Bitcoins

grifferz

Anthorn wrote: »

If that's the case then how is it that the price didn't move when China bought 140 tonnes of the stuff? The gold price is in fact fixed twice a day on the London Bullion Market and provides a benchmark price used internationally. Go to for example, London, Singapore and Zurich and you'll find the gold price very similar if not identical.

I think that it is not the case because otherwise they would decide to set the price at say £20bn per ounce tomorrow.

They are setting it twice a day based on spot price and their list of orders, and they have to come to an agreement between all of that because it is a market.

The fact that it's twice a day instead of once a day is because there is a market at work here, in different time zones, and they're reacting to it - not controlling it!

All you have illustrated is that it is an extremely slow and dysfunctional market with too much control in the hands of a small group of people, making it open to massive fraud in the guise of "stability". And indeed, Barclays have been fined a few times for impropriety in their dealings as chair of the fixing committee.

I don't know much about gold trading and so I have no answer to your point about China buying 140 tonnes and it not affecting the price, but I don't believe that just because the price is set twice a day means that the price is literally fixed in that sense of the word. That would require a massive conspiracy and would also not be a positive thing for people outside the conspiracy.

Free markets ensure that the price of any commodity is the same worldwide (modulo local conditions) just the same as the gold fixing committee ensures the price is the same worldwide.

I think you are reading too much into the name of the committee.

Anthorn wrote: »

There are several other cryptocurrencies besides Bitcoin but all are tarred with the same brush: i.e. What's the difference between a cryptocurrency which is not backed up with anything and a Fiat currency? The answer as far as I'm concerned is, "Not a lot".

Cryptocurrencies do have to be backed by something otherwise they don't actually work. What it sounds like here is that you just don't believe that what they are backed by (proof of work) has value, which is a different argument.

Certainly if you come from a position of not trusting proof of work then it only follows that you see all cryptocurrencies as equally worthless. I don't think I will change your mind on that. If you don't accept the premise then there's nowhere to go with that.

Although I would say that "goldbugs" seem to be over-represented within the Bitcoin community in general, I suspect because the idea that it is a currency that is backed by something intrinsic—even though it is maths rather than bullion—appeals to them, versus fiat.

JohnRo

lvader wrote: »

That is why it will ultimately fail, it's too complex for people to understand.

The protocol can't fail and it really isn't all that complicated for users, MS windows is a bloated piece of software with all sorts of complexity, security issues and back door accessibility but many millions seem to cope with it just fine. What you mean is that btc probably won't gain widespread adoption, but that process is already happening whether people like it or not.

It's a long way from threatening the fraudulent, government run, fiat money pyramids at this stage of course but that can and probably will start to change over the decades. Who knows..

jamesd

JohnRo wrote: »

The protocol can't fail

ROFL.

"Mt. Gox CEO Mark Karpeles acknowledged that it had likely lost nearly $500 million of Bitcoin – almost 7% of the total outstanding number of Bitcoin worldwide. In total, over 850,000 Bitcoin were lost, of which nearly 90% of which belonged to its over-100,000 customers."

Protocol failure recently brought down the world's biggest Bitcoin exchange.

Losing 7% of the global amount of a Bitcoin in circulation to theft involving a protocol implementation weakness by people who apparently lacked any semblance of a clue about transactional integrity is a pretty hard thing for anyone who wants a trustworthy currency to ignore. This doesn't mean that it might not be safe eventually. Just not today.

Still, it was sadly amusing to watch Bitcoin fans saying that Mt. Gox was Bitcoin's lehman Brothers moment and was too big to fail and that all other Bitcoin users should be bailed in to replace the stolen Bitcoins. Maybe it'll end up becoming a normal currency after all.

grifferz

jamesd wrote: »

ROFL.

"Mt. Gox CEO Mark Karpeles acknowledged that it had likely lost nearly $500 million of Bitcoin – almost 7% of the total outstanding number of Bitcoin worldwide. In total, over 850,000 Bitcoin were lost, of which nearly 90% of which belonged to its over-100,000 customers."

Protocol failure recently brought down the world's biggest Bitcoin exchange.

What part of the protocol was that then?

We will probably never know what happened at MtGox, but likely explanations range from "Karpeles and/or his employees were completely incompetent and the funds were lifted by one or more attackers" to "Karpeles and/or his employees were completely dishonest and stole those funds themselves."

No one has yet come up with an explanation that points to a flaw in the protocol of Bitcoin itself. Even Karpeles, who initially made vague implausible claims that the exchange's downtime was caused by the need to protect against transaction malleability, has later changed his story to one of multiple thefts by unknown means over a period of years.

So, if you have new information, many people would be very interested.

jamesd wrote: »

people who apparently lacked any semblance of a clue about transactional integrity

Here's the thing. MtGox isnt/wasn't Bitcoin. Karpeles isn't/wasn't Bitcoin. The Bitcoin world is full of unregulated noddy websites written by teenagers who live in their parents' basements who have no knowledge of secure programming.

It's not hard to find examples of Bitcoin service provider incompetence, though not on the impressive scale of MtGox. One of my favourites is an exchange called Poloniex whose sole operator/developer decided that the appropriate way to do a withdrawal was to have pseudocode like this:

if (customer_balance() >= $amount_to_withdraw) {
    withdraw($amount_to_withdraw)
    deduct_from_balance($amount_to_withdraw)
}

So, attackers figured out that if they simply bashed on the "withdraw" form many times simultaneously, then some proportion of the customer_balance() checks would happen before one of the other deduct_from_balance() actions, thus they could send their account balance negative and withdraw the exchange's own funds out of its single store.

For example, let's say the user's balance is 1BTC. They have a program do 500 withdrawals of 1BTC all at once. Let's say that 20% of these hit their balance check before the first one has ever deducted 1BTC. They've just withdrawn their 1BTC and defrauded the exchange for 100BTC more.

Now, the person running Poloniex, although clearly not cut out to be developing services that take care of other people's money, did handle the matter in a way that was refreshingly transparent by the woeful standards of contemporary Bitcoin service providers: he confessed all to his customers.

Since his exchange at this point had less funds than his customers had actually deposited, if they all tried to withdraw at once then he would be bankrupted. He gave everyone a 12% haircut (told them all that 12% of their funds had been stolen) and promised to pay it back over time out of his service's profits. I believe he has now done this.

It's not exactly a happy ending though. Poloniex still exists today, still run by the same guy on his own. He hasn't hired any more experienced developers or done an audit of his existing code. There are still lot of people who know all of this and still think it is a good idea to put their money into his care.

Putting your Bitcoins under the control of one of these services is incredibly risky. You have no way to know if they are a MtGox or a Poloniex.

But you don't need to do that in order to use Bitcoin. That is not an integral part of Bitcoin. The people who lost money at MtGox were for the most part Bitcoin miners and Bitcoin speculators. They were also the least attentive of that group, because MtGox had been showing signs of trouble for literally years.

So for you to bring up MtGox as your best example of a flaw in the protocol of Bitcoin is a bit weird, and at best I have to assume that you've done it because you just know very little about Bitcoin aside from tech headlines.

jamesd wrote: »

This doesn't mean that it might not be safe eventually. Just not today.

Correct! Today it is sadly not safe to give your money to a pseudonymous individual or group operating a web site, with only their promise that they will keep it safe and give it back when you ask for it.

I don't expect that to ever be safe. I don't recommend that people do it!

Luckily no one needs to do that to use Bitcoin today, and it's been a very very long time since they have needed to do it.

jamesd wrote: »

Still, it was sadly amusing to watch Bitcoin fans saying that Mt. Gox was Bitcoin's lehman Brothers moment and was too big to fail and that all other Bitcoin users should be bailed in to replace the stolen Bitcoins. Maybe it'll end up becoming a normal currency after all.

A lot of people who mistakenly thought that MtGox was Bitcoin predicted the death of Bitcoin shortly after the death of MtGox. I too was rather concerned for it for a time; I wouldn't have been surprised if it had crashed to near nothing and never recovered, just from the bad press.

But it's been almost 5 months now and the Bitcoin price has remained pretty stable in that time. There's been several other dramas in the Bitcoin world since then.

So isn't it time we stopped linking the fortunes of MtGox with the fortunes of Bitcoin?

It's easy to find highly irrational actors within the Bitcoin community to point and laugh at. Not really a surprise when by its nature it tickles the curiosity of anarchists, goldbugs, libertarians, paranoids, amateur day traders and more.

If you're a Twitter user then I can recommend https://twitter.com/bitcoin_txt which compiles some of the best from the Bitcoin Forum, Reddit, etc.

jamesd

A protocol has to have practical implementations to be useful. Mt. Gox demonstrated one of the problems with that. It also demonstrated the immaturity of the Bitcoin ecosystem.

I've also encountered money transfer businesses that did not even use transactional databases for their transactions and educated them about how daft that was in the hope that they might actually not lose people's money.

No, it's not time to stop mentioning Mt. Gox as an illustration of the vulnerability of the Bitcoin ecosystem. People deserve proper warnings about just how unpredictably unreliable the ecosystem has been and still is, including mentions of recent spectacular failures.

jamesd

I do wonder, though, how much longer MSE is going to tolerate a Bitcoin ramping topic like the now banned silver ones.

JohnRo

Ramping? I've always thought the purpose of this thread is to try and help to clear up some of the confusion and challenge what appears at times wilful ignorance and hysteria.

jamesd

In practice it's more about Bitcoin fans trying to minimise problems and get more people interested.

JohnRo

I suppose so - in the same way talking about anything does those things.

How does the confusion, ignorance and misinformation get corrected without doing that though or those correcting the nonsense do so without being branded a fan, which let's be honest is just another thinly veiled pejorative that appears to be aimed at silencing a discussion?

sabretoothtigger

According to The Keiser Report (RT) today, in or around October 2014 there is to be a gold-backed cryptocurrency called "Goldfish" launched by therealasset.co.uk The question is whether it will affect the price of Bitcoins which are not backed up by anything at all? The other question is who else will also launch such a cryptocurrency?

That was already done with silver coins and crypto. It doesnt really work as crypto is distributed peer to peer and solid metal requires a central store. Crypto is very cheap to handle but the metal has costs and liability

Mt. Gox as an illustration of the vulnerability of the Bitcoin ecosystem.

Its one website and they ran it badly but it says more about people then the protocol.
Phishing happens with bank transfers even when the banks do well to secure their systems, its the people who are lax mostly.

If we find out they can 'print' duplicate or falsify transfer of btc so its not an accurate record that'll be a proper failure.
The mtgox failure was internal and trust was misplaced with that brand unfortunately.
The basic premise is distributed highly communicable worth so 1 website handling a large section of trade was already a mistake even with no loss.

Looking forward the majority of the blockchain is being confirmed by just 100 ip addresses.
A great many 'miners' stand behind that work but it is decided in effect by 100 people so it can fail again for the same reason that human nature is predetermined to crowd into herds and is a liability to security.
At one point 50% of the network was being controlled by 1 system admin, now I dont know if that one position required five or fifty separate keys to his actions. But its possible it was just one person, almost a total failure to distributed network idea