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Sifting Mt. Gox's Logs Reveals Suspicious Trading Patterns
This analysis of trading logs from the Mt. Gox Bitcoin exchange analyzes a subset of the transactions that took place there prior to the exchange's collapse, and makes the case that two bots (the writer calls them "Willy," and "Markus") were making suspicious transactions which may have been used to intentionally manipulate the trading price, and which can explain the loss of Bitcoin inventory on which the exchange's failure was blamed.
The author of the analysis says "[T]here is more than plenty of evidence to suspect that what happened at Mt. Gox may have been an inside job. What I hope to achieve by releasing this analysis into the wild is for the public to learn the truth behind what happened at Mt. Gox, how it affected the Bitcoin price, and hopefully for the individuals responsible for the massive fraud that occurred at Mt. Gox to be put to justice. Although the evidence shown in this report is far from conclusive, it can hopefully spur a more rigorous investigation into Mt. Gox’s accounting data, both by the public (using the leaked data) and the authorities (forensic investigation on the actual data)."
First we hear how BitCoin rules because it side steps those evil governments and their rules and regulations. Now that people have lost money due to dishonest behavior (which was 100% predictable given the nature of BitCoin) people are howling for the "individuals responsible for the massive fraud that occurred at Mt. Gox to be put to justice".
HAHAHAHAHAHAHAHA
What buffoons. First its "The government is evil! We rule because we are outside their jurisdiction". Then when the completely obvious consequence of having an unregulated and anonymous system for monetary transactions happens its "Hey, what the ???? Someone has stolen our money! Quick! Call the police! Government, come save us!".
HAHAHAHAHAHAHAHAHA
A virtual Internet-based currency is subject to electronic flim-flammery? Color me shocked.
I want to delete my account but Slashdot doesn't allow it.
No matter what the price is, a correctly operated exchange should pair buyers with sellers, and only perform the transactions when the buyers offer more than the sellers demand (exchange gets the difference). That's what it means to be an exchange: you facilitate trades. Some price manipulation shouldn't hurt them: it's just more trades and thus more profit.
If you want to add some extra damping there and capture some profits from the changing prices, you can either screw with the profit margin size dynamically, or you can become a user of your own exchange (become an investor in multiple currencies, and shift between them on your own exchange). Investing like that is a separate thing, and if they mixed that up with the operating of the exchange part, then they really screwed up: if you botch separation on concerns, one screw up wrecks everything. Well, we know they really screwed up in lots of ways, and with no proper separation of concerns, they totally wrecked everything in lots of ways. No partial failure support + fail horribly at something = oops, no more company.
The less people will care. The less people will remember their lost money, and the less people will be able to do about it. I think we're close to that point where those who lost have accepted it and those who followed the story stopped, no lessons learned, look at all the thriving bitcoin exchanges & online wallets. Like school shootings, we're about over it til the next big one hits.
If only they would have made it simpler by either stealing a lot more, or a lot less.
Look where all this talking got us, baby.
What do Mt Gox and slashdot have in common? They accidentally the whole thing.
So, this whole Mt. Gox thing is why we have financial regulation?
Well-done article. Read it top to bottom. Congrats.
Religous speak to God. Insane are spoken to by God. When all shut up, one can finally hear Shostakovich in peace
No. This whole Mt. Gox thing is solid evidence that "financial regulation" (because it does exist), when it isn't just "Good Old Boyism", is just plain incompetent.
It wasn't foresight; same as for the EPA, labor laws, OSHA, ...
Wow. For you Tea Baggists - oh, I'm sorry, "Libertarians" - it always comes back to the EPA and OSHA...
He isn't saying there shouldn't be an EPA or OSHA, he's saying that people had problems then came up with the regulatory solution (ie creating the EPA). WTF are you responding to? I don't even think the GP is a tea partier.
PS I'm a Democrat, not trusting the FED (which is a rational position if you know its history) isn't the same as being a Tea Party member. Its just one issue out of many and one that quiet a few Occupiers would agree with (well the ones that know what the FED is anyway). Now go troll elsewhere.
"Those that start by burning books, will end by burning men."
BitCoin is not "money".
Even if true, bitcoin would still be a very useful payment system. It may not replace the US Dollar but it may very well replace PayPal.
By definition, BitCoin is money. Troll more elsewhere. "any article or substance used as a medium of exchange, measure of wealth, or means of payment, as checks on demand deposit or cowrie."
It currently fails as a stable measure of wealth (alternatively described as a store of value), its a bit too volatile. Although it is currently a good medium of exchange.
As evidence for the proceeding notice the growing popularity of exchange merchant services where merchants who accepts bitcoins as payments (from the customer's perspective) never in fact sees or "touches" a bitcoin. They specify a price to the echange in fiat, the exchange provides the equivalent price in bitcoins and provides a payment address. The bitcoin payment in fact goes to the exchange which immediately converts to fiat and credits/pays the merchant.
I think the US government is genuinely confused.
I think the US government doesn't care. Its the Japanese government that cares, Mt Gox is in Japan. :-)
FYI - it is more politically correct to refer to them as Tea Baggers.
Slashdot: where don knuth is an idiot because he cant grasp the awesome power of php
PS I'm a Democrat, not trusting the FED (which is a rational position if you know its history)
And what history is that?
The Federal Reserve Banking System was created in response to a string of banking panics, culminating in the panic of 1907.
The Fed literally replaced a group of really rich dudes who had thrown money into (aka "bailed out) the banking system to keep it afloat.
[Fuck Beta]
o0t!
The same applies to real gold, precious gems, and many works of art.
It had to be gross mismanagement at best. An exchange doesn't need to hold money. If they ran a bank and an exchange then those operations should have been isolated.
This is really just a bank failure by another name. Banks love to take risks with other people's money, which is why they tend to fail all the time when left to their own devices, which is why nobody leaves them to their own devices.
.... Do you remember those hundreds of billions of dollars of taxpayers money, Obama and his team of banksters handed over to commercial privately held banks?
Not quite. Not quite.
Personally, I recall the $700 billion dollar TARP program advocated by Henry Paulson and signed into law by George W. Bush. Can you provide us with links describing the Obama bailout program you refer to? (Don't worry, I'm not holding my breath).
I also recall Obama announcing that the banks had paid back their loans with interest, such that the government made a profit on TARP.
In summary, you are entitled to your own opinion, but not to your own facts!
--- Often in error; never in doubt!
transactions which may have been used to intentionally manipulate the trading price
Isn't that exactly what trading is all about?
The Fed literally replaced a group of really rich dudes who had thrown money into (aka "bailed out) the banking system to keep it afloat.
Right, the people who broke the system to begin with had to bail it out. The people with the money make the rules, see, the same rules that caused the collapses. The new rules say that we all have to pay for the bank bailouts, they obviously don't prevent them. You have, ironically, simply provided your opposition more ammunition.
The wealthy own 85% of everything, they should pay 85% of the taxes.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
How much "insert your own currency here" and its electronic backing would also not be wiped out by said EMP? You think all of your savings are neatly stacked in a vault somewhere to be withdrawn when the electricity goes off and spent as and when you wanted? If the electricity failed I guess your currency would also become pretty worthless. Give me a truckfull of food, water and seeds over a lump of inedible gold or pile of paper and ink any day, diamonds just get stuck in your teeth and are a tad uncomfortable when passing them out anway I should imagine. but they are nice and shiny.
Governments do generally recognise that you can steal things other than legit currency.
The difference between banks and MTGox is that while banks also use fraction reserve, the full liabilities are backed by assets in the form of loans they have handed out, and security on the assets of the borrowers such as property. At the time of the financial crisis, those assets and collateral were not sufficient to cover the fractional reserve liabilities, but at least they had something, unlike MTGox which had nothing to back the fractional reserve liabilities.
You need to stop watching Fox News until you realize that they are full of shit most of the time.
And when you realize that, you will find that Fox News is this incredible piece of performance art.
I mean really, just about every woman on there is younger, with a push up bra and LOTS of cleavage, hooker heels, lots of makeup, and slit slutty dresses.
Their target demographic is: old, white, conservative, men. The same goes for talk radio. (I know this because I was in on a programming meeting at a station.)
So, they cater to the old whit conservative guy World view and tell them what they want to see and hear - regardless of the truth: that they are the only ones working hard and everyone else is sponging off of them and the World is filled with cheap slutty women with push-up bras.
Everyone else watching is just gravy.
I tell you, the programming people there think you and your kind are stupid. And the way they can manipulate you people just makes me think they are right.
Every time Hannity says that Talk Radio listeners are smarter than everyone else, I just have to wonder how he keeps from breaking into hysterical laughter.
It's going to take a really massive EMP to destroy my Bitcoin paper wallet.
Get free satoshi (Bitcoin) and Dogecoins
Should we be surprised this fucked up with potheads at the wheel?
Obama effectively wrote checks for over $2 trillion in the bailout mess.
As if Democratic-flavored fuck-ups taste any better than Republican ones. It's practically funny watching two groups argue while both of them shove shit in their mouths purporting theirs tastes far better.
When we can start talking about how the next asshole-in-charge won't write even more checks instead of pointing fingers, then perhaps I'll start giving a shit as to who's name is on the signature line.
Just to be precise about the situation, Candidates McCain and Obama were invited to the meetings where TARP was agreed upon. They weren't directly responsible, but neither did either object.
sPh
There is no question that the financial structure of the United States, and mostly likely the world as a result, was in danger in the 2008 time frame. President Bush and Secretary Poulson took the responsible course of action, deflected those whose advice was to let it all burn on principle, put together a bailout plan, invited the presidential candidates to review it, and got it signed into law. IMHO the only competent thing that W did during his entire Presidency.
What President Obama can be held responsible for is not following up TARP with detailed investigations into violations of civil and criminal law, including prosecutions where appropriate. Particularly investigations into the utterly illegal shadow mortgage documentation "registry" that the financial industry apparently created around 2000. This was the first major financial crisis in the history of the United States that did not generate a strong investigatory response. There are undoubtedly reasons why that didn't happen, reasons noble, neutral, and craven, but the lack of _any_ investigation or prosecution is an utter failure of President Obama and his Administration.
sPh
Spot-on. Of course the major Western money center banks and financial institutions also had the backing of the full faith and credit of major, stable governments including both the maligned US Federal Reserve and ultimately the US Treasury. While bitcoin has the full faith and backing of... Satoshi I guess.
sPh
I wouldn't assume he would have fled someplace under a new name. There are a number of recent cases where people who should have fled did not. Bernie Madoff surprised me that he didn't run, the Silk Road founder still living in the states was also surprising. I guess it's part of the mentality of 'they'll never catch me'
And Congress. Both the Senate and the House could have done their own hearings and upon finding wrong doing formally report it to the DoJ and/or SEC. demanding justice.
putting the 'B' in LGBTQ+
It had to be gross mismanagement at best.
No, it didn't.
An exchange doesn't need to hold money. If they ran a bank and an exchange then those operations should have been isolated.
An exchange had little reason to exist at all, except to milk stupid investors. Dealing in Bitcoin did not require exchanges. AND they added exchange fees that were totally unnecessary, and which was actually a form of double-dipping.
Banks are repositories for MONEY. Bitcoin does not need repositories. There is a very huge damned difference.
Just to be precise about the situation, Candidates McCain and Obama were invited to the meetings where TARP was agreed upon. They weren't directly responsible, but neither did either object.
A more accurate writeup.
Please proceed, Senator from Arizona.
sPh
(I was trying to be reasonably neutral - after all, the nation's financial stability was at risk)
It had to be gross mismanagement at best.
No, it didn't.
How can money held in trust for somebody else be lost other than by mismanagement? Every bank in the world holds money in trust for others and most of them manage to do it without losing track of it (and frankly they should be better-regulated than they are as it is). You just need to hold money for as little time as necessary and avoid treating the money you're holding onto like it is your personal investment account.
An exchange doesn't need to hold money. If they ran a bank and an exchange then those operations should have been isolated.
An exchange had little reason to exist at all, except to milk stupid investors. Dealing in Bitcoin did not require exchanges. AND they added exchange fees that were totally unnecessary, and which was actually a form of double-dipping.
Banks are repositories for MONEY. Bitcoin does not need repositories. There is a very huge damned difference.
All currencies are traded on exchanges today - they're a convenience. Sure, if I have a pocket full of yen there is no reason that I shouldn't be able to work out a deal with a store owner to buy some milk in the US with it. However, in practice this is fairly painful for all involved, so instead everybody just goes to an exchange where they charge totally unnecessary fees so that we can have the convenience of working in a single currency.
There will always be a need for exchanges. They act as market makers and also can function as a trusted intermediary for financial systems that do not guarantee atomic transactions (which is pretty-much all of them, especially if you want to go between two different systems).
How does fractional reserve work with Bitcoin? If they loan out some deposited coins, fair enough, but if the original owner draws on it they cryptographically need that exact coin, not some other random one.
Or do depositors hand over the coins to the exchange for a virtual account, destroying the signed-ownership benefit of Bitcoin and replacing it with trust in an institution?
You can't have fractional reserve banking without people trusting the bank. Bitcoins are like cash: good for transactions, possibly useful as a store of value or speculation, but you can't get interest in them without lending them to somebody you can trust.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
How can money held in trust for somebody else be lost other than by mismanagement?
My apologies. I read "at best" and somehow it got interpreted as "at most". But that is clearly not what you wrote.
All currencies are traded on exchanges today - they're a convenience.
Part of the whole purpose of Bitcoin was that it was designed to not need exchanges. The exchanges capitalized on the ignorance of people who were used to using exchanges and thinking in those terms, and didn't realize that they were paying money for something they could have gotten for "free".
Part of the whole purpose of Bitcoin was that it was designed to not need exchanges. The exchanges capitalized on the ignorance of people who were used to using exchanges and thinking in those terms, and didn't realize that they were paying money for something they could have gotten for "free".
Bitcoin doesn't require banks for storage, but it certainly needs exchanges. What is your alternative if you have $100 in USD that you want to convert into Bitcoin? You could look on some random forum and mail a check to some random individual and hope they deposit the bitcoin in your wallet. Exchanges exist for the same reason that escrow services do - they're points of convenience and trust.
People deposited fiat money with MT Gox in exchange for Bitcoins, however MT Gox did not have enough Bitcoins in stock to give them out to all the people that bought them, so the Bitcoin denominated account balances at MT Gox were liabilities with limited assets to back them. They relied on the fact that most people would not withdraw their Bitcoins, therefore it was a fractional reserve system.
Bitcoin doesn't require banks for storage, but it certainly needs exchanges. What is your alternative if you have $100 in USD that you want to convert into Bitcoin? You could look on some random forum and mail a check to some random individual and hope they deposit the bitcoin in your wallet. Exchanges exist for the same reason that escrow services do - they're points of convenience and trust.
Unlike most "currencies", Bitcoin is a commodity, in the genuine economic sense of the term. Further, unlike most commodities even, its "value" determination was built in. Therefore speculating on Bitcoin is pretty irrational, because in a rational market, inevitably its "value" is going to settle around a relatively fixed number.
So if you were a rational person, it is likely you would seldom have good reason to converting cash to $100 worth of Bitcoin. Unless you wanted to make an anonymous online transaction. But that isn't an "investment".
Exchanges corrupted the whole idea behind Bitcoin. They removed anonymity (which is supposed to be one of the reasons Bitcoin exists in the first place), they facilitated irrational price speculation, and they charged fees for "services" that were supposed to be built into the cost of mining (which means they were double-dipping).
So if you were a rational person, it is likely you would seldom have good reason to converting cash to $100 worth of Bitcoin. Unless you wanted to make an anonymous online transaction.
No argument there, but people exchange currencies all the time for the sole purpose of performing transactions.
When I travel to Europe it is helpful to have Euros in my wallet and not US Dollars. So, I go to a local exchange (at my bank or in an airport) to exchange my Dollars for Euros. That's all an exchange is - somebody willing to trade one thing for another. It doesn't have to be as part of an investment, though people will always trade commodities of any kind.
Further, unlike most commodities even, its "value" determination was built in.
Its supply is built-in. The value of a commodity depends on both its supply, AND its demand. So, the value of Bitcoin would be expected to go up and down since there is no way to regulate its supply to maintain a constant value. Value is also relative - compared to fiat currency the value would certainly be expected to change as the supply of those currencies changes.