Bitcoin, flash in the pan or boondoggle?

[rubato]

Now that it has hit the popular consciousness as the medium of exchange which allowed "silk road", a site for trading illegal drugs, to operate what should we think about it?

On the plus side it is a medium of exchange which cuts transaction fees by a lot compared to using any regular currency via credit card or paypal. On the downside any medium of exchange only exists as long as both buyers and sellers agree that it is worth something. It is a form of mutual delusion if you like. Unlike a national currency, or even the Euro, there is no government out there who agrees in advance to accept bitcoins in payment of taxes and fees and so there is no floor to the value of bitcoins should the collective delusion stop being widely persuasive.

The creators were like gold bugs who only understand one thing about money; that you have to control the total supply lest you wind up with Weimar or Zimbabwean hyperinflation. Bu they don't 'get' the second part where someone asks why anyone would believe that it has independent value.

If there is nothing to stop a run on the bank and there is a positive reason for someone to bet it will happen, by shorting bitcoins for example, it is almost certain to occur.

I can always be persuaded otherwise but for the moment I wouldn't leave any value in bitcoins beyond what I could burn up and not miss.


yrs,
rubato

[oldr_n_wsr]

credit cards and paypal serve me fine. No need for me to use bitcoins. Sounds like a scam in the making (if not already).

[Crackpot]

Bitcoin is no more or less a scams than any other form of currency. It's value is what it's preceived to be.

[rubato]

I'm leaning further towards "boondoggle" and a big bitch-slap to the Libertarians who promoted it. Apparently, a viable currency needs a government to back it up and provide it with stabile value.


http://money.cnn.com/2014/02/25/technol ... x-bitcoin/

Mt.Gox site disappears, Bitcoin future in doubt
By Jose Pagliery @Jose_Pagliery February 25, 2014: 9:45 AM ET

mt gox karpeles

Mt.Gox CEO Mark Karpeles has resigned from the Bitcoin Foundation, the currency's top advocacy group.


NEW YORK (CNNMoney)
What was once the world's largest trading platform for bitcoins is now a blank page.

The Bitcoin-trading website Mt.Gox was taken offline late Monday, putting at risk millions of dollars put there by investors who gambled on the digital currency. The exchange also deleted all of its tweets, and Mt.Gox CEO Mark Karpeles resigned from the Bitcoin Foundation's board of directors on Sunday.

The news frightened Bitcoin investors elsewhere, knocking the price down about 3% to $490 -- its lowest level since November.

For now, there's no telling what's behind the shutdown. Mt.Gox did not respond to requests for comment.

However, an unverified document called "Crisis Strategy Draft" that is being circulated online claims Mt.Gox has lost 744,408 of its users' bitcoins, worth nearly $367 million. It also claims Mt.Gox is planning to rebrand itself as Gox.

Mt.Gox has been mired in problems ever since Feb. 7, when it halted withdrawals from its trading accounts. The company's computer programmers hadn't accounted for a quirk in the way Bitcoin works, allowing cyber attackers to dupe Mt.Gox with a scheme resembling receipt fraud. When Mt.Gox discovered it was under attack, it stopped any investors from pulling their money out of their trading platform -- but it has yet to allow them access to their money.

By the time trading at Mt.Gox was halted entirely late Monday, the price of a Bitcoin there had dropped significantly, to $130. Meanwhile it was trading for more than four times that on other exchanges.

Late on Monday, several other Bitcoin exchanges sought to reassure investors and took a harder line with Mt. Gox.

"This tragic violation of the trust of users of Mt.Gox was the result of one company's abhorrent actions and does not reflect the resilience or value of Bitcoin and the digital currency industry," the groups said in a statement. ..."

A national currency does not depend entirely on the 'faith' of other people since the issuing country is required to accept their own currency in payment of debt or taxes.

yrs,
rubato

[rubato]

Bitcoins, btw, are an example of an interesting experiment in creating an extragovernmental medium of exchange.




yrs,
rubato

[Lord Jim]

I had never thought much of the whole bitcoin thing, but it after seeing rube's criticism of it, I thought there might be some value in investing in a little; (I have great confidence in rube's judgement as a barometer for decision making; he's almost never right.)

However I'm glad I held off this time; from the looks of things he appears to have stumbled on to an acorn...

[rubato]

You gotta love this story. It really illustrates the staying power of a delusion once people have given in to it. $500,000,000 in assets disappears w/o a trace and they are still defending it.

Now, as mentioned in the OP, and many other places, all mediums of exchange depend on the belief of the users that they are valuable and will retain their value in the future. To the average person this kind of thing rather undercuts that belief in "Bitcoins" (and its competitors) so I am a bit in awe of the disconnection from reality evidenced by Bitcoin users reactions to this. "And then we'll buy more."



http://www.reuters.com/article/2014/02/ ... FX20140228

(Reuters) - Mt. Gox, once the world's biggest bitcoin exchange, filed for bankruptcy protection in Japan on Friday, saying it may have lost nearly half a billion dollars worth of the virtual coins due to hacking into its faulty computer system.

The collapse caps a tumultuous few weeks in which the company has remained virtually silent after halting trades of the crypto-currency, shaking the nascent but burgeoning bitcoin community.

Wearing a suit instead of his customary T-shirt, Mt. Gox's French CEO Mark Karpeles bowed in contrition and apologized in Japanese at a news conference at the Tokyo District Court, blaming his firm's collapse on a "weakness in our system", but predicting that bitcoin would continue to grow.

"First of all, I'm very sorry," he said. "The bitcoin industry is healthy and it is growing. It will continue, and reducing the impact is the most important point."

Many bitcoin market participants have said Mt. Gox's problems were specific to the company and were caused by what they said was a lax attitude by Karpeles, while bitcoin itself - free of any central bank control - was still a noble venture.

"Bitcoin has always been volatile and speculative, said bitcoin user Ken Shishido, who had about a tenth of his bitcoin holdings at Mt. Gox, but has seen the rest of his bitcoins soar tenfold since he began trading 18 months ago.

"It's too bad that this happened, but we have to let it go. And then we'll buy more."

yrs,
rubato