Bitcoin Forum

Besides the Mt. Gox Live online users count, now you can use Bitcoinica's system status to monitor market activity. It provides a nice 24-hour chart of throughput, which is the number of requests served by the server.

https://www.bitcoinica.com/pages/status (https://www.bitcoinica.com/pages/status)

Estimated online users = Throughput (rpm) / 40

Since Bitcoinica contributes 1/4 - 1/3 of the trades to Mt. Gox, this indicator should be quite reflective. And it can be more accurate than Mt. Gox Live because the online users are actual people with Bitcoinica accounts.

Enjoy your trading!

Thanks! Looks great! Are there any plans for implementing either SMS authentication or Yubikeys? I think security is still a big priority for any serious Bitcoins corporations and would make me deposit more funds to Bitcoinica. I'm sure there are others thinking the same.

It would help, if I knew in which timezone are the times there.

Im sorry, I just don't see how bitcoinica's website & database response times nor it's throughput has anything to do with the exchange rate on mtgox. Care to walk me through the logic or give me some examples showing the price correlation? I only have 24 hours of data to work on.

Frankly, what I found far more informative is your statement that bitcoinica is responsible for up to 1/3 of the trades on mtgox.
That came as a bit of a surprise. I thought bitcoinica was supposed to have a balanced internal orderbook?

A daily volume chart and a chart displaying the number of daily trades on your platform would be of far greater use to the community. Would you be willing to provide this data? As it stands now, bitcoinica is a darkpool in every sense of the word. Nobody has any idea of these numbers except you Zhoutong. This is not a sustainable position to expect to hold into the future.

Releasing this technical website data as a 'financial metric' is dishonest. It is nothing more than a glorified page-hit counter. There seems to be a distinct unwillingness on the part of bitcoinica to share any information regarding its books.

1/3 sounds like an awful lot. Shouldn't The majority of Bitcoinica positions cancel each other out? Leaving only the net resultant positions to be hedged against the market? Any chance we will ever see what that net position is?

Yes... how the hell does this help ?

When I ran my mining pool I put as much stats about the server as I could up for users to see.  I also had Cacti monitoring every performance metric under the moon that I logged into from the background.  It had no effect on how fast we could mine a block, but it showed how well the server was running and how much load was on it.  This gives the end user an idea that work is being performed and that I, as the admin, was trying as hard as I could to improve server performance.  These stats from Bitcoinica do not relate to price, they relate to showing how hard the server is working and how well zhoutong can design, tweak, and maintain performance.

We quote 24-hour rolling volume and number of orders placed on the front page, along with the average spreads, etc.

Also, it's not just me that knows the hedging information, Mt. Gox also knows. Dark pool is our feature, not our evilness. We are totally open about this issue, releasing financial information potentially hurts our business and customers. People feel safe trading at a dark pool.

For the same reason, we have no plans to release these data in premium data reports for advanced traders as well. We have no intention to capitalize on the secret data that we have.

Perhaps you just want such information, but please face it, every trader has his right to not tell you the position he is holding. If there are good alternatives to Bitcoinica, we are glad to compete on transparency. But for now, unfortunately, we have no ideas how to release financial information without risking our customers.

That's only during the peak trading periods, sorry for the inaccurate data.

You are right, but we have a number of huge accounts that simply have to trade directly to the market because the quantities are too large for P2P transaction within Bitcoinica. These accounts are active during peak trading periods, or they create peak trading periods and price spikes.

Do you ever run out of capital for these big traders? at 10:1 you might need to have quite a lot on hand.

We have at least 10 of them having significant positions, so one trader can't run out of capital. Also, they won't choose 10:1 because their trading activity will increase the spread to about 4% very easily (removal of liquidity). They can be liquidated with just 2% of price movement after considering the spread.

The title of the topic: "Another good indicator of market activity". I can see why people might want to know how well coded the platform is, how the server tolerates large loads etc, but Zhoutong was presenting this data as a market activity metric when it is patently not. I expected more than a glorified hit-counter after reading the title. I was actually getting ready to applaud Zhoutong for his great work until I read it's contents!


I was talking about charts, not a spot quote. Would it not make more sense to quote the spot on the server performance data and use the fancy charts for actual financial metrics such as trade volume, capitalization etc? Why have you devoted an entire page to this and a single line to the most important stats, with no historical charts available?


Mt. Gox is not capable of ripping their clients off as easily as you could yours, if you wanted to, as you and I both know. It is a nonsense to suggest that just because a small number of other bitcoin 'elites' have access to the information, that it is ok to keep it from everyone else.

Anyway, this is not about releasing the positions of your clients. I was referring to historical volume charts and data relating to the financial health of the bitcoinica platform. Keep the rest of your data secret if you like, but users who are invested with you are entitled to know how healthy your operation is when they are putting their money at risk on your site.

If you were to become insolvent tomorrow, how long would it take for anyone to even find out about it?


A simple dark pool that just executes orders on the market is one thing, but a leveraged darkpool that allow it's clients to trade (pretty much anonymously) on margin is something altogether more insidious.

When the rest of the market avoids darkpools, you are single handedly moving the nash equilibrium to a point where ALL of the exchanges will have to go dark in order to compete with you. So you are putting pressure on the others to restrict the data they provide.

Who feels safe trading at a dark pool, the normal everyday trader or the bigfish market movers? Your platform allows the latter group to bend the market to their will more easily, lose less money in the process and ultimately increase their profits. Yes, I can see how they would feel much safer using bitcoinica for this purpose. We definitely must ensure that underhanded traders are able to maximize their profits by squeezing purchasing power from everyone else! That is of prime importance.

What would you say are the top advantages to trading on a darkpool rather than on MtGox directly? I'd like to hear your rationale.


How noble of you. Little point selling the information to the chumps, when you can keep it all for Zhoutong's eyes only and reap 100% of the benefit yourself. You would profit magnitudes more by keeping it secret. Why sell it or (heaven forbid) give it away, when you would just be taking money out of your own pocket?

I'm being facetious to illustrate my point.


I don't necessarily want the information personally but I definitely wouldn't turn down a glimpse... we all know how tempting it is, you most of all I would imagine. Is your name Frodo Baggins by any chance? Because he is the only person that would be impervious to temptation on this scale. Unless you are a deity or something and are in fact not of this planet.

What worries me is that a small number of people, yourself included and whoever else you grant access to in the future without our knowledge, have the information and the rest of us do not. This creates a market of imperfect information to which you alone have perfect information. This is an extremely unfair trading environment with significant moral hazard, and since your company is not audited and your platform is solely under your authority, we must rely completely on your word that you will not use the information against your clients. And unfortunately, your promises are NOT good enough, no matter how nice of a guy you appear to be.  

You say that if there were good alternatives to bitcoinica that you would be willing to compete on transparency, so then you are only willing to budge on the issue when you are forced to do so by competition? That does not inspire much confidence in bitcoinica nor yourself, and more than that, it suggests that you are capable of doing it but are not willing to do the work required until someone twists your arm. If you do not know how to release financial information, you should not be operating a highly complex trading platform. MtGox can handle it, Tradehill can do it, as with many of the other exchanges. It's not like it is something awfully complicated, it could be easily achieved if you wanted to do so.

But you are, apparently, not motivated enough to do anything about it however. I wonder why that might be?

Bitcoinica is currently the only player in market making. We're not like a Forex brokerage which only represents 0.01% of total trading volume. When we are small or Bitcoin is too big, we can afford to release information because there's no threat of running the stops.

You're right that I have the ability to steal money and take advantage from customers. This applies to everyone who operates a Bitcoin service. But please don't compare Bitcoinica with Mt. Gox or TradeHill. Bitcoinica is just a trading bot that provides liquidity for everyone.

Unfortunately, we are just big enough to trigger your alarm. Introducing a competitor will be helpful for both of us, because I don't have to worry too much about my customers because they have choices, and you can request whatever you want in a competitive environment. The status quo is, Bitcoinica is just a monopoly that decides for everyone. We have decided that orders should be secret. You don't tell everyone that when the price increases to exactly $3.1 you will buy 10,000 BTC no matter what. You also don't tell you will buy every sell order up to 10,000 BTC below $2.9 as you're not willing to put up a wall.

The financial health is very good, and it's better and better everyday. Just look at our volume and average spread, you have the idea of the revenues that we're getting. Our customers trust Bitcoinica with their money and we're really serious about this.

Bitcoinica is a private business and we have the rights to choose the business model that helps our customers the best. I know you don't like dark pools or market manipulators, but this is the free market. It doesn't even matter if you put up "I hate Bitcoinica! Don't use it!" in your forum signature.

I can completely understand the trust issues in the Bitcoin community. When I first started the service, I faced a lot more of such issues. It just takes time to prove everything. Again, I promise not to trade for 24 hours after looking at customers' order data. If that's not enough, sorry, please hate Bitcoinica.

Understatement of the year.

Bitcoinica is a lot more than a simple trading bot. It is a trading platform that lends money to newbies and allows them to take extraordinarily risky speculative positions on the bitcoin:usd exchange rate, and which operates a trading bot which actively trades on the exchange to hedge these risky positions so that the net risk of the entire operation is placed squarely on the shoulders of the market participants at MtGox rather than on itself.

I have my own homebrew 'bot' that calculates liquidity and prices on either side of the active trading zone, and allows me to place my own 'dark' orders, but it is not bitcoinica!


This really puts my mind at ease. Now I can sleep easily.  ::)


I of course understand this. But the only reason for wanting to do this in an environment where all the exchanges order books are open is to profit from unexpected market movements that you yourself are likely to be the cause of. Do you not see what power you are giving to speculators? I don't want to have to spell it out.


If you are truly serious about it, then you should publish the numbers. Simples.


Just to be clear... I do NOT 'hate' bitcoinica, and I do not 'hate' darkpools. Bitcoinica worries me because of the potential risks and moral hazard involved, and darkpools only serve one purpose - to hide information that will allow you to profit off decisions made by others who are basing them on an incomplete set of data. Yet I do not hate either, and do not intend to slander your good name.

It is a private business, and I sincerely congratulate you on what you have achieved to date despite being relatively young. I also respect the fact that you address these issues maturely and unemotionally. However, I DO expect at least some level of transparency with your clients (who pay your spreads) and indeed the wider bitcoin economy (your loyal risk-takers).

While this is a free market, and you are free to take whatever action you see as best for your clients you must also understand that your decisions impact on the wider bitcoin economy too. Since it is the MtGox market participants who pay for the mistakes of your clients, you have a clear duty of care and responsibility to not just your clients but also the wider community. We shoulder the risk of your operation, the least you can do is be responsive to our wishes.

If you expect to be able to remain unaccountable for your decisions, you are in for a wakeup call.


I will repeat... your promises are MOST DEFINITELY NOT enough. But I won't hate bitcoinica.
I have no reason to hate a computer program. It is what some people are capable of using it for that I strongly disapprove of.

If you don't like it, don't use it.  And you shouldn't care if we lose our asses using it.  Make your trades somewhere else and profit off our mistakes.  You can make money whether the market goes up or down.

You are failing to understand the point. Whether I want to use bitcoinica or not, it's effects are felt in the wider market independently of whether I use it or not, as bitcoinica hedges (i.e. shrugs off) its risk onto the market participants.

When Zhoutong states that bitcoinica hedges it's net position on MtGox, what he really means is that the net burden of risk is foisted onto the shoulders of the markets when it is unable to be balanced internally. Essentially, if Zhoutong's clients make large collective mistakes, YOU and ME and anyone else who holds bitcoin will end up paying for these mistakes whether we use the bitcoinica platform or not.

The 'vote with your wallet' rhetoric does not really apply. If I am not given a choice, how can I make a decision?

Hahahaha...dude, listen.  Buy high, sell low.  It doesn't matter *what* makes the price go up or down.  It doesn't matter how fast, it doesn't matter how much.  It doesn't matter which exchange you use.  All that matters is that your trades are set up in the right spots.  Not every trade will be positive, nor every trade negative just because of Bitcoinica.  Set limit orders, set stop losses, watch all the charts.  Do whatever you have to do, but don't blame Bitcoinica for your loses.

Just to be clear, I have not lost anything. In fact I am up 48% in the past few weeks, largely in part thanks to the fact that I avoided using leverage and was therefore able to sit out a few unexpected movements which returned to their original levels after a few days. I did not use bitcoinica for any of my trades. I did open an account a few weeks ago, but just poked around for a couple hours and tested a few minor features to satisfy my intellectual curiosity. I have only returned to the site on a few occasions since.


Ummm... thanks for the advice but I think you have got it on it's head. Maybe that explains how you managed to get yourself 'zhoutonged' last week. Still haven't learned your lesson yet though I see. Or have you just lost so much that you now intend to try and play the catchup game with some ridiculous leverage ratio? If that is what you are planning, I feel sorry for you.


You sound like a stereotypical testosterone fueled stock-market meathead from wall street in the 70s, who doesn't bother with such trifling things like fundamentals, causality, or the real world in general. Do you just invest blindly in anything based on what the technical indicators tell you to do? Prices can be manipulated, charts and trends made to look persuasive, indicators made to give false signals, all in order to lull people like you into creating real (but artificially caused) price movements.  
  

Of course it does. Some are trustworthy and reputable, others are not. Some have high fees, others are more reasonable. Some are thinly traded, others have high volume. Some support certain currencies, others do not. Must I go on?


This is the bones of your argument.

I agree that the most important thing is that trades are set up in the right spot. But, how are we to determine what the right spot is when potentially 1/3 of the orders are invisibly sitting on bitcoinica waiting to kick you in the nuts. Likewise with the stop losses and limits. But thankfully, I don't need to use either of these as I do not trade on leverage and can make those decisions on my own time.

If you think that my post is motivated by losses, you are probably just projecting your own instinctual behavioral reactions. What motivates me to talk ardently on this issue is not that I have a vendetta against Zhoutong or Bitcoinica, rather it is the riskiness of the operation as I have clearly outlined above, the moral hazard of darkpools and the unforeseen effects that all of this can have on the btc:usd market. Wise men talk because they have something to say; fools talk because they have to say something (Plato).

If you think there is absolutely nothing to worry about, you are a fool.

Zhoutong, just so I can get a definitive answer here and now, I want to ask you directly. Do you have any intentions whatsoever, either presently or in the not too distant future, to provide us with the following data?

1) Total deposits in BTC and USD
2) Daily ratio of internal 'balanced' trades to direct market trades
3) Total daily hedging volumes in btc
4) Some indication of the net balance of your orderbook (e.g. 48% buy, 52% sell etc) as is often customary

This information really is the minimum required for us to be able to assess in some shape or form the solvency of your operation if we are to be able to go on anything other than your promises and personal guarantees that you will not fall victim to moral hazard. The hedging volume data does not need to be specific. Trading levels and the positions of your clients are not necessary, we just need the overall totals to ensure that your platform is solvent and viable. That should not be anywhere near enough information to allow users to run your users stops. You could delay the information by 24 hours if you still felt the need.

It will shut me up if you do, and others with similar concerns. If you have nothing to hide, the trust that you have established to date can only be reinforced by this. I see no disadvantages here.

If you intend to refuse, please furnish us with some hard facts as to why it is exactly that providing this information would harm your clients.

I would recommend to everyone reading this, not use bitcoinica's services until either the data is provided or 100% valid and detailed reasons are given as to why this specific information can not be revealed to the bitcoin community.

Obviously, everyone is free to make up their own minds on the issue but I think it is important enough to be doggedly persistent in our requests for transparency from bitcoinica. If you agree, please say so.

Even though I DO enjoy losing small amounts of money on Bitcoinica ALMOST as much as I enjoy recreational drug use, I definitely see mjcmurfy's point.

Question:  Is creating an alternative to Bitcoinica a viable alternative to boycotting it, and if so, what (in theory at least) would be the necessary capital to get the ball rolling on that?

This sounds familiar... oh yea, the Wall Street debacle.

Any Exchange, Broker, Escrow, etc... can take advantage of its customers... Personally, I would be more concerned with the exchanges. Everybody knows what Derivatives are... its gambling... and the House always wins. Now some players by using their wits and skills can narrow or even overtake the odds stacked against them.

Which btw, if Zhoutong is correct that his service accounts for over 1/3 of the trades at MTGOX during peak hours of trading, it would give those people with enough wits, skills, and experience to use that information to their advantage.

When are those peak hours? What are the 'odds'? In which direction would it favor the user to place said bets... I bet someone can find out without to much effort.

Unlike fiat services that do the same thing, BitCoin has a paradigm shift out into the future. At some point, people will realize they don't need the exchanges, brokers, and escrow services. They can do it all themselves. They can trade in person, in the -otc, at the store, and yes even at the Casino. It will be the best of times, It will be the worst of times...

Bitcoinica is going through its growing pains, hopefully it will fair better than MTGOX's growing pains... We all know he had them. Or he might go the way of others and disappear with peoples BitCoins just like some banks are doing.

But all should understand, it is about Trust. Can I trust this person, entity, service, or whatever to do what he says he is going to do. But before we throw Zhoutong under the bus, ask that question about almost any other service you use.

Lets end my diatribe cause it will all even out in the end, when I have all the BitCoins.

BTW: Thanks for the info  ;)

1) We will do this if Mt. Gox or TradeHill does this. The exact numbers of customer deposits have serious legal implications. We're not sure about the potential risk. Also, it doesn't really matter. Some people (like DialCoin) use Bitcoinica as e-wallets.

2) I will make this data available in the next two weeks.

3) I will make this data available in the next two weeks.

4) This data doesn't make much sense. It's just like Mt. Gox's order book. The percentage of buying and selling doesn't really matter because the price and quantities can vary a lot. Most people watch specific price points, which are sensitive information for a dark pool. If you want the percentage of buy and sell, I can give it to you on demand, but it's just silly to show on homepage or whatever.

Also, it's risky to reveal net positions because we don't want Bitcoinica to be a sentiment indicator Most of the time, the positions are quite balanced compared to our holdings and deposits. During price spikes, things may change and we don't want traders to over-react by looking at others' trades. If there are several Bitcoinica-like services in Bitcoin community with similar volumes, it might be easier for us to release the data, but definitely not now.

MjcMurfy,

Would you mind explaining how Bitcoinica is displacing risk to MtGox?  Because I don't see how they possibly could. I don't think you understand the risks of margin trading.

If I make a stupid trading decision, say buying at $10 right now, I only end up putting my money into another person's pocket.  If Bitcoinica hedges, it goes into a Gox user's pocket, if they don't it goes into a Bitcoinica user's pocket. Margin trading would only multiply the amount of money leaving my pocket and going into someone else's. If I take on bad risk, it creates a good opportunity to others.  If the value of my account goes to zero, I get liquidated. My risk does not transfer to others.

If Bitcoinica hedges well, they can avoid risk.  If they don't, they are assuming risk opposite to mine.

Newbies losing money margin trading are putting money into other people's pockets.  They aren't hurting anyone but themselves.

The only way Bitcoinica users can take money out of Gox users' pockets is if they are taking smarter positions.  The smartest traders should be able to capitalize on the poor predictions of others: this is the purpose of a market.  Zhou should absolutely NOT publicize the net balance of the order book, because this would allow market manipulators short squeeze his customers much more easily. 

What makes you think newbies with risky positions on Bitcoinica are somehow transferring this risk to MtGox users?

Why are you making attacks on the character of those who disagree with you?

PS: I love bitcointorrentz, thanks for providing us with that great site.

Despite the deliberately opaque and complicated way this system is operating, I'll try and explain my concerns as clearly as I can, without knowing more about the inner workings of bitcoinica, it's financial status, how it's trading bot works and how it hedges.

Basically, it all comes down to the fact that it can become very expensive to hedge a leveraged position (i.e. more than the initial deposits), on an exchange that does not allow you to also leverage the hedge position. This is the case we find ourselves in with Bitcoinica and MtGox. One offers leveraged positions but the other does not.

On bitcoinica, you make nominal profits in usd for your trades, not bitcoin. Let's say that I decide to leverage a large bitcoin holding at 2.5:1 on bitcoinica.  If I decide that the market is going to move up, and it does, I am entitled to 2.5 times the profit in usd than I would if I were trading directly on the exchange. Where exactly does this cash come from?

Some of it will come from investors who have taken losing opposing positions at bitcoinica, but it is easy to conceive of a huge leveraged position being held for a long time which has accumulated a lot of profit. It is possible that bitcoinica would not have the volume on its own orderbooks alone to pay the winnings. So once the trader closes out his position, bitcoinica may have a significantly acute deficit to meet which may make them insolvent.

When bitcoinica's orderbook becomes internally out of balance, the overspill from any huge positions closing out will require bitcoinica to foot the bill which is denominated in USD. Because bitcoinica does not pay this bill from it's own funds, the money necessarily has to come from the btc deposits on its books. Bitcoinica can 'hedge' the position, but since they can not leverage it, they would have no option but to try and use the bitcoinica depositors bitcoin on mtgox to speculate on the market proper for a profit. Considering the fickle nature of the market, this is very risky and could potentially be a double edged sword for bitcoinica traders.

So bitcoinica now has a strong incentive (almost a requirement) to profit on the MtGox platform. And since they are privy to a hell of a lot of market position data and other market information, they have an unfair level of insight into the market - even if this insight is only coming from a derivative platform as long as there is enough people making predictions it is extremely representative of what is going on in the market proper as everyone is speculating on the primary market itself. So what I am saying is that there is a strong likelihood that zhoutong would be forced to use this data to manipulate traders on the exchanges. Another potential scenario is that he would attempt to minimize the amount to be 'hedged' or put at risk, by actively trading against his clients directly on the bitcoinica platform. Neither scenarios are pretty.

When you consider that a lot of high volume traders are starting to take leveraged positions, you have to wonder how bitcoinica is supposed to foot the bill if a net majority of them happened to wind up significantly in the green at some point in the future.

Also, consider that someone with a lot of capital could take up a large position on bitcoinica using lots of leverage then pop over to MtGox, take a huge bite out of the market, maybe even at a loss, and still wind up hugely in profit because of his bitcoinica position.


Why should zhoutong protect his clients who are taking extremely risky positions at the expense of the market proper? Doesn't sheltering a section of the market participants go against everything the free market is supposed to achieve? People who take risky positions and lose deserve to have their money taken away as they would have been perfectly entitled to the profit had the trade gone the other direction. They should not be trading with more than they can afford to lose.

Why does MtGox or TradeHill not feel the need to do this? Zhou must just value his clients so much more than everyone else. It of course motivated out of self interest. Work your own way through to the logical conclusion of that one.

Please answer a few simple questions for me, mjcmurfy.

Has Bitcoinica ever coerced anyone into using their services?
Has Bitcoinica ever committed fraud against its users or its counter-parties?
If the answers to the first two questions are negative, then why do you feel entitled to Bitcoinica's proprietary data? Do they owe you anything?

1) No  2) No and 3) No, they owe me nothing.

If you want a more thorough explanation of why I think an overview of this data is necessary, then maybe you should actually read my previous posts. Just because they have not defrauded anyone to date, does not mean that they might not in the future. The only way to monitor the platform is with this information. I'm not saying bitcoinica is a scam or that zhoutong is not an honest guy, but there is significant potential moral hazard as I already explained.

If bitcoinica were operating in the financial system proper, do you think they would be able to evade these questions the way they are able to currently? And do you think people would be jumping to their defense on the issue? Would you deposit your money with a bank who would give two fingers up to the financial services regulators?

So your argument boils down to "Bitcoinica could commit fraud so we need to check their books". It's a very nice argument because A. You don't need to show a shred of evidence, and B. You can profit from Bitcoinica's proprietary data without doing any work.

I'm only getting on your case because you mentioned "free market". In a free market there are no thugs who threaten to kidnap you if you don't show your books to them.

I don't like boiling anything down to simplistic statements. But I digress. Yes, bitcoinica might commit fraud and take your money, and you probably wouldn't even realize it had happened. Therefore we need to make sure that it can't happen. Very 'nice' argument indeed. Also, how am I to produce any evidence when no data is published and none can be obtained? All I can do is point to lessons that were HARD learned in the real financial sector. We ignore these lessons at our peril.

It's absolutely hilarious that you are trying to typecast ME as the thug, when I have literally ZERO power to do anything but try and convince others that there is a significant potential issue here. I'm not saying bitcoinica IS a scam or that zhoutong is not an honest guy, but there is significant potential moral hazard as I already explained.

There ARE 'thugs' who 'kidnap' you in the free market if you refuse to show them your books. They are called financial regulators. All financial institutions have to document for them exactly what they are doing with their depositors money. Pesky, aren't they? Since we don't have their help here, we need to do the job they normally do ourselves.

If you do not want to heed caution, then throw it to the wind for all I care, and deposit all of your coin with bitcoinica. I have no vendetta against bitcoinica, I do not use their services, and have no reason otherwise to continue this line of argument other than for the good of the bitcoin economy. You are entitled to disagree with me, but I have no obligation to save you from your own stupidity.

You should look up what "free market" means. There are no financial regulators in a free market.  I don't disagree with your position, but if you're claiming we need bitcoin regulators and you want a free market then I need to point out that hypocrisy.

Even a completely 'free' market requires some amount of oversight. The fair and efficient operation of markets requires that monopolies such as bitcoinica are not allowed to abuse their dominance, and that competitors participate in the market in ways which do not restrict, prevent or distort competition.

Regulators do not have to be given any actual powers, but should at least have the ability to raise awareness of potential problems in the market that would be otherwise hidden, so that the market participants themselves are made aware and can correct the issues themselves by voting with their feet, or more appropriately, their bitcoin.

From wikipedia:
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts.

From Merriam-Webster:
An economic market operating by free competition

I do know how to use wikipedia. But thanks for being so kind in providing those paragraphs for my benefit. Have you somehow gleaned from my posts that I am a proponent of economic intervention by the regulators? Your copy-pasted wikipedia and merriam-webster definitions do not contradict my argument one iota.

Even when regulation is limited to tax collection and enforcement of private contracts, how do you think that the authorities know how much tax to collect? Because the businesses they collect from are required to disclose their accounts and other financial activities.

The only thing that truly defines a free market is the former (unbolded) part of your wikipedia definition, where prices are determined by supply and demand in a competitive market only and not by economic intervention by states or other financial institutions.

Again, as I already said, we as a community don't need to have the ability to impose sanctions on bitcoinica or otherwise intervene in the market to prevent them from operating, HOWEVER (I am copy and pasting my own statements now) we should at least have the ability to raise awareness of potential problems in the market that would be otherwise hidden, so that the market participants themselves are made aware and can correct the issues themselves by voting with their feet, or more appropriately, their bitcoin.

In order for this to work, then we need transparency on at least some of the data. If a business is unwilling to provide this data, then the logical reason for not wanting to do this is that they are trying to hide something that they do not want their clients to know about.

Or more simply, the state doesn't collect tax on corporations operating outside the state, like for example, Singapore where Bitcoinca is incorporated. So taxation is obviously out.

Any other reason why they have to open their books?





I agree that regulation is necessary, both IRL and in the bitcoin world. Except I'm more pragmatic. There's simply no way to enforce regulation on anonymous corporations without a physical presence and operating with a nearly untraceable currency.

"Voting with their feet and their bitcoins" won't work because like Zhou repeatedly pointed out, Bitcoinica is currently a monopoly. If you open up a Bitcoinica clone with transparency then I would love to use your service, but until then Bitcoinica is free to release as little information as they want.

I'm not saying we should tax bitcoinica. I was pointing out that the definition you posted from wikipedia does not support your argument. Of course, a particular nation does not collect tax from corporations operating outside the state. However, they would have to declare this information to the relevant authority in their respective location.

What do you mean any other reason to open their books? Have you even read my posts, or are you simply arguing for the sake of argument?
I won't be baited by your diversionary tactics. Go back and read the thread more thoroughly.


I see. It's difficult, so I guess we should just forget about trying to do anything about it then. ::)

Thankfully this 'pragmatic' view of yours was not shared by people like Satoshi Nakamoto, Rick Falkvinge, Julian Assange and the folks involved with the Global Occupy Movement, to name but a few people who were determined not to accept the status quo because it was too hard to do anything about it.


You don't seem to understand. Yes they are free to release as little as they want, but only if we let them get away with it!

You are right, they are currently a monopoly, and the only way to deal with a monopoly is to stop using their services until they are willing to cooperate with the wishes of the market participants. They are not providing such a 'vital' service to the community that ceasing giving them your coin will negatively affect the bitcoin economy.

I realize that I seem to be the only voice actively calling for transparency, but surely there must be a majority of people who understand the risk posed by bitcoinica in it's current form. I hope I am not wasting my breath and have gotten through to at least a few of the more savvy traders.

We could go and create a bitcoinica competitor, as was mentioned already a few posts back, but the reasonable thing to do first is to try and persuade zhou. And that is what I am doing right now. Failing that, other options can be considered.

I trust Zhou too, and think he has done an absolutely fantastic job on bitcoinica and have told him as much in private (and in public). Some people here seem to think that I have a vendetta against him and this is totally false. I have a lot of respect for Zhou. But the point that I am trying to get across is that trust, and personal guarantees, are just not enough to put my mind at ease with regards to the moral hazard issue, even from a guy as upstanding as Zhoutong. Because after all, when it comes to moral hazard, even the most respectable and trustworthy people sometimes fall victim.

Nobody was held in higher regard on Wall Street than Bernard Madoff and Richard Fuld, and look how that turned out.

What is to say that in the future, Zhou is not forced between a rock and a hard place from which he has no alternative but to do the thing that he gave such ardent assurances that he wouldn't? His guarantees and assurances that this will never happen are just too tentative. When it comes to other people's money, something more than simple promises is required.

You might be right in believing that at least part of the reason why I am speaking so loudly on this topic is due to my own self interest. I want to be able to use bitcoinica, but I have no interest whatsoever in using the platform in it's current form. It's just too risky. And I am not just talking about the risks associated with margin trading.

The onus is squarely on the shoulders of Zhoutong to come up with SOMETHING to ease the minds of those who invest money with him. I am simply applying the required pressure to motivate him to do so. Thankfully, Zhou has already promised to publish some numbers. I am not trying to say that I know what it is that is required. I requested transparency from bitcoinica, but was told that this is impossible for the most important data, the data we need to ensure the financial health of the platform. So if this is not possible, Zhou is going to have to innovate and come up with some other means of letting us all know in quantitative terms that it is safe to invest with bitcoinica. I have full confidence that he will be able to do this.

I want the bitcoin economy to be developed properly, safely and as openly and transparently as is possible. Since this new financial system we are building is in it's early days and the economy itself is basically free from any regulation whatsoever, we have to do the job of the regulators ourselves and be extremely cautious when it comes to issues like this. It is of vital importance that that we use as much forethought as possible to prevent any future problems that may shake the trust we are collectively building in this infrastructure. I don't want to see the efforts of so many people in this community dashed on the rocks by those who refuse to listen to reason.

A monetary system requires ignorance, hidden information and secrecy in order to function. If we had perfect transparency in all market place dealings, then no one would be able to profit, and then there would be no need for money.

Almost completely disagree... What 'they' are afraid of is you finding out the Mark-Up.  You expect them to make a profit cause you understand the need for it. Retail can be as high as 300% but if you found out they are making 1500% or more... then you might say: Hey, I am getting scammed.

A truly transparent currency would minimize Mark-Ups to reasonable rates when taking Taxes, Expenses, and Labor Costs into affect.

Some Mark-Ups are really low but that is because of a huge volume of business.

Doesn't disprove the assertion.

Am I understanding correctly that you make an assertion and you expect others to disprove it?  I always thought that if one made an assertion then they took on the burden of proving that assertion.  Or is it guilty until proven innocent in your world?

Actually you both confirmed the assertion. Private property is integral to a monetary system, allowing for and encouraging excess and greed. And how do we know what a business's margin is unless they are totally transparent?

Hey guys, my resolution is simple - Bitcoinica will publicize information that helps people to trust us, and continue protecting our customers and ourselves from financial attacks.

List of data that's okay to be shared:

- Hedge vs P2P ratio
- Trading volume (already available)
- Average spread (already available)
- Unbalanced portfolio percentage (in absolute value - regardless of long or short)

List of data that's definitely NOT okay to be shared:

- Stop orders (to prevent short squeeze)
- Limit orders (as the only publicly available dark pool)
- Forced liquidation status (to prevent short squeeze)
- Customer deposits (to minimize the data available for competitors)
- Absolute reserve amounts (to minimize the data available for competitors)

List of data that requires further discussion to decide:

- Reserve percentage (targeted financial attacks?)
- Delayed order book (it's technically complicated)
- Percentage change in customer deposits (targeted financial attacks?)

If we make our financial data available, it will be much easier to trigger our circuit breaker, which means that our customers will not be able to buy or sell for a brief period. This can generate market opportunities for manipulators.

However, I'm aware that hiding is not a solution. I will figure out a systematic solution to prevent us from having the ability to trade against our customers at all, even when the algorithm fails to balance the portfolio properly.

I hope this debate can end peacefully. Thank you for all the trust!

Do they have information pertaining to the quality of the items, their relative scarcity, the availability of the resources to produce the bread, the chicken population, the dietary needs of others, etc.