Bitcoin's flaw: a lesson still not learned

[Figleaf]

And I though you did all your sniping on eBay?

Peter

[andyg]

There is one real big flaw to bitcoin - it's untraceable..... for now.

If you bought something from "The Silk Road" now is the time to start worrying.

[Bimat]

Few more crazy currencies.

http://www.gobankingrates.com/checking-accounts/9-alternative-currencies-crazier-bitcoin/

Aditya

[Bimat]

Bitcoin Value Passes $400 Ahead of Virtual Currency Hearing at US Senate

The value of bitcoin has surged through the $400 barrier for the first time, as unprecedented growth sees the virtual currency's value quadruple in just three months.

Despite the the mysterious disappearance of a Chinese bitcoin exchange taking £2.5m worth of coins with it, and a theft of £660,000 worth of coins from an Australian teenager both occurring in recent days, the currency's growth shows no signs of slowing.

Similar rampant growth was seen in April this year, when the near-anonymous currency reached $266 per coin - but the upside was short-lived, as its value crashed by 50%, a matter of hours after reaching the record high.

In a week which has seen bitcoin rise from around $250 to more than $420, the billionaire Winklevoss twins revealed they expect the currency's value to increase almost 100 times, taking its market cap from around $5 billion now, to more than $400bn - they describe the currency as "Gold 2.0".

Other than increased media attention - which contributed to the spike back in April - it isn't clear why bitcoin's value has accelerated so violently over the past two weeks. Some say Baidu's acceptance of the currency to pay for its Jiasule online security and firewall service is responsible; Baidu is a Chinese internet giant offering similar service to Google.

Speaking to the Wall Street Journal, Adam Shapiro, a director at financial-services consultancy firm Promontory Financial Group, said: "Our clients have seen an uptick in interest among a wider circle than just the types of people who were early adopters in the US."

Those early adopters are now seeing enormous returns on their investments. A Norwegian man who bought £15 worth of bitcoin when the currency was formed in 2009 recently found its value to have reached more than £500,000. In the two weeks since that story broke, bitcoin's value has almost doubled.

Legislation

On 18 November, a Senate subcommittee is scheduled to hold a hearing on virtual currencies like bitcoin and its lesser-known competitors litecoin and altcoin. The hearing comes after a unit of the Treasury Department earlier this year issued guidelines stating virtual currencies should be subject to the same anti-money-laundering laws as traditional currency-transfer businesses like Western Union.

New York-based market strategist Nicholas Colas said in a report that bitcoin "has clearly withstood many challenges, and there are probably more to come. The end of the journey actually has little to do with how much bitcoin is worth, but what it might be good for."

Source: IB Times

[Bimat]

Bitcoin world in turmoil as exchange shuts down after theft

SAN FRANCISCO, February 26, 2014

Bitcoin investors and enthusiasts were in turmoil Tuesday after one of the largest exchanges of the virtual currency ceased operations amid reports of a massive theft.

Mt Gox, a Tokyo-based website that acted as a kind of Bitcoin bank was unreachable Tuesday following a leaked memo. It allowed holders to store their virtual currency there or exchange it for dollars, yen or other hard currency and had conducted hundreds of millions of dollars in transactions since its 2010 founding.

The memo, purported to come from Mt Gox management, detailed how the site may have lost some 744,000 Bitcoins to theft over several years and was on the verge of bankruptcy.

The stolen Bitcoins amount to about 6 per cent of all the Bitcoins in circulation. At peak value of 1,200 dollars per Bitcoin the lost currency represents over 893 million dollars. But the value of Bitcoin has fallen sharply in recent months, including a more than 10 per cent drop on the news of Mt Gox's trouble, and was trading at less than 500 dollars Tuesday.

"In light of recent news reports and the potential repercussions on Mt Gox's operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users," a notice on the Mt Gox website read. "We will be closely monitoring the situation and will react accordingly." Other Bitcoin exchanges sought to distance themselves from the website troubles issuing a joint statement that called Mt Gox's action "a tragic violation of the trust of users," and promising that other companies "would continue to build the future of money by making Bitcoin more secure and easy to use for consumers and merchants." The imbroglio has highlighted the supposed dangers posed by a virtual currency that is unregulated by governments. But the group of Bitcoin companies urged the adoption of a set of security standards, including independently audited security measures, transparent balance sheets and policies to not use customer balances for leveraged trading.

However, the Mt Gox incident undermined even the most ardent Bitcoin supporters.

"I do believe that this is one of the existential threats to Bitcoin that many have feared and have personally sold all my Botcoin holdings," prominent Bitcoin blogger Ryan Galt said. "I am a risk-tolerant investor, but I believe this will be catastrophic for Bitcoin, both as a currency and as a fledgling industry." Mt Gox halted withdrawals from user accounts earlier in the month, citing what it said was a flaw in Bitcoin software that potentially allowed fraudulent withdrawals.

The demise of what had been the largest Bitcoin exchange represented the deepest crisis in the history of the virtual currency which was introduced in 2009. Hailed by supporters as a revolutionary economic innovation, the coins can be traded between accounts using secret passwords which allow for near complete anonymity. Only 21 million coins can be in circulation.

Source: The Hindu

[Figleaf]

Of course, there are plenty of wannabe bit coins. One of these is winning notoriety, thanks to a US rapper whose name, Kanye. West, was new to me.

The individuals behind the idea apparently decided to make every mistake possible, including choosing a non-neutral name and designing a picture of what a 3-d "coinye" would look like, clearly a caricature of Mr. West. This mobilised a fearsome US army of lawyers, who sent threatening letters to everyone involved with the coinye thingy they could find on the internet (probably charging Mr. West some $100 per letter plus $1000 per hour for research )

The coinye people didn't change the name, but replaced the caricature by a hybrid fish that looks more generic and fatter, but reminds you of Mr. West if you know the history behind it. The fish refers to a "South Park" joke. In one episode, a West caricature is the only one who doesn't get a joke on fish having oral sex. The West character gets angry and pontificates that he is the "the voice of a generation" and "a genius". Mr. West's lawyers must have been delirious with joy: another mountain of Mr. West's money moving their way.

Now, the characters behind the coinye have a face: unconcerned Dutch student Robbie Hontelé, probably without a penny to his name. Who cares. Mr. West still has lots of pennies. Meanwhile, coinye gets loads of free publicity and Mr. West looks as funny as ever (as well as politically incorrect in that coat).

Peter

[Figleaf]

I am picking up rumours that the terrorists behind the recent attacks in Paris have been using bitcoins for payments. If so, that would have serious implications.

Peter

[Figleaf]

A decade later. The sector has grown fast and wild. Many new "coins" were issued, so the new name for the sector became crypto currencies. New billionaires with vast amounts of crypto currencies flocked to hangouts in the US and Asia to be weird together. From time to time, a crypto coin fell over and a few fools lost their life savings, terrorists, blackmailers and ransomware stingers switched to crypto, but there were also some genuine success stories. Still, crypto failed to become a currency.

In general, Crypto did not intrude into professional investment portfolios on a significant scale. It was mostly considered an equivalent to gold with an even higher risk and return profile.

Governments one by one started taxing crypto like other capital market goods, but otherwise considered the sector too small for detailed regulation. The sector gratefully responded with a plethora of shady offshore intermediaries, not subject to much regulation and pushed by wild advertising, up to and including aggressive spam and URL squatting.

Now, the lack of regulation has come to haunt the sector. The combination of the end of COVID-19. the Russian war and the return of inflation made some of the smarter investors edgy. They started selling in a tight market a few months back. A threatening bank run was prevented by some big players, pumping liquidity in the system.

It seems that it wasn't enough. Since mid-November, the third largest crypto exchange (fancy name for a specialised crypto trader), FTX, is in fact bankrupt. Investors big and small stand to lose very large amounts of money. The company was based on the Bahamas, covered by virtually no legislation and now, when it is too late, a suspect in FBI investigations.

That's no longer the end of the story. Persistent signs point at the possibility that Genesis Trading will be next. While FTX is a retailer, Genesis is the global top wholesaler. It is difficult even to find out which law system applies to them, though Iceland seems to be a good candidate. Crypto true believers are in for a big shock if Genesis falls. Will regulators wake up at last?

Peter