Drug Site Silk Road Says It Will Survive Bitcoin's Volatility

Sparrowvsrevolution writes "Bitcoin's recent spike and then collapse in value has convinced many that it's too unstable to use as a practical currency. But not the founder of Silk Road, the black market drug site that exclusively accepts Bitcoin in exchange for heroin, cocaine and practically every other drug imaginable. Silk Road's creator, who calls himself the Dread Pirate Roberts, broke his usual media silence to issue a short statement that Silk Road will survive Bitcoin's bubble and bust. The market's prices are generally pegged to the dollar, with prices in Bitcoin fluctuating to account for movements in the exchange rate. And Roberts explained that vendors on the site have the option to also hedge the Bitcoins that buyers place in escrow for their products, so that they can't lose money due to Bitcoin's volatility while the drugs are in the mail. As a result, only about 1,000 of the site's more than 11,000 product listings were taken down during the recent crash."

Comments

Speculation

[Errol backfiring]

Why blame the victim? The rise and fall in price (PLEASE, not "value". There's a difference, you know) is due to speculation, not to the currency itself. Dollars, euros and other fiat currency are just as vulnerable.

Re:Speculation

[Greyfox]

And Gold. Fox news was the agent of a massive pump-up in the price of gold over the last couple years, looks like that bubble is now bursting too.

Re:Speculation

[Anonymous Coward]

Any time I listen to Glenn Beck or Rush Limbaugh or Hannity, there are constant commercials for people selling gold. I think it speak a lot towards the type of people that listen to these jacknuts that the advertisers have identified them as a target demographic. Those talk show entertainers should have their asses sued for ruining the life savings of many, many gullible old people.

Re:Speculation

[alexander_686]

No they are not.

“Dollars, euros and other fiat currencies” have central banks that can intervene and do try to manage the currency. When inflation / deflation spikes they can create / destroy currency, money, and near money. (Does this mean they can debase the currency, unlike BitCoin? Yes)

Gold, which I think is more like BitCoin, has the advantage of – for the lack of a better word – mass – that resists rapid changes. A wide user base, lots of the stuff gathering dust in vaults or grandma’s jewelry.

Both have deep forward and futures market they also lend long term stability. Maybe one day BitCoin will get there – but right now it is an interesting experiment in my opinion.

Re:Speculation

[sribe]

Dollars, euros and other fiat currency are just as vulnerable.

Bullshit! Currencies backed by the economic activity of entire 1st-world nations are nowhere near as vulnerable.

Re:Speculation

[h4rr4r]

They are, the full faith and credit of the USA.
Bitcoins have the network backing them as their source of value.

One of these is easy to replicate the other is not.

Re:Speculation

[petermgreen]

Massive ammounts of contracts are written for pre-determined ammounts of dollars, euros, pounds etc. That makes the value of those currencies somewhat "sticky", yes it does change over time but usually fairly slowly. If it changes too rapidly governments will sometimes step in to halt the shift.(e.g. http://www.guardian.co.uk/business/2011/sep/06/switzerland-pegs-swiss-franc-euro )

Bitcoin has none of that, it just floats to whereever supply and demand take it. Speculators consistute some of that supply and demand but not all of it. Depending on their strategy they may either increase or decrease volatility

Re:Speculation

[tehcyder]

There is a direct correlation between having insane rightwing views and believing that a return to the Gold Standard will usher in a new kingdom of heaven on Earth.

Re:Speculation

[O('_')O_Bush]

That is mostly bullshit. Gold has some intrinsic value, but the vast majority of gold's value is inflated by speculators and wealth storage (bullion, futures, jewelry). What you are claiming is not dissimilar to saying the greenback with never hyperinflate because of the intrinsic value of the paper it is printed on.

Looking at historical gold prices, I'd estimate that if gold was priced on intrinsic value alone, cost per oz would be less than a tenth of what it is.

Re:Speculation

[Nadaka]

Its backed by the value of the sexual favors your wife/girlfriend/hooker will perform in exchange for jewelry.

Re:Speculation

[Anonymous Coward]

I don't think any of them thinks it brings wealth. Equality perhaps, but not wealth.

Re:Speculation

[Archangel Michael]

Equality of results (not equality of opportunity) which is their version of "Utopia", and impossible, and tyranny of a sort. It punishes success, rewards failure, by definition.

I believe in equal opportunity, given that is possible, in a truly fair and just society. Look, I have as much if not more problem with our current justice system as most left wingers. It isn't fair. There is too much cronyism, on both sides of the isle.

Re:Speculation

[Archangel Michael]

"Providing" basic needs, means they don't have to provide for themselves. And you think that is humane, but it is the worst kind of tyranny, dependance. There is a reason why National Parks posts signs saying "don't feed the bears". Why we recognize this with bears and not humans is baffling.

Taking from productive members of society, by threat of force, to provide for people unwilling to provide for themselves, is the tyranny I speak of . Do you think that is okay?

Re:Speculation

[sarysa]

Really? A dollar is only worth what you can buy with it. It can become nearly worthless overnight. It is only paper and your faith in it is all that gives it value.

That's a foolish and tired cliche. It has centuries of history. People realize that society would collapse if we just gave up on the dollar overnight. I'm no fan of our current president but I certainly know that the checks and balances in our system would make it virtually impossible for his administration to ruin the currency. (fears which propped up gold) There is apocalyptic military might backing it up. People have been making that argument since we went off the gold standard (not the first time in U.S. history, btw...was a common practice during wartime) and most realize these things (at least subconsciously) and rest easy that their fellow citizens will not allow the economy to spontaneously combust and return to the barter system.

Unless you're a college student who is just waking up to how the world works, it's ridiculous to make that statement. Adults will simply reply: We know, and we don't care.

Re:Speculation

[Anonymous Coward]

There's a difference between providing services where society benefits from universal coverage and costs go down and a welfare state where unproductive members of society are entirely carried by the productive members. Entirely idealistic Socialism is just as wrong as entirely idealistic Capitalism. What we need is a pragmatic approach to finding the correct balance.

What people seem to forget when they're complaining about socialism is that they've already bought into it. Taxes pay for our police, firemen, military, road construction and a whole crapton of other services where allowing privatization creates chaos and introduces a ton of inefficiency into the system. Early America didn't have these government-run systems and realized very quickly why that was a bad idea. There were instances of fire engines sitting outside of burning buildings because the building wasn't a subscriber to their service. But they had to respond anyways in case the fire spread to the neighboring buildings, which were subscribers. And just imagine a world with multiple police forces or multiple street providers...navigating around town would require subscribing to multiple services and traffic laws would depend which law enforcement was patrolling which streets.

The question isn't whether universal health care is socialist...it is. The question should be whether the current, privatized system introduces enough inefficiency to merit a single, unified system. It should be whether having a partially-insured populace has enough of a negative effect on the entire population to justify requiring everyone to be covered. It's an entirely pragmatic question that can be answered with data...are nationalized health care systems more or less efficient and do the benefits of universal coverage (a more reliable workforce, less untreated infectious diseases, fewer emergency room visits, etc) outweigh the extra cost of insuring those who would not otherwise be covered. From what I've seen, the answers point to yes (socialized care in Europe is cheaper and seems to work better that what we have in US).

But what the answer is is of secondary concern to me than how the decision is made. If we're going to persist in framing the debate as one of ideals where the decision comes down to compassion, personal responsibility or other such non-quantifiable value, we'll never arrive at the right answer.

Re:Speculation

[Kjella]

Equality of results (not equality of opportunity) which is their version of "Utopia", and impossible, and tyranny of a sort. It punishes success, rewards failure, by definition.

Depends on your understanding of equal opportunity, let's take college education as an example. Is it "equal opportunity" if the B-grade son of a minimum wage worker goes to college and the C-grade son of a millionaire doesn't get in? Or is it that they both had the "equal opportunity" to pay Harvard $40,000/year in tuition? If a teenage kid develops a serious condition before he's had any chance to pay for his own medical insurance does he deserve the same quality of life if he's the son of a minimum wage work or a millionaire? Or is it equal opportunity that their parents both had "equal opportunity" to pay for an insurance with good coverage? The words are the same but the meaning is very different.

The plan economy died with the Soviet Union decades ago and despite the rumors of socialism in Europe doctors are paid very different than burger flippers, there is competition to provide many if not most goods and services. The difference is the cost is often shifted from the user to the tax payer, particularly at the lowest end to provide universal services to those who can't afford them. But I wouldn't call giving someone who's fallen down help getting up rewarding failure, whether they tripped on their own shoelaces or got pushed to the gutter. Then again offers to bring a mattress, food and water so they can stay down more comfortable might. Unless they have broken legs, in which case they don't need tough love to pull them back on their feet but real help to recover. And some can't recover, but we can give them a decent life.

It's easy to become a capitalist when you're on the winning side of the equation. I'm not so selfish to believe that I "deserve" a better life than an Indian or Chinese or worse a third world country but if you lay out of a plan to average the standard of living across the world then hell yeah expect opposition. The rich want to stay rich, whether it was earned fair... meh, like anyone chose to be born a son of a poor, non-literate sheep herder in Africa or not. I've run into many people with various physical and mental disabilities and the only thing I can say is that I'm happy to be relatively healthy. You're right, I'm quite probably going to be a net tax contributor unless I happen to live to 100+ or have some hyper-expensive medical issues down the road. I still think I got the better end of that deal.

Re:Speculation

[dave420]

Most folks are not unwilling to provide for themselves, but simply incapable of doing so. You assuming they are all free-loaders speaks more of your view of humanity than of those you wish to degrade.

Re:I sell actual things in Bitcoin

[Wookie Monster]

So, you like BTC being unregulated, but you want governments to make certain activities illegal. How is this not regulated?

Re:I sell actual things in Bitcoin

[mooingyak]

I blogged about it the other day, in how I wish governments would just make BTC to fiat currency transactions illegal. It would be a great step in reducing volatility and decoupling BTC from the regulated markets.

That sounds to me like a sure way to kill bitcoins. If I accept bitcoins as payment, and no one who sells something else I want to buy accepts them, then the bitcoin has no value for me.

There is still need for a decentralised exchange

[Jesrad]

With the very recent forceful closing of the BitFloor BitCoin exchange, and the inavailability of bitcoin-24, another (european) exchange, there seems to be a crackdown on BitC exchanges going on.

What is needed, is a decentralised method for trading BitCs for other currencies, or else BitCoins can be made to be worthless by shutting down the current centralised, easily identified exchanges. I'd suggest Ripple but that technical solution seems to be going nowhere at the moment, alas.

Re:I sell actual things in Bitcoin

[Registered Coward v2]

I sell physical goods and accept Bitcoin as a payment method. The volatility doesn't bug me at all. it's only a tiny percentage of overall sales...

That is because your risk is very limited. If you had a significant amount of your sales in Bitcoin you'd probably think differently; since your risk exposure would be much higher.

If a seller is concerned with volatility, they should consider not selling their received BTC for fiat currency.

No, they should immediately convert it so they assume no volatility risk.

It's the number of "we accept bitcoin" sites that accept currency and then immediately convert it to fiat that is one reason for the downward pressure.

That's called market forces.

Shhh!

[Bob9113]

Silk Road's creator, who calls himself the Dread Pirate Roberts, broke his usual media silence

Yegads, man! You're going to scare the horses. Your usual media silence is a wise practice. The general public doesn't know you exist, and doesn't know you use Bitcoins. Those are good things. The first rule of drug dealing is you do not talk about drug dealing. Just 'cuz I don't use your service doesn't mean I want to see more scrutiny aimed at you, or at Bitcoin.

Re:Shhh!

[drinkypoo]

The problem is that many drugs cause you to lose the capacity for rational thought while intoxicated and directly cause you to do things that you would probably never do sober.

If the bar is the capacity for rational thought, then many people would not be permitted to roam free.

Additionally drugs cost money.

Their high price is a result of their legal status.

Drug addicts generally have a difficult time finding employment thanks to drug screens. Tobacco users are starting to feel this pinch as well yet tobacco is totally legal so no blaming the government here

Those two things are totally different, and pushed on companies for different reasons.

A viable solution might be to legalize drugs and severely increase penalties for drug-related crimes and domestic violence.

A thousand times no. There is no need for different laws for violence committed under the influence and violence committed while sober and only under the influence of whatever chemicals your brain is making that day, just as there is no need for a law against driving like an asshole when you're using your cellphone when there's already a law against driving like an asshole.

There is a great explanation.

[TsuruchiBrian]

There is no obvious explanation for why the digital currency has fallen so far and so fast, although the market correcting after such a huge rise might be a good explanation.

The price of bitcoin rose much higher than the cost to mine bitcoins (i.e. price of computers and electricity). While some people got caught up in speculating, others saw this and started mining and selling instead, causing a crash. Bitcoins are volatile because people don't understand it yet. If they did, they'd realize that the value can not go far above the price of mining. Having said that, the price of mining is continually going up.

Once a few websites start publishing indices of the average cost of mining a bitcoin at any given time, I think that will keep this sort of speculation in check.

U.S. currency is printed on paper

[Frosty Piss]

It's cloth, actually. Currency isn't printed on paper, it's roughly 75% cotton, 25% linen.

U.S. currency is printed on paper

Cloth is a flexible woven material consisting of a network of natural or artificial fibres often referred to as thread or yarn.

Paper can be made of many things including cotton and linen. Paper is a thin material mainly used for writing upon, printing upon, drawing or for packaging. It is produced by pressing together moist fibers, typically cellulose pulp derived from wood, rags or grasses, and drying them into flexible sheets.

Completely overblown

[slashmydots]

Besides one obviously fake spike and drop, the value hasn't changed much more than 20% in either direction lately that I've seen. Yeah, the dollar differences are insanely high compared to the last 2 years but from a percentage standpoint, the value hasn't changed much. Overall, it's still up significantly from 3 months ago.