The troubled history of the Bitcoin exchange MtGox
anders.io
anders.io
There's nothing wrong with them keeping a proprietary ledger of accounts, but attaching their crap code to the network is a crime of epic proportions. Hopefully Ethereum will help with this.
Better blame proprietary software. Whatever you do, don't question your assumptions. And under no circumstances should you think about the fact that fiat banks in the US all use proprietary software and rarely experience serious problems (and when they do, consumers' deposits are insured up to a large amount).
Turns out they try to make you spend it by continually inflating the supply of them out there with no end. In order to keep your head above water, you have to put in a "bank".
Fine, it compensates you for the loss of purchasing power, so no biggie, right? Wrong. They actually lend out the dollars that are supposed to be in your account so when you come to get your dollars out, they might not even be there!
Now, they claim to have this handled, but it's kind of a hacky solution: supposedly what happens is that they'll go to a head honcho and get a temporary loan to be able to pay you, but they only give this privilege those that can get the political connections.
They also have have this system where you money is "insured" so that even if they can't get a loan "your dollars are safe, you'll still be able to get them out!" Kludgy, but it should work, right? Well, it turns out the insurance fund couldn't actually handle everyone pulling their money back out!
So, yeah, kind of hip, but I don't think it can catch on as a serious model, especially once auditors and whatnot get involved.
"those that can get the political connections" ... if you have the capital and do the paperwork and follow the regs, you can start a bank and get access to the discount window.
"insurance fund couldn't handle yada yada yada" ... the FDIC is implicitly backed by the full faith and credit of the US government. As long as the Treasury exists and has the ability to tax and borrow, your deposit is money good up to FDIC limits.
if you're going to invent new money, makes sense to understand the existing money, and try not to invent something worse.
Not true. There's this little extra step where first the regulatory authority gets to decide whether your state needs another bank.
$0.
This is a rather good record compared to bitcoin.
You shouldn't play a shell game with the money and say then say there are "zero losses", but people do. It's called cognitive dissonance and it sucks.
0 BTC.
Not bad!
The reason that people use fiat currencies is because they can trust the institution/government backing them. They can trust that if they are handed a dollar by a business, it's a dollar, no questions asked.
If folks have to worry about whether or not the person they're exchanging with is being legit, and whether or not the institution handling the transaction will be as well, they're going to be turned off.
Like it or not, most people are lazy; adding one more layer of headache to financial transactions will be a MAJOR turn-off for a vast majority of people.
Bitcoin is a fiat currency and I trust the Bitcoin specification a lot more than I'll trust any central bank. They're notorious for usury, secret bailouts, and inflation.
>They can trust that if they are handed a dollar by a business, it's a dollar, no questions asked.
Well you can trust that if you're sent a Bitcoin then it will end up in your wallet.
>the person they're exchanging with is being legit
This is the same thing that happened with online shopping at the end of the '90 and early '00s. Consumers got used to using their credit cards online and they will get used to the notion of owning, transferring, and protecting digital property.
>adding one more layer of headache to financial transactions
There is no such headache. The software will improve and the banking infrastructure will grow. I expect to see banks that hold their reserves in Bitcoin and give out lines of credit denominated in Bitcoin. Infrastructure will solve this problem, but first capital is needed to meet current regulatory compliance with the archaic legacy system that is currently in place.
That's great for you. What about the average consumer?
>This is the same thing that happened with online shopping at the end of the '90 and early '00s. Consumers got used to using their credit cards online and they will get used to the notion of owning, transferring, and protecting digital property.
Except with the vast difference that credit card companies were already well established in mainstream life, and people trust them (right or wrong) to keep their information safe. Pair that with a massive PR campaign on the part of credit card companies, and you've got something.
>There is no such headache. The software will improve and the banking infrastructure will grow. I expect to see banks that hold their reserves in Bitcoin and give out lines of credit denominated in Bitcoin. Infrastructure will solve this problem, but first capital is needed to meet current regulatory compliance with the archaic legacy system that is currently in place.
Yes, yes there is. Imagine, again, being an average suburban housewife. Now, try to cash out your bitcoin. Try to wrap your head around the volatility of the currency.
I genuinely believe you're being a bit too optimistic about how banks and bitcoin will interact. After consulting with large and small banks alike, I've learned they are incredibly risk averse. Something as volatile as bitcoin, and as out of their control, is a red flag from day one. There may come a day when banks exchange in bitcoin, with heavy fees, but I'm not certain that they will hold their reserves in it, or extend lines of credit in it, either.
There's more to this than having a secure currency. There is a lot of politics. There is quite a bit of control that banks want to have. They, generally, want to make sure that any bets they make can be insured. Can they do that with bitcoin?
Cryptocurrency in general, but Bitcoin and dogecoin especially strike me as being marketed as the next big get rich quick scheme, and I'm leery of that, regardless of the technology behind it.
Maybe I'm wrong, who knows; I'm just fascinated to see this develop, and am generally as cynical as possible.
Then Bitcoin really isn't for you. Bitcoin requires faith in mathematics and humanity.
Somewhat unrelated: the Winkelvoss Twins are making an ETF for Bitcoins, and its going through the SEC right now. http://blogs.wsj.com/moneybeat/2014/01/17/lawyer-for-winkelv...
So at very least, SEC approved BTC funds are beginning to be set up. Its only a matter of time before a startup goes for full SEC approval in the BTC Exchange world.
Integration into US Society and Regulations is a good thing, and will give much confidence to the rather scary world that BTC currently is.
Small-mindedness will usually trump technological ability.
So that when an exploitable bug is found in that common solution, it can be used to hit every exchange at once?
It is much safer to have multiple, independent solutions.
All these articles written about what happened but no one able to just look at the blockchain and give hard numbers.
But you'll still see folks putting large sums of money into something like a small biotech company that doesn't have a working product yet.
It's speculation, of course, but that's the point. People speculate all the time, some of them with large sums of money. Shouldn't be surprising news.
That makes such woes some sort of contribution towards a better economy.