South Sea Bubble
Bitcoin et al
Farcebook (it will come)
Beginning to get the picture?
Embattled Bitcoin exchange MtGox has taken steps to withdraw itself from the wider Bitcoin community, having resigned its seat on the Bitcoin Foundation board and reduced its presence in social media. "Effective immediately, Mt. Gox has submitted their resignation from the board of directors," the Bitcoin Foundation's Jon …
Oh dear. Looks like Mt.Gox is no more. The site has disappeared and the cat appears to be out of the bag on their long-term hack / losses. Or possibly internal scam, but that might just be the ex EVE player in me talking...
I think I disagree with you on Facebook though. They make substantial profits and have the sign ups of the parents of all the teenagers that may be thiking of leaving it. The parents could well stick around. So they might well end up with 20 years of life.
Of course, the valuation might go down. $100 billion for a company that's making single-digit billion profits is somewhat over the top. I can't see it growing all that much. But the only thing likely to kill it is Zuckerberg going nuts, and bankrupting it buying other companies. He's un-sackable, as with only 20% of the shares, he's got over 50% of the voting stock. I suppose that's entirely possible. He doesn't look like good CEO material to me.
I'm not sure it's fair to compare BitCoin itself to other bubble investments of the past. prior to the hoo-ha with MtGox, the price had actually been remarkably stable for a couple of months, rather than the rapid growth and subsequent crash of bubbles. Compare this to some fiat currencies (Argentina's Peso springs to mind).
MtGox itself is clearly doomed - even if they do resume withdrawals, their reputation is now fatally damaged. If withdrawals do resume, we may see a burst of activity as people pick up bitcoins cheap and imemdiately withdraw them, but after that, nobody will touch it with a barge-pole.
Facebook may be overvalued, but it does have an income - albeit only really from advertising, this will continue to bring in revenue as long as people use the site; the value of its shares may drop as people get bored of it, but they're hardly going to crash.
Well yes, sooner or later everything will come to an end (to clarify, Mt Gox in this news story, not Bitcoin). I'm not sure that's useful though, without knowing whether that will happen tomorrow or the heat death of the Universe. And The Register will one day end too, but you're still here using it in the meantime.
3 months ago on another form they had a really busy get-rich-quick bitcoin forum. Seeing how very few people are capable of understanding the intricacies of the protocol, there were a lot of very noisy people pumping BTC with exactly the kind of 'reasons' they did for gold 2 years ago. They have all fine somewhat quieter recently.
Funnily enough I see BTC fills a certain space in the market, and follow its progress, but the ffact is that you cannot any longer mine them without dedicated and expensive hardware meaning any rate changes are down to speculators, resulting in hype and instability. That isn't good for a currency. Maybe after the frenzied hype settles there will be something worthwhile left over, but right now there's too much noise to signal.
MtGox needs to go down the pan, it's been poorly run. Bitcoin really needs a decent, secure and well run exchange and less of the amateurs who don't quite grasp how the system works.
Fortunately people can store their bitcoins locally, personally I hold none on exchanges and only usually sell via localbitcoins.
"Last Thursday, the Tokyo, Japan–based company said that it had been forced to relocate to its previous office space in the Shibuya special ward to escape 'the security problems inherent in having one's address known to organized crime figures, drug lords, and terrorist organizations, all capable of hiring and dispatching any number of psychopathic enforcers.'"
Security by obscurity. Sometimes the best security there is. Live it every day.
"The Tokyo, Japan–based company said..."
Side issue, but why is Mt. Gox based in Japan anyway, when according to Wikipedia, both the original owner ("Jed McCaleb") and the current owner ("Mark Karpeles") have Western-sounding names?
I know it's possible that *both* are Westerners already living in Japan and/or (part-)Japanese, but it seems unusual and I haven't come across much on Mt. Gox's background, at least not that goes into any detail on that point.
This is the sort of pattern you'd see in various Latin American and African countries during the 1970s:
* High living. rich, influential leaders suddenly brought down and deposed.
* Massive devaluations.
* A smoldering pile where once was potential and wealth.
History is just the study of patterns of human behaviour.
"A thief doesn't benefit from a theft that results in a drop in the value of the asset."
If the value of some stolen Bitcoins drops from $10m to $1m (or whatever), from a purely selfish point-of-view the theft is probably still worth their time, though- assuming they're behaving in a purely rational manner- I assume they'd want to avoid or minimise it if possible.
"Other vested interests - banks, governments - do."
Unless, of course, one or more of those vested interests *was* behind the theft. This is obviously pure speculation on my part- I literally thought about it after reading your post- but it's known that (i) the American NSA has spied on others to further US government and establishment business interests, and (ii) they have vast and deep expertise in security and cryptographic standards (regardless of whether or not they were responsible for intentionally introducing exploitable weaknesses into them).
Mt Gox started out as a trading card exchange (MT GOX = "Magic The Gathering Online eXchange", remember), and they're still not Goldman Sachs, so one suspects that even if their security has been massively beefed up since their axe-wielding-dwarf-stats-card-exchange days, it's still not going to have kept up with their increase in importance, i.e. it'll still be easy- if not a knife through butter- for the NSA to subvert. Not that I'm saying that the NSA did it, just that if they wanted to, it would be relatively easy and they *do* have the motive.
If that were the case, the value of the Bitcoins themselves would be a relatively small factor compared to the damage that could be done to Bitcoin and- by extension- the reputation of cryptocurrencies in general.
A thief doesn't benefit from a theft that results in a drop in the value of the asset.
They are still better off than they were, and it depends how long they are prepared to sit on their stash and what their expectation of value being restored is.
I am guessing these aren't 'lob a brick through the window' knuckle-dragging thieves so we cannot tell what their strategy is. Perhaps they are simply looking to force short-term value drops to facilitate cheaper investments with higher profits later?
They possibly are but at the same time it would be incredibly difficult to offload all that cash and exit with money without arousing suspicion. Exchanges match buy orders to sell orders. A thief selling a mountain of bitcoins is going to collapse the price just by selling, which means they would have to do it over a very long period of time.
The second problem is that bitcoin has a transaction chain. Somewhere in that chain it has a transaction that corresponds to the fraudulent withdrawals from Mtgox. It might be possible to launder a small amount of bitcoin through a laundering service (i.e. I give bitcoins A to the laundry and it gives me bitcoins A' from a separate pile, thus breaking my connection to the theft), but we're talking of a massive heist. It would be impossible to launder. Statistical analysis of who is trying to sell all those bitcoins would probably point straight at the perpetrator. Transactions are also distributed over P2P.
I suppose its even possible that as transactions of the theft fan outwards from a particular node or nodes in the network that someone with sufficient nodes of their own could figure out where those transactions originated from.
Think of it this way:
There is a finite amount of Bitcoins, 21 million or so. 744,408 bitcoins is 3,5% of all Bitcoins that will ever be available. 3,5%! The thief can sit on his loot for years and eventually turn those Bitcoins to something that is much more valuable then. Unless the bubble bursts that is...
Besides, the pro-Bitcoiners have told that all transactions can be tracked (like sequential bills) and thus the thief would immediately be caught if (s)he'd use those Bitcoins. Or was that just BS from their foaming mouths?
"A thief doesn't benefit from a theft that results in a drop in the value of the asset."
If that were true metal thieves wouldn't cause tens of millions of pounds cost of travel disruption for the sake of a hundred pounds' worth of scrap metal stolen from a railway signal box or duct. Seems like you know nothing about the criminal mindset.
Call me a sceptic, but I'm not buying that. They don't actually display it- had it been that obvious, people would expect them to have noticed and removed it. However, it's still "inadvertantly" showing in the source code *on its own*, and the fact that it's still there some time after you made your comment smacks of something calculated to "accidentally slip through" and be seen, but in a reasonably plausible manner.
What their motives are for wanting people to believe this "secret" they... oops!... "let slip" is open to question.
Not any more... 16:08 25/2/14
Dear MtGox Customers,
In the event of recent news reports and the potential repercussions on MtGox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.
Anyone with sense has seen that MtGox were quick to take your coins but slow to give them back, and this didn't just start happening yesterday, think over a year. It's also speculated that much of the losses (theft?) happened in 2011, and it's been a game of waiting for the house of cards to fall since then.
Yes we all know that a BTC really isn't worth $1000+, but it may be worth something in the grand scheme of things, and surely was a splendid way to sell a graphics card upgrade.
Unfortunately at the current price of >£300 for a BTC, even mining alternate currencies is only going to make you pennies over the cost of the electricity so miner = off :-(
Just die already MtGox
Anyone else find these repeated implosions of bitcoin banks reminiscent of Eve Online player-run banks?
It's been a few years since I played, but every single bank in the game eventually turned into a scam (dozens that lost some huge amounts of currency and many more smaller ones). Every single one.
Even those that were plausibly not founded with anything other than honest dealings as the goal. Sometimes the temptation grew to be too much for an individual. Other times success meant too much work for the original people necessitating eventually taking on others who turned out to be of lesser character.
I don't see any reason to think that every single Bitcoin bank would have any different ending than every single Eve bank.
Surely one of the important points of BitCoin is that you don't need banks - if you keep your coins in your wallet, you are in charge of their security. If you put them in a bank, you are essentially trusting stranger not to steal them.
MtGox is not, in any case, a bank - it is nominally an exchange, although it is starting to look like they have not been exactly careful with the assets that are supposed to have been holding onto. Anyone with any sense would have them hold their coins for exactly the amount fo time it takes to sell them for currency - if buying them, then the sensible would withdraw them pronto.
I hate to side with various governments on this - but BitCoin is in need of some regulation in this regard. Those operating exhanges should be expected to provide a certain amount of transparency and accounting - to prove they are holding the funds they say they are. I believe that there are various things built into the block chain that provide an audit of all transactions - exhanges and escrow services need to be able to provide details of which of these transactions are theirs, and with whom they are transacted.
The difference with EVE online is that the scams were considered completely legitimate in the game world since they didn't violate the rules of the game or use exploits.
Somehow I doubt applies to these real world scams. When the proprietors of Mtgox are caught they'll face the music. Not that it will help any of those people who "invested" in this exchange.
Bitcoin was never much more than a crowd sourced ponzi from the beginning. Early adopters who'd mined out the easy money hyped it up to attract new investors and the exited with hard cash. Eventually the speculation bubble would burst and the cycle would repeat. I expect this latest collapse will be a tad harder to recover from than previously.
Wait, Bitcoin is a business? Lets see, some geek, (me for example :^=) generate some coins (a crypt to-code), then some guy will come and give me £900 for that doing, so they can hold it in the hopes that it raise in prize, well I'm glad I found the sucker to give me the £900 in the first place... and this is not a scam? And wait, it get's better, I can put a server in the middle, set up an exchange and make it look like there is hundred of transactions? In the fist place, most of those original transactions occurred in a well device scheme to make it look like there was a supply and demand shortage, a good way to get more suckers to pony up the £900 the thing was selling for, and those that did get in to it, only find out how hard it is to sell your coin after you gave it to some Joe Blow in the first place... nah, that is a legitimate business, what was I thinking to call it a scam...
It's like back in the day, when people would buy these shinny rocks, and hold onto them with the hope that they would rise in value. Like seriuosly, i pulled this rock out of the ground, and some dude gave me like $1500 for an oz of it! Is he crazy? Its just a rock! And now some guys has setup an exchange for these rocks, and people buy and sell them for profit all the time. What a crazy world we live in.
I am not an economist, but aren't _most_ currencies effectively virtual these days? Control mechanisms vary, but in most (all?) cases, that colored sheet of stuff that you exchange for goods and services doesn't actually correlate to anything other than blind faith.
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