Bitcoin virtual currency is on verge of collapse

[True Federalist (진정한 연방 주의자)]

http://www.latimes.com/business/la-fi-bitcoin-collapse-20140226,0,5968430.story

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A bit hyperbolic on the headline, but this latest incident exemplifies a major problem all these stateless virtual currencies have.  Not as big as the fact that they aren't backed by anything at all, not even a government's promise to accept them as a means of paying taxes and fees, but still a fairly major one.  However, there are enough delusional people who for various reasons want a stateless virtual currency that I don't see even this leading to a total collapse.

[compson III]

The only reason the bubble hasn't already popped is speculators (like me) are staying out for fear of counter-party risk.

[MASHED POTATOES. VOTE!]

Is that the thing you're paying with on the deep internet?

[PiMp DaDdy FitzGerald]

But muh freedom.

[President Tyrion]

The interesting thing about all this is that it really isn't the currency itself that's the issue, but the stability in the currency "trading houses".

The funny thing is that it's basically a pyramid scheme* and a large scale money laundering operation** at the same time.

*The pyramid scheme, in my mind, is that it's a deflationary currency, so the value will continue to increase so long as new members are "recruited". The moment that bitcoin loses some of its ability to grow a base, then its price sinks. And it's extremely, extremely profitable for the early adopters.

**The amount of illegal activities perpetrated by this unregulated currency is astounding.

[Adam Griffin]

Allow me to say that I have some experience with the currency, and first adopted it back in 2011. The currency is fine. You see a lot of media outlets lately with headlines like "Bitcoin is dead" and misleading quotes such as "Bitcoins can be duplicated", "The market has crashed", "they were supposed to be unhackable but apparently can be easily hacked" and so forth. None of that is actually true if you have been around the currency for more than a couple of months and actually understand how the currency functions.

Mt Gox was initially the only real place you could trade BTC; until about a year ago, more than 90% of all BTC trading was on Gox. BTC exploded, though, and Gox's actual significance in terms of trading as a % of the market became pretty darn insignificant. That 90% they were getting two years ago wouldn't equal 10% of the market today. They were hovering between 2nd and 3rd largest exchange before the latest round of drama occurred. Outside of hype, trust, tradition and reputation, Gox meant nothing for Bitcoin for months, save the ability to drag down its price whenever something went wrong there.

Three main issues have presented themselves recently:

1) a variety of prosecutions of underworld activists by (mainly) US authorities that have been running sites such as Silk Road; the first one got busted (which was actually the trigger in retrospect for the most recent bubble), and the Silk Road 2.0 that deployed after it being hacked

2) a vulnerability in currency exchange systems that was actually identified approximately two years ago (and Mt Gox never bothered to fix) that can result in the exchange crediting a user with BTC from their main source while simultaneously never allowing the actual transaction to go through on the user's end. Basically, this led to Gox suddenly realizing that it had way less BTC than it had thought.

3) A variety of sophisticated hacking incidents. It is said that Gox went through this, but it wouldn't surprise me if that's a convenient excuse for the damage caused by #2. People tried to say that the coin's promises of being "unhackable" are invalid because of all of these news stories. This isn't true: Bitcoins can't be "hacked" unless you are running an exchange with outdated scripts and a weak interface that allow long-known exploits to take advantage, and they can only be stolen in the same way that any form of electronic information or data can be: by having sh**tty security on your computer or whatever device on which the coins reside.

The coin isn't "crashing"; I've beat myself over the head because of some holdings that I let go of around two years ago. After all of this "crashing" that has occurred that apparently spells the end of the coin, I'd still be worth ~$300k had I held onto the initial $1,000 investment I made. The coins are still worth more than twice what they were at the peak of the first bubble that began roughly a year ago, and the most recent bubble pushed that market five times higher than the first bubble did.

And yes, this is my one true weakness when it comes to libertarian tendencies. Just get out before it pops and jump back on before the media notices the next bubble forming, or hold for a couple of years with some acknowledged risk.

[King]

Libertarians said this is how money would work without that nasty Federal Reserve.

[I spent the winter writing songs about getting better]

Libertarians said this is how money would work without that nasty Federal Reserve.

Yeah crashing or not a currency this unstable is not what I would regard as ideal.

[DC Al Fine]

Good riddance, it was so hard dealing heroine in such a volatile currency.

[True Federalist (진정한 연방 주의자)]

Good riddance, it was so hard dealing heroine in such a volatile currency.

Yeah.  I never knew if I had enough for Princess Leia in the Hutt slave girl outfit or only in the Empire Strikes Back outfit.

[Sec. of State Superique]

Thank god!

[DC Al Fine]

Good riddance, it was so hard dealing heroine in such a volatile currency.

Yeah.  I never knew if I had enough for Princess Leia in the Hutt slave girl outfit or only in the Empire Strikes Back outfit.