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Author Topic: How protected is the GLBSE from a pirate default?  (Read 3674 times)
bitcoiners
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June 11, 2012, 01:23:30 AM
 #1

What happens if pirate defaults and half of the GLBSE becomes worthless?  Is my money safe?  Are my other stocks/bonds safe?

I've decided to sell my final pirate bonds and be done with it.  It's too risky for me.  But over half of the glbse is invested.  I'm sure mining operators are invested as well.  Maybe even Nefario.  What would happen should pirate default?  Is there a contingency plan if your servers are overloaded or there is a bank run?

It just seems like a lot of money is invested in this Pirate fund.  I'd like to know as a non-pirate investor.  Is my money safe?

No one else is wondering this?
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June 11, 2012, 01:37:00 AM
 #2

You need to understand that it is investment money you talking about and in every investment their is risk .
But i know for sure that you'r money are more in risk when their in you'r bank of some imaginary paper asset that pays you 2% yearly with inflation of 15 % (informal of course).
use bitcoins ,and invest in bitcoins that way you can convert you'r assets to any form of papers or metals or services or goods that is why we need "money",bitcoins i mean. : Cheesy Cheesy for more info you can visit my website at: btcwallet.org

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June 11, 2012, 01:38:42 AM
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I don't see how a pirate default would effect anything outside of the pass-thru bonds on the exchange. 

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XertroV
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June 11, 2012, 01:39:34 AM
 #4

If Pirate defaults then all the PPT.X, PPT.DIV, FOO.PPPPT, etc will become worthless. If Pirate only half-defaults and gives some coins back then some of them will not be worthless, but their value will drop to a proportionate amount.

If a default happens then everyone loses their money; hopefully nobody is unethically holding other people's funds in a BS&T account to get some easy interest - if that's happening then the shit will hit the fan for those involved. If half the GLBSE bonds crash, GLBSE itself won't be negatively affected, but there will be a lot of people with a lot of worthless things associated with their account because they can't sell them.

GLBSE won't have 'a bank run'. It doesn't work like that. People might try and sell all their *PPT* stuff, but if nobody wants to buy it then they're just stuck with it. There's no real need to withdraw everything from GLBSE in that case. However, if people do try and withdraw everything, then there shouldn't be any issue at all if Nefario has been holding users' funds ethically. GLBSE is not a lending institution.

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Is my money safe?
What money are you referring to? Any coins in GLBSE won't shouldn't be affected by a default.

I think a lot of people are thinking this; I recently sold anything I had to do with PPT. People are aware that it's unsustainable.
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June 11, 2012, 01:47:41 AM
 #5

None of the funds raised from the various pirate offerings are even held by GLBSE. Those funds are withdrawn and sent to Pirate for whatever it is he's doing. If those assets crash it will have no impact at all on the investors account balances.

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June 11, 2012, 01:51:48 AM
 #6

It's all very scary since there are absolutely no laws or regulations managing anything pirate is doing. He could get up and decide all this money is his overnight, steal it all and completely disappear and nobody would ever find him. It's strange the amount of money people are just trusting this random dude on the internet with. Where the hell did he even come from and why does he have all this apparent trust?
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June 11, 2012, 02:00:30 AM
 #7

First, a single default does not mean total default.   It depends on what income was backing that income.

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June 11, 2012, 02:06:02 AM
 #8

If half the GLBSE bonds crash, GLBSE itself won't be negatively affected, but there will be a lot of people with a lot of worthless things associated with their account because they can't sell them.

I appreciate yours and everyone's comments and thoughts.  Keep them coming.

I do disagree with you on this point though.  I think the GLBSE will be negatively affected.  The GLBSE economy is still young and fragile.  It is currently illiquid.  With all that money gone, I think it would affect trading negatively.

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Is my money safe?
Quote
What money are you referring to?

Stocks, bonds, bitcoins, it's all money to me.

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Any coins in GLBSE won't shouldn't be affected by a default.

Let's hope not, huh!

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people are aware that it's unsustainable.

I'm not saying that they aren't.  Just opening dialogue.  Smiley

Cheers.
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June 11, 2012, 02:59:14 AM
 #9

It's all very scary since there are absolutely no laws or regulations managing anything pirate is doing. He could get up and decide all this money is his overnight, steal it all and completely disappear and nobody would ever find him. It's strange the amount of money people are just trusting this random dude on the internet with. Where the hell did he even come from and why does he have all this apparent trust?

Because he is awesome !

He is not anonymous and everybody knows him and his real identity.

He won't default any time soon mate so chillax !
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June 11, 2012, 04:35:21 AM
 #10

It's all very scary since there are absolutely no laws or regulations managing anything pirate is doing. He could get up and decide all this money is his overnight, steal it all and completely disappear and nobody would ever find him. It's strange the amount of money people are just trusting this random dude on the internet with. Where the hell did he even come from and why does he have all this apparent trust?

Because he is awesome !

He is not anonymous and everybody knows him and his real identity.

He won't default any time soon mate so chillax !

What do you mean he's not anonymous? Care to explain who he is?
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June 11, 2012, 04:49:48 AM
 #11


If you hold PPT-series products, you get 25% insurance, but this is not official, I might have that number wrong.

That is accurate. Still, if you were to put coins into it now, only if pirate defaulted in 5 months’ time would you have little/no losses:



The principle with pirate would quadruple in that period of time.


However, isn't that the same risk as anything else? Just because we do not understand Pirate's business does not mean he will default. It increases our fear of that occurring, yes, but it is not a logical deduction.

Not logical? I think it's pretty logical; well, at least that the interest rate will be forced to decrease. 7% a week is >2000% a year, and given that you can't manufacture bitcoins, the sheer fraction of all bitcoins that would need to be passing through pirate cast a dubious light on how long this can continue. (That's ignoring that starting with 100,00 btc today - which seems reasonable - in 17 months there will be more btc owed than in existence, presuming reinvestment of interest.)
It is necessary for pirate to default or force payouts at some point, simply so he's not sitting on most of the bitcoin economy, and since the chance of that increases with time, it is logical to assign the probability of default a higher chance as time goes by.
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June 11, 2012, 05:23:38 AM
 #12

It's about 3,000% actually. Anyways, pirate does not have an open door policy. You can see the demand is exceeding supply on the PPT.x series which habitually sells up to 1.05 bid. It's a nice immediate kick in the pants profit for the owners. If I had a pirate account, I'd do it too.

3372% after 52 weeks, so yeah, much more than 2000%.

He does and he doesn't; my understanding is everyone is open to reinvest their profits, which is not as closed as forcing them to payout their profits (which is far more sustainable, since the amount of principle doesn't change).

There's no denying that they're making a fair return on all that, and I suppose if they're not reinvesting that profit into pirate then the rate of growth of capital in BS&T might drag things out a little longer. And the reinvestment level available through PPT bonds is fairly limited, which will keep things a little more under control as well.
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June 11, 2012, 09:18:31 AM
 #13


When the FBI comes to break down pirate's door, GLBSE is quite certain to get affected.

    - all the pass-thru bonds will become worthless
    - GPUMax will stop, which means many mining bond's yield wills go down and therefore their price
    - many of the large miners who have a chunk of their net worth with pirate might become insolvent.
    - if GLBSE owners participate in pirate's scheme as well, let us just say : ouch.

In other words, the exposure of GLBSE to pirate's scheme is certainly
large, but it's quite impossible to fathom given the secrecy around the
scheme: no one but pirate knows how large it is and who participates.


If we're going to talk about indirect consequences, though, maybe we should talk about how protected BTC is from a Pirate default. Pirate has hundreds of thousands of dollars worth of BTC, now. BTC market cap is ~$50m -- that includes coins (potentially a very large amount) which aren't at all involved in the BTC economy, yet.

Loss of GPUMax -> GPU mining less profitable (this'd come on the heels of the block reward halving, and ASICs coming in 2013 -- GPUMoney was supposed to have contingency plans to keep GPU hashing there profitable, even if BTC mining wasn't)
Loss of Pirate -> Miners (including GLBSE-listed organizations) may default -> various funds may collapse
Lendees who do Pirate arb will likely default -> lenders may default (those with significant liabilities, anyway) -> various funds and bonds may collapse

What happens from there will be interesting. Will investors have the outside capital and be resilient enough to continue on with BTC, perhaps buying back in? I'd guess it'd be a massive blow to morale (as an effect of a blow to profits) for a large portion of those using the BTC they've purchased for investment. Pirate may also sell the coins he's collected at that time, if he hasn't already. It could set crowdfunding way, way back, and for those with a large chunk in BTC investments, but not much USD, could cause them to cash out and drop Bitcoin entirely. It may cause a significant decline in the BTC exchange rate. Currently, almost nobody accounts for what they're doing -- with the rate Pirate offers, almost any business venture could be doing arb, and giving investors a minor amount of that and a pat on the head. Even for those of us who do disclose what we do, there's not much way to verify it. It's all online or on paper. It's not like I can point to a rental unit and say "yup, that's ours. Here's my key. We walk in, and everyone respects my claim on this property. Here are the checks we collected from last month." It's "nobody contests with my claim on the property I say I own, though nobody would really be able to, anyway." Even for those with services like BitCoinTorrentz (and I use them only for the sake of needing a name), they could be putting everything they earn in a Pirate account until it's time to pay dividends, when they pay only principal on what they put in Pirate. We have no idea how deep it goes, it's very difficult to verify someone's ownership of what they say, and that's what allows semi-drunken BS speculative posts like my own right here. It seems ironic, though, that Bitcoin, based on a zero-trust philosophy, currently requires full-trust for actual commerce (even if that full trust is placed in an escrow service, or perhaps later, an "independent" auditor).

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June 11, 2012, 09:26:27 AM
 #14

It could be done via "open wallets" - disclosing each and every address you use for your business and using addresses as accounts like in accounting.

Combined with CoinControl patches, this could enable you to do proper open book accounting and the only thing needed to trust you is that these are really your addresses (and all of your addresses).

Pirate defaulting though would in my opinion rather have a psychological factor than real implications on GLBSE (aside from pass through products) and might be a nice "cleansing" and test for people claiming to have 0 pirate exposure.

Maybe we should create a listing of all assets and let asset owners confirm how much pirate exposure they currently have? Then, if it turns out they were lying, there might be the possibility to sue.

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June 11, 2012, 09:37:40 AM
 #15

there's some huge bitcoin crash ahead of us for sure. Bitcoin is totally unregulated. No one knows when shit will hit the fan, but it will for sure. Just take your popcorn, sit down and watch  Grin Meanwhile you can earn some nice profit Cool
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June 11, 2012, 09:38:55 AM
 #16



http://bitcoinmagazine.net/ponzi-schemes-the-danger-of-high-interest-savings-funds/

for what it worth

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June 11, 2012, 12:13:35 PM
 #17

Quote
It's all very scary since there are absolutely no laws or regulations managing anything pirate is doing.

What did you expect to freedom tastes like? Something warm, softy, sweet and pink?
Freedom sucks with out the law, police, governments and the army  Roll Eyes

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June 11, 2012, 12:26:29 PM
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Will GLBSE be able to handle the traffic/server load caused by panic selling and people watching the panic selling?


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June 11, 2012, 03:25:19 PM
 #19

I personally don't invest in any assets on GLBSE or outside GLBSE apart from GLBSE itself (this has been my only investment in terms of time and money).

GLBSE as a whole does not invest in anything except GLBSE.

I and GLBSE are not invested in any way with BS&T or any of it's pass through bonds,shares whatever.

Is your BTC that is held in GLBSE safe?

Whatever the BTC balance is of your account is what we have in cold storage (of course, this number is the sum of all BTC account balances on GLBSE).

If there is a "run", i.e. if EVERYONE on GLBSE wished to withdraw all their BTC at the same time there would be a delay of one or two hours, as large withdrawal requests are checked and funds dropped into the hot wallet to fund these. Every bitcent and satoishi would be returned.

Regarding the effect of a complete default of BS&T, I believe it would have a negative knockon effect on the entire bitcoin economy in the same way the sub-prime mortgages fiasco effected stock markets around the world.

There would be something of a recession on GLBSE, and I think as a result trade volume would probably reduce(which means that GLBSE's revenue would also reduce).

The upside to all this is that uncompetitive businesses (that are involved) would probably close and capital would begin to be more effectively allocated to the productive parts of the bitcoin economy.

It would mean that there would be more funds available for new ideas and technologies instead of being wasted or tied up in an unproductive area of the economy.

I love markets, and they will previal.

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June 11, 2012, 11:42:26 PM
 #20

Quote
It's all very scary since there are absolutely no laws or regulations managing anything pirate is doing.

What did you expect to freedom tastes like? Something warm, softy, sweet and pink?
Freedom sucks with out the law, police, governments and the army  Roll Eyes

I agree and I have no quarrel with that but I am just very much confused with why there is so much trust flying around for this person when I've yet to see what he's done to deserve any of it.
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