I don't understand why news like this doesn't have that huge of an impact of bitcoin's price.. Bitcoin seems to be hovering around 11k~ as I'm writing this. It's been at the same price it seems for the past couple of days...
This quote applies to unregulated markets: drugs or cryptocurrencies.
https://www.youtube.com/watch?v=AtoM9x-Bfu8
Omar robs drug kingpin Marlo who is at a card night, sat round the table, raking in winnings. Marlo claims the money is his, in response Omar says “Man, money ain’t got no owners, only spenders.” He then goes on to take Marlo's ring rather than just run off with the $$$.
So, in the context of the show, Marlo thinks he has just raked in all of these chips and made himself rich, there is the stack of these bits of plastic chips in front of him.
Meanwhile, the $$$ gets handed to Omar straight from where it is kept in the back of the room, the 'bank' off table. All the money for all the chips that are on the table is kept in this one area that Omar is able to head off with, leaving Marlo with his useless chips on the table. At the instant that Omar takes the money all the chips on the table are rendered useless for all players and no longer of value. It is apparent for all that the chips will not be exchanged for USD at the 'bank'.
Marlo doesn't just lose the 'fiat' $$$ that he thought he was winning, he also loses the ring on his finger. Although the money may be just money and he may not have lost as much as the prize pot, the ring is an item that cannot be so easily replaced. It has value beyond nominal gold value, sentimental value.
Before Omar rocks up the card game is being played in an unregulated way with the players having to trust but verify each other. Nobody cheats at the game. The card deck has its own blockchain technology.
The Wire was a long time ago and now Omar has realised that it is more lucrative to move into crypto. So in the 2018 remake Omar does not need a gun to steal all the money from all of the gamblers using a set of chips. He uses chips he printed earlier and limits the available chips so new players wanting to win big in the unregulated card game have to pay more for their chips.
Not all players play every game, most just hold on to their chips hoping others wanting to play will want to buy their chips. So they tell others to play the game. The value of their chips goes up so notionally the chips are now worth millions even though there is only a huge but nonetheless smaller pile of money in the 'bank'.
Because any one player can cash out at any time they do not care if there is less than the sum total of all play money in the 'bank'. So long as there is a multiple of what their chips are worth they have no real concern, unless everyone else starts cashing out.
Because the bank is quite slow and everyone has to queue, some players start to sell their own tokens. These can be placed as side bets on the major games. These coins are copies of the original coins but are super lightweight and have an alleged advantage of being totally anonymous, nobody can track them.
Some of these players are making good business on this side betting and they tell their customers that their coins will one day be able to be useful for more things than side bets. One day they will be able to do every day things with the tokens like get a shopping trolley at a supermarket with one, thereby not needing a 'fiat currency coin'.
So Omar rocks up and rather than use a gun he simply takes his position on the coin to run off with all the money. The people with the chips thought they were the lucky ones owning all the money but no, Omar goes and spends it for them.
[0]: https://www.damninteresting.com/the-baader-meinhof-phenomeno...
Or did you have a different meaning for 30M than per episode? Usually that’s what people mean for tv so I am assuming that.
This however might have potentially positive impact on prices of truly anonymous cryptos - typical direction of thiefs to "lose tails"
Surely the point was more: "Why doesn't the obvious risk events like this represent affect the price of the commodity?"
I mean, at this point I have to believe that the likelihood of a given dollar-equivalent of crypto currencies being stolen is much, much higher that it is for literal paper money. And paper is uniformly considered too risky to use as an asset.
It's insanity. This is the way bubbles look before they pop. I can't tell you when it'll happen, but it'll happen.
This isn't just some investment play-thing of otherwise well-off individuals in developed countries. A lot of dumb money has flowed in, and it's from people who probably can't really afford to lose it without taking a serious hit to their net worth.
Interesting times, maybe 50 years from now historians will be talking about the crypto-bubble and rising nationalism as the precursors to the next big war.
Keep in mind that statistically speaking, you and I live in an echo chamber. Hacker News is a bubble of engineers with a penchant for business and finance (startups, the main thing here, are where geeks who also like money gravitate towards). My subjective experience in meatspace is similar to yours: a lot of people around me are involved somehow with cryptos, but I think that is likely caused by me fitting the aforementioned demographic.
I think (and surveys validate) that the general penetration in the general population is still low. Total market cap for cryptocurrencies is 500B as we speak. Actual capital involved is much less.
This is peanuts when compared to any measure of the global financial system. Most people have heard and operate by the mantra "this is crazy, don't put anything in that you are not willing to lose".
500B is a little over half what Apple alone is worth on NASDAQ. The difference being most people don't invest in Apple directly. A lot of people are probably exposed to Apple stock, but I don't think any mutual/hedge funds have significant positions in cryptocurrencies where a crash would affect the common folk.
That is very different from a subprime mortgage used to buy a house you live in. No one that I know sells during dips or crashes, because cryptos are to some extent "play money". This, I think, explains the resiliency of the market to its wild fluctuations: no one expects anything else but crazy volatility.
That being said, I am certain that cryptos will take a page in the history books. I have personally witnessed people doing and saying things that immediately make me think I should probably be working on the script for the cryptocurrency edition of The Big Short.
Source: I have a bit of skin in the game.
I hope these numbers aren't in any way accurate or representative, because they are absurdly high. If 40% of the population has invested in cryptocurrencies, that can't be anything but dangerous.
Where I'm from, discussing with friends and acquaintances in real life, I haven't been able to find anybody at all who owns any cryptocurrencies whatsoever. So, there certainly might be a bubble (price market exceeding utility), but at this stage it would affect a very insignificant percentage of the overall population.
If this would have happened after a month of two of a bull run, then yeah, I could see some panic selling and a significant price correction then.
The Bitcoin price hasn't reflected fundamentals for years. The fact that the Bitcoin Conference stopped accepting bitcoins because the system is so broken, yet it had no impact on price, should be a hint.
If there was some secure way to do password recovery that was built into the currency that might be a game changer. That might be impossible by definition, not sure.
When sending coins to your storage address, you'd say "anyone can use this money if they have this private key OR if they get a digitally-signed certificate from 3 out of 4 of these keys (A, B, C, D)". Those keys could belong to different institutions (or persons) that would declare they vouch for your identity.
Then if you lost your key, you'd go to each of them to get your certificate signed and could then use the coins again.
--
Of course, this means that if those institutions colluded, or all got hacked, you could still lose your coins, but it'd be harder than just keeping them in an exchange.
Instead of doing what you suggested, normally it's 2 of 3 where it's your cold wallet, your hot wallet, and the online wallet provider.
Shamir's secret sharing algorithm can be applied over many groups other than GF(2^N). In particular, you can generate a polynomial of degree N where F(0) is your ECDSA private key, and for 1 < x < M, tell trusted party number x that they're party x and F(x) = y. Cooperation/collusion among any N of the M parties is sufficient to reconstruct the polynomial and calculate F(0). However, N-1 collaborators learn nothing about F(0), as long as you've generated all of your coefficients randomly and uniformly over the size of the subgroup generated by your elliptic curve's generator.
You can even have N parties each generate their own secret random polynomial f of degree N, and publicly share f(0)*G and privately share f(x) with party x. You add up all of the publicly shared elliptic curve points to get a public key for which no one party knows the secret key. Each party remembers the sum of the f(x) secrets they've been told. For polynomials, f(x) + g(x) + h(x) = (g+g+h)(x), so any N of the participants can collaborate to calculate the previously unknown polynomial for which f(0) is the private key. You need to first share Pedersen commitments of the public f(0)G values, perform a sanity check on those, and then reveal the f(0)G values and perform some more sanity checks in order to rule out cheating. See https://duckduckgo.com/?q=gennaro+distributed+key+generation
Once you have your public key for which nobody knows the private key, you can perform the same procedure to generate the random R value of the (R,S) pair of a Schnorr signature. Each party can then perform a Schnorr signature on H using their secret share of R and their secret share of the public key. They each reveal their signatures, and any N of those signatures can be used to reconstruct a polynomial where F(0) is the S value in the (R,S) signature on H. At the end, all of the sub-signatures and the final signature can be made public without anyone learning anything about the secret values. This is called a threshold signature scheme. (There are other threshold signature schemes. I had to implement threshold RSA in Rivest's 6.857 class.)
Unfortunately, ECDSA isn't a Schnorr signature scheme, but Ed25519 is. Any coin built using Schnorr signatures for wallets would allow you to construct threshold wallets where any N of M parties can collaborate to spend from the wallet, but generating transactions doesn't leak information to anyone about how to generate transactions alone.
BitCoin, at present, only supports ECDSA signatures, which aren't linearly composable.
Traders take a risk in putting funds, fiat or otherwise, on an exchange. Many use domestic exchanges that have higher fees in an attempt to mitigate this risk. They are all well aware, but see the reward to be worth it.
On Ethereum this ecosystem is much more developed, and you can choose between EtherDelta, IDEX, 0xProject and Radex.
These exchanges eliminate counterparty risk because you control your funds at all times. They essentially act as matchmakers between those creating buy/sell orders and those who fill them.
Why would I want to put my money into something "decentralized" when my bank does a fine job?
Cryptocurrencies are complicated and nonsensical at times. I have yet to see anything in this space that makes me actually think it's the future of anything. It's far too risky.
Because you trust that your money will still be in the bank, in full, when you want to withdraw it. People in Cyprus, Venezuela, and Zimbabwe don't have that trust because it's been broken by bailouts and hyperinflation.
As long as the economy doesn't hyperinflate, and the banks don't haircut your accounts, and the IRS doesn't freeze your funds, and the government doesn't use civil forfeiture to take your money because they suspect you could be involved in criminal activity, your money is safe.
Therefore, many people see holding cryptocurrency as a hedge against that type of stuff.
Centralized exchange: send your FBI to exchange's wallet -> exchange updates your balance in its database, i.e. postgres -> trade for NSA -> withdraw NSA, which causes the exchange to send you NSA tokens (if they have them) and update another record in its DB.
The problem is in "if they have them". While normal banks are FDIC insured and a run on the bank won't prevent them from giving you your money, crypto exchanges provide no such guarantees. If the money is stolen from the exchange, like in the case of the OP, then you are SOL. Basically, you have to trust the exchange as much as you trust your bank. And clearly one entity is way more trustworthy than another.
In the decentralized exchange case, instead of trusting an organization to keep money safe through operational processes and tight regulation, you trust a smart contract. Provided that the smart contract has no bugs, this pretty much eliminates the need to trust the exchange. You trust it just as much as you trust mathematics.
Hope my explanation is not too verbose and makes sense.
When hundreds of millions of dollars worth can disappear in the blink of an eye like that, it adds a new element of risk aside from the risk of normal price drops. So it only stands to reason that investors would factor that into the value they place on bitcoin and the price would go down.
Have you ever noticed that currencies issued by corrupt and/or unstable governments tend to be worth little relative to the currencies of stable, well-governed countries?
To the crime victim, they just disappeared. Owning bitcoin is a very risky proposition for those who aren't extremely savvy in protecting themselves from thieves.
Personally, I would like to understand what it really means to say "the current price of BTC is ___." It's not like stocks where you can see actual bid/ask and daily volume numbers. And since transaction costs and times make arbitrage impractical, the price is not even the same across exchanges.
Actually, it's exactly like that.
> And since transaction costs and times make arbitrage impractical, the price is not even the same across exchanges.
Arbitrage across crypto-currencies is happening constantly. As with stocks, bonds, futures, etc. the average person is unable to take advantage. Effective arbitrage requires large sums of money and the ability to execute quickly. Quick execution often means having a preferential agreement with one or more exchanges. This is true in or out of crypto. Price differences reflect friction and risk.
Then why doesn't it have the effect of equalizing prices across exchanges, as it does with traditional currencies across traditional currency exchanges?
I'm not arguing, I'm just asking. If I don't know what I'm talking about, I'm happy to be enlightened.
Yes it is. Cryptocurrency exchanges have orderbooks like regular exchanges do.
Can you show me a current bid on bitcoin? IOW, where someone has obligated themselves to purchase N BTC at a price of $P, if someone is willing to sell that many at that price? Is that information posted publicly as it is with stocks?
Here is an example with GDAX:
https://www.gdax.com/trade/BTC-USD
Here is an example of an API supporting public access through Gemini:
https://docs.gemini.com/rest-api/
Here is another (clunkier) one from Kraken:
Usually there’s a UI accessible with an account and an API that allows faster, direct access to the feed.
There are more APIs there, publically accessible, small rate limit, have fun.
GDAX == Coinbase API. Trading on Coinbase makes, AFAIK, a market buy/sell through GDAX.
This can be mitigated. Exchanging to a less congested coin can be done quickly for fast, low-cost transfers. Keeping a buffer at each exchange will lower overall rate of return but also reduce the frequency of transfers required.
Eventually they will get wiped out, become completely largely non-liquid and end up in jail which would cause a cool off. But not yet. We have not yet reached critical mass.