If Pirate Runs: The Danger of one entity with 500K BTC

[Astro]

I heard he stored his 500k BTC on his Ellet.

[Matthew N. Wright]

I heard he stored his 500k BTC on his Ellet.

IMPOSSIBRU!

[phelix]

the "investors" will buy back in, too.

[crazy_rabbit]

Still hypothetically,    I hope the bitcoin community has considered the very real danger posed by an individual in control of 500K of BTC. Sure there are accounts with balances almost as high but what is to prevent Pirate or anyone else with so much BTC from cyclically crashing the market and buying up more coins?

Some might say that someone with so many coins wouldn't destroy the market as they are so invested in it, but what happens if their Buy/Sell cycle doesn't destroy bitcoin in the long run, but they are just taking a wager that they can pull it off enough times while bitcoin is small enough and then quit misbehaving when it's bigger?

Even if you can't regularly do $15 to $8, even 1-2$ in change often enough could eventually give you monopolistic power over the bitcoin system.

For bitcoin's sake- I hope Pirate Returns the money, and the community stays away from such "financial innovation" in the future, even if it's not a ponzi.

So you're saying... he'll sell $1 of Bitcoin, sending the price down, then buy $1 of Bitcoin, sending the price up... and then he'll profit from that over and over?

Interesting business idea. Let me know how it goes.

There is zero danger of having one entity with 500k coins. The WORST outcome is if that person dumped all coins instantly. It would crash the price. Then what would happen? People like myself would buy up the cheap coins, the price would find some new stabilization level, and the "grave danger" would be gone. Someone with that many coins can crash the price, but only once. Problems solved.

It's a non issue.

Actually you misunderstood what I was saying. I was actually saying your second point, or more actually, you were saying mine.

[Serenata]

For bitcoin's sake- I hope Pirate Returns the money, and the community stays away from such "financial innovation" in the future, even if it's not a ponzi.

For bitcoin's sake, I hope Pirate doesn't return the money. Even if he pays out in full, anyone giving Pirate money took a huge risk. If that risk is rewarded, imagine how eager people will be to get in on the next big thing completely indistinguishable from a scam. It can only get worse if he pays out.

People also tend to forget. So eventually it will be the same.

The only "danger" I see, is Pirate being "the government" or "the bank". A 51% attack on bitcoin to try to weaken or bring it down, would require too much funding. These operations though (all Pirate's operations), if shit hits the fan, could have a strong impact on people's trust on Bitcoin (usage, price, merchant adoption etc) providing at the same time a huge profit. No person could chase "the government" or "the bank" to "settle" the matter or even to just threaten them. Every time Bitcoin gains some popularity among users and merchants, a new Pirate appears... Repeat that for X number of times.

[proudhon]

Has anyone been paid back yet?

[unclescrooge]

Has anyone been paid back yet?

What do you think? 

[proudhon]

Has anyone been paid back yet?

What do you think? 

I know, I know.  BTW, has anyone looked in the lending forum?  If you happen to think Pirate will pay back, there are plenty of his lenders who seem to be less confident about that and are selling their accounts for super cheap.

[ribuck]

There is zero danger of having one entity with 500k coins.

Exactly. 500k coins is about 5% of the current coins. Consider the three possibilities:

1. The entity hoards the coins and never spends them: wow, everyone else's coins have 5% greater spending power!

2. The entity spends or slowly sells the coins: ok, the coins enter circulation and everyone's coins have their "normal" spending power.

3. The entity dumps the coins all at once. The market tanks at first, then is unstable for a few days, but ends up with each bitcoin having exactly the same spending power as it had in possibility number 2. The prudent advice is to not sell your coins in the first few days after a dump this big. After that, life proceeds as normal.

[Piper67]

Has anyone been paid back yet?

What do you think? 

I know, I know.  BTW, has anyone looked in the lending forum?  If you happen to think Pirate will pay back, there are plenty of his lenders who seem to be less confident about that and are selling their accounts for super cheap.

Hey! I'll buy them all up... I'll pay them with the shiny bridge I have for sale!

[niko]

For bitcoin's sake- I hope Pirate Returns the money, and the community stays away from such "financial innovation" in the future, even if it's not a ponzi.

For bitcoin's sake, I hope Pirate doesn't return the money. Even if he pays out in full, anyone giving Pirate money took a huge risk. If that risk is rewarded, imagine how eager people will be to get in on the next big thing completely indistinguishable from a scam. It can only get worse if he pays out.

People also tend to forget. So eventually it will be the same.

The only "danger" I see, is Pirate being "the government" or "the bank". A 51% attack on bitcoin to try to weaken or bring it down, would require too much funding. These operations though (all Pirate's operations), if shit hits the fan, could have a strong impact on people's trust on Bitcoin (usage, price, merchant adoption etc) providing at the same time a huge profit. No person could chase "the government" or "the bank" to "settle" the matter or even to just threaten them. Every time Bitcoin gains some popularity among users and merchants, a new Pirate appears... Repeat that for X number of times.

There's a pirate every minute. Tom Williams, too. Nothing to do with Bitcoin specifically. They are junk merchants, except they don't exploit opiate addicts but greedy and lazy people. Same principles.  Bitcoin works, in many ways better than centrally-issued fiat, and that's what matters. Hell, if it didn't work, scammers wouldn't be using it. If you are worried about Pirate, simply don't play along. If you do play along, don't pretend like you care about Bitcoin.

[Serenata]

For bitcoin's sake- I hope Pirate Returns the money, and the community stays away from such "financial innovation" in the future, even if it's not a ponzi.

For bitcoin's sake, I hope Pirate doesn't return the money. Even if he pays out in full, anyone giving Pirate money took a huge risk. If that risk is rewarded, imagine how eager people will be to get in on the next big thing completely indistinguishable from a scam. It can only get worse if he pays out.

People also tend to forget. So eventually it will be the same.

The only "danger" I see, is Pirate being "the government" or "the bank". A 51% attack on bitcoin to try to weaken or bring it down, would require too much funding. These operations though (all Pirate's operations), if shit hits the fan, could have a strong impact on people's trust on Bitcoin (usage, price, merchant adoption etc) providing at the same time a huge profit. No person could chase "the government" or "the bank" to "settle" the matter or even to just threaten them. Every time Bitcoin gains some popularity among users and merchants, a new Pirate appears... Repeat that for X number of times.

There's a pirate every minute. Tom Williams, too. Nothing to do with Bitcoin specifically. They are junk merchants, except they don't exploit opiate addicts but greedy and lazy people. Same principles.  Bitcoin works, in many ways better than centrally-issued fiat, and that's what matters. Hell, if it didn't work, scammers wouldn't be using it. If you are worried about Pirate, simply don't play along. If you do play along, don't pretend like you care about Bitcoin.

You're missing the point... Even if I, or you don't play along with Pirate(s), others will. It seems like greed is in human nature, others have it more others less. Nevertheless Bitcoin's reputation is damaged every time something like that happens. If the people that don't know a lot, or anything, about Bitcoin, all they hear about it is scam, scam, scam, they will never want to use it.
Agreed though, that everyone should be more careful of Pirate(s).

[niko]

For bitcoin's sake- I hope Pirate Returns the money, and the community stays away from such "financial innovation" in the future, even if it's not a ponzi.

For bitcoin's sake, I hope Pirate doesn't return the money. Even if he pays out in full, anyone giving Pirate money took a huge risk. If that risk is rewarded, imagine how eager people will be to get in on the next big thing completely indistinguishable from a scam. It can only get worse if he pays out.

People also tend to forget. So eventually it will be the same.

The only "danger" I see, is Pirate being "the government" or "the bank". A 51% attack on bitcoin to try to weaken or bring it down, would require too much funding. These operations though (all Pirate's operations), if shit hits the fan, could have a strong impact on people's trust on Bitcoin (usage, price, merchant adoption etc) providing at the same time a huge profit. No person could chase "the government" or "the bank" to "settle" the matter or even to just threaten them. Every time Bitcoin gains some popularity among users and merchants, a new Pirate appears... Repeat that for X number of times.

There's a pirate every minute. Tom Williams, too. Nothing to do with Bitcoin specifically. They are junk merchants, except they don't exploit opiate addicts but greedy and lazy people. Same principles.  Bitcoin works, in many ways better than centrally-issued fiat, and that's what matters. Hell, if it didn't work, scammers wouldn't be using it. If you are worried about Pirate, simply don't play along. If you do play along, don't pretend like you care about Bitcoin.

You're missing the point... Even if I, or you don't play along with Pirate(s), others will. It seems like greed is in human nature, others have it more others less. Nevertheless Bitcoin's reputation is damaged every time something like that happens. If the people that don't know a lot, or anything, about Bitcoin, all they hear about it is scam, scam, scam, they will never want to use it.
Agreed though, that everyone should be more careful of Pirate(s).

Well, if it is mostly scam, scam, scam, then people should indeed avoid Bitcoin, and it should end in the landfill of flawed or impractical ideas. All ends well.
In my experience, current users tend to make much more drama about occasional scams than the curious newcomers. This can maybe be explained by current users being emotionally and financially vested in Bitcoin. Most "uninitiated" people I talked to about various aspects of Bitcoin - including scams - never thought scams were something exclusive to Bitcoin. Their concerns mostly revolve about "what's backing it?" "No one accepts it yet" "is it legal?" and "it's too complicated to use". All these concerns are either unfounded or are being actively worked on by the community.

[Carlton Banks]

I have said this in another thread, but it bears repeating here...

What if pirate sent 500, 000 BTC to an invalid address? It's got to be the most extreme volatility you could subject the system to with that amount of coins. I do get that the 20.5 million BTC left will be worth more eventually, but the immediate aftermath of such an event would be more violent than any pirate antics so far (and easily exploited if he only destroyed some coins, as it would still give him BTC volume to make the market dance with).

[JoelKatz]

What if pirate sent 500, 000 BTC to an invalid address? It's got to be the most extreme volatility you could subject the system to with that amount of coins. I do get that the 20.5 million BTC left will be worth more eventually, but the immediate aftermath of such an event would be more violent than any pirate antics so far (and easily exploited if he only destroyed some coins, as it would still give him BTC volume to make the market dance with).

That would be an incredibly generous gift to everyone who currently holds BTC.

[Timbert33]

What if pirate sent 500, 000 BTC to an invalid address? It's got to be the most extreme volatility you could subject the system to with that amount of coins. I do get that the 20.5 million BTC left will be worth more eventually, but the immediate aftermath of such an event would be more violent than any pirate antics so far (and easily exploited if he only destroyed some coins, as it would still give him BTC volume to make the market dance with).

That would be an incredibly generous gift to everyone who currently holds BTC.

Yeah, I'd be okay with this =D

[Boussac]

Still hypothetically,    I hope the bitcoin community has considered the very real danger posed by an individual in control of 500K of BTC. Sure there are accounts with balances almost as high but what is to prevent Pirate or anyone else with so much BTC from cyclically crashing the market and buying up more coins?

Some might say that someone with so many coins wouldn't destroy the market as they are so invested in it, but what happens if their Buy/Sell cycle doesn't destroy bitcoin in the long run, but they are just taking a wager that they can pull it off enough times while bitcoin is small enough and then quit misbehaving when it's bigger?

Even if you can't regularly do $15 to $8, even 1-2$ in change often enough could eventually give you monopolistic power over the bitcoin system.

For bitcoin's sake- I hope Pirate Returns the money, and the community stays away from such "financial innovation" in the future, even if it's not a ponzi.

So you're saying... he'll sell $1 of Bitcoin, sending the price down, then buy $1 of Bitcoin, sending the price up... and then he'll profit from that over and over?

Interesting business idea. Let me know how it goes.

There is zero danger of having one entity with 500k coins. The WORST outcome is if that person dumped all coins instantly. It would crash the price. Then what would happen? People like myself would buy up the cheap coins, the price would find some new stabilization level, and the "grave danger" would be gone. Someone with that many coins can crash the price, but only once. Problems solved.

It's a non issue.

As much as I would like to follow you, let me try to challenge your dismissal of the attack. Let's say George Soros sets aside 10 M USD to pump and dump bitcoins.
He pumps 500k bitcoins over a period of time when the price rises from 8 to 12 USD (buying @10 USD on average, spending 5 M USD). Then he dumps from 12 USD to zero (selling @ 6 USD average, getting 3 M USD). This first move cost him 2 M USD but now he can pump cheap bitcoins (starting at virtually zero) with 8 M USD in a second move.. Assuming he buys back at 5 USD on average (buyers are cautious because he has burned some), the remaining 8 M USD now yield 1.6 million BTC. Had he spent the 10 M USD upfront , he would have gotten only 1 million BTC (@ 10 USD average)..

[Piper67]

Still hypothetically,    I hope the bitcoin community has considered the very real danger posed by an individual in control of 500K of BTC. Sure there are accounts with balances almost as high but what is to prevent Pirate or anyone else with so much BTC from cyclically crashing the market and buying up more coins?

Some might say that someone with so many coins wouldn't destroy the market as they are so invested in it, but what happens if their Buy/Sell cycle doesn't destroy bitcoin in the long run, but they are just taking a wager that they can pull it off enough times while bitcoin is small enough and then quit misbehaving when it's bigger?

Even if you can't regularly do $15 to $8, even 1-2$ in change often enough could eventually give you monopolistic power over the bitcoin system.

For bitcoin's sake- I hope Pirate Returns the money, and the community stays away from such "financial innovation" in the future, even if it's not a ponzi.

So you're saying... he'll sell $1 of Bitcoin, sending the price down, then buy $1 of Bitcoin, sending the price up... and then he'll profit from that over and over?

Interesting business idea. Let me know how it goes.

There is zero danger of having one entity with 500k coins. The WORST outcome is if that person dumped all coins instantly. It would crash the price. Then what would happen? People like myself would buy up the cheap coins, the price would find some new stabilization level, and the "grave danger" would be gone. Someone with that many coins can crash the price, but only once. Problems solved.

It's a non issue.

As much as I would like to follow you, let me try to challenge your dismissal of the attack. Let's say George Soros sets aside 10 M USD to pump and dump bitcoins.
He pumps 500k bitcoins over a period of time when the price rises from 8 to 12 USD (buying @10 USD on average, spending 5 M USD). Then he dumps from 12 USD to zero (selling @ 6 USD average, getting 3 M USD). This first move cost him 2 M USD but now he can pump cheap bitcoins (starting at virtually zero) with 8 M USD in a second move.. Assuming he buys back at 5 USD on average (buyers are cautious because he has burned some), the remaining 8 M USD now yield 1.6 million BTC. Had he spent the 10 M USD upfront , he would have gotten only 1 million BTC (@ 10 USD average)..

That assumes he's the only one buying, though. He may be able to do this once, but when he tries it again (say next weekend) he'd find it harder to get away with.

[Boussac]

That assumes he's the only one buying, though. He may be able to do this once, but when he tries it again (say next weekend) he'd find it harder to get away with.

No, the only implicit assumption I am making here is that he is able to drive the market up and down because of his clout and larger stash of cash. Each successful cycle would only increase his momentum. A failed cycle would signal the end of the attack. The key success factor is to start with a big enough cash reserve and solid nerves..

[Piper67]

That assumes he's the only one buying, though. He may be able to do this once, but when he tries it again (say next weekend) he'd find it harder to get away with.

No, the only assumption is that he is able to drive the market up and down because of his clout and larger stash of cash.

He'll never reach zero. Firstly, not every bit of fiat on MtGox is on the order book. Secondly, there are exchanges beside MtGox. He'd have to do this across the board, and essentially own every BTC out there at one end of the swing, and own no BTC at the other, then somehow prevent others from jumping in and ruining his plans. Plus, he'd be paying quite a bit of money in fees to the exchanges as well.

If it was that simple, anyone could do it by taking over the stock exchange of a small country... say Bolivia. It can be done, the first time, and with the element of surprise on your side. The second time it becomes orders of magnitude harder. The third time is almost impossible.