Bitcoin Forum

Anyone doing this yet? There must be a great market for naked short selling of this stuff. Come on
exchanges and you Bitcoin bulls, there is a market waiting for you to put
your money where your mouth is and offer naked short selling!

How would that even work?  Bitcoins safeguards kind of prevent that don't they?  You'd need an exchange that allows you to sell Bitcoins that you haven't deposited for that to work.  And even then, the exchange would quickly go belly up when people tried to get their Bitcoins out.

To me, one of the beauties of bitcoin is that is prevents this sort of thing. I could see the day when stock certificates are issued bitcoin style precisely to prevent naked short selling.

Campbx is going live with naked short selling is what I understand

The only way to do naked shorts in bitcoin is if some exchange is willing to go fractional reserve.  This would be considered fraud, and would probably be prosecutable.

Do you know what a short sale is?

User A signs up to have their bitcoin holdings entered into a pool. User B borrows xxx bitcoins from pool and sells at xxx price. Price goes down/up. User B either gains or loses money on the short. User B closes the trade and bitcoins are re-purchased to be put into User A's pool holdings. Typically to get users to allow their bitcoins to be borrowed they'll get a small return from allowing someone to borrow them. No risk for user A and they get a small return. User B assumes all risk and needs to maintain a balance in their account to cover the short based on market prices.

You need to look up the difference between short selling (which will certainly come to the exchanges) and naked shorting (which should not be done on the exchanges but on prediction markets instead)

Hey this aint no intellecutal competition. Setting up a short selling outfit is a piece of piss. Just wondering why there aint one out there.
Short selling Bitcoin would batter the price and drive out the speculators leaving only the true believers.

Wasn't responding to you, was responding to the poster above me who seems to think that "naked shorting" and "regular shorting" are the same thing.


Naked short selling, no one is borrowing the securities before they sell them. They are just selling them and assuming they will be able to deliver them at a future date.

Shorting is in the works. But otherwise, if you want to bet on the price of bitcoin going down, best done on derivatives/prediction markets where you are simply opening positions against other people, no bitcoins needed.

I think you might be confusing your lack of wearing any shorts in the morning with an economic concept.  To check, after you put your shorts back on, does this question leave your mind?  if so, then don't worry about it...

There are no options, derivatives, or short selling for Bitcoin because there are no parties who can be trusted to pay up when they lose big, and no enforcement system to make them. Just getting the current parties to reliably pay up on ordinary transactions is hard enough.

In addition to the above: some potential players actually audited the source code for the Satoshi bitcoin client and know that it contains the code to reverse transactions (chain reorganization) and change transaction timestamps in direct violation of the GAAP (or their equivalent throughout the civilized world).

And yet the bitcoin promoters continue to advertise that there's no chargebacks in bitcoin.

I agree viperjbm, it would be easy to do standard short sales.   It was naked short sales I was doubting would be possible.

Can you point me at this thread?

No one needed to audit the code to learn this, it has been very well known since day 1.  It isn't anything like a chargeback though, since an arbitrary spender can't just make the decision to reverse one of their transactions on a whim.

Well, in a way what you say is true. And yet nobody important from the bitcoin community was willing to sign their name under the sacramental formula:
In fact at least Gavin Andresen closed his company instead of facing an audit. Simultaneusly, I have to commend him for not accepting patches that change or completely remove the chain reorganization functionality.

There's lots of patched and otherwise badly designed code floating around that makes the assumption about nonexistence of chargebacks. This is going to be an interesting subject for litigation:

1) on one hand the chargebacks "should never happen",
2) on the other hand this is the major feature of the protocol as described in the whitepaper.

There will be interesting legal debate wheter removing the chargeback functionality was: (a) negligent accounting, (b) fraudulent accounting, (c) conspiracy to commit accounting fraud, (d) something else. Interesting times ahead.

You should really stop saying "chargeback".  It isn't even slightly similar to what actually exists in the bitcoin system.

Tell this to your accountant. How about "wholesale transaction reversal and freshly mined coin destruction"? Does this sound better to your ear? It certainly is more true.

Chargeback is the proper term of art when writing about accounting in English.

Here's the Gavin Anderson dancing around the issue in the section of this forum related to the alternative currencies.

https://bitcointalk.org/index.php?topic=43465.msg520923#msg520923

Since that section is the "wildest of the Wild West" it may have been missed by many of the readers of this forum.

Ahh, you are using chargeback as accounting jargon, and not in the sense that the other 99.99% of English speakers use in normal conversation.  I'm no accountant, so I'll take your word for it.  I'll even apologize:  my bad.

Now that we have the basic definitions straight, we can continue.

What exactly is it that you imagine Gavin to be dancing around?  Even better, how did you make it two months on this forum without learning about this?

The block chain, as a whole, represents a consensus agreement about the global state of transactions.  It can exist in different versions in different places and times.  The "correct" version is, by protocol, the version that would require the most work (statistically) to replace.  The protocol was designed to minimize the amount of trust that any one party needs to have for any other party, so the "correct" version of the block chain is still correct, even if it isn't the version that you saw first.

This is explained in the FAQ, and the Weaknesses page of the wiki, and in many, many threads here on the forums.

If an accountant (or author of accounting software) doesn't understand this, the fault lies with the accountant for improper recording, not with the software for doing exactly what it says it is going to do.

I imagine Gavin dancing around GAAP (Generally Accepted Accounting Principles).

Actually, I'll ask you the opposite. Do you see any easy-to-use software advertised here on this forum that is upfront about:

1) bitcoins could disappear from your wallet
2) transactions will get their timestamps changed in some obscure ways

I'm not talking "upfront" as "discoverable here on the forum after two months of reading". I'm talking "upfront" as popping up a message when that happens or having any other mechanism to alert the user about those occurences.

Seems to me that...

Naked short selling relies on selling someone something which does not exist.  This is possible with stocks because the DTCC allows it to some extent and because the DTCC is out of the loop in ex-clearing situations.  The buyer _thinks_ they have bought shares, and that is what shows up in their Scottrade accounts, but in reality what they have is an IOU.

So, as long as you can give a buyer something which they can be convinced is a BTC, knock yourself out.  If you work with an exchange or develop your own app which shows a BTC balance of your choosing, you can probably get away with it for some time.

It doesn't take two months to learn that.  I don't think it even took me 2 hours from the first time I heard about bitcoin to understand how and why chain reorgs happen.

At any rate, you are right that chain reorgs need better handling in the stock client.  It has been a frequent topic here on the forums, and on the dev list.  What isn't at all clear is what to change, or how.

Outside of the billions incident a while back, I don't think there has ever been a reorg involving more than a few blocks.  And we sorta think that no one has the ability to actually redirect a transaction right now, or even will have the ability in the near future.  Also, while we are pretty sure that we, as humans, can tell a benign reorg (every few days) from a hostile one (never, so far), writing an algorithm to do it for us isn't so easy.

This is a pretty big subject, with lots of technical and philosophical issues, and this isn't the right thread to discuss it in.  You can find a lot of it in the development and technical discussion area.  Or, if you want to make a new thread on the subject, I can try to fill in the details for you.

This is true only on the "public" block chain. I'm inclined to believe Tom Williams' story (of Mybitcoin's fame) that his machine had seen some sort of prepared, non-public block chain due to an attack.

Having seen the inside of the software and having heard of the testing methodologies that it undergoes I' thinking that the further failures related to mishandled chain reorganizations are inevitable.

Personally: I'm disinterested. But for the wider community some sort of anti-propaganda would be an asset. Something along the lines "Conscientous accounting auditor's guide to the bitcoin internals."

I think the saddest part is that you (presonally) are one of the very few bitcoin-positive people who is actually willing to admit problems and discuss the deeper philosophical issues related to its implemenatation. I have this unfortunate experience that the full 100% of the bitcoin-positive people I've got personally acuqainted with were either fraudsers, gross-incompetents, fly-by-night operators or some combination of that.

I don't buy his story at all, at least not the version I heard.  Here's why.  Nodes forward valid blocks.  This is obviously true in the window between accepting the block and having it overturned, but it is also true after a new longest chain has been accepted.  Hell, it is even true if the blocks are stale at the time they are received, if I recall correctly from reading the code a while back.

If his node had been fed blocks that were later overturned, his node would have shared those, and they would have spread across the entire network, meaning that we'd all have copies of them.  Certain people that have a keen interest in the block chain, like Theymos, would have noticed proof of a spend redirection attack in the wild and would have announced it widely.  I gave up on reading the crap sloshing around in the mybitcoin threads, so I might have missed it, but I'm pretty sure that I would have come across it eventually if it had been announced.

I don't necessarily think that he stole the coins, but I'm pretty sure the attack did not come through the bitcoin side of things, even if he really did count deposits after a single confirmation.


Thanks, I appreciate that.  But I don't think the community is quite that bad.  It is certainly true that a lot of knowledgeable people have given up on the forums and moved on, but there are still a bunch around.

On this particular issue, the philosophical issue is this:  Should the bitcoin client be an accounting platform?  My gut says no.  Accounting is not a monolithic thing, it is a collection of different practices and procedures, with many, many differences from place to place.  Even if proper accounting was a function that was appropriate for the client, there is no possible way for it to do everything that everyone would need it to do.  So, accounting should be in a different layer, in different software that talks to the client.

I would even take the next step and say that the client does too much stuff, already.

It seems to me you are operating under the assumption that bitcoin is " money".

With all due respect to your experience with both software and accounting, that seems like a strange view, as bitcoin has as much  in common with any typically known form of money as a wifi-sniffing UAV has with a seagull (flying noisy things :) )

why the f*** do exchanges want to share naked short selling with YOU when they can do it already with almost no margin limit and front run the orders.  mtgox controls at least 50%+ of the bitcoin market, they can and do short the bitcoins at will.

1) fill all buy orders down to a threshold with enough support  (~$5 currently)
2) fill all sell orders up to resistance (~$10 currently)
3) rinse and repeat.
4) and you cant do anything about it.

Same happened  on wall street back when they were still trading out on the streets.  I think it was outlawed in the 40s.

My personal views are really immaterial. My personal position is in reaction to the various efforts to legitimize bitcoin as an investment vehicle in the EU. People whom I would otherwise respect (like eg. various Pirate Party functionaries) got involved with some frauds and/or fly-by-nights. The bitcoin millieu had attracted a lot of various social sediments. Unlike the run-of-the-mill financial frauds the bitcoin promoters feel that by operating on the uncharted territory they are free from any legal constraints of the existing societies.

It is quite fortunate that the frauds attraced by bitcoin are also typically unsophisticated and small time frauds. They get really surprised that the laws against their favourite scam are on the books for a long time, just under a different name.

Well, as far as "investment vehicle" is concerned, in my very humble Belorussian opinion, any thing people are ready to pay for can be an investment vehicle, irrespective of whether it is remotely sane (in the sense that it does not have to pass giggle test) or technologically sound.

Gold price is quite apparently so huge only due to a very long-lived "glitch" in human perception of value. If a fairly unspectacular element (that isn't even fissionable   or something, lol) can have absurdly huge price just because market is full of agents with a kind of weird response to the very notion of "gold", so can abstract  digital thingamabobbles made of some kind of eldritch mathemagics, if the market just accumulates enough agents with a peculiar response to the notion of abstract    thingamabobbles born   out of weird math ;)

Sorry for the bleated post:
I can agree to your opinion only on the condition that you really trust the publicly visible portion of the bitcoin community. From where I sit, I see the underbelly of bitcoin, and the picture I see isn't pretty at all.

You and many other people make an assumption that Tom Williams ran unmodified Satoshi bitcoin client. Or if not unmodified at least competently modified. Since his servers were FreeBSD, he had to at least recompile, or more likely hire somebody to recompile and integrate it for him.

From my brief experience I envision the following events: (1) somebody offers him "bitcoind Enterprise Edition", (2) he buys it, (3) "bitcoind EE" is diverging from the "official bitcoind". Then there are two variants:

(4a) from the start there was a remote exploit and the subcontractor bid low assuming that he'll do a "remote self-help" later
(4b) there was a dispute between him and the subcontractor about the scope of work. Subcontractor later on used "remote self-help" as a form of collecting its overdue fees by exploiting some old vulnerability that Tom Williams refused to pay to patch.

Obviously it is possible that the above isn't the true story of MyBitcoin. But from my experience this is or will be the story that will unfold later about some other Bitcoin deployment.

it appears you as a technical person potentially sees more than i as an investor.  but i have some serious concerns about your claims.

first of all, Gavin wasn't dancing around anything in that single post of his regarding Namecoin.  everything he said in that post was in regards to Namecoin, not Bitcoin.   am i wrong?  the reason Namecoin is susceptible to a rewrite of its block chain is b/c its so new; w/o the hashing power of a Bitcoin to protect it.  in fact, if anything, he was perhaps intimating the strength of Bitcoin as it currently has several large hashing power players that have the strength to squash any competition just because they can.  this is the advantage of being first to market.  its a competitive world; the fact that BitcoinExpress backed off his threat for now is a Godsend to Namecoin.  i'm assuming he is a Bitcoin supporter and he has every reason, justifiably in my opinion, to eliminate competitors if he so chooses.  i'm sure he has an economic interest in doing so.  this is life.  just like i fully expect the US gov't to try and squash Bitcoin.  this is the risk i take by investing in Bitcoin and knowing i might lose that investment to a gnarly attack. 

one of the things i use to monitor whether strange things are happening to the block chain is this:

http://blockexplorer.com/q/reorglog

this is theymos's reorg log.  as you can see a block gets changed every 5 days or so and this hasn't changed since July when he started monitoring this.  very stable i must say and very encouraging.  no one is losing coins haphazardly in Bitcoin.  its almost 3 yrs now since it was developed and thats a long time by my estimation.  i personally am very confident in how its working so far.

you obviously think  you're seeing something specific to Bitcoin.  i would love to hear something more concrete.

Listen up dipstick, I just want to locate a short selling outfit so I can make some quick green off Bitcoin.
 They are easy to set up, you don't need an exchange, just cash and a tiddly bit of infrastructure.

Now take your mumbo-jumbo and skeddadle.

Sorry the guy lost you.  I'll try to be helpful again.

You want to short with someone elses liquidity?  Go to Bitcoinica.

You want to _naked_ short (and be on the winning side)?

 a) find an exchange who will work with you on the ponzi scam. *

or

 b) set up your own.

* If the Bitcoin network goes down before you run out of participants who will take something you are asserting is a bitcoin, it's not technically a ponzi operation...just good business.  If you can induce the Bitcoin network to go down by virtue of or as a side effect of your naked short operations, congratulations, you've won.  Good luck with that.

Um, could you kindly hook me up with any of the kingpins of said underbelly ^__~ ?

Such scenarios are not specific to bitcoins.

Such scenarios could take place with any kind of system where an agent hires the lowest bidder as subcontractor and fails to carry out due diligence.

If you hire "dude from Sandcraterstania who looks tooootaaallllyyyy leeegiiiit" to code a system intended to manage thousands upon thousands of dollars and pay him a penny, you have it coming.

Whether you deal in exotic products of arcane mathematications or more traditional subjects of trade is at that point irrelevant.

Are you high? Nothing you write makes any sense.

Look, it's simple, Bitcoin is all about free markets and liberalism and all that jazz. So I'm just saying I want to naked short sell.
Dude, if Bitcoin can't cope and shits itself up its own anus then that just be market forces.

That's true, but partially. Satosh bitcoin obfuscated code base and its mizantropic build process are such that they greatly increases the chances of exploits and errors, no matter whether they are intentional or not. Add to that the attitude of majority of the supporters who claim "chargebacks never happen" and you have a extraordinarily fertile substrate for incompetency and fraud.

The icing on the cake are fly-by-night-s: mostly miners. They claim "yeah, we are in for the long term", and yet you can see one-way ticket out of the country for December 2012 (or whatever is the date of first mining knee) that is hanging from the front pocket in their shirt.

I've met investors, I've met gamblers and I've met investors who occasionally liked to gamble. Your way of arguing puts you in my opinion clearly in the gambler group. It is hard to argue with somebody, whose emotions are so tightly wrapped up that his heart aches anytime somebody says something unfavorable about your beloved bitcoins.

If you maybe try to untangle your emotions a bit you'll notice that when people talk about bitcoins, they actually talk about different things:

1) bitcoin as an abstract idea and its current valuation in terms of FIAT currencies: I talked next to nothing about this
2) bitcoin as implemented by the "Satoshi client": I talked a lot about this, I consider this implementation very bad, and the sooner somebody else implements full bitcoin protocol in a clear, modular and understandable way, the better it will be for everyone with exception of scammers and various guerilla-job-safety-C++-programmer types.
3) bitcoin as represented by its promoters and supporters: I talked about the ones I've met and they were uniformly 100% in the spectrum of incompetents, fly-by-nights & fraudsters.
4) something other that I neglected to think of.

Anyway, the Bitcoin Disneyland is now open: https://bitcoin.org.uk/forums/ . There the threads that may hurt your feelings are clearly marked ATTACK ON BITCOIN. Bitcoin enthusiasts and supporters have now option to play amongst themselves in a safe environment that is professionally moderated by one of its own.

wow, and i thought i was actually being nice to you. 

who's being emotional?  contrast my post with yours.  sounds like you may have had some alt chain coin at risk.

100% of bit coin supporters incompetent, fly-by-nights & fraudsters?  who the hell are you?  thats quite an insult to everyone around here.  clearly you can't provide any concrete examples that i nicely asked you for.

You clearly have no idea what 'naked shorting' is...which is a good reason not to play around with it (or any form of leverage.)

 - Shorting is borrowing something, then selling it.

 - 'Naked shorting' is simply selling that something without bothering to own it or borrow it in the first place.

The idea is to buy it back later at a better price and return it to where you got it, and pocket the difference in the price.  That difference is in your favor if the value of the item goes down.  That is why 'shorting' is 'betting against'.

So, if you can sell BTC to someone without having any to sell, go for it.  I am sure that some people can do just that.  I doubt that _you_ will ever be able to.

This is exactly what I'm talking about:


The emotions inhibit understanding. I haven't met you nor anyone else on this forum.

This whole fracas reminds me of the good old days of fuckedcompany.com. I remember marketing executives making emotional pleas in the same style as yours: intentionally distorting their mother's tongue. Commenters were joking "shiftless!", "undercapitalized!". After months of back and forth the dirty laundry was finally taken out for everyone to see. The public psychoanalysis of those well-known executives was really interesting and educational: this is an early warning sign.

The whole psychology of this is really worth studying.

please point out my "emotional pleas".  my original post to you was written in respect of your self proclaimed expertise in the technical arena.  i actually do wish to hear your views on the perceived weaknesses in the protocol but instead got back a venomous emotional response to a simple request.  i pointed out my interpretation of Gavin's post which is contrary to yours but still accurate in my opinion.  your response makes me question your integrity on this issue.

While I can make no argument as to quality of code, being a mere graphic designer, the build process is something a person with simpleton brainmeats like mine is definitely capable of mastering with some input from nice  souls in the community (I know this for a fact since I did craft together  and compile an alt-chain bitcoin fork to tentatively call my own ;) )

I doubt that a cleaner, neater client would save the hide of someone who hires a John Doe to write business software for him and has zero code audit (which usually comes hand in hand with hiring Does). Scenario you present is not a "bitcoin has *insert term* quality of code or documentation" issue, scenario you present is "a guy who's entire business is a bunch of code running on a box somewhere hires lowest bidder and has no audit" issue.



I can relate to those lads.

Having said that, I don't think that the first knee would necessarily cause a miner exodus (depending on overall market response, the opposite might happen)


Could you point me to a concise and preferably online (being Belorussian I have a hard time ordering from them amazons) sources pertaining to "The public psychoanalysis of those well-known executives" ?
I just find that turn of phrase intriguing...

Listen up knackersack, I was naked shorting Sterling in '92, the Yen during Koyoto and the banks in '08. So don't try to lecture me
on commerce buddy, I wrote the book, then tore it up... then re-wrote it again, and I might still tear it up again!

Seems you chimps can't answer a simple question about finding a counterparty in this scheme. 

Why don't you make one yourself ?

According to your claims, ye'r quite a rich lad!

Bitcoinica seems happy to act as counter-party.

I'm not aware of anything like this. Fuckedcompany.com was a prominent fixture of the first dot-com buble. This is where I first read John Nagle's analyses. Its maintainer Phillip "Pud" Kaplan made a number of technical errors and all the archives are lost forever. I'm afraid that simply you had to be there or you had to know somebody who was there. Only a lore remains, you could probably search for mentions of "Bay Aryan", the premier satirist in that community.

Ya, ya, of course you were.  -snicker-

oh, so you're a follower of Nagle's?  that explains everything.  i don't agree with him either.

Look, there's no polite way of telling someone that they are loosing touch with reality.


I only wrote about inconsistent use of big-endian and little-endian values in the protocol. This is pretty much it. It is a non-controversial issue, core developers pretty much agree with it, but consider it very low priority.

Perhaps if you sit with a friend and read the history of my posts, you'll understand that.

Perhaps you won't do anything like that, and you will continue seeing the world as filled with two kind of people: good (bitcoin supporters) and bad (attackers of bitcoin).

I feel that you are on your way to become another logansryche.

from your posts you seem to take offense to anyone who disagrees with you. 

if the Satoshi client is so messed up why don't you do something about it besides wasting so much time here bashing anyone who is positive on the technology?  your constant complaining is annoying.   create your own client or if bit coin is such a bad thing create your own alt chain and divorce yourself from this forum where more positive ppl of Bitcoin are surely to congregate much to your chagrin.

If a company offers a futures contract for something they do not have at x price and buys them later for delivery at y price, is this a form of naked short selling?

Is it also when a broker pretends to buy some shares but simply takes the money and hopes to profit if the buyer wants to seemingly sell the non-existent shares at a lower price?

I would not think so (but could be wrong.)  In this case, nobody was delivered something which did not exist.


Exactly this.  In this case they adjust your account balance to make it look like you have something when in fact you do not.  In my book, that is fraud.

As a matter of principle I keep almost all my BTC in my own wallet on my own machine and in my own house (with off-site backups.)  I keep at the exchange only what I need for trading and can afford to lose if they disappear.  That is quite practical to do with BTC, and if a trading house is reluctant to allow me to transfer my BTC with ease and at will, that would be a bit red-flag to me.  It _should_ be no skin off their ass and relatively little effort to allow me do what I want with my BTC.

I also make a point of keeping my stock certs in a safe deposit box, but that is much less practical than with BTC.  Possibly by design.

Sorta, but not really.  The exchanges have margin requirements and provisions for cash settlement, so it is pretty much never a problem.  Some of the exchanges are now so distant from the physical markets that physical settlement is unusual.


This is called FTD fraud, and it is illegal.  The brokerages have set up elaborate systems to ensure that a broker can always borrow shares in advance.  The system even allows cycling, where a broker borrows shares, sells them to a client, and then since the brokerage has control of the client's account, the shares return instantly to the borrowing pool to be borrowed again and again and again.  Extra bonus WTF ensues when the brokerage sells borrowed shares to the very same client it borrowed them from.  Even with this system set up to mock the SEC rules, FTD is still a regular daily thing, and as far as I can tell, no one ever gets prosecuted just for doing it.  But if the SEC is already planning to piss on a broker it'll usually get included in the book that they throw at him, which is how you get headlines like "Broker charged with 372 counts of securities fraud".

I seem to recall that some dot coms that got killed by this sort of thing, and the SEC did nothing even though there was plain evidence of FTD fraud.  Covered shorting can make it look like a thing has more supply on the market than it really has, which drives the price down.  Naked shorting can make it look like supply is infinite, which can destroy companies and lives.

Oh, and FTD isn't always fraudulent.  Sometimes there are legitimate errors and mistakes, but if I recall correctly, most of it is bogus.

What does FTD stand for, sorry?

'Failure To Deliver'

There is also a 'Stratigic Failure To Deliver' which means that it was not an accident of mis-placed paperwork but rather that the failures are deliberate.  I have never heard anyone aurgue that stratigic FTD's are anything but illegal, but the SEC not very interested in doing much about it.

Here's an interesting vid on the subject:

http://www.deepcapture.com/naked-short-selling-redefining-systemic-risk/ (http://www.deepcapture.com/naked-short-selling-redefining-systemic-risk/)

The best way to define naked short selling is this I suppose -> Counterfeit securities. Right?

Depends on what you want to do.

You could define it as 'providing liquidity' or 'allowing market cap to achieve fair value' if you were making a lot of money doing it.

I find 'counterfeiting' to be the most applicable definition personally.

Actually the better turn of phrase would probably be: selling "phantom securities" or "ghost securities".

I would just like to say something about a few of the things that have been said in this thread.

First off about transaction timestamps.

A transaction doesn't have any timestamp at all.  The timestamp displayed in the client is merely the time the transaction was received by the client or the timestamp for the block.  There is a real reason for this, the node cannot modify transactions to list the time the transaction was seen, but more so that time wouldn't match between all clients, which would be even worse for accounting purposes.

Secondly the talk about chargebacks.

this is from a table that can be found in the white paper http://bitcoin.org/bitcoin.pdf

If an attacker controls 30% of the compute power then their odds of controlling the block chain after z blocks is P.  As you can see there is an exponential drop in the probability the attacker controls the block chain.

z=0 P=1.0000000
z=5 P=0.1773523
z=10 P=0.0416605
z=15 P=0.0101008
z=20 P=0.0024804
z=25 P=0.0006132
z=30 P=0.0001522
z=35 P=0.0000379
z=40 P=0.0000095
z=45 P=0.0000024
z=50 P=0.0000006

Now it's definitely true that the current client does not handle block chain reorganization particularly well, however the information necessary to completely reconstruct the reorganization is saved in blk0001.dat should anybody have to deal with transaction reversals.

As far as I am aware the only entity that has ever claimed to have a block chain reorganization negatively effect them is mybitcoin.com and to be frank I think he's lying.

As for the original topic of this thread.

Naked short selling only works when you're fairly certain you can settle with the shorting party at the end of the day, this is a lot easier to do when your clients have other assets you could freeze.

It seems to me that someone wishing to 'naked short' will have problems to deal with at the 'beginning of the day' also.  That is to say, if they are going to sell into the market, they need to have something to sell.

With stocks, this is relatively easy because the seller has three days to dig up the shares after he or she sold them.  The SEC doesn't really mind if the three days is extended out to three years, and the DTCC doing the accounting creates something which looks to the buyer as though it were a share.  (Gotta keep 'confidence in the markets' ya know...)

No 'three day rule' with Bitcoin.  I surmise that the best way to do it with Bitcoin would be to own an exchange or wallet service.  To the person who bought the Bitcoin, just manipulate their account balance and tell them "Oh ya...we just sold you some Bitcoin...check your balances."   They do so and see they have fewer $$ and more BTC on their browser window and are happy.

In this case, then I can see your argument about being 'fairly certain that you can settle at the end of the day' although the same holds for a lot of types of futures and options.  Another requirement is that you don't have a run on your exchange/wallet service before the 'end of the day' comes...though that holds for a lot of types of fractional reserve operations.

I think that the biggest requirement is that you can keep the loot and not go to jail if/when things blow up.  Bitcoin shines here.

I've read that futures with no asset backing are considered naked shorts. Several places refer to them that way. It all depends on the person I suppose as to how they use semantics.

"Semantics"
That's right nga, you tell it how it is! All these complex financial produces are produced by poets hiding in Wall Street basements.