What are your thoughts on BitCoin?

[Antilogic]

Well from what I understand from the WIRED article, basically this heist involves changing some numbers around to make it look like the transaction never happened, so that instead the transaction happened with the thief rather than the real owner. Since from what I understand the way "bitcoins" are recorded is more the record of a transaction rather than some sort of virtual number of dollars sitting on a hard drive.

Also, apparently setting up a proper accounting method to prevent this type of heist was trivial, and Mt. Gox just never got around to doing it. The main dude over there is this fairly interesting, out of touch guy who is either incredibly naive and criminally negligent, or, is the most cunning thief of a half billion dollars I have ever seen.

It's apparently not just Mt. Gox, but now multiple bitcoin exchanges are reporting losses and thefts. Wonder if it's the same guys.

Libertarian Dunning-Krugers have their new buttgold, lol lol lol lol lol.



http://www.forbes.com/sites/jasperh...erican-tribe-launches-its-own-cryptocurrency/
http://www.coindesk.com/mazacoin-sovereign-altcoin-native-americans/

Not again. Now we have to think up of new nicknames.

 

[Algeroth]

It's apparently not just Mt. Gox, but now multiple bitcoin exchanges are reporting losses and thefts. Wonder if it's the same guys.

Could be, but the trick was so basic that existence of multiple independent groups is possibility. As well as last minute copycat thefts when this started leaking out.

Not again. Now we have to think up of new nicknames.

But, but I want to hang out with other cool kids and call others Dunning-Krugers without having any knowledge about the subject whatsoever.

Buttgold. Haha.

 

[Cutlass]

The Nakamoto chase is a sideshow: Here's the real story on bitcoins

By Michael Hiltzik

March 7, 2014, 12:35 p.m.

Bitcoin fanciers should count themselves lucky that the entire world press has become obsessed with the cabaret over whether a 64-year-old Temple City software engineer is the Satoshi Nakamoto, the fabled mysterious/pseudonymous inventor/inventors of bitcoins.

That's because the pursuit of the corporeal Mr. Nakamoto has distracted everyone's attention from the real problems with bitcoins, which erupted last month with the collapse of the Mt. Gox bitcoin exchange--at one time the largest bitcoin exchange in the world--and have only continued to look worse.

A couple of new analyses shed more light on the Mt. Gox failure, and point up how it illustrates the fundamental problems with the bitcoin system. That system is based on distributed verification, rather than central management, and that's exactly its problem.

In a piece in Bitcoin magazine, Ken Griffith provides some shocking context for the Mt. Gox affair. "MtGox is not alone," he writes. "Forty-five percent of Bitcoin exchanges to date have failed, in most cases with their customers’ money. The digital currency industry’s track record on fiduciary responsibility is abysmal."

Griffith's source for the figure, a paper by two computer scientists at SMU and Carnegie Mellon, observes that because of bitcoin's growing popularity the system has been "repeatedly targeted by fraudsters." What makes bitcoin accounts especially inviting to wrongdoers, they say, is that bitcoin transactions are irrevocable--even fraudulent ones. That makes them different from credit cards and electronic transfers, which can be unwound if they're found to be improper. "Fraudsters prefer irrevocable payments, since victims usually only identify fraud after transactions have taken place."

The biggest risk for bitcoin owners, the authors say, is in their dealings with intermediaries--like Mt. Gox.

Or in the words of the indispensable Izabella Kaminska of the Financial Times: "Who’d have thought that there might be an incentive for operators in a totally unregulated market to take people’s assets and run?"

Over at the website Hacking, Distributed, Cornell computer scientist Emin Gun Sirer takes a closer look at what might or might not have happened to bring Mt. Gox down. Sirer's thesis is that the entire bitcoin system is build on a foundation of sand -- bad technologies rife with technical problems and vulnerable to attacks "from insiders and out."

"What Nigerian scams are to your grandfather, Bitcoin exchanges are to the 20-30 semi-tech-savvy libertarian demographic," he warns.

Sirer walks us through every excuse and explanation Mt. Gox or its defenders have issued over the last few weeks to explain its apparent loss of some $400 million in bitcoins, mostly entrusted to the firm by customers. He doubts the loss is due to "transaction malleability," a known bug that might have allowed attackers to fool Mt. Gox into double-paying them. He's no more impressed by the notion that Mt. Gox might have lost the digital keys that give it access to its own accounts, or that hackers or the U.S. government are behind the losses.

"Chances are that this is a simple case of theft, involving at least one insider," he concludes. That points again to the crummy technical underpinnings of the entire bitcoin system, which have been disregarded by bitcoin fans who don't understand it or don't think it's important.

"The exchanges are based on layers upon layers of bad software, run by shady characters," he writes. "The Bitcoin masses, judging by their behavior on forums, have no actual interest in science, technology or even objective reality when it interferes with their market position. They believe that holding a Bitcoin somehow makes them an active participant in a bold new future, even as they passively get fleeced in the bolder current present."

He believes that there is a place for crypocurrencies like bitcoin--in fact, Ben Bernanke and many other current or former central bankers agree--but a sustainable model won't look like bitcoin. The one good thing about the collapse of Mt. Gox, he concludes, is that if you can prove your loss to the IRS, it's tax-deductible.

Reach me at @hiltzikm on Twitter, Facebook, Google+ or by email.

http://www.latimes.com/business/hil...-chase-20140307,0,7591905.story#axzz2vLsbJb4F

 

[Kaitzilla]

"Chances are that this is a simple case of theft, involving at least one insider," he concludes. That points again to the crummy technical underpinnings of the entire bitcoin system, which have been disregarded by bitcoin fans who don't understand it or don't think it's important.

Hah!

So there was likely an insider at Mt. Gox helping steal the $400 million over the last few years.

It was such a small business though.
Who is driving Ferraris that shouldn't be driving them?


Not terribly hard to understand.
"Boss, we found some security flaws that we need fixed, we need your permission"
"Bah, I'll fix it myself in a few weeks, don't touch anything"
"Grr, it makes me so angry he doesn't even care. Hey, wait a minute..."




Also, are there any forums heros that can go into super technical detail on what Bitcoin actually is and how it is transacted?

I like analogies as much as the next person, but there is so much drama involved now I wonder myself if the whole thing isn't fundamentally built on sand.

 

[dutchfire]

The Nakamoto chase is a sideshow: Here's the real story on bitcoins



http://www.latimes.com/business/hil...-chase-20140307,0,7591905.story#axzz2vLsbJb4F

If this guy was living in the 1800s, he'd argue for abolishing banking.

 

[illram]

Wait some people are saying the US government did it? Is there some sort of equation where time = x and as x increases, the likelihood of the CIA being blamed for unexplained event y grows exponentially larger?

 

[Dachs]

Wait some people are saying the US government did it? Is there some sort of equation where time = x and as x increases, the likelihood of the CIA being blamed for unexplained event y grows exponentially larger?

We're talking about a community made up in very large part by loony libertarians. Of course they think the government is behind it; it's easier than accepting that their own system is deeply flawed.

 

[Narz]

My thoughts are I wished I'd bought it when I first heard about it at about $60 and sold at $1,000.

 

[TheLastOne36]

My thoughts are I wished I'd bought it when I first heard about it at about $60 and sold at $1,000.

Yah I remember hearing about it early on too, and being unwilling to invest because I believed it to be a bubble at $80.

 

[Antilogic]

From a hindsight perspective, I think it is better to have recognized it was a bubble. You are never going to be able to reliably predict when bubbles will pop unless you have some mad inside information.



EDIT: Although, even if you realized it was a bubble and wanted to sell, apparently these exchanges were not carrying out transactions for cash for months--so even if you put in a sell order at the correct time, it might not have been executed before the crash.

 

[Cutlass]

Bubbles are always problematical to identify at the time they are going on. Some people will call a bubble, but others won't agree. There's no way to be certain until it's over. And, in any case, there's nothing that really can be done about it either way.

 

[Cutlass]

Bitcoin's deflation problem
Apr 3rd 2014, 9:30 by R.A. | LONDON

Timekeeper

TWO weeks ago we published a Free exchange column examining whether Bitcoin could be considered a true money, and if not, why not. Mike Hearn, one of Bitcoin's most prominent software developers, responded to the column somewhat dismissively. I wrote an e-mail response to Mr Hearn, the gist of which I will reproduce here. He makes two broad criticisms. The first is that we have lazily repeated the argument that deflation will kill Bitcoin, which in his view has been debunked. And the second is that we are naive to think put much faith in official inflation statistics.

I think Mr Hearn may have misunderstood the piece's argument. It was not that deflation would kill Bitcoin. Rather, it is that deflation will prevent Bitcoin from becoming a unit of account, and that, in turn, will keep it from displacing traditional currencies. But Bitcoin could survive and indeed thrive without becoming the coin of the realm.

The issue, as the piece explains, is that deflation in the unit of account leads to unemployment, thanks to the fact that wages generally don't adjust downward. Mr Hearn suggests that the idea that deflation might be costly is controversial among economists. I must disagree; it really isn't. Economists would love it if he were right that deflation didn't matter—that money, in economists' parlance, is neutral. If wages adjusted quickly and cleanly then they could go back to applying really straightforward classical economic models and everyone's life would be simpler. But the data are very clear on this point; wages are "sticky", and so deflation in the currency in which wages are set is costly.

I understand there is a general lack of faith in official inflation statistics in the Bitcoin community, which is perfectly reasonable. What is less clear to me is the assumption that weaknesses in inflation statistics cause them to systematically understate inflation. There is good reason to expect that inflation is actually being overstated in some areas of the economy. Statisticians aren't very good at taking into account rapid improvements in the quality of technological goods, nor do they do a good job capturing when technology sends the market price of some goods (like encyclopedias, for instance) to zero. On the whole, I'm inclined to believe that various biases generally offset each other, so that the official inflation number is broadly reliable.

Why should I believe that? For a simple reason: inflation may be hard to estimate but total spending in an economy, or nominal GDP, is much less so. Calculating nominal output does not require any value judgments about the comparability of certain goods, or much in the way of statistical wizardry, so we can feel reasonably confident that such figures, while imperfect, are not especially biased. Mr Hearn cites housing prices as evidence that CPI understates inflation. Let's assume he's right, and that actual inflation from 2004-2006 was in fact much, much higher than the official estimate. Here we run into a problem. Since we have good data on nominal GDP, a much higher rate of inflation implies that real, or inflation-adjusted, GDP was actually performing terribly during this period: that America was actually in severe recession from 2004-6. But during this period American unemployment was falling rapidly and the economy was adding jobs at a healthy clip, which is definitely not what happens during severe recessions. One could say that the jobs figures are cooked, but there are lots of private estimates of job growth, industrial production, and so on which also indicate that America was booming at the time, not busting. When the data all point in one direction like that, I tend to trust it.

One final point: I think it is a mistake to view deflation or zero inflation as the idyllic, uncorrupted state of a monetary system. Money is not a natural thing. It's a technology that society deploys to meet certain needs. Different monetary systems imply different things for the price level in an economy, with vastly different distributional consequences. To say that one set of distributional consequences is right while another is not would be wrong; they are what they are and society chooses which it prefers. There are costly side effects to -2% inflation or 0% inflation just as there are to 2% inflation or 15% inflation. My personal view is that the societal consensus behind low but positive inflation that prevails at the moment makes a lot of sense.

More broadly, a hard supply cap or built-in deflation is not an inherent strength for a would-be money. A money's strength is in its ability to meet society's needs. From my perspective, Bitcoin's built-in deflation means that it does a poorer job than it might at meeting society's needs. Maybe I will be proven wrong. We shall see.

http://www.economist.com/blogs/freeexchange/2014/04/money?

 

[dutchfire]

http://arstechnica.com/security/201...red-by-anonymous-miner-with-51-network-power/

Is this the end? Is this the beginning or the end? Or even just the end of the beginning?

 

[Crezth]

Plus, Gavin Andresen (among others) have promised that if a 51% attack occurs, the core devs will change the proof-of-work algorithm overnight and make the mining companies worthless.

This, and more, tonight on When Libertarians Propose Regulation Instead of Regulation.

 

[Tahuti]

The idea of alternative currencies is probably here to stay - unless it is going to be banned. BitCoin will probably dissappear, though the general idea probably will not. The security issues surrounding BitCoin may actually threaten national currencies as well, for all we know.

 

[innonimatu]

It doesn't need to be banned, any more that any other private paper asset needs to be. Bitcoin is a financial fad, not the first and not the last. Someone produced it out of thin aid, no one backs it - it's not a currency. Any more than stock in the South Seas Company or tulip bulbs were.

don't care about the mathematics behind it, whether it can be "printed" or not: it there is nothing material or political backing it it's not a currency, it's a virtual property title traded based on for price speculation.

 

[Zelig]

So what should we call currency that used to have political backing but no longer does?

 

[innonimatu]

So what should we call currency that used to have political backing but no longer does?

The one still physically extant? Property.

 

[Zelig]

The one still physically extant? Property.

What if you print out a bitcoin?

 

[innonimatu]

What if you print out a bitcoin?

Its a piece of property, I already answered. I won't argue otherwise. People will value it and trade for it, whether printed or not, i know that. But it's not a currency.