For those not in the know, the Magic: the Gathering Online eXchange (MtGOX for short, emptygox to some) is the largest and most popular bitcoin “exchange,” a service that matches fools wishing to buy bitcoins with those who are just a bit wiser and are trying to get out. It’s somewhat similar to real stock exchanges, except it focuses on only one thing, does a terrible job trading, and was originally intended to exchange virtual Magic: the Gathering cards. MtGOX theoretically matches buyers and sellers, then takes a fee for each transaction, then apparently throws that away instead of spending it on maintenance, infrastructure, or administration. The site is notoriously laggy, has been
This is a company that makes $60k per day on average (more than $100k now with the price spikes and rise in volume) and has 18 employees but they can’t get a fucking server functioning for shit. Every time the price starts to drop Mt. Gox lags to the point of being unusable. Either they’re incompetent or are manipulating the price. Higer price = Bigger profits.
Can’t someone save the free markets!
As we cross the $100 bitcoin threshold we examine the growing Bitcoin bubble that’s guaranteed to pop.
For those that don’t know, there was some news a while back where the Bitcoin enthusiasts were excited about having an electronics store that specialized in bitcoins, which “proved” that bitcoins were slowly becoming a legitimate currency for legitimate transactions. But has anyone actually checked out the site?
Normally, transparency is very difficult in the bitcoin world. But bitcoinstore is a special case, because they need to hit a certain dollar amount with their supplier in order to maintain the best possible discounts. Since they are nowhere close to reaching their goal, they put up a live chart on their website to show viewers how far they need to go. At the current market rate of $77, bitcoinstore has raised about $363,000. They need to hit $850,000 by March 31st, three days from now. This implies that they currently have around 4700 bitcoins in their wallet, or about 0.04% of all bitcoins in existence (1 in every 2,500).
From February to March, bitcoins essentially went from a low of $20 to a high of $95. That means that they essentially created $800 million in market value from thin air. For every dollar spent at the bitcoinstore, the market value of bitcoins has increased by $2000. This completely destroys the argument that the price of bitcoins are going up for any reason other than speculation. People are speculating on the idea that bitcoins are a useful currency, but the simple fact of the matter is, no one seems to be using them for anything other than silk road.
Here’s another bit that’s interesting:
Notice how even as the price is going up, the number of actual transactions has gone down? This pretty much destroys the idea that bitcoins have gone up due to heightened interest. Instead, it implies one or both of the following:
1) The lack of transactions is causing the price to go up. Speculators hoard their bitcoins in the hopes of future gains, which creates artificial scarcity and a self-fulfilling prophecy.
2) The price going up is causing a lack of scarcity. This would imply that the price is going up due to manipulation, rather than actual interest. As the price goes up, hoarders are less likely to sell (due to greed), and buyers are less likely to buy (because it’s too expensive).
Since bitcoins generally have no accountability, such manipulation would be impossible to investigate.
We should also note that the $800 million increase in market value is purely speculation. In other words, just because you have 11 million bitcoins each valued at $95, that doesn’t mean that you will actually be able to sell them at that price. Which is precisely what happened here.
One of the major problems with the bitcoin economy is that the current market price is based on the current trading price, and trade volume is easy to inflate. You simply pass some money back and forth between different wallets, so that the market looks more active than it really is.
Imagine if an author wanted to get on the bestsellers list, so he sets up two separate book stores. Bookstore A purchases 100 copies from Bookstore B, and then Bookstore B purchases those books back from Bookstore A. As long as there’s no sales tax, this can go back and forth indefinitely to make it look like millions of copies were sold, even though you only had 100 copies to start with. Bitcoins are never actually consumed. They’re not a good or a commodity on their own. Instead, they can only pass from one hand to the next, and we have no way of knowing if these transactions are legitimate.
This brings up another point: If Bitcoins can be re-used an infinite number of times, then you can’t really attribute the skyrocketing price to supply and demand, because the supply is essentially infinite. There is absolutely no reason for the price to go up so dramatically, other than greed and speculation.
In other words, the economy of Bitcoin is not growing in any meaningful way, and it will stay that way in a deflationary economy. Why spend Bitcoins when holding them will produce grater rewards? Any growth in the economy is due to the simple movement of coins back and forth, not due any type of exchange between Bitcoins for goods and services.
The fact is this bubble is undeniable and with no real growth to be seen the instability will increase until everything collapses again.
Bitcoins is on another wild swing, this time it’s going down, down, down really goddamn fast
/r/Bitcoin and BTCTalk are in a panic, tons of buy orders coming through right now.
Only thing preventing a major panic sell is the fact that Mt. Gox has 10 minutes of trading lag. You aren’t trading bitcoins, you’re trading on what you think bitcoins will be in 10 minutes. This is some serious shit.
Here’s a 24 hour look.
Watch it all live here! http://bitcoinity.org/markets
Today Bitcoins hit $88 (and went up and then down and then up again) which is an important milestone because it allowed me to write this witty title.
I think we’ll probably hit over $100 by the end of the week or mid next week. My opinion is that we’ll see a little over $100-$120 before the crash comes again, but I’m terrible at predicting these things.
So instead I’ll post these 4 simple signs that you’re investing in a bubble.
There are four signs that can help you recognize that an investment is probably in a bubble:
1. Skyrocketing Price
One of the major signs that an investment is headed into bubble territory is a skyrocketing price. The price might be shooting up quickly, seeing rapid appreciation. There doesn
A bored pentester used this one weird old trick to find out Silk Road’s public IP address, which has the potential to compromise the entire operation.
EDIT: Don’t go into freak-out mode here! This is potentially serious, but is fixable and I disclosed to DPR alone about 15 hours ago. He’s good, skilled, and this will be investigated and fixed in no time, I am sure. In the interim, if you need to use Silk Road BE SURE TO USE GPG. The beauty of Bitcoin and Tor is that even if the server were to be seized, if your messages are GPGed, it’s near-impossible to get anything valuable. I just know that not everyone uses GPG.
I am a penetration tester by trade, and while I do not use SR, I do occasionally conduct informal tests of the security of various Tor Hidden Services.
I debated for hours whether to post this, but I need to alert the community in case no actions are taken:
Last night, while SR was down for maintenance, a brief few moments allowed a certain set of circumstances that caused me to be able to view the public IP of the httpd server of Silk Road. This isn’t an obvious flaw, but it is extremely simple if you know where to look – the server basically will publish a page containing all of the configuration data of the httpd server including the public IP address.
For the sake of the site’s security, that’s all the information I’m going to reveal.
I have messaged Dread Pirate Roberts and am currently waiting a response. I do have a SHA512 hash of the public IP which I have retained as evidence if DPR needs proof.
I will keep this updated with any news received.
With such information, authorities may be able to locate and shut down Silk Road and apprehend its operator, or more. What does this mean for Bitcoin? If the Silk Road gets busted, the only thing left to prop up the price of butts is the Magic: the Gathering Online Exchange’s creaky servers and meddling hands.
For the uninitiated, SatoshiDice is a Bitcoin gambling site described as a ”blockchain-based betting game,” accused of being a DDoS against Bitcoin by Luke-jr (notable for his fanatical devotion to “Tonal Bitcoin,” which as far as anyone can tell is actually a joke.) Users send an amount of their bitcoins to a SatoshiDice address, the “service” then determines whether the “bet” wins or loses, then returns a transaction with winnings or a fraction of the house winnings, since they’re such great guys.
The “bets” on SatoshiDice generate a tremendous volume of microtransactions (each bet takes two transactions to complete,) which spam up the Bitcoin network, and those who play SatoshiDice pay elevated transaction fees (which are, for the most part, ignored or not paid by many users,) and as a result SatoshiDice transactions receive priority when processed, forcing other transactions to wait for the next block. SatoshiDice transactions account for most of the content of the blocks generated now and its transactions filling blocks helped contribute to the blockchain fork, which caused chaos and allowed someone to perform the infamous double-spend attack. This problem has been known for at least a year yet nothing was done to patch or prevent SatoshiDice from forking Bitcoin.
The chart below illustrates the damage SatoshiDice does to Bitcoin.
The vast majority of the blue markers are SatoshiDice and because they pay the transaction fee, they have priority over normal transactions and are effectively choking out the rest of the economy and causing long delays in confirmations.