian crowd, who seem quite certain that the US is going to hell sooner rather than later and want out as soon as possible, but of course want their water and electricity and police and roads and all the rest in the meantime. Just no taxes, mind you.

All I want is the benefits of society without any of the obligations. IS THAT SO MUCH TO ASK?!?!?!
posted by Pope Guilty at 3:52 PM on December 8, 2013 [12 favorites]

It seems the price has recovered to basically double what it was ago.

Bitcoins seem irksomely resistant to a massive crash so far.
posted by Just this guy, y'know at 3:09 AM on December 10, 2013

Dead cat bounce, imo. It'll hit $200 before it hits $1200 again.
posted by empath at 4:43 AM on December 10, 2013

Bitcoin feeds on hype and is still in the "Bad news is good exposure" phase, so I think it could get pumped bigger as money gets easier to pump in.

It'll get really crazy once the Winklevoss ETF kicks in.
posted by mccarty.tim at 5:37 AM on December 10, 2013

But we need to consider that at $1200, the value plateaued even as great news poured in.
posted by mccarty.tim at 5:38 AM on December 10, 2013

Incidentally Bruce Schneier posted a link the other day to "the best explanation of the bitcoin protocol that [he's] read": How the Bitcoin protocol actually works.
posted by Going To Maine at 7:41 AM on December 10, 2013 [1 favorite]

LOL, it just occurred to me that bitcoin mining is basically using coal as its gold standard.

Yeah, they're burning coal to mint bitcoins, but converting back is tricky.
posted by malocchio at 10:23 AM on December 10, 2013 [1 favorite]

Well, it's back up to $1025. I have no idea what this means re: bitcoin viability, but darn, is it fun to watch the volatility.
posted by mccarty.tim at 10:50 AM on December 10, 2013 [1 favorite]

Look at the dotcom bubble chart.

Or the 2007 crash.

You'll see it test previous highs a few times before people realize that the easy money is gone for good and the speculators start dumping coins while they can.
posted by empath at 7:32 PM on December 10, 2013

Dead cat bounce

(Cut to dead cat growing wings and soaring to Heaven, playing a harp)
(CUT TO GLORIOUS BITCOIN MASTER RACE SIPPING DIAMOND CHAMPAGNE OUT OF TRUFFLE FLUTES)
("I wonder what the poor are doing, ha ha!")
(The poor are not doing anything, because they are all dying of poverty)
posted by Sticherbeast at 7:58 PM on December 10, 2013 [1 favorite]

Somebody is planning on opening up a pawn shop for Bitcoins.

You give them the bitcoins, they give you some cash and a short term loan that you have to pay off plus 10% interest to get the bitcoins back. It's all backed by the premise that bitcoins can only go up.
posted by mccarty.tim at 8:32 AM on December 11, 2013

It's all backed by the premise that bitcoins can only go up.

Bernie Madoff needs to sign on as an advisor. I hear he has plenty of time nowadays.
posted by localroger at 8:41 AM on December 11, 2013 [1 favorite]

Land prices can only go up! They're not making any more of it!
posted by Chrysostom at 8:52 AM on December 11, 2013

Prisoners actually asked Bernie Madoff for tips on investing.
posted by mccarty.tim at 10:53 AM on December 11, 2013 [1 favorite]

So long as we haven't hit Peak Sucker, Madoff's investment tips are top-notch; it's his tips on not getting caught that leave something to be desired.
posted by griphus at 11:25 AM on December 11, 2013 [3 favorites]

mccarty.tim: "Prisoners actually asked Bernie Madoff for tips on investing."

That makes me think of the last scene in The Producers.
posted by octothorpe at 11:42 AM on December 11, 2013 [2 favorites]

it's his tips on not getting caught that leave something to be desired.

Actually there wasn't much Madoff could do to avoid getting caught; he spun up a Ponzi scheme and did not have the resources to spin it down. It's easy to speculate about how easy it would be to disappear into anonymity with a comfortable nest egg before it completely unraveled but that can be surprisingly hard for someone so high profile. It's very likely Madoff didn't have any contacts capable of arranging such an exit for him, or capable of finding such contacts without the danger of alerting someone who would start putting the pieces together.
posted by localroger at 5:23 PM on December 11, 2013

Holy shit!
1130 USD on Nov 30 (daily high)
790 USD on Dec 1 (daily low)
1125 USD on Dec 4 (daily high)
530 USD on Dec 6 (daily low)
995 USD on Dec 10 (daily high)

The volatility just keeps going.

If there was true two-way liquidity, this would be interesting, instead of just a trainwreck in progress (as a volatility trade).
posted by IAmBroom at 11:13 AM on December 12, 2013 [1 favorite]

I'm actually enoying reading the amateur technical analysis over at /r/bitcoinmarkets, because when the underlying asset has no underlying value, technical analysis is pretty much the only game in town. I really feel like people holding them for profit should be concerned that it can't hit the previous highs, even with all the recent good news.
posted by empath at 11:40 AM on December 12, 2013

Wow that subreddit is hilarious. Please, please, please, anyone reading this: do not gamble money on Bitcoin you can't afford to lose.
posted by Nelson at 3:24 PM on December 12, 2013

Yeah there was a terrible post about a guy who invested his (and his sisters) inheritance in bitcoin and lost everything.
posted by empath at 5:24 PM on December 12, 2013

Cameron Winklevoss did an IAmA on Reddit. He and his brother, famous for not working at Facebook, have been trying to set up a Bitcoin ETF. Sadly the IAmA is mostly just stupid, although there's one serious answer about Silk Road and a belief that a BitCoin could be worth more than $40,000 some day.

The Winklevoss ETF seems to have not gotten anywhere yet. But meanwhile SecondMarket is setting up a Bitcoin fund and recently announced they'd raised $65 million to buy Bitcoin.
posted by Nelson at 9:07 AM on December 15, 2013

Nelson: "...a belief that a BitCoin could be worth more than $40,000 some day."

There's belief that Obama may be a Muslim socialist. Doesn't mean much.

"The Winklevoss ETF seems to have not gotten anywhere yet. But meanwhile SecondMarket is setting up a Bitcoin fund and recently announced they'd raised $65 million to buy Bitcoin."

That would be interesting if it were publicly traded... Since it's not, I'm not sure what liquidity it provides. If it doesn't seriously increase liquidity for its shareholders, it's just another dollars-to-bitcoin market. From your 2nd link:

"Next year, it will allow people to sell shares of the Bitcoin Investment Trust in online auctions, and each sale will carry a 1.5% fee, said Mr. Silbert."

THAT sounds like you aren't even allowed to sell the shares yet: zero liquidity back to dollars.
posted by IAmBroom at 9:41 AM on December 15, 2013

Yeah, the SecondMarket thing looks like a private equity fund for big investors to buy Bitcoins. It's pretty similar to other investments they already offer so I imagine it seemed pretty straightforward for them to try.

The Winklevoss fund is trying to be a publicly traded ETF for consumer investors and is seeking SEC review. At best that will take months to get approved, more realistically years or never. The fact that one of the fund creators is now on the record saying "This ETF will be worth $40,000 / BTC" makes me think they are not terribly serious about succeeding in SEC review.
posted by Nelson at 10:05 AM on December 15, 2013 [1 favorite]

Yet again Bitcoin appears to have defied skeptics who predicted its immediate end.
posted by humanfont at 11:23 AM on December 15, 2013

It's also defying the boosters who said it'd hit 10K at Christmas when it surged past $1000.

The thing with bubbles is that you can't really know when they'll pop, and it's not always something that happens overnight.

I really don't think Bitcoin is "doomed," I just think its fans are largely overestimating its potential. It has fundamental qualities that make it less appealing than a credit card or debit card for most online and in-person transactions, and it shows in the way people buy and use bitcoin. The number of transactions and volume of money in those transactions (weighted to the BTC/USD exchange) show that even as the value rises and more and more people set up Bitcoin wallets, people just plain aren't spending Bitcoin.

If we want to accept bitcoin as a currency or a "commodity money" as some Bitcoiners are now calling it, it needs to move between users. The reason people take Paypal seriously isn't because of how much of a balance people keep in their Paypal accounts, it's because of how much money it moves.

Bitcoin does have uses, it's just that the legitimate ones are easily copied or already exist (see SquareCash), and the illegitimate ones probably aren't widespread enough to justify the current price, so I highly doubt Bitcoin can justify its current valuation on actual use.

Ideological hoarding, though, might create a higher bottom than people here expect. There's a lot of faithful goldbugs who keep buying precious metals through booms and busts. I'd honestly be surprised to see Bitcoin's price fall to double digits.
posted by mccarty.tim at 3:18 PM on December 15, 2013

As people keep pointing out, actually spending Bitcoin would be nuts because you'd have no way of knowing exactly what you just spent since prices fluctuate so wildly. It doesn't help that most people use the Magic The Gathering Online eXchange price despite MTGOX having a months-long waiting list (meaning that however much you think your MTGOX bitcoins are worth, good fucking luck getting it).
posted by Pope Guilty at 6:43 PM on December 15, 2013

Pope Guilty: "As people keep pointing out, actually spending Bitcoin would be nuts because you'd have no way of knowing exactly what you just spent since prices fluctuate so wildly."

Yeah, I guess an early online transaction with bitcoins was two pizzas delivered for 10,000 bitcoins - about $25 at the time. Now those 10,000 bitcoins are "worth" (if you kept them safe and could actually get them out of an exchange) roughly $8,600,000.

The most disturbing thing about that story: the pizzas were from Papa John's.
posted by bluecore at 12:07 AM on December 16, 2013 [3 favorites]

You know, I don't eat a lot of pizza these days, but if you want mass-market chain pizza I think Papa John's is the best of the bunch. Not as greasy as Pizza Hut or Domino's. Of course, I live in a town with several local shops so I'm spoiled in that way.
posted by Pope Guilty at 2:15 AM on December 16, 2013 [1 favorite]

Looks like today there was another flash crash. Within a few hours, culminating in some very active trading, BTC/USD went from 928 to 801, approximately a 14% drop. It has recovered a bit, but it looks like another day at the races.
posted by charlie don't surf at 8:16 AM on December 16, 2013

No, that's normal. It typically has a big dip or rise over the course of a day, making it very likely your savings in bitcoin will grow or shrink by 5-10% with no apparent reason. Further, Thursday and late Saturday/early Sunday tend to have routine dips, and nobody's quite sure why.

Theories include something to do with bank/wire schedules and a Bitcoin-using company using a trading robot to routinely cash out on a schedule.
posted by mccarty.tim at 8:21 AM on December 16, 2013

Has anyone seen a good analysis of Bitcoin volatility compared to national currencies and gold? A quick look turned up this article with this chart, showing Sep 2010 to Sep 2013. BTC vs USD has a 10%-50% volatility per 30 days compared to about 5% for EUR vs USD. No comparison to gold's volatility though, and I didn't verify that their volatility measure is really correct.

The middle blue graph here shows Rate of Change since September 2010. The main thing you see there is intense periods of volatility in May 2013 and recently.
posted by Nelson at 8:30 AM on December 16, 2013 [2 favorites]

The longer that bitcoin goes without hitting $1000+ again, the more likely that the speculators are going to cash out, imo. It's not going to go to 0 any time soon, especially with pump&dumpers like the Winklevii twins out there pushing it, but imo, it'll probably start to drift downwards.

When the easy money is gone in bitcoin, there's going to be tremendous incentive for programmers to create bitcoin alternatives to make some quick cash, as well as for institutions to create an alternative with fewer regulatory issues and less volatility.
posted by empath at 1:10 PM on December 16, 2013

That's Winkelvodes.
posted by Chrysostom at 1:33 PM on December 16, 2013

Not a bubble.
posted by empath at 7:31 PM on December 16, 2013 [1 favorite]

Out in the Open: Cyberpunk Builds Bitcoin Wallet That Even Apple Can’t Ban
posted by homunculus at 12:00 PM on December 17, 2013

Bitcoins in Space: Hacker to Fire Digital Currency Into Orbit
posted by homunculus at 12:01 PM on December 17, 2013

Imho, there is a lovely killer app for bitcoin-alike currencies : implementing unregulated markets. Want to fund a movie? IPO? Nah, Hollywood, Wall St., etc. steal all the money. Just sell shares as an altcoin that's better designed than bitcoin, or launch your own.
posted by jeffburdges at 3:05 PM on December 17, 2013

Down to about $500 now that Chinese exchanges are shutting down.
posted by empath at 12:29 AM on December 18, 2013 [1 favorite]

It hit about $455 before bouncing and seems to be "settling" around $525-540.
posted by mccarty.tim at 5:03 AM on December 18, 2013

China Says No To Bitcoins, Matthew Yglesias, Slate, 18 December 2013

The Chinese government announced that it's pulling the plug on what's thus far emerged as the most serious use of Bitcoins in the world—evading China's capital control regime.

posted by ob1quixote at 5:28 AM on December 18, 2013 [3 favorites]

Imho, there is a lovely killer app for bitcoin-alike currencies : implementing unregulated markets. Want to fund a movie? IPO? Nah, Hollywood, Wall St., etc. steal all the money. Just sell shares as an altcoin that's better designed than bitcoin, or launch your own.

That would be illegal in most of the developed world. You'd have to be located in somewhere really off the run.
posted by JPD at 6:21 AM on December 18, 2013

Charlie Stross: Why I want Bitcoin to die in a fire
posted by bluecore at 7:50 AM on December 18, 2013 [8 favorites]

Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography). - Stross

How is this different from any other currency?
posted by BrotherCaine at 9:10 AM on December 18, 2013 [1 favorite]

"Remember, it's just money."
posted by tonycpsu at 9:17 AM on December 18, 2013 [4 favorites]

BTC China Halts CNY Deposits, CNY-USD Spread Climbs to 30% as CNY Volume Drops

I like the charts at bitcoinwisdom.com if I want to easily spot the highs and lows in a big movement over time. It shows a peak at 990 on Dec 13 and then a drop to 455 today. It has recovered somewhat but holy crap, that's a 54% drop.

BTW I recently charted the earnings of my single GPU Mac mini mining. On July 1, I could mine about 0.0012BTC per day. Now I am mining about 0.000028 per day. I used to be able to mine .01BTC about every 9 days. Now at the current difficulty, that will take about 357 days. But the difficulty will continue increasing for the foreseeable future, so it could take years. Or forever.
posted by charlie don't surf at 9:35 AM on December 18, 2013

Bitcoin, Magical Thinking, and Political Ideology
posted by Nelson at 4:38 PM on December 18, 2013 [2 favorites]

That was a good article.

It would be ironic, but I wonder if part of the bitcoin price explosion was due to high demand for US Dollars in China. It seems that, although the limits are high for Chinese citizens, there are restrictions on how much money can be converted from RMB to USD and thus on how easy it is for foreigners to invest in China how much USD Chinese citizens can use for investment and to purchase things outside the country. Apparently China does this to try to prevent capital from leaving China. I could imagine that buying BTC on an exchange in China and selling them on an exchange in the US was a way around this, and taxes perhaps. Yang Rui is always complaining about the USD being the global reserve currency on CCTV "Dialogue." If China wants RMB to replace the dollar, I would think they would need to loosen these restrictions.

For foreigners, please pay special attention that the RMB is not a free-exchange currency. You can change USD to RMB freely in China but the reserve exchange (RMB to USD) is restricted. If you want to change the remaining RMB back to USD, do keep the exchange receipt with you. RMB to USD exchange is not accepted without your original receipt.
posted by Golden Eternity at 8:05 PM on December 18, 2013

Why [Charles Stross] want Bitcoin to die in a fire (via)

I want Bitcoin to die in a fire as well, but disagree about the reasons. I'll address his concerns :

"Mining BtC has a carbon footprint from hell", "Bitcoin mining software is now being distributed as malware", and "Bitcoin violates Gresham's law".

All true. Ain't too hard to fix though, so unimportant long term. If even one important nation took bitcoin's carbon footprint and/or electricity theft seriously, they could make their national currency, or a companion currency, provide all the benefits of bitcoin and more, quickly destroying bitcoin. Bitcoin & forks are merely a reality check for our corrupt central banking system.

"Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination and drugs and child pornography."

You argument loses credibility when you equate recreational drugs with assassination and child pornographers. We should've a right to responsibly engage in recreational drug use, while assassination and child pornography intrinsically involve victimization.

A priori, Bitcoin is far more traceable than cash. Yes, inexpensive transactions facilitate mix networks which facilitate money laundering, but that only raises the tracking costs. We should happily spend that money when tracking down assassins and child pornography. And doing so is realistic because such activities are so rare and laws against them are legitimate.

Recreational drugs are otoh ubiquitous, and laws against them are illegitimate, so all your drug arrests achieve is intimidation. Again Bitcoin acts merely as a reality check against illegitimate government power.

"Bitcoin is pretty much designed for tax evasion.

There is a crisis of legitimacy in taxation too specifically because taxes are insufficiently progressive. Income taxes were created to tax extreme wealth, but now they're regressive at any income scale their creators ever envisioned taxing. We could tax extremely wealthy individuals despite technical tools like Bitcoin because avoiding even a small risk of jail has more utility for them. And a progressive VAT that taxes large corporations more than small ones would achieve even more important social functions than individual income taxes. We should redistribute wealth to the poor from the extremely wealthy and corporation, rather than from the lower middle class anyways.

"The Gini coefficient of the Bitcoin economy is ghastly"

Amen brother! I wish for bitcoins death for exactly this reason. I've never observed a citation for Bitcoin's Gini coefficient growing worse, but Dorit Ron and Adi Shamir showed that almost all the BitCoins are owned by one group. Inequality doesn't get much worse than that.

We must accept that bitcoin-like currency as inevitable at least until governments kill it by copying it's properties, figure out the most progressive stance achievable with currency properties, and build a "progress" or "lefty coin" that implements them.

Example : Inflation is progressive in that it benefits borrowers/doers at the expense of investors/hoarders, but investors are pretty good at defeating it, and inflation creates poverty by increasing the cost of living more than wages. We might create a not-too-inflationary altcoin with account balances decline at a constant rate r. We'd implement this by, every time an account participated in a transaction, that account must declare 1-exp(-r t) coins destroyed. And miners receive new coins so the currency could be viewed as taxing all account balances to pay for the transaction costs of those actually using the currency for economic activity. Won't this provide the benefits of inflation without screwing up cost of living and wages?

In short, we should exploit tools as close to pure mathematics as bitcoin for our own progressive and left-wing political ends, not bemoan them. And bitcoin is thankfully open source.
posted by jeffburdges at 7:32 AM on December 19, 2013

Nelson: “Dogecoin”

As of 2013-12-20 07:00 -0500 UTC

Rank 9th out of 53
Market Cap $ 10,031,214
Price $ 0.001
Total Supply 9,989,101,743 DOGE
% Change (24h) +54.79 %

coinmarketcap.com
posted by ob1quixote at 4:07 AM on December 20, 2013

wow

such cap

so supply

much disrupt
posted by Pope Guilty at 7:26 AM on December 20, 2013 [5 favorites]

Tbh, I'm not sure why doge coin isn't completely valid as an alt coin. I mean sure, it's entire reason to exist is that it's funny, but people used gold for a currency for centuries because it was shiny.
posted by empath at 8:40 AM on December 20, 2013 [2 favorites]

Too bad doge coin didn't improve the protocol any, but the Gini coefficient is the most important metric. Is all the money concentrated in a few hands like with BTC and XRP? We should obviously cheer for doge coin if its beginning as a joke means the founders aren't running a pyramid scheme like the others.
posted by jeffburdges at 9:45 AM on December 20, 2013

Gold wasn't used just because it was shiny. It doesn't corrode, which is a pretty great property for a currency. It's in the sweet spot of being relatively rare but not extremely so. It's soft, so it's easy to mint (a little too soft, but then you just add other metals to).

AND it's shiny.
posted by Chrysostom at 10:23 AM on December 20, 2013 [1 favorite]

The Bitcoin Mines of Iceland
posted by Chrysostom at 6:31 AM on December 23, 2013 [1 favorite]

How the Federal Reserve and Bank of England are fueling massive global inequality
posted by jeffburdges at 7:50 AM on December 23, 2013

Chrysostom: Gold wasn't used just because it was shiny. It doesn't corrode, which is a pretty great property for a currency. It's in the sweet spot of being relatively rare but not extremely so. It's soft, so it's easy to mint (a little too soft, but then you just add other metals to).

I'll agree with everything but "rare but not extremely so". Aluminum is the only metal I can think of that was rarer, and since it oxidizes gray so quickly, has a high melting point, and doesn't stamp well (too hard), it's not really a good precious metal for coinage.

Gold is pretty much the standard for "rare metals".
posted by IAmBroom at 6:21 PM on December 23, 2013

Platinum is rarer than gold but wasn't known to Europeans until the mid 1700s.
posted by Mitheral at 10:44 PM on December 23, 2013 [1 favorite]

mathowie: "Earlier this week I read this incredible story of a Canadian trying to sell bitcoin and man, it did not sound good."

This just in: It's still easier for a camel to pass through the eye of a needle than it is to convert Bitcoins into dirty fiat money.
posted by tonycpsu at 6:46 PM on December 26, 2013 [2 favorites]

I've often wondered about the solvency of MtGox and its like. Unaudited, unregulated banks often meet with calamity.
posted by humanfont at 7:25 PM on December 26, 2013 [1 favorite]

Millions of Dogecoin stolen in Christmas hack

amaze

such theft

many hack
posted by grouse at 8:40 PM on December 26, 2013 [6 favorites]

Bitcoin Exchanges Shut Down in India After Government Warning
posted by Going To Maine at 1:31 PM on December 27, 2013

The Greatest Investment Opportunity Since Dogecoin

Dogecoin, a joke cryptocurrency based on an internet dog meme, exploded last week. Now it's Ponzicoin's turn.

I HAVE USED MY DEEP UNDERSTANDING OF AUSTRIAN ECONOMICS TO INVENT THE BEST OF ALL POSSIBLE CRYPTOCURRENCIES. IT IS CALLED PONZICOIN. WHAT MAKES IT BETTER THAN BITCOIN OR DOGECOIN OR ANY OTHER COIN IS THE QUESTION YOU ARE WONDERING AND NOW I WILL TELL YOU FREE OF CHARGE. PONZICOIN HAS THE MOST LIMITED SUPPLY POSSIBLE AND THE MOST SECURE LOCATION POSSIBLE. AT ANY TIME THERE IS AT MOST ONE PONZICOIN AND IT ALWAYS STAYS WITH ME. BUT IT IS INFINITELY DIVISIBLE SO YOU CAN BUY AS SMALL A PART AS YOU LIKE AND I WILL SEND YOU A CODE TO VERIFY YOUR HOLDING.

posted by tonycpsu at 10:40 AM on December 29, 2013 [4 favorites]

humanfont: I've often wondered about the solvency of MtGox and its like. Unaudited, unregulated banks often meet with calamity.

That's crazy talk. What could be more secure?
posted by IAmBroom at 12:55 PM on December 29, 2013

Well the box of well preserved first gen Magic The Gathering cards I found stashed on my bookshelf untouched for more than a decade seems to have been a successful long term investment.
posted by humanfont at 1:11 PM on December 29, 2013 [1 favorite]

The Greatest Investment Opportunity Since Dogecoin

DISCLAIMER: I possess approx. $0.25 DOGE, conflict of interest.

I preferred Scientology propaganda.
posted by save alive nothing that breatheth at 3:56 PM on December 29, 2013

Screw Bitcoin and Dogecoin, There’s a Kanye West Themed Cryptocurrency On The Way
posted by tonycpsu at 9:12 PM on January 5, 2014 [1 favorite]

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