Silk Road admins: Sorry for the hack, we're sorting out refunds The masterminds of the SilkRoad 2.0 underground market have vowed to pay back all of the funds lost in a recent Bitcoin hack. Administrator Defcon said that the team behind the darknet market would be donating all commissions it gathers on transactions towards reimbursing funds which were lifted from its escrow account by …
Indeed it is, so much so that there are many people who are absolutely convinced that it is not.
To those people I have two observations to make :
A Bitcoin could initially be fully minted in just minutes. Now it is a lottery where a number of BitCoins are "created" and their attribution depends on who finishes the last block first. In order to finish first, there are now companies that build specialized machines for burning through a block in minimal time, and of course, there are shady merchants who fleece the unwary in various ways with gay abandon.
On top of that, the "value" of a BitCoin varies from day to day by over a percent point sometimes by as much as 10%. It is not stable, not reliable and can be completely buggered by malice or a simple mistake.
So you can go "mint" your BitCoins. I wish you lots of fun and success.
Meanwhile, I will keep my day job which pays the bills and a bit more.
How is hyper-inflation avoided if a "coin" can be pulled out of thin air
The more of them there are, the harder it is to mint one, and there is a hard limit on how many will ever be made (which we'll hit in 2041, provided the system survives that long). Add to that the fact that a lot of bitcoin vanishes due to lost or confiscated wallets, and you've got your answer.
In fact the value of the things has soared ever since the US legislature decided they are, in fact, legal. When I first looked at them they were worth $0.20 and relatively easy to mine (my math at the time said I could reasonably expect to get one every month solo mining - if the pools were around yet I didn't know about them). I gave them a pass, thinking that they'd never be worth the effort. (Yes, I'm kicking myself now.) Today they're worth $625, and that's AFTER taking a huge nosedive in value thanks to Mt. Gox's antics.
No, Bitcoin is not a ponzi scheme. Neither was the tulip bulb mania of the 1600s. You could make the case that both are speculative bubbles destined to crash, but only a complete ignoramus whose mouth is too fast for his brain would describe either of them as being a ponzi scheme.
quote: "On top of that, the "value" of a BitCoin varies from day to day by over a percent point sometimes by as much as 10%. It is not stable, not reliable and can be completely buggered by malice or a simple mistake."
As opposed to shares of publicly traded companies, which are limited in number, can vary by >30% over the course of a day due to one negative news item, and can be completely buggered by malice or a simple mistake (like a single trader making one wrong keypress)?
You continue avoiding BitCoin, I'll continue avoiding stock exchanges for the same reasons, even though I work for a listed company.
Shit, I've just realised that my day job (that pays the bills) is inextricably linked to an unstable, unreliable item that is vulnerable to malice or a simple mistake. Arses :(
Crypto currency is a gamble (albeit an educated one) like any other. It's like investing in things at the stock exchange. You may never get rich working your 9-5 job. But if you invest in crypto currency and are good at working the system a lot of money can be made from it (or lost obviously).
Crypto currency is a gamble
Not much of a gamble if you do it the way I have been. I haven't bought anything for mining. I'm just using what I have and, currently, doing a hair better than breakeven. Actually probably a lot better than breakeven when you consider my computers never got shut down before I started mining. If (and I realize that's a big if) the value of them gets back up to what it was in December I'll have made a tidy profit with basically 0 investment. If they tank, then I've paid another $10 on my electric bill. If they skyrocket like they did last year I might just have enough to buy a better system capable of mining faster.
Now those guys buying $5000 ASICs, THAT'S a gamble. I did the math on that once. By the time you actually get your hands on an ASIC you preordered the difficulty of Bitcoin will have gone up so much that it'll take you years before you're making a profit if the pattern for the ones currently available holds.
Nothing Ponzi about it.
It's a business pledging to refund customers for a loss of company assets due to theft. AFAICT they're acting just like any regular small business startup would do if they lost assets in this manner - either make good as best they can, as soon as they can; or go bust.
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While this is all very amusing, I can't help but point out that the last alleged DPR was sitting on about $28 meeelion without stealing from anyone. This was apart from what the Feds took from Silk Road itself.
If it is a Ponzi scheme, why on earth would they cash out so early with so little compared to what this market is worth? Didn't the pot sellers of Colorado make more than the stolen amount in the first week? And Silk Road as I'm sure you are aware, sells a lot more than pot to people all over the world.
They fucked up and lost a shitload of other peoples drug money, isn't that a juicy enough story already?
Yes, but I know that they know that I know that they know that I know, so if they know that I know that they know if I ask then perhaps they know that I know that they know that I have a suspicion of where they put the money. I know that they know that I know that they have it.
And yes, they know that I know that I need a tinfoil hat.
"many sets of 0s and 1s that, for some unknown reason, some people appear to attach a value to"
That's a pretty good description of my bank balance, or indeed any piece of information that's capable of being stored in a digital form.
The music on my harddrive is made up of ones and zeros and I value that, ditto the games I've bought etc.
Information has value, how much a particular bit of information is worth is purely dependant on how much someone is willing to give you for it.
"Information has value, how much a particular bit of information is worth is purely dependant on how much someone is willing to give you for it" - generally true, except in those cases when a certain organization decides someone came into possession of their entertainment-related bits of information without permission, in which case the alleged worth is apparently calculated as the factorial of actual worth.
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But people often point out that money is not real money either, in that you can't jog off to the bank and get a real pound of silver for your pound note. But more importantly, you can in fact buy normal legal products with bitcoins. For instance a company named "Gyft" takes bitcoins in exchange for store credit various businesses including Amazon. It's not quite as simple as paying with a credit card, but too bad either.
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Only someone in a pyramid scheme would say Bitcoin it not one.
Unless other mugs buy them they rapidly become worthless so of course anyone who has one is going to encourage other people to get them as well.
Real money is worth something because in the end of the day the government will arrest/shoot you if you don't accept the currency. No one will shoot you for not using bitcoin making them in the end valueless
"Overvaluation is NOT the same as a pyramid scheme."
Indeed it is not. What makes BitCoin like a Ponzi scheme is that people are currently putting money in because doing so encourages others to put money in and the first party hopes to cash out while their ahead with their gains having come from the others buying in after them. That's where the image of a Pyramid comes from. A small number at the top (the initial investors), followed by a larger number of secondary investors, followed by a larger number of tertiary investors and so forth with ever larger waves whilst those at each higher, smaller level find the value of what they already have increasing. So yes, it's very much like a Ponzi or Pyramid scheme. Not because of overvaluation (which you seem to think is the argument), but because of this migration of money from the newcomers to those earlier. The earlier you got in, the easier Bitcoins were to mine, and this reduction in generative ability as more and more people come in is very much a Ponzi / Pyramid scheme because it's not accompanied by a proportional reduction in investment.
The only saving graces that affords some differentiation from a pyramid scheme is that (a) many of the early players do not have the motivation of 'build it up and get out before the collapse'. They want to genuinely see BitCoin establish itself. And (b), there's a slim chance it actually might. However, there is a massive number of people who are treating it exactly like a pyramid scheme buying in now whilst the value is increasing and hoping to cash out ahead of the majority. The more people think and behave like that, the more it becomes a genuine pyramid scheme because that's exactly how it will behave. And is currently behaving.
Whether the number of people acting like that is, as a proportion, high enough to overwhelm the good intentions of others, I have no hard numbers. And it's a definition with no hard lines anyway. However, reading online and forums, my strong impression is that the largest wave of people in BitCoin at the moment are the get in and cash out ahead of everyone else after you've gained enough from the increasing value of them. Which means pyramid or Ponzi scheme to me - she who leaves the restaurant last, pays the bill.
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