[Conceptually, the idea that a piece of gold is really just an IOU is always rather difficult to wrap one's head around, but something like this must be true, because even when gold and silver coins were in use, they almost never circulated at their bullion value.]

tldr: The value of bitcoin comes most directly from trust in exchanges (or trust in the ability to sell bitcoin at a certain price).

What would Mitchell-Innes think? This excerpt from "Debt: the first 5,000 years" by David Graeber, is enlightening:

Mitchell-Innes was an exponent of what came to be known as the Credit Theory of money, a position that over the course of the nineteenth century had its most avid proponents not in Mitchell-Innes's native Britain but in the two up-and-coming rival powers of the day, the United States and Germany. Credit Theorists insisted that money is not a commodity but an accounting tool. In other words, it is not a "thing" at all. You can no more touch a dollar or a deutschmark than you can touch an hour or a cubic centimeter. Units of currency are merely abstract units of measurement, and as the credit theorists correctly noted, historically, such abstract systems of accounting emerged long before the use of any particular token of exchange.

The obvious next question is: If money is a just a yardstick, what then does it measure? The answer was simple: debt. A coin is, effectively, an IOU. Whereas conventional wisdom holds that a banknote is, or should be, a promise to pay a certain amount of "real money" (gold, silver, whatever that might be taken to mean), Credit Theorists argued that a banknote is simply the promise to pay something of the same value as an ounce of gold. But that's all that money ever is. There's no fundamental difference in this respect between a silver dollar, a Susan B. Anthony dollar coin made of a copper-nickel alloy designed to look vaguely like gold, a green piece of paper with a picture of George Washington on it, or a digital blip on some bank's computer. Conceptually, the idea that a piece of gold is really just an IOU is always rather difficult to wrap one's head around, but something like this must be true, because even when gold and silver coins were in use, they almost never circulated at their bullion value.

...

What credit theorists like Mitchell-Innes were arguing is that even if Henry gave Joshua a gold coin instead of a piece of paper, the situation would be essentially the same. A gold coin is a promise to pay something else of equivalent value to a gold coin. After all, a gold coin is not actually useful in itself. One only accepts it because one assumes other people will.

In this sense, the value of a unit of currency is not the measure of the value of an object, but the measure of one's trust in other human beings.

[Step 1]

So, bitcoins are now probably the most wanted target of hackers and trojan-botnet operators in search of easy profit. They are the most easily monetized score of digital theft, valued at face in BTC while credit card numbers are sold for pennies on the dollar.

Every time you download programs, or re-install windows using that iso you got a from a torrent, chances are ever greater that there is a trojan/virus. The chances are also good that it will go Fully UnDetected by most, if not all, Anti-Virus programs (botnet operators use a "FUD crypter" for this). If so, your mtgox password will be captured and added to the botnet database of login/password form submissions.

Then dude takes your mtgox funds.

I lost roughly 2000 USD from my MT.Gox account at 08:40 JST on the 31th of may 2012.

A lot of that going on.

"MtGox account got cleared out"
 - http://bitcointalk.org/index.php?topic=85533.0

"All BTC disappeared from my Mt. Gox account"
 - http://bitcointalk.org/index.php?topic=88368.0

Another:
 - http://bitcointalk.org/index.php?topic=80562.msg941759#msg941759

And another:
"My mtgox account got compromised, what can I do?"
 - http://bitcointalk.org/index.php?topic=84585.0

And on other services as well.  Here same thing happened to some GLBSE users:
 - http://bitcointalk.org/index.php?topic=84893.0

In none of these was the person using multi-factor authentication.  Mt. Gox has had Yubikey support for a while.  Mt. Gox accounts now support Google Authenticator:
 - https://mtgox.com/press_release_20120605.html

But not you! Because you used 2-factor auth for withdrawals and dude only has your mtgox password, not your OTP private key.
 

Step 1:

Go to your mtgox security center and click "ADD NEW" under software authenticators.



Take a screenshot of this window, print it out, and lock it in a safe. Or copy/paste the secure private key and save it encrypted to a USB and lock that in a safe. Write it on a post-it, memorize it and then eat the post-it. Whatever you do, keep it secret but don't lose it.


Step 2:

If you have an android phone, install the google authenticator app for android. If you have an iOS device (iPod touch, iPad, iPhone), install the iOS app.

If you have neither, you can use this html5 google authenticator app. Download the zip file, extract it and open the index.html in your browser.

Now click the plus sign and add your secure private key. You are only running a local html5 app, so your secure private key is not being shared with anyone. You can even do this on an offline computer; you don't have to be online to use your secure private key to generate a one-time-passcode.




Step 3:

Use your generated one-time-passcode in the mtgox security center.



This passcode changes every 30 seconds. That's how long you have to type it into mtgox and "save" your new 2-factor auth system.




Step 4:

Add your new 2-factor method to "Withdrawal" to protect withdrawals.






Step 5:

Also add it to "Security Center". Otherwise, anyone with your login password can simply go to security center and remove your 2-factor auth protection.






Now a one-time-passcode is needed to remove 2-factor from withdrawals.



Step 6:

Your withdrawals are now protected.





CAVEAT on using the google authenticator html5 app:

Obviously, if you use your 2-factor "secure private key" on the same computer, it can be stolen along with the password. So pray that dude's trojan doesn't keylog everything, just login form passwords to sites like mtgox. Or use the google authenticator app on an offline computer. If you're ultra-paranoid, remember that your secure private key could be captured at set-up time when done on an insecure computer.

Also, the html5 app saves the secure private key to html5 localStorage, so click the (x) after use to remove it. Or clear it from the browser's cache/localStorage.

EDIT: Turning this into a contest. I'll award 1 BTC per day to that day's winner. Entries in by midnight UTC, I'll pay the following day. First day is Monday 8/27 (to be paid out tuesday), last day is Sunday 9/9 (to be paid monday 9/10). That should be around the time the MNW bet ends.

Let's see what you can find. They don't have to be ducks, anything related to ponzis, greed, lies and gullibility. Animations are a bonus, and original creations are a bonus. This runs for two weeks, so pace yourself!

Source: Inside Apple's Go-Slow Approach to Mobile Payments

http://news.ycombinator.com/item?id=4177605

The article is #1 on HN ("hacker news" aka ycombinator news) at time of posting. Coinbase is notable because its a Ycombinator startup founded by a former employee of Airbnb, which itself is one of Ycombinator's most successful ventures to date.

Difficulty charts at http://bitcoin.sipa.be/

Any way to do this and speed up the confirmations?

Posting the question here because there's an error on mtgox support forums: "There was an error displaying the form. Please copy and paste the embed code again."

http://www.bloomberg.com/news/2012-06-06/is-global-finance-a-ponzi-scheme-ask-a-russian-expert.html

What's the difference between today's global finance system and a Ponzi scheme? This is the question that a 56-year-old veteran Russian financial scammer has been asking his victims.
Chillingly, he almost has a point.

The wall at $5.3 is withering away (was equal in size to the bid wall. now half).

[more than $400 million]

http://www.nytimes.com/2012/06/02/business/new-rules-for-money-transfers-but-few-limits.html

Aside from the transfer fees, Western Union and other similar services profit as they buy batches of currencies at a wholesale rate. The money-transfer companies do not disclose the spreads they benefit from when they set exchange rates.

“It’s a big profit center for these companies, borne on the backs of the people who can least afford it,” said Matthew Piers, a lawyer in Chicago, who successfully brought a lawsuit on behalf of Mexican immigrants against Western Union in 2000 that accused the company of misrepresenting exchange spreads.

Western Union did not admit or deny wrongdoing, but agreed to pay more than $400 million to settle the claims.

Referring to the money it makes off the spread, Western Union said in its 2012 annual filing, “we generate revenues based on the difference between the exchange rate set by us to the customer and the rate at which we or our agents are able to acquire currency.”

Western Union received $1.15 billion in so-called foreign-exchange revenue in 2011, up from $910.3 million in 2009.

1. I play no part in Bitcoinica. If you get your money late, it's Bitcoinica Consultancy's fault.

 Nope, it's your fault too.

Both major incidents happen due to bitcoind problems (while we are trying to find alternate solutions), and there are tons of small incidents happening during development stage, majority are due to bitcoind problems as well.

Blaming bitcoind? No, the majority of the problems are due to you.

If anything of the following happened this would be prevented:

- Patrick's email was not added to the mailing list, and he used Bitcoinica email instead.
- Rackspace should just terminate the sessions then at least the database would be safe.
- We should not use the official Bitcoin client because it's very hard to secure it without large investments and affecting instant withdrawals in large amounts.

Blame email. Blame Rackspace. Blame the bitcoin client.

I made a mistake not to advise the previous owner to stop the negotiation. I only asked him to check their actual technical abilities.

Your continual mistake is a lack of honest self-reflection.

They did an intensive code review and dig out a Nginx vulnerability that someone notified me earlier but I forgot to address. (This was really my fault! Luckily no one exploited it.)

Luckily.

The hacker almost gained access to our Mt. Gox API keys, before I revoke them!

He could get 30,000+ BTC easily if I was asleep, or busy.

So all bitcoinica's MtGox funds were on one account and unsecured by yubikey? Good thing you were on top of things.

Well, shit just happens and it's not anyone's fault or incompetence here.

I disagree. It is your fault for not thinking ahead, having contingency plans, and back-ups.

I know you've made statements accepting responsibility elsewhere, but these conflicting statements reveal your actual attitude. You got yourself into this mess entirely on your own, zhou.

Nope. I wouldn't handle things like this.

But you did.

I'm taking all the responsibility here.
...[snip]...
I might be immature (I have no age privilege to disprove this). I might just suck at PR. I might be the 17-year-old kid causing endless troubles for you. I'm truly sorry.

You are? are you truly?

I actually LOL'd when I see the mess I'm creating.
...[snip]...
Just that the whole thing is quite funny if I look back. :-D

[Banks sell defaulted charged-off debt as a commodity for pennies on the dollar.]

This was originally a google groups discussion, but is now on hacker news:
Debt Strike and Debt Forgiveness - Debt Strike /Kick-Stopper (groups.google.com)

I'll just quote the most relevant part:

Sorry everyone, I took down the original link because I wasn't sure everyone in our conversation about debt forgiveness/debt strike would feel comfortable having a wider audience read it. But I've added all the relevant info about our project below. We'll be launching it soon and could use your help spreading the word when we do. I also welcome any feedback/criticism that you might have. Thanks. -------------

Our Story

The banks got bailed out and we got sold out. It’s time for a bailout of the 99% by the 99% for the 99%. Help us raise $5,000 to launch a large-scale debt forgiveness project.

Banks sell defaulted charged-off debt as a commodity for pennies on the dollar. The banks make so much money charging interest and imposing fees that they don’t mind selling some debts to collectors at a significant loss provided that the debtors are financially ruined in the process. So here's our plan: We're going to raise as much money as possible, buy as much debt as possible, and then forgive the debt outright. If we can raise $5,000 we will be able to launch the project by forgiving $100,000-$500,000 worth of personal debt. This project is 100% legal.

The Impact

The 1% gets rich by keeping millions of hardworking people poor and in debt. Over three quarters of all Americans are in debt and one out of every seven is currently being pursued by a debt collector. Debt Fairy liberates people from some of their debt by forgiving it outright.

But the real impact will come through non-cooperation with our own oppression. Nonviolent direct action searches for the point of contact between our lives and the unjust systems which exploit us. One point of contact can be found every month when we dutifully pay the banks money they didn’t earn. The 1% could not exploit us without our cooperation. If millions of us organized to refuse to pay our debts we could bring this unjust system to a grinding halt and demand real changes. Go to the Occupy Student Debt Campaign and sign the Debtor’s Pledge of Refusal.

Other Ways You Can Help

Spread the word! Educate yourself about how debt works and how we can liberate ourselves from debt by fighting back. Attend a GA at your local occupation and join a working group.

FAQ

Q. Is this legal? A. Yes. After the savings and loan crisis in the 1980’s the government made it legal to buy and sell debt as a commodity. As the legal owner of this debt the Debt Fairy has the legal power to forgive this debt.

Q. Can you forgive my debt? A. Unfortunately there is no way to seek out a specific person and buy their debt. Before purchasing the debt there is very limited information as to whose debt it is. The Debt Fairy is a playful creature and liberates people out of the blue.

Q. Can the Debt Fairy forgive student debt? A. No. The government guarantees student loans made by private lenders like Sallie Mae which means that these private lenders will always make a profit no matter what and have no incentive to lend responsibly or to sell these debts at a discounted rate. Sometimes a private lender will lend directly to a student in excess of the amount that the government will guarantee. This usually happens under highly predatory circumstances like for-profit scam schools such as the University of Phoenix. It is somewhat hard to find, but this highly predatory kind of student loan can be purchased and forgiven.

However, we are looking in to other ways we might be able to aquire and forgive student loans. We'll keep you posted.

Q. But shouldn’t we all pay our debts? Isn’t it unfair to forgive some people’s debt? A. The 1% can always get their debts forgiven, even as they rewrite the laws to make it nearly impossible for the 99% to get out from under their debt. The 1% profits without working by keeping the rest of us in debt. The undemocratic system the 1% have built is unfair and unjust. The Debt Fairy is a small intervention to set people free from from their debt and give them a fresh start. Debt refusal or a debt strike is a way to directly confront the whole unjust system and replace it with a just system.

Q. Who/what is the Debt Fairy?

A. The Debt Fairy is a mysterious, anonymous, magical creature who playfully liberates people from their debt.

Paul Graham's Startup Curve

Many people think startups are up and to the right all the time. But more services exhibit this "startup curve" than any other growth pattern.

We recovered from the "crash of ineptitude" and are now entering "wiggles of false hope". The VC bubble is tremendous (FB for $100B anyone?), and Payments is one of the hottest spaces. Bitcoin is the only truly disruptive player in the game. It has traction and plenty of runway. Regulatory hurdles on the internet are a laughable concept. The Force of the network effect is with bitcoin, but do not be alarmed if we experience some turbulence during take off. Please take your seats and fasten your belts for Lift-off in T-minus..

last chance 

i pay more attention to weighted indicators like accumulation/distribution and price-volume trend.

Now this is interesting..

Bullish ACD divergence  

With stocks falling hard today (1361 at time of posting), it reminded me of OBV inventor Joseph Granville's Jan 25 call that the rally up into 1400 was bound to fall because of the weak "momentum".

But what does OBV say about the price of bitcoin?

On the weekly chart, the OBV at $3.8 aligned with the ~$2.0 low, suggesting a bottom at seller climax ($4 is the new $2).

Switching to the daily chart..

The OBV lows are still aligned fairly well.

For even further granularity, the 12-hour chart..

Now it doesn't look so sure. But I think there's too much noise on the 12-hour.

The weekly chart is the one to look at (and the one most suggestive of a $3.8 bottom, conveniently enough).


How do the rest of you see the volume / money-flow indicators?

[These signals look similar to what we think might be produced from an extraterrestrial technology]

Breaking news.  This is no coincidence;  they're here for the bitcoin.  Difficulty about to spike.

These signals look similar to what we think might be produced from an extraterrestrial technology. They are narrow in frequency, much narrower than would be produced by any known astrophysical phenomena, and they drift in frequency with time, as we would expect because of the doppler effect imposed by the relative motion of the transmitter and the receiving radio telescope.

Each of the signals below is shown in a pair of plots, one from an observation of Kepler Object of Interest (KOI) 817 and one from an observation of KOI-812.

[maintenance margin requirement]

After breaking $5, the rise to $9-$12 is happening very quickly.  If there is a correction coming before breaking into all-time-highs, in all likelihood it will be there at $9-$12.  And there's no telling how sharp the correction could be.

I'll have no sympathy for the panic sellers, but I am concerned about the common bitcoinica user.

From the screenshots people are posting, the interface is very confusing in one obvious respect: the maintenance margin requirement.

Because bitcoinica is missing a "maintenance margin calculator", the user is forced to solve a ridiculous algebraic formula to determine the lowest bitcoin price a position can suffer before you are completely zhoutonged. 

With bitcoinica there is the extra complication in that it lets you keep your maintenance margin in bitcoin.  This means it shrinks as the price drops, and you will get zhoutonged much quicker than you expect.

I'm probably as bullish as anyone here, but I wouldn't be surprised to see a correction retrace down to as low as $4.  Yes, it will definitely bounce back from $4 but only after you have lost everything.

Furthermore, stop-loss and limit orders will not protect you.  If the correction is sharp (and it most likely will be), your stop or limit order may not even get executed before you suffer a fatal margin call.  Market orders are executed at the market price, which could very well drop instantly to below your zhoutong price.  Your limit order to sell before losses only happens if there's a willing buyer, and when there's not it will never even be executed.

Analysts are predicting that $9-$12 will be a major inflection point, and a correction from there will cause many to suffer a forced liquidation.

Please be extra careful and be absolutely sure to understand the risk you are facing.  The top 1% of bitcoinica users have 50% of the wealth.  Too many of you could easily lose everything in the correction which could be coming very soon. 

The top percentile could take everything you have, and it might not even be intentional.  If too many people lose too much, $9-$12 could prove to be final top price for bitcoin.  The richest will be a lot richer and the majority will just be poorer.  It doesn't have to end that way, but it will if we are not smart enough when left to our own devices.

The world thought bitcoin was dead.  They thought we had died in a bubble of our own financial illiteracy.  The greatest risk to bitcoin is nothing and nobody more than ourselves.  Let's prove them wrong.

Please be careful.  See you on the upside.

*ahem.  could be wrong.

Been wanting to chart this correlation for a while.  I'm not sure what to make of it.

My intuition is that unless the volume peters out, price will find a bottom.  At $0.10/BTC, $100k buys a million bitcoins.  But the record volume in BTC is between 100k-200k.

"volume should be lower during wave two than during wave one".  Its getting lower, but will it fizzle out?  Or will it pick back up?