oh great, MTGox is under attack again right now

[Desolator]

I'm sure I'm not the only person who noticed this but right now, MTGox (as seen by MTGox Live) is getting pounded with an suspicious sequence of trade orders.  They're at about 5-10 per second nonstop and all are buy orders and are all of the size: 0.02, 0.09, 0.10, or 0.37 BTC.  They're all those same 4 values but are completely randomly sequenced though.

This has only driven the price up a couple cents US but it's been at least 1000 straight trades for easily 10 minutes and that's just how long I've been watching it for.  It's so many trades, I'm on an i5 quad core with 8 GB of RAM and a GTS450 and the javascript to draw them is causing this separate window to lag as I type.

Is someone's tradebot having a meltdown? Otherwise this is obviously a specific attack trying to crash the exchange with a high volume of low orders?  The same 4 values in a random pattern is textbook AI avoidance.  They probably have a guard that catches hundreds of the same order or same order sequence being placed in a row as a sort of DOS attack so they just made

As of right now, the MTGox Live graph line is actually frozen so their servers aren't doing so well.  This could be anything from an attack against MTGox Live viewers only to attempting to crash MTGox's trade servers or even something I haven't thought of yet.

Here's a screenshot of it as it's happening.  So imagine this but relentlessly for about 20 minutes now.

[GeniuSxBoY]

It's what happens when bots exploit their freedoms.



This is why bad people can't have good things.

[MrWizard]

You are wrong.  The small trades are asks, not bids.  Do your research.  This is not an attack.  Just because mtgoxlive is slow does not mean mtgox is affected.

[Optonic]

You are wrong.  The small trades are asks, not bids.  Do your research.  This is not an attack.  Just because mtgoxlive is slow does not mean mtgox is affected.

It is affected. Orders remain "pending"/"in queue" due to a long queue or because processing is stuck. I would call this beeing affected :-)

[csshih]

attack? do we really have to use such fear mongering words? It's probably some sort of bot glitch.

[GeniuSxBoY]

Nothing more than a code exploit.

The stack algorithm didn't have set boundaries....


rather... the dumbasses who coded the program didn't think bots could do things that human beings couldn't do.

[kjj]

Nothing more than a code exploit.

The stack algorithm didn't have set boundaries....


rather... the dumbasses who coded the program didn't think bots could do things that human beings couldn't do.

Can you explain this?  I know what all of the words in your post mean, but I have no idea what you are trying to say.

[Desolator]

Are you sure they're posted asks and not actual sales? Because I'm pretty sure only actual sales modify the price while asks don't affect it at all.  In fact, on the bottom it says "last price" as in the last price a completed trade just was.  Oh and to make the price go up, they were bids, not asks.  More asks would drive the price down because more BTC would be available.

I would easily write this off as an accidental bot loop but there is no simple mathematical basis for the buying pattern.  It is seriously picking one of those amounts randomly.  And then there's the circumstantial evidence that the price swung above and below that price point minutes before which means the bot implemented that trade and hit the trigger inside of a couple minutes.  Who sets up a buying rule involving thousands of dollars and then leaves?  And who would pick intervals that small?   All of those can be explained individually but none override the fact that no bot logic would be "this trigger happened so pull a random number off this list and put in an order for it."  I don't think any bots are even capable of generating random buy and sell values.  That's so unbelievably illogical and stupid in a financial system, it wouldn't be done.

[Nagle]

Mt. Gox needs to charge for limit orders that are revoked. They don't need to charge much, just enough to discourage junk orders.

[IdeaMan]

Someone is buying a better rate for fees from Gox.

They waited for a nice flat floor with a little bit of space and shuffled around a bunch of BitCoins in a very constricted price range, then selling off a few at the end at slightly higher prices to recoup their at least some of their loss to fees after the flurry of trading causes the volume stat to spike, (raising appeal to prospectors or speculators) and by slowly (bot slowly) moving their asks out to higher price points.

This could be a hoarder or early miner getting ready to release a bunch of the silent hoarded Bitcoins into the market.  It could be a BitCoin business about to open that is "investing" in good rates.  It could be a lone local exchanger or speculator doing the exact the same thing.  We may not ever know.

But it proves one thing:

A digital currency, handled over a digital, automated, purely electronic exchange in 2011 will be run by bots.  Individuals will still be able to buy and sell as they like, but businesses, criminals, and governments (classic big money) will interact with the BitCoin economy through bots.  And yet people still think of it as "being like the stock market", with little guys running around and yelling buy/sell.

The stock market, the precious metals markets, and any other market you can think of that uses a computer or not is already traded by bots.

Bots don't always trade.  Many bots are modeling bots to help determine market trends, for instance, or tracking bots that feed data to other programs for use elsewhere in that organization's data chain.

One of the reasons it is such a powerful paradigm, is that (when written well) bots can execute highly efficient trades at speeds the human mind can barely think about.  The computer's (honestly, even a cell-phone's) ability to process data and send out orders is easily a hundred times the power of a human's by any stretch of the imagination.

We can all agree bots are a powerful tool - that much is plainly obvious.  Many people will tell you they are dangerous - and bots can be dangerous.  Certainly a bot that is buggy could cost you (theoretically as much as) 100% of your money.  Bots can be malicious, to facilitate or even operate pump-and-dump schemes.  But bots are not inherently malware.

In my mind the real dangers of bots is the fact that they are "unavailable" to the common man - BitCoin is not a currency for people who can write php, it's a currency for everyone. In that light  they can be seen as a tool to manipulate the economic system in ways that the have-nots can't, and the groups with the server-grade hardware and piles of cash are going to walk in and step all over the relatively insignificant amount of wealth represented in BitCoin (as compared to the total world economy, the target audience for BitCoin).

If BitCoin is about democracy, then the tools that we grow up around it will either support it or destroy it.  It's certainly an open enough design that the cards could come up either either way.  As human beings, we're sick of the money lenders.  We don't want some rich Wall Street guy walking out to his Ferrari with bags full of our money to drive home to his martinis and supermodels.  Banks and corporations have caught a ton of heat in the last few years, and probably for a good reason, largely because of the sense that these guys have ALL of the money and are showing record profits, and the rest of us get to eat double dip recession, popping bubbles, crashing markets, metal fevers and the ever-tightening belt.

And nothing can stop it.  We're on the verge of assistant programs that can handle human language with 95% accuracy - on your smartphone (see also: Siri / Nuance, iOS)  Bots are here to stay, now and forever, and they're impossible to get rid of.

This proves to me that the BitCoin community will require, in order to remain a democratic environment for all users of BitCoin: a library of open source bots.  Bots would obviously have to be approved as goodware before being posted to the list by whatever commission of linux programmers who live and die for that kind of stuff.  Talk to Mozilla, they've got a stake in it ideologically.

If there's a public domain mtgox script that allows a sole BitCoin owner to automatically monitor, track, and place sell orders mathematically, that bot can get a better sale or purchase price than a human - and it can do it with way less work than it would take an individual human..  If this bot were free for every man woman and child using BitCoin, overall profit margins for BitCoin users would rise.  This is an instant bonus for business.  "Guarantee" yourself a few cents profit just because you had a computer cash out your BitCoins to the free market for your local fiat, instead of setting a simple sell order yourself and wasting man-hours to do it.  Stop-loss bots to prevent the loss of excessive value in the case of sudden market swing.  Bots that allow regular people to automatically get the lowest price when buying BitCoins.  Calculates math, waits for a buy window, buys.  Calculates math, finds a good wall to sell into, sells. Calculates math, predicts trend, indicates buy point or sell point.  Outputs JSON feed, shiny animated graphs like goxlive, and tracks coins through the block chain.

But one way or another, the future of BitCoin is clear - and it looks like an army of bots.

[kjj]

Someone is buying a better rate for fees from Gox.

They waited for a nice flat floor with a little bit of space and shuffled around a bunch of BitCoins in a very constricted price range, then selling off a few at the end at slightly higher prices to recoup their at least some of their loss to fees after the flurry of trading causes the volume stat to spike, (raising appeal to prospectors or speculators) and by slowly (bot slowly) moving their asks out to higher price points.

Wait, if he can push up the price, why bother with the first part?

Buying a better rate on Gox isn't practical, because it costs more than it gains*.  So why dilute the gains from manipulating the market by first doing something that is a certain loss?  Wouldn't it make more sense to skip straight to manipulating the market?

* - This might not be true under certain rare circumstances, and depending on the exact way the discount calculation is coded by the exchange.

[IdeaMan]

Wait, if he can push up the price, why bother with the first part?

Buying a better rate on Gox isn't practical, because it costs more than it gains*.  So why dilute the gains from manipulating the market by first doing something that is a certain loss?  Wouldn't it make more sense to skip straight to manipulating the market?

* - This might not be true under certain rare circumstances, and depending on the exact way the discount calculation is coded by the exchange.

Maybe this is a high-capital scalper trying to minimize costs over the long term.  Maybe it's a business model that requires a certain rate to get off the ground.  Maybe it's an idiot who hasn't done their math (although this is relatively unlikely).  Maybe it's an early miner looking to get a good rate for a big sell-off, or a new fiat investor looking to do the same.  Maybe it's two bots going back and forth, or more than 2.  Maybe it's a HFT bot.

But these point to the same fundamental market truth - bots will rapidly become more dominant players than humans without bots.

In order to minimize the effect this has on small- to average-sized BitCoin users, the only potential solutions are:

1) Disallowing all bots on the exchanges.  It is unlikely the exchanges will ever take this step, as bots provide their customer base with more options to pay fees.

2) Leveling the playing field by releasing open-source bots to the public with the appropriate documentation to utilize them.  This is doable, but not simple.

As bots become available to the public general market behavior changes, which will scare off some investors.  Others will join the market since they now have more powerful tools available to them.

But bot behavior (while ultimately definable by the end user) is inherently more stable than human behavior due to their programmatic nature.  The more BitCoin users who use bots in the markets, the more likely the market will begin to move towards a stable price.  The closer it gets to a stable price, the less risk taken by businesses who accept it as a currency.  The less risk businesses take on using BitCoins, the greater the rate of adoption.  The greater the rate of merchant adoption, the more real purchasing value BitCoins represent.

Even humans making flawed decisions through a bot do so in a more controlled way than humans alone.

Let's take the example of an early miner or hoarder that wants to cash out some (but not all) of their BitCoins:

Without a bot, that user merely sets a price point, aims for it, and waits for transactions to execute into their price wall.  If they set the wall at a low price, they lose a ton of potential income, and risk causing a panic following a sudden price drop.  If they set the wall too high or too strong, they show their hand and sway the market away from their target price to a point lower than they wish to sell at.

With a bot, the hoarder can sell off all of their BitCoins without causing waves in the market.  The user would set a price point (or range, or average price point, or minimum price point, or moving price point), and the bot can place only the orders that will be filled immediately - thereby executing trades at a better sale price for that user without destabilizing the market and devaluing the rest of their holdings.

Let's take the example of a new investor to BitCoin:

Without a bot, that investor would follow a process very similar to the hoarder trying to sell.  Set a price point, and buy into it.  With a bot, the new investor can buy in at a price point they set, or an automatically determined one weighted against past performance and price history.  The average cost per BitCoin of the investor's entry is lower, with the result of lowering the effective barrier of entry to new money into the BitCoin economy.

Let's take the example of a local BitCoin exchanger:

In order to get the best prices on trades, without bots an exchanger has to day-trade the market heavily or take on large extended-exposure risk by holding BitCoins for a long period of time while they are volatile.  With a stable of bots to handle buying and selling, the exchanger can focus on meeting new clients or promoting BitCoins with their time instead of sitting in front of mtgoxlive.com.

Bots add to net profitability in any market.  The only question is whether or not the BitCoin community will build a suite of functional bots for the general public to use, or leave them in the realm of the big money that already uses them to dominate the other world markets.

[Desolator]

You're overstating the importance of bots.  The only inherently bad or unfair part is when they outbid you purely based on speed and get a deal you wanted.  Otherwise bots do precisely what a human tells them to so they can program it to trade fairly or like a jerk.  A human can manually set up unfair trades and scams and that sort of thing, just not as quickly.  So really the bot isn't that important.

I guess if your scheme involves 1000 trades, you'd have to use a bot but other than that, people are going to try and exploit the exchange with or without bots.

But nobody is explaining why a bot script would grab random values from a list and use them in buy orders.  That's no strategy.  It was obviously an attempt to crash the exchange.  This makes sense if you think about it.  Someone just sold off enough BTC to drop it from $11 to around $8 and then suddenly a few days later, there's a massive trade volume attack.  It was supposed to crash so everyone gets scared and sells off their BTC on mtgox.  Then when it hits like $5, the guy who originally sold off the massive amount of BTC buys it again for a lower price and waits for the price to normalize a week or two later.  Seems like the most logical explanation to me.

By the way, this was no price scheme.  This person easily lost 10x their money in fees.  That was like 1000+ cycles of their BTC.

[IdeaMan]

You're overstating the importance of bots.  The only inherently bad or unfair part is when they outbid you purely based on speed and get a deal you wanted.  Otherwise bots do precisely what a human tells them to so they can program it to trade fairly or like a jerk.  A human can manually set up unfair trades and scams and that sort of thing, just not as quickly.  So really the bot isn't that important.

I may be overstating the importance of bots.  It's possible.  But this entire thread is about a bot that may have attacked the dominant exchange, so they're at least very important in the security sense.

I guess if your scheme involves 1000 trades, you'd have to use a bot but other than that, people are going to try and exploit the exchange with or without bots.

There are plenty of other strategies that could only be executed by bot in the current environment, like stop-loss order bots.

But nobody is explaining why a bot script would grab random values from a list and use them in buy orders.  That's no strategy.  It was obviously an attempt to crash the exchange.  This makes sense if you think about it.  Someone just sold off enough BTC to drop it from $11 to around $8 and then suddenly a few days later, there's a massive trade volume attack.  It was supposed to crash so everyone gets scared and sells off their BTC on mtgox.  Then when it hits like $5, the guy who originally sold off the massive amount of BTC buys it again for a lower price and waits for the price to normalize a week or two later.  Seems like the most logical explanation to me.

This could be an actual attack on mtgox, absolutely.  That doesn't mean that it is an attack on mtgox.

By the way, this was no price scheme.  This person easily lost 10x their money in fees.  That was like 1000+ cycles of their BTC.

In order to know this you would have to know how many BitCoins they had, how much fiat they had, what fee rate they were paying, and that it was in fact one bot and not the cross-section of multiple unrelated bots.

[kjj]

You're overstating the importance of bots.  The only inherently bad or unfair part is when they outbid you purely based on speed and get a deal you wanted.  Otherwise bots do precisely what a human tells them to so they can program it to trade fairly or like a jerk.  A human can manually set up unfair trades and scams and that sort of thing, just not as quickly.  So really the bot isn't that important.

Tell me more about these unfair trades.  Start with exactly what about a trade makes it unfair.

[Desolator]

You're overstating the importance of bots.  The only inherently bad or unfair part is when they outbid you purely based on speed and get a deal you wanted.  Otherwise bots do precisely what a human tells them to so they can program it to trade fairly or like a jerk.  A human can manually set up unfair trades and scams and that sort of thing, just not as quickly.  So really the bot isn't that important.

Tell me more about these unfair trades.  Start with exactly what about a trade makes it unfair.

I'm no shady strategist so I bet I'm missing a lot simpler ideas and also, ones proposed above do not actually work out to a profit mathematically.
One basic examples would be anything that involves posting offers then buying your own offers back after whatever you were trying to do was done.  Also, making bots pretend to be multiple people to anyone watching just the anonymous stats.
One implementation of that would be let's say I operate some kind of company thing or whatever so I have 100,000 BTC sitting around.  I actually have 14 BTC sitting around myself so no, this isn't me this is hypothetical me lol.  I want to make some money using that 100,000 so I use a bot to post a ton of very close to each other groups of 50 at a couple cents above the price.  That prevents the price from going up for a few days and makes it appear, from the volume, that the price is really stable and not going to raise any time soon.  That encourages buyers to pick up some of my BTC sell offers.  As soon as 50% of the offers have succeeded or 2 days have passed, whichever happens first, that's 2 days at let's say $9.00 and quite a few people bought in at the new stabilized price since they know it's a safe time to buy when the price hasn't changed a lot lately.
Then I immediately change the sell offers at like $9.01 to $7 and drive the price down the toilet and sell off all my BTC for probably an $8.75 average on the way down since a higher number of trades would occur closer to the current price than farther away.  So then the tail end of my sell off results in let's say a $7.50 price.  Except here's the catch: my bot artificially delayed all the trade orders so they occur over several hours and it looks like a mass sell off, not just one guy offloading 50,000 coins instantly.  Everyone panics and assumes the market is crashing and sells.  Before people even have time to see the graphs, you wait for the price to bottom out from the additional sell offs then buy 100,000 coins back at a $6 ea average.  Now you're back with your 100,000 coins which you sold for an average of $8.75 and bought back for $6 just by scaring the crap out people with your bot and faking a sell off after faking 2 days of price stability.

I'm pretty sure that's what just happened a week or so ago by the way.  It was in the low $11 range for a looooong time and then someone dumped off a TON of coins and then suddenly a gigantic buy offer came in to shoot it eventually to $8.50 where it sits now.

[IdeaMan]

You're overstating the importance of bots.  The only inherently bad or unfair part is when they outbid you purely based on speed and get a deal you wanted.  Otherwise bots do precisely what a human tells them to so they can program it to trade fairly or like a jerk.  A human can manually set up unfair trades and scams and that sort of thing, just not as quickly.  So really the bot isn't that important.

Tell me more about these unfair trades.  Start with exactly what about a trade makes it unfair.

I'm no shady strategist so I bet I'm missing a lot simpler ideas and also, ones proposed above do not actually work out to a profit mathematically.

I do wonder why you are calling out a hero member as a shady strategist, but I haven't read all of kjj's posts, so he could be I guess.

One basic examples would be anything that involves posting offers then buying your own offers back after whatever you were trying to do was done.  Also, making bots pretend to be multiple people to anyone watching just the anonymous stats.
One implementation of that would be let's say I operate some kind of company thing or whatever so I have 100,000 BTC sitting around.  I actually have 14 BTC sitting around myself so no, this isn't me this is hypothetical me lol.  I want to make some money using that 100,000 so I use a bot to post a ton of very close to each other groups of 50 at a couple cents above the price.  That prevents the price from going up for a few days and makes it appear, from the volume, that the price is really stable and not going to raise any time soon.  That encourages buyers to pick up some of my BTC sell offers.  As soon as 50% of the offers have succeeded or 2 days have passed, whichever happens first, that's 2 days at let's say $9.00 and quite a few people bought in at the new stabilized price since they know it's a safe time to buy when the price hasn't changed a lot lately.
Then I immediately change the sell offers at like $9.01 to $7 and drive the price down the toilet and sell off all my BTC for probably an $8.75 average on the way down since a higher number of trades would occur closer to the current price than farther away.  So then the tail end of my sell off results in let's say a $7.50 price.  Except here's the catch: my bot artificially delayed all the trade orders so they occur over several hours and it looks like a mass sell off, not just one guy offloading 50,000 coins instantly.  Everyone panics and assumes the market is crashing and sells.  Before people even have time to see the graphs, you wait for the price to bottom out from the additional sell offs then buy 100,000 coins back at a $6 ea average.  Now you're back with your 100,000 coins which you sold for an average of $8.75 and bought back for $6 just by scaring the crap out people with your bot and faking a sell off after faking 2 days of price stability.

I love how people can claim I overstate the importance of bots, and then back it up with an example of how a bot caused a massive price shift for the benefit of the few at the expense of the many.  Ideas like this are proof that the bot paradigm needs to be seriously addressed due to it's power.

I'm pretty sure that's what just happened a week or so ago by the way.  It was in the low $11 range for a looooong time and then someone dumped off a TON of coins and then suddenly a gigantic buy offer came in to shoot it eventually to $8.50 where it sits now.

Maybe, it certainly seems like a possibility.  I think probably a bot set an ask wall to get the bid to meet it, then sold into an average price, and the $8.50 cost is "market correction" or whatever the speculative equivalent of correction is.

[kjj]

I'm no shady strategist so I bet I'm missing a lot simpler ideas and also, ones proposed above do not actually work out to a profit mathematically.

I do wonder why you are calling out a hero member as a shady strategist, but I haven't read all of kjj's posts, so he could be I guess.

I didn't read this as him calling me shady.  I just saw him saying that he wasn't shady, not in contrast to anyone, but in general.

My posting history is a mixed bag.  In one post, I'll be a complete jackass.  In the next, I'll be patient and helpful.  In the next, I'll be both.  And so on.

In the spirit of disclosure, I'll say that my join date on these forums was essentially the day that I learned more about bitcoin than just the name.  In that time, I've mined about 100 bitcoins, and I've spent about 25 of them on various things like shirts, tokens, computer parts and dollars.  I wrote and operate my own bot, which is not at all like a traditional trading bot.  It has been far more useful than profitable.  Since it started, it has made a profit of about a half bitcoin (minus the value of my time, which is apparently zero), and hasn't made a trade in several weeks.

My question to Desolator was, and remains, "What about these trades makes them unfair?".

The larger point that was I was getting at was this:  On the exchanges, each party gets to set the exact conditions for the trade.  You tell mtgox, or tradehill, or whatever, that you want to buy or sell, how many bitcoins, and the worst price you'll accept.  You never pay more than you specified when you buy, and you never get less than you asked for when you sell.

In what possible way could anyone consider a trade which happens under the exact conditions that they specify to be unfair?

[Desolator]

just FYI, they are under a phishing/account hijacking account right now just for the record and yeah, I didn't mean to imply the above ideas were shady.  I just meant that basically selling it from $9 down to $8 and then buying a bunch of them at $8 since you just drove the price down nets you exactly $0 before fees.  The only alteration in profit or loss is due to other people's trades during that time, which would have affected you in precisely the same way had you not bought or sold anything and just sat on your BTC.  The only way to profit from buying and selling is to get other people to do something that benefits you.

But just remember, my point is, a bot is not magic nor is it smart.  Bots don't create new trading strategies, humans do.  Bots are just the tools that make those trades go faster or high volume trading possible.  Not even the smartest one can actually "learn."  They pretend to learn but humans programmed them how to pretend to learn.  Every bot is just carrying out whatever idea their human owner told it to do.  So people are going to come up with some pretty evil stuff with or without a bot.

Using a bot to imitate thousands of people in a fake sell off over a short period of time when a human could never input that many trades is certainly exploitative though.

[HappyFunnyFoo]

I don't encounter problems like this when I buy and sell stocks on my REGULATED by the FEDERAL GOVERNMENT exchanges.  Hope you guys like the true reality of libertarianism!  Suck it!