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Cryptocurrency Exchange Vircurex To Freeze Customer Accounts
Powercntrl (458442) writes "Vircurex, an online exchange for Bitcoin as well as other cryptocurrencies is freezing customer accounts as it battles insolvency. While opinions differ on whether cryptocurrency is the future of cash, a Dutch tulip bubble, a Ponzi scheme, or some varying mixture of all three, the news of yet another exchange in turmoil does not bode well for those banking on the success of Bitcoin or its altcoin brethren, such as Litecoin and Dogecoin."
Or day traders, or high frequency traders...
Patent litigation: A doctrine of Mutually Assured Destruction... in which everyone seems willing to push the button
Repetitve comment, that.
This is nothing new, the new thing is that the news is covering all the bitcoin exchange drama. Bitcoin is designed specifically so people have the choice of whether to trust 3rd parties with their funds, force of habit due to the fiat systems is causing people to put undeserved trust into these exchanges. They will learn as their fingers get burnt.
Or day traders
Day trading has never been a way to make a quick buck. At the end of 1999, a brokerage survey found that most day traders had lost money over the previous year, despite the NASDAQ rising a record 85%. The day traders were just eaten alive by the transaction fees.
or high frequency traders...
HFT is much less profitable than it used to be. They made money by squeezing inefficiencies out of the system, but once everyone else was doing the same thing, that doesn't work anymore.
Saying that an exchange like this going going bad means Bitcoin is failing, is like claiming a small corner bank failing means the end of the U.S. dollar is nigh.
The exchanges dying is good for bitcoin, because the bad ones will be replaced by more solid and upright entities.
Dogecoin started as a joke, remains a joke, and should be treated as a joke.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
It's a trifle astonishing to watch how persistently people line up to make the same mistake with their crytopcurrency-of-the-moment again and again.
In theory, cryptocurrencies are secure-through-math and don't rely on flyblown banking institutions and so on, (and, in fairness, they have a decent track record as software goes); but their properties only apply if you use them correctly.
If you give the actual crypto keys that correspond to your cryptocurrency units to me, and I give you an account at First Bank of Fungus with 'X cryptocoins', guess what? From the perspective of all the neat math, I own the coins, and enjoy whatever properties they possess, and you own a not-particularly-distinguished private-label IOU, which offers absolutely no security by design, and probably quite limited security-by-legal-force.
Basically none of the special properties of cryptocurrencies extend beyond your personal grasp on them, and the surrounding institutions are... dubiously stable.
This is an Exchange. They are matching buyers and sellers together. The point where they meet determines the exchange value of the two involved currencies at that point in time.
The exchange provides services to facilitate the transaction and charges a transaction fee. If the exchange is properly managed, they rake a profit on every transactions and can't loose, no matter how the market sways.
And until a hundred years ago, cartels were legal, too. Two hundred years ago, the slave trade was going strong in parts of the USA.
Just goes to show.
It's the people, goddammit!
No, It's because Bitcoin is stupid.
It can't expand and shrink to fit economic use.
Money is convenient form barter and needs to represent the productive capital of its users and to remain stable for a given capital. (Eg an apple is worth 1 dollar from year to year, not 1 dollar today, then 10 dollars next week)
As more people use it, scarcity increases its value, making early adopters insanely rich. The crypto bit of bit coin may be sound, but it's economic utility is not.
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There is another significant distinction between Bitcoin and a Ponzi scheme. In a Ponzi scheme, you put money into it with the expectation of getting more money out than you put in. In Bitcoin, you don't do this -- or rather, nothing in Bitcoin will tell you that you can.
If you can point to the bit of Bitcoin that attempts to give you this expectation, then great: please do so. However, please don't point at a person pulling a scam involving Bitcoin -- that would be like pointing to Charles Ponzi to explain why the US dollar is a scam. Similarly, please don't point to all the speculators: they are essentially the same thing as Wall Street day traders, and they don't make the US dollar a scam either.
Bitcoin is a payment network. To make a payment using Bitcoin, you buy some bitcoins on an exchange, then you send them to the seller, who sells them on an exchange. Where is the scam in all this? You paid your $x, the seller got his $x. That's not a scam, that's mission accomplished.
hft doesn't provide that. that is a common misconception about hft and one that hft trading companies want you to believe.
in practice hft sits between the buyer and seller who would exist regardless of the hft existing. that is the whole point of hft. the hft skims money from both of those people, they longer term buyer and seller(even if the buyer is going to just hold the stocks for few hours), it would be far simpler for everyone involved if the stock brokerage would just take the cut without the hft sitting in the middle.. it would save resources, electricity etc. only thing it would change would be that certain people(hft trading companies/consultants/people sitting on the approve list for fast pipe access) would not get so much money.
now the broker house cut done through the hft is largely invisible and can't be measured easily... that's why wall street loves it, it gives them a way to skim money from people who want to trade stocks based on their expected values.. it would be really easy to fix the hft arms race, makes sales ticks every 10 secs for example or whatever, to make it so that it didn't matter if your processing had 1ms ping or 250ms ping.. but that would fuck up the very lucrative business of selling the short fast pipe to the stock exchange so they don't want to do that.
world was created 5 seconds before this post as it is.
As we have seen, keeping any amount of money at an exchange's account is a recipe for disaster. They can still be used, but only if you take care to move your money out of it as soon as possible.
Bitcoin is a payment network. To make a payment using Bitcoin, you buy some bitcoins on an exchange, then you send them to the seller, who sells them on an exchange. Where is the scam in all this? You paid your $x, the seller got his $x. That's not a scam, that's mission accomplished.
Not really. A viable payment system lets you get real money in exchange for something; with Bitcoin there is no assurance you will be able to get anything beyond some bits and bytes. You are at the mercy of the exchange and if they don't have the cash you don't get paid. One huge red flag is the seeming arbitrage opportunities with Bitcoin process varying exchgane to exchange. If Bitcoin were a viable transaction system those opportunities would disappear as people took advantage of the free money. That they don't says a lot about the liquidity, or rather lack of it, in the Bitcoin market. A currency that is touted as being easy to use for transactions anywhere with no transaction costs would quickly erase any arbitrage if it really was that easy to buy and sell.
All this noise about Ponzi Scheme: Yes or No? masks the real issues with Bitcoin. It is an illiquid, volatile commodity that lacks any assurance you will ever be able to get real money for it; as a result almost no one really takes Bitcoin, they simply let you "Pay" in Bitcoin by assuring they can immediately convert them to real money. While that may work for a handful of deals the lack of liquidity makes them unusable as a real payment system to take on PayPal or other electronic payment systems. Unlike Paypal, which mostly just moves money for a fee or holds it in a form that is easily turned back to cash as needed; Bitcoin "exchanges" take short positions that they can't cover since they lack the cash reserves to payout all the withdrawals.
As a result, Bitcoin became a nice place for speculators and people who are hoping to cash in on the "next big thing" and now the bubble is starting to burst. I wouldn't say it is a scam as much as one more chapter in the mass hysteria of crowds.
I'm a consultant - I convert gibberish into cash-flow.