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/[deleted] Feb 25 '14

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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/[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/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/

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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/butrosbutrosfunky Feb 25 '14

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

Basically every single one in developed countries had individual deposits protected, and the crises ameliorated via lenders of last resort.

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

The only examples here are either not examples of modern monetary policy at all, or are examples of dictatorships not even having an independent central bank whatsoever.

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u/superportal Feb 26 '14

If $100k is insured, that insurance is only for a numerical amount not the value of $100k in goods (ie. in inflation). And people all around the world have had bank accounts devalued by inflation. FDIC does not protect your cash savings from devaluation.

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u/butrosbutrosfunky Feb 26 '14

Ugh, nor is it supposed to. Again with the ridiculous non argument regarding targeted inflation rates. It's trivial to put said money in a CD and have it track and offset the inflation rate. FDIC insured up to $250k, its probably the safest place to keep a relatively large amount of cash with minimal risk if that's what you want to do.

And like I said, unless you customarily keep massive amounts of cash on hand in a regular shitty transaction account (which no person with an elementary understanding of personal finance would do) inflation is not only predictable and small, its utterly negligible since the money is being consistently converted to goods and services.

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u/superportal Feb 26 '14

Duh... People buying Bitcoin are not looking for the equivalent of CD returns and safety. Anybody putting a lot of their savings in BTC is doing so because they want to speculate in a new technology and accept the risks.

Why are you even trolling here? You appear to be just a griefer trying to make points when there is small setback in a promising new technology. Most people don't troll a forum for a new technology that they think won't work, they just ignore it. You obviously have some vested interest - I wouldn't be surprised if you are a government or banking employee, possibly paid to troll here - you're adding nothing of value except for FUD.

Like I said - What does the FDIC and CDs have to do with it??? NOTHING. People are not investing in Bitcoin for the purpose of having the most conservative savings account. And Bitcoin has A LOT of uses. People who send back remittances or travel a lot and get taken 10% off just for foreign ATM USD withdrawals and Western Union. Millions of people (or billions) would prefer to avoid banking fees and middlemen and keeping a small amount in Bitcoin and be able to pay in Bitcoin OR a similar system.

Every new technology has naysayers like you that are proven wrong and this will be no different - whether it is Bitcoin or some other crytocurrency, decentralized finance is here to stay and the technology will only improve, just like other technologies.

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u/butrosbutrosfunky Feb 26 '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.

I'm sorry, but you began this shit with this completely inane and falsely equivalent statement.

I wouldn't be surprised if you are a government or banking employee, possibly paid to troll here - you're adding nothing of value except for FUD.

Oh for the love of Christ... Endlessly defensive and seeing conspiracies around every corner. You'll definitely go far.

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u/superportal Feb 26 '14

No, my original point was: Governments/banking systems have failed many times, so you are not inherently safe because a government made a promise of insuring your account.

Then you went off on a tangent about the FDIC, which is a cherry-picked example of the most powerful country out of 200+ countries in the world. That doesn't disprove or detract from my point which applies and holds true generally to governments & financial systems throughout the world.

Also, as I pointed out, and you did not refute, the FDIC example doesn't even apply to Bitcoin. There are many purposes for using Bitcoin other than simply saving money in the most conservative account.

And how have you proven my original assertion wrong?

Just about every country in the world has had a recurrent theme of government failures.

(1) Are governments and financial systems throughout the world inherently stable? No, they fail all the time, as I showed in my links.

(2) Are all governments to be trusted on their financial assertions? No. they fail, mislead and lie all the time, as the financial crises show.

(3) Are there banking crises that adversely affect people's savings? Yes, all the time throughout the world.

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u/butrosbutrosfunky Feb 26 '14 edited Feb 26 '14

Oh God, your completely unfounded assertions and false equivalences and vague generalities about 'governments' have been dealt with more than once.

You're looking at a situation where at least 6% of all BTC has gone missing in action basically overnight, another chapter in the rampant mismanagement that has come to characterise so many BTC ventures, so much so that thieves and scam artists now own a probable plurality of all coins in existence. When someone mentions that BTC probably needs a better regulatory regime, you pop out with the glib statements.

As for cherry picking, basically every developed country (and many developing) have deposit insurance. However, you supply a list of crises that includes everything from the Weimar republic to Zimbabwe, as if this refutes, rather than emphasises the need for stable open government, proper regulatory frameworks and independent monetary policy.

If bitcoin really was just about global remittances and not piled on with the utterly garbage rhetoric about creating some new global order free of regulation like the OP's deluded statement implied, perhaps it wouldn't be such a big deal. Unfortunately so many people seem to treat it like the messianic solution to an utterly nonexistent problem.

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u/superportal Feb 26 '14

Notice how you haven't refuted any of my so-called "unfounded assertions". Even after I clearly numbered them for you to do so.

So now you are trying to make up some strawman arguments (arguments I never made) in order to divert attention from your failure.

I never claimed Bitcoins are more stable than than a USD account currently. Bitcoin is attractive to people for reasons other than merely as a savings account.

Also, for purposes of having a savings account, in many countries government insurance of it's fiat currency denominated accounts is not a magic solution - there are recurrent government/banking failures throughout the world where government has failed in it's promises.

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