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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."
are frequently criminals.
Don't complain about syntax, grammar, or spelling. There is no.hell like input on android.
It's the people, goddammit!
Vicurex is tiny. They only did US$30,822 of business in the past 30 days. The corner pawnbroker is probably a bigger business. The corner gas station definitely is.
Bitcoin may be a future currency (though I doubt it is The Future of Currency). It may be a very bad high risk investment (though calling it a Ponzi scheme would be giving the players far too much credit). Whichever it is, or wherever in between, it is no more or less what it was in the (nearly imperceptible) wake of Vicurex's failure.
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Any organization that attempts to provide exchange services between 'hard' currencies and an inflating virtual currency is doomed to insolvency in terms of the hard currency. The operations of such an organization will always amount effectively to a Ponzi scheme when viewed from the hard currency point of view. A little thought experiment: an exchange takes in $100 for 100 v-coins valued at $1 each. The v-coin value inflates to $2 and the investors decide to exchange their v-coins back to dollars ... how many v-coins can be exchanged before the exchange is insolvent? HALF! DUH! The moment a virtual currency becomes established enough to be treated as a valid investment it is doomed to increase its pace of inflation and then collapse. This can only be avoided if the exchanges charge fees that are greater than the future inflation rate. However if they do this, the virtual currency's advantages will quickly be less than simply trading in the original currency ... so what's the point?
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 argument is completely flawed. Using a currency like dollars is inherently safer because it is backed by the government of the United States. Consumer protections exist (in the form of the FDIC) that ensure that if you choose an institution that fails, your deposits are insured and will be returned to you. There is no such protection for Bitcoin, or any other crypto currency that lacks any form of backing. The reason that banks don't deal with crypto currency is that it's too risky. An asset that can gain/lose 30% of it's value in a given day isn't very worthwhile to a bank.
Copied and pasted from the Bitcoin FAQ, since the site seems to be broken at the moment:
Is Bitcoin a Ponzi scheme?
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.
A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters, and indeed, society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.
The fact that early adopters benefit more doesn't alone make anything a Ponzi scheme. All good investments in successful companies have this quality.
Cryptocurrency is a platform and the exchanges are an app built on the platform. The security problems have been with the apps built on the platform. The peer to peer architecture is not what is being exploited. Its reckless abandonment of P2P for client server.
Seastead this.
Major difference. Banking _is_ safe - the first link you paste is investors who bought a wealth product who did not get the ROI they expected. They didn't understand what an investment risk is, that's different than *banking* in the sense you're depositing cash / expect to be able to withdraw it at a later date. The second link, that's a "farmers co-op". That's not a bank, even if the article mentions it as a "bank" in quotes. There's nothing normal about some small town's peasant created co-op - 'normal' banks in China are the likes of ICBC, BOC, etc.
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.
So they're not promising anything, therefore they can't break their promises. This does not affect anything about how the scheme actually works.
A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters, and indeed, society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.
This assumes that the "usefulness" actually exists and is beneficial. So far, Bitcoin hasn't been stable, fast, or widely-accepted, so the win-win scenario they propose isn't actually possible. I can just as easily say that by everyone giving me all of their money, society will benefit because I will donate everybody's money all at once to a charity, reducing the charity's overhead costs.
The fact that early adopters benefit more doesn't alone make anything a Ponzi scheme. All good investments in successful companies have this quality.
This is true, because the FAQ writer doesn't seem to understand what a Ponzi scheme is in the first place. In a Ponzi scheme, the investment capital of latecomers is used to pay the returns of the early investors.
When you invest in a company, your money is pooled with everyone else's to run the company. The company also has a pool of profit, which is often split proportionally for dividends. You can also get a return by selling your stake in the company to someone else who wants to be involved. At no point are investments used to pay out returns to earlier shareholders.
Bitcoin as a whole fits the Ponzi scheme pattern, because at the exchanges the money used to pay off the early miners comes directly from people now buying coins. Since the Bitcoin market is so much smaller than the price of the Bitcoin supply, the main mechanism that external value comes into the Bitcoin economy is by investors trying to get into the scheme for its high (not-guaranteed) returns.
The only real distinction between a Ponzi scheme and Bitcoin is that Bitcoin has no single master, that we know of. Ponzi schemes usually have a single person or small group promoting the investment. Bitcoin doesn't have any organized leadership, but rather relies on the self-sustaining marketing buzz of zealots. That makes it a better fit for an economic bubble, rather than an actual Ponzi scheme.
You do not have a moral or legal right to do absolutely anything you want.
Precisely. The BitBelievers cannot actually defend (and in most cases I am finding, don't actually understand it enough to be able to do so), so they mire down in semantics trying to talk about everything but the facts of the matter.
Just the fact that a pro-BitCoin site has that question up as a FAQ is pretty telling on its own, written with slick marketing tricks, to boot.
I guess we need to start being ultra-specific for the BitBelievers. It is a Ponzi-like scheme. Broken down to its fundamentals, ignored in that FAQ question, a Ponzi scheme is generally understood to be a money making venture that is wholly dependent on new folks coming into the scheme in order to continue to fund the upper levels. If folks stop buying into the bottom, then things dry out all the way back up the chain until it fails.
That is precisely how BitCoin operates. It's just a new twist on it because it masquerades as a currency. Instead of trying to convince you that you are buying into something, it is quite up front about the fact that it's based on nothing. If folks stop bringing in legal currency to the BitCoin system by using it to purchase BitCoins, BitCoins become worthless. While the BitBelievers insist that it can be spent quite readily, it's a joke and everyone knows it - one can spend a dollar at literally millions of places, you can spend BitCoin directly at what, a few hundred? Maybe a thousand? The BitBelievers will then tell you about BitCoin ATMs, which, again, ignores the fact that when you use a BitCoin ATM, you are using it to pull legal tender out in order to be spent. It's worthless if one cannot turn it into legal tender (one way or another).
That's what makes it a Ponzi-like scheme, because if no one continued to exchange legal tender for BitCoin for people who have BitCoin, they have no intrinsic value on their own. It's based on nothingness. That's why that FAQ is so disingenuous - if people stopped trading Apple stock tomorrow, Apple stock is still worth money because people still buy Apple products. You would be stuck with the stock itself but you would collect dividends based on the performance of the company and the percentage of profit you get as a stockholder. BitCoin's only product is itself, and is wholly dependent on the willingness of people to give someone legal tender for the right to own a virtual property. Since BitCoin doesn't produce income aside from more people buying into the scheme, they can wrap it up any way you like, but it's still based on nothingness.
Just look at the curt, pithy replies from BitBelievers - they know this train has gone off the rails, so that's really all they can say. With MtGox they proclaimed that it was just a poorly run business, and their talking points (I swear they must distribute them like Fox News does) were "it hadn't been the go to exchange for quite some time". Now that another one has fallen into insolvency, and another domino has hit the table, it's already becoming harder to defend, hence the growth of childish retorts because it's getting increasingly difficult to deny that the motion behind the fall of MtGox wasn't the start of the domino chain falling, but an isolated incident.
Now it's clear that MtGox may have been the first to go because indeed it was run poorly, but that it didn't fall solely because of how poorly it was run as the BitBelievers would like to think.
I'll be very curious how history looks at this very strange episode - in some ways, it's quite predictable that something like this would happen as it's happened over and over throughout human history (if prostitution is the oldest profession, parting a fool from their money must run a close second), but on the other hand things like this usually target the weak, the old, the infirm, those who are easy prey. In this case, a lot of very educated, erudite folks were taken in - I guess that will just go to show that the lure of a quick buck is more deeply imb
It's decentralized. There's no controlling entity that can tell you who you can or cannot pay.
Another thing it allows you to do is change which company you use for payments, and yet still make payments to all the same people you could before. If you want to buy something from somebody that uses Paypal to take payments, then you're kinda stuck with using Paypal. With a Bitcoin-based system, you could pay them via a different company.
This is like asking "what's the point of SMTP when we have Gmail?"
So I'm not a capitalist or anything, but as I understand it HFT provide a market for people who wan't to buy or sell trades. Back before HFT, people had to go to established market makers, which would be large entities that hold on to large amounts of stock. This would not be held speculatively, but rather to harness the arbitrage opportunities in the difference between selling and buying price. These guys used to "skim" 10% of the price every time people traded, and they were old white guys, established players that could leverage their reputation and historical position to print money. HFQ now takes the place of market makers in many trading venues, and take much less off the top, as the rely on the frequency of trades.
So like I said I'm not a capitalist and I don't think that HFQs are really good. But they are no different than other elements of the capitalist system, and seem much fairer than what they replaced. This is kinda like when people complain about short selling. In a market, pricing is a mechanism to ensure the efficient production of goods across society. Without short selling, there is no mechanism to drop prices in capitalism. It isn't making money off of failure (well no more so than any element of the capitalist economy) it's providing a necessary pricing function.
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.
Classifying something as a Ponzi scheme, usually involves outright fraud. ie someone is claiming that there is a huge pile of cash somewhere that doesn't actually exist.
There may be individuals committing fraud using bitcoin. And bitcoin may be a speculative asset bubble with very similar outcomes to a Ponzi scheme. But it isn't *technically* a Ponzi scheme.
09F91102 no, 455FE104 nope, F190A1E8 uh-uh, 7A5F8A09 that's not it, C87294CE no. Ah! 452F6E403CDF10714E41DFAA257D313F.
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.
Eh? I was drinking with the executive director of the Foundation and routinely work with Gavin, who is maintainer of the core software. I guess they are the closest you're going to get to "developers and leaders" by your description. Obviously they're concerned about all this. But the alternatives aren't there yet. One Bitcoin developer, Gregory Maxwell, has proposed protocols that allow exchanges to prove solvency - but they're complex and of course, do not address the root problem that large piles of coins make tempting targets for hackers.
Decentralised exchanges are very interesting and the way to go, but the technology to do them well isn't here yet.
> They are ACTING BEFORE Alice or Bob can which is why it is a TIME BASED man in the middle attack.
Everybody is acting before the next order comes in... Kind of the definition of a QUEUE.
They get to see the state of the order book first and act on it faster because of their colo deals with the stock exchanges --- again, this changes nothing.
Only if they see Bob's order, then make the order, and it is on the queue before Bob's order, and therefore in the market book before Bob's order, are they doing anything that would actually damage the market and should be banned from.
Ie, they would have to have prioritised access to the QUEUE, not the MARKET BOOK.
And I'm 95% sure this is NOT the case. If you have proof otherwise, now is the time to show it.
Short selling.. it is a scam especially 'naked' shots - where you bet on the price before you have the contracts in place.
Short selling is not a scam at all. In fact it is arguably very important to price discovery, providing a counterweight to excessive bullishness, ex-ante identification of asset bubbles and providing incentives to find fraud. Short selling in an of itself is just fine. That doesn't mean there aren't practical concerns that have to be addressed but the mere act of short selling certainly is not a scam.
Shorting is simply the act of selling something before you have bought it. Usually people buy something before they sell it but there is no fundamental reason it has to be done that way. In a short transaction you borrow the asset, sell it and then buy it back later and return it to the lender. The second order consequence of selling before you buy is that you tend to do it when you expect the price to fall because you want to sell high and buy low. Stock prices fall almost as often as they rise and there is no principled reason not to allow people to to bet on the directionality of stock prices. In fact when someone ends a long position, very often they are simply betting that the stock is going to fall. It's the same sale for the same reason, the only difference is that the buy occurred in the past instead of the future.
Now there are some practical issues that have to be addressed with short selling in order to have an orderly and reliable market. You are correct that an exchange whose procedures allow naked shorting to occur is asking for trouble because they can easily end up with a transaction that cannot be completed. It also opens a door to certain types of fraud. Naked short selling isn't illegal per-se because in some cases it isn't actually a problem but it's a type of transaction that tends to carry more risk than allowing it is worth.
Track record this far is ... can I use enron as an adjective?
Perhaps you can, but perhaps not in regard to the Bitcoin. Enron used (and I mean used like a rented mule) accounting firm Arthur Anderson to audit and sign off on their creative bookkeeping to cover $billions (US) in losses to keep their operation afloat. They were able to corrupt a key step in the securities and exchange' system of checks and balances. Without A. Anderson's complicity, that house of cards would've fallen much sooner.
Bitcoin's strength and popularity rest with it's kinship to virtual cash with no ties to government. This is also it's weakness, as there is zero oversight.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
I've traded some "thinly traded" shares in the past - this pretty much describes ALL options today...
Back in the 1990s, and even early 2000s, you could put out a "Bid" for 10,000 shares @ $1.00 per share max and frequently, you'd get a transaction that looked like:
5000 shares @ 0.95
3000 shares @ 0.97
2000 shares @ 1.00
That doesn't happen since HFT - now it's all 10,000 shares @ 1.00 - and since I pay fairly high commissions per transaction, I can't optimize my trade by making a bunch of small ones to match what's showing in the queue - back in the day, you couldn't even look at the queue anyway.
Late entrants provide them the money and in so doing lose theirs. ... I suggest getting out of Bitcoin now.
See, this is a misconception that I've been trying to correct in this thread. You don't "get into Bitcoin" by buying up a bunch of bitcoin and sitting on it. You don't "get out of Bitcoin" by selling a bunch of bitcoin that you've been sitting on.
Bitcoin is a payment network. You use it to make payments. You don't buy bitcoin and sit on it; you buy it and then immediately send it to the person you're paying. They then sell it to convert it to whatever their normal currency is. I attempted to explain this in the post you responded to.
What you're describing is how you get into speculating on the bitcoin exchange rate. That's something completely different, and I won't stop you from getting involved in that if you want, but it's just like speculation on anything else: you might get burnt. However, if you just want to make a payment (which is what Bitcoin is for), then you don't need to do that.
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.
Dogecoin is different - its not a speculative 'currency' like Bitcoin wants to be.
Dogecoin knows this should not be taken too seriously, it also is an inflationary-based coin, ie you can always mine motre, so anyone who is hoarding coins will find their value falling over time (see bitcoin which was designed to become more expensive over time which encourages hoarding), and as a result means Dogecoins are meant to be spent.
So Dogecoin is the only true virtual currency as they are really used for simply, tiny transactions (eg reddits tip jar). Others like BC are corrupted by people thinking they can make a quick buck, or like NorrisCoin, run by scammers hoping to be top of a ponzi pyramid.
Actually, Dogecoin is still deflationary, just not as bad as all the rest. There are 100M Dogecoin in the first batch and ~5M/year afterwards. Since the number is fixed, the inflation rate goes down- it's 5% the first year, but only 2.5% 20 years from now. The world's GDP growth is running about 3%, so assuming that's constant (yeah, yeah) Dogecoin will turn deflationary in about 15 years and accelerate after that.
"Seven Deadly Sins? I thought it was a to-do list!"
Is it news because the final Goxing finally came, and Slashdot editors have an agenda to keep bringing up articles on the smallest negative event happening to anyone somehow related to Bitcoin?
The agenda of the slashdot editors is simple. To attract readers and comments. Articles on bitcoin seem to accomplish that agenda.