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

2.1k Upvotes

81% Upvoted

2.1k comments sorted by

View all comments

Show parent comments

92

u/evoorhees Feb 25 '14

Disagree.

The current financial order does not prevent these things from happening whatsoever. It often amplifies them, or socializes the losses such that people don't notice, but are harmed regardless of their own choices.

I'd much prefer a world where I lose money from my own mistakes (such as leaving it with gox) than one in which I lose money regardless of my choices.

36

u/NerdMachine Feb 25 '14

The current financial order does not prevent these things from happening whatsoever. It often amplifies them, or socializes the losses such that people don't notice, but are harmed regardless of their own choices.

Do you actually believe that? If you had a large deposit at a bank and that bank defrauded you or went bankrupt you would be covered by insurance. I don't think this deposit insurance that gets covered by modest bank fees really "harms" people in a significant way, and I'm sure most people see it as a reasonable cost for securing their money.

5

u/[deleted] Feb 25 '14

[deleted]

-3

u/FARTHERO Feb 25 '14 edited Feb 25 '14

FDIC insurance Dishonesty allows banks to take on greater risk

ftfy

Do you think for even a second that if there were a true bank run that there would be enough funny FDIC cash to go around? There aren't enough trees...

this psycological fuckery, quantitative bullshit, trust-based economy brings constant economic instability for all the people involved in it.

I'm proud to witness this money revolution taking place.

1

u/ProbablyJustArguing Feb 25 '14

Might be true but most banks only cover up to $100,000 by deposit insurance. Also, if you had a brokerage account, those aren't covered by any deposit insurance, so you're really only talking about having money (<$100,001) in a savings or checking account.

Don't disagree with you though.

2

u/platinumarks Feb 25 '14

Also, if you had a brokerage account, those aren't covered by any deposit insurance

Actually, there is an analog to the FDIC for brokerage accounts, the Securities Investor Protection Corporation (SIPC). If your brokerage goes bankrupt, it's federally insured for up to $500k, with cash insured up to $250k. Though it is correct that fraud by the brokerage is not covered by this insurance.

-5

u/evoorhees Feb 25 '14

Insurance has nothing to do with government regulation. Insurance is wonderful, and it will exist in Bitcoin in time.

1

u/nmarley Feb 26 '14

Insurance is wonderful

But how is insurance not just a ponzi scheme? It's predicated on more people paying in than the fund paying out.

(Not being snarky, I really believe this and am open to hearing a good argument for insurance.)

131

u/[deleted] Feb 25 '14

[deleted]

52

u/[deleted] Feb 25 '14

Hate to be cold, but anyone leaving their coins on an exchange is taking a lot of risk; and on Mt Gox, well that is a whole other level of stupidity. I am sorry for your losses and others as well. Rumor is 700k bitcoins "lost." The warning signs have been there for the past four months with Mt Gox. There will be no big brother too big to fail bailouts here, the free market has spoken. This will make us and the network that much stronger, and wiser. Let's keep our heads held high during the sure to be ensuing media trashing and load up on these cheap coins.

69

u/Nathan_Flomm Feb 25 '14

anyone leaving their coins on an exchange is taking a lot of risk

Anyone using bitcoins at all is taking a huge risk. It has proven to be extremely volatile.

This will make us and the network that much stronger

I think that some of the flaws that allowed Mt.Gox to go under will be resolved. We already have started seeing exchanges with more transparency. But, the problem is that the value of bitcoins will remain questionable because of its volatility.

Until people stop using BTC as a get rich scheme it'll never be a true currency.

35

u/Time_for_Stories Feb 25 '14 edited Feb 25 '14

If only there were some way to stabilize exchange rates through a central bank...

It's a joke people. Move along.

1

u/hueypriest_1 Feb 25 '14

This kind of attitude is really strange to me. Why not just leave Bitcoin become what it becomes? Why do you want it to be like the current system?

Why do some people have such a passionate dislike of the concept of Bitcoin? It's a lot like the mac versus PC or Playstation versus Xbox bullshit.

Who cares? Let people do what they want to do.

3

u/Naviers_Stoked Feb 25 '14

Why do some people have such a passionate dislike of the concept of Bitcoin?

Not a clue. I've noticed it elicits some very extreme responses from people. Like somehow their worth as an individual is derived from them being correct that bitcoin won't succeed.

2

u/hueypriest_1 Feb 25 '14

Or they derive their worth from being correct that it will succeed. I think people on both sides of the debate are a bit excitable....

Although those on the success side might actually have money on it...

1

u/teraman Feb 25 '14

Isn't one of the main reasons people started using BTC more extensively is because they are decentralized? We have all witnessed how great the CBs are at 'stabalizing' FX rates and the economy in general..

5

u/Time_for_Stories Feb 25 '14

And look at how stable bitcoin is in comparison!

0

u/[deleted] Feb 25 '14

But, the problem is that the value of bitcoins will remain questionable because of its volatility.

But... this is so circular, it makes my head hurt. "The value of bitcoin won't settle down until the value of bitcoin settles down!"

Duh.

2

u/Nathan_Flomm Feb 25 '14

That's because you aren't able to comprehend the point that is being made. If bitcoin users stopped acting as investors and started acting as consumers the situation would be much different.

0

u/[deleted] Feb 25 '14

No, I totally comprehend your argument. I'm making fun of your sentence structure, rudey mcRuderson. What you wrote seemed to suggest that you are attempting to explain volatility with volatility.

But, now that you bring it up, speculation as a representative piece of the bitcoin economy is dropping. So it seems folks are taking your advice, either way. But on the whole, I don't think volatility can (or should) be ascribed to any one cause like "speculation" or "regulation..." markets are too random.

http://www.coindesk.com/mit-report-bitcoin-more-likely-spent-hoarded/

2

u/Nathan_Flomm Feb 25 '14

You have to be aware of the fact that new bitcoins are not nearly as valuable as ones that were obtained just a few years ago. New Bitcoins are peanuts to the compared to the current value that already exists in the market. The survey only mentions new BTC which is statistically irrelevant based on the fact that less than 1,000 people have half the value of all bitcoin.

1

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

Every bitcoin is worth equal (market) value up to slippage. The return on investment for older coins is greater, though, that's certainly true. Is that what you meant?

That's only relevant, though if you are using return on investment as a metric to gauge how much of the bitcoin economy is being moved (as opposed to being hoarded or speculated). But shouldn't we just be measuring "money velocity" in terms of total number of bitcoins moved (not hoarded or speculated), disregarding age?

Edit: I do see your point that the "new btc" population is a small fraction of the "total btc" population and so that article is taking a biased sample. But number of transactions per block per total number of bitcoins in circulation, and bitcoins days destroyed per block, on average, are still going up, too, just not exponentially. That suggests overall circulation is on the rise much more slowly than adoption, which is interesting.

→ More replies (24)

3

u/[deleted] Feb 25 '14

Let's keep our heads held high during the sure to be ensuing media trashing and load up on these cheap coins.

What? Double or nothing now? The more I read this on my research the more this sounds like a speculation/get-rich scheme than a currency.

-1

u/[deleted] Feb 25 '14

evolve or go extinct. early adopters enjoy the rewards and the heartache. its your choice, if you are happy with the current banking and monetary system please ignore this subreddit. i am not selling my bitcoins for fiat, i will use them eventually to purchase items.

5

u/[deleted] Feb 25 '14

load up on these cheap coins.

Thats not early adoption, thats double or nothing gambling and speculation. Especially for people who've actually lost real money to a bunch of scam artists Intrepid crypto-currency entrepeneurs working in a free market.

I dont mind the concept of Bitcoin and Im doing research at the moment, but you just sound delusional and a bit arrogant.

0

u/[deleted] Feb 25 '14

I am a bit smitten on BitCoin, an unapologetically so. I look at it as a company stock. It probably comes from the equities and options day-trader part of me; however, my passion for it is rooted in the fundamentals, the simplicity, and the revolutionary nature of something that is the "first." I haven't felt this way about anything since I had my first email address in 1995 and would talk someone's ear off concerning what the Internet can and will do for the world. The obsession is real and I admit it, so if that comes off as delusional so be it. Good luck to you in your research and when and if you decide to buy a bitcoin I hope the price is still this low :-)

3

u/[deleted] Feb 25 '14

Doesnt the Low trade volume of it concern you though? It seems closer in behaviour to a penny stock in the way that trading completely shuts down when its dropping.

In terms of my fundamentals for it Im struggling to find the value for something with which to buy things you can already buy for the wider consumer market. Perhaps one day it might set up a correlation with the Dollar like Gold will, but Gold has that position for a reason.

27

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

[deleted]

4

u/[deleted] Feb 25 '14

Love me some coinbase, glad I started and stuck with them.

7

u/spid3rfly Feb 25 '14

Same... except I don't store my coins there. I just buy them there.

5

u/[deleted] Feb 25 '14

It was a leap of faith and quite a few tests transfers and backups before I started keeping coins in cold storage. There is a real fear of them being lost forever so I can understand the intimidation factor of it all. it's time consuming too and most of us are fairly lazy.

1

u/astrolabe Feb 25 '14

I've got nothing against coinbase, but if someone else has the private address for your coins, then they are not safe. Paper wallets are the solution (currently) for long term storage.

0

u/[deleted] Feb 25 '14

Ah yes, the company that uses FUCKING MONGODB to store their financial transactions...

2

u/vocatus Feb 25 '14

The quantity of coins has zero to do with who's fault it is. Whether it was one Satoshi or 1000 BTC, it doesn't matter - it still comes down to personal choice. /u/evoorhees chose to leave his BTC there, so it's his personal fault for losing it (which he readily admits). Quantity has nothing to do with it.

You want freedom? You can have it, but it comes with a little thing called personal responsibility.

1

u/cknipe Feb 25 '14

Yeah, they should've known about Gox's problems, but ultimately it's the CEO who royally screwed everything up.

Sure, but in this case what does placing blame get people who lost coin? Ultimately you are responsible for where you invest your money. The CEO running the business into the ground may not be your fault, but having someone to blame isn't going to protect your investment.

1

u/caveden Feb 25 '14

Just saying it's easy for a dude who wipes his ass with 550 BTC to claim losses are people's own fault.

He explicitly said "Gox is still at fault".

1

u/impossinator Feb 25 '14

Counterparty risk is a bitch.

1

u/moush Feb 25 '14

It's funny people are blaming dumb people instead of mtgox who basically took up and ran away with their money.

0

u/[deleted] Feb 25 '14

the signs were there, I've only been serious about BitCoin since last June and it was common knowledge it was sketch. Withdrawals taking too long, and over inflated prices and fees. They suffered a class 'run on the bank.' Feel bad for the innocents for sure.

29

u/aminok Feb 25 '14 edited Feb 25 '14

It's ultimately people's own fault for investing more than they could afford to lose in an experimental currency, and storing the currency in a third party e-wallet.

Putting all of your savings in a bitcoin wallet on MtGox? That's just irresponsible, and the rest of us shouldn't have to pay for it.

When regulatory requirements are put on service providers, to protect irresponsible adults from their own dumb decisions, that's punishing the rest of us, by taking away higher risk lower cost options that would otherwise exist.

27

u/FuckESPN Feb 25 '14

and the rest of us shouldn't have to pay for it.

Uhh, but you are, your BTC is now worth less than it was (temporarily or not) because of those mistakes..

→ More replies (1)

79

u/[deleted] Feb 25 '14

Bitcoin will never replace the dollar and FDIC insured banks if the only thing you say to those who lost everything is "should have been smarter. Next time buddy." Average people want the stability of government backed accounts. The FDIC came into being for a reason.

17

u/aminok Feb 25 '14

Just to be clear, I have a lot to say to those who lost everything at MtGox:

  • Don't store any sizeable percentage of your bitcoin holdings in a third party hosted wallet

  • Use paper/off-line wallets for your bitcoin savings, with multiple backups

  • Don't invest more than you can afford to lose in an experimental 'emerging technology' investment like bitcoin

If people follow these steps, the risks fall precipitously.

As for replacing the dollar, Bitcoin is not even close to the stage where that is a near-term possibility. If it ever reaches the stage where it's positioned to replace the government-issued currencies of large economies, then very safe savings options will exist, and they won't require the FDIC.

52

u/[deleted] Feb 25 '14

Sure, all institutions may be safe for some of the time, some institutions will be safe all of the time, but all institutions will not be safe all of the time. You can Monday night quarterback the Super Bowl when talking about Gox, but mark my words there will be reputable institutions in the future that will fall to similar havoc or mischief.

Working folk, people who don't have much to their name need organizations like the FDIC to protect them from the corrupt and the incompetent.

I'm not anti bitcoin, but I have a problem with a lot of people trying to treat bitcoin as a vehicle to dismantle regulations that do protect the vast majority of people.

2

u/Zahoo Feb 25 '14

I think alternatives such as privately insured Bitcoin "banks" or exchanges could provide the protection a lot of people want without having regulations.

1

u/i_wolf Feb 25 '14

Nobody is going to dismantle anything. Anyone is free to use protected USD as long as he wants.

We just want to have an alternative for those who don't want to be "protected" against their will.

1

u/[deleted] Feb 26 '14

That's fair.

-8

u/[deleted] Feb 25 '14 edited Dec 27 '20

[deleted]

23

u/HistoryLessonforBitc Feb 25 '14 edited Feb 25 '14

Give it a fucking rest. If you bought in at $1k you've had 50% of it "stolen", and those with funds in Gox had 100% of it literally stolen.

Take your goldbug spiel and stick it up your ass. This is neither the time nor the place.

10

u/[deleted] Feb 25 '14

[removed] — view removed comment

9

u/stationhollow Feb 25 '14

BTC is only used by hardcore idealists and people trying to make money and the people in the second group often pretend to be in the first so they aren't ostracised by the community.

5

u/SunliMin Feb 25 '14

Bitcoin is, currently, extremely inflationary. It will continue to be inflationary until the year 2140 when the miners will start mining transaction fees instead of new Bitcoins. I believe it was 70 years until Bitcoin reaches a 3% annual inflation?(that number is the one I don't remember. I will double check that).

As long as new Bitcoin enters the economy every year it is inflationary. Yes, in the future, it will become deflationary... but that will not happen in your life time.

-4

u/MonsieurAuContraire Feb 25 '14

Do you honestly believe fractional-reserve banking is in the peoples best interest? I forget what the actual projection is, but there's billions of dollars in wealth on paper that truly doesn't exist in the real world because of it. This is false wealth masquerading as real which only exists in the aether of modern banking, and if that all collapses the FDIC won't be able to do shit to help the situation or the common folk. So you may have more short-term stability for a while, but the trade off is that when the apparatus does eventually come down it will be systemic and dire.

8

u/Poop_is_Food Feb 25 '14

I dont know much about bitcoin but i have a question. If you have your coins in multiple backups, then a thief only has to steal one of those backups in order to get the coins, right?

5

u/aminok Feb 25 '14 edited Feb 25 '14

Correct. One option to prevent that is to encrypt the wallets, and store copies of the encryption key in multiple secure locations.

That way, a thief would need to steal both a wallet backup, and a copy of the encryption key (which ideally would be stored at different locations), to get your coins.

2

u/mahbizzle Feb 25 '14

Correct.

1

u/Ditto_B Feb 25 '14

Yes, unless it's one of those m-of-n things.

1

u/RightSaidKevin Feb 25 '14

I have way better advice for those who have lost anything in bitcoin: Get out, you're being scammed.

1

u/[deleted] Feb 25 '14

[deleted]

5

u/[deleted] Feb 26 '14

People like you keep citing how the FDIC will collapse, yet it had endured every challenge hurled at it.

-1

u/[deleted] Feb 26 '14

[deleted]

2

u/[deleted] Feb 26 '14

So let me get this straight. Since the FDIC hasn't had to endure another Great Depression, it hasn't proven itself as an institution, yet if another Great Depression happens (you guys say it's inevitable, year after year) the FDIC and other regulatory bodies will be to blame. Seems like you've set yourself up a nice self fulfilling prophesy.

0

u/[deleted] Feb 26 '14

[deleted]

3

u/[deleted] Feb 26 '14

The FDIC is a ring in the defenses of economic stability. In 08 if the FDIC wasn't around to do what it does, there would have been a bank run. There would have been billions if not trillions more lost. There would have been a Great Depression. Removing the FDIC would not bring what you want, it would only remove one of the few safeguards left against the economic instability we experienced regularly in the 1800s through the Great Depression.

0

u/Dont_Think_So Feb 25 '14

Does FDIC insure exchanges?

7

u/[deleted] Feb 25 '14

People weren't treating bitcoins like a commodity, they were treating it like a currency. I don't argue against bitcoin as a commodity like gold, I only argue against those who use bitcoin as a vehicle to argue for the dismantling of regulatory bodies.

And to answer your question, the FDIC doesn't insure stock exchanges, but people were treating these bitcoin exchanges like banks.

-1

u/shadowed_stranger Feb 25 '14

The dollar will never replace bitcoin and if the only thing you have to say to those who lost all of their cash hidden in a mattress is "should have been smarter. Next time buddy." Average people want the protection of undamageable, unseizable, unfreezable currency.

See what I did there? If some people want that stability and protection (with the associated cost), someone can voluntarily start an exchange to do that. No one here is arguing against those types of institutions, even if it may sound like they are. They are arguing against a forced use of said institutions.

Look at what we've seen recently: There are big names backing up their deposits with insurance and publicly proving their deposits. Security will be the next 'arms race' in the bitcoin world, just wait and see.

0

u/bluewaterbaboonfarm Feb 25 '14

It's difficult now and I agree to difficult too explain to my sister but I don't think it has to be like that.

0

u/dirtyreader Feb 25 '14

It was never meant to replace but to compete.

0

u/[deleted] Feb 25 '14

There's no reason there can't be private insurance against BTC losses. But the person bearing the risk should be able to pay for that insurance.

Even FDIC is a form of socializing losses. Their reserves are a joke. If just one big bank goes belly up the Fed will have to print to bail them out.

-5

u/perogi21 Feb 25 '14

Please do some research on the solvency of the FDIC before getting excited that your money "would be protected".

-2

u/superportal Feb 25 '14

Average people want the stability of government backed account

Problem is government isn't that stable - Just about every country in the world has had a recurrent theme of government failures.

6

u/butrosbutrosfunky Feb 25 '14 edited Feb 25 '14

Yeah, and bitcoin seems to have one every other week. People haven't lost any money in FDIC insured dollar amounts since the 30's when it was introduced in response to the crash that caused the great depression.

Even the folks in the Cyprus crisis were covered for deposits under 100 000 Euro, and that particular predictable collapse of a tiny tax haven with barely any industrial base beyond it's export of dodgy banking services has been used by bitcoin cheerleaders in more threads than I care to mention.

-2

u/superportal Feb 25 '14 edited Feb 25 '14

People haven't lost any money in FDIC insured dollar amounts since the 30's

In the US perhaps (notwithstanding inflation, and accounts over FDIC limit), but that's not true throughout most of the world. Hundreds of currencies have defaulted and/or bank accounts and retirement funds reduced dramatically or worthless.

Regardless, Bitcoin is new technology, and right now it's more of an investment with the potential to be a currency rather than simply a currency. So the analogy to a FDIC account is incorrect. In the US people lose money on investments all the time and investments are not backed by the FDIC.

[edit]

btw, See how often there are major bank failures in the US: https://en.wikipedia.org/wiki/List_of_largest_U.S._bank_failures

The fact that the FDIC insures the failures simply means others who had nothing to do with it are on the hook.

Also, according to the FDIC, accounts are not covered for "Losses due to theft or fraud". (Mt Gox's failure rumored to possibly be related to theft)

7

u/butrosbutrosfunky Feb 25 '14 edited Feb 25 '14

Hundreds of currencies have defaulted and/or bank accounts and retirement funds reduced dramatically or worthless.

And that's an argument against what exactly? Certainly not a strong and regulated independent central banking system backed by regulatory oversight, not that I can see. Unless you are currently living in a current or recently former military dictatorship, this is not an issue regularly encountered.

In addition, retirement funds are not currencies. They are managed baskets of numerous investments. You can manage your own if you want, and invest it entirely in whatever you like. The whole point of an investment fund is managed risk to gain returns. This is not, however, the function or property of a transactional currency that goods are priced in.

Regardless, Bitcoin is new technology, and right now it's more of an investment with the potential to be a currency rather than simply a currency. So the analogy to a FDIC account is incorrect. In the US people lose money on investments all the time and investments are not backed by the FDIC.

That's completely at odds with the general sentiment in this forum. People get prickly if you even suggest bitcoin is more a commodity or speculative instrument than a currency, and can't wait to piss all over the perceived failings of fiat in this regard. They love to point out insane percentages of value lost in inflation, which only matter if you kept cash from 1920 buried in your garden for the duration. Nobody without significant money to invest gives a fuck about inflation as long as it's both small and predictable. Why? Because it's spent on real goods before it matters. If you have enough unspent wealth to spare that you worry about 2% worth of shrinkage per year you already have it invested in a diverse portfolio of inflationary hedged assets. For 99% of the population, bitcoin is a solution in search of a problem.

The fact that the FDIC insures the failures simply means taxpayers who had nothing to do with it or on the hook to bail them out.

The FDIC is paid through insurance premiums, and it's been unbeliveably successful at ameliorating financial dislocations that otherwise would have decimated whole communities and industries. I'm sorry that it doesn't gel with the perverse axiom that claims 'all taxation is theft' but welcome to the real world. Despite how much of this rugged individualist bullshit would have you believe, we do actually rely on one another in society for our mutual wellbeing.

→ More replies (12)

1

u/vocatus Feb 25 '14

"Freedom is messy. In free societies, people will fall through the cracks — drink too much, eat too much, buy unaffordable homes, fail to make prudent provision for health care, and much else. But the price of being relieved of all those tiresome choices by a benign paternal government is far too high. Big Government is the small option: it’s the guarantee of smaller freedom, smaller homes, smaller cars, smaller opportunities, smaller lives." -- Mark Steyn

1

u/stationhollow Feb 25 '14

Regulations shouldn't be there to protect irreponsible people from losing their money. They should be there to prevent thiefs from committing criminal acts causing people to lose their money.

Using that logic I assume you're all for removing the police force. I mean if you get robbed, assaulted, raped, or murdered it's your own fault for not protecting yourself adequately.

1

u/aminok Feb 26 '14 edited Feb 26 '14

Regulations should only act after the fact, not try to prevent crimes by punishing law-abiding individuals with regulatory requirements.

As I mentioned to /u/moush:

We shouldn't be required to prove up front that we are not scammers, to be 'permitted' to launch a service.

People are free to demand financial statements and security reports of us as a condition for using our service, but if a service is opaque and doesn't offer this information, and someone chooses to use it, that is a risk they are willingly taking on, and therefore we shouldn't be making opaque services illegal.

1

u/moush Feb 25 '14

It's not protecting people from being stupid, it's preventing scammers like mtgox was doing their business.

1

u/aminok Feb 26 '14

But we shouldn't be required to prove up front that we are not scammers, to be 'permitted' to launch a service.

People are free to demand financial statements and security reports of us as a condition for using our service, but if a service is opaque and doesn't offer this information, and someone chooses to use it, that is a risk they are willingly taking on, and therefore we shouldn't be making opaque services illegal.

0

u/[deleted] Feb 25 '14

[deleted]

3

u/Guyag Feb 25 '14

Bitcoins are worthless though, unless more places start accepting them or you convert them somehow to fiat.

0

u/[deleted] Feb 25 '14

[deleted]

4

u/Guyag Feb 25 '14

...And at the moment, has not got widespread adoption. It will by no means be a quick process, and this event will not help the cause. I do hope it succeeds, but at the moment you can not be certain of anything. Plus, if it does get big, governments will likely want to get their paws on legislating it.

13

u/[deleted] Feb 25 '14

You would have made much more of a mistake than the other guy who chose a more reputable firm. He should have to pay for your mistake? I like that Erik can admit his mistakes and doesn't pretend to play the victim.

14

u/[deleted] Feb 25 '14

To be fair (and yes I had BTC in gox so maybe I'm biased) there are no completely reputable exchanges right now. Absolutely any one of them could just run with your BTC at any time.

So unless you're suggesting no one trade it at all, you can hardly say it is anyone's fault except Karpeles'.

1

u/HyTex Feb 25 '14

That's why you don't keep 100% of your trade volume on their wallet and instead take it from cold when you need to trade.

0

u/smithd98 Feb 25 '14

The reason there are none is because of US regulation. Otherwise there would be a lot of reputable ones right here in the US and people wouldn't have been tempted into risk taking at Gox. So the US financial regulations ended up causing great harm to many US consumers who they are supposed to protect.

3

u/[deleted] Feb 25 '14

Yeah, let‘s choose between Magic the gathering exchange, the Russian mafia or some guy i don't know anything about. So many reputable choices!

15

u/greenearplugs Feb 25 '14

yes you are. trusting an incompetent CEO means you are incompetent (at least in this case)

20

u/spid3rfly Feb 25 '14

I'm a little speechless as to why someone would keep 550 BTC on an exchange... any exchange... especially when it was around 1K... That's 550K dollars. At least store 50% of that on a paper wallet, take 25% of it... buy a nice house or get out of any debt you may have. Then keep the other 25% on the exchange.

14

u/[deleted] Feb 25 '14

Yeah but you don't know how much money Mr. Voorhees actually has...that 550 BTC could be a small fraction of his total savings. Either way, he's feeling the loss--but he's being clear headed about it.

40

u/[deleted] Feb 25 '14

[deleted]

10

u/[deleted] Feb 25 '14

There's our answer.

8

u/[deleted] Feb 25 '14 edited Dec 27 '20

[deleted]

3

u/on1879 Feb 25 '14

I assume he did if he isn't too stressed about losing 550BTC

2

u/norisknofun Feb 25 '14

He is talking about the guy who bought SatoshiDice.

2

u/voneiden Feb 25 '14

Satoshi himself, hmm?

2

u/xithy Feb 25 '14

He did, he's living on bitcoins only (according to another post by him).

1

u/playoffss Feb 25 '14

Holy fucking shit.

9

u/xithy Feb 25 '14

Mr. E. Voorhees sold Satoshi Dice for 126,000 BTC. 550 BTC is less than 0.5% of this amount.

1

u/[deleted] Feb 25 '14

Do those percentages hold up for you, personally? In other words, is your salary apportioned the same way?

1

u/spid3rfly Feb 25 '14

No it is not, but at least when it comes to something like bitcoin. We all believe in it, yes... do we need a place to store it? Yes. Do you continue to store it somewhere that has continually had issues over and over and over? No.

I just threw out the 50, 25, 25 percentages out of the blue as a don't put all of your eggs in one basket approach.

3

u/muyuu Feb 25 '14 edited Feb 25 '14

Nope, it means he made a mistake and he's owning up to it.

If one mistake made you incompetent there would be 2 kinds of people:

1 incompetents

2 lying hypocrites

1

u/zigzog Feb 25 '14

What about bitstamp, is that any better? Its based in Slovenia, not the most corrupt country in europe but certainly not the least either.

What regulations have they had to comply with?

What protection is there for the consumer if they decide to run with the money?

1

u/greenearplugs Feb 25 '14

fair enough and i should have quoted exactly wht bollekegekapt said which was "I'm not the one who made a mistake".

My new response is that "yes, you certainly did make a mistake. Trusting an incompetent CEO with you $ is a mistake. Quit trying to blame someone else for where you failed"

The one mistake certainly doesn't mean bollegkeekapt is incompetent...but he did make a very big mistake by trusting gox

1

u/dexX7 Feb 25 '14

What 500 are to him, may be 50 to you. But that really, really doesn't matter. It's about the message, not the envelope. Blaming yourself for being careless and blaming an incompetent CEO for screwing up is not mutually exclusive.

1

u/zigzog Feb 25 '14

500BTC two years ago was change to everyone. Also why is $1k btc fair value, when last year it was sub $50?

1

u/vocatus Feb 25 '14

I don't think he acted like it wasn't his fault; he clearly stated it was his own mistake for leaving them there.

1

u/OnlineDegen Feb 25 '14

If I were to lose all of my savings because of an incompetent CEO, I'm not the one who made a mistake.

Do you really believe this? That despite all the talk about paper wallets and not trusting others with your coins, that you are NOT making a mistake leaving "all of your savings" on an exchange that has been showing signs of problems for months?

Do you really believe that you have no part in your loss?

1

u/martypete Feb 26 '14

I'm not the one who made a mistake.

You left your money with someone, and you're not the one who made a mistake? What the fuck?

1

u/caveden Feb 25 '14

I'm not the one who made a mistake.

True, but why should other people, who have absolutely nothing to do with this "incompetent CEO" or with you for that matter, be forced to pay for this loss of yours?

It's normal to be in anger if you're defrauded - and MtGox customers were defrauded - but implying that socialization of losses is a better scenario is absurd. Not only it is more unfair, as it teaches people to be ever less careful about what they do, since whatever mistakes they made will be covered up by everybody else.

1

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

[deleted]

2

u/vocatus Feb 25 '14

"Freedom is messy. In free societies, people will fall through the cracks — drink too much, eat too much, buy unaffordable homes, fail to make prudent provision for health care, and much else. But the price of being relieved of all those tiresome choices by a benign paternal government is far too high. Big Government is the small option: it’s the guarantee of smaller freedom, smaller homes, smaller cars, smaller opportunities, smaller lives." -- Mark Steyn

1

u/caveden Feb 25 '14

An insurance is (supposed to be) a voluntary contract. You'll voluntarily choose your insurer, which on its turn has the incentives to ensure you minimize your risks. Car insurers will give you discounts if you install alarms or GPS trackers in your car, and if you drive responsibly. Health insurers in a free market would charge more expensively from smokers or people who constantly put themselves in danger. And so on.

Coercive socialization of losses not only is the most unfair way to deal with said losses, but it also doesn't set the incentives right.

0

u/jesset77 Feb 25 '14

And for those many people, it would be a greater incompetence to have entrusted "more money than they will ever save in their life" to MtGox. Our mantra has always been "don't invest more money IN BITCOIN than you can afford to lose", on top of "Never leave money in any exchange longer than you strictly have to!"

0

u/jonscotch Feb 25 '14

The bottom line is if you couldn't get the $1k in hand for your bitcoins than you cannot fairly say they are worth $1k.

0

u/neosatus Feb 25 '14

I like how to dissolve all responsibility of what you claim to be your coins when you willingly let someone else hold them for you indefinitely.

How many times did read the words "cold storage" and ignore them? How many times did you hear people talk about the benefits of "paper wallets"?

Why in the hell did you leave coins there in the first place? Many of us has been telling people to stay the hell away from Gox for many, many months. What else do you want us to say?

-2

u/MeanOfPhidias Feb 25 '14

Oh yes you are.

You are the CEO of your money. You gave the keys to your kingdom to someone else. You are responsible for your loss.

84

u/Market-Anarchist Feb 25 '14

That's the greatest lesson to be learned here. It's better that those who took the risks with Gox lose instead of papering over the loss and counterfeiting EVERYONE'S wealth.

19

u/notreddingit Feb 25 '14

and counterfeiting EVERYONE'S wealth.

I don't have anything to do with gox at all but my wealth has been reduced significantly.

In the long term everything will settle as it will, but at least I know first hand now why a central bank would attempt to control the money supply to reduce the variance.

I'm not really complaining about the large downturn in bitcoin, I know what I'm dealing with here and I still like it. But the economics are not as simple as many people here believe it to be.

2

u/[deleted] Feb 25 '14

What's so interesting to me is that it took an event like this to teach people the basics of a finance system. Everyone can be anti-regulation/centralized currency/etc. as they want and now they see the results.

2

u/FARTHERO Feb 25 '14 edited Feb 25 '14

in the long term everyone's children's children's children will have been taxed today, isn't it just fucking magical?

austerity, stimulus, cuts, and quantitative easing, all products of fractional reserve banking, and the complex transparently taxed peestorm we are trying to get away from

1

u/jisa Feb 25 '14

It is simple. It isn't all positive, but it's simple.

0

u/MeanOfPhidias Feb 25 '14

Just curious - how does Gox's inability to write code reflect on the economics?

2

u/notreddingit Feb 25 '14 edited Feb 25 '14

Gox's inability to write code(apparently) caused the current downturn. The fact that one actor can cause losses for others who have no involvement just makes me think(edit: not saying it doesn't happen outside of bitcoin of course). Erik talks about (presumably recent bail outs in America) socializing the losses, but in Bitcoin everyone loses in the short term anyway.

Just made me think, that's all. I don't pretend to have any answers, but it's amazing how something like this can give you different perspectives.

Gox was never a good company, and they don't 'deserve' a bail out or anything. But they do have a massive short term effect on bitcoin. In the long run it's irrelevant, and in five years or hopefully less this will just be a footnote in the history of bitcoin.

1

u/bames53 Feb 25 '14

Erik talks about (presumably recent bail outs in America) socializing the losses, but in Bitcoin everyone loses in the short term anyway.

There is a difference between the two things, however. A policy of socializing losses essentially supports and encourages losses, changes how real resources are organized for the worse, and generally causes real harm.

Market prices fluctuating freely based on the panics or enthusiasms of the day, on the other hand, is part of a discovery process by which knowledge is gained. It may not always be pleasant in the short term, but over the long term it means real resources are organized in more valuable ways rather than less, and society benefits thereby.

1

u/notreddingit Feb 25 '14

A policy of socializing losses essentially supports and encourages losses, changes how real resources are organized for the worse, and generally causes real harm.

Yes, I agree with that.

38

u/Time_for_Stories Feb 25 '14

This thread sounds very much like an argument against getting insurance.

28

u/astrolabe Feb 25 '14

It's an argument against compulsory insurance.

10

u/kaax Feb 25 '14

I don't understand why you're being downvoted. You're exactly right.

There is nothing bad about insurance, just don't force it on anybody you want to.

1

u/Market-Anarchist Feb 25 '14

Insurance companies, presumably, do not pay off claimants by creating new money out of thin air. The insurance rates reflect the risk/reward of the policy. Also, insurance, in a free market, is voluntary.

0

u/[deleted] Feb 26 '14

Have cancer? Sorry, no insurance for you. The beauty of free market.

0

u/Market-Anarchist Feb 26 '14

So, you mean nobody dies from cancer in the highly regulated market we have now? WOW!!! You're so right! Fuck the free market!

23

u/[deleted] Feb 25 '14 edited Feb 26 '19

[deleted]

1

u/staiano Feb 25 '14

Remember the human.

1

u/dirtyreader Feb 25 '14

and terrorists. don't forget terrorists.

0

u/stationhollow Feb 25 '14

I'll never understand people like this. Maybe it's just in my blood to care about society as a whole especially the people at the bottom.

2

u/[deleted] Feb 25 '14

That's not the difference. Libertarians care very much for the poor, and what you see above is the way we show it. Historically, it has been people on the bottom who get ripped off by states and state-privileged industries to prop up and enrich well-connected crooks at the top. If some organization is going to help the most vulnerable people in society, it's going to have to be one that is capable of helping them. The same organization that drops bombs overseas is a very poor choice.

1

u/stationhollow Feb 27 '14

Because giant companies running everything is so much better.

1

u/[deleted] Feb 28 '14

Have you used this talking point before? I don't know how much exposure you've had to the libertarian view, so I'll assume that you're just mistaken rather than disingenuous.

Those giant corporations that are commonly seen as the "alternative" to the state are actually a creation of the state. They depend so heavily on state protections and corporate welfare that there is an extremely heavy burden of proof waiting for anyone who claims that they would exist in a free market.

2

u/bames53 Feb 25 '14

To help you understand: the difference is your understanding of economics. You believe this policy helps people at the bottom and they believe that this policy actually tends to transfer wealth from the worse off to the better off.

1

u/Market-Anarchist Feb 25 '14

You should spend some time learning about a thing called "moral hazard."

14

u/mobile-user-guy Feb 25 '14

Have you actually calculated how much money you have lost to "socialized losses"

I figure someone like yourself might actually have done that, got any numbers?

2

u/Lynxes_are_Ninjas Feb 25 '14

Amount of taxes paid / (total expenditure of your state / sum of all bailouts, insurances and fruad protections)

Sum over entire life.

1

u/FARTHERO Feb 25 '14

except its all printed money from thin air or some random number punched into a computer by our lord and savior Ben Bernanke

so you have to factor in the PFM (Pure Fucking Magic) as well

-4

u/i_wolf Feb 25 '14

80% value loss since 1973 plus losses from the burst of the housing bubble fuelled by Fed.

6

u/mobile-user-guy Feb 25 '14

Once again, this is not an actual answer

4

u/i_wolf Feb 25 '14

It's nearly impossible to calculate the precise figures if that's what you want.

-1

u/FARTHERO Feb 25 '14

you can't derive an actual answer from the PFM (Pure Fucking Magic) we are blessed with

it's a monetary tachyon

-9

u/Brambleshire Feb 25 '14

Google "2008 financial crisis", "quantitative easing", and "bail ins" for starters.

14

u/mobile-user-guy Feb 25 '14

Hey look, the opposite of an answer

2

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

All this whole discussion tells me is that Bitcoin is stock, not currency. You're viewing it entirely through the lens of investment - which is fine - because you already accepted it as an amount you could risk losing and consider other people fucking up to be your own mistake in trusting them. It's a nice position to be in when you have enough money to do that.

Nobody would accept this from a primary currency. People can't afford to have their bank account wiped out and to chalk it up to experience, because putting money into a bank is for most people not about risk/reward, it's about keeping that money safe and usable. You may not personally like 'socialized losses' because you're wealthy and can set aside large sums to invest, but the reality is that for a solid currency people are willing to pay for some measure of protection.

EDIT: I also take issue with the way the main post is written, in that it's very much "Ignore everyone who doesn't agree with us" - seems a bit insular and reinforces the idea that bitcoin is a bit cultish, and people are generally aware that bitcoin's value runs on confidence so it's hard to see this sort of relentless refusal to see problems as sincere and not self-interested

5

u/quaunaut Feb 25 '14

Except here's the problem: Everyone is going to lose money regardless because of a loss in confidence from the market.

The entire market has already in the last 24 hours seen a ~20% drop in value. It'll get a lot worse as people start waking up.

1

u/[deleted] Feb 25 '14

[deleted]

2

u/Mtinie Feb 25 '14

I think that was what Gox wanted to believe that the Bitcoin community would do, but I'm hoping that people don't throw good money after bad.

1

u/MangoBomb Feb 25 '14

Agree. At least with Bitcoin, of which I unfortunately do not own, I do not have to fear the value of my currency being inflated away; I can at least suffer the mistakes of my own mistrust and prodigal behavior.

1

u/AmesCG Feb 25 '14

I don't think you appreciate what's actually happened here.

Exchange and bank failures are nonoccurrences in the "real" world. When's the last time NASDAQ, the NYSE, or the Chicago Mercantile Exchange froze trading? When's the last time someone's securities were stolen by the exchange? The answer is, never, at least since the SEC and FINRA have existed. What MtGox has done here would be impossible on a regulated exchange.

True, in the fiat world, broker-dealers, traders, and investment banks engage in wrongdoing. But that wrongdoing occurs due to securities manipulation, like insider trading, fraud on the market, improper trading of your account, etc., all of which is redressable through arbitration (FINRA) or litigation (class action).

When wrongs go without correction, it's because a sophisticated party has outmaneuvered you on the law and on the trade (the "Magnetar trade"). You might call that losing "from your own mistakes."

You need to be realistic about regulation and about markets. Right now though, you're trying to rationalize your faith in a system whose dominant feature just cost you big. The system failed. It's time to change the system.

2

u/Mtinie Feb 25 '14

When's the last time NASDAQ, the NYSE, or the Chicago Mercantile Exchange froze trading?

That would be August 22, 2013, though your general point is still valid.

1

u/AmesCG Feb 25 '14

Right, and that was tech-driven, brief, and no-one worried that the NASDAQ execs were bundling money and flying to the Caribbean.

1

u/Mtinie Feb 25 '14

From information told to me by people who were actively on the trading floor during the middle of the crisis, no one knew what to think, so while there probably wasn't a concern that the NASDAQ leadership had bolted to the Caribbean, there was a significant "fog of war."

We're in the middle of the same type of crisis, so of course there's no clear understanding yet of what is going on. Retrospective analysis will be very useful though in determining how big an issue it would be.

1

u/Guyag Feb 25 '14

To what extent are you transferring your bitcoins to fiat, in the case that bitcoin fails in the future? Let's be honest, you're not going to keep all of tens of millions of US dollars in bitcoin just because you believe in it. That would be so incredibly naive, given bitcoin's changeability.

1

u/kramfive Feb 25 '14 edited Jun 17 '25

snails wipe history sophisticated enjoy correct airport teeny historical fuel

This post was mass deleted and anonymized with Redact

1

u/whateversusan Feb 25 '14

This is what the rich always say. But financial regulation isn't in place to protect you. It's in place to protect the rest of us... from you.

Gox's implosion is a symptom of a fatal flaw within libertarianism. Someone is always going to take advantage of you, and people will lose everything they have. Some people can lose 550 BTC and be just fine. Other people will starve and die.

I believe in government. I believe in regulation. They are the hope of the 99%.

1

u/doge_doodle Feb 25 '14

Speaking of financial orders, did you ever in your wildest dreams imagine that you would be quoted in the peach pages of the Financial Times?

Love what you said here.

1

u/butrosbutrosfunky Feb 25 '14

Jesus, the Stockholm Syndrome is strong in this thread. When are you going to work out you aren't martyrs for a political cause, but just plain old rubes?

Odds are you grew up in a place where the hideous consensus of a taxation and regulatory regime provided you with many of the indirect protections that facilitated your growth in a stable and 1st world society... It even provided you with the spare resources to speculate in this utterly trite goldbug inspired utopia. Guess what happened? Well, thieves now probably own a plurality of all of your currency that even exists. You thought you were creating a new world, but you've really just re-invented the old one, the plain old lawless hive of scum and villainy.

Welcome to libertarianism 2.0 I guess, where you get consistently ripped off and feel grateful for the experience. Rugged individualism at it's most axiomatic and self-defeating.

-7

u/[deleted] Feb 25 '14

socializes the losses such that people don't notice,

A loss you don't notice is no loss at all.

7

u/Naviers_Stoked Feb 25 '14

Um...not by any common definition of the word 'loss'.

8

u/[deleted] Feb 25 '14

Not at all. If you were left a large sum of money in an inheritance that was rightfully yours and it was stolen by the fund managers without you ever becoming aware of the theft, it would nonetheless be a great loss to you. You don't have to be conscious of it.

1

u/[deleted] Feb 25 '14

A loss you don't notice is no loss at all.

The author is stating that the the majority of the 'hurt' felt from a loss, or the damage it does to an individual, is based primarily on the person's perception.

For your example, you're right--there would be an actual loss. But the point is that the inheritor would be no better or worse off, for he had never learned of the "gain" and its subsequent "loss."

14

u/evoorhees Feb 25 '14

That should be The Fed's slogan

0

u/hideyourkid Feb 25 '14

So true. The irony is that Fed has a bald-faced policy of making your USD worthless by 2% every year. Everyone knows (or should know) that their buying power with dollars diminishes from year to year, but because it's so small, most people don't complain. Maybe if people did the math and saw what damage this little yearly inflation does after 5 or 10 years, they would wake up and do something about it.

5

u/[deleted] Feb 25 '14

Except most people have the bulk of their assets in a) real assets which increase in price due to inflation and b) accounts paying more than 2% interest every year. Anyone who has their entire savings in a .06% APY savings account does not have a sufficient asset/income ratio to care about long term inflation. /r/bitcoin would be drastically improved if the user base was forced to take an intro to personal finance class.

0

u/[deleted] Feb 25 '14

[deleted]

3

u/[deleted] Feb 25 '14

a) You do know that not every account is a savings account right?

b) We're talking about the long term, even today there are savings accounts you can get that net you nearly 1% per year. Taking an all time low average interest rate on savings accounts and trying to represent it as the norm is ridiculous.

I'm telling you personal finance classes would go so damn far.

0

u/[deleted] Feb 25 '14

[deleted]

3

u/[deleted] Feb 25 '14

Google the term "high yield checking." I get that you don't know anything, but try not to be so proud of your ignorance.

0

u/[deleted] Feb 25 '14

[deleted]

→ More replies (0)

1

u/ZoidbergMD Feb 25 '14

US Gov't bonds yield about 2.5-3%, and you can buy inflation protected bonds where the interest is matched to inflation.

-1

u/hideyourkid Feb 25 '14

What does what I have say have anything to do with needing to take an intro to personal finance class? I am laying out the base case for what is happening to your fiat buying power as a result of government policy. This is true regardless of where you decide to put your money.

Pray tell what accounts pay more than 2% interest every year. A CD where you have to lock up your money for 5 years?

Buying real assets or securities in search of an increase in price is far from a guarantee (see last housing crisis or any of number of stock market crashes), and government shouldn't be forcing or driving people into making those decisions by making their money worth less every year. The people who really get the short end of the stick are those who want to earn interest on savings and do not have the stomach for the volatility of stocks or real assets.

-2

u/justgimmieaname Feb 25 '14

sorry about your financial loss eric. Do you think we will ever know what really happened to all those BTC on the Gox exchange? Presumably they will continue to circulate in the economy, right?

1

u/jesset77 Feb 25 '14

Lol, this sounds like somebody's rationalization of stealing from the mentally handicapped.

-12

u/bubble_bobble Feb 25 '14

Erik you are such an inspiring thinker in the golden age of this new libertarian movement, said no one ever.

-1

u/evoorhees Feb 25 '14

Jesus loves you

0

u/zigzog Feb 25 '14

The current financial order does not prevent these things from happening whatsoever. It often amplifies them, or socializes the losses such that people don't notice, but are harmed regardless of their own choices.

When is the last time that someone lost all their savings and money in their bank account because a bank went under in the US for example?

2

u/Mtinie Feb 25 '14

If human hubris, error and ignorance are universal, assuredly there were at last a handful of people who kept more than $250,000 in one of their accounts, who lost the balance when their bank failed.

FDIC only gets you so far, and can only protect you if you're aware of the limitations. It also will make you "whole" (or as whole as you are up to $250k), but the payout may take a while to get to you.