Hacker News new | past | comments | ask | show | jobs | submit login
Warning Signs About Another Giant Bitcoin Exchange (nytimes.com)
360 points by donohoe on Nov 22, 2017 | hide | past | favorite | 251 comments



Don't forget that someone has been using Tether to wash trade bitcoin on bitfinex...

https://medium.com/@bitfinexed/are-fraudulent-tethers-being-...

https://medium.com/@bitfinexed/wash-trading-bitcoin-part-ii-...

It was widely believed that the tethers being "sold" weren't really backed by anything and were being used to inflate BTC prices. Now they are claiming 30M were stolen? I'm betting it's going to end up being a lot higher. They are using 30M to soften the blow of the higher number. I believe this tactic has been using by Yahoo and others in announcing the number of stolen accounts as well.


Tether has a blockchain so you can see for yourself how much was stolen. Also, they blacklisted the hacker's address^.

The @bitfinexed narrative is so flaky, especially the chart "proving" that Tether issuance pumps BTC. I could post a similar chart showing that my trips to Costco pump BTC.

There are legitimate concerns around Bitfinex and Tether^^ but the FUD has gotten out of hand.

Things to keep in mind if you disagree:

1) There is increased demand for Tether mostly from exchanges other than Bitfinex. They aren't even the largest holder of Tether by a long shot. This explains increased issuance as much as any conspiracy.

2) There are no widespread complaints about being able to withdraw from Bitfinex

3) There is no premium on BTC price on Bitfinex as there would be if there were problems withdrawing in things other than BTC, a la Mt. Gox.

All this being said -- all this would go away if they would prove they had the funds backing Tether.

^https://twitter.com/petertoddbtc/status/932862730415017984

^^Mostly, IMO, around 1) making themselves a target for FinCEN, 2) the market not pricing a proper risk premium into Tether


> I could post a similar chart showing that my trips to Costco pump BTC.

Obligatory mention: http://www.tylervigen.com/spurious-correlations


Baffling how you think that's relevant here.

A relevant analogy would be a correlation between "trips to Costco and dollars spent at Costco". Do more trips to Costco definitely cause more dollars to be spent there? Maybe, maybe not, but there is strong reason to believe so.


It’s relevance is in how clearly it illustrates the ease of being able to correlate two unrelated things, but despite this fact many people repeatedly try to use correlation to imply causation.


> Tether has a blockchain

How can they create new tether on demand if it's backed by a blockchain? Do they control all the mining?


It is not really on its own blockchain. Tether exists on top of the bitcoin blockchain through the OMNI layer protocol. I discovered this the hard way by trying to transfer some Tether once and it was taking forever and I researched why. Bitcoin itself is very slow due to congestion from the silly 1 mb blocksize limit and 10 minute blocks.


Something like that.


Stupid, right? Why don't they just use a Postgres database?


Because then we wouldn't have a known number of issued coins as well as the full set of holders of those coins? Nor would we be able to trustlessly send them anywhere?


> Nor would we be able to trustlessly send them anywhere?

That’s not the case anyway, since Tether can retroactively refuse to honor tokens that were allegedly stolen. What if the attacker had traded his 30m Tether-USD in exchange for bitcoins? Then the seller of these bitcoins would be left holding the bag, because the central party that is Tether refuses to honor these obligations.

Tether can never be trustless, because it’s credit. Some party needs to redeem tether tokens for USD, and if that party refuses to do so then your money is gone.


people who hold Tether trust the Tether system that is enough to keep the peg to the dollar for now, but I have doubts the peg holds


I don't understand your point. Are you saying Postgres is not capable of storing a list of accounts numbers with balances?

Also, how is something "trustless" if all the miners and validators are run by the same person?


Because the cryptocurrency set is more easily impressed by a "blockchain" than a "database". E.g. this nonsense: http://www.ibtimes.com/un-will-use-blockchain-ids-fight-chil...


Amazing.


/r/bitfinex has quite a lot of people claiming both ways. The people having problems withdrawing say support is non-existent.


This is why I qualified with "widespread". All the exchanges have poor support, and all of them have haters. It wasn't long ago that even seemingly knowledgeable people were urging people to get out of Poloniex because they were about to be the next Gox. Nothing yet, in fact they've gotten better likely because the exodus of many traders eased the support and scaling burden. Again, I don't mean to defend any exchange in particular, it is still the wild west and I'm sure a lot of shady stuff goes on. There's just a lot about the Bitfinex narrative that doesn't make a lot of sense, and it seems mostly because one guy has built a successful brand around beating his drum the loudest.


> It wasn't long ago that even seemingly knowledgeable people were urging people to get out of Poloniex because they were about to be the next Gox. Nothing yet, in fact they've gotten better likely because the exodus of many traders eased the support and scaling burden.

I have no idea what the truth is there, but this sounds a lot like "people said Y2K would be a big deal and spent millions fixing code and then nothing happened!"


We also have some proof of this belief now. Wells Fargo stopped Wires to Tether on March 30, 2017 and Taiwanese banks stopped all international wires from Tether on April 18, 2017.

Tether has since issued 600 mill new tokens.

Source: https://tether.to/announcement/


I noticed that NYT wrote "Since then, it has moved between a series of banks in other countries, without telling customers where the exchange’s money is stored." but afaik there is zero evidence that there was any bank that interacted with Bitfinex after Wells Fargo dropped them.


But the comment above suggests that Taiwanese banks worked with them after Wells Fargo. Is it sloppy research on NYT's part or is BFX's claim unverifiable?


NP@NYT summarized a long-standing Twitter discussion - he's put in little to no independent work on the story.

Tether has claimed to have audited bank statements from the start. To date, they've never performed a real audit from an internationally recognized auditor.

In Sep '17, Tether paid for Friedman to state that they had ~$350m in USD in certain bank accounts. The bank names and locations were blacked out. If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity). Over the past two months, Tether has issued another $300m in USDT while transparency remains opaque


> If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity).

Can you expand on this?


Auditors sell trust. If an auditor says that the company has $XX in their bank, you're more likely to believe the company. If an auditor is found to lie, you get Arthur Anderson. In a full audit, the auditor bears the risk of fraud, and they get paid for assuming that risk.

In the note (not a formal audit, but literally just a letter) they gave Tether, Friedman consistently uses language like this:

- "We have not performed any procedures or make any conclusion for activity prior to or subsequent to September 15, 2017."

[note: audits are usually for periods of time, not snapshots at a certain point in time]

- "Screenshots from the Client of the balances in each Tether address purportedly controlled by the Client".

- "FLLP ... makes no representations about the Client's ability to access funds from the accounts or whether the funds are committed for purposes other than token redemptions."

Basically, Tether is representing to the world and their clients that Friedman has rubber-stamped the USDT-USD relationship Tether claims. On their website, Tether claimed their bank balances are audited (they're not), and Friedman happens to be an auditor who sent them a letter.

Friedman is saying that "all we know is that Tether had matching funds attributed to their names in certain banks on a certain date."

Tether could very well just have placed those funds in there temporarily, or have a side-letter with these unnamed banks to move funds in and out of the account for a snapshot in exchange for a fee, or have an arrangement via which they've borrowed using the funds as collateral. These are scenarios that either a full audit or a regulatory body would protect against.

-

Note: looks like Tether took down all references to their past audit issues from their website, but they forgot to remove the Friedman letter: https://tether.to/wp-content/uploads/2017/09/Final-Tether-Co....


Very interesting, thank you


Although you're right that if tethers are not backed by anything they'd inflate BTC, keep in mind this is likely an extremely small effect, because a lot of the inbound also occurred throughout time, and at any given time, the vast majority of trading and volume was outside of any trade involving tethers. It should be well below single digit % - a lot less than the daily volatility, hence any influence on BTC price is negligible unless I am missing something (which is entirely possible, I'm new to this stuff).


The Tether liability is about the same size as MtGox was, in dollar terms, when things started to unravel. That wasn’t a small effect.


In order to equate those, you would have to

1. either divide it by the market cap then and now

2. or divide it by the size of the order book(s) then and now

The first should give you a longer term view of the effect (I'd guess maybe a month?), the second a short-term view of it (within hours).


The first is rediculous. Market cap is meaningless, especially in bitcoin where it isn’t even known well how much coin is accessible, and velocity of those coins in circulation is so low and order books so thin by comparison.

The effect is exactly comparable to how much value will disappear. That’s how many lives will be affected, people disillusioned, etc.

I honestly don’t know what you’re trying to argue in the last paragraph.


You're right, market cap is not the best indicator. But the point is that it's not an equivalent comparison, and that point stands.

Let's do some math:

In Feb 2014, ~12,400,000 BTC had been mined. In the case of BTC, that's not really equivalent to "being in circulation", as many of those were probably forever lost in various unrecoverable wallets, but we'll pretend it was 12.4 million anyway(^1). 850,000 BTC ($450 mil) were stolen in the MTGOX day parade. That equated to nearly 7% of BTC in circulation.

This whole Tether thing, though also valued at around $500 mil, is not equivalent.

$500 mil right now is 61,000 BTC. There are currently 16,700,000 BTC in circulation. Making the Tether stuff only equate to 0.3% of all Bitcoin. I'm assuming that is what OP meant, and they are right - 7% is very different from 0.3%.

[1] - this actually makes my estimates more conservative than they could be, because I can almost guarantee that the BTC mined from 2014-2017 are more accessible than BTC mined from 2009-2014.


> $500 mil right now is 61,000 BTC. There are currently 16,700,000 BTC in circulation. Making the Tether stuff only equate to 0.3% of all Bitcoin.

That's also not the correct way to look at it. The price hasn't been a constant $8200 during the issuance of those tethers, it was lower earlier. So way more than 61,000 BTC could have been bought with that money.

Besides, to figure out what effect tether has had on the price you need to factor in liquidity, not the total supply of BTC. If the real value of tethers is much lower than their nominal value (because they are not actually backed by dollars), and they were used to take a significant percent of BTC off the market, then the price of BTC is significantly higher than it ought to be.


> The price hasn't been a constant $8200 during the issuance of those tethers, it was lower earlier.

The same holds for the bitcoins bought with dollars at Mtgox.

But to end the discussion:

  Dec 31, 2013: Marketcap 10  bn, Vol 34 mn
  Today       : Marketcap 240 bn, Vol  8 bn
So 600 mn had a much bigger impact (20x daily volume back then) than they'd have today (0.075x daily volume).


What exactly do you mean by "take a significant percent of BTC off the market"?

If this is some sort of Ponzi/exit scheme like many people are thinking, and all that BTC is effectively stolen by Bitfinex, I'm sure they'll spend it eventually. It's not like they're taking Bitcoin, giving people Tether, and then burning the Bitcoin.


> The first is rediculous

So you're saying the same amount of money in 2013 will have the same impact today? I don't think so, market cap is a proxy for this. It's not a good one but it is one.

> The effect is exactly comparable to how much value will disappear.

Yes but it will be shouldered by many more coins and many more dollars.

> I honestly don’t know what you’re trying to argue in the last paragraph.

You can compare the 600 mn mtgox impact using either of the two proxies, liquidity will give you a view of what will happen in the short-term, market cap will give you a glimpse of what will happen after the initial shockwave went through the orderbooks.

PS: It's "ridiculous" not rediculous.


yep: the Tethers are being used for margin lending, so a small amount of Tether can drive the price up quite a ways. Particularly with wash trading, spoof orders, tape-painting and other such shenanigans that are (rightly) banned on proper securities exchanges, but are de rigeur in Bitcoinland.


> I believe this tactic has been using by Yahoo and others in announcing the number of stolen accounts as well.

"We lost personal information of 57M users, but no credit card leaked and we paid the hackers to delete it"


You might want to get more info. Not a single dollar was stolen. Their “blockchain” was hacked. It can distrube them but not bankrupt them. The USD will be always on their bank accounts if they are holding full reserves.


One thing I have been remarking recent conversations with other long-interested crypto-friends hasn't been about the price action, or about the drama, or about the lack of transparency on exchanges like Bitfinex -- but rather about the comparability of discussions today to those we were having in 2013. (Disclaimer: I attempt to avoid holding strong opinions in this space)

There are certainly patterns in the environment (maybe marketplace) which are repetitive and reminiscent of the early days. Confusion around price is one. Two viscerally opposed schools-of-thought is another.

One thing I think, though, that has suffered is the availability of information assessing the market structure or environment on it's merits/deficiencies without bias. This is likely hard to achieve, in general, but these days you cannot find reliable news without being sucked in to the swirl. Coindesk is pulling a CNBC-of-crypto, articles flying out every hour with opposing themes. I totally understand the model, captivating the audience, but it makes it hard to observe what's happening fundamentally (without having a grasp on the core narrative).

I continue to follow, in a casual way, but as I said continuously impressed by how the environment remains young -- trends from '13 persist to '17 and probably '18 (still young!).


Is it possible that a large part of the back and forth of mixed article opinions is to drum up volatility? Because if that were the case it'd most benefit people who make money buying and selling on exchanges. They don't just make money when it goes up.


AND not to mention it makes money for those who own the exchanges -- volatility == more transactions and hence transaction fees.


Kudos to you for not having strong opinions. Is there ANY place you recommend for information in this space?


Coindesk is intimately linked with blockstream, the company that has gone to great lengths to take over the github repository, censor /r/bitcoin, and ultimately keep the block size limit at 1 MB so that they can profit from fees on their own 3rd party chain.


The controversy surrounding BlockStream is fairly well known, but what is the connection between them and Coindesk? I've not been following that side of things.


As far as I can tell, they both share a minor investor, Barry Silbert. And anyone who thinks that means anything hasn’t been paying attention to what went down regarding the New York Agreement, where Blockstream (standing alongside many others) opposed Barry and won.


Have a shred of evidence to back up your rediculous conspiracy theories?

This isn’t Reddit. If you make wild accusations, back them up.


Which part do you think is a theory? Censorship on /r/Bitcoin is trivial to test, just go there and post something about censorship, criticism of blockstream, the high fees on the main chain due to block size restrictions, etc. See if your comment stays. Don't forget to log out and check that it wasn't silently grey listed.


> Coindesk is intimately linked with blockstream,

As I said in another comment: "As far as I can tell, they both share a minor investor, Barry Silbert. And anyone who thinks that means anything hasn’t been paying attention to what went down regarding the New York Agreement, where Blockstream (standing alongside many others) opposed Barry and won."

> the company that has gone to great lengths to take over the github repository,

I have no idea what this is in reference to. The Bitcoin Core repo? The release manager for Bitcoin is employed by MIT DCI. The largest group of contributors is from ChainCode Labs. Of the half-dozen or so people who have commit access (a meaningless metric since no one has unilateral authority and they operate by consensus), only one works for Blockstream, and he has some sort of special contract where he is independent and isolated in his decision making capacity and can leave, with pay, at any time for any reason.

> censor /r/bitcoin,

There is no relationship I know of between r/bitcoin and Blockstream. r/bitcoin seems to like Blockstream, but that's not their fault. r/bitcoin has also had some issues with excessive moderation, but none of the mods there work for the company or are in any way tied to Blockstream afaict.

> and ultimately keep the block size limit at 1 MB so that they can profit from fees on their own 3rd party chain.

Blockstream's supposed scaling solution is Lightning, a peer-to-peer protocol where the users collect fees from each other, which they are developing in an open source basis with multiple compatible implementations and no vendor lock-in. It will probably reduce the fees paid to miners for comparable levels of transactions, but with those fees being collected by users directly. There doesn't appear to be any profit opportunity for Blockstream here except perhaps consulting income in helping people and industries setup and maintain such networks, which has been their "RedHat of Bitcoin" model from the beginning.


Theory part is this: "Coindesk is intimately linked with blockstream". As far as I know, there is no evidnece of this.


BTC is special because it's designed and desired to be a pure transaction system, separated from all of the "soft" skills like human trust. It's EVE Online with real money.

Thus, everything that makes BTC interesting for use the real world -- trying to use it to buy stuff, to put it somewhere safely, etc, it fundamentally broken by design, because none of that real world stuff has the mathematical strength of the core bitcoin protocol, and all the players are trying to operate on the assumption that none of the stuff that makes the real world work is important in the BTC world. It's an anarchic paradise, bubbles and scams as far as the eye can see.


    >  it fundamentally broken by design
Literally three comments up you are blaiming speculators for the fact it isn't being used as currency, rather than design.


This has no relevance to the comment you’re replying to except that it’s about cryptocurrency.


As someone who lost over 100 bitcoins in a sketchy mining pool, for the love of god, please be careful. I was in early on this madness, and dedicated my gaming rig for a couple of years. Basically forgot about it, until one day I went to move my coins only to find the site just a Cloudflare mirror. Learn from my mistakes and be careful.


How did you lose money in a mining pool? Hopped in a cloudmining scam?

Mining pools don't store funds, you tell them your payout address.


I seem to remember that in some pools you had to initiate a payout to your wallet through the pool website. Payouts weren't automatic.


They used his machine for mining over the years but never paid?


In the early days, I fairly sure you had to manually request a payout. Even when automatic payouts were added, the default thresholds to trigger a payment were at what would now be a fairly significant amount.


They used to store funds.


Not all pool software was, or even still is so enlightened.


eh, just 100 bitcoins (stop whining, back then).... $800K today. Damn!

It's still the wild, wild west in that world. Those few that saw it 6-7 years ago, made bets that were relatively small, sorta buying lottery tickets. It takes a lot of "faith," for a lack of better term to invest serious money now.


It's not quite that simple. I sold 5 BTC at the $32 peak and felt smart. It crashed right after, and I paid a phone bill.

The temptation to sell was far stronger in the early days, mostly because people were unprepared for the sheer volatility of BTC. It's been the most lucrative tulip farm in history, and unlike tulips BTC is useful. It's hard to know where it will top out.


I disagree. I don’t want to play the smartass, but I’ve been into Bitcoin since late 2012 and I just started to sell very recently, when a small investment (low 4 figures) and some lucky events like particiating in early ICOs (for ex. Ethereum in August 2014)became a life changing amount of money (high 7 figures).

This is not entirely true because I sold a little (very little) in November 2013 just to be able to “touch” those paper profits. I needed to see they were real and could impact my life. Anyhow 95% of my stash remained untouched until very recently.

The rationale for me was crystal clear: this technology has the potential to change the world forever (yes, I’m a true believer). This shit can be the biggest revolution since the internet. Sure, it can go to 0, but the downside is clear: I could just lose everything that i invested, which definitely was money I could comfortably afford to lose. On the contrary the potential upside is enormous, 1 dollar could easy become 10k.

Therefore I simply decided I was not going to sell unless I could comfortably retire on the profits. And that I would leave a little btc for my kids, no matter what.

I really can’t understand how anyone could buy Bitcoin early on with a different mindset.


I bought at $4 with the knowledge that it could hit $50k a coin in a relatively short period. But I sold most of it anyway. In my mind the odds of bitcoin being banned go up every day. People on HN underestimate how much we rely on the financial system to enforce regulations. Governments are not going to just give that up. It’s lasted longer than I though it would, and it might last forever if there is a way to get regulators involved, but 7 years ago I estimated that at 5% odds.


But the thing about Bitcoin is that it’s made to be censorship-resistant. It is resilient. If you read Satoshi’s posts on Bitcointalk he simply assumed Bitcoin would have been banned at some point, and that’s why he made the design choices he made. Bitcoin is designed not only to survive but to thrive in an adversarial environment.

But then, even if a government ban could really destroy Bitcoin (i’m certain it wouldn’t, I remind you that Russia banned it for a while and 0 fucks were given... what about sharing films on Bittorent? Did the ban do something?) you say there’s a 5% chance the ban will not happen.

I will take any day a bet that gives me a 5% chance that every dollar i bet becomes $10k. And I won’t exit that bet unless i’ve made enough money to retire comfortably, which is what is happening to me now.


Unlike websites governments can do a 51% attack on Bitcoin which would 'kill' it in weeks.


No, they can’t. And even if they could the network would just fork to a different hashing algorithm, which means that the attacker would have had burnt hundreds, if not thosaunds, of millions for nothing.


Never underestimate what a government can do. If they want, they can make bitcoin as popular to hold as child p//n on your PC. Go ahead then


China can take console of all of their miners in the country which would all for a 51% attack to be profitable ignoring opportunity costs.

In this case forking does not help as they maintain control of the equipment and have access to massive CPU and GPU resources to swap to alternative architectures.

Now, if you think bitcoin maintains value if there are zero transactions for ~6+ months you are clearly mistaken.


How is bitcoin useful? Other coins do exactly the same thing with faster transactions, more anonymity, and lower fees.


There's a ton more infrastructure behind Bitcoin, like ATMs, hardware wallets, point-of-sale systems, exchanges, and more physical and online stores accept it.


And the ability for cryptocurrencies to evolve and update over time means that the network effect could be the single largest factor in determining it's worth.


I'm interested to see how this will evolve.

Right now you can use bitcoin's network effects to some degree with altcoins. eg. You use xmr.to to buy anything that you can buy with bitcoin with Monero.

This is a band-aid of sorts for the time being but I don't see why services that currently allow you to use bitcoin could not upgrade to include a better currency/currencies?


Well, the security of a cryptocurrency (assuming Proof-of-work based) comes from the total amount of work that has happened in the chain since your transaction.

Because of that, the largest cryptocurrencies with the most work behind them will naturally be the most secure the quickest.

Monero might have some very good benefits, but the much smaller size of the network means it's a magnitude easier to attack from a state level adversary.

And the fact that Bitcoin can (and will) evolve over time means that the benefits from other cryptocurrencies can be put into Bitcoin as they become useful or proven.

This is already happening with Bitcoin, and it's not going to stop.

That being said, I don't think that other cryptocurrencies are pointless, and I do believe that they can continue to happily coexist. Ethereum is focused on the "smart contract" side of things. Monero is focused on privacy. They can all have their uses and specializations, and they can all exist together in the same ecosystem.

Even if Bitcoin ends up not being able to adapt and evolve for whatever reason, being a "store of value", your cryptocurrency savings account, is still a valid use case, and can continue to be one even if there are cryptocurrencies that do everything else objectively better.


Bitcoin radically gimped their VM at the start, destroying the inherent value of the coin.

BTC is going to die to a gen 3 VM that learns from the ETH mess of gen 2 and just ungimps the BTC VM.

I don't believe BTC has the political leadership to fix that poor decision, given that a) they've demonstrated poor leadership until now and b) some of the people involved in the gimping are still in positions of influence.


What do you want to do with BTC scripts that you can't do now? P2SH lets you use arbitrary scripts, at least.


Maybe they do.

I can't find a single reference on them that contains actual details on the computational model because the internet is full of vapid circular search bait, particularly about cryptocurrencies.

The last I checked, the BTC VM disabled most useful opcodes, which meant you couldn't actually make money automatically redeemable for a large number of constraints you would want to impose.

My quick search seems to support that the VM still disables many opcodes: https://en.bitcoin.it/wiki/Script


I only count 15 "disabled" opcodes on that chart, the majority are usable in P2SH transactions.

What specifically would you like to see done with Bitcoin scripts that can't be done?


3-SAT solution verifiers, and modest extensions to other kinds of problem spaces.


How do you verify 3-SAT? Just plug in the values and check if it evaluates to TRUE? I assume the idea is to pay people to solve NP-hard problems via TX's, which is a kinda neat idea imo.


It's just asking if many 3 term clauses ANDed together are true for a given input set, so you'd give the inputs to spend it to your wallet. Automatic bounties on optimization (sub)problems, yep.

For various reasons, you probably want to use arithmetic and string operations for encoding certain problens. You could do it in bit operations, but efficiency.

I can't take credit for it -- it's one of those things that was floating around as a usage early on, but the features were killed.


Which features? Looks like (arithmetic, not bitwise) AND/OR/NOT are supported, I'm not an expert but it seems like this could be do-able. I'll have to think about this more maybe I'm missing something.


Network effect. Try buying MDMA online with Dogecoin.


So they are useful too?


Liquidity is the most important property of the cryptocurrency. Faster transactions, anonymity or lower fees hardly matter if there are no places where I can spend the currency. Or if I sell services with it, there are no customers willing to pay.

It is a huge chicken-and-egg problem, but looks like Bitcoin has solved it at least some level, since it is accepted on quite many places. We might start seeing services and merchants adopting other cryptocurrencies as well, but currently those alternatives don't seem that widely adopted.


the same applies to the dollar, which is useful, only not the cheapest, fastest or most anonymous...


A few of us in my office bought several years ago. It went up 50% and then dropped dramatically. We've talked about how seeing it drop and then forgetting about it for a few years probably stopped us from bailing whenever it's peaked and trough-ed since.


I sold a fair number of bitcoin early on (30-50 IIRC) for a few dollars a piece. I feel like it was the right call at the time (paid for a new graphics card and a few nights out, and a few economics students with whom I was friends and I expected it to bubble and crash completely -- which it mostly did, then has repeatedly rallied after that), but the feeling of "What could have been" comes on every now and again.

Edit: found my Gox emails - it was in June 2012.


eh, i sold my 250btc at the hugely inflated price of $20, made out like a bandit i did (bought at $4)! even got my cash out of mtgox before it imploded. a regular uncle moneybags i am!


For what its worth, if you tried to cash out $800k today I think it would take some time to clear. The paper value of Bitcoins is grossly inflated over the actual market cap. It's a natural reaction to the inherently deflationary nature of the currency, everybody wants to hold on to them because they're only going up! This restricts supply and causes the prices to go up even more. Unless you can buy goods and services (more than drugs and burritos) with Bitcoin directly the wealth is a fantasy.


You can clear that much Bitcoin in five minutes with maybe 5% slippage, or in a day with close to 0% slippage.


I’ve never cleared that amount of money on an exchange. For ~1M and above you use OTC a brokers. You have brokers in the US that can transfer you $20M per day without impacting the market in the short term. That’s how big ICOs liquidate their crypto millions.


It's surprising to me that the rather straightforward question of whether Tether (Bitfinex) is actually holding the dollar reserves against the issued tether tokens is so difficult to answer.

Just the fact that the company has not definitively disproved the accusations of fraud against it, which have been instesifying for weeks, is evidence that there is something to the charges.

There is a not much discussed point I'm curious if anyone here has a perspective on.

Tether has claimed that their business model is based, in part, on earning interest on the reserves they (supposedly) hold to back the issue tether tokens.

It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.)

This strikes me as rather suspicious: that a significant part of the explanation for how Tether earns money doesn't make sense.


> It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.)

Even zero-risk loans (usually) have a non-zero return. The yield on 1 month US treasuries is about 1% [1]. That is about the lowest risk asset you'll be able to find. Certainly lower risk than a business account at a bank.

[1] https://www.treasury.gov/resource-center/data-chart-center/i...


It's probably part of their agreement with the bank(s) -- if they're even traditional banks -- not to reveal the relationship except to certain parties.

And yeah, assuming all the funds do exist, I'd be amazed if they were being held in a risk-free non-interest bearing form. Which is why it's a bit crazy that Tether sticks to the peg so well -- the NPV of a Tether accounting for even non-conspiratorial risks has got to be less than $1


> It's probably part of their agreement with the bank(s)

The point is that Tether and Bitfinex have the power to publish their bank balances, and they could authorize their banks to confirm the deposits if they wanted to.

Why would they refuse to do this, even while under intense suspicion of actually not controlling 1:1 reserves, unless the accusations were true?

The question of interest is a distraction. Businesses usually hold cash in money market accounts or do short-term repo agreements to get a little yield with very low risk. But that yield would be at most 2% a year, so not relevant to the real question.


To see adoption go as wide as current HODLERS hope BTC can go newbies need to be insulated from the type of insanity laid out in this article.

Like at bare minimum and for the survival of crypto nobody should trade on unaudited exchanges.

Or a step further despite Coinbase's scaling issues the fact that they have both insurance coverage and FDIC coverage on all accounts makes me much more likely to refer people interested in starting w Bitcoin there than anywhere else.

But this is also the kind of centralization that Crypto is designed to avoid.

https://support.coinbase.com/customer/en/portal/articles/166...


> they have both insurance coverage and FDIC coverage on all accounts makes me much more likely to refer people interested in starting w Bitcoin there than anywhere else.

Very misleading statements.

The FDIC coverage does not include any bitcoin wallets. The bitcoin insurance only covers their hot wallets (something like 2% of all the bitcoin they hold). Yes, cold storage is a bitcoin security best practice, but it obviously does not eliminate the chance that a breach could occur, and if it does, none of that 98% is covered.

With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape.


> With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape.

They have been victims of massive USD chargebacks. I think Coinbase is bleeding so much money to chargebacks that co-founder Fred Erhsam figured out company is never going to turn a profit and resigned.


If their chargeback rate was as high as you said it is, they would be kicked off of the acquiring networks (visa, mc) and be prevented from opening merchant accounts.


Completely unfounded nonsense. Their profit margin is much higher than the fraud rate (as others pointed out, if fraud was as high as you say, banks would have shut down the relationship years ago).


Paypal turned that around, so in theory it's possible for Coinbase to do the same.


PayPal turned it around because they are a fiat-only company.

Coinbase is a Bitcoin-Fiat company, and fiat is reversible while Bitcoin is irreversible.


My understanding is that Paypal eventually developed a system to prevent fraud; they didn't just revert all fraudulent transactions. If Coinbase can eventually prevent fraud then irreversibility doesn't matter.


I thought AHC transfers were very difficult to get chargebacks on. How much could they actually be losing on these events? Are they actually not that rare?


The ACH system in the US is rough. It operates on the theory of "success in absence of failure/chargeback." In most cases, this is fine. You use ACH to pay your rent but charge back? You get evicted. Use ACH for your mobile phone bill and charge back? Your phone gets shut off.

With easily transferrable assets it gets tough. The charge back window is on the order of 30+ days.

You buy BTC via ACH at $X and a week later it's $X/2? Chargeback "I was hacked!". You can fight it as the merchant, but it takes time, tons of documentation, and dealing with traditional bank compliance departments that a) don't know what BTC is or are trained to distrust it, b) are trained to protect their customers, c) are overworked, and d) have no vested interest in resolving it correctly irrespective of evidence.


They are pretty easy to chargeback as long as you initiate it within 30 days of your first transfer. Give a notarized letter to your bank stating that you did not do these ACH transfers to this "Coin Base" company.

You can get ACH charged back for up to 180 days with more involved procedure.


When your bank figures out that you're probably full of shit, are they likely to terminate your account and/or report you to the police for fraud?


Terminate, yes. Report you to the police, not sure.

Chargebacks for small amounts are often paid by the bank itself because it's cheaper than actually disputing with the merchant, so banks will certainly terminate accounts of customers who abuse that.


I've heard in most cases, banks don't bother investigating / pursuing (credit card) fraud for amounts <$10K.


Honestly it sucks that these incredibly sketchy exchanges do so much volume. Poloniex and Bitfinex are sketchy as hell, but I guess their fees are low so no one cares.

It would be somewhat surprising if bitfinex doesn't go down in a spectacular ball of fire within the next 4 years.


It seems like an example of market failure that radical transparency isn't rewarded.

In the cryptocurrency wild west, there are no government regulations, no deposit insurance, no SIPC.

But a new kind of exchange could hold themselves accountable and publish their assets and liabilities every day.

They could publish the addresses that hold cryptocurrency and sign messages to prove they control these addresses.

They could authorize their banks to confirm deposits of national currencies.

With this data, audits of their positions could be automated and updated every day.

Why would traders risk losing their funds to sketchy, secretive exchanges?

A radically transparent exchange would have an enormous competitive advantage and attract large volumes.

This liquidity would drive down spreads and the exchange could operate profitably with lower fees, further driving up volumes.

So why doesn't this exist?


There is a very vocal minority of the cryptocurrency space that are against any companies that do follow the regulations.

There are thousands that are boycotting Coinbase because their KYC systems take too long, or their deposits/widthdraw take 2 weeks sometimes. Just today I was reading a thread on Reddit where someone was claiming to be currently sueing Coinbase because their account was closed due to them depositing from a bank account that didn't match the name on the coinbase account...

Or people don't use them because the fees are marginally higher.

I just don't get it. If I'm going to put my money somewhere, I want the place to be following every US law, and charge enough fees that I'm not worried they will go bankrupt or resort to shady tactics to make money.


Yeah it'll be interesting to see how this all shakes out.

I used to be pretty Randian/anti-regs but I now see that places like this need to operate under some level of regulation to ensure they aren't massive conduits for money laundering, and are subject to basic rule of law (e.g. following court orders).

The real question is the extent to which people see operating outside the law as a good thing. Sure, it may be cheaper in the short run, but in the long term, having recourse to courts, police, and other standard norms of civilized society might be worth more than people realize.


I don't equate Randian with "anti-reg".

Rand speaks of an ethos of personal accountability versus one that hides their crimes behind a facade of claimed social norms. It's not an issue of private business vs public regulation other than the sort of people each group tends to attract.

Rule of law is pretty important to having a fluid economy. I've looking into starting businesses in parts of the world with fewer regulations - hard-to-attain power becomes the defacto currency in those economies. In crypto, the corollaries are Tether-like frauds and electricity-theft driven mining pools.


I'm not even talking about KYC or US law or anything else. If you want that, there's Gemini and Coinbase.

I say, fine - run it anonymously from Hong Kong for all I care, just be transparent about assets and liabilities so everyone can see that you're solvent.

If someone did this, wouldn't they quickly take the lion's share of volume away from the sketchy exchanges?


Its a space where millions are raised on nothing more than a whitepaper, probably a bit idealistic to expect rational actors.

Bitfinex has been undergoing third party audit from Friedman for months now. No one cares though and still throw accusations around like confetti.

Anyone who knows this fact and doesnt trust Friedman as a multinational auditor/accountant should say as such, rather than repeating blatant falsehoods.

It quite easy to see what others have to gain from the negative coverage.

Exchanges ddos each other all the time, its a shady industry, 15mins downtime for poloniex can double the weekly income of small exchanges.

I'd hope hn readers see between the lines a bit more rather then jump on bandwagons.

https://www.bitfinex.com/posts/202

http://www.friedmanllp.com


> Bitfinex has been undergoing third party audit from Friedman for months now.

Is there proof of this? All I've seen (and I may be ignorant of the rest, so this is a legitimate request :) ) is that "note" from Friedman LLP that explicitly stated it was not an audit.


When stating easily verifiable information about the cryptocurrency industry the proof/sources request as some form of rebuttal seems to be a very common respone, always find it intruiging that many either don't want to search themselves or perhaps simply want to use it as a way to discredit a comment.

3rd result from googling "friedman bitfinex":

http://www.friedmanllp.com/insights/auditor-engagement

Now you said Friedman "explicitly stated it was not an audit", I searched and all i can find is blog posts and reddit threads. Any chance you could procure this explicit statement? Thanks.

The url I provided says the compete opposite and itself links to the original source I offered.


Have we experienced high-profile auditors, accountants and other "independent third parties" in the financial industry lying, prevaricating, or even acting in bad faith in recent memory?

http://www.mcclatchydc.com/news/politics-government/article2...

http://www.chicagotribune.com/news/chi-0209010315sep01-story...


Undoubtedely, I'm not going into bat for the financial industry here, but essentially it comes down to the delegation of trust that is required with many transactions, financial or not


If you don't follow US laws, you'd better not be taking any US currency, because you will get your shit shut down, and any US funds sent there most likely frozen at some point.


Ultimately, because large traders care more about short term liquidity than long term solvency.


Are liquidity and solvency mutually exclusive?

They seem symbiotic to me (exclusively mutual?).


But what does Coinbase has to do when people do stuff like this:

http://fortune.com/2017/03/19/irs-bitcoin-lawsuit/

Though the claim was lowered to 20k:

http://fortune.com/2017/07/10/bitcoin-irs-coinbase/

But with BTC prices increasing even this might prove troubling and net more than 14k customers which coinbase reported earlier: https://blog.coinbase.com/coinbase-irs-update-ed9c966c7747


> market failure that radical transparency isn't rewarded.

People want to believe. They're willing to risk lots of money to obscure systems for that. The last thing they want is transparency ruining the illusion.

I think Gemini was trying to be the most legitimate of Bitcoin exchanges, but without the shadow puppets trading producing fake volume on other exchanges it looks very empty.


That is basically GDAX. The fees are higher so it isn't worth it necessarily if you are day trading.


The only practical use cases for bitcoin as a currency are money laundering, selling drugs, evading capital controls and tax evasion so the least regulated exchanges are going to draw a lot of volume.

As a store of value, you’re depending on its continued use as a tool for criminals for it to appreciate in value beyond pure beanie baby-style speculation, so you depend on you still depend sketchy exchanges to drive the price.

When the futures contracts come out, there is going to be a massive price correction as bitfinex isn’t going to be able to print enough tether to counteract all the shorts.

Once the price of bitcoin starts dropping, people are going to try and cash out of bitfinex en masse, causing a run on the bank and collapsing the whole house of cards. I wouldn’t be surprised to see sub-1000 bitcoins by January.


> The only practical use cases for bitcoin as a currency are money laundering, selling drugs, evading capital controls and tax evasion

Bitcoin is actually terrible for these use cases since the blockchain is public and more traceable than your credit card. If you're really trying to hide your financial transactions then a better option would be something more anonymous like cash, or one of the other cryptocoins that actually does provide anonymity.

Your inaccurate and misconceived perception of what bitcoin's use case is would be laughable if it weren't so popular and wrong. I fear you're completely misunderstanding the new world economy. You think that bitcoin is a sideshow for criminals, and seemingly failed to see that maybe a large parallel economy is being created digitally.

You see, Bitcoin was created after the 2008 crash where the banks, the organizations we've trusted with our money for a century, made some deliberate and knowingly poor decisions and they lost a lot of money for many of us.

Bitcoin was invented so that never has to happen again, so that we can have a secure storage for our money without someone else controlling that money. You might say that bitcoin was created to get away from the wall street criminals. I suggest you pick up some cryptocoin (of any kind) so you're not completely left in the dust as the centralized banks lose power and the decentralized economy reigns.


> You see, Bitcoin was created after the 2008 crash where the banks, the organizations we've trusted with our money for a century, made some deliberate and knowingly poor decisions and they lost a lot of money for many of us.

I hadn't heard about that. Which banks lost their customers' money in the 2008 crash?


A lot of them of them but customers didn’t see their balance move because it was repaid indirectly with their taxes money


You seem to be interpreting this very literally as money lost from bank accounts.

Banking involves a lot more than simply money in checking accounts so I didn't think it needed to be established that a lot of people lost value in different ways in 2008. A number of banks packaged subprime mortgage lots that were misrepresented, sold and when they defaulted, they crashed the lending market which rippled through other parts of the economy causing job loss, real estate price crashes, stock value crashes and other types of lost equity for millions of people.

But I guess if you want to take it literally, then you're right... nobody had cash go missing from their checking account. I personally lost about $60,000 in equity, but my checking account was not affected if that makes you feel warm and fuzzy about saying no banks lost anybody's "money".


I certainly know of people who lost a lot of money as bank shareholders rather than as customers.


The banking system deliberately removed value from all holders of EUR, GBP and USD: https://en.wikipedia.org/wiki/Quantitative_easing


This is false. During QE, inflation rate was below target, so less value than normal was removed from EUR, GBP, USD, etc.


You can't measure value like that during a recession. Whichever way you look at it, QE removed value from those currencies.

If I were to rob you, claiming that the overall robbery rate was lower that year, so you weren't robbed by others, so your expected losses were lower does not change the fact that I robbed you.


If the money in my bank losing value is robbery, isn't Bitcoin robbing me all the time? Bitcoin price changes may not be intentional, but I don't see why that should matter to me.




Bitcoin replaces one tyranny with one that is far worse.

If it succeeded in displacing existing currencies as you attest, it would amount to an unprecedented and catastrophic redistribution and concentration of wealth.

80% of all bitcoins that can ever exist have been mined and are already owned; this is a monstrous design decision far more unjust than the inflation bitcoin sought to prevent.

Our current corrupt and stinking financial system is far preferable to the neo-feudal world of bitcoin where all spending power is concentrated in the hands of a tiny number of tech overlords who had the sheer good fortune to literally own all the money.


I think you're right in a lot of ways, but that doesn't change what is happening and the best option doesn't always win.


You convinced me, I’m putting everything into dogecoin.


Not really true, there are legitimate use cases for bitcoin. E.g. Cross Border payments, settlement between untrusted parties in a low amount of time, Transaction Settlement Layer etc.

Not saying there aren't a lot of dodgy transactions going on, or that the legitimate use cases will take off, but ignoring the practical use cases is misleading.


As someone who has dozens of thousands of dollars (not in Bitcoin, I sold some of them) on an exchange, what should I do with that money ? Should I ask the website to verse everything on my bank account ?


If you’re on a legit exchange you should be able to withdraw everything. You should never use an exchange as a bank. Have exactly the money on there that you intend to trade with and no more.


It's basically the opportunity cost of being able to trade quickly (xc->bank->xc would take 10+ business days) versus the risk of having co-mingled funds in an unregulated exchange.

The reason banks are regulated in the US is because the banking system pre 1930s wasn't too dissimilar from crypto now.


>The only practical use cases for bitcoin as a currency are money laundering, selling drugs, evading capital controls and tax evasion so the least regulated exchanges are going to draw a lot of volume.

I think it's somewhat realistic to envision a future where there is substantial transaction value of legitimate, legal uses. Maybe that future isn't probable, but the idea that the price of bitcoin would ever reach its current price seemed rather unlikely at one point, too.


I'm not conversant on the first part, but as soon as I heard about futures, I thought a correction would be likely. I suppose we'll see.


Amateur mistake!

Bitcoin cannot crash because you cannot sell and cash out in timely manner.


The CME futures won't mean a thing if the spot price they settle against is being manipulated. The future predicts the spot price so the spot moves the future not the other way around. Since the CME futures will be financially settled against the spot index look out for another LIBOR type problem where the future doesnt do anything except predict an artificial number.


It seems you misunderstand both derivatives as well as the Libor rigging. The price of a future absolutely can affect the price of its underlying, and the Libor rigging has nothing to do with any of this - the problem was that the value was not determined by the market, it was basically just a “vote.”


I work in derivatives trading (well did, recently fx). I see you do too. Fun huh.

I meant libor as in a futures price that was disconnected from anything meaningful not a direct comparison. The comparison was to how libor was easily rigged by those submitting quotes that weren't correct. Libor wasn't just a vote but a collection of informal (and incorrect) quotes.

When financially settled against a manipulated number the standard ways a future affects the spot (by taking delivery) doesn't apply.

Go read the proposed contacts for the future and real time BTC index. If the index is being manipulated the future doesn't stand a chance at correcting it.


Ah I see what you mean, that makes sense. I took quickly jumped to assuming ignorance regarding the Libor thing. I definitely agree with the concept.

This reminds me of potential VIX options manipulation. Not quite the same thing, and probably not as susceptible to manipulation, but a similar concept nonetheless: https://www.bloomberg.com/view/articles/2017-05-24/vix-tradi...

My experience is equity options, btw.


I used to run a trade of equity options against the closing cross near witching days. Cool.

I'm going to hit you up on linkedin. Always good to have good tech contacts.


Is there any independent evidence that they do in fact do so much volume? I know bitfinex in particular has been accused of creating fake wash trades in order to manipulate prices; this would also have the effect of increasing their reported trading volume.


Why do you suspect volume is faked? Bitfinex's volume is not even that high. It's only twice the volume of GDAX ($550M vs $250M in last 24h: https://coinmarketcap.com/currencies/bitcoin/#markets) and we know GDAX isn't faking volume or wash trading because of all exchanges in the world GDAX are the most law-abiding/professional, plus they have high taker fees (~0.25%) which make wash trading expensive/impossible.

So, with Bitfinex (1) trading 10 times more currency pairs than GDAX, (2) being older, and (3) having somewhat smaller fees, it's perfectly plausible they have manage to trade (only!) twice the volume of GDAX.


I don't have any reason to be suspicious beyond "they have been accused of this".

BTW the fact that GDAX has high fees doesn't mean it's expensive for them to create fictitious trades... they don't have to pay themselves fees!


I don't believe GDAX is creating fictitious trades. As I said they are the most law-abiding/professional. Plus they have 30,000 new users signing up everyday, so they certainly don't need to pretend they are successful.

Besides, I personally day-trade an average daily volume of ~$200k on GDAX's BTC/USD pair. And I am just one small fish. Imagine about a thousand other persons like me and it would easily explain their $250M daily volume...


Jeeeez you wrote hdminer in 2010...that is... being suuuuuper early in BTC! Congrats on sticking with it all the time! (Just realized I read that Whitepixel article on your blog a while back, awesome content!)


0.25% rates are only for plebs and noobs.

There are whale volume discounts available on almost every exchange. Mid-level whales can get 0% rate for trading over certain number of Bitcoins. Back in 2013-14 you could even get NEGATIVE rates for trading large amounts. I.e., if I trade a certain number of BTC, I get a rebate at the end of the month. High volume boosts exchange's rating and brings more customers, so it is a no brainer to offer rebates.

If you remember early days of Chinese exchanges, they were doing millions of coins a day in first week of their launch. That was clear example of Exchanges themselves doing wash trading. All volume data is available in public domain for verification.


I was talking about GDAX. You CANNOT get 0% taker fees on GDAX. The lowest is 0.10%: https://www.gdax.com/fees/BTC-USD


You are talking about Bitfinex, and using 24-hour GDAX volume to support your argument.

Bitfinex has traded 1 trillion (not billion) dollars in volume. How did a hacked exchange with no USD deposit or withdrawal method did it? Answer: wash trading and self-manipulation.


No, my sentence here was about GDAX: «GDAX are the most law-abiding/professional, plus they have high taker fees (~0.25%) which make wash trading expensive/impossible» You somehow replied to me implying fees could be zero or negative on GDAX. They can't.

Bitfinex traded $1 billion, not $1 trillion: https://coinmarketcap.com/exchanges/bitfinex/ ($1,168,128,071)


You are claiming that Bitfinex cannot do wash trading because GDAX has higher fees. Doesn't make any sense! I am suggesting that Bitfinex is doing tons of Wash Trading: https://medium.com/@bitfinexed/wash-trading-bitcoin-part-ii-...


What a terribly written piece.

«First, I know of at least one instance where it appears that a wash trade was not charged a fee for a trade.»

Absolutely zero evidence is provided. Just the author saying "trust me, I've seen it."

«Second, even if a fee is charged, that doesn’t mean a wash trader paying fees is really paying fees. If you’re a shareholder in Bitfinex, you’re allegedly paid dividends.»

This is mathematically false. Even if you hold, say, 10% of the shares (huge shareholder) you will still lose ~90% of your fees.

That's it. It's a thousand+ words post with ZERO evidence of massive wash trading.

The rest of the post is just ramblings on unrelated things.

I don't disagree there are shady/unethical practices occurring at Bitfinex, but wash trading is not one of them.


Bitfinexed is interesting. They remind me of Marc Cohodes, who often uncovers fraud but lacks the diligence to back up his claims and lacks the prose to convey his findings precisely.

Re Tether-Bitfinex-washtrading, the paper trail indicates that Bitfinex and Tether have the same controlling interests. Dividends aren't the deciding factor - figuring out how both businesses can generate income (Tether via issuing unbacked USD; Bitfinex by driving real volume via pretending to have fake volume).

Unlike the issue of unaudited bank accounts, the wash trading issue isn't as easy to point out, since it requires (a) knowledge of trades taking place behind a black box, (b) high volumes capital to test these trades that requires sending that capital to these exchanges you're skeptical of.


You are too trusting and optimistic, which doesn't work well given irreversible nature of Bitcoin transfers. Would you let me, a total stranger, hold your Bitcoins?

If not, then you should definitely not let British Virgin Islands based Bitfinex hold them either. Use less risky options based in USA or EU, so you are at least protected by a decent legal and regulatory system.


Now you're moving the goalposts


I mean that is definitely possible.

https://coinmarketcap.com/exchanges/bitfinex/

I put some btc on bitfinex to quickly buy some NEO and move it off the exchange this year.


Why does volume matter? BTC is failing as a currency because it's in a speculating bubble. So, volume is just BTC circulating among traders and storage systems, not being used for anything.


    > BTC is failing as a currency because
    > it's in a speculating bubble
This feels pretty inevitable. There's no reliable tie to any economic activity, virtually no raw materials are priced in Bitcoin, and there's no central institution that can price stabilize, so pricing anything in Bitcoin (rather than: x USD/EUR/GBP/whatever as Bitcoin) seems a long way off.

It's also -- comparative to fiat or commodities -- massively untested, so price shocks seem inevitable. Regulatory or technical risks that could reduce (or massively inflate) the value seem almost certain.


Apparently Bitcoin is trying to re-position itself as Digital Gold instead of currency now.

https://multicoin.capital/2017/09/21/bitcoin-better-digital-... https://medium.com/@tuurdemeester/bitcoin-digital-gold-or-di...


What does it mean that "Bitcoin is trying to re-position itself" ? There is no central "Bitcoin" organization, and the only person who might have been able to speak with authority about the goals of the project hasn't been heard from in years.


Bitcoin was always digital gold. That was it’s value proposition from the beginning: a return to the gold standard, in digital form.


I think btc is being more and more recognized as a store of value rather than a currency. Gold/stocks also fail as currencies and are also prone to speculation bubbles.


Funny, that's exactly opposite of my perception.

It seems too volatile to use as a unit of account or store of value, but almost perfect as a medium of exchange.


Are we looking at the same charts? https://coinmarketcap.com/currencies/bitcoin/


Mediums of exchange need to encourage usage, not hoarding.


Here's an interesting thought: you need a certain amount of liquidity to overcome the liquidity premium (https://www.investopedia.com/terms/l/liquiditypremium.asp). However, if the velocity of your asset is too high (nobody has incentive to HODL), then your asset becomes a medium of exchange because nobody wants to hold it due to price risk relative to fiat.

So the best digital currency is one that is valuable to be _held_ but still has high transaction counts.

The article that stimulated my thoughts on the matter: https://docs.google.com/document/d/1-ix9BDmGie8tPAwrfRKqe9CN...


Do you mean something other than velocity? It doesn’t make sense I’m hat context. (I’m not opening a google doc for security reasons).


The article is great and gives context. Maybe use a service like Pocket or a proxy to open the link?


Velocity is how quickly money changes hands. Did you mean volatility?


> not being used for anything

That is a common misconception on HN, almost repeated on every Bitcoin thread. There is, in fact, evidence usage for payments is sharply increasing:

https://blog.bitpay.com/bitpay-growth-2017/


Transactions != Payments

The increases in transactions are due to HFTs speculating: https://www.bloomberg.com/news/articles/2017-01-16/high-spee...

Also, 70% of bitcoins won't be moved for 6+ months, making it more speculative than currency: https://www.coindesk.com/analysis-around-70-bitcoins-dormant...


Did you read the webpage? BitPay is a payment processor. They mention the increase in total BTC transactions but it focuses on their growth as a payment processor


They're converting Bitcoins to USD and back again, which is HFT activity. People are not using it to make payments to people but converting it to/from other currencies, which is speculative and not currency behavior.


Bitpay is a payment processor, they receive bitcoin on behalf of a store, and then give the store USD or EURO or whatever. When Bitpay says their activity has gone up, that means more bitcoin is being used to pay for real goods, services, etc.

Please go back and read the article, or just look at their homepage...


Neither of those two articles mention bitpay. Did you reply to the right comment?


You didn't even read the page. They showed an increase in payments.


HN seems to be very negative towards crypto currency in general lately. Disappointing really.


If I was going to pay you 100k, would you rather receive it in btc or yuan? You are a chinese citizen in this scenario.


If you have the means to manage offshore funds, you'd want it in BTC so you can stash it somewhere outside China. If you're an ordinary Chinese dude, you'd want it in Yuan since that's the only thing you can spend.


It is not the fees but anonymity which these exchanges guarantee to a certain level. But with the increasing prices is making it hard for people not to get greedy and do something stupid.


There is no verification on the volume. They could say any number they like. That's how it usually play out.

Source: I ran exchanges before. That's one of the first trick you learn.


It is certain that US law enforcement will come down hard on Tether eventually. Anyone pretending to transfer dollars outside the banking system will meet the same fate as Liberty Reserve. When it happens Bitfinex will be toast, and Bittrex and Poloniex may fall too.


Why would Bittrex be hit by this?


Tether is a large fraction of their volume and likely deposits as well. If all that money vanished overnight their customers would be extremely upset. Also, without Tether they could no longer pretend to have USD support. So many people are fooled by "USDT" into thinking that they have dollars.

Could Bittrex push all the blame onto Tether and just keep operating as if nothing happened? I don't think this would work very well. At the very least this would suddenly point a ton of law enforcement scrutiny in Bittrex's direction which might end the unlicensed money transmitter party over there.


I believe the parent commenter is referring to other exchanges that trade tether.


Yes and no. With the 'owner' of BTC-e now facing extradition to Russia instead of the US, it appears that the US is rapidly losing control of the world monetary system. BTC-e was back up within a month as WEX, so it appears the US effort had no effect. There is nothing stopping someone from opening and operating a cryptocurrency exchange from a country without an extradition treaty. Even countries with extradition treaties are less keen than ever to extradite to the US, especially with the US facing war crimes charges in international courts. The US has made their position on torture clear. Other countries are concerned that by sending their citizens to a nation complicit in torture, they might face legal penalties or lawsuits themselves.

It's ironic, since the US gloated heavily when they took over the BTC-e domain. They thought that this would be another cut and dry Liberty Reserve, but this time they're caught in an international tug of war.


Hold up. The US is not “facing war crimes charges in international courts.” That’s a very dangerous mischaracterization of what’s actually happening, and you can’t just type things like that.

A year ago, Bensouda made some noise and said her administration at ICC wanted to investigate Afghanistan. (They’ve been looking at it informally for eleven years. They’ve been investigating Darfur since 2005; how’s that going?) Now, she has made more noise and requested formal authorization to investigate. She doesn’t have it yet. This seems like a pedantic point but is actually extremely important, otherwise we could say President Trump is facing obstruction of justice charges. He isn’t. They’re looking for them, and they don’t exist yet. Big difference.

https://www.icc-cpi.int/Pages/item.aspx?name=171120-otp-stat...

It’s certainly possible, though I consider it extremely unlikely given the political situation and resources of ICC, that charges will surface in the future. That said, ICC does not charge nations. It charges individuals. Long ago, we had our own debate on this under Gonzales regarding the applicability of the Geneva Conventions to unlawful combatants, which is how multiple administrations (and nations) have considered detained terrorists. The Hague is late to the party.

Worth noting that Bensouda is looking to investigate the “Situation in Afghanistan” (that’s a quote) as a whole, lumped us in with the Taliban and Afghani forces, and hedged our alleged crimes to 2003-2004, a courtesy she did not extend to other parties. I think it’s safe to say we all know what that’s about.


The ICC deal with matters under the following conditions:

1) The state is a party to the Rome Statute; or 2) Referral by the UN security counsel; and 3) The internal judicial processes of the state cannot deal with the apparent crimes

The US is not a party to the Rome statute (see "Invasion of the Hague Act" https://en.wikipedia.org/wiki/American_Service-Members%27_Pr...), and with veto power on the security counsel it seems unlikely to be referred to the Court by that body.

Therefore any suggestion that any US citizen/president is tried by the ICC is ridiculous. The threat is toothless. The ICC has no enforcers.


Do you have any good sources you recommend on the BTC-e "owner" and his story so far? I would like to read more about it.


Sources?


Its interesting to see how hostile HN is towards Cryptos. Completely ignoring the opportunities that it offers for fund raising Start Ups. At the same time HN likes to bash VCs that are uptight and how hard it is to find capital. I think this is a sign that even the tech world is not resistant to legacy thinking. Just like the legacy thinkers of other industries, like print and brick and mortar commerce were dismissing the new innovation that is happening on the internet. This time the "internet guys" that are so familiar with the legacy VC model are dismissing the new innovation in VC.

As with most legacy thinker its almost impossible to change there mind with arguments, they like to ponder on the risks and counter arguments, just to stay comfy in the status quo.

Banking, Finance, VC is one of the oldest industries with the least innovation in the last century.

The really smart VCs did already realize that and instead of shuffing their head into the sand. They started proactivaly getting involved into the field

Tim Draper of DFJ, (Tesla, SpaceX, Skype Early Investor) holds over 1B$ in the crypto space.

https://www.youtube.com/watch?v=obKtE1in7NA


HN was actually pretty pro-crypto 4-5 years ago, I think the tech world in general has started to see crypto and ICOs as a bubble within the last year or so.


Probably not wrong: I've started seeing crypto investment posts from friends who are musicians, teachers, and baristas.

https://blogs.cfainstitute.org/investor/2014/02/10/top-anecd...


> completely ignoring the opportunities that it offers for fund raising Start Ups

Millions in funds with zero accountability... ok that's a pretty decent deal, I can't argue with that.

> were dismissing the new innovation that is happening on the internet

Where is the innovation? The innovation with regard to print and commerce on the internet was that people could access publications and products without having to leave their home; a very clear benefit for consumers that was prohibitively impractical at best before the internet. Where is the innovation for cryptocurrency? It is clearly a marvel of technology that money can emerge from code, but, as has been repeated over and over again, it doesn't solve any problems for the vast majority of people. Credit cards and banks service all the financial needs for the vast majority of consumers and cryptocurrency offers no compelling benefits at the cost of serious risk, a technical learning curve, and an ecosystem full of scammers.

> As with most legacy thinker its almost impossible to change there mind with arguments, they like to ponder on the risks and counter arguments, just to stay comfy in the status quo.

And that right there is a great technique for engendering hostility: condescending ridicule in response to criticism. Yeah, we're all just bitter naysayers stuck in our ways, probably just jealous because we didn't get on the bitcoin rocket to the moon back in the early days.

> Banking, Finance, VC is one of the oldest industries with the least innovation in the last century.

Bitcoin has nothing to do with banking or finance, it's a first-of-its-kind digital commodity that can be traded on the internet... that's cool... that's noteworthy... but completely unremarkable as it relates to banking or finance.

> Tim Draper of DFJ, (Tesla, SpaceX, Skype Early Investor) holds over 1B$ in the crypto space.

With nothing to show for it besides middle-men businesses like exchanges. Can you name even a single cryptocurrency venture where the business model isn't "charge fees for the service of moving around blockchain tokens"?


I would say HN is very pro-crypto in the sense of projects that are actually useful or novel.

And only hostile about the mainstream media "get rich quick by speculating on crypto" narrative.


Is it wrong that, as a non-Bitfinex customer, I'm kind of rooting for an exit scam so that the price of BTC tanks and offers a perfect buying opportunity?


Not wrong. Smart as an investor to consider all the scenarios.

But be careful on that "tanks" part. If it really tanks, there might be a whole lot of people trying to catch knives.. And that could be real bad indeed.


How would that be bad? People catching knives would stabilize the price.


Honestly - I think a sharp enough correction in Bitcoin would be a bloodbath.

It's a plausible scenario anyway - although strongly differing views on the probability.


Just remember that it took about 3 years for the pre-Mt. Gox failure price to return.


Those 3 years were really, really painful.


How so?


A token only redeemable for bitcoin collapses and you think that will hurt the price of bitcoin? It will hurt the price of tether certainly, the other side of the trade will boom.

Always amazed that some fail to grasp this, tether disintegrating is a solid buy for bitcoin, apart from the bad media coverage, which going by current standards has no effect on price. So that's $600m desperately trying to get into bitcoin all at once, this likely happening within a space of ~72 hours, think about it for a moment.


It's not a zero-sum game: value can and will be created and destroyed. If a crash of tether causes a distrust in the whole crypto space (which is not a given at all, granted), and people rush out of the whole space, all of it will crash.

Would a crash of tether be a source of concern for the value of Bitcoin? If bitfinexed hypothesis is correct, that is to say that Tether is printed out of thin air and used to buy Bitcoin thus artificially inflating its value, then yes, absolutely: a crash of Tether would cause massive distrust in the entire crypto space...


in such a scenario, tether collapsing in value, the demand for Bitcoin (or other coins) would be from those who held the collapsed token. So the price of Bitcoin in tethers might skyrocket, but since the one to one peg to the US Dollar will be broken, I don't see why the effect of the dollar price of Bitcoin would rise? Maybe if even those who held actual dollars on the very few exchanges who allow them panicked as well, it might. The overall panic could cause the bitcoin price to go down too. A lot of uncertaint mass psychology at play here.


Good luck with that strategy but how should you you place your buy orders though? to another exchange :)

Also remember this saying: "Don't catch a falling turd."


That's probably why the price goes up.


Timing the market doesn't really work.


Problem is that strategy is not as solid anymore since you have bitcoin cash on bitcoin's heels. If BTC doesn't innovate then BCH will eventually over take it. BCH is more user friendly for people who want to do daily transactions while BTC is not. If legitimate users switch to BCH then the only thing that will hold up BTC is the long-term people. All the speculators are just going to follow where they can get quick profits.


There is plenty of innovation going on in bitcoin space. Schnorr signatures, MAST, lightning, client efficiency improvements.


Yup. Also Confidential transactions, mimblewimble, sidechains, drivechains,... even bigger blocks. People forget that bigger blocks could come to BTC too, but devs are making the safe choice to try scaling with ways they know won’t compromise security or decentralization first.

People have had cheaper alternatives to Bitcoin for a while now (ETH? LTC?) and yet BTC is still valued significantly higher. There’s more to this game than a cheap digital payment.


NYT in 1997 about him:

PHILIP G. POTTER, who develops investment products for high-net-worth clients of Morgan Stanley, Dean Witter, Discover & Company, likes to think of himself as an ''uberconsumer.''

Last year, he spent his bonus on a 50-inch TV and a $3,500 Rolex watch. He wears custom-made $800 suits, custom-made $80 shirts -- always with white collars and white French cuffs -- and $200 shoes. He is ''totally wired,'' as he puts it: His home phone forwards messages to his pager; he answers them over a tiny $800 cellular phone."

...'I can continue to come up with new products, to add value, [in a downturn market]'' he said. ''I'm not responsible for getting money. Getting it's hard when the market goes down. But there will still be products to sell. It'll just force me to be a little more creative.''

http://www.nytimes.com/1997/10/19/business/faces-of-the-new-...


In a somewhat matter of his defense, in 1997 he was 25 years old... that was 20 years ago. I know my ideals and opinions have changed from 25 to 30, I can only hope he has grown a bit in those 20 years and only to take that article as a small matter of his personality.


> Last year, he spent his bonus on a 50-inch TV

That made me chuckle


Sorry to go OT, but ten years ago we needed five guys and a truck to move my friend's $2000 55" rear-projection TV. It weighed as much as a small piano and we almost dropped it off the deck. I just got a 55" 4k LED TV for $400 and it weighs as much as my dog. The mind reels.


The stolen Tether are unredeemable, and thusly worth nothing.

They pose a certain risk with accepting dodgy transactions though.


We don’t know for certain how much was really stolen. We just have Tether at their word. And if more was stolen than the amount frozen, it certainly is redeemable—for bitcoin on an exchange.



These exchanges are running off of traditional programming, not decentralize programming correct? Isn't it possible to run them decentralized like with Ethereum or something? Maybe that's too slow? Just wondering as trust mixed with trustless seems tainted by design. I imagine getting some encrypted thing passed with a one time transaction id to transfer from a real fund that when completed, verifies transfer and notes that in the blockchain. I don't know though, haven't done programming DAP stuff yet.


Yes, it's called Etherdelta.io


I moved the crypto funds I had on Bitfinex to other exchanges a couple of days ago because the tether situation was making me uncomfortable and distrusting of Bitfinex.


With so many issues, how does one invest in Bitcoin safely?


Buy on Coinbase or Kraken, buy a Ledger cold wallet and move them there instead of keeping on the exchange


I recommend HW wallet like https://trezor.io Trezor is well thought off, very secure way of storing digital currency. I have been using SW wallet but switched to Trezor recently and finally I feel my coins are safe..

Just make sure to chose a good pin and passphrase (I recommend setting up both). Ideally somehow compute or derive this pin/passphrase so that you never forget it. I mean generating a random pin is a very bad idea as you will almost surely forget it over time and you will lose the wallet.


What is a ledger cold wallet?



Buy $1,000 worth from Coinbase, assuming you have $1,000 to lose. Move it immediately to a paper wallet. Store the paper safely and forget about it for five years.


What is “safe” about storing $1000 on a piece of paper that you “forget about for five years”?


Paper should last longer in a firesafe than most digital devices and is quite a trustworthy device. Paper has an autoignition temperature of 450 degrees F, so a UL class 350 rated fire safe should keep your paper documents safe, but those temperatures might ruin digital storage devices.


Just imagine it is some obscure paper currency that you put into your safe.


I agree with everything you're saying except the paper wallet.

This insanity surrounding: "store your fortune on a piece of paper under you mattress/buried in your backyard/etc" has got to stop. Pay coinbase to do that for you.


But that is the essence of Bitcoin, and indeed of any encryption: ultimately you're responsible for keeping some sequence of bits secret from everyone else in the world. Encryption doesn't help with that ultimate problem, because the key to decrypt must be held in cleartext. If you keep the data online, you're simply moving the responsibility of protecting those bits to another set of bits (your passphrase/OTP for the online service). If you keep the data on a machine-readable medium such as a USB drive, you're trusting that the flash memory's floating-gate transistors will keep their state longer than you need. If the medium is a spinning drive of any kind, you're trusting that the moving parts will still work. If it's a less volatile medium like a CD-R, then you're trusting that you'll still have a device capable of reading the physical medium and the filesystem in the future.

Today, your fortune is either (1) bits you protect through physical custody (including your password manager's master passphrase that you have memorized (or "buried" in the mattress/back yard of your brain, if you will) -- and what are you going to do to pass that passphrase on to your successors when you die?) or else (2) trust in institutions such as your bank, your employer, your county recorder, and Coinbase that they'll honor your claim to the rights/property they manage for you. Bitcoin gives you the _option_ to eliminate (2) and rely only on (1). You're right that you don't need to eliminate (2) if doing so doesn't interest you. But even if you do choose to rely on (2), you still have no choice but to use (1) as well for at least _some_ of your secrets.

For whatever that set of secrets is for (1) -- especially when the question of inheritability is addressed -- ink written on paper is a very good solution.


Not controlling your private keys is inherently unsafe. I have several copies of my (encrypted) paper wallet that I distributed among friends and family.

If anything that's much safer.


Buy on a trusted exchange (ie coinbase), move coins to your own private wallet.


Buy stocks of GPU manufacturers.


Relevance? Bitcoins aren’t mined on GPUs.


AMD is very cheap. Morgan Stanley recently downgraded because they believe mining crypto will fade by 50% in 2018.


Considering AMD has lost increasingly large amounts of money every year since at least 2013, I'd say AMD is pretty expensive.


Fair enough. They will pull into the black in the 4th quarter if they hit estimates.


or options.




Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact

Search: