Adderall said:Ah, so that's called arbitrage. But how else one would extract wealth from bitcoin trading other than arbitrage, though?
russ_watters said:Isn't that partly what undid MtGox?
“The site shows the coins, but it indicates it has no real meaning with respect to claims,” said Aaron G., an investor who did not want his last name to be used. His balance indicates about 464 bitcoins (roughly $286,700 according to average bitcoin prices on other exchanges).
“So, just numbers on a screen—just as ‘real’ as they were before Gox went down,” he said in an email interview.
But beneath it all, some say, Mt. Gox was a disaster in waiting. Last year, a Tokyo-based software developer sat down in Gox’s first-floor meeting room to talk about working for the company. “I thought it was going to be really awesome,” says the developer, who also spoke on condition of anonymity. Soon, however, there were some serious red flags.
Mt. Gox, he says, didn’t use any type of version control software — a standard tool in any professional software development environment. This meant that any coder could accidentally overwrite a colleague’s code if they happened to be working on the same file. According to this developer, the world’s largest bitcoin exchange had only recently introduced a test environment, meaning that, previously, untested software changes were pushed out to the exchanges customers — not the kind of thing you’d see on a professionally run financial services website. And, he says, there was only one person who could approve changes to the site’s source code: Mark Karpeles. That meant that some bug fixes — even security fixes — could languish for weeks, waiting for Karpeles to get to the code. “The source code was a complete mess,” says one insider.
By the fall of 2013, Mt. Gox’s business was also a mess. Federal agents had seized $5 million from the company’s U.S. bank account, because the company had not registered with the government as a money transmitter, and Mt. Gox was being sued for $75 million by a former business partner called CoinLab. U.S. customers complained of months-long delays withdrawing dollars from the exchange, and Mt. Gox had tumbled from the world’s number one bitcoin exchange to position number three.
[...]
But Karpeles was obsessed with a new project: The Bitcoin Cafe.
[...]
One insider says that Mt. Gox spent the equivalent of $1 million on the cafe venture, renovating Mt. Gox’s office building to Karepeles’ specifications. At a time when Gox’s business was falling apart, this insider says, the project was a major distraction. “[Karpeles] was super-proud of being able to use his hacked cash register with the code he wrote,” this insider says.
[...]
According to a leaked Mt. Gox document that hit the web last week, hackers had been skimming money from the company for years.
[...]
After Mt. Gox was hacked for the first time in summer of 2011...
Then the premise is restated later:A purely peer-to-peer version of electronic cash would allow online
payments to be sent directly from one party to another without going through a
financial institution.
Needed? The technology for making a cryptocurrency is not all that complicated, but the questions of whether people want a peer-to-peer currency and how it could function in a real economy aren't addressed at all. The economic system is the big issue here, not the technology (though the inclusion of mining in the technology is part of what makes me suspicious). This starting premise is an hypothesis itself that needs to be proven. Bitcoin enabled a test of it and the result is clearly a total failure:What is needed is an electronic payment system based on cryptographic proof instead of trust,
allowing any two willing parties to transact directly with each other without the need for a trusted
third party.
Doesn't that mean that a worm that siezes control of a sufficiently large number of computers could completely destroy Bitcoin? Just as bad, doesn't it mean that Bitcoin users could band together and "overthrow" it? What fraction of Bitcoin users are angry MtGox customers?The system is secure as long as honest nodes collectively control more CPU power than any
cooperating group of attacker nodes.
russ_waters said:Needed? The technology for making a cryptocurrency is not all that complicated...
phinds said:No, the way to have made money on bitcoin, as on any cabbage patch doll fad is to have bought early and sold after a big run-up. Arbitrage is about very modest gains but lots of them. If you don't understand it, look it up.
The problem of course is knowing that it's still early enough to buy in and then getting out when you have made a profit, not hanging on until the crash.
Adderall said:I believe I understand the difference. Both consist in extracting wealth from trades without adding anything to, well, ANYTHING. I find fad-profiteering to be a bit more nakedly avaricious than arbitrage, but I find both to be morally murky.
...
In real life, how wealth is distributed matters greatly (I understand the difference between wealth and income) and whether you engage in fad-profiteering or arbitrage, I don't see how this ends well for anyone but the successful (fad-profiteering is still worse than arbitrage, I think).
No, but if someone is stupid or not all there mentally it makes me feel bad to take advantage of them.phinds said:Yes, this is how the real world works. No one is forced to make any of the bets we are talking about. I think your moral outraged is misplaced.
russ_watters said:No, but if someone is stupid or not all there mentally it makes me feel bad to take advantage of them.
AlephZero said:Memo to MtGox - keep searching down the back of the sofa... http://www.bbc.co.uk/news/technology-26677291
Was it really 'lost'?Large amounts of bitcoins previously handled by Mt Gox, which have lain dormant for years, have started moving on the block chain.
phinds said:Of course you COULD argue that anyone who speculates in cabbage patch dolls or bitcoins IS "stupid or not all there mentally" :tongue:
Adderall said:I know you were joking but I kind of non-ironically agree with russ_watters about money and stupid people. That literally is what online poker is - taking money from stupid people. Even at low stakes, it just feels weird.
I 100% agree these bets are risky and not guaranteed for any outcome. I guess I feel that people can't be trusted to be safe or to effectively manage their own bankrolls. The US gov't doesn't trust people in every day life, considering seat belt & speed limit laws. I would be comfortable letting people blow their wad on inane nonsense like cabbage patch dolls if they at least had to undergo some sort of psych evaluation first.
TylerH said:What happened to self ownership? Is it not vain to assume that your view that investment in something is insane must be the correct view? By what objective reasoning could you justify subjecting everyone of the opposing view to some arbitrary standard to act on their view?
phinds said:Yes, this is how the real world works. No one is forced to make any of the bets we are talking about. I think your moral outraged is misplaced.
Yes, but what if you had made a ton of money off of Beanie Babies? How would you feel about it today? I was too young at the time to have done it, but I remember talking to a friend's mom and being dumbfounded by her belief in what she was doing. It made an impression on me.TylerH said:What happened to self ownership? Is it not vain to assume that your view that investment in something is insane must be the correct view?
Adderall said:
“Count Four, which charges Mr. Ulbricht with participating in a money laundering conspiracy…must be dismissed because the allegation lacks an essential element: that the ‘financial transactions’ alleged involved ‘monetary instruments,’” the motion reads. “Bitcoins, the exclusive means of payment on Silk Road, do not qualify as ‘monetary instruments,’ and therefore cannot serve as the basis for a money laundering violation.”