This is why Bitcoinica users must wait in line for withdrawals

[finway]

Bitconica is great,  MtGox should increase withdraw volume.

Monopoly is bad!

[1714775264]

1714775264

[zhoutong]

In my opinion, the story goes like this.

Mt. Gox User: Mark, please, I want to trade at your site. Please allow me to get a code for your site on Bitcoinica.
Mark: No, I don't want your business, because your funds come from Bitcoinica.

Practically, Mt. Gox shouldn't have a limit on Mt. Gox codes because they are how people transfer money internally to trade. Majority of Bitcoinica users want to withdraw because they want to trade on Mt. Gox.

Also, legality is irrelevant in this context. Bitcoinica can't launder money if majority of its users only use Mt. Gox codes for deposits and withdrawals. (The last "hop" of money laundering must be at Mt. Gox, where withdrawal limit applies.) I have specifically told Mark that no other withdrawal method will be used for bitcoinica_withdraw account.

[BTCurious]

Based on history, there is more reason to trust the "illegal loan entity run by a minor" than MtGox themselves. Only thing that worries me is that a lot of bitcoinica's money is in MtGox accounts. If there is such hostility towards bitcoinica, and likely future conflicts of interest, it makes me worried.

[ineededausername]

Based on history, there is more reason to trust the "illegal loan entity run by a minor" than MtGox themselves. Only thing that worries me is that a lot of bitcoinica's money is in MtGox accounts. If there is such hostility towards bitcoinica, and likely future conflicts of interest, it makes me worried.

+1.

[DeathAndTaxes]

They allow people to trade mtgox codes, and they leave all the difficult work (dealing with banks and regulations) to mtgox.

They "allow"?

In related news Amazon "allows" me to buy products from them handling all the difficult work of procurement, distribution, payment processing, and claims.

How nice of them.

[ineededausername]

This is a petty attempt at Mt. Gox to undermine a competitor.  Having 99% of the market isn't enough.

Bitcoinica is not a competitor to mtgox. They look more like a parasite of mtgox.

They allow people to trade mtgox codes, and they leave all the difficult work (dealing with banks and regulations) to mtgox.

Do you know how much Bitcoinica pays in fees? Probably a significant portion of mtgox's income.

[ThomasV]

They allow people to trade mtgox codes, and they leave all the difficult work (dealing with banks and regulations) to mtgox.

They "allow"?

In related news Amazon "allows" me to buy products from them handling all the difficult work of procurement, distribution, payment processing, and claims.

How nice of them.

err, what is your point exactly? that I should have used another verb? fine.

it remains that there is an obvious conflict of interest between mtgox and bitcoinica.
The trades that take place internally at bitcoinica are a loss of revenue for mtgox, and this will become even more obvious when mtgox offers margin trading.
I think that this "partnership" will not end well,

I am all for a diversification away from mtgox, and I think that it is actually happening; see the volume increase at tradehill, intersango.
However, I do not buy the story that bitcoinica is a "partner" of mtgox. They are just eating in mtgox's plate.

[ThomasV]

Do you know how much Bitcoinica pays in fees? Probably a significant portion of mtgox's income.

they need to transfer bitcoins to mtgox (and thus to pay fees) only when there is a statistically significant change in the positions of all their customers.
However, when trades inside bitcoinica are balanced, they do not need to pay any fees.

Trades inside bitcoinica are significantly higher in volume than what they actually trade with mtgox (at least this is what they claimed a few days after opening).

[zhoutong]

Do you know how much Bitcoinica pays in fees? Probably a significant portion of mtgox's income.

they need to transfer bitcoins to mtgox (and thus to pay fees) only when there is a statistically significant change in the positions of all their customers.
However, when trades inside bitcoinica are balanced, they do not need to pay any fees.

Trades inside bitcoinica are significantly higher in volume than what they actually trade with mtgox (at least this is what they claimed a few days after opening).

Our 30-day volume is kept constant at around 500,000 BTC at Mt. Gox. So it's about 1,300 BTC in fees every month for them.

Also, not to forget that Bitcoinica has facilitated the other sides of the trades, which generate extra fees of 2,500 BTC in total. (Assuming the average fee is 0.5%.)

Mt. Gox has made a lot (almost 4,000 BTC per month) from Bitcoinica. This is truth.

[Raoul Duke]

Do you know how much Bitcoinica pays in fees? Probably a significant portion of mtgox's income.

they need to transfer bitcoins to mtgox (and thus to pay fees) only when there is a statistically significant change in the positions of all their customers.
However, when trades inside bitcoinica are balanced, they do not need to pay any fees.

Trades inside bitcoinica are significantly higher in volume than what they actually trade with mtgox (at least this is what they claimed a few days after opening).

Our 30-day volume is kept constant at around 500,000 BTC at Mt. Gox. So it's about 1,300 BTC in fees every month for them.

Also, not to forget that Bitcoinica has facilitated the other sides of the trades, which generate extra fees of 2,500 BTC in total. (Assuming the average fee is 0.5%.)

Mt. Gox has made a lot (almost 4,000 BTC per month) from Bitcoinica. This is truth.

Would you be willing to start up as an exchange since Mt. Gox is acting like this? Clearly you know what you are doing. Copy them, before they copy you.

I think the 17 year old guy wouldn't need to copy as he has proven than he can code web-services better than Mark, who can't even manage his main business(hosting). I would like to see Mt. Gox copying Bitcoinica... And how many holes they would introduce in their website while doing it lol

[zhoutong]

Do you know how much Bitcoinica pays in fees? Probably a significant portion of mtgox's income.

they need to transfer bitcoins to mtgox (and thus to pay fees) only when there is a statistically significant change in the positions of all their customers.
However, when trades inside bitcoinica are balanced, they do not need to pay any fees.

Trades inside bitcoinica are significantly higher in volume than what they actually trade with mtgox (at least this is what they claimed a few days after opening).

Our 30-day volume is kept constant at around 500,000 BTC at Mt. Gox. So it's about 1,300 BTC in fees every month for them.

Also, not to forget that Bitcoinica has facilitated the other sides of the trades, which generate extra fees of 2,500 BTC in total. (Assuming the average fee is 0.5%.)

Mt. Gox has made a lot (almost 4,000 BTC per month) from Bitcoinica. This is truth.

Would you be willing to start up as an exchange since Mt. Gox is acting like this? Clearly you know what you are doing. Copy them, before they copy you.

Thought before. But I want to remain friendly with Mt. Gox. They are pretty good at building exchange infrastructures.

Even if I ignore the volume, Mt. Gox is still the most robust exchange in Bitcoin community. I could have built a better one, but it's simply not worth the effort to grab market share from a natural monopoly.

[ThomasV]

Our 30-day volume is kept constant at around 500,000 BTC at Mt. Gox. So it's about 1,300 BTC in fees every month for them.

Also, not to forget that Bitcoinica has facilitated the other sides of the trades, which generate extra fees of 2,500 BTC in total. (Assuming the average fee is 0.5%.)

Mt. Gox has made a lot (almost 4,000 BTC per month) from Bitcoinica. This is truth.

Hey, do not misunderstand me: I am not jugding you. All I'm saying is that, in terms of business, you are in a very uncomfortable position. The only reason why your business exists is that mtgox does not (yet) offer margin trading.

Even if your exchange pays fees to mtgox, the fact is that mtgox would get even more fees if the exchanges that take place at bitcoinica would take place at mtgox. You are litteraly eating in their plate.

If I was in your position, I would try one of the following options:
- sell Bitcoinica to mtgox. It could work, if they want to offer margin trading and have no time to develop it. Perhaps you have tried already.
- diversify into a real exchange, with bank account and deposits.

[zhoutong]

What if tomorrow Mt. Gox offers everything you offer?

Also, will you ever offer options. I need puts and calls baby!

I actually really want to see Mt. Gox's margin trading.

I'm seriously curious about any way to effectively allow margin trading while being an exchange.

Maybe I'm not intelligent enough to come up with a solution, so I want to learn from them if they can really make margin trading facility.

Options are possible for them, but I'm not sure how are they going to liquidate people.

[zhoutong]

Our 30-day volume is kept constant at around 500,000 BTC at Mt. Gox. So it's about 1,300 BTC in fees every month for them.

Also, not to forget that Bitcoinica has facilitated the other sides of the trades, which generate extra fees of 2,500 BTC in total. (Assuming the average fee is 0.5%.)

Mt. Gox has made a lot (almost 4,000 BTC per month) from Bitcoinica. This is truth.

Hey, do not misunderstand me: I am not jugding you. All I'm saying is that, in terms of business, you are in a very uncomfortable position. The only reason why your business exists is that mtgox does not (yet) offer margin trading.

Even if your exchange pays fees to mtgox, the fact is that mtgox would get even more fees if the exchanges that take place at bitcoinica would take place at mtgox. You are litteraly eating in their plate.

If I was in your position, I would try one of the following options:
- sell Bitcoinica to mtgox. It could work, if they want to offer margin trading and have no time to develop it. Perhaps you have tried already.
- diversify into a real exchange, with bank account and deposits.

Thanks for the kind suggestion. However, I do believe that Bitcoinica has benefited Mt. Gox in some ways. The average volume/balance ratio of Bitcoinica's account is much higher than average in Mt. Gox. I'm very confident about this because Bitcoinica's trading volume is highly concentrated on large price movements. People are allowed to utilize other people's money to trade at Mt. Gox for the first time.

I don't want to sell to Mt. Gox at the moment, and I believe that they have no interest to buy it either, based on the chat log published by OP.

Also, an exchange as good as Mt. Gox is hard to build. Even though I sometimes don't like their business practices and PR, I'm generally fine with their exchange system. I tried to work with TradeHill, ExchB and Crypto X Change before, but none of them gave me a better impression.

[BTCurious]

I actually really want to see Mt. Gox's margin trading.

I'm seriously curious about any way to effectively allow margin trading while being an exchange.

Maybe I'm not intelligent enough to come up with a solution, so I want to learn from them if they can really make margin trading facility.

Can't they do the exact same thing you're doing? Offer people margin trading, with automatic hedging versus other (margin) traders on the same exchange? I don't see why it wouldn't work. Am I missing something?

[2112]

I don't see why it wouldn't work. Am I missing something?

Well, to offer a "real margin trading" a "real exchange" would have to do a "real credit check". This is where the zhoutong's genius lies. He offers the fake "credit" for the fake "trades" in the currency of the far away land and not the local currency of where he lives. Thus he incurs no credit check expenses whatsoever.

I remember a quip or joke from some experienced broker long time ago. He was asked why the basic of securities and trading aren't taught in high schools. They really are that simple. His answer was "Oh, no! That would kill the markets! There wouldn't be anyone to take the stupid side of the  smart people's trades."

Some people can learn from other people's mistakes that are recorded in books stored in libraries. Other people need to learn from their own mistakes that are recorder in their own checkbook. Which way is better?

[Adam S (TradeHill)]

I tried to work with TradeHill, ExchB and Crypto X Change before, but none of them gave me a better impression.

Zhou,

At no time have you ever reached out to me or any other TH people to "work with" us.  

Regards,
Adam

[zhoutong]

I tried to work with TradeHill, ExchB and Crypto X Change before, but none of them gave me a better impression.

Zhou,

At no time have you ever reached out to me or any other TH people to "work with" us.  

Regards,
Adam

I was contacted by Jered before, and I expressed interest in partnership. I wanted to accept deposits and withdrawals from TradeHill and hedge at TradeHill. But the last message I received was about waiting for the lead developer to arrive.

MagicalTux is way more responsive than you guys.

[zhoutong]

By the way, if anyone has what it takes to build a killer exchange, email me at ryan@xwaylab.com.

I'll invest with capital, code and business straightaway.

The exchange guys don't know how to talk to people. The landscape is broken. A fix is needed.

[tvbcof]

By the way, if anyone has what it takes to build a killer exchange, email me at ryan@xwaylab.com.

I'll invest with capital, code and business straightaway.

The exchange guys don't know how to talk to people. The landscape is broken. A fix is needed.

Well placed or not, Mr. Zhou Tong has built up some credibility in my mind.  A compelling offering to me would be Bitcoin related services with said individual as a principal, and operating in an environment which is outside of the immediate influence of Western financial institutions (and the enforcement organs which they control.)  I personally don't happen to be doing anything which is illegal (as currently defined.)  It's mostly that I don't trust the stability of any of our current monetary systems and am concerned that they will act in desperate and stupid ways.  This could happen in any area, but as a Westerner, I simply wish to to be more diversified.