Major Bitcoin Exchange Ceases Operation

Bizarre and Confusing Summary by eldavojohn · 2012-02-15 05:24 · Score: 5, Informative

... meanwhile their competitors are fighting over who gets Tradehill's customers.

Not sure where that came from, didn't find it in the Ars article. At the end they mention Mt. Gox being the only other exchange ... so there's one competitor. They didn't mention anything about fighting over customers.

Furthermore the third sentence in the Ars article was suspiciously absent from the summary:

He has pledged to open a new site once these issues have been resolved.

As well as the explanation of why all this happened (lack of proper money transmission licensing). I've asked this many times before but how do you track illegal purchases on BitCoin when, by definition, it claims to be an anonymous payment solution?

Quite simply put, no BitCoin exchange -- neither Tradehill nor Mt. Gox -- is going to be able to comply with the Bank Secrecy Act.

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My work here is dung.

Re:Bizarre and Confusing Summary by alphatel · 2012-02-15 05:25 · Score: 3, Funny

A trading firm that never actually trades, with non-existent competitors, trading a currency that doesn't exist, has gone out of business due to massive losses!

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When the foot seeks the place of the head, the line is crossed. Know your place. Keep your place. Be a shoe.
Re:Bizarre and Confusing Summary by Ogi_UnixNut · 2012-02-15 05:28 · Score: 3, Insightful

Sounds just like some of the financial trickery you hear about happening in the finance industry, doesn't it?
Re:Bizarre and Confusing Summary by Ogi_UnixNut · 2012-02-15 05:31 · Score: 3, Insightful

The Act only applies to the US though. Many places you can host an exchange. Never heard of tradehill though, so can't tell where they were based.
One of the nice things about bitcoin is that there are no real borders for it. You can trade on any exchange in the world, and use the currencty anywhere without restrictions (so a bit like cash, but without limits on how much you can take out the country, or currency conversion fees, etc...).
Re:Bizarre and Confusing Summary by iluvcapra · 2012-02-15 05:39 · Score: 4, Insightful

Quite simply put, no BitCoin exchange -- neither Tradehill nor Mt. Gox -- is going to be able to comply with the Bank Secrecy Act.
I disagree. As long as an exchange keeps identity records for all of its business and for all of the address endpoints it creates, it'd probably be able to comply with US Treasury Department regulations. Bitcoin isn't anonymous. Things only start to get murky once you are moving bitcoins around off an exchange, but that's not the exchange's problem.

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Don't blame me, I voted for Baltar.
Re:Bizarre and Confusing Summary by houstonbofh · 2012-02-15 05:40 · Score: 5, Informative

Quite simply put, no BitCoin exchange -- neither Tradehill nor Mt. Gox -- is going to be able to comply with the Bank Secrecy Act.
Totally not true. They have to record cash transactions for negotiable instruments. They have to report cash transactions over $10,000. Most of them did not deal in cash at all, but in credit or debit cards and paypal, all of which is easily recorded. The act makes no mention of tracking the negotiable instruments (bitcoin) after they are sold.
Re:Bizarre and Confusing Summary by subreality · 2012-02-15 05:41 · Score: 4, Interesting

Mt. Gox being the only other exchange
MtGox is the only exchange bigger than TradeHill, but there are lots of smaller exchanges: https://en.bitcoin.it/wiki/Category:Exchanges

Quite simply put, no BitCoin exchange -- neither Tradehill nor Mt. Gox -- is going to be able to comply with the Bank Secrecy Act.
First, Bitcoin is pseudonymous, not anonymous. Second, the important part: while it's very difficult to positively identify who sent you some Bitcoins, the exchanges know exactly who receives them, trades them back and forth to fiat currencies, and then sends them back out. They have names and bank account numbers, or they're using fiat payment services that have bank account numbers. Know Your Customer is not a problem for most exchanges.
Re:Bizarre and Confusing Summary by Wonko+the+Sane · 2012-02-15 05:42 · Score: 4, Insightful

The Act only applies to the US though.
Technically true but in practice any institution that touches dollars ends up being bound to obey US law if it wants access to the international financial system.
Re:Bizarre and Confusing Summary by tompaulco · 2012-02-15 07:19 · Score: 3, Funny

And by "print money" you mean "waste electricity while participating in a pyramid scheme that was destined to fail." Right?
Nope. Because Bitcoin is not a scheme whereby people use newcomers money to pay people who have been in the scheme longer. In fact, Bitcoin does not ask people for money at all.

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If you are not allowed to question your government then the government has answered your question.

Bitcoin's still around? by SleazyRidr · 2012-02-15 05:35 · Score: 4, Funny

I thought that Bitcoin must have ceased operating when there stopped being a slashdot story about them every day.

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Is 1563649 a prime number?

Re:Bitcoin's still around? by maxwell+demon · 2012-02-15 08:26 · Score: 4, Funny

You think that Taco left because of a lack of bitcoin articles?

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The Tao of math: The numbers you can count are not the real numbers.

Re:Oh! The huge manatee! by houstonbofh · 2012-02-15 05:41 · Score: 4, Funny

On Monday the CEO of prominent Bitcoin exchange Tradehill announced that they are shutting down.

And not a single fuck was given that day.

If everyone actually stopped fucking for a day, that would be huge news. (To everyone other than you)

Major? by sexconker · 2012-02-15 05:56 · Score: 3, Interesting

Tradehill was never a major Bitcoin exchange.
MtGox is the only one anyone ever used. Tradehill was started by some guy who got mad that MtGox was raking in the cash. He started throwing out accusations about security holes, the owner (of MtGox) not actually having all of the BitCoins backing his market, etc. Then he threw up Tradehill and it was shit.

All Bitcoin exchanges are shit. They're for speculators. Bitcoin as a currency is fine, and it will be fine if every exchange dies off.

But the protocols are still intact by adjustable_pliers · 2012-02-15 05:57 · Score: 5, Insightful

The loss of Tradehill and the security breaches of other exchanges disrupted the confidence in using Bitcoin, but the protocols remained intact. I see this as a testament to the design of the system, even though a fundamental quality for any currency is the confidence of its users.

As a Bitcoin lurker (I've never owned anything more than 2 BTC), I've been intensely fascinated in the potential of this "currency." Without belaboring the great qualities of a decentralized currency, it has attracted a speculative class of users that have rushed into centralized exchanges using nervous money transmission providers. The irony is not lost on me.

Tradehill's departure and what I believe will be an eventual international agreement hobbling Bitcoin's biggest exchange Mt. Gox in Japan (a la UBS in Switzerland), due to tax evasion, ought to serve as a cautionary note to Bitcoin users. Money transmission is a confiscatorially regulated practice. Bitcoin's best hope ought to be transactions as decentralized as the protocol it uses.

Lurkers such as I can only hope of an ecosystem or application so widespread, so diversified, secure enough, and easy to use before Bitcoin can be considered useful to most internet users. I dream of a decentralized Facebook knock-off (e.g. diaspora*, etc.) with a Bitcoin client built in, making currency transmission as simple as tossing a dollar to a friend to buy a cup of coffee. Perhaps even at a coffee shop with patrons casually swapping US$ and BTC as they play chess or read.

Tradehill were the good guys by Animats · 2012-02-15 06:08 · Score: 4, Informative

Tradehill was probably the best-run Bitcoin exchange. They didn't steal customer funds, like some of the other defunct Bitcoin services. They didn't go down much. They didn't have a monthly crisis like Mt. Gox. (formerly Magic, the Gathering Online Exchange. Really.) If Tradehill does in fact return all customer funds, at least they shut down honestly.

A basic problem with Bitcoin is that the ability to irrevocably transfer funds to anonymous parties is the scammer's dream. Bitcoin is thus a scammer magnet. Just about every known financial scam was replicated in the tiny Bitcoin world, from fake banks to fake stock exchanges to Ponzi schemes.

But there are exchanges by Sycraft-fu · 2012-02-15 06:33 · Score: 4, Insightful

Many of them. The US dollar is traded on all international currency markets and for a small scale, any bank will convert them. If it weren't, it wouldn't be very useful. If I pay someone in Europe in US dollars they are ok with that because they can convert them to Euros, which is what they need to do their business. If they couldn't, if US dollars were non-convertible, they'd be non-useful.

Also you have the problem that next to nobody accepts and deals in bitcoins directly. It isn't a functional currency. The US Dollar, the Euro, the Yen, these are all functional currencies because a lot of people will accept them as such. You can buy goods with them, pay taxes with them, etc. I cannot name a single thing I'd want to buy, a single place I shop at, that takes bitcoins. As such if they aren't convertible, they are worthless.

Why Bitcoin is doomed by betterunixthanunix · 2012-02-15 06:34 · Score: 3, Insightful

We go through this discussion every single time a Bitcoin article appears on Slashdot. Bitcoin is guaranteed to fail in the long run:

It is a digital cash system in which the tokens cannot be refreshed; this is known in crypto research community to imply that the tokens must grow linearly in the number of transactions. Bitcoin attempts to hide this fact in its architecture, but if Bitcoin is secure then the computation resources needed to continue using Bitcoin will grow over time. Worse, as more people use Bitcoin, the growth rate will accelerate because of the increased number of transactions. If Bitcoin was used at anything close to the number of dollar transactions that happen every day, the technical limitations of Bitcoin would kill it off within a week's time.

Useful digital cash systems involve a central issuing authority like a bank or government, that can accept old tokens and produce "fresh" tokens of equal value. Having such a central authority is not a bad thing:
The demand for Bitcoin will never exceed the demand for national currencies. Using the USA as an example, people who live in America must pay taxes -- taxes on income, taxes on property, sometimes taxes on purchases they make, and so forth. The government only accepts tax payments that are made in dollars, and yes, you have to pay taxes on transactions that do not involve dollars, such as barter or having a Bitcoin salary. Every year, hundreds of millions of Americans must pay their taxes, and if they were all using Bitcoin for everything, they would all simultaneously try to trade their Bitcoins for dollars to cover their tax debt. While this frequently happens with other currencies -- people paid in pounds sterling will try to make a similar trade -- all national currencies are demanded by some nation's citizens for a similar purpose, unlike Bitcoin, which nobody is legally obligated to use.

It is a good thing that nobody is obligated to use BItcoin to pay their debts, because:
Bitcoin is a deflationary currency -- there is a fixed maximum number of Bitcoins that can exist. If you had a long-term debt to repay in Bitcoins, it would be harder to make payments as time went on, because Bitcoins would become harder to find (assuming that the Bitcoin economy continues to grow, which I already noted is an unlikely event). You would be a fool to ever incur a Bitcoin debt for this very reason. Unfortunately for Bitcoin, credit is a necessary component of any economy; this has been a fact of life for so long that it not only predates paper currency, but paper itself.

So there you have it.

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Palm trees and 8

Re:Why Bitcoin is doomed by betterunixthanunix · 2012-02-15 07:14 · Score: 3, Insightful

they have already begun by taking the mining out of the default client
This makes the scalability problem even worse, since it forces you to reuse older tokens, which have already grown because of their use in previous transactions. This is not a problem that you can just hack your way around, it is a fundamental limitation of digital cash systems. Note that on the very page you linked to, they attempt to sidestep this problem by claiming that hard drive sizes will grow to accommodate their needs, which I seriously doubt unless Bitcoin remains an obscure payment system.

The black market already holds its own to the deman for national currency and the black market is growing with time - it is very likely that within the next decade or two it may outpace the regulated one. With half the world's population already employed in the black market it is not much of a stretch to think that you don't need a government to back a currency, if the incentives are right for the market to protect it itself.

It is very much a stretch to think that money can exist without government backing. If the black market stopped using national currencies, they would be forced to switch to a currency backed by some other large, powerful organization to enforce payments, and that organization would be a de facto government. Money is only valuable within some enforcement structure, which is the role that a government plays; even when banks issue currency, they rely on governments to enforce debt payments.

And you could say by the same metric that trade in physical goods, whether coins or paper bills have been a 'necessary' component ...until the digital banking started to take over in the 80's or so. Just because something has always been part of the economy does not mean that it is necessary. That is a correlation vs. causation error in thinking.
Except that we still trade in physical goods (and even if all currency were digital cash, you would still trade in physical goods -- you need food, clothing, etc.), and we have had paper transactions managed by banks for centuries (which have simply moved computers, which are more efficient record keeping systems).

At a basic level, credit is necessary in any economy because people with the skills needed to complete a task do not always have the resources needed for that task. A farmer might not have enough money to buy the fertilizer he needs for a particular growing season, a cook might not have the resources needed to start a restaurant, etc. At an even more fundamental level, you might need to work before you are able to pay the soldiers that protect you from a hostile enemy, but those soldiers need to be paid while they are busy protecting you; taxes themselves are a form of debt, and governments cannot function without tax revenue.

The unfortunate thing about Bitcoin is that people have come to associate Bitcoin with digital cash. There are plenty of other digital cash systems that have all of Bitcoin's advantages without the serious disadvantages; those systems use a bank or other token issuing authority to renew tokens that have long transaction chains (thus avoiding the scalability problem) and are easy to back with a national currency, or perhaps to use as a national currency. Anarchists may not like the idea of a bank having power over currency, but that is just how currencies work: some central authority must back the currency. I am personally a big fan of digital cash, since it would solve a lot of the security problems that we see with debit and credit cards, but because of the various crypto battles and patents in the 90s digital cash never did take off.

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Palm trees and 8
Re:Why Bitcoin is doomed by subreality · 2012-02-15 08:23 · Score: 3, Informative

which have already grown because of their use in previous transactions
This isn't actually true. Coins don't keep getting split into smaller and smaller portions forever. Every time you spend it takes several old coins and combines them into (usually) two new ones: 1, the payment you make, and 2, your "change" (which goes back in your wallet). The previous inputs are permanently combined and no longer needed going forward. The current software does not yet actually implement it, but obsolete coins CAN be "pruned" entirely, facilitated by the Merkle tree.
The blockchain will still undergo a lot of growth if more people begin using Bitcoin (since the currency base will be divided between more wallets, and there will be greater numbers of recent transactions that are not yet pruned), but it doesn't geometrically expand forever. When Bitcoin stabilizes at a certain level of market saturation the blockchain will also stabilize in size.
Whether that will be a reasonable and manageable size is still an open question.

all of Bitcoin's advantages without the serious disadvantages; those systems use a bank or other token issuing authority

I want to know that the central bank won't just start issuing more currency and devalue mine.
I want to send money to Wikileaks, but all the banks are forbidding it.
I want to pay someone over the internet without Mastercard or Paypal or whoever taking a 2% cut.
There is no other currency that currently has ALL of those advantages of Bitcoin. Some of the advantages are inherently incompatible with centralized, bank-operated currencies. It also has a long and substantial list of disadvantages too - no argument there. But on the whole it simply has a different set of tradeoffs than any other currency, and so it (or one of it's descendants; I don't expect Bitcoin is going to be the last word in decentralized e-currency) will be relevant for some time.

Re:wtf? by Anonymous Coward · 2012-02-15 07:11 · Score: 3, Informative

Bitcoin is a decentralised computer currency designed by self-righteous Ayn Rand-reading nerds who despise looters and parasites like, er, you. It is used to purchase Internet services, illegal drugs and pictures of naked women holding video cards.

Bitcoin works by an emergent synergy of cryptography, peer-to-peer, anonymity, anarchism, libertarianism, wasting stupendous quantities of electricity, the marketing department at NVidia, the enduring exchange value of tulip bulbs and doing all of this instead of Folding@Home.

Bitcoin successfully harnesses a hitherto-unexploited Internet resource: the vast reserves of unexamined privilege amongst computer programmers. Coins are “mined” by stealing them from people who are able to comprehend this level of computer science but still keep their Bitcoin wallet in plain text on a Windows machine.

The Bitcoin system is robustly designed to continue past the inevitable collapse of the US dollar and the world economy, as the Internet, fast computers and reliable electricity are all expected to be readily available when barbarian hordes are wandering the burnt-out post-apocalyptic remnants of civilisation.

It is completely incorrect to describe Bitcoin as a “pyramid scheme.” Technically, it’s a “pump-and-dump.”

Many common products are still inexplicably not purchasable with Bitcoins. “It’s like they don’t understand the revolutionary wonder of Bitcoin,” says Debian developer Hiram Nerdboy, 17. “I can’t get chicks with Bitcoins either. Even with my slickest Pick-Up Artist techniques! It’s as if my knowledge of economics, game theory and Bayesian epistemology didn’t substitute for understanding anything about people. But that’s impossible, of course. They’re probably just theists. Hold on, I just gotta post to Slashdot about this.”

Bitcoin was invented by Internet libertarians, in the spirit of freely-chosen individual interpersonal interactions that will bring about the utter collapse of the oppressive taint of the dead hand of government, in order to make money at your expense.

from http://newstechnica.com/2011/06/18/bitcoin-to-revolutionise-the-economy/

Re:Speculation is all the Bitcoin has by subreality · 2012-02-15 07:23 · Score: 4, Informative

How can I short this currency?

Right over here: https://bitcoinica.com/

Be careful. Volatility cuts both ways.

Slashdot Mirror

Major Bitcoin Exchange Ceases Operation

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