Well that's how banks work.  If you kept 100% of the money on deposit in reserve you couldn't make any money to pay interest to depositors.  But it doesn't matter because there is no way I would be able to setup something like that anyway.  Way too involved for such a small piece of the market.  I'm sure the exchanges will be the only ones who can handle stuff like this.

I wish I knew where people were still finding 5870s or better in stock.  I saw a couple of 5870s in stock at Newegg the other day for $280, but that didn't seem like a great price or anything so I didn't snap them.  Someone else must have though because they were gone within an hour or two.  Any time I do the math I can't come up with any result other than buying more 5830s (and good thing too because it's the only card I can find).

Edit:  I looked on that overclockers.co.uk site and with the current exchange rate and shipping to the US it should be costing me around $220/each.  I was thinking about picking up 4, but it keeps trying to charge me the VAT when I checkout with paypal.  I thought I would get the ex-VAT price since I'm in the US.  What's up with that?

First hardware is coming online.

Hah, I always read it as MTGOx and not Mt. Gox.  MTGO is a good game, addicting and expensive though (if you're bad that is).

Looking at the trade data right is kind of interesting because you do get to see supply and demand in action and volatility is much higher with the volume so low.  I'm sure in the long run it means very little, because this is pretty much equivalent to the after hours market on regular stock exchanges which may be way different than what happens when trade opens.  I remember watching Jim Cramer's show on CNBC like five years ago, and any time he'd do a big segment on a certain stock it would jump a few percent in after hours, and then almost invariably give the gain back during the next trading day.

My prediction for the rest of the day, which will mean nothing I'm sure but I'd like to see if I'm right, is there is there is some support at the $16 range, so we'll likely stabilize around there, but if it breaks through the $16 mark it will go all the way down to $14.  Should make for a good buying opportunity.

I doubt it would be a problem for the person at the end who actually made the donation.  The limit is $2,500 a person I believe, so the person collecting could do up to that amount.  I suppose people who had already contributed the max and used bitcoins as a method to get more money in would be violating some FEC rules, but I can't see anything coming of it because you can't prove who the money came from. I doubt people would really go through so much trouble just so they could give more money to politicians.  And as far as anyone is concerned all the money came from you.  

Newegg has some

HIS H587F2G6DG Radeon HD 5870 2GB 256-bit GDDR5 PCI Express 2.1 x16 CrossFireX Support Eyefinity 6 Edition Video Card

in stock for $280.  I'll buy it for you with two day shipping in exchange for bitcoins, at whatever the market rate is.  As I type this it's $13, so that would be 22 BTC.  Get it now before your BTC drop and before Newegg sells out again!

But does that serve any real purpose?  If difficulty increases by 100x because of all the new miners does that help bitcoins as a unit of exchange?  All that equipment is basically wasting power to do arbitrary calculations that only have value because of an artificial currency.  I don't want to sound anti-bitcoin or anything, it's just that argument reminds me of when people saying government spending is good because it creates jobs without considering whether those jobs add anything of value to the economy.

Make sure you put half your net worth into bitcoins then!  A 1000% return by December and 10000% by 2013?  You could turn $10,000 into $1,000,000!

Sorry, but it just seems ridiculous to assume that returns like this will continue for a year or more to come, unless you are balancing that by saying there is a 99% chance it goes to 0 and and a 1% chance it goes to 1,000, which would be closer to my guess.  There is no reason to expect it to keep going up without a mitigating downside risk, and since the downside is $13 and the upside is hundreds, one has to assume that the chance of going to zero is much more likely.

I'll buy anything that can be shipped with Amazon prime (free two day shipping to continental US) and have it sent to you in exchange for an equivalent amount of bitcoins.  Any interest please let me know.

I know it's just a joke, but it's not like you can just decide to peg your currency to something and call it good.  It involves artificially raising or lowering the price of your currency by either selling it to lower the price, or buying it in the open market with other currencies to raise the price.  It's a manipulation of the actual market value.  They would need substantial foreign currency reserves and a currency that has some actual value to begin with.  What you're probably thinking of is what they actually did which was abandon their currency in favor of a real one, but then they can't print their own money.

Shorting of BTC should be pretty easy to implement and quite effective for a market maker with a huge supply of bitcoins accumulated from fees and from the accounts of people who have deposited but not listed their coins for sale yet.  Then you could charge interest for a loan that effectively costs you nothing.

And now that I think about it the most logical thing to do would be never even give the borrower the bitcoins.  And they could probably afford to short with much more leverage than I originally thought.  In your example you shouldn't need anywhere near $1000 to short 50BTCs. They could probably do it with as little as $100.  You as the banker could borrow these from a depositor or use your own supply and sell them at the current market price right away.  There is no need to ever deliver the coins to the person borrowing them, because they need to keep the proceeds with you for security anyway.  Now they have the $500 from the sale and the $100 they put in for a total of $600 in assets with a liability of 50x whatever the going rate of BTC is (plus interest/transaction fees).  The value of the account would go negative with a BTC price of $12 or more, so you wouldn't need to call in the margin until there are no listings on the market with ask prices of $12 or less.

With how quickly transactions can be completed and how open the information on bid/ask spreads look it seems like someone could make a killing on this by making tons of highly leveraged small bets against bitcoins.

Edit: The more I think about it the more I think maybe this wouldn't be good for the economy.  Naked short selling with unlimited leverage and perfect information on supply and demand?  It might just be asking to be exploited. The path to legitimacy is probably more through increasing the use of bitcoins as a means of exchange for value added goods and services, rather than for value sucking financial derivatives.  I must be pretty fickle... in the span of three hours I went from wanting to start a service to wanting to prevent it from happening.

Yeah, I gave up on the idea of doing it myself pretty quickly.  This is the essence of how it is done in real financial markets though.  Investment banks have custody of shares of stock that they hold for their customers and can freely loan them out to others.  They would of course have to return them to their original owners on demand, but shares of stock are fungible so they have a large pool to draw from.  And the loaning isn't an issue because they would only loan shares to people who had assets with the bank to use as collateral for the loan, so if you never paid it back they could force you to liquidate your holdings.

I was thinking about doing the same thing, but it sounds like a bit too much of a headache.  I may be on for an investment though depending on the terms.

I do have an idea for a service the exchange could offer that I haven't seen implemented yet.  That would be investing banking with the ability to pay depositors interest for depositing bitcoins, and then loan these bitcoins out to speculators who hope to profit from a decline in the bitcoin exchange rate.  I came up with some safeguards for it, but I just can't devote the time to the technical aspects of getting it working.  It also works best as part of an existing BTC exchange.  The details are here:

http://forum.bitcoin.org/index.php?topic=11406.msg161711#msg161711

The more types of real world financial transactions that can be fit within the bitcoin world the better the currency has of being successful.

I don't think any reputation based system will be sufficient to create a real economy.  I would like to set up a BitCoin investment bank that has this type of functionality.  I've thought about a lot of the things you would need in place in order to do this.  People deposit their bitcoins with my site and earn interest (in bitcoins).  I take these and lend them out to speculators hoping to profit on the fall in the bitcoin-USD exchange rate.  They pay a slightly higher interest rate to borrow the bitcoins as I pay to the lenders who deposited them with me.  The difference is the bank's profit and goes to the reserve so I can cover short term swings in deposits and withdrawals.

Person A deposits 100 BTC at an interest rate of 6% per year on June 1st.   One month later their bank account has 100.5 BTC.

Person B borrows those 100 BTC at the rate of 8% per year on the same day.  They immediately sell those bitcoins on the market for USD.  They will owe interest of .6667% per month.  If they cover their short in a month they need to return 100.6667 BTC.

Person A profits .5 BTCs, and they are free to cash out at any time so they lose no flexibility.  They gain in purchasing power if bitcoins increase in value, and conversely lose purchasing power if they decrease.

Person B has to pay .6667 BTC in interest for the loan, so he profits if he is able to buy 100.6667 BTC for less than he originally sold the 100 BTC for.

That's all there really is to a short sale.  You need people who want to deposit bitcoins with a third party (my bank) in exchange for interest.  And then I take these bitcoins and lend them out to people who expect to profit from their decline in value relative to the dollar.  The two major concerns:

When I lend out your bitcoins I no longer have those exact coins.  But bitcoins are fungible, so if you want to withdraw it doesn't matter if I give you your exact coins back, the coins of another depositor, or my own coins in reserve.  I need enough depositors to keep the market liquid, and enough of my own bitcoins in a reserve account to cover deposits and withdrawals.  Keeping 10% of the amount on deposit should be sufficient, as I will require anyone who borrows bitcoins to keep cash deposited at the bank to cover all the bitcoins they borrow.  So I have people depositing both bitcoins and cash.  When I have lots of cash reserves and little bitcoin reserves I use the cash to buy more bitcoins, and vice versa.

The second problem is what is to stop the speculator from borrowing the bitcoins, selling them for cash, and disappearing without repaying the loan?  The only way I can see to do this is to require them to deposit cash in excess of the bitcoins they deposited.  Let's say they borrow 100 BTC, worth $1000 today.  I could require them to deposit $1200 with me until they repay the bitcoins.  Furthermore, they would need to maintain a cash balance in their account with my bank of at least 10% more than the current exchange rate.  This excess would be required because when the value of bitcoins rises, let's say to $13, now they owe $1300 worth of bitcoins and only have $1200 in their account with my bank. This brings us back to the original problem of what if they just decide to disappear, now owing more than they deposited?  This is why we would require them to maintain a cash balance of 10% over the amount of their loan at all times.

In my above example they deposited $1200 and owe 100 bitcoins.  If bitcoins rise to $11 each and they did not deposit any more money to cover this they now owe effectively $1100 ($11 x 100) and have a required balance of $1210 ($1100 x 110%).  Since they failed to cover this required balance I take their $1200 balance and buy back on the market place 100 bitcoins for $1100 to cover their short position for them.  They now have $100 in their account and owe nothing.

I think these restrictions address most of the problems with the theory on how this will operate.  I just need to know how to get the software in place to manage these types of transactions and get accounts with payment processors to allow people to get money in and out.  Any suggestions for this or any ideas about things I have overlooked would be appreciated.

This price has been slightly increased, now $220 per unit because six units have already been sold.

I am selling existing mining rigs, $220 per 250mhash/sec.  They are online now, and you get daily dividends.  I operate them for you for $1.50/day in upkeep until it becomes unprofitable or you want to stop.  Then I either send you the computer or sell it for you and give you the money. If something breaks while you pay upkeep I replace it for you at my expense.  If there is downtime I cover it for you.  You can buy individual units, so you can own just one unit for $220, but in order to redeem for a full rig you would need at least two shares and to pay for shipping from the east coast of the USA.  

I will also be willing to lease the equipment to you if you do not want to be bothered with owning it at the end.  The lease rate depends on the terms, with more favorable rates for longer term leases.  With leases there is no upkeep cost and you receive no variance payments daily.  A one month lease is $120, two months is $220, three is $300, and additional months are $60/month all paid in advance.  That's as low as $0.24 per mhash per month.  Compare that with the prevailing rates.  If you rented 1 ghash from me for 4 months it would cost you a total of $1440 ($360 x 4), while others would charge 1760GBP, which is more than double.

In either case the payments are all zero variance, so downtime is never an issue.  Payments will be based on the rate determined here http://www.alloscomp.com/bitcoin/calculator.php, which at the current difficulty level is .182btc/day per unit purchased or leased.  If you own and I operate, the upkeep costs are taken out of the daily payments at exchange rate at the time of the transfer.

I would prefer payment via some method with no chargebacks, so I will gladly accept bitcoin or Mt. Gox transfers when they reopen.  If you have any questions please post or PM.  

This isn't super relevant to the mining operation, but if you are worried about security, I also have an ebay business with nearly 10,000 feedback and monthly sales of around $30,000.  You will have all my details to see that I am legit.