Ask Slashdot: Do You Still Trust Bitcoin?

Nerval's Lobster writes "It hasn't been a great week for Bitcoin. Cruise the Web, and you'll find stories from people who lost thousands (even millions, in some cases) of paper value when the Mt.Gox exchange went offline for still-mysterious reasons. (Rumors have circulated for days about the shutdown, ranging from an epic heist of the Bitcoins under its stewardship, to financial improprieties leading the exchange to the edge of bankruptcy.) But as one Slashdotter pointed out in a previous posting, Mt.Gox isn't Bitcoin (and vice versa), and it's likely that other exchanges will take up the burden of helping manage the currency. Even so, all currencies depend on a certain amount of stability and trust in order to survive, and Bitcoin faces something of a confidence crisis in the wake of this event. So here's the question: do you still trust Bitcoin?"

Comments

My guess

[goombah99]

I speculate that the real story behind mT Gox is not the one they are telling us. My guess is that back when bitcoins were worth pennies that Mt Gox needed a bridge loan to cover a shorfall in revenues wrt to expenses. I imagine they gave themselves a loan from their holdings intending to pay it back from downstream revenues. But then bit coin went 10,000 fold in exchange rate and they could never pay back the 400 million that was now due. Their only hope was to either wait for the market price to drop, or to act like a ponzi scheme where they paid demands out of other depositors money. All of which they could do because they controlled the coins. Even if they paid everything back but $4000 of an original bit coin loan, that would now be worth the 400 million they are short. Perhaps they also boofed the maliabile ID too at some point, but they would have easily detected that instantly because their total assets would be different that their total liabilities. Unless of course they already had a deficit in assets that was masking that.

Re:As Frontalot says

[dan the person]

how can we be sure that an exchange won't be hacked?

Exactly. We can be sure traditional banks won't be hacked because they are regulated by the government appointed banking regulator.

And if they had loose security that somehow the regulators missed and loose billions in wire-fraud? In most countries the government guarantees your funds to a certain extent. So the question becomes, do you trust your government? (or the government in charge of the foreign currency you are storing).

This is the trouble with bit-coin. All currencies are based on faith. Faith that they will hold value (that the government wont print money), faith that they will be accepted for exchange (again, government mandated for most currencies). With bit-coin, to whom do you place your faith?

Re:As Frontalot says

[PopeRatzo]

We can be sure traditional banks won't be hacked because they are regulated by the government appointed banking regulator.

I'm pretty sure the housing bubble of the 2000s, which turned into the bank bust-out of 2008 and the subsequent taxpayer bailout could very accurately be described as "hacking the banks".

It was a process that started in the late 1990's, with Sen Graham's crusade to repeal Glass-Steagal. Even before the bailouts, it was the largest redistribution of wealth upward in all of human history. As a hack, it is one of the most audacious and effective. A pure example of social engineering. And its legacy is nothing short of the creation of a two-tier economy, in which there is one monetary system, one economy for the very elite, and another for the rest of us.

Oh yes, our "traditional banks" were hacked, but good.