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3601  Economy / Service Discussion / Re: What do you guys think of BitEnsure? Interest Bearing Wallets on: August 12, 2013, 06:42:02 AM
The best case is it is a Ponzi scheme, but you are in the early innings, and you will get your principal plus interest back before the whole thing collapses.  Remember, even with Madoff, some early investors actually made a lot of profit (though they were eventually clawed-back)
It will work out for me because I'm special!

Scammers trap more suckers via that logical fallacy than all the rest combined.
3602  Bitcoin / Bitcoin Discussion / Re: [ANNOUNCE] Android key rotation on: August 12, 2013, 06:38:46 AM
It's possible a user exportet a single key from his electrum wallet and used it in mycelium (for example). It could get compromised by the bad RNG in android and compromise all keys of the wallet.
Does Electrum have "watching only" copies of deterministic wallets like Armory does? The attacker would need access to that in order to compromise the entire wallet instead of just the single private key that was exported and then used on a vulnerable client.

I just don't ever export private keys from them.
Private keys are called "private" for a reason, the belief of some people that it's a good idea to share them notwithstanding...
3603  Bitcoin / Press / Re: 2013-08-11 WSJ - Regulator Examines Bitcoin Practices on: August 12, 2013, 06:17:50 AM
If you were are one of the subpoena recipients mentioned here and are marveling at the multitude of demands and short deadline and are contemplating not responding:  That would probably be a very bad idea. You should seek legal council immediately. relocate your self and your business outside the US and never look back.
Fixed.
3604  Economy / Service Discussion / Re: What do you guys think of BitEnsure? Interest Bearing Wallets on: August 12, 2013, 06:12:06 AM
It doesn't matter how long a scheme goes on before problems show up - if the source of the returns is illusionary or unsustainable it will eventually fail.

No legitimate investment is going to pay random depositors on the Internet 27% to borrow their bitcoins for 90 days.

If there exists a borrower who has such an incredibly profitable opportunity they need to finance that justifies such a high APR they can write up a business plan and find far less expensive lending via other channels so there's no reason for them to pay you exorbitant interest rates.

At rates like those, someone is either borrowing your bitcoins in order to speculate on a BTC price crash, or else funds from new investors are being used to pay old investors, i.e. Ponzi scheme.

The best case scenario is that somebody is gambling with your deposits.
3605  Economy / Speculation / Re: Gold collapsing. Bitcoin UP. on: August 12, 2013, 03:39:40 AM
You forgot #3, depleted uranium is less radioactive than the dirt you find it in, and of course, #4, "mass destruction" doesn't mean "reporters don't understand it", it has a specific meaning involving large areas.
Is there or is there not a leukaemia epidemic in Iraq that wasn't there 10 years ago?
3606  Economy / Service Discussion / Re: What do you guys think of BitEnsure? Interest Bearing Wallets on: August 12, 2013, 03:38:07 AM
27.25% for 90 day CDs.
Three possibilities for who is on the other side of that trade:

  • BTC Borrower(s) who have business ideas capable of generating 30% return in 90 days but can't find cheaper financing.
  • Speculator(s) who want to short the BTC exchange rate but can't find a cheaper borrow. (*)
  • Ponzi scheme.

Which one is the least unlikely?

*This also includes people who don't understand that borrowing in BTC is the same thing as taking a short position.
3607  Bitcoin / Bitcoin Discussion / Re: [ANNOUNCE] Android key rotation on: August 12, 2013, 01:25:27 AM
Of course it must work multiple times - just like PGP/RSA has been working, ever since it was invented.
And nobody says that you using the same PGP key twice "should be considered negligent" - it would just defeat the purpose of a digital signature Smiley
A better analogy would compare Bitcoin addresses to session keys.
3608  Bitcoin / Bitcoin Discussion / Re: Instant Bitcoin confirmation time (IDEA) on: August 12, 2013, 12:57:49 AM
I didn't say it was easy to estimate P, just that it is necessary.

Clearly any changes to the network which makes the cost of a double spend attack more deterministic makes it easier for merchants to price risk.
3609  Economy / Service Discussion / Re: What do you guys think of BitEnsure? Interest Bearing Wallets on: August 12, 2013, 12:54:27 AM
Any service which promises to pay interest on Bitcoin deposits right now is a scam.

The only legitimate and sustainable way to pay interest on Bitcoin deposits is by profitably lending bitcoins, and there are very, very few sound loans to be made right now.

There are virtually no business activities capable of generating a return on investment that exceeds the appreciation of Bitcoin in purchasing power. If you lend bitcoins out for a 1 year term and expect to be repaid you've got to plan for the possibility that the exchange rate could be ten times higher a year from now than it is today. This means if you're looking for a borrower capable of paying back a 1 year BTC loan they had better have a business plan capable of generating more than 10X returns in the course of a year, or else they are likely to default.

Lending BTC for a year is insane, anyone proposing longer term loans at the present state of the adoption curve is a danger to themselves and others.

So where are all the sound loans to going to be made that will generate the profit needed to pay interest on deposits? Overnight lending to bitcoin businesses that need extra liquidity? How much demand for that is there really, and how much profit is available to pay depositors?

Basically if the interest you're being paid on a deposit (for any type of deposit, not just BTC) doesn't come from a borrower who used that loan to generate more business profit than they paid in borrowing costs during the loan term, then you're either gambling (speculating) or else dealing with a Ponzi scheme.
3610  Bitcoin / Bitcoin Discussion / Re: Instant Bitcoin confirmation time (IDEA) on: August 12, 2013, 12:27:21 AM
What merchants need to know in order to deal with double spends rationally is the cost to of successfully implementing a double spend attack.

There exists a P(x,y) where x is the number of confirmations and y is the value of the transactions, and P is the probability that a double spend attempt can be successfully such that the cost for the attacker is at or below y.

If P can be accurately estimated for a given transaction all a merchant needs to do is increase their prices accordingly.

If the odds of a profitable double spend for a given type of transaction is 1% then the rational merchant just raises the price by 1% to cover the losses and goes on with life. Maybe if P is high enough to start negatively impacting sales that merchant looks for technological solutions for reducing P (that don't cost more to implement than they produce in tangible improvements).

The problem is that nobody as far as I can tell is even trying to estimate P, or if they are then nobody is talking about it publicly.
3611  Economy / Speculation / Re: Gold collapsing. Bitcoin UP. on: August 11, 2013, 11:25:08 PM
DU weapons, by any objective definition of the term, are dirty bombs and as such should be classified as weapons of mass destruction whose use is a war crime. There are two problems with this, however.

Firs,t like all governments, the US government is in no way interested in obeying the rules that it imposes on others. Second, the term "war crime" is misleadingly redundant.
3612  Bitcoin / Bitcoin Discussion / Re: [ANNOUNCE] Android key rotation on: August 11, 2013, 07:51:46 PM
I guess, or understand, that 'receive' addresses can be safely used more than once?
Receive addresses should be used exactly one time, then never again.

If you reuse addresses for receiving bitcoins you have no financial privacy, and you're vulnerable to issues like this.
3613  Other / Off-topic / Re: Why MP is your God. on: August 11, 2013, 07:11:03 PM
Something to keep in mind whenever someone bring up past prediction performance is that distinguishing between luck and skill is very difficult.

http://www.ffscambridge.com/blog/post/taleb_on_distinguishing_between_investing_skill_and_random_chance

Quote
Consider a group of 10,000 investment managers whose investment success is comparable to that of a fair coin toss. Each manager has a 50-50 chance of making or losing 10% in any year.  At the end of each year the losing managers are thrown out of the game.

After the first year 5,000 managers have made money and the rest have bailed out.  After seven years there will still be 78 managers who have made money continuously, purely on the basis of random chance. Their portfolios are up a total of almost 95% after 7 years.  If these folks then go off and start their own hedge funds, there’s no way to know that their apparent genius was merely luck, and they’ll probably attract a lot of investors.

Now suppose that instead of giving the managers an even chance of making or losing money, we start with a pool of 10,000 relatively incompetent managers. These individuals are more likely to lose money than to make it: they each have a 45% chance of making a profit and a 55% chance of losing money.  At the end there are still 37 fund managers who have made 10% a year for seven years. Even though this group is more likely to lose money than to make it, a few will still run up impressive gains and develop reputations as hot managers.

This demonstrates that if there are lots of fund managers, a certain number of them can look like geniuses when in fact they are merely “lucky,” even if, in reality, they’re moderately incompetent! As Taleb notes, knowing that a manager has an extraordinary investment track records doesn’t tell you anything: “without knowing how many managers out there have tried and failed, we will not be able to assess the validity of the track record.” If the manager population were small, a good track record would be impressive.  But in fact, if you count all the money managers in the U.S. alone, 10,000 underestimates the reality.
3614  Bitcoin / Bitcoin Discussion / Re: [ANNOUNCE] Android key rotation on: August 11, 2013, 06:51:30 PM
But that has nothing to do with deterministic wallets. Non deterministic wallets do not require address re-use.
The reason that clients reuse addresses is because random key wallets are unsuitable for general use.

Requiring users to update their backups after every n transactions results in permanently lost funds.

The solution is to implement BIP32.
3615  Bitcoin / Bitcoin Discussion / Re: [ANNOUNCE] Android key rotation on: August 11, 2013, 06:48:25 PM
Not really.  This is a problem with a specific implementation of a specific secure random number generator (android).
If addresses are never reused, it doesn't matter if individual private keys are compromised after the fact.
3616  Bitcoin / Bitcoin Discussion / Re: [ANNOUNCE] Android key rotation on: August 11, 2013, 06:37:29 PM
This vulnerability is yet another reason address reuse in Bitcoin clients must be eliminated.

Prior to this, using non-deterministic wallets was either a privacy disaster (single key model) or else a usability nightmare (random key model).

Now anything which encourages address reuse should be considered negligent.
3617  Other / Off-topic / Re: Lavabit.com and Tormail Email Alternatives... on: August 11, 2013, 05:43:48 AM
There's also I2P mail, which has a gateway out to the internet at large.
The only problem with I2P mail is that the admins don't want heavy usage, i.e you're only supposed to download mail a few times per day.

That makes sense when it's necessary to operate it as a free service, but it's no longer impossible to make anonymous online payments to services like that.

Perhaps whomever runs that site could be persuaded to make a paid premium version.
3618  Bitcoin / Bitcoin Discussion / Re: Here come the MLM scams on: August 11, 2013, 05:39:44 AM
I'm as jaded as the next cybercat, but while the term mlm is notorious for scams, in this case it may not be because they are targetting experienced mlm folks about something they've never heard of.
That's why asked about whether or not any part of the business involves actually selling bitcoins to customers at any point.

The deer-in-the-headlights look I got in return was pretty much all I needed to know.
3619  Bitcoin / Bitcoin Discussion / Re: Here come the MLM scams on: August 10, 2013, 11:31:39 PM
Many thousands of people make an excellent living via multi-level marketing. 
Too bad those thousands who make an excellent living need millions of suckers to make that possible.
3620  Bitcoin / Bitcoin Discussion / Here come the MLM scams on: August 10, 2013, 11:03:59 PM
I'm sitting here at a local Bitcoin meetup, listening to someone who knows absolutely nothing about Bitcoin talking about a MLM that's getting ready to start up.

If this is an indication of that particular industry getting involved it could make Pirateat40 look like a small time pickpocket.
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