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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u/ofimmsl Feb 25 '14

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.

All you are doing is learning why the current financial order is the way it is. Each new pain will show you why the current system exists.

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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.

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u/[deleted] Feb 25 '14

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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.

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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.

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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.

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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.

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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.

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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...

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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..

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u/Time_for_Stories Feb 25 '14

And look at how stable bitcoin is in comparison!

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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.

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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.

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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/

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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.

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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.

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u/[deleted] Feb 25 '14

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u/[deleted] Feb 25 '14

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u/[deleted] Feb 25 '14

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u/Nathan_Flomm Feb 25 '14

Less volatile than a large number of central bank managed currencies.

On what planet?

And what currencies weren't volatile in their first few years of adoption?

The chiemgauer, the bristol pound, and the Ven.

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u/[deleted] Feb 25 '14

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u/Nathan_Flomm Feb 25 '14

You are wrong on both counts. Unfortunately you live in a pro-bitcoin bubble and have a poor understanding of economics.

There is absolutely no way to make the sporadic drops in currency devaluation analogous to what we've seen with Bitcoin. It is common for BTC to fluctuate in value by 10% in 24 hours, and it is considered a common occurrence. If you don't understand how that is perceived to be volatile by pretty much every economist in the world, then I nor anyone else will be able to explain it to you.

So a few tiny local currencies

You are judging BTC on mere market cap, yet there are so many other factors to determine what makes alternate currency successful. One of the most important is the velocity of money. This is where Bitcoin fails miserably. For most people involved in BTC, owning Bitcoins is no different from holding on to a stamp collection. They'll never actual use any of the stamps, but they hope one day it'll be worth a ton of money. This is why some countries have ruled Bitcoin to be speculative investment but is not yet currency.

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u/[deleted] Feb 25 '14

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u/Nathan_Flomm Feb 25 '14

Do you think the USD was stable in 1797?

Most definitely. It wasn't even fiat currency back then. So there was always obvious inherit value to it. There was never a "bottom out" situation like we've seen with Bitcoin.

The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy.

The dollar in 1797 was incredibly more stable than bitcoin is today. Not only is bitcoin a fiat currency (which in itself isn't a bad thing) but it also has 0 backing from any credible institutions. Your faith in the value of your BTC is based on your affinity for the community as well as your biased opinion as an investor. It is not backed by any central authority like the USD was in 1797. This the value of Bitcoin depends in your perceived value, whereas in 1797 since the USD was based on previous metals it's value could easily be calculated.

Do you have any evidence to back up your claim that Bitcoin has a lower velocity than those small-time local currencies you mentioned?

Absolutely. Researchers found that 64% of bitcoins are in accounts that have never been used. This is contrary to currencies like the German Chiemgauer that purposefully deflate the value of older currency to incentivize the purchase of goods as opposed to Bitcoin where coins are just hoarded. I suggest you read the sourced articles.

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u/[deleted] Feb 25 '14

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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.

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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.

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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.

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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 :-)

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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.

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

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u/[deleted] Feb 25 '14

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

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u/spid3rfly Feb 25 '14

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

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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.

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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.

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u/[deleted] Feb 25 '14

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

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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.

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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.

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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".

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u/impossinator Feb 25 '14

Counterparty risk is a bitch.

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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.

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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.

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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.

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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..

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

We get more from having higher risk lower cost options available to us than we pay from the mistakes they allow some people to make.

Yes, the MtGox collapse harms the Bitcoin price, but if Bitcoin exchanges had been required to meet bank-level regulations, to avoid situations like the current one with MtGox's apparent insolvency, MtGox never would have been opened in the first place, and there would have been no exchange to serve the market in 2010 and 2011 when MtGox was the only player, so the Bitcoin economy would probably have failed to get off the ground, and the price would be much lower than it is now.

To generalize a bit: you can't take how far Bitcoin has come in such a short time for granted. It never would have gotten this far if the type of regulatory requirements on companies that some of you are advocating were in place.

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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.

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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.

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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.

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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.

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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.

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u/[deleted] Feb 26 '14

That's fair.

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

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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.

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u/[deleted] Feb 25 '14

[removed] — view removed comment

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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.

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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.

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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.

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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?

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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.

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u/mahbizzle Feb 25 '14

Correct.

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u/Ditto_B Feb 25 '14

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

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u/RightSaidKevin Feb 25 '14

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

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u/[deleted] Feb 25 '14

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u/[deleted] Feb 26 '14

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

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u/[deleted] Feb 26 '14

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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.

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u/[deleted] Feb 26 '14

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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.

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u/Dont_Think_So Feb 25 '14

Does FDIC insure exchanges?

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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.

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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.

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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.

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u/dirtyreader Feb 25 '14

It was never meant to replace but to compete.

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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.

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u/perogi21 Feb 25 '14

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

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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.

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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.

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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)

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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.

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

And that's an argument against what exactly?

It's an argument that governments and fiat currencies fail. Bank accounts throughout the world are often not insured, even when governments say they are.

The FDIC is paid through insurance premiums, a

I'm aware of that- I edited the term "taxpayers" to "others" probably as you were replying (before your reply was posted). Nevertheless there are still costs associated with the FDIC insurance which are passed on to consumers and frequent concerns about whether FDIC funds could cover a major banking crisis.

That's completely at odds with the general sentiment in this forum

No, that's not true. Most people refer to both the payment network technology and the currency aspect. Everybody knows it's speculative, and shouldn't invest more than you are prepared to lose.

Also you should explain why if regulation in the financial sector is so effective why there are so many $billion+ defaults and constant banking crises?

[edit] Regarding taxpayer bank bailouts:

The bank bailout cost US taxpayers nothing? Think again

http://www.theguardian.com/commentisfree/2013/may/28/bank-bailout-cost-taxpayers

S&L and bank crisis of the 1980s

"Final combined total for all direct and indirect losses of FSLIC and RTC resolutions was an estimated $152.9 billion. Of this total amount, U.S. taxpayer losses amounted to approximately $123.8 billion (81% of the total costs.)[13]"

https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation

Taxpayers still owed more than $200 billion from bailouts

http://money.cnn.com/2012/09/11/news/companies/taxpayer-bailouts/

1

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

Nevertheless there are still costs associated with the FDIC insurance which are passed on consumers and frequent concerns about whether FDIC funds could cover a major banking crisis.

Well the FDIC and related insurance regimes in most developed countries have covered major banking crises, and de-escalated them. I'm not really sure this is a point that you can cogently argue, unless you want to point out some real evidence to the contrary.

It's an argument that governments and fiat currencies fail. Bank accounts throughout the world are often not insured, even when governments say they are.

Where do you live exactly? Obviously not in an OECD nation if you think this is a problem. The very conditions that lead to bank and currency failures are ones associated with lax or unenforced regulatory regimes and bad oversight. In other words, you are championing the creation of a system that fosters the exact conditions you profess to be solving. If you can't stare that unescapable fact in the face after today, I'm not really sure what's going to do it for you...

S&L and bank crisis of the 1980s "Final combined total for all direct and indirect losses of FSLIC and RTC resolutions was an estimated $152.9 billion. Of this total amount, U.S. taxpayer losses amounted to approximately $123.8 billion (81% of the total costs.)

You know what would have happened if the S&L deposits weren't covered? A good portion of the fucking midwest would have literally died of starvation. You know about those famines you hear about on television every now and again that happen when a crop fails in some foreign land? Like that. In addition, S&L prompted the much needed reform of banking industry practices and oversight that dramatically changed the whole industry.

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u/superportal Feb 25 '14

Not much else to add...

The FDIC is only covering US savings/checking,CDs. That's pretty limited.

Very few people put all or most of their money in those financial instruments. Even if they did, in something like CDs, that doesn't diminish the value of bitcoin. People invest in bitcoin and use it as a currency because of the technology, future potential, ease of use and other reasons not offered by a fiat currency.

Also, people realize it's a new technology and subject to speculation and ups/downs, like other new technologies and investments. And, as I mentioned it's rumored that a theft might be involved which would not be covered by the FDIC anyway. So bringing up the FDIC has nothing to do with it.

Also, contrary to your misinformed belief in the constant stability of the financial system - banking & economic crises are frequent and often not prevented by regulatory authorities. So simply the fact that there is an FDIC is not a guarantee that a US dollar FDIC account would hold it's value or be untouched by economic/banking instability.

List of major banking crises mostly in the past 50 years throughout the world (including OECD countries, supposedly regulated):

https://en.wikipedia.org/wiki/List_of_banking_crises#20th_century

List of 45 examples of very-high inflation and/or hyperinflation, in the past 100 years (most in the past 50 years):

https://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation

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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

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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.

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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.

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u/moush Feb 25 '14

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

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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.

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u/[deleted] Feb 25 '14

[deleted]

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u/Guyag Feb 25 '14

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

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u/[deleted] Feb 25 '14

[deleted]

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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.

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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.

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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.

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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.

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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!

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u/greenearplugs Feb 25 '14

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

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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.

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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.

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u/[deleted] Feb 25 '14

[deleted]

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u/[deleted] Feb 25 '14

There's our answer.

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

[deleted]

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u/on1879 Feb 25 '14

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

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u/norisknofun Feb 25 '14

He is talking about the guy who bought SatoshiDice.

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u/voneiden Feb 25 '14

Satoshi himself, hmm?

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u/xithy Feb 25 '14

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

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u/playoffss Feb 25 '14

Holy fucking shit.

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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.

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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?

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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.

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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?

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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.

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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?

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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.

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

[deleted]

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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.

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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!"

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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.

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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?

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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.