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Major Bitcoin Exchange Ceases Operation

Unknown Lamer posted more than 2 years ago | from the but-mom-money-does-grow-on-gpus dept.

Bitcoin 208

First time accepted submitter Sabbetus writes "On Monday the CEO of prominent Bitcoin exchange Tradehill announced that they are shutting down. Ars Technica ran a story on this stating that 'After Monday's news, the currency's value fell from $5.50 to $4.40, a decline of 20 percent.' Tradehill is returning all funds and meanwhile their competitors are fighting over who gets Tradehill's customers."

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208 comments

Bizarre and Confusing Summary (5, Informative)

eldavojohn (898314) | more than 2 years ago | (#39046329)

... meanwhile their competitors are fighting over who gets Tradehill's customers.

Not sure where that came from, didn't find it in the Ars article. At the end they mention Mt. Gox being the only other exchange ... so there's one competitor. They didn't mention anything about fighting over customers.

Furthermore the third sentence in the Ars article was suspiciously absent from the summary:

He has pledged to open a new site once these issues have been resolved.

As well as the explanation of why all this happened (lack of proper money transmission licensing). I've asked this many times before but how do you track illegal purchases on BitCoin [slashdot.org] when, by definition, it claims to be an anonymous payment solution?

Quite simply put, no BitCoin exchange -- neither Tradehill nor Mt. Gox -- is going to be able to comply with the Bank Secrecy Act [wikipedia.org] .

Re:Bizarre and Confusing Summary (3, Funny)

alphatel (1450715) | more than 2 years ago | (#39046365)

A trading firm that never actually trades, with non-existent competitors, trading a currency that doesn't exist, has gone out of business due to massive losses!

Re:Bizarre and Confusing Summary (3, Insightful)

Ogi_UnixNut (916982) | more than 2 years ago | (#39046407)

Sounds just like some of the financial trickery you hear about happening in the finance industry, doesn't it?

Re:Bizarre and Confusing Summary (1)

fred911 (83970) | more than 2 years ago | (#39047613)

No. In todays industry, those "to big to fail", don't. Their losses are replaced by printing more money so they can pay their bonuses, and have another shot at craps.

Re:Bizarre and Confusing Summary (3, Insightful)

Ogi_UnixNut (916982) | more than 2 years ago | (#39046449)

The Act only applies to the US though. Many places you can host an exchange. Never heard of tradehill though, so can't tell where they were based.

One of the nice things about bitcoin is that there are no real borders for it. You can trade on any exchange in the world, and use the currencty anywhere without restrictions (so a bit like cash, but without limits on how much you can take out the country, or currency conversion fees, etc...).

Re:Bizarre and Confusing Summary (2)

zill (1690130) | more than 2 years ago | (#39046623)

You seem to forgot that the US government controls the DNS system and can confiscate domain names at will.

Also we're not talking about a Bitcoins to seashells exchange here; we're talking about a Bitcoins to USD exchange. Any such exchange must perform transactions with other banks that operate with USD. Guess where a majority of those USD-handling banks are located?

Re:Bizarre and Confusing Summary (4, Insightful)

Wonko the Sane (25252) | more than 2 years ago | (#39046633)

The Act only applies to the US though.

Technically true but in practice any institution that touches dollars ends up being bound to obey US law if it wants access to the international financial system.

Re:Bizarre and Confusing Summary (0)

Anonymous Coward | more than 2 years ago | (#39046481)

I've asked this many times before but how do you track illegal purchases on BitCoin when, by definition, it claims to be an anonymous payment solution?

The entire selling point of the "currency" is that you can't, of course. When it was just "paranoid cryptography enthusiasts" and "currency wonks who don't like fiat money but realize that gold is retarded" screwing around with Bitcoin, it was trading at something like $0.25 USD. After Silk Road started picking up steam the currency jumped to its bubble peak of $30+ USD. I'm sure I wasn't the only one who noticed the timeline there.

Re:Bizarre and Confusing Summary (1)

Wesley Felter (138342) | more than 2 years ago | (#39047079)

After Silk Road started picking up steam the currency jumped to its bubble peak of $30+ USD. I'm sure I wasn't the only one who noticed the timeline there.

I think the $30 spike was more likely caused by an influx of noobs who found out that their GPU could print money.

Re:Bizarre and Confusing Summary (0)

Anonymous Coward | more than 2 years ago | (#39047267)

I think the $30 spike was more likely caused by an influx of noobs who found out that their GPU could print money.

How would that work? People printing money and holding onto it shouldn't affectthe price. People printing money and selling it or otherwise circulating it should depress the price. For the price to go up someone had to be buying.

Re:Bizarre and Confusing Summary (1)

maxwell demon (590494) | more than 2 years ago | (#39048679)

I think the $30 spike was more likely caused by an influx of noobs who found out that their GPU could print money.

How would that work? People printing money and holding onto it shouldn't affectthe price. People printing money and selling it or otherwise circulating it should depress the price. For the price to go up someone had to be buying.

As far as I understand, the bitcoin generation rate is adapted to the available computing power. Therefore if many new people generate bitcoins without selling them, the bitcoin value of computing power goes down, that is you get less bitcoins per computation. Since the computing power of those selling is not increased by additional non-selling miners, this means that those selling sell less bitcoins (because they get less), and therefore the price goes up. Note that the price giong up is a self-amplifying process (because if the price goes up, people are more likely to keep their bitcoins so they can gain more value, thus further reducing the supply and increasing the price), therefore the initial effect may have been quite modest.

I don't know if this is what actually happened, but unless my understanding is wrong, it's a mechanism by which additional mining can indeed increase the price.

Re:Bizarre and Confusing Summary (0)

Anonymous Coward | more than 2 years ago | (#39047289)

And by "print money" you mean "waste electricity while participating in a pyramid scheme that was destined to fail."

Right?

Re:Bizarre and Confusing Summary (3, Funny)

tompaulco (629533) | more than 2 years ago | (#39048251)

And by "print money" you mean "waste electricity while participating in a pyramid scheme that was destined to fail." Right?
Nope. Because Bitcoin is not a scheme whereby people use newcomers money to pay people who have been in the scheme longer. In fact, Bitcoin does not ask people for money at all.

Re:Bizarre and Confusing Summary (1)

Algae_94 (2017070) | more than 2 years ago | (#39049249)

Just cut the word "pyramid" from his comment. It's an abused term any more. Every system where a small group makes over sized profits and a larger group lose money is labeled a pyramid scheme, regardless of whether the people that lost money made terrible decisions along the way or not. In this case the new people to Bitcoins lost money by spending more on electricity and video cards than they earned while the people that had been in for a while could have sold out at the high.

Re:Bizarre and Confusing Summary (0)

Anonymous Coward | more than 2 years ago | (#39046503)

Assuming they operate "properly" in the US.

Go host somewhere else on a .cc or something, they have (less) of a reason to touch you then..

Re:Bizarre and Confusing Summary (4, Insightful)

iluvcapra (782887) | more than 2 years ago | (#39046569)

Quite simply put, no BitCoin exchange -- neither Tradehill nor Mt. Gox -- is going to be able to comply with the Bank Secrecy Act.

I disagree. As long as an exchange keeps identity records for all of its business and for all of the address endpoints it creates, it'd probably be able to comply with US Treasury Department regulations. Bitcoin isn't anonymous. Things only start to get murky once you are moving bitcoins around off an exchange, but that's not the exchange's problem.

Re:Bizarre and Confusing Summary (5, Informative)

houstonbofh (602064) | more than 2 years ago | (#39046599)

Quite simply put, no BitCoin exchange -- neither Tradehill nor Mt. Gox -- is going to be able to comply with the Bank Secrecy Act [wikipedia.org] .

Totally not true. They have to record cash transactions for negotiable instruments. They have to report cash transactions over $10,000. Most of them did not deal in cash at all, but in credit or debit cards and paypal, all of which is easily recorded. The act makes no mention of tracking the negotiable instruments (bitcoin) after they are sold.

Re:Bizarre and Confusing Summary (4, Interesting)

subreality (157447) | more than 2 years ago | (#39046619)

Mt. Gox being the only other exchange

MtGox is the only exchange bigger than TradeHill, but there are lots of smaller exchanges: https://en.bitcoin.it/wiki/Category:Exchanges [bitcoin.it]

Quite simply put, no BitCoin exchange -- neither Tradehill nor Mt. Gox -- is going to be able to comply with the Bank Secrecy Act.

First, Bitcoin is pseudonymous, not anonymous. Second, the important part: while it's very difficult to positively identify who sent you some Bitcoins, the exchanges know exactly who receives them, trades them back and forth to fiat currencies, and then sends them back out. They have names and bank account numbers, or they're using fiat payment services that have bank account numbers. Know Your Customer is not a problem for most exchanges.

Re:Bizarre and Confusing Summary (1)

sexconker (1179573) | more than 2 years ago | (#39046907)

Bitcoin is perfectly anonymous.
Bitcoin exchanges like Tradehill and MtGox are not anyonymous.

Re:Bizarre and Confusing Summary (1)

iluvcapra (782887) | more than 2 years ago | (#39047027)

Bitcoin is as anonymous as an advertiser clickstream. It's quite possible to correlate individuals from their transactions [blogspot.com] , and the transactions are out in the open for all to see.

Re:Bizarre and Confusing Summary (1)

gox (1595435) | more than 2 years ago | (#39047349)

Bitcoin is as anonymous as you need it to be. It's neither perfectly anonymous nor perfectly traceable. You can, for instance, create transaction records offline, and then submit it to the network through a mediator, so it can be as anonymous as any method of communication (I2P, postal service, carrier pigeon, etc.). In most practical use cases (where anonymity is required), it would be mostly like an F2F situation. It also provides considerable plausible deniability.

Re:Bizarre and Confusing Summary (1)

Algae_94 (2017070) | more than 2 years ago | (#39049335)

You know what else is as anonymous as I need it to be. Dollar bills. If you're really paranoid and don't want to be traced by the serial number of the bills, use dollar coins.

Re:Bizarre and Confusing Summary (1)

lightknight (213164) | more than 2 years ago | (#39046681)

Hmm. I thought Trade Hill was going down, and the company behind it was putting up a new, compliant website by the end of the month...

Re:Bizarre and Confusing Summary (2, Funny)

Anonymous Coward | more than 2 years ago | (#39047993)

AHA! Proof that you actually read the article AND Jered's original post to the bitcointalk forum announcing the change. Tradehill is closing so that a new platform can be built from the developer team.

You actually read the article and its source material. You are an embarrassment to the Slashdot community. :-)

Re:Bizarre and Confusing Summary (2)

Ultra64 (318705) | more than 2 years ago | (#39047009)

Bitcoin never claimed to be an anonymous payment solution. In fact every single payment (along with sender and recipient address) ever made is visible in the very public block chain.

People who don't understand bitcoin claimed it was an anonymous payment solution.

Re:Bizarre and Confusing Summary (1)

Kjella (173770) | more than 2 years ago | (#39048921)

As I understand it all you needed was a swapping service, you put a coin in and get a different coin back. It's a little more complicated to avoid correlation and timing attacks and such, but that's the basic idea.

Re:Bizarre and Confusing Summary (2)

Sabbetus (2457652) | more than 2 years ago | (#39047059)

I could have written a much longer description but I think that the Ars Technica article covers it well. The claim that Mt. Gox is the only other exchange is silly though. There are many exchanges and Tradehill was only slightly bigger than Intersango and Cryptoxchange. Both of these exchanges have started to push their marketing especially at Bitcointalk forums, after this incident: https://bitcointalk.org/index.php?topic=63941.0 [bitcointalk.org] & https://bitcointalk.org/index.php?topic=63877.0 [bitcointalk.org]

So that everyone clearly understands, Mt. Gox is by far the biggest exchange. Even though Tradehill was the 2nd biggest exchange, it was tiny compared to Mt. Gox. Both Intersango and Cryptoxchange were almost as big as Tradehill at the time of its demise. This information is available at http://bitcoincharts.com/markets/ [bitcoincharts.com]

I didn't pull anything out of my hat but I could have perhaps added a few more links and a slightly longer description.

Re:Bizarre and Confusing Summary (1)

CurryCamel (2265886) | more than 2 years ago | (#39048025)

You mean the summaries on /. are not supposed to be Bizarre, Confusing, Misleading and (dare I say) a bit Trollish?

Yeh, I'm new here.

Oh! The huge manatee! (1)

Anonymous Coward | more than 2 years ago | (#39046405)

On Monday the CEO of prominent Bitcoin exchange Tradehill announced that they are shutting down.

And not a single fuck was given that day.

Re:Oh! The huge manatee! (4, Funny)

houstonbofh (602064) | more than 2 years ago | (#39046621)

On Monday the CEO of prominent Bitcoin exchange Tradehill announced that they are shutting down.

And not a single fuck was given that day.

If everyone actually stopped fucking for a day, that would be huge news. (To everyone other than you)

MtGox it is then (0)

Anonymous Coward | more than 2 years ago | (#39046411)

Glad I went with them from the get-go. Is there anyone else really to go with?

Not money! (0)

Anonymous Coward | more than 2 years ago | (#39046425)

Until i can go buy a new pc, a case of beer, a bag of weed, and a pack of smokes with bitcoins... THEY ARE NOT REAL MONEY!

Who the hell keeps approving all these bitcoin storys around here.

Re:Not money! (1)

houstonbofh (602064) | more than 2 years ago | (#39046637)

Actually, you can do all but the beer. Several whitebox outfits take bitcoin. And there are vice e-bay clones for the drugs and smokes...

Re:Not money! (2)

gox (1595435) | more than 2 years ago | (#39047123)

Weed? Give me a break, the biggest political attack on Bitcoin so far is because you *can* buy weed with it.

Buying most of these online might not work for you, but for what it's worth, one of my friends buys beer online with the coins he mines. Belgian Flavours shop accepts Bitcoin AFAIK. You can buy PCs and all kinds of electronics for sure. Not sure how competitive the prices are though, at the worst case you can buy vouchers for more popular sites. Smokes, yes, there are a multitude of shops for tobacco products, including e-cigarettes. Prices for these sort of products are really competitive.

Re:Not money! (0)

Anonymous Coward | more than 2 years ago | (#39047189)

Weed? Give me a break, the biggest political attack on Bitcoin so far is because you *can* buy weed with it.

I thought the biggest political attack on Bitcoin so far was that you had to be *on* weed to think it's a good idea.

Oh, wait, sorry, that's the biggest attack on it from *reality*.

20% Drop... where's CNBC's coverage? (0)

LostCluster (625375) | more than 2 years ago | (#39046433)

If Bitcoins were a national currency its population would be protesting... a 20% overnight drop would be business news if this currency had enough people caring it existed. These money-like substances always seem to fail resulting in no payout to those holding the bag. Nothing left to see here, move along.

Re:20% Drop... where's CNBC's coverage? (0)

Anonymous Coward | more than 2 years ago | (#39046887)

Until its recent island of stability (which can be put down to lack of anyone left wanting to trade), a 20% shift in one day was not unusual for Bitcoin.

Re:20% Drop... where's CNBC's coverage? (1)

themusicgod1 (241799) | more than 2 years ago | (#39047627)

It takes about 1-3 days to take money from the legacy currency system and put it into one of these exchanges...so even if the price suddenly drops those who know it's a good deal have a bit of a delay, hence a lot of the 20% bounces.

Re:20% Drop... where's CNBC's coverage? (1)

subreality (157447) | more than 2 years ago | (#39047859)

If Bitcoins were a national currency its population would be protesting... a 20% overnight drop would be business news if this currency had enough people caring it existed. These money-like substances always seem to fail resulting in no payout to those holding the bag. Nothing left to see here, move along.

Sure. But Bitcoin isn't a major reserve currency. It's current size is like a tiny stock, and volatility is expected at that scale.

Unlike the corporate micro-currencies (Beenz, Flooz, whatever), Bitcoin doesn't suddenly go under and not pay out. Bitcoin is volatile, but it's still liquid - if you want to trade back to dollars, you can do so at market rate on any of several dozen markets.

Bitcoin's not for you if you don't want to deal with volatility, but it has very different properties than any other currency which does make it appealing to some people for legitimate reasons.

Re:20% Drop... where's CNBC's coverage? (1, Funny)

MysteriousPreacher (702266) | more than 2 years ago | (#39049551)

Zimbabwe should switch to Bitcoin. A 20% overnight drop in their national currency would be a cause for astonished celebration.

Bitcoin's still around? (4, Funny)

SleazyRidr (1563649) | more than 2 years ago | (#39046527)

I thought that Bitcoin must have ceased operating when there stopped being a slashdot story about them every day.

Re:Bitcoin's still around? (2)

Bieeanda (961632) | more than 2 years ago | (#39046747)

Dude, there are nerds who are still convinced that the Amiga could make a comeback. Irrational fixations transcend population boundaries.

Re:Bitcoin's still around? (0)

Anonymous Coward | more than 2 years ago | (#39046785)

Do you blame them?

Just look at how wonderfully usable current PCs and tablets are.

Re:Bitcoin's still around? (1)

pz (113803) | more than 2 years ago | (#39047121)

We stopped getting bitcoin articles when Taco left.

Yeah, yeah, correlation is not causation ... but it sure is sufficient cause to suspect causation.

Re:Bitcoin's still around? (0)

Anonymous Coward | more than 2 years ago | (#39047229)

I had thought they got the picture when they had that questionaire and poll. I guarantee a large portion of people wrote they were tired of bitcoin stories.

Whatever editor was in to them sold them (1, Insightful)

Sycraft-fu (314770) | more than 2 years ago | (#39047587)

That's my bet. One (or maybe more) of the Slashdot staff was in to bitcoins. They mined them, bought them, whatever. So they had an interest in getting people in to them so the value would go up and they could make money. Now they are out of it so they don't give a shit, no reason to pimp it anymore.

Plus it was a fad, and its time has come and gone. While it isn't dead, the days of "big money" are gone. It lost a shit ton of value, the miners aren't making much, etc, etc. The virtual gold rush is over, so it is a non story. It'll just slowly fade in to obscurity as time goes on.

Re:Bitcoin's still around? (0)

Anonymous Coward | more than 2 years ago | (#39048105)

That's because Raspberry Pi started advertis... I mean, it's progress got more interesting. Imagine what Slashdot would be like if you could purchase Raspberry Pi with Bitcoin.

Not naming names (1)

Bobberly (1677220) | more than 2 years ago | (#39046607)

I noticed the name Dwolla was missing where they said "payment processor." If I recall, the chargeback happened back in August of 2011. I wonder if the lawsuit finally progressed to a point that they realized they weren't going to win?

Sounds interesting (1)

roguegramma (982660) | more than 2 years ago | (#39049231)

Sounds interesting, but I don't find anything about it on the wikipedia pages related to Dwolla and Bitcoin that I googled for.

wtf? (0)

Anonymous Coward | more than 2 years ago | (#39046655)

What is bitcoin? Monopoly money?

Re:wtf? (3, Informative)

Anonymous Coward | more than 2 years ago | (#39048141)

Bitcoin is a decentralised computer currency designed by self-righteous Ayn Rand-reading nerds who despise looters and parasites like, er, you. It is used to purchase Internet services, illegal drugs and pictures of naked women holding video cards.

Bitcoin works by an emergent synergy of cryptography, peer-to-peer, anonymity, anarchism, libertarianism, wasting stupendous quantities of electricity, the marketing department at NVidia, the enduring exchange value of tulip bulbs and doing all of this instead of Folding@Home.

Bitcoin successfully harnesses a hitherto-unexploited Internet resource: the vast reserves of unexamined privilege amongst computer programmers. Coins are “mined” by stealing them from people who are able to comprehend this level of computer science but still keep their Bitcoin wallet in plain text on a Windows machine.

The Bitcoin system is robustly designed to continue past the inevitable collapse of the US dollar and the world economy, as the Internet, fast computers and reliable electricity are all expected to be readily available when barbarian hordes are wandering the burnt-out post-apocalyptic remnants of civilisation.

It is completely incorrect to describe Bitcoin as a “pyramid scheme.” Technically, it’s a “pump-and-dump.”

Many common products are still inexplicably not purchasable with Bitcoins. “It’s like they don’t understand the revolutionary wonder of Bitcoin,” says Debian developer Hiram Nerdboy, 17. “I can’t get chicks with Bitcoins either. Even with my slickest Pick-Up Artist techniques! It’s as if my knowledge of economics, game theory and Bayesian epistemology didn’t substitute for understanding anything about people. But that’s impossible, of course. They’re probably just theists. Hold on, I just gotta post to Slashdot about this.”

Bitcoin was invented by Internet libertarians, in the spirit of freely-chosen individual interpersonal interactions that will bring about the utter collapse of the oppressive taint of the dead hand of government, in order to make money at your expense.

from http://newstechnica.com/2011/06/18/bitcoin-to-revolutionise-the-economy/ [newstechnica.com]

Re:wtf? (1)

Issarlk (1429361) | more than 2 years ago | (#39049255)

> the marketing department at NVidia

At AMD, not NVidia. Unless someone wrote a miner that works on NVidia GPU recently ?

Move on. (0)

slasho81 (455509) | more than 2 years ago | (#39046687)

Why do we keep seeing stories about BitCoin? Money is fiction. It's only as valuable as people believe it is. Nobody believes in BitCoin. It's not working. We get it. Move on.

Why money has value (2, Interesting)

betterunixthanunix (980855) | more than 2 years ago | (#39047017)

Money is not fiction, it is a mechanism that governments and banks can use. Dollars not valuable simply because people believe they are valuable, they are valuable because the US government requires a large group of people to use dollars (i.e. to pay taxes and other debts). People believe dollars are valuable because all the tax-paying and otherwise indebted citizens around them demand dollars as payment, because they need those dollars if they do not want the government to take their property or freedom. As long as people agree to be governed by the US government, currency issued by the government will have value.

Nobody is required to use Bitcoin, which is why it is so volatile (its value is based entirely on speculation) and will ultimately fail (as people demand dollars and other currencies more than they demand Bitcoin).

Re:Why money has value (1)

gox (1595435) | more than 2 years ago | (#39047855)

Nobody is required to use Bitcoin, which is why it is so volatile (its value is based entirely on speculation) and will ultimately fail (as people demand dollars and other currencies more than they demand Bitcoin).

Even with the above reasoning, Bitcoin can still survive if there are enough situations where no currency is de jure standard and Bitcoin has a considerable advantage. Black market for sure, and gray market might be a good candidate for it.

Yours is a bleak perspective though. I tend to believe that realism is not very realistic. Only time can tell...

Re:Why money has value (1)

betterunixthanunix (980855) | more than 2 years ago | (#39048263)

Even with the above reasoning, Bitcoin can still survive if there are enough situations where no currency is de jure standard and Bitcoin has a considerable advantage. Black market for sure, and gray market might be a good candidate for it.

In which case it would only take a digital currency system that does not suffer from Bitcoin's inherent scalability problem -- the fact that the computational resources needed for Bitcoin grow with the number of Bitcoin transactions, a fact that is inherent in all digital cash systems and that is typically resolved by means of a central issuing authority that can "renew" tokens -- to kill of Bitcoin. If the only advantage Bitcoin has is that it is a digital cash system, it is only a matter of time before it dies and all the people who bought into the system but did not have a chance to cash out have to eat the loss.

Yours is a bleak perspective though

Probably because Bitcoin is a badly designed system. Interesting as a mental exercise, but ultimately doomed. Worse still, Bitcoin has become synonymous with digital cash, which means that better systems have even worse chances of being adopted, especially once Bitcoin fails.

Re:Move on. (1)

DanielRavenNest (107550) | more than 2 years ago | (#39047053)

What you are really saying is "I don't believe in bitcoin". Other people do, however, to the tune of $40 million USD.

If you treat BitCoin as an experiment in electronic currency without a central bank, I would say it is worth it just to learn what works and does not work. Money has been getting ever more electronic over time, and we should have some idea how the fuck it works. Second Life is another experiment in electronic currency. It has a total money supply worth $27 million, convertibility back and forth to dollars, and a large market of goods people buy and sell. It may be a toy sized economy compared to the rest of the world, but it's better to experiment and make mistakes on one of those, than, say, Greece.

Re:Move on. (1)

ScentCone (795499) | more than 2 years ago | (#39047847)

but it's better to experiment and make mistakes on one of those, than, say, Greece.

True that working small is a good way to test. But the Greece analogy isn't very good. That wasn't about the form/format of money or the exchange thereof. That was about spending than you can afford and don't have the will to produce ... which is just as bad when you're on a barter system as when you're on a currency system. Entitlement mentality killed the Greek economy, not the ebb and flow around currency mechanisms.

Re:Move on. (0)

Anonymous Coward | more than 2 years ago | (#39048565)

May as well use Greece for something while it still has electricity and running water.

Major? (3, Interesting)

sexconker (1179573) | more than 2 years ago | (#39046849)

Tradehill was never a major Bitcoin exchange.
MtGox is the only one anyone ever used. Tradehill was started by some guy who got mad that MtGox was raking in the cash. He started throwing out accusations about security holes, the owner (of MtGox) not actually having all of the BitCoins backing his market, etc. Then he threw up Tradehill and it was shit.

All Bitcoin exchanges are shit. They're for speculators. Bitcoin as a currency is fine, and it will be fine if every exchange dies off.

Re:Major? (1)

Ultra64 (318705) | more than 2 years ago | (#39047077)

"and it will be fine if every exchange dies off."

Except for the fact that there will be no way to acquire bitcoins?

Re:Major? (1)

betterunixthanunix (980855) | more than 2 years ago | (#39047253)

Sure there will -- you can grow some marijuana and trade that for Bitcoins. Except that the only reason anyone does such a thing right now is because they want to trade the Bitcoins for their nation's currency.

Re:Major? (2)

subreality (157447) | more than 2 years ago | (#39047393)

"and it will be fine if every exchange dies off."

Except for the fact that there will be no way to acquire bitcoins?

By that logic there would be no way of acquiring US dollars either.

Without exchanges, you acquire Bitcoins in exchange for goods and services. It's money. Earn it.

But there are exchanges (4, Insightful)

Sycraft-fu (314770) | more than 2 years ago | (#39047507)

Many of them. The US dollar is traded on all international currency markets and for a small scale, any bank will convert them. If it weren't, it wouldn't be very useful. If I pay someone in Europe in US dollars they are ok with that because they can convert them to Euros, which is what they need to do their business. If they couldn't, if US dollars were non-convertible, they'd be non-useful.

Also you have the problem that next to nobody accepts and deals in bitcoins directly. It isn't a functional currency. The US Dollar, the Euro, the Yen, these are all functional currencies because a lot of people will accept them as such. You can buy goods with them, pay taxes with them, etc. I cannot name a single thing I'd want to buy, a single place I shop at, that takes bitcoins. As such if they aren't convertible, they are worthless.

Re:But there are exchanges (1)

subreality (157447) | more than 2 years ago | (#39047589)

Sure, it would only be used by a tiny niche of enthusiasts. So what? It has to start somewhere, and even if it didn't grow from there it could live on as a functional niche currency.

Re:Major? (0)

Anonymous Coward | more than 2 years ago | (#39049095)

You may still earn bitcoins the old fashioned way. You can mine your own coins.

Speculation is all the Bitcoin has (1, Insightful)

betterunixthanunix (980855) | more than 2 years ago | (#39047225)

All Bitcoin exchanges are shit. They're for speculators. Bitcoin as a currency is fine, and it will be fine if every exchange dies off.

Without speculation, Bitcoin is worthless. The only reason anyone has ever accepted Bitcoin as payment for anything is because they believe they can redeem Bitcoin for some other currency later on -- something which there is never any guarantee of (compare to private currencies that are backed by national currencies). This is in stark contrast to national currencies like dollars, which people must have if they intend to pay their taxes (which they must do if they intend to legally own property, hold a job, etc.). Nobody actually needs to use Bitcoin, no governments accept Bitcoin for tax purposes, no banks accept Bitcoin as a repayment on debt, and its technical advantages as a digital cash system are neither unique nor anything close to a justification for its value.

When Bitcoin exchanges die, Bitcoin will die too. If people cannot buy into the system or cash out, the system will come grinding to a halt.

Re:Speculation is all the Bitcoin has (1)

JazzHarper (745403) | more than 2 years ago | (#39047417)

How can I short this currency?

Re:Speculation is all the Bitcoin has (0)

Anonymous Coward | more than 2 years ago | (#39048041)

Bubble already popped, dude. It was above thirty bucks last June, and sharply crashed in August.

Re:Speculation is all the Bitcoin has (1)

subreality (157447) | more than 2 years ago | (#39047473)

The only reason anyone has ever accepted Bitcoin as payment for anything is because they believe they can redeem Bitcoin for some other currency later on

This is demonstrably false. There's a considerable demographic in the Bitcoin community who don't like that the speculators have eclipsed the commerce side, and who would very much prefer if they could trade it back and forth as an isolated currency rather than having everyone think of it as a proxy for dollars.

Re:Speculation is all the Bitcoin has (1)

betterunixthanunix (980855) | more than 2 years ago | (#39047687)

There's a considerable demographic in the Bitcoin community...who would very much prefer if they could trade it back and forth as an isolated currency

Unless they live outside the jurisdiction of any effective government, they will have to find at least enough of some nation's currency to pay their taxes (which in some nations includes taxes on transactions made using Bitcoin, which cannot themselves be paid using Bitcoin). I sincerely doubt that these users live under such circumstances, and even if they did, they would also have to find a way to generate electricity and connect to the Internet without incurring any costs other than Bitcoin, which is also an unlikely event. Either these people are paying the fees associated with using Bitcoin (energy, bandwidth, property taxes, etc.) using some other currency that they have obtained by some other means (and which will still affect the value of Bitcoin because of its use in paying for Bitcoin infrastructure) or they are going to have to trade their Bitcoins for some other currency at some point.

Aside from some toy examples, Bitcoin is never going to be anything more than a proxy for some other currency. There is no way for Bitcoin to scale (even if we ignore the technical problems with Bitcoin scalability) to anything that even resembles a national economy without some government "backing" it (that is, enforcing the payment of debt using Bitcoin). That is not going to happen, for various reasons, the most prominent being that governments like to be able to control the amount of currency in circulation and Bitcoin makes that impossible.

Re:Speculation is all the Bitcoin has (1)

subreality (157447) | more than 2 years ago | (#39047973)

they will have to find at least enough of some nation's currency to pay their taxes

Just because you're using Bitcoins doesn't mean you have to use ONLY Bitcoins. There's no reason it can't exist as a niche currency.

Re:Speculation is all the Bitcoin has (2)

betterunixthanunix (980855) | more than 2 years ago | (#39048337)

There's no reason it can't exist as a niche currency

OK, I'll grant that -- Bitcoin might live on as an obscure, niche currency with extremely limited utility. Not even the black market users will stick with it in that case, and perhaps people will realize that there are more effective digital cash systems out there that could be deployed in a way that benefits society (not just the black market).

Re:Speculation is all the Bitcoin has (1)

subreality (157447) | more than 2 years ago | (#39048405)

On the other hand I think it will be exchangeable to dollars for the foreseeable future, regardless of what the island-currency niche wants. As long as there's another group that DOES want it exchangeable, they'll find a way.

Re:Speculation is all the Bitcoin has (1)

betterunixthanunix (980855) | more than 2 years ago | (#39048493)

Except that there will always been more demand for national currencies than there will be for Bitcoin, and so over the long term we should expect Bitcoin's value to decline. Trying to bet on it being exchangeable for dollars for any period of time is speculation, which gets back to my original point: Bitcoin's value is almost entirely due to speculation.

Re:Speculation is all the Bitcoin has (1)

subreality (157447) | more than 2 years ago | (#39048741)

and so over the long term we should expect Bitcoin's value to decline.

That too is speculation. It's just speculating on the downside. :)

Bitcoin's value is almost entirely due to speculation.

I agree, but I want to contrast it with your earlier statement...

Without speculation, Bitcoin is worthless.

... which which I disagree.

Re:Major? (1)

subreality (157447) | more than 2 years ago | (#39049029)

NYSE was never a major stock exchange.
NYSE is the only one anyone ever used. NASDAQ was started by some guy who got mad that NYSE was raking in the cash. ... Then he threw up NASDAQ and it was shit.

All stock exchanges are shit. They're for speculators.

FTFY. :)

But the protocols are still intact (5, Insightful)

adjustable_pliers (1409219) | more than 2 years ago | (#39046871)

The loss of Tradehill and the security breaches of other exchanges disrupted the confidence in using Bitcoin, but the protocols remained intact. I see this as a testament to the design of the system, even though a fundamental quality for any currency is the confidence of its users.

As a Bitcoin lurker (I've never owned anything more than 2 BTC), I've been intensely fascinated in the potential of this "currency." Without belaboring the great qualities of a decentralized currency, it has attracted a speculative class of users that have rushed into centralized exchanges using nervous money transmission providers. The irony is not lost on me.

Tradehill's departure and what I believe will be an eventual international agreement hobbling Bitcoin's biggest exchange Mt. Gox in Japan (a la UBS in Switzerland), due to tax evasion, ought to serve as a cautionary note to Bitcoin users. Money transmission is a confiscatorially regulated practice. Bitcoin's best hope ought to be transactions as decentralized as the protocol it uses.

Lurkers such as I can only hope of an ecosystem or application so widespread, so diversified, secure enough, and easy to use before Bitcoin can be considered useful to most internet users. I dream of a decentralized Facebook knock-off (e.g. diaspora*, etc.) with a Bitcoin client built in, making currency transmission as simple as tossing a dollar to a friend to buy a cup of coffee. Perhaps even at a coffee shop with patrons casually swapping US$ and BTC as they play chess or read.

Why Bitcoin is doomed (3, Insightful)

betterunixthanunix (980855) | more than 2 years ago | (#39047523)

We go through this discussion every single time a Bitcoin article appears on Slashdot. Bitcoin is guaranteed to fail in the long run:
  1. It is a digital cash system in which the tokens cannot be refreshed; this is known in crypto research community to imply that the tokens must grow linearly in the number of transactions. Bitcoin attempts to hide this fact in its architecture, but if Bitcoin is secure then the computation resources needed to continue using Bitcoin will grow over time. Worse, as more people use Bitcoin, the growth rate will accelerate because of the increased number of transactions. If Bitcoin was used at anything close to the number of dollar transactions that happen every day, the technical limitations of Bitcoin would kill it off within a week's time.

    Useful digital cash systems involve a central issuing authority like a bank or government, that can accept old tokens and produce "fresh" tokens of equal value. Having such a central authority is not a bad thing:
  2. The demand for Bitcoin will never exceed the demand for national currencies. Using the USA as an example, people who live in America must pay taxes -- taxes on income, taxes on property, sometimes taxes on purchases they make, and so forth. The government only accepts tax payments that are made in dollars, and yes, you have to pay taxes on transactions that do not involve dollars, such as barter or having a Bitcoin salary. Every year, hundreds of millions of Americans must pay their taxes, and if they were all using Bitcoin for everything, they would all simultaneously try to trade their Bitcoins for dollars to cover their tax debt. While this frequently happens with other currencies -- people paid in pounds sterling will try to make a similar trade -- all national currencies are demanded by some nation's citizens for a similar purpose, unlike Bitcoin, which nobody is legally obligated to use.

    It is a good thing that nobody is obligated to use BItcoin to pay their debts, because:
  3. Bitcoin is a deflationary currency -- there is a fixed maximum number of Bitcoins that can exist. If you had a long-term debt to repay in Bitcoins, it would be harder to make payments as time went on, because Bitcoins would become harder to find (assuming that the Bitcoin economy continues to grow, which I already noted is an unlikely event). You would be a fool to ever incur a Bitcoin debt for this very reason. Unfortunately for Bitcoin, credit is a necessary component of any economy; this has been a fact of life for so long that it not only predates paper currency, but paper itself.

So there you have it.

Re:Why Bitcoin is doomed (1)

themusicgod1 (241799) | more than 2 years ago | (#39047817)

"If Bitcoin was used at anything close to the number of dollar transactions that happen every day, the technical limitations of Bitcoin would kill it off within a week's time."

This is not clear at all [bitcoin.it] . First of all, there are already designs to deal with this situation for when (not if) this occurs - they have already begun by taking the mining out of the default client (they are moving to a thinner and thinner client, which will and has to some extent culumnated in credit-card like applications for mobile devices). There are proposals for securely pruning the existing block chain and for dealing with the higher load all the way up to the size of the world economy.

2) "...The demand for Bitcoin will never exceed the demand for national currencies..."

The black market already holds its own to the deman for national currency and the black market is growing with time - it is very likely that within the next decade or two it may outpace the regulated one. With half the world's population already employed [foreignpolicy.com] in the black market it is not much of a stretch to think that you don't need a government to back a currency, if the incentives are right for the market to protect it itself.

3) "credit is a necessary component of any economy; "

And you could say by the same metric that trade in physical goods, whether coins or paper bills have been a 'necessary' component ...until the digital banking started to take over in the 80's or so. Just because something has always been part of the economy does not mean that it is necessary. That is a correlation vs. causation error in thinking.

Re:Why Bitcoin is doomed (3, Insightful)

betterunixthanunix (980855) | more than 2 years ago | (#39048169)

they have already begun by taking the mining out of the default client

This makes the scalability problem even worse, since it forces you to reuse older tokens, which have already grown because of their use in previous transactions. This is not a problem that you can just hack your way around, it is a fundamental limitation of digital cash systems. Note that on the very page you linked to, they attempt to sidestep this problem by claiming that hard drive sizes will grow to accommodate their needs, which I seriously doubt unless Bitcoin remains an obscure payment system.

The black market already holds its own to the deman for national currency and the black market is growing with time - it is very likely that within the next decade or two it may outpace the regulated one. With half the world's population already employed in the black market it is not much of a stretch to think that you don't need a government to back a currency, if the incentives are right for the market to protect it itself.

It is very much a stretch to think that money can exist without government backing. If the black market stopped using national currencies, they would be forced to switch to a currency backed by some other large, powerful organization to enforce payments, and that organization would be a de facto government. Money is only valuable within some enforcement structure, which is the role that a government plays; even when banks issue currency, they rely on governments to enforce debt payments.

And you could say by the same metric that trade in physical goods, whether coins or paper bills have been a 'necessary' component ...until the digital banking started to take over in the 80's or so. Just because something has always been part of the economy does not mean that it is necessary. That is a correlation vs. causation error in thinking.

Except that we still trade in physical goods (and even if all currency were digital cash, you would still trade in physical goods -- you need food, clothing, etc.), and we have had paper transactions managed by banks for centuries (which have simply moved computers, which are more efficient record keeping systems).

At a basic level, credit is necessary in any economy because people with the skills needed to complete a task do not always have the resources needed for that task. A farmer might not have enough money to buy the fertilizer he needs for a particular growing season, a cook might not have the resources needed to start a restaurant, etc. At an even more fundamental level, you might need to work before you are able to pay the soldiers that protect you from a hostile enemy, but those soldiers need to be paid while they are busy protecting you; taxes themselves are a form of debt, and governments cannot function without tax revenue.

The unfortunate thing about Bitcoin is that people have come to associate Bitcoin with digital cash. There are plenty of other digital cash systems that have all of Bitcoin's advantages without the serious disadvantages; those systems use a bank or other token issuing authority to renew tokens that have long transaction chains (thus avoiding the scalability problem) and are easy to back with a national currency, or perhaps to use as a national currency. Anarchists may not like the idea of a bank having power over currency, but that is just how currencies work: some central authority must back the currency. I am personally a big fan of digital cash, since it would solve a lot of the security problems that we see with debit and credit cards, but because of the various crypto battles and patents in the 90s digital cash never did take off.

Re:Why Bitcoin is doomed (3, Informative)

subreality (157447) | more than 2 years ago | (#39049513)

which have already grown because of their use in previous transactions

This isn't actually true. Coins don't keep getting split into smaller and smaller portions forever. Every time you spend it takes several old coins and combines them into (usually) two new ones: 1, the payment you make, and 2, your "change" (which goes back in your wallet). The previous inputs are permanently combined and no longer needed going forward. The current software does not yet actually implement it, but obsolete coins CAN be "pruned" entirely, facilitated by the Merkle tree.

The blockchain will still undergo a lot of growth if more people begin using Bitcoin (since the currency base will be divided between more wallets, and there will be greater numbers of recent transactions that are not yet pruned), but it doesn't geometrically expand forever. When Bitcoin stabilizes at a certain level of market saturation the blockchain will also stabilize in size.

Whether that will be a reasonable and manageable size is still an open question.

all of Bitcoin's advantages without the serious disadvantages; those systems use a bank or other token issuing authority

I want to know that the central bank won't just start issuing more currency and devalue mine.

I want to send money to Wikileaks, but all the banks are forbidding it.

I want to pay someone over the internet without Mastercard or Paypal or whoever taking a 2% cut.

There is no other currency that currently has ALL of those advantages of Bitcoin. Some of the advantages are inherently incompatible with centralized, bank-operated currencies. It also has a long and substantial list of disadvantages too - no argument there. But on the whole it simply has a different set of tradeoffs than any other currency, and so it (or one of it's descendants; I don't expect Bitcoin is going to be the last word in decentralized e-currency) will be relevant for some time.

smart (0)

Anonymous Coward | more than 2 years ago | (#39046891)

Make your money and then get out before the feds show up.

Bitcoin was never going to work (0)

Spy Handler (822350) | more than 2 years ago | (#39047011)

A pump-and-dump scheme is kind of like a snake oil venture. It requires a good salesman that can work up a crowd. With an engaging, outgoing personality (not an introverted nerd).

Can you imagine a BitOil scheme, created by computer nerds, writing mail to people and explaining how it's superior to regular snake oil due to its technical features such as (blah blah). It ain't gonna work. You need to get a hot chick, a magic act, a shill, a strongman, and put an act together.

Watch here for an example [youtube.com]

Re:Bitcoin was never going to work (1)

Sycraft-fu (314770) | more than 2 years ago | (#39047651)

Even if it wasn't a pump and dump scheme it was doomed to failure as a currency for one simple reason: Built in deflation.

The total number of bitcoins that can ever exist is finite, and as time goes on they get harder and harder to "mine". So as such, deflation is just built in to the currency, if it were ever adopted on a wide scale.

While this is something that plenty of Internet 'tards who have no understanding of economics think is great "The money I have will be worth more!" anyone who knows economics knows that deflation is an economic killer. Money has to be spent to be useful and deflation encourages hoarding. It creates a vicious cycle.

Hence the reason why all it will ever be used for is pump n' dump or the like because it cannot be used as a useful currency.

Re:Bitcoin was never going to work (2)

TheCarp (96830) | more than 2 years ago | (#39048049)

Actually, I used to really like bitcoin and never thought most of the arguments against it held much water, since they mostly ignore that all the fiction in bitcoin is the same fiction in other currency. All currency is fake, because its all an abstraction. Nothing wrong with that.

However, the more I learned about it and dove into it...the more convinced I came of this simple fact... a currency wants deflation because currency isn't intended to be a savings instrument. People hoard gold. People hoarded bitcoins. Hell, I gave in to that temptation, even as I started to see the reall folly in it.

Inflation serves a purpose though...I am very much with the bitcoiners still in not trusting governments to be the arbiters. Worst though, allowing a few private hands to do it. I don't trust the fed as far as I can afford to pay someone to throw them

I still ove bitcoin for trying. It was a good attempt, just like some of the good attempts before it...I hope there will be more...and the community will keep trying until something wins out.

Re:Bitcoin was never going to work (1)

TheCarp (96830) | more than 2 years ago | (#39048073)

Sorry.... inflation.... not deflation. Inflation is good (up to a point).

Tradehill were the good guys (4, Informative)

Animats (122034) | more than 2 years ago | (#39047067)

Tradehill was probably the best-run Bitcoin exchange. They didn't steal customer funds, like some of the other defunct Bitcoin services. [betabeat.com] They didn't go down much. They didn't have a monthly crisis [thebitcoinsun.com] like Mt. Gox. (formerly Magic, the Gathering Online Exchange. Really.) If Tradehill does in fact return all customer funds, at least they shut down honestly.

A basic problem with Bitcoin is that the ability to irrevocably transfer funds to anonymous parties is the scammer's dream. Bitcoin is thus a scammer magnet. Just about every known financial scam was replicated in the tiny Bitcoin world, from fake banks [globalstandardbank.com] to fake stock exchanges [glbse.com] to Ponzi schemes. [bitponzi.net]

Re:Tradehill were the good guys (1)

IamTheRealMike (537420) | more than 2 years ago | (#39047437)

That seems a little unfair. It'd be equally valid to say that a scammers dream is an electronic payments system that allows purchases to be made with only a fixed password, which must be given to anyone who accepts payments, which isn't connectable to any kind of second factor and in which the costs of fraud get sunk by the merchants (who can't do anything about it) rather than banks or end users, thus ensuring the party continues endlessly. How many credit card details can be bought on the black market again?

The Bitcoin protocol has built in support for mediated transactions, 2-factor coins and other good things, the support for which will be fleshed out with time. But the TradeHill closure doesn't have anything to do with Bitcoins features per se. Some banks relied on by Paxum decided that they don't want to allow Bitcoin related trade, period. Whether this is really to do with "risk" or they simply don't like/understand it, we will likely never know.

Re:Tradehill were the good guys (1)

gox (1595435) | more than 2 years ago | (#39047629)

Just about every known financial scam was replicated in the tiny Bitcoin world ... ... fake stock exchanges [glbse.com] to Ponzi schemes. [bitponzi.net]

Although I agree that every kind of scam is replicated many times over in the Bitcoin world, your examples are a little misguided. A ponzi scheme calling itself a ponzi scheme is not actually a ponzi scheme, is it? It's just a basic gambling game with an eccentric name. Also, GLBSE is a weakly regulated stock exchange, which can be called a scammer magnet for sure, but nevertheless cannot be called a scam itself.

That scam still exists? (1)

Anonymous Coward | more than 2 years ago | (#39047577)

I figured it would have imploded months ago.

Enough already. :( (1)

Anonymous Coward | more than 2 years ago | (#39047653)

Willfully or not, bitcoin is just another variant of pump'n'dump.

When it hasn't gotten any media attention for a while, and it suddenly gets some attention, the price goes up for a small time, and then it drops like a stone again.

Just stop acknowledging bitcoin's existence. Stop giving that silly hate crime any attention.

Please. It really hurts to see so many people get scammed.

Legal Issues (0)

Anonymous Coward | more than 2 years ago | (#39048445)

Legal issues are primarily why I got out of Bitcoin months ago. The U.S. is going to crack down on this, it's just a matter of time.

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