Hedge against BitCoin collapse

[kkaspar]

I hope some rich holders are smart enough to start a new boom in LTC when the crash comes. If there would be an another quick rise in LTC, then selling BTC to LTC would be quite attractive. This way, much of the value would stay in cryptos and BTC would recover alot quicker. If people sell to fiat, then that value will walk and there will be another 6 month low period. Only another crypto-currency could cause the value to stay behind and "inside the family". The content of this bubble could be caught and reinserted, only if the game is played the right way.
LTC would be the current winner here for just because it has a decent enough start-up volume. Technical reasons will be taken into account in the future.

[AnonyMint]

Litecoin!

Look at the charts.  When Bitcoin is in it's bubble cycle, move to Litcoin.  When Bitcoin corrects, move back to from Litecoin to Bitcoin.

In other words, buy the undervalued crypto.  Right now Litecoin and Bitcoin are the only real players.

If bitcoin suffered a technical failure then litecoin would most likely suffer it in an identical manner.  

I am thinking it is more difficult for the Litecoin to make the fix suggested by the research paper for the selfish-mining attack due to the shorter block time. Waiting for discussion on that over at hackingdistributed.com

[petersiddle98]

Litecoin!

Look at the charts.  When Bitcoin is in it's bubble cycle, move to Litcoin.  When Bitcoin corrects, move back to from Litecoin to Bitcoin.

In other words, buy the undervalued crypto.  Right now Litecoin and Bitcoin are the only real players.

If bitcoin suffered a technical failure then litecoin would most likely suffer it in an identical manner.  

I am thinking it is more difficult for the Litecoin to make the fix suggested by the research paper for the selfish-mining attack due to the shorter block time. Waiting for discussion on that over at hackingdistributed.com

You mean the selfish mining is vulnerable to all alt-coin and not only Bitcoin? Last I heard scrytp coin is safe...

[AnonyMint]

Litecoin!

Look at the charts.  When Bitcoin is in it's bubble cycle, move to Litcoin.  When Bitcoin corrects, move back to from Litecoin to Bitcoin.

In other words, buy the undervalued crypto.  Right now Litecoin and Bitcoin are the only real players.

If bitcoin suffered a technical failure then litecoin would most likely suffer it in an identical manner.  

I am thinking it is more difficult for the Litecoin to make the fix suggested by the research paper for the selfish-mining attack due to the shorter block time. Waiting for discussion on that over at hackingdistributed.com

You mean the selfish mining is vulnerable to all alt-coin and not only Bitcoin? Last I heard scrytp coin is safe...

The variant of PoW hash (e.g. Scrypt) has nothing to do with the selfish-mining attack.

Here is what I mean:

http://hackingdistributed.com/2013/11/04/bitcoin-is-broken/#comment-1126295970

And I mean that Litecoin might be less fixable for that suggested fix, than Bitcoin is. But I am might be wrong on that conjecture.

I suppose non-experts are going to have to wait for the experts to come to a consensus. I will not conclude I am correct on all matters of the selfish-mining attack even though I consider myself to be reasonably expert on the technical side. That is what peer review is for. We must wait for the analysis and discussion amongst the experts.

[AnonyMint]

I am posting here the possible risks to Bitcoin and strategies for dealing with them.

Risks:
a) A Technical flaw in either the network protocol or private key/public key algo is exposed.
Risk Mitigation: Alt Coins with significantly different POS/ Pow functions

A flaw has already been argued against PoS.

b) New innovative AltCoin is introduced in the future. That takes away market share from BTC. While we don't have such a coin right now, there is likely be one in the future.

 

[AnonyMint]

I never know there is so much risk to Bitcoin.

Don't get angry at me if I am wrong, but my analysis so far is there is very low near-term risk such as Bitcoin would overnight permanently lose its value due to a technical flaw. I am not commenting about the recent speculative runup in the price, of course if could correct at some point. (Americans not in a tax-deferred trading account at least have the problem that if they sell now, then they have to declare and pay capital gains taxes, so that is one motivation for finding a hedge)

So I guess I am saying the risk from technical flaw is not so great as I think you will have time to form an opinion and react. The attacks so far presented seem to be more of risks later when Bitcoin is much more valuable and a cartel is attempting a (even invisible and silent) takeover. Although I am not yet clear on whether the selfish-mining could be hidden, probably not.

Many people have put thought into finding weaknesses in Bitcoin, so my intuition+analysis is that it is less likely that a catastrophic flaw could be found that would destroy it overnight. We are more likely to see attacks found which were not considered because they are more insidious and applicable for those who have huge resources, e.g. it is claimed with a fix that Bitcoin would only be subject to attack with selfish-mining if attacker has 25+% of the total network hashrate.

On the regulatory risk, it depends how you think the government views Bitcoin. My extreme conjecture is they (NSA et al) view it as a good honeypot for tracking illegal activities on the public ledger which is for the most part not anonymous. So thus I don't expect negative regulatory action near-term. However, due to compartmentalization, perhaps not all government sectors (within the same nation even) possess the same viewpoint.

[whitemage]

I never know there is so much risk to Bitcoin.

Don't get angry at me if I am wrong, but my analysis so far is there is very low near-term risk such as Bitcoin would overnight permanently lose its value due to a technical flaw. I am not commenting about the recent speculative runup in the price, of course if could correct at some point. (Americans not in a tax-deferred trading account at least have the problem that if they sell now, then they have to declare and pay capital gains taxes, so that is one motivation for finding a hedge)

So I guess I am saying the risk from technical flaw is not so great as I think you will have time to form an opinion and react. The attacks so far presented seem to be more of risks later when Bitcoin is much more valuable and a cartel is attempting a (even invisible and silent) takeover. Although I am not yet clear on whether the selfish-mining could be hidden, probably not.

Many people have put thought into finding weaknesses in Bitcoin, so my intuition+analysis is that it is less likely that a catastrophic flaw could be found that would destroy it overnight. We are more likely to see attacks found which were not considered because they are more insidious and applicable for those who have huge resources, e.g. it is claimed with a fix that Bitcoin would only be subject to attack with selfish-mining if attacker has 25+% of the total network hashrate.

On the regulatory risk, it depends how you think the government views Bitcoin. My extreme conjecture is they (NSA et al) view it as a good honeypot for tracking illegal activities on the public ledger which is for the most part not anonymous. So thus I don't expect negative regulatory action near-term. However, due to compartmentalization, perhaps not all government sectors (within the same nation even) possess the same viewpoint.

I myself isn't really good at computer stuff and I find it hard to really understand. So in short, Bitcoin has a really small chances to go 0 and what about other type if coins like litecoin?

[AnonyMint]

I never know there is so much risk to Bitcoin.

Don't get angry at me if I am wrong, but my analysis so far is there is very low near-term risk such as Bitcoin would overnight permanently lose its value due to a technical flaw. I am not commenting about the recent speculative runup in the price, of course if could correct at some point. (Americans not in a tax-deferred trading account at least have the problem that if they sell now, then they have to declare and pay capital gains taxes, so that is one motivation for finding a hedge)

So I guess I am saying the risk from technical flaw is not so great as I think you will have time to form an opinion and react. The attacks so far presented seem to be more of risks later when Bitcoin is much more valuable and a cartel is attempting a (even invisible and silent) takeover. Although I am not yet clear on whether the selfish-mining could be hidden, probably not.

Many people have put thought into finding weaknesses in Bitcoin, so my intuition+analysis is that it is less likely that a catastrophic flaw could be found that would destroy it overnight. We are more likely to see attacks found which were not considered because they are more insidious and applicable for those who have huge resources, e.g. it is claimed with a fix that Bitcoin would only be subject to attack with selfish-mining if attacker has 25+% of the total network hashrate.

On the regulatory risk, it depends how you think the government views Bitcoin. My extreme conjecture is they (NSA et al) view it as a good honeypot for tracking illegal activities on the public ledger which is for the most part not anonymous. So thus I don't expect negative regulatory action near-term. However, due to compartmentalization, perhaps not all government sectors (within the same nation even) possess the same viewpoint.

I myself isn't really good at computer stuff and I find it hard to really understand. So in short, Bitcoin has a really small chances to go 0 and what about other type if coins like litecoin?

Newer and smaller altcoins will be more at risk of a technical vulnerability because they are less tested and probably have less resource for programming, etc..

I am not an expert on the valuations of altcoins.

Seems to me that Litecoin (LTC) is holding up its value well because it is the Bitcoin for GPUs. All those GPUs had to go mine somewhere and Litecoin is the most professional xerox of Bitcoin but so far ASICs can't mine on it.

I am not very knowledgable about the other altcoins and why people valued them. There is a lot of interest in proof-of-stake type coins such as Peercoin (PPC). I've read that one problem is the early adopters control too much in PoS. I have not analyzed that deeply.

I am biased because I want to see an altcoin with features I have been championing as important. And because I feel that a really great altcoin that was so much better than Bitcoin, would really get a lot of attention and support.

Some people have said altcoins are inherently more risky, because they are less proven, smaller market caps, and less hashrate securing their networks. Well there are counter points to those points too. But in general I would agree with the notion that altcoins are more speculative. But speculative can be a good thing too, for example that killer altcoin comes and then you ride it all the way from 1/1000 of a penny to $1 million.

[cunicula]

I never know there is so much risk to Bitcoin.

Don't get angry at me if I am wrong, but my analysis so far is there is very low near-term risk such as Bitcoin would overnight permanently lose its value due to a technical flaw. I am not commenting about the recent speculative runup in the price, of course if could correct at some point. (Americans not in a tax-deferred trading account at least have the problem that if they sell now, then they have to declare and pay capital gains taxes, so that is one motivation for finding a hedge)

So I guess I am saying the risk from technical flaw is not so great as I think you will have time to form an opinion and react. The attacks so far presented seem to be more of risks later when Bitcoin is much more valuable and a cartel is attempting a (even invisible and silent) takeover. Although I am not yet clear on whether the selfish-mining could be hidden, probably not.

Many people have put thought into finding weaknesses in Bitcoin, so my intuition+analysis is that it is less likely that a catastrophic flaw could be found that would destroy it overnight. We are more likely to see attacks found which were not considered because they are more insidious and applicable for those who have huge resources, e.g. it is claimed with a fix that Bitcoin would only be subject to attack with selfish-mining if attacker has 25+% of the total network hashrate.

On the regulatory risk, it depends how you think the government views Bitcoin. My extreme conjecture is they (NSA et al) view it as a good honeypot for tracking illegal activities on the public ledger which is for the most part not anonymous. So thus I don't expect negative regulatory action near-term. However, due to compartmentalization, perhaps not all government sectors (within the same nation even) possess the same viewpoint.

I myself isn't really good at computer stuff and I find it hard to really understand. So in short, Bitcoin has a really small chances to go 0 and what about other type if coins like litecoin?

There is no weakness. The authors made a number of serious mistakes in their article. Litecoin is more vulnerable to attacks in general due to the lack of ASICs. If you want to look at a coin that doesn't share a similar set of vulnerabilities as bitcoin, look at PPC.

[AnonyMint]

There is no weakness. The authors made a number of serious mistakes in their article.

You and I (and many others) are still debating selfish-mining. And I think I am winning that debate against your points over at hackingdistributed.com. So how can you make that conclusion? Did you respond to me again over there? (Don't debate selfish-mining technical points here in this thread please, off-topic)

Litecoin is more vulnerable to attacks in general due to the lack of ASICs.

Although I tend to agree, but it is an irrelevant point almost. That can be argued different ways. Being dominated by ASICs means Bitcoin could potentially be cartelized much more easily. And Litecoin has a considerable amount of GPU hashing rate on it, so it may not be vulnerable to any realistic attack.

If you want to look at a coin that doesn't share a similar set of vulnerabilities as bitcoin, look at PPC.

Yes but it may have other vulnerabilities and they may be better or worse.

[MilesJohan]

I never know there is so much risk to Bitcoin.

Don't get angry at me if I am wrong, but my analysis so far is there is very low near-term risk such as Bitcoin would overnight permanently lose its value due to a technical flaw. I am not commenting about the recent speculative runup in the price, of course if could correct at some point. (Americans not in a tax-deferred trading account at least have the problem that if they sell now, then they have to declare and pay capital gains taxes, so that is one motivation for finding a hedge)

So I guess I am saying the risk from technical flaw is not so great as I think you will have time to form an opinion and react. The attacks so far presented seem to be more of risks later when Bitcoin is much more valuable and a cartel is attempting a (even invisible and silent) takeover. Although I am not yet clear on whether the selfish-mining could be hidden, probably not.

Many people have put thought into finding weaknesses in Bitcoin, so my intuition+analysis is that it is less likely that a catastrophic flaw could be found that would destroy it overnight. We are more likely to see attacks found which were not considered because they are more insidious and applicable for those who have huge resources, e.g. it is claimed with a fix that Bitcoin would only be subject to attack with selfish-mining if attacker has 25+% of the total network hashrate.

On the regulatory risk, it depends how you think the government views Bitcoin. My extreme conjecture is they (NSA et al) view it as a good honeypot for tracking illegal activities on the public ledger which is for the most part not anonymous. So thus I don't expect negative regulatory action near-term. However, due to compartmentalization, perhaps not all government sectors (within the same nation even) possess the same viewpoint.

I myself isn't really good at computer stuff and I find it hard to really understand. So in short, Bitcoin has a really small chances to go 0 and what about other type if coins like litecoin?

There is no weakness. The authors made a number of serious mistakes in their article. Litecoin is more vulnerable to attacks in general due to the lack of ASICs. If you want to look at a coin that doesn't share a similar set of vulnerabilities as bitcoin, look at PPC.

Seriously, why would litecoin be more vulnerable to attacks due to lack of ASIC?

[Omikifuse]

There are many hedge against Bitcoin, what about property and stocks?

[SuperHakka]

There are many hedge against Bitcoin, what about property and stocks?

I think what the OP really means is how to short bitcoin, i.e. a 1 for -1 move on bitcoin. Properdy and stocks aren't going to do 1 for -1, they are uncorellted.

[shutik]

to hedge means to remove the risk of financial losses in the event of decline in value. http://en.wikipedia.org/wiki/Hedge_%28finance%29

By definition hedging protects from loss at the expense of limiting gain.

I suspect author means delta hedge, one that protects from decline in direction of the price.

Forward of future contract with another party accomplishes it, but introduces counter-party risk.

Clearing house mitigates this risk, but there isn't one that I know of as of this moment.

We just have to wait until bitcoin gets bigger and more secure to store.

Until than limiting yourself to the % of exposure of your total investable assets is a good way to proceed.

[AnonyMint]

and to think, a few months ago i was going to buy $100 worth of litecoins when it was trading at 6 cents per.. being lazy is a bad, bad thing!

this.

[Johnny Bitcoinseed]

Storable Food, clothing shoes etc you wear, tires if you have a car, tools, firearms and ammunition.  These are the best hedges of all because you can use them no matter what happens.

[byronbb]

People mis-understand OP. He wants to buy insurance against a bitcoin collapse. So he pays a premium upfront to win a huge USD payout if it collapses.

[AnonyMint]

Some talk of a potential plan to short LTC now that it has reached $36:

https://bitcointalk.org/index.php?topic=323988.msg3747729#msg3747729

Regarding the last two comments, I wonder when calls for the SEC and EU equivalents to get involved will come due to what I am reading to be desire to collude to manipulate markets? Or am I misreading.

[lumierre]

@Topic
If you're afraid of Bitcoin's vulnerabilities then Peercoins could be a good place for cover. PPC is almost invulnerable to a 50% attack and selfish mining. The way Proof-of-Stake blocks are generated encourages randomness in minting coins, especially the 30 day minimum minting time and 90 day coin days cap. I suggest you read more about it and decide for yourself.

[AnonyMint]

@Topic
If you're afraid of Bitcoin's vulnerabilities then Peercoins could be a good place for cover. PPC is almost invulnerable to a 50% attack and selfish mining. The way Proof-of-Stake blocks are generated encourages randomness in minting coins, especially the 30 day minimum minting time and 90 day coin days cap. I suggest you read more about it and decide for yourself.

I posted (from the Bitcoin stackoverflow Q&A) a hypothetical attack on PPC upthread. I have not verified that.