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1  Bitcoin / Electrum / What smart-card is supported by Electrum? on: August 05, 2016, 06:09:14 AM
I couldn't find this through Google. Normally one would expect a list on electrum's website. More specifically, since I am on Linux and with a computer that has a smart-card reader, I look for a smart-card that can plugin to my laptop directly. Of course the smart-card has to support ECC, however it seems most do.

If there isn't a ready choice, which one is the easiest to start hacking for a solution?

I also wish to know whether or not a ECC-supporting smart-card with software is a sufficient replacement for a hardware wallet.

2  Economy / Trading Discussion / What to do: bank to empty my bank account for receiving payment from cons on: December 17, 2015, 02:06:37 AM
My bank ING DIRECT discovered that a customer who bought bitcoin from me last month, paid me money with a stolen account. That account's bank, ANZ in this case, demands it. My bank will empty my bank account to pay for it.

Phone call I received: "because the money is stolen, you have never been entitled to this money. This is happens. Your account will be empty in a couple of days and there is nothing I can do for you."

Since the transaction happened on localbitcoins, with purchase and delivery of goods provable, it seems to me that I am punished for someone else's fault. I already contacted localbitcoin to suspend the buyer's account. I also contacted ANZ bank's efraud team by email.

What to do? And if I call the bank to ask for paper trail, what document do I ask for that can authorize them to empty my account?

The event happens in Australia, but I think in general the western law system work the same?
3  Economy / Trading Discussion / account suspended for receiving bank transfer from stolen account (solved) on: December 15, 2015, 11:00:35 AM
Any suggestions on the proceeding? (Australia)

After realizing that my bank account is suspended (by not being able to login to online banking), I called the bank, in this case ING DIRECT. They informed me that a serial of transaction used to pay me for bitcoins are from a stolen account, and provided information which leads me to find the questioned transactions. Then they refused to talk to me when I call again, saying that they will contact me instead. They also informed me that they are acting on the request of the paying account's bank.

I have records of all transactions with him from, including the proof of delivery of goods (Bitcoin is categorized as goods in Australia). This proof comes from - in case you didn't know, this escrow service takes 1% commission fee and holds the goods each time until the transaction gets settled in the bank. I also have my bank (ING DIRECT)'s monthly statements which includes the transactions in question.

The question I am asking, is what to do next? Apparently I wish to prevent lose. Bitcoin selling is legit in Australia. I am registerred as a sole trader, with Australia's business licence number, and I didn't evade tax. I have reported the case to localbitcoins.

I always finalize the bank transfer trades on the 3rd day, so that the transaction becomes "irreversible". I offended many customers with this slowness but kept my way.

I wonder what to expect when bank calls me. I have a legit business, but should I be afraid that banks will try to get me agreed on something to my disadvantage?

P.S. I did try to use Google for an answer, but 100% search results are written for those whose account is compromised, not for those who received payment from such accounts.
4  Economy / Speculation / some insights from a Chinese speculator on: November 04, 2015, 03:33:19 PM
My editor called my attention to the recent surge on bitcoin price. I am a bit out of touch since I moved away from China last year, but I'll share a few points of view - could be useful because I see things from a different angle.

There are surprisingly sparse information about this surge on the Chinese internet - a disconnected part of the Internet that the Chinese think is the Internet. I hope I could be of more use to my editor by my source of information from QQ groups, but my QQ account is suspended after I logged in from Australia a few times and the formality necessary to regain it looks painful to me. So I won't be able to write a news report - but there is something to be see from nothingness that I can speculate freely in forums. Observation about things that should happen (but didn't) reveals much information.

What didn't happen is the precursor good news. Foreign news like Nasdaq doesn't move sentiments here. BTCC's reënabling of bank deposite seems to be the only good news that can touch the ignorant nerves of Chinese gamblers. BTCC didn't make a fuzz about it - almost doing it quietly. For a tiny industry set back by government scrutiny, BTCC has no reason to make a fuzz about it before the government, play the fool and gets whipped ("see? I know what the emperor will do!"). The big question is "Do BTCC know something we don't, but didn't tell lest playing the all-knowing jester?" The opposite could be true as well - BTCC simply decide to do the act since the Lord has lost his interest - Zhou Xiaochuan (PBOC) has a lot to worry about and President Xi won't mind these small things. I explained before: "If Bitcoin remains small, it will be allowed to live". Now bitcoin is so weak, it's probably fine to test the Lord. Since BTCC won't tell, the truth is irrelevant to market price.

The other possible cause, MMM-China, I dismiss as unlikely. They still need to rewrite their propaganda in everyday Chinese. Besides, MMM-China attacks bankers, trying to inspire sympathy, while the Chinese don't hate bankers - bankers don't rule China; they obay the Party (what else do you expect in Communism China?). Before MMM-China corrects the two problems, they can't win the heart of average Chinese. How ignorant, foreign cons and evangelists, I see from time to time, think that they can replicate their success in China as-is.

So what do I learn from the lack of information?

The future market is influnced by market sentiment and Chinese government reaction. The market sentiment we can't calculate - but I'll be succinct in stating the Chinese gamblers usually have a good appetite. The government reaction, on the other hand, is a lot easier to predict. It's going to be between inaction and "No", depends on whether a clear "no" degrades the government image to that of a micromanagement boss. Since it's all about image, or face value, or crowd control, it is inappropriate for the government to interfere if the people, the common crowd, are not yet influnced. There is a good indicator of "people gets influnced" - media coverage. So, we got a good precursor: no public media coverage of the Bitcoin frenzy, no government ban. Set Google keyword alert to be a public media coverage by a provincial level or well-known media and (market sentiment aside) it's safe to hold your coins until then (and a bit of time after, since the government works at its own pace).

I am not that ignorant to be pride of my ignorance of the latest developments in China - if you know some info, share it or message me, and I may change my take on things (and thank you as well).

A few words about myself:

I made a few good guesses in the past, including predicting Chinese government ban to bitcoin and the Chinese frenzy that leads to 1000USD, gained a bit fame. Then I migrated to Australia - not due to the uneventful Bitcoin development in China (which I predicted) but due to the dim future for a liberal mind under the regime of the new emperor. The bitcoin speculation won me some money, which eased my way to Australia, but didn't make it easy for me to blend in. For example, one of the reason Google here turns me down is that I lack International view - a rephrase of my interesting Chinese way of looking at things. Not many care about bitcoin here down under. In an effort to intermingle with Aussie startups I designed an Android public transit app - youtube link here) - it works everywhere in the world, so if that's what you need, help by testing itSmiley
5  Economy / Speculation / I expect that self-regulation by Chinese exchanges can't please the central on: May 12, 2014, 04:25:11 PM
My latest editorial on this speculative topic.

"Bitcoin is not a naughty child – it challenges China’s national control of its money. It shouldn’t have been born"
(German edition:

(My editor likes this ironic tone in the title - I myself actually is a supporter of Bitcoin)

Following text no longer valid because voting is closed:
Rotten tomatos welcome here, flowers kindly send to BlockChain:

Hallo, editor from bitcoinblog here. I am lucky to publish Zhangs insightful articles, and I am lucky to read you like them.

Currently accepts nominations for the blockchain award, and one category is "most insightful journalist". If you think like me Zhangs articles are the most insightful source of information about one of the most important (price-forming) issue in the temporary bitcoin seen I would be glad if you take some seconds to nominate him.

Just click here

Thank you

I myself find "most insightful journalist" award helpful, because I am expecting gloomy future in China hence need to move my ass out of China to go on working on Bitcoin projects. Once outside, I don't have the connections and resources, an award or two helps me getting things started.
6  Economy / Speculation / on the close-down of FxBTC before all users could withdraw on: May 12, 2014, 01:28:47 AM
can't help pointing out that I predicted the event will happen, one month ago:
possibility of insolvency of Chinese exchange FxBTC examed (they are 4th biggest in China)

(No, I don't know if the rest are insolvent, but they have a chance to save themselves by forming a league, as they did in self-regulation, thanks to the fact that Chinese traders do not use wallets, instead they transfer coins to the most trusted one when they are worried, hence if they "help each other" a real bank run can be delayed - but, it is also a golden opportunity to take down a competitor, e.g. "Hey, Huobi just came to me saying they want a league to fight bank run! They must have a problem, let's make their plead public". FxBTC is known aloof, not working together with other exchanges, it is their bane as it turns out)

Chinese news system alread received instruction from central on what/how to report Bitcoin, whether state media secure the opportunity to paint Bitcoin black or not depends on their judgement of the noise Bitcoin made: Big noise -> paint Bitcoin black, now you see the ponzi scheme; small noice -> no report of Bitcoin allowed, let it die without much debate.

(No I don't think Bitcoin will die, but more bad news from China expected)
7  Economy / Speculation / ardent speculators: consider shorting before 4th May 00:00GMT (that means 3rd) on: May 02, 2014, 08:46:16 AM
The market is brooding for negative news from China, and there likely will be. In the mean time, the market may get over-confident just by chance. The earliest possible time of negative news from China is 4th May 8:00AM, which is 0:0GMT - it may be days or weeks after that time, but it won't be earlier for simply holiday reason. If the market price rise over 500$ without apparent good news before that time, it should be a mistake, and can be speculated upon. Even 450$ may be speculated upon. I am not making prediction here this time, only that I don't think there are not much to lose by this way - reverse position a while after 4th May if you feel unsafe. Each time Chinese influnce is smaller, I hope the Chinese influnce fade away quickly, to the point that we can simply ignore Chinese news, because I am looking forward to see a stream of negative news from China, and short pain is better than long one.
8  Economy / Speculation / expect a set of 3 articles about China situation and a prediction following on: April 30, 2014, 02:27:23 AM
I've been guest writing for for a while. The latest article is the first of a serial of 3 articles after 15th April.

The prediction will come after the set of 3 articles because it only make sense after readers get a grasp of China's realities.

My previous articles for are here: (look for my name)

It may be possible that I will be slowed by my recent eye problem, that reality happens before I finish the whole set and the prediction.

For your information my past records on prediction on China issue were not bad:

Predicted 9th January. PBOC will not ban bitcoin but cripple its operation. Check.

Predicted 24th March: the PBOC order exists and was unintentionally revealed. Check. (most were blaming the order a rumour by then, I said "That means that we (PBOC) were not sure how to deal with bitcoin in the beginning. Now, though, we have made up our mind: forget it.  We will simply force you out of business."

Predicted 4th April: OKcoin will move to Hong Kong. Still waiting for that news.

Predicted 10th April: the bottom is in, don’t wait any longer. There will be no dip in price on 15th April.
Check (real bottom of 350$ occurred that day and repeated the next day - only)
9  Economy / Service Discussion / possibility of insolvency of Chinese exchange FxBTC examed on: April 04, 2014, 09:23:48 AM
1. The exchange always charge the highest bitcoin withdraw fee (in this year lowered from 0.02 to 0.01), a behaviour adopted by MtGox when they are hit by TM bug.

2. The exhcange runs incognito like BTC-E.  They don't have a phone number, physical address - this is not new, it has always been like this. When I email to ask, the answer is simple: "(We don't tell our identity.) This is a business of trust, if you don't trust us, we can't serve you. You know what I mean." (The owner's name is not a mystery, do some searches you can find it out.)

3. They didn't lower fee under heavy competition: MtGox behave the same in attempt to regain solvency.

I don't speculate their insolvency with these 3 points, but recently:

4. They ceased to allow bank transfer withdraw. Withdraw is still possible through 3rd party payment processor (tenpay). They cited that their banks forced them to close account under PBOC order: but, the other two exchanges whose bank received such order only ceased bank-account deposite, not withdraw. Some banks may over-execute the PBOC order, but FxBTC have accounts in many banks, the chance of all of them over-execute the PBOC order is small. One can speculate it being a measurement to slow down withdraw. Here is the catch: if FxBTC really intend to slow down withdraw, they should stop 3rd party withdraw first, 'cos that arose little speculation. So, I cannot conclude FxBTC intends to slow down withdraw. But it is unusal at least, and I noted it.

With 4 unusual behaviour, I should say the possibility of their insolvency can be considered now.

I know they have not many users, and they have no English version; and I don't expect to get some splash here, but at leasat some who set up Google Alert may catch this message anyway. There is already one of the 15 PBOC-banned exchange closed: website went down. It is the time people take cautious.

P.S. I know the exchange has been hacked March 2013. On my scale, this doesn't count towards a factor of insolvency speculation: every exchange I believe are hacked to some extent and all willing to make up with a part of profit, if the lose is not much. What they do after the hack marks their insolvency.
10  Economy / Service Discussion / reset google authenticate after lost phone? (I still can access coinbase fully) on: April 03, 2014, 08:16:00 AM
The typical newbie problem is that you didn't backup Google OTP. That's not my case. I have auhty (an OTP tool) on one phone, and Google Authenticator on another. Both can be used to login coinbase and use any services / functions they offer. The two phones are in two different cities, losing them together is unlikely, hence I consider myself backed-up - not a totally ignorant newbie.

And I lost the one with Google Authenticator. I have full access to coinbase and use every feature they offer, including password reset. The only thing I cannot do, is to reset Google Authenticator. I was surprised, because I thought I can reset one OTP with another.

coinbase says they cannot do anything on their end: this hints that Google has the control.

So if coinbase can do nothing to reset Google authenticator, even if I have full access to my account, then who can? It is damn difficult to search for a solution on Google, because all search results point to 'how to reset google authenticator so that you can login to your Google Accout' - I don't have that problem at all, because I use Google Apps and the admin disabled 2-factor authentication for the whole domain.


P.S. Even worse: iOS offers me to upgrade authy, and after upgrade it says "Health Check Failed: please re-install authy app. Before you delete the authy app, enable your authenticator backups and verify the upload status of all tokens to prevent losing them". And 15 minutes google search did not reveal how to "enable your authenticator backups". I still can access every coinbase feature with SMS authentication. This is a seperate problem than the one I am asking, though.
11  Economy / Speculation / the China PBOC event explained on: March 28, 2014, 01:55:09 AM
Unlike in the western world, PBOC doesn't have the disclosure obligation. The recent event is a notification to the banks, to stop and close the trading account used by 15 named exchanges to receive deposite and send withdraw.

The notification was never meant to go to main stream media. In smaller cases too paltry for media interes, I expect, sometimes the bank account holder may simply gets confused why his account is closed, and finds no one can answer. A kind official may explain that "you know what I mean", implying there are higher orders. I'll divert the topic a minute for "you know what I mean": it is a famous quote. In a recent press conference, foreign medias are told they are forbidden to ask about Zhou Yong Kang. A journalist however asked, putting his/her news agency at risk. The spokesman said he doesn't know, and "you know what I mean" i.e. you know you are forbidden to talk about it and you know I am too.

This is to give an idea that notifications is not for the public, although PBOC may be aware that it will be on the news anyway. Notifications are not treated as secret neither, only 'internal information'. The notification was issued, according to Caixin, "around mid of March", so it has been a while. Remember that there were speculation why the supposely-fake news of China ban held down the market for longer than it should? Various speculation were there and I don't buy any of them †- seems it is because that some players in the market knows the 'notification',  people who know more than I do. I've been acepted and deleted out of some seasoned investor's QQ group for a few rounds, and no one answers me why, otherwise I might have known more info before this hard crash - did I speak in English about China too much?

Caixin said they confirmed the 'notification'.‡ Du Jun (co-founder of Huobi) said that 80% of the chance the news being untrue.  Caixin is a reputable financial media in China. I'll believe Caixin's report for now. In the report it mis-quotes that China makes up 60% of the BTC trade world wide, while I guess the reality is less than 40%, 15 to 25% is a reasonable guess. But Caixin's ignorance of China's trade volume doesn't mean they'd risk misreporting PBOC.

So what's the impact? Price was 520USD this Chinese morning. I am surprised the price only went down by this far. In comparison, 18th Dec PBOC news press made a 35% drop and this ban is harsher than that. Perhaps the people are waiting for a formal press release from PBOC, perhaps they ain't scared enough. After 18th Dec the Chinese bag holders are all long term investors, motivated by the dream of prosperity and wealth, but any long term investors dreaming of wealth are not long term investors, i.e. they look at the reward (of their effort, belief and sacrifices), not value (of their wise choice). I expect them to dump more; too much emotion are attached to BTC investments here. There is going to be a huge transfer of digital wealth from the east to the west. Read my other post about investor sentiments: (a continued inspection of China )

Chinese people have little believe that the government does anything in their interest. If, after the saga, Bitcoin rises again, Chinese players will feel that the government robbed them away the chance to be rich, once again! This is a perfect backdrop for P2P trading network, or "blackmarket" as our government would like to call it. It is a very good opportunity to develop p2p trading software that links online and offline world. PBOC did not ban Bitcoin trades, only bans Bank's involvement, 'cos banning the trade requires other government sector to work with PBOC. With bank involvement removed, this is a good opportunity to test whether Bitcoin really can replace Banks on payment processing, deposite, transfer, settlement and foreign-exchange. (It cannot replace Bank for lending, because Bitcoin is a hard limited currency, not suitable for usury, but that need is secondary.)

On a interesting side note, Bitfinex, an exchange based in Hong Kong, is not on the ban list. Does that mean PBOC have no jurisdiction over Hong Kong? Can someone knowledgable verify this? If so, we should be seeing massive move to Hong Kong soon.

Mind you the Exchange-Run (like Bank-Run) will reveal the insolvency of some Chinese exchanges, which may trigger another crash, depending on the size of the debtor.

P. S.

I'll quote myself when one of my background homework revealed to be true:
Myth: Like Hong Kong, Shanghai Free Trade Zone respects rules

Reality: Hong Kong maintained its system because people defend it as a bottom line: it is not rules that worked, it is people that worked (to defend rules). Our government never liked that HK culture but cannot simply chop it. There is no similiar culture background in Shanghai. Shanghai Free Trade Zone is where various new things are allowed to live longer so that the government can see what kind of fruit it begets, which one benifits, which one isn't, and select what they want; chop off unwanted - like Special Economic Zone we had before. Hong Kong is a free trade zone, Shanghai Free Trade Zone is a controlled experiment. Like all experiment, you the bad seed are allowed to live longer because you are more closely watched. When they feels certain that your bad seed is weed, they won't let it grow.
12  Economy / Speculation / Do not expect value-based investors in China to hold a bottom on: March 27, 2014, 03:07:41 PM
I explained this view many times. Even the weathered players on the market are opportunists, vary on degree. Going to fall hard for days, not a splash-fall-and-back-soon. Price difference between China and Bitsamp is only 4.23% - last Government ban caused a 20% difference.

P.S. I reserved 200,000CNY for this predictable fiasco - at the time the price reach 4000, I think a Chinese ban flash-crash would reach 3300CNY so I placed bid there. It was triggered in the precursor cash (a few d ays ago when Bank of China romoured to ban), now with the real crash I wasn't prepared. Pity, because now I expect it fall below 2500CNY.
13  Other / Beginners & Help / what do you call the money you plan to use for day-trading? on: March 13, 2014, 09:46:05 AM
Hi. Looking for a word to address the money reserved for day trading. This is about 100BTC when the whole amount left on the exchange account is about 500BTC, 'cos the other 400 are retained for other purposes. when I say day trading I mean it in finance sense, that is the position opened with this money is closed within a day.

A lazy way is to call it "pool-for-day-trading" or 'fund-reserved-for-scalping'. But there is perhaps a professional name?

Or please just tell me a general word for 'fund reserved for a certain trading purpose'.
14  Economy / Speculation / a continued inspection of China on: March 11, 2014, 12:26:01 PM
I endeavoured to travel hundreds miles away to Xi'an for last weekend's bitcoin event ( hosted it). Given time I'd write a full report, but in this forum of speculators a few words of sentiments should suffice.

  • First I wish to warn speculators of a possible major fiduciary obligation violation in China in bitcoin circle, can be as early as this year 2014. This is through observation of the death-match-ready culture I occassionally smell (read my other article for culture background). I am not sure if bitcoin circle's event would splash an impact though - Chinese are now more frantic about knock-off altcoins.
  • Second: larceny in China is to cause more damage to trust than the same level of security breach would normally cause, because exchanges are playing banks' role. Although everybody are apparently worried about fund security, no one in the event knows electrum and amory. Some use bitcoin client as-is; most keep the money on the exchange and use them as a bank. Most major exchanges offer wallets, but they are only as trust-worthy as the exchanges. Some in the meeting argues that keeping the coins on exchange accounts may be safer than in bitcoin-qt, because few have the resource to secure their own PC (they feel helpless against viruses).
  • In the event, any time not spent on discussing security and mining, are spent on discussing margin trading. 3 of the 4 top Chinese exchanges are offering margin trading: they are: chbtc, huobi, okcoin. The one not offering margin trading, but instead offered liquidity rebate (a measurement to stablize price, opposite to margin trading) is BTCChina.
  • To my surprise, only a few are geeks, and that many non-geek participants in the Xi'an event look as if they scrapes by. To think these are the ones engaging margin trading frightens me.
  • Understand that China has been ruled by a strong government for a long time. The resistance towards centralized power usually is the highest in early stage, later they are tamed. I don't feel any one wish to sign praise to bitcoin for its decentralization nature. Their is no hatred for the government, banks, society: they just want to be allowed to grow rich and bitcoin is the means.

I am only covering a free-to-enter meeting in Xi'an (not nearly as cosmopolitan as Shanghai). The upcoming event in Beijing ( ) should offer a chance to have a good look at other players who can afford to pay the 3,800CNY entrance fee (around one bitcoin at the current price), if I can manage to see through Beijing's trademark smog.

Big change from 2013: in the past most exchanges run incognito like BTC-E, now most run under a company umbrella.

I should not be surprised if interest returns to Bitcoin later this year, as mercurial as Chinese players may be.

P.S. In this forum I have fine records of previous speculative opinions. e.g. I bet the price had the gloomy outlook built-in before the Chinese-new-year's dead-line issued by central government, and speculators are wait for nothing. It turns out the price is indeed flat in the days around the deadline.
15  Economy / Service Discussion / Crowd-fund MtGox, a framework, request for comments on: February 28, 2014, 10:24:30 AM
I have been expecting someone to post an idea of crowd-funding MtGox, and there is one. See:

The picture said much and I thank its author (presumably coastermonger). There is one flaws and something missing.

The flaw: it entitles MtGox as a non-profit after the event. Most intended to profit by becoming MtGox customer, without profit, customers would wish to withdraw as soon as the assets reache the old value, this way it may never did, because once it did too much stakes will be drained out/ And in this setting, no one wants to plan beyond "repay all debt" stage, defeating the purpose of a non-profit. You see, 'non-profit' defined what new MtGox is not, but failed to define what it is. It's like saying "my life goal is not money but I don't know what it is". "Community-driven" or "community-owned", or "co-op" are better names.

The missing part: it focuses on the method getting the money back. If MtGox can be made community-owned, it means something bigger than dun for debts. And an organization framework to carry out the necessary steps was not mentioned. Typical complaint: why do I trust you to do this?  Companies are made of people, need organization/people to execute the plan.

I did the following draft framework. Take it as an idea, comment and develop it. Karpeles has been silent, some facts are missing. Edit: now they file bankrupt and we know a bit more. Some say don't do planning before we know all facts. But this way you are always one-step behind Karpeles: he acts, we receive action. The disadvantage of lacking a plan, is that the customers have demands but not control over the situation, the decision is still made by Karpeles and other investors Edit: now liquidator, all of them outside of the comunity. Besides, plan-ahead gives time to chew it.


Each of the outline items are further explained later. What is already mentioned on the sketch are not repeated (e.g. customers can opt-out with a percentage of stuck fund). This plan assumes Karpeles' cooperation is secured.

  • Customers agree to convert credits to shares. The company is redefined a community co-op, by/of/for the community.
  • All customers vote for a team of supervisors. The supervisors appoint a CEO.
  • Transparency is achieved by: 1) if information can be made directly accessable, it should. 2) Otherwise, all information are accessible to the supervisors who are then inquired by the community. 3) regular audit by 3rd party.
  • Cost reduction and business development will be aided by distributed teams around the world.

On management and transparency

The community and customers demand transparency. This can be achieved by voting a team of supervisors, tasked to supervise the operation. Presumably, in order to get voted as a supervisor, one has to have existing reputation of honesty, responsibility and knowledge of bitcoin. CEO however have a different set of requirements, not only reliable but also having technology development and business skills. It is the responsibility for the supervisors to exam and appoint a CEO to execute the plans, so that a new CEO would not be the "Wizard of Oz" as Karpeles.

Since we urgently need a team to do the audit of existing record, exam existing situation, a short-term general manager can be appointed by the supervisor to conduct the process, before a formal CEO assignment.

Transparency can be done in layers, like existing public companies. Furthermore the most important and sensative information should be made available online directly. Supervisors works tightly with the team, they are burdened with monitoring the operation and can access all information.

All these management framework must be detailed in a charter

On cost reduction and business development

The new business has to be a global one, using comunity power everywhere and having teams in inexpensive countries like India and China.

Beating Bitstamp/BTC-e will no longer be the goal. Business development can be achieved by helping people having easier access to bitcoin. MtGox should extend from exchange market operator to community service provider, providing ease of access to bitcoin in every means. e.g. co-operation with currency exchange booths to let customers convert their money to accessible bitcoin wallets, and get cash from Bitcoin ATMs available in many countries (e.g. Spain), competing with banks instead of exchange markets. Reducing fee and risk for bitcoin buyers who are not speculating the market, and thus opens a door for new customers. The distributed teams can also seek opportunity in other countries to survive new-coming regluation scrutiny.

Managing a network of teams from everywhere will be a huge challange, but it comes together with the challange of managing a global community co-op. You just have to face it.

On technology

The gap that MtGox is out of business must be as short as possible.

The next-generation trade engine being developed in MtGox should made opensource for community patches and white-hat helps - such help may be rewarded with a share of the new business. If it is close to production use, in-time help to make it mature should be rewarded higher, in order to close the gap.

Opensource the software and opensource (made transparent) the management has to be done together.

On risk management

As the first community co-op, the new business can start an alliance of bitcoin service providers, or form a certain unions, with emergency coin stash collected from members, to aid emergency cases and offer a method of garantee for the public - on the condition that the protected partners should operate with a certain level of transparency.

A seperate team / project be started to pursue lost coins.

On procedure

The first step is to start a website, and invite MtGox users to register. The website owner and building team must clearly state they are not self-appointed to manage the transition. Instead, they are merely providing a platform where demands are heard, and aid the process of voting for a supervisor team, who are trusted to proceed on.

If MtGox is found extremely short of coins, a sum of money should be borrowed from reliable sources, with reasonable interest rate, much of them used to acquire coins to balance the coin/fiat ratio for a healthy start of the new business.

P. S.

Typical reply I expect is "Do you honestly believe Karpeles did lost the coins, and not hiding them?"
I doubt everything Karpeles said. Still, if we have a plan, when we know the truth we are prepared. And a test of willingness of forming a community co-op offer some insights even if turns out not needed.

Another typical reply I expect is "In your eyes, does MtGox look worthy business to buy?" (or "take a business of -740BTC is stupid").
Answer: Customer's fund is there (on the book), they could end up getting nothing. Why not use the opportunity to build something.
16  Economy / Speculation / Why I believe MtGox knows the leak for months / years (not "unnoticed") on: February 27, 2014, 07:53:12 AM
For me the best explanation is this one:

1. The leak was found months/years ago.

2. Declearing the situation begins the down fall of the business. Karpeles being a young enterpreneur who “Giving up is not a part of how I usually do things", thinks he can revert the situation. "I made millions, I could do it again, and the lose can be covered". He is in fact too young to judge situation by past experience; youngsters like him needs a mentor (many young enterpreneurs did get one)

3. Facing lack of liquidity, and unable to solve the leak without the risk of revealing code and cold fact to outside experts, he decideds South American can help him. Expansion towards South American both boost confidence and the new money postpone the revelation.

Mark is too young to be a good businessman and too smart to acknowledge it. There is a big ego acting, since being the CEO of the world 's leading bitcoin exchange has defined him so far. He was ambitious to start with: "my goal is world domination"(source: even jokingly, a youngster's ambition is hard to hide)

I reason that the kind of misjudement (or hubris?) demonstrated in this paragraph can only be from a big ego:

The reality is that MtGox can go bankrupt at any moment, and certainly deserves to as a company. However, with Bitcoin/crypto just recently gaining acceptance in the public eye, the likely damage in public perception to this class of technology could put it back 5~10 years, and cause governments to react swiftly and harshly.

At the risk of appearing hyperbolic, this could be the end of Bitcoin, at least for most of the public. We believe in the value of Bitcoin, its potential to change the world, and its principles of transparency. Most importantly we care about the customers of MtGox and other bitcoin-based businesses who will be affected. The likely consequences will be larger than this localized financial damage, and we believe that the benefits of keeping MtGox stable and running outweigh the risks.

Knowing the leak, MtGox would weight the 'stable and running' over the risk of exposing the problem, just like Chinese government. If it is ture now, it was since the leak was found, because MtGox had more market share then.

You may wonder how he gets to sleep everyday with this. This guilty feeling, the impulse to face the fact, doesn't apply to self-proclaimed genuines in their heights. When I run my first business (22 years old) my intelligence was superior in the small circle we had, and I decide that pedestrian concerns doesn't  apply to me. I was in a similiar situation burning my own money and I decide if I could make them in the first place I can do it again as easily, and sleep as soundly as usual. I too naïvely seek business expansion when it was failing. Man wasn't born with personal integrity, some has to suffer to build it. I did. Multiply this sensation many times for a smarter guy like him, I know Mark K. can manage to sleep well and live happily with his cat (except that he is leaking others' money) and to hide the fact away, thinking he is doing mankind a favor. In fact, he perhaps still have rather high "self-esteem", knowing that he is impacting the world by being able to weight different outcome of MtGox - and people pay atttention to his newly gained weight. You can hardly blame him for pure evil, because he lack grown integrity, for judging by age his is in the midst of building one. The mistake is that the world allowed too much stake on a young man like him.

It would be a mistake if you think his nonchalant attitude (showing cat etc) means the business is okay or he has a solution.

Next time when you seek to do business with a company, put more stake if the guy/woman is married (marrage teaches a lot), even more if he had bankrupted and maintained good relationship with former employees and clients. Tripple so if he endeavours difficulty and didn't turn to blame someone the moment when things go wrong.

Now, technically, I've been a tech engineer and I know it is possible that a bug in a complex system takes more than half a year to find or solve - especially if firefighting constantly takes away your focus, and especially the system was running all the time, and especially it is a single point of failure, and MtGox has all 3 characters. Such thing happened in other complex systems before. (Edit after reader assumed that I am defending Mark) this is not saying MtGox is forgivable, but to emphasize that Karpeles made a bad judgement to choose to hide it over exposing it to the experts. To blame it on lack of a grown personality integrity is better than to blame on lame tech. Mind it, if another CEO consider the essential of this event being bad programming skill, don't use his bitcoin services, because he too lack the personal integrity. Errare humanum esta, the way you treat it tells your integrity.

17  Economy / Service Discussion / you still have 11.61% of your money, if MtGox did full insider deal unpunished on: February 25, 2014, 08:55:56 AM
The asset  liability table is on page 4:                                        
Asset in BTC = 2000 BTC, in Fiat = 932,930,000 USD (22430000 + 5000000 + 5500000)
Liability in BTC = 664200 BTC (624408+120000-80208), in Fiat: 55,000,000 USD


If nothing has changed since that document is written, and MtGox has debt liquidated, has receivable received, and suppose they only pay BTC in BTC, pay USD in USD, then you get 0.36% of the bitcoins you lent to MtGox, you get 60% of the fiat money you lent to MtGox. Tehnically, since they didn't lose as much fiat money as Bitcoins. The media can say that fiat money is safer than bitcoins (you may argue that bitcoin is safe, implementains are not weathered as fiat money, and that bitcoin will be as safe as fiat money in the future - then it did not contradict with the public preception that fiat money is safer against robbery for the time being).


This involve MtGox doing insider deal but not doing arbitrage, because insider deal is simply done on the book but arbitrage requires real coins, and there are no more than 2000 real coins they can do arbitrage with - not without outside help. It's apparent that they bought lots of coints at $260 between 2014-02-19 04:00GMT and 2014-02-20 04:00GMT, so let's assume they emptied their fiat account to buy these coins, that converts 22430000 USD to 86268 BTC. They can sell some of these coins later to get fiat, at a reasonable aftermath price of 700USD. Suppose they wish to pay customers / creditors BTC and Fiat at an equal rate, let that rate be x:

664200BTC × x + 55,000,000 USD × x / 700 = 86268 BTC
x = 11.61%
you get 11.61% of your money back if MtGox used all its fiat money for insider deal and was not punished for that

We can also calculate that at the price of 260USD,  their asset can only buy themselves 86269.23 coins, that is only ¼ of what is needed. MtGox cannnot pay back their customer in fulll with insider deal.


Now let's say the document is outdated. The document says it plans to reduce liability as its first priority, and it plans to shutdown trading by 25th (which was done according to schedule), by the time it would have covered 50% coins of the 624408 customer liability - the plan is to be found on page 3. ¹

Let's suppose MtGox has reached that goal - it is an illegal insider deal, but let's say they did it. You may think doing arbitrage can get the money they want: that is impossible. They only have 2000 real coins, and arbitrage requires real coins, while insider deal simply removes liability from the book. With only 2000 real coins, there is no arbitrage to do: you take 2000 real coins, sell it in Bitstamp, get cash, and buy more coins from MtGox - but there is no more coins in MtGox at all. You can cook the book but Bitstamp wants to see real coins. So arbitrage is a dead end.

Let's say they managed to reach that goal in the end, however magically done - since they planed it, perhaps there is a way to do it - at the cost of all their fiat:

Asset in BTC = 312204 (624408/2), in Fiat = 0USD
Liability in BTC = 664200 BTC (624408+120000-80208), in Fiat: 55,000,000 USD

Having 0USD in fiat money sounds horrible but having considered that the post-MtGox era would see appreciation of BTC, it would indeed be a smart move.

Now, suppose liquidator requires fiat money be paid first (from the bottom of heart of Mark K. I speculate that he wishes to avoid weighting bitcoin less than fiat money, but it is perhaps not his decision to make), he would have to sell some coins to pay back client's fiat money. 700USD is a reasonable price for post-MtGox era, hence they need to sell 78571.43 BTC to get everyone's fiat deposite fully paid. That leaves him 233,632.57 coins, roughly 35.2% of liabilities in coins. Hence you get 35.2% of the bitcoins, and 100% of your fiat money.

Please someone with related knowledge point out, that if MtGox did a few rounds of arbitrage and insider deals, are they forced to compensate them before compensating creditors?


I'd like to suggest everyone focus on how to resolve the situation, blaming Mark K. doesn't help any more. I don't know Mark, from the photo he seems to be in his 30s, like me (I am 31, ran a business), and I know how difficult it is to steer business for a youngster and how diffcult it is to admit incompetence. (Bobby Lee also look like of the same age, perhaps the same to all other bitcoin 'heros'.) You made the mistake to trust Mark the first time, you can't expect him to do beyond what he can. For your information I have 100 coins in MtGox, I transferred half of which into MtGox a few days before their accident, and it is a harder hit for me than those of you who live in the first world (if you live in the first world, imagine that you have 500 to 800 coins stuck in MtGox).

Note 1:
The document was ambigious: it can also be interpreted as "50% coins is already covered, and we plan to cover all coins by 25th". However, MtGox doesn't have nearly enough money to cover all customer coins, even if they don't want any fiat money reserve - and if 50% coins are already covered, they would not have only 2000BTC on their asset table. Thus the document can only mean they intend to cover 50% customer coins.

Note 2:
 (why 260USD? Because they apparently already bought a lot at that price, check price chart)
18  Economy / Service Discussion / why MtGox (in)solvency cannot be calculated from the blockchain? on: February 21, 2014, 03:29:04 PM
I was waiting for someone to calculate it for a few days, and no one did, means it is impossible. But I thought it was possible.

1. Identify MtGox addresses. I remember someone did this before, academic work. Or blockchain's Andreas knows it.
2. Calculate all the coins in and out. The amount-into-mtgox minus amount-out-of-mtgox is the coins in possession by MtGox.
3. Calculate the current market cap in MtGox. If market cap is greater than the coins MtGox possesses, they must be insolvent, because the market is trading coins that ain't there. If not, they are either solvent or insolvent, where market cap divided by coins-in-possession can give you percentage of coins being traded, which hints the solvence/insolvence: e.g. if 90% of the coins are being traded on the market, then some of the coins ain't there.

Perhaps this calculation is not possible, e.g. because MtGox adopted some anti-trace measurement some time in the past years. Then, is it possible to start an alliance that requires each member exchanges to publish their addresses, so that a 3rd party can verify the solvence of exchanges in the alliance - and notify them if small leaks are found.

If it is indeeded calculatable, anyone who did it must have tried to do it to other exchanges as well.

P.S. I also wonder why it takes so long for MtGox to find someone stealing their coins. It is easily spotted by checking the sum of wallets against the book. My guess is that wallet's sum is bugged, so it didn't report the leak.
19  Economy / Service Discussion / How do you weight 'withdraw voucher' as an indicator of insolvency? on: February 15, 2014, 06:57:36 AM
I was a long time BtcChina user and only noticed BTCChina's withdraw voucher a few days ago:

"Withdrawal to BTCC Voucher is our latest withdrawal method. CNY can be withdrawn into voucher codes and given to others to fund their BTC China account."

"The voucher consists of two parts: A part is for verification of the amount and validity of the code and can be given to others to prove you have the code. The buyer of the code will need to input both codes to fund their account."

The volucher, or "promise-to-pay", is essential to the fractional-reserve system banks use. An easy way to check the value of these promises, is to see how they are traded on black-market. Right now, there doesn't seems to be a black market for these voluchers, at least not found with a search engine. The reason could be that withdrawing cash is as easy as withdrawing the voucher, thus there is no market, and the volucher's value is 100% of the reach cash. This may not hold true in the long run. Can anyone reveal when is your last withdraw from BtcChina and how many days it took?

There is a reason why BtcChina wishes to issue volcuhers: that it removes the 0.5% transaction fee involved in cash-withdraw. But, few should need it. If I wish to give fiat money to someone-else's account on the same exchange, I would exchange my fiat with bitcoins, transfer the coins, and ask him to change it back. With Btc-E the cost is 0.2% trade fee two times, that is 0.4%. With BtcChina, with their liquidity rebate, you can do it with two times ±0.3% fee (yes, you may gain instead of pay).

So the voucher service is useful to a very limited extent. With so many things going around it is a bit strange BtcChina would spend some energy doing the feature. The only other rational execuse is that those who have fiat account on their account can sell the deposite service to others, thus working around the lack of online deposite measurements - e.g. China's alipay, the world's largest payment service (the second largest being paypal) refused to help process bitcoin payment. But I didn't see such activity going on yet.

How much would you weight 'withdraw voucher' as a possibility of insolvency? 20%? 50%? And is there any other exchange issuing promise-to-pay in-place of or along with real payment?

P.S. I reveal this: Back a few months ago, my BtcChina withdraw was processed in 2 days; while in MtGox I requested cash withdraw for more than 5 months, and canceled my withdraw because the account to receive it expired before I my withdraw can be processed.

P.S. It is a well known culture in China Mainland that if you have trouble in your business you should conseal it. Honesty doesn't receive much praise here, not until the two very recent years. I am concerned that we don't have much bitcoin larceny story in China yet. It's too quiet, the probability is highly against it. In other words, some exchange was hacked and coin stolen, we don't know who.
20  Bitcoin / Bitcoin Discussion / What does bitcoin foundation do? on: February 15, 2014, 03:38:50 AM
Since it gets a lot of media coverage recently, the things apparent are:

- Accepting donation through MtGox and their website
- Getting media coverage of member arrest without much response
- Response strongly against MtGox on Transaction Malleability

I had to look up what it does, in order to know better what I have invested. Predicting the reaction (or lack of it) of an important media news source is the homework of a speculator.

In fact I found very little what the foundation does. It seems although it receives a lot of media coverage, it react very little to the outside world.

The things I would assume bitcoin foundation do would be:

- Issue whitepapers about security flaws. It helps becalm investors.
- Maintain co-operation with important entities (MtGox) and help them with PR in order to reduce damage to bitcoin image. E.g. back entities from false accusation if can be confirmed.
- Establish a fund police to bail-out certain specific occassions - not necessarily by issuing more money but with a smarter framework, e.g. union of members of extremely large wallet to help each other.
- Create blacklist of addresses to make known heist harder to cash out, or effectivley force large scale stolen money out of circulation.
- Produce other community services, e.g. in the recent trouble, publish a list of exchanges that have correct implementation against TM hack, so that 1) other exchanges are less harmed with MtGox incident; 2) investors who wish to enter the market in the hard time (when we need them most) know where to invest.

It seems bitcoin foundation maintains the anarchism idea popular in opensource projects (e.g. libav project, where there is no leader), by doing nothing at all, or prevent a leading management to exist. In this case it perhaps better be named 'bitcoin no-foundation' and it perhaps can still receive as much donation as it were before, for there are people who wish to donate to maintain  'toal freedom'.

I only studied the foundation for one day, so this is a quick note. Criticism welcome, because that helps my homework.

A glance over their forum a few posts pops up to my eyes:

-  What would you think about removing temporairly MtGox as a gold member?
- Actions against environmental Issues of Mining
- We must advocate against a rushed protocol change

The second is about an action to take, the tone of the first and last post is not about what to do, but about what not to do - e.g. not engaging a problem but evading one (it's not our problem). They don't seem to realize since they claimed protecting bitcoin, every bitcoin problem is a foundation problem, only differ on size. Even if fighting against MtGox is the best interest of bitcoin, it should always and frequently be declared so, lest people think Bitcoin foundatin does nothing. It all look immature to me.

When I wonder why there are not many posts, I realized the forum has no registration link, later I realized I can be a member by paying a sum (measured in USD), so I guess if I pay I can post there, right?

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