Bitcoin Forum

i wrote this in another thread but i think it maybe deserves its own. sorry to anyone who disagrees.

lets consider for a moment. if people are so stupid as to give 500,000 btc to someone with absolutely no credibility, identification, etc then we may have no chance whatsoever of hanging onto this currency and building any kind of real value with it.

that's because: the exact same method could be used by governments, banks and other interests that do not want btc to be anything more than a funny hobby currency (if that), locking up huge amounts of capital and constantly fucking with the markets to make it basically unusable for commerce.

this seems pretty serious to me. in fact, we have no proof either way that "pirate" isn't actually that very thing.

this is one thing that makes me seriously question whether bitcoin can work. certainly i believe in cryptocurrency... but bitcoin designed in this way, coupled with the apparent stupidity of speculators who would give coin away so easily? they'll ruin it for all of us.

if anyone can tell me why i am technically wrong, i'd like to hear it.

the first rule of bitcoin: do not question the limited supply

https://bitcointalk.org/index.php?topic=11627.0

no, this is not the same question, and I am not talking about deflation.

if someone controls, say, 2 million BTC, then the issue is that they can constantly mess with the exchange rate, create panics, etc.

they can even more or less _AUTOMATE_ this (ie, write a program to poison the market with fluctuations). this would _remove_ value from the economy because people would simply stop using it for anything.

Quote: "do not question the limited supply"

Oh yeah good point. Once "the man" owns all the bitcoins, except maybe for some trivial token number of them all the billions of peons will have to make do with, maybe the virtues of altcoins will start to occur to people. Hey "the man", wanna buy up all those too? Bargain prices! ;)

-MarkM-

and why would they be able to constantly mess with the exchange rate and create panics?

is your question _really_ suggesting that this would not be possible?

the answer is by automating pump & dump where that entity retains control of the majority of the btc.

clearly, based on last week's activities, this would not be a difficult thing to achieve.

I was trying to oh-so-gently lead you back to "because there is a strictly limited supply", a flaw I consider fatal.

Sure you can do it at a cost.  Take 500K BTC sell them all, then buy them back.  Guess what you have less than 500K BTC.  Keep doing that and eventually you have 0 BTC.  Idiots lose money in scams all the time.  It is simply a form of economic darwinism.  Money moves to the strong.  Those who do due diligence, require enforceable contracts, and build strong business relationships will accumulate the capital at the expense of those who don't.

Now what is different about Bitcoin is you have a some people who became incredibly wealthy in a short period of time.  A lot of them will lose their coins and they will be transferred to stronger hands.

Do we know 100% that Pirate did/do control 500K BTC ?

To destroy Bitcoin?

Banks can lose billions if bitcoin become widespread.

i really don't believe that this is the only way that manipulations can play out. sophisticated investors have been gaming the traditional currency markets for ages in order to get more of it into their hands, not always to the benefit of everyone else (usually to the contrary).

He claimed over 500k btc.  Various estimates based on from the community put him at 350-500k.  Both of these numbers are going on the assumption that he was not running a ponzi, in which case he would have significantly less real btc than the total value of his accounts on paper.

The more complicated a conspiracy theory, the less likely it is true.

An elephant with laser cannons may have caused the latest earthquake, but the evidence points toward plate tectonics.

Yeah, 'cause plate tectonics isn't complicated at all  ;D

Generally speaking, Occam's razor applies, but only where there is no preponderance of evidence.

also it isn't that complicated.

it's clear to me that if you wanted to destroy bitcoin, all you'd need to do is get ahold of a certain % of the coin which you could then write some smart trading algorithms against, with the assumption that your competition basically doesn't exist.

it's hardly implausible.

Actually, according to Fmr. Gov. Ventura (http://www.youtube.com/watch?v=nY4HGs-9JiU) more evidence points at HAARP (http://www.youtube.com/watch?v=QkLTzesBxGE) than either laser equipped elephants or plate tectonics, particularly when there are geo-political ramifications.

Ok so you can manipulate the price on an exchange.   

Sorry I'm a bit slow today.  Can you connect the dots for me, how do we get to the "destroy"  bit? 

Same here, I have my bitcoins right here, perfectly fine, so your point is...

yes that's true, they can still be exchanged for their own "value", but what we have traditionally been doing here is plotting 1BTC against a certain number of USD. by creating massive fluctuations (and therefore panics), it would be pretty easy to drive the 'exchange value' totally out of the market, or at least scaring people to the degree that very few are holding onto BTC, driving down the peak values.

am i really thinking so outside the box that this seems crazy? i want bitcoin to succeed as much as anyone else; i would really like someone to tell me why this wouldn't be possible.

say you are the Fed and you are shaking in your boots because bitcoin basically obviates your entire business model. And so you decide to conjure up enough FRNs to buy ALL The available bitcions. Well theres only so many bitcoins on the market, and by buying them all up you'll push the price up and create a mania. Now you want to dump them, so you sell them all off, fast, you crash the price. Then you're fighting to buy them all back again at this lower price, but you're not the only buyer, theres a lot of other people out there who are just waiting for bitcoins to go on sale before buying them up. So you lost control of half your bitcoins when you dumped them, and now you can only buy back what is still for sale again, only because now supply-for-sale is less, the price is higher than it was. OOPS PLAN FAILS. To buy the entire supply once again you have to push the price up even further. So yeah you get to create a series of manias and crashes that in effect funnel bitcoins to the people who want to 'buy them on sale' while slowly moving the average price up and also further destroying your little fiat central bank currency in the process. Maybe I got that wrong but thats how I see that scenario playing out.

@paulie_w - what you (and others often) fail to consider is there is no specific date by which Bitcoin must "succeed". There is no specific plan of adoption Bitcoin must follow. And I put "succeed" in quotes because that meaning can be subjective.

You might think if bitcoins don't provide you with measurable ROI in 5 years they haven't succeeded; or maybe they should be usable at your local grocery store by that time. I argue something different. I say Bitcoin succeeds as long as bitcoins are used by some number of people.

You can't "destroy" Bitcoin any more than you can destroy gold. Like gold bitcoins simply exist and are available for use.

Now, some of your arguments/concerns can be equally applied to gold - manipulating exchange rates and such. It's true gold, to be used as currency, has been pushed out of the market by external (I'd say conspiring) forces.

But has gold been destroyed? No. Can gold still be used as currency by people? Of course, at anytime.

While it may be possible to engineer attacks with purpose to cause panics on the Bitcoin exchange rate, what is NOT possible (short of shutting down the Internet) is entirely preventing the use of bitcoins. It's like that quote by Victor Hugo: "One can resist the invasion of armies; one cannot resist the invasion of ideas."

Anytime enough people agree to exchange bitcoins they have value. It's that simple. Any exchange rate is incidental.

Bitcoins, IMO, are more likely to succeed as currency than raw gold usage for several reasons: They are more resistant to oppressive governments than gold as they can't be confiscated. They are also easier to transact (including precision to 8 decimal places), easier to store, transfer, and use anonymously. Yet, like gold, they can't be arbitrarily inflated. It's only a matter of time before this reality is known by a substantial number of people. Again, you can't kill an idea.

Maybe I can help explain what the OP Is getting at, because I do think he has a valid point.

One of the aspects of bitcoin that is temporarily discouraging to merchants is volatility in the price, which translates to currency risk. Over time as the user base grows I believe this will be less and less of a problem.

But what if the Fed wanted to cause some mischief by alternately buying up some large percentage of the available bitcoins and dumping them back on the market? It would induce more volatility in the price than there would be otherwise. Sure, it might cost them money every time they do this. Sure, they will probably not be able to sell them for what they paid. But they wouldn't care: they are the Fed, and they can print as much as they want. The point would be to induce the volatility and discourage or suppress the adoption rate of bitcoin.

And yes, I think they could do it a few times, until we all caught on to their game and started riding the wave.

You're still focusing on comparing bitcoins to outside currencies. If you use only bitcoins there is no such thing as volatility.

I'm saying that is one possible scenario under which bitcoin still succeeds. Does it mean a majority mainstream merchants accept it, ones that depend one other currencies? Possibly not. But it would still be accepted in some places by some people, for different things.

Let me give an example.

I'm going to call this example "bread and bed". Let's say bitcoin users begin promoting the idea of accepting bitcoins for bread and bed. (As I think this out, this may be good to actually do) This forum currently has a ballpark 500 bitcoiner users, spread all over the world. We could all agree to try everything in our power to offer anyone paying say 2 bitcoins a loaf of bread. This could be home baked, store bought, or whatever. We also offer 1 night accommodation for 20 bitcoins. This could be spare sofa, apartment floor, whatever, just a place to crash.

The problem is whenever people travel anywhere away from home is, unless staying with relatives/friends, they must pay for food and a place to stay. If bitcoiners put into practice the above it would result in hundreds (possibly thousands) of alternative places to receive food and/or shelter when away from home. That's valuable. That would mean bitcoins have some value, regardless of any external exchange rate. Now, what if the idea got popular and there was suddenly 10 million people participating - 10 million locations around the world that you could get those two basic necessities. Guess what? There are only about 10 million bitcoins TOTAL now in circulation. That's only enough for 1 bitcoin per person at those numbers... That means the value per bitcoin when measured against outside currencies would go UP, because the service has become more valuable yet there are limited bitcoins available. No other merchants need accept bitcoins. They would still have value. What if bitcoiners kept growing in number, 50 million, 100 million, etc. Get the idea?

Good example but where/how you get hold of bitcoins assuming you can't mine/earn them yourself? Unless you expect salaries to be paid out in BTC, which is not any time soon I guess :(
To continue with your example... Let's assume I have two options for bed and breakfast
1) pay 10BTC
2) pay 50EUR
Assuming I don't have any BTC since my salary is in EUR and I don't mine either, I would need to exchange EUR for BTC. If the price for 1BTC was close to 8EUR i would pick the second (cheaper) option and pay in EUR. If the price for 1BTC was close to 3BTC I would pick the first option.
Convert your example to a vendor and client situation and you'll see that the stability of a currency has a strong influence in adoption.

We can NOT skip the comparison of BTC to fiat currencies as we're some 20-30 years away from the time that most transaction will be in bitcoins instead of fiat. And to get there we need people to start using it. A vendor accepting (now) BTC has to make the comparison since he can't pay all of his suppliers/costs in BTC. I client has to make the comparison since he's not getting his salary in BTC. If both have to check daily (or worse twice a day) the rate, they'll abandon the whole idea cause it will be too much of a hassle. And since the value that bitcoin has is how many people want to use it, you know what will happen if fewer and fewer people want to use it (as per the example above).

And unfortunately there is no magic switch from some-people-use-BTC to most-people-use-BTC in global scale. When we get to the point when EVERYONE uses bitcoins, then you're right! There is no volatility, but how do you suggest we get there without a fair price stability?

I agree with the OP, take a look at my post some days ago...
https://bitcointalk.org/index.php?topic=102184.msg1122874#msg1122874

what domrada and serenata said.

i agree that 'volatility doesn't exist' in some sense if you are only using btc. but no one ever will if they are perceived to have no real value, and until a certain point probably the only way they're going to attain that value is by being traded against fiat.

would you even bother riding it if btc was trading at 1 cent though? i think that's where this could head given this kind of momentum.

Thats like, what, four bitcoins for a litecoin? Sure, I'd ride it...

-MarkM-

Its def in the conspiracy area but not completely unrealistic in my opinion.
The fact that there is a FBI report on bitcoin shows that there is attention for this topic.
Considered the huge interventions on the currency market (for example usd/jpy) they of course could cause volatility with the aim to scare oeple from holding bitcoins, ie drying out the market.

I think if you focus on bitcoin's true advantages will you find it's road to adoption.

What are bitcoin's true advantages?

For now, it's definitely not "to be a better currency than fiat".

As for the thread, I think assuming he is profiting from panic buying/selling successfully, and is ultimately "cashing out" his profits into fiat, he is on the one hand dampening price extremes, while on the other reducing total market capitalization from those less skilled at trading.

Oh awesome idea, scare people away like they scared people away from alcohol, oh no wait I mean marijua oops uh make that, uh... cocaine oops maybe not, uh, well you know, all that stuff that prohibition eliminated so well that I cannot even think of an example of it offhand...

-MarkM-

none of those advantages are really advantages if no one is using bitcoin, which would be the case if the dollar conversion market were 'dried out'. anyone who thinks otherwise is fooling themselves. sure there were early-early adopters who were in it for other reasons, but you're probably talking about probably a few hundred people.

Thanks for the question. Let me try to clarify.

You first ask: "where/how you get hold of bitcoins assuming you can't mine/earn them yourself?"

You may not realize it, but that is actually in support of bitcoins succeeding. The reason bitcoins have such a great opportunity to succeed is because they take full advantage of economic systems. Bitcoins are an effective, efficient currency, so they are not limited for how and why they can be exchanged.

Let's start from the original posed problem: intentionally engineered (or incidental) volatility of bitcoins compared to fiat which could discourage merchant adoption.

Say that's absolutely true. Merchant adoption would be hindered. What I'm trying to show is that "handcuffing" bitcoins in one way doesn't restrict them in all ways (thereby destroying them). That's the key. Again, think of my example.

Bitcoins are a voluntary currency. Nobody is forced to use them. Yet it's likely many people would if they thought they had value because bitcoins enable things fiat currencies don't - less costly usage, unchecked payment and transfer freedom, etc. They also can't be arbitrarily inflated. See the world's current fiscal crisis for why that's important. In other words, bitcoins can be considered the people's money, whereas fiat can be considered the government's money.

Guess which version is more economically powerful? Hint: there are more people than governments.

Right now fiat wins economically because it is what has the economic reins, so to speak. It's what everyone accepts, so that engenders value.

Let's say people acted on my suggestion for bed and bread. I agree it doesn't make sense if there is a more beneficial fiat conversion rate, as you indicate. But the original problem was eliminating a high conversion rate due to volatility, merchant hindrance, and decreased acceptance, and consequentially value, remember? I'm saying in such a situation bitcoin is not destroyed. People could offer the bed and bread for bitcoins.

Since bitcoins are the "people's money" the bed and bread paradigm could spread, globally. Forget merchant acceptance. People would want to be "in" on the bitcoin community experience. Imagine the unspoken extras from meeting new people, being welcomed anywhere in the world, while at the same time increasing bitcoin saturation/adoption. A currency gains power when it is well spread. It's that's simple. As you said yourself, to get bitcoins without mining or earning them you have to find other ways, such as trading items of value for them or providing direct work/service for them. That gives bitcoins value regardless of fiat exchange.

What if that kept going? If a large portion of world population now held bitcoins in this way? There are only 21 million bitcoins, yet billions of people. Gradually, bitcoins would be accepted for more and more things, like dental services for example. Did you see that current thread (https://bitcointalk.org/index.php?topic=103008.0)? It would only be a matter of time before bitcoins could be used for mainstream goods and services. Bitcoins win again - and bypass fiat exchange entirely.

I'm not saying I know that's how bitcoins will be successful. But it could be a way. There could also be some other way, or a combination of ways. That's the point. As I said, bitcoins simply exist ready for use, like gold. It only requires people pick it up and use it for currency, and that's where the value comes from.

Perhaps we could analyse them? I'm not sure which advantages I even spoke of there.

What would you say were bitcoins true advantages? I mean the things that nothing else comes close to satisfying. I can only think of one, myself - unregulation. Are there any others?

When you buy below X and sell above, you drive prices together across time, decreasing volatility and making money in the process.  When you do the opposite, you lose money.  The short of it is that traders who increase volatility will on average lose money to pay the gains of the traders that decrease it.

For this entity to cause wide swings AND profit, he must so panic the market that the average trader makes horrible decisions and adds even more volatility than the initiating entity, thus allowing the bulk of this entity's trades to actually reduce volatility.  Otherwise, he will lose money in the attempt.

Smart traders are waiting to take advantage of opportunities like this, including those that don't want to see bitcoin destroyed.  Any entity that tries to manipulate the market will only be increasing volatility in the short run, and funneling money to those traders in the long run.  It's a "kill it now at whatever cost, or it will rise stronger than ever" type of strategy.  And a widely distributed public ledger isn't the sort of thing that actually dies.  Which makes it one of the worst possible strategies to employ.  Not that someone won't be stupid enough to try.

Exactly. I think people often see bitcoins as an either or proposition. They think either bitcoins have value in relation to national fiat, or they don't, meaning they are worthless.

In reality bitcoins have no problem existing alongside other currencies.

Whether people exchange bitcoins for fiat in various places, at various times, at various rates makes little difference in the long run. Bitcoins win when a large number of people have them, and that can come about different ways.

@paulie_w - perhaps it helps thinking of it this way.

Your original post talks about "destroying" bitcoin. I'm guessing you mean drive the exchange rate down to $0.

I argue that doesn't destroy bitcoin. Take this test.

I'm guessing you own some number of bitcoins now. Let's say 1,000 BTC. Let's also say tomorrow someone somehow crashes the market down to $0 per BTC.

Of course, with Bitcoin nothing is broken in a technical sense. You would still hold your 1,000 BTC. Answer this question honestly. With what you know about the Bitcoin project continuing on would you politely send ALL your BTC to my wallet for free? Since they are at $0 per BTC?

If you answer no, then they do have value, because you still want them. You probably understand full well that just because those 1,000 BTC might not have value now, doesn't mean they would always have zero value. Even if you couldn't presently exchange them for anything of value, the system is still intact. You would hold 1,000 of a global system totaling just 21 million. I don't think you, or others, wouldn't see the value in that.

okay i grant you all that bitcoin is something special. i guess i just don't see how the value inputs work if its value against fiat is insignificant. i don't see the _bridge_, and i don't think that this is a flawed perspective, no matter how cool bitcoin is.

btw why did the admins move this? this is not a "service discussion".

the answer is only no because i would be hoping that someone would figure out the new fiat value conversion problem, someday, and because storage of them costs me nothing.

What I'm saying is the value against fiat being insignificant would not always be the case.



I think you don't see the "bridge" because you're expecting linear progression. What I've been trying to argue is that linear progression is not necessary for Bitcoin's success.


As long as the answer is 'no' it means you assign bitcoins some value even with a fiat rate of $0. That's all that matters.

Just how much you would be willing to part with them for is another matter. You might be willing to part with them for $1 per coin. And I'd be right there buying them from you. Some others (like me) would ask a much higher price to part with them, if they were for sale at all. That's because I consider bitcoins and assign value one way, and you do differently. The fact that we don't share exact same views is to be expected. That's how the world works, and why people make different decisions, for better or worse.

But it doesn't matter because there are millions, actually billions of people in the world; that's a lot of varying views where you can bet some number will lean toward the 'yep they have value' conclusion.

If you and maybe all the people you know have not managed to come up with customers you can sell bitcoins to for fiat, that is just an arbitrage opportunity for someone who does have some customers secreted away somewhere.

A lot of the best prices one can get when selling virtual/digital currencies are inside games or near games (such as where gamers hang out even if that happens not to be an in-game location). A person selling bitcoins at an important bridge in a game, where the troll that guards the bridge is basically undefeatable and cannot be "sneaked" past and demands toll in bitcoins, can likely get a better price for bitcoins than those selling them elsewhere not only to smart adventurers who think ahead and know they will meet that troll eventually, likely with a pack of dire-wolves on their heels, but also to random passers-by who maybe have no idea trolls and direwolves, or the game in which players meet them, is out there somewhere.

A general public exchange is probably mostly a clearing-house frequented by people who have no really good method of doing whatever the conversion the exchange provides in a more "controlled" environment possibly with customers who are not so much looking for fine distinctions in exchange rates as simply to buy a certain type of coin regardless of the price because they need it right now and it is available right near where they want it.

Basically your folk are thinking a thing is worth zero because they have watched the price drop and drop or whatever; they are all about the exchange rate. The guys facing the troll just know it is something they need right now and have no idea, maybe, how much the last player to pass that way paid nor how much the next to pass will pay.

Maybe your markets simply do not attract the people who actually value the things; I know plenty of people who buy up bitcoins any time they can spare enough of whatever other assets they can buy them with, but never sell any simply because they are so insanely undervalued right now that they cannot get anywhere near the amount they think they are worth. The prices being offered are, basically, an insult. If those people were "rich" you'd see their impact more, but since the only riches they have are their bitcoins, they simply do not have much volume to offer until they win some lotteries or something.

-MarkM-

In case of volatility the traders should buy low and sell high (https://bitcointalk.org/index.php?topic=101668.0). They will make profit, while the ones causing volatility will make loss.

But yes, we've seen both buy panics aka. bubble starts, and sell panics aka. bubble bursts. People should learn to see what's it really worth, instead of sentiments "now everyone buys" / "now everyone sells".

This...


...will take a long time.  :P

that's _exactly_ my point. especially given all of this building regulation and lockdown of control of all things digital, i'm not sure if it's something that should really be risked.

i would also like to state that reducing the fiat-conversion value of the currency (probably) reduces the number of miners, which (probably) makes the 51% problem even more of a risk.

@markm the games/virtual worlds' currency concept is interesting, and believable as a possible bridge in light of "near zero" fiat conversion value.

Actually it seems like the most famous ones only keep it near zero by massive, rampant inflation. (WoW gold, Lindens, EVE isks...)

Take a look at http://galaxies.mygamesonline.org/digitalisassets.html sometime...

-MarkM-

i wish i could understand what i am seeing here. care to explain?

I think there is a much cheaper way to influence Bitcoin compared to destroying it by trade.

Just lean on the lead developers, push them towards implementing new features no one really wants, which in small steps would move away from the current core concept of Bitcoin where control is with the user.

Cheaper? He got the coins for free. Would even make a huge profit, if the amount of coins is true. Which I doubt.

Not to mention the fact that Bitcoin developers are not "soldiers" following orders.

Different lead developers would take over the old fork.  It happens every day in the open source world, usually when someone gets burned out.

istar,

In what way would "getting the coins for free" destroy Bitcoin unless he actually do something with them?


Serenata,

If a government or corporation really "lean" on you, what is the price you are willing to pay to deny?


kjj,

You are assuming one lead developer then, but what if all of of them are targeted (not that many anyway).

I dont think it would destroy Bitcoin. It would just do more or less "damage" if you look at the price of a Bitcoin as a messure of its success which most people do.

Why?
If the price tanks in one second down to $1, this will be reported by NEWS media "everytime" Bitcoin is mentioned.

99% of normal uneducated people would take this as a confirmation that Bitcoin is a failure/dangerous currency and something to stay away from and many merchants would hesitate.
Most people tend to not like money that can crash in value any second.

Ofcourse there is more to Bitcoin and there is allways the saying...
What doesnt kill you makes you stronger and all publicity is good publicity.
But the more people who dare try and understand Bitcoin, the stronger it gets and the lower its value goes the less people who will mine. So the weaker the system gets.

This could be fixed if exchanges had a crash prevention break mechanism.
Something like, not allowing a single person to dump the price down more than 5-10% in a single dump per day.

To get the price down 5% would mean you would have to dump 21,000 Bitcoins. After that he could still sell the rest of his coins, as long as they price was not driven down.

Most people do not even have that many Bitcoins and most people would like to sell them at the highest price possible. So only those who want to break the stability and price of Bitcoins would get a harder time.

This would give people time to react and make it much harder for a single person to control the price of everyone in the worlds Bitcoins. Not allowing a single user to dump the price in an instant at the expense of every Bitcoin holder out there.

Now we would get a stable currency.

Still, I think Bitcoin would survive that scenario, volatile or not.

Perhaps there could be one way to hurt Bitcoin by trading; Pirate sell all of the 500k BTC (he supposedly sits on) over a short period of time, driving the BTC rate towards $0, spread posts like "This is the end!" using sockpuppet aliases on forums, then buy by back as much BTC as possible during the collapse, transfer all Bitcoins to a local wallet and delete it (DoD 7 pass wipe). Second thought, it would probably just drive up the price on the few remaining Bitcoins still in circulation, as he can't get all of them. ;)

I'm not assuming anything.  I'm telling you that the exact thing you are talking about happens every single day.  Not the coersion, but the forking of software projects and the changes in development teams.

Ok, then lets have a new currency every single fork and see how that pans out, because that is in effect what a fork would mean in this case. In reality I think people would stick to the established Bitcoin, despite changes to core functionality eventually leading to central control and new rules.

Ugh.  No one will accept changes of that sort in the first place.  We know better.  And by "we", I mean the bulk of current bitcoin users, and absolutely 100% of the people running virtually all of the important associated services (pools, exchanges, explorers, gambling sites, etc)

I thought you meant like UI changes and stuff, because making the UI annoying is literally the only thing they could really do.  If someone leaned on the devs to make them change the protocol for the worst, that fork would die on the vine and the old version would continue.

I was hoping for a reply like this, and I feel the same. Just making users aware of likely destructive scenarios, mainly that it doesn't have to involve Bitcoin speculation.

Maybe pirate was just a guy who ran a very successful Ponzi?