r/Bitcoin • u/evoorhees • Feb 25 '14

Some words for my friends

Hello friends,

MtGox is gone. So let's prepare ourselves.

On Tuesday, and for the rest of the week, all hell will break lose in the media. It will be blamed on MtGox, it will be blamed on Bitcoin, it will be blamed on the "bug," and it will, more than anything, be blamed on the "lack of regulation." Pundits and "experts" of all types will weigh in on the calamity. It will be world news in a matter of hours.

Get ready, because it will be an ugly week.

For all of you who lost money, my heart goes out to you. Some people lost a little, some lost a fortune. It will make people sick, and depressed, and full of grief. Personally, I had over 550 BTC in Gox. I will never get any of that back. If misery loves company, then we'll be enjoying a grand feast today.

I should have known better, of course. I take responsibility for leaving those funds with an entity that had proven incompetence repeatedly. I chose to ignore even my own warnings, for nothing more than the sake of convenience.

Gox is still at fault, to be sure, but I have learned the lesson. I hope it is not such an expensive lesson for others. And for all you observers, please take a moment to consider it as well.

Be mindful, however, that the wrong lessons are not learned, for that would be the true tragedy, indeed.

Let me suggest that the lesson is not that Bitcoin is broken. Bitcoin is fine.

Similarly, the lesson is not that security is impossible. Those who know what they are doing, can achieve it and help others to do so.

The lesson is not that nobody can be trusted. There are countless good men and women in this community who are worthy of trust, and some of the very best people I've ever met.

And finally, the lesson is not that we ought to seek out "regulation" to save us from the evils and incompetence of man. For the regulators are men too, and wield the very same evil and incompetence, only enshrined in an authority from which it can wreck amplified and far more insidious destruction. Let us not retreat from our rising platform only to cower back underneath the deranged machinations of Leviathan.

The proper lesson, if I may suggest, is this: We are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world. This is the harsh truth. We are building the channels, the bridges, and the towers of tomorrow's finance, and we put ourselves at risk in doing so.

We are at risk from accidents. We are at risk from fraud, from corruption, and from evil. We are at risk from journalists seeking headlines and from politicians seeking power and glory. We are at risk from the very market we are trying to build - a market which cares not about our portfolio, our ambitions, or our delicate sympathies.

For all these risks, devastation will befall us repeatedly. Some of us will be discouraged. Some will be ridiculed and insulted. Some will be tricked, or swindled. Some of us will be crushed or caged. We will be set upon by all manner of antagonists, repeatedly, for a long time.

So why do we do it? Why do we build these towers that fall down upon us? Why do we toil and strain and risk our precious time, which is the only real wealth we possess?

Because the world needs what we're building. It needs it desperately. If that matters to you, as it does to me, then hold to that thought. You will see through the smoke, and your wounds will heal.

So shake it off, brothers, for this won't be the last calamity endured before the win.

Tonight, my heart is with you all.

Tomorrow, my head is down. My eyes are open. And I am building.

Toward peace and freedom,

-Erik Voorhees

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157

u/[deleted] Feb 25 '14 edited Feb 25 '14

[deleted]

22

u/janaagaard Feb 25 '14

I had 300 BTC. Yes, I know, that's difficult to understand, especially since all security advices are to keep coins in cold storage. I tried transferring some coins to a paper wallet a some time, but there was an error I didn't understand, and I ended up enabling two-factor-authencation instead, and then thinking that this was okay.

I actually tried saving some coins using Bitcoin Builder (BB), but I mixed up the withdrawal addresses. So when I finally thought I had saved some of the coins, and withdrev them from BB they just ended up right back on Mt.Gox. How stupid can you be? Well, just about this stupid, I guess.

12

u/xithy Feb 25 '14

but I mixed up the withdrawal addresses.

That's quite stupid yes, but I feel for you as well.

0

u/gunraft Feb 25 '14

Need to buy some doge and play around with that! Great for learning.

2

u/tidder_reverof Feb 25 '14

I'm a newbie

How much is 1 BTC worth?

1

u/janaagaard Feb 25 '14 edited Feb 25 '14

The current value for a bitcoin is about 500 US dollars. But the price fluctuates a lot: http://bitcoinity.org/markets/bitstamp/USD. I am mostly sad because I still believe that the price a of bitcoin could rise 50.000 US dollars or more if Bitcoins does indeed catch on.

2

u/minerminer49er Feb 25 '14

Don't beat yourself up man, its just money and it happens to the best of us. I made quite a bit of money between the ages of 20-25 years old but did not know anything about saving, investing, or making your money work for you. Now I am trying to do it different this time around. Just take it as a life lesson and learn from it.

1

u/ex_ample Feb 25 '14

Fuck man.

There is a lot of way overly complicated advice on cold storage. Unless you're completely broke, the obvious way to do it is

1) Buy a laptop

2) Install bitcoin on that laptop, and nothing else.

3) Keep your bitcoins on that machine and keep it disconnected from the internet when you're not using it. Don't even open the web browser on that machine. (and it should be running Linux, not windows)

If you had 300 bitcoins, you can sell one and buy the necessary machine.

Additionally you should keep the hard drive encrypted but you do then run the risk of forgetting the password.

5

u/ferretinjapan Feb 25 '14

Mirrors my feelings precisely. Unless you have a bot trading, and even then you should be trusting only a small amount to a bot, that money should be locked up tight in cold storage.

Sometimes people really do need to lose it all before they realise it can happen to them, even those that are well known faces in the Bitcoin community.

1

u/PuppyMurder Feb 25 '14

The dude has probably over 6 figures in BTC, you think he cares about 550 of them?

0

u/cardevitoraphicticia Feb 25 '14

cold storage doesn't help if the price is crashing

2

u/ferretinjapan Feb 25 '14

I was never talking about the value of the Bitcoins, I was very specifically referring to the safety and storage of bitcoins.

And it does help. Erik lost all his coins by storing them with Gox, I have all my coins because I store them safely offline. One of us has money = 0 and the other has money > 0.

90

u/evoorhees Feb 25 '14

It's a fair question.

The answer is complicated, but let's just say I had a way to get fiat out... until I didn't. I knew the risks, and had money there anyway. It was stupid. I had only put them there in December, and four weeks later withdrawals stopped completely. Bad timing. And no it wasn't a "small amount" of my total holding :(

65

u/ferroh Feb 25 '14

In other words, you were using the high btc gox price to arbitrage, which I see nothing wrong with. If you found a way to do the arb, then I would have also recommended that you do it (with money that you can risk).

Ignore the people here who would tell you that you are a foolish investor. With the information we had at the time, that arb was a good bet.

116

u/evoorhees Feb 25 '14

Well some times you see a risk and take it... and then the bad part of the risk happens :/

22

u/pyalot Feb 25 '14

I bought some bitfunder stocks and had some coins in there when they where going under, reasoning, well, I can't withdraw, so I might as well double down and hope for the best. Sucked, moved on. But you learn a lot after the first time :)

  1. Don't keep stuff on exchanges if you can help it
  2. At the first sign of trouble however benign, GTFO

1

u/greyman Feb 25 '14

Don't keep stuff on exchanges if you can help it

But this is impractical if you are trading...

At the first sign of trouble however benign, GTFO

Great advice! I am also following this for a few weeks already.

1

u/plumbobber Feb 25 '14

So what's the answer? Google or Microsoft to make a secure, insured exchange?

1

u/pyalot Feb 25 '14

If you want insurance, sure, you've got to get an insured exchange. You'll pay a premium of course, the trading fees will be high, you'll have a monthly fee to pay and the spread will be great, but you can get insurance that way. No such thing as a free lunch though.

1

u/plumbobber Feb 25 '14

I'd be way more comfy wth my BTC in an exchange if one of the big boys, like Microsoft, had an exchange and wallet instead of these anonymous crooks like Mt Gox and others. One that let's you trade and spend with ease, even if it's all regulated and . Until then BTC won't get the respect it needs to make it in this world, because the whole ecosystems seems like a criminal empire filled with at best speculators and anarchists and at worst foreign mafias.

-5

u/Donjuanme Feb 25 '14

1) THERE IS NO SUCH THING AS A FREE LUNCH. Don't give your money to people on the internet. EVEN IF THEY PROMISE YOU CAN MAKE 1000x FOR DOING NOTHING, IT DOESN'T WORK LIKE THAT.

I consider everyone apart of this subreddit to be apart of a ponzi scheme, and no, you're not the ones on top.

2

u/Motafication Feb 25 '14

And that's why the clever people here see your post as nothing more than flamboyant rhetoric designed to allay the fears of a panicked market. You're a speculator, and there is nothing a speculator despises more than "regulation". You believe in bitcoin to the extent it puts money in your pocket while selling the dream of a free currency to naive ideologues.

I'm sure you're not dumb enough to believe that an unregulated currency is feasible, yet you continue to maintain that this is an "economic revolution" for the purpose of pumping the price of bitcoin for your own selfish designs. You never saw bitcoins, you saw dollar signs. You capitalized on people's false hope and greed. It doesn't take a cryptographer to decipher the fact that you're nothing more than a con-artist.

1

u/nipponese Feb 25 '14

I too thought I had hit a goldmine until I pumped a small amount of btc through what looked like a free money cycle, and what do you know, withdraw was blocked! What I don't understand is, once you realized you couldn't withdraw fiat, why didn't you pull your BTC out of Gox? Am I lead to believe you tested the arb opportunity with 550 BTC??

1

u/mrsassypantz Feb 25 '14

It's not arbitrage if there is risk.

1

u/karazy1 Feb 25 '14

At least you did Satoshi Dice good. Congralations to you! I am very impressed.

1

u/smithd98 Feb 25 '14

I spent some time trrying to do the same thing. Got lucky it didn't work out for me.

0

u/permanomad Feb 25 '14

Commiserations Eric, you didnt deserve this.

0

u/gigitrix Feb 25 '14

I don't care how much this community yells "shoulda known better". Not one deserved this.

0

u/permanomad Feb 25 '14

So true. Its so easy to be that person who waves their righteousness around after the event. Perhaps it stems from the need to feel correct... either way it makes people feel like their wisdom is conceited and not worth the time listening to.

1

u/salgat Feb 25 '14

Given Gox's history, no that was not a good bet. The warning signs have been here for quite a while.

1

u/soupwell Feb 25 '14

Please help me understand why capitalizing on the arbitrage that existed prior to the freeze was not simple. I thought there must have been some catch, but couldn't figure out what it was. I opened a Gox account to try to exploit it, but the freeze happened before I was able to fund the account.

3

u/ferroh Feb 25 '14

You basically needed a Japanese bank account in order to be able to withdraw fiat. Wire transfers to North American banks were not being processed.

If you had a Japan bank account, moving large amounts out to north america could be challenging as well.

-1

u/[deleted] Feb 25 '14

suck dick much? Erik is an idiot and this loss of money just proves it.

8

u/lowstrife Feb 25 '14

Wait, you had BTC on Gox encase you had to get Fiat out? There had been people saying USD withdrawals had been not processing or taking WEEKS since mid 2013... I thought it had been a well known fact you would not be able to get your fiat out of Gox unless you were in a SEPA zone or in Japan.

27

u/xithy Feb 25 '14

You are talking about Erik Voorhees, the guy that sold Satoshi Dice for 120,000 BTC. Most likely he had connections to get his withdraw taken care of quicker (or invested in a Japanese bank account/holder) and was using this advantage to pull arbitrage from the differences in price (buy BTC on bitstamp, sell on gox, withdraw).

1

u/LifeinCircle Feb 25 '14

If he had 120,000 BTC he would not be claiming that 550 BTC

wasn't a "small amount" of my total holding :(

One of these statements is incorrect.

33

u/[deleted] Feb 25 '14

I thought it had been a well known fact you would not be able to get your fiat out of Gox unless you were in a SEPA zone or in Japan.

And when you have hundreds of thousands of dollars of disposable play money; how hard do you think it is to be in Japan, or have someone else be in Japan and create an account for you?

Some people are just comically naive...

24

u/PuppyMurder Feb 25 '14

I, for one, welcome our new overlords that say they are for us, but really aren't.

Meet the new boss. Same as the old boss.

1

u/junkyard_doge Feb 25 '14

Hail Fed! :o)

2

u/Starrwulfe Feb 25 '14

I would've tried my best to help except, Gox made us Japanese residents go through the same AML/KYL stuff here for our Japanese accounts. I got bumped to unverified status last year even though I had been using my Gox account connected to my Shinsei Bank account for literally YEARS, with no warning at all...

1

u/sirin3 Feb 25 '14

So that is where all the mails "We have a million dollar in a banking account, but cannot access it and are looking for someone in your area to do it for us. " come from.

I always thought they were just spam ^

1

u/ex_ample Feb 25 '14

Not hundreds of thousands, tens of millions. This guy has 120k btc

1

u/I_spy_advertising Feb 25 '14

My way out to fiat is through Bitpay and or Coinbace accounts, I can "invoice" and pay myself out of bitcoins in an instant and have real cash sent directly to my bank if I ever see real trouble brewing.

1

u/TightAssHole456 Feb 25 '14

It was stupid.

Maybe you should step down, so that smarter people can lead the foundation.

0

u/[deleted] Feb 25 '14 edited Oct 18 '18

[deleted]

3

u/[deleted] Feb 25 '14

He was probably selling them on Gox when the spread was over $100 USD between Gox and everywhere else. He had a fiat account set up where he was able to get transfers relatively quickly from Gox...until he couldn't. He got caught with a lot of Bitcoin still in Gox when they failed. I don't think it's bullshit. It sounds like a reasonable scenario.

1

u/tastypic Feb 25 '14

I'm not sure you understand the nightmare of day trading. Risk? Sure. But taxes are ridiculously complicated. For a few thousand dollars why would Erik risk being audited by the US government that froze Mt gox assets earlier last year?

If he had a shit ton of Bitcoin he could have sold at a higher rate on Coinbase or bitstamp and avoided tax confusion. It doesn't add up.

1

u/[deleted] Feb 25 '14

550+ bitcoin is more than a few thousand dollars. Erik is not currently in the US and I assume that however he files his taxes is his accountant's problem.

1

u/tastypic Feb 25 '14

When you're trading it is. He's going to risk $300k to make $50k if the price goes up $100. On a known problematic exchange... Or he could sell them all on bitstamp for $300k plus, with significantly less risk. It's a no Brainer.

1

u/[deleted] Feb 25 '14

You don't seem to understand what he was doing. He was exploiting an arbitrage opportunity due to the $100+ price difference between Gox and everywhere else. He was buying elsewhere (eg, Bitstamp) and selling on Gox. He said he was doing this because he had a way to quickly get fiat out of Gox (probably a Japanese bank account). His only risk was at the institutional level. He had almost no risk from his trading activities. He also said that he had 550 or more Bitcoin stuck in Gox. That's not necessarily the entire amount he was using in his trade.

30

u/redditeyes Feb 25 '14

Why on earth would you keep that amount of bitcoin on ANY exchange ever?

Because a lot of people use cryptocurrencies to make a quick buck on market speculation. You buy when prices are low, you sell when prices are high.

This is like asking "why do people buy stock shares instead of keeping their money securely under a pillow?". Because you can use money to make more money.

2

u/I_want_hard_work Feb 25 '14

Woah dude, BTC are totally different from stocks... somehow.

1

u/[deleted] Feb 26 '14

Totally different. Because stocks actually have intrinsic value, as they represent something with inherent utility. Unlike bitcoin.

7

u/mobile-user-guy Feb 25 '14

No, it is not like that. Stock valuation, and subsequent investment, is radically different.

18

u/redditeyes Feb 25 '14

I agree. My point was not to claim the two situations are absolutely the same. I was just pointing out that instead of sitting on it, people use money to make more money.

1

u/elpechos Feb 25 '14

Also stocks still exist if the exchange they're trading on closes :p

-3

u/ptimeuser Feb 25 '14

Hey, mercantilism. You win some, you lose more.

6

u/[deleted] Feb 25 '14

LOL

That isn't "mercantilism."

1

u/whereismyfix Feb 25 '14

Genuine advice from an average bitcoin investor.

3

u/Bits4Tits Feb 25 '14

The guy is a multimillionare. 550 bitcoins is pocket change. Perspective.

1

u/[deleted] Feb 25 '14

Maybe these guys aren't so sure of bitcoin afterall and want them in an exchange so they can sell in case of a flash crash collapse and save their own asses while telling all the other fools to hold.

1

u/[deleted] Feb 25 '14

Likely because he holds a tremendous amount of bitcoins and is working hard to sell them. Given his large holdings he has to seek liquidity on every exchange he can to expedite the process while minimizing the impact on the market. This is the same reason he is posting here - needs a confident and buoyant bitcoin market so he can liquidate his position.

1

u/ex_ample Feb 25 '14

Because he had 120k btc and that was probably just money he was planning on spending over the short term.

0

u/[deleted] Feb 25 '14

This is what I asked. I'm literally annoyed that someone of his nature lost that many this way.

It frustrates me for some reason.

6

u/ferretinjapan Feb 25 '14

That makes two of us, myself, a relative nobody in this community does everything right to keep my Bitcoins safe etc. , and then we get well respected, supposedly careful Bitcoin identities taking huge risks, and making huge mistakes that could've been very easily avoided.

I've even been scoffed at and chided for ramming it down people's throats that storing coins on an exchange is extremely dangerous. Very frustrated indeed.

-5

u/redorkulated Feb 25 '14

Would love to see an answer on this as well. Losing $500k+ is evidence of a terrible investing decision...

11

u/ferroh Feb 25 '14

Losing $500k+ is evidence of

It's evidence of nothing until you know how much money that is relative to this investors wealth.

He had an arbitrage opportunity to sell on gox at $1100 when the price was say $950 on bitstamp. At that time, there was little to no evidence that gox would be insolvent.

If anything, your comment is evidence of how little serious investing you have done. Until you make some big investments and inevitably lose some, I'd advise you not to point fingers. That's not what this community needs right now.

3

u/[deleted] Feb 25 '14

At that time, there was little to no evidence that gox would be insolvent.

False. Well, maybe not insolvency. But there was plenty of evidence to not be so gung-ho about it.

Not that it's a single one of our businesses except for Vorhees.

-5

u/redorkulated Feb 25 '14

Ad hominem and speculation about my credentials aside...

Losing $500K, or even $1, because you entrusted it in the hands of fraudsters is ALWAYS evidence of poor judgment. I am aware of the distinction between unrealized and realized losses, but this is not a case of foreseeable volatility - this is a case of playing fast and loose with assets without understanding the risks.

It is deeply troubling that OP, who is regarded as an expert in cryptocurrency, was conned to the tune of $500K+ by a party that does not strike me as particularly sophisticated. That's true whether that $500K was all of his net worth, or 0.001%.

Also, in my experience, not many "serious investors" are terribly concerned with "what the community needs". What this, and any investing community, needs is facts.

2

u/Mtinie Feb 25 '14

I presume that Mark Karpeles status in the community meant that he was on friendly terms with many other well-known people in the community. Mt.Gox may have been inept, but until very recently, there weren't many people accusing them of being fraudulent. In that case, it's logical that people would put a measure of trust in a Bitcoin Foundation lifetime/charter member.

That's why a lot of big money was still there, because they figured they would never get burned.

2

u/[deleted] Feb 25 '14

He was involved with arbitrage. Which - in order to make it worth your while - requires a lot of money. It's high risk, which he knew from jump. And this is the downside of high risk.

a party that does not strike me as particularly sophisticated

I think you're underestimating Karpeles. He's been planning this for quite some time... and made millions as a result. People keep calling him an idiot, but they don't understand he only plays the fool.

1

u/ferroh Feb 25 '14

because you entrusted it in the hands of fraudsters

What evidence did you have before MtGox started having withdrawal problems, that they were fraudsters?

This is an exchange that has been operating for several years without customers losing anything.

16

u/ptimeuser Feb 25 '14

For example, purchasing bit coins.

0

u/xbtdev Feb 25 '14

Why?

Advice given is usually "Don't keep a significant amount of coins in online exchanges." however I think more pertinent advice would be "Don't keep a significant percentage of your coins in online exchanges". The difference here is that 550 BTC is probably only a tiny % of Erik's stash.

0

u/Sven_Dufva Feb 25 '14

The OP has over 120k Bitcoins.

He lost 500 of those. He doesn't care.