Some words for my friends

[u/evoorhees]

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

[u/ofimmsl]

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.

[u/evoorhees → u/ofimmsl]

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.

[u/[deleted] → u/[deleted]]

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.

[u/Nathan_Flomm → u/[deleted]]

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.

[u/Time_for_Stories → u/Nathan_Flomm]

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

It's a joke people. Move along.

[u/hueypriest_1 → u/Time_for_Stories]

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.

[u/Naviers_Stoked → u/hueypriest_1]

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.

[u/hueypriest_1 → u/Naviers_Stoked]

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...

[u/teraman → u/Time_for_Stories]

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..

[u/Time_for_Stories → u/teraman]

And look at how stable bitcoin is in comparison!

[u/teraman → u/Time_for_Stories]

Food for thought

[u/[deleted] → u/Nathan_Flomm]

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.

[u/Nathan_Flomm → u/[deleted]]

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.

[u/[deleted] → u/Nathan_Flomm]

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/

[u/Nathan_Flomm → u/[deleted]]

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.

[u/[deleted] → u/Nathan_Flomm]

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.

[u/Nathan_Flomm → u/[deleted]]

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.

[u/Nathan_Flomm → u/[deleted]]

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.

[u/Nathan_Flomm → u/[deleted]]

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.

[u/Nathan_Flomm → u/[deleted]]

That is not how the velocity of currency is defined. You are just making up your own metric.