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Cryptocurrency Exchange Vircurex To Freeze Customer Accounts

timothy posted about 9 months ago | from the experiencing-unusually-heavy-call-volume dept.

Bitcoin 357

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."

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hmm, people out to make a quick buck (3, Interesting)

Jmc23 (2353706) | about 9 months ago | (#46561063)

are frequently criminals.

Re:hmm, people out to make a quick buck (4, Insightful)

GumphMaster (772693) | about 9 months ago | (#46561091)

Or day traders, or high frequency traders...

Re:hmm, people out to make a quick buck (5, Insightful)

Anonymous Coward | about 9 months ago | (#46561123)

Repetitve comment, that.

Re:hmm, people out to make a quick buck (2, Interesting)

MobSwatter (2884921) | about 9 months ago | (#46561167)

You're not taking into account that since the strength and credibility of the dollar is no longer what it was, the mob and gangs are trading in humans and blood money, this market is one they can fortify by attacking any substitute for the dollar.

Re: hmm, people out to make a quick buck (1)

VTBlue (600055) | about 9 months ago | (#46561519)

The strength and credibility of the dollar is unquestioned, and it will remain unquestioned so long as the federal government spends money and collects taxes without causing too much inflation.

Re: hmm, people out to make a quick buck (1)

MobSwatter (2884921) | about 9 months ago | (#46561647)

Wouldn't be the first question I've seen the government refuse to explore. Credibility and confidence is not earned by the use of force, or martial law or any shade of gray in that they elect to impose.

Re:hmm, people out to make a quick buck (0)

Anonymous Coward | about 9 months ago | (#46561227)

Day trading and HFT are not criminal activities.

Re:hmm, people out to make a quick buck (5, Insightful)

Anna Merikin (529843) | about 9 months ago | (#46561271)

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.

Re:hmm, people out to make a quick buck (1)

Anonymous Coward | about 9 months ago | (#46561297)

Goes to show what, exactly? Laws change? No disagreement there.

Re:hmm, people out to make a quick buck (2)

NFN_NLN (633283) | about 9 months ago | (#46561643)

Goes to show that sometimes it takes laws time to catch up.
What value does HFT provide to the economy? Are companies suppose to change direction every 1/100 of a second in response to trades -OR- is it just a method for skimming money?

Re:hmm, people out to make a quick buck (1)

GumphMaster (772693) | about 9 months ago | (#46561287)

Nobody is claiming they are, just that the participants intend to make a quick buck.

Re:hmm, people out to make a quick buck (0)

Anonymous Coward | about 9 months ago | (#46561321)

>>>hmm, people out to make a quick buck are frequently criminals.
>>Or day traders, or high frequency traders...
>Repetitve comment, that.

In context that comment can easily be read to imply that day traders or HFTraders are criminals.
It could also be read to imply that day trading and HFT are redundant terms. (Some overlap, but they aren't the same thing either.)

Re:hmm, people out to make a quick buck (1)

invictusvoyd (3546069) | about 9 months ago | (#46561541)

Nobody is claiming they are, just that the participants intend to make a quick buck.

Like the fellas at Enron . Just guys trying to do whatever they can to make some extra cash .. Al Capone was a criminal ! .

Re:hmm, people out to make a quick buck (-1, Flamebait)

chromaexcursion (2047080) | about 9 months ago | (#46561173)

is there really that much of a difference?

making money without working for it.

Making money without working for it (0)

Taco Cowboy (5327) | about 9 months ago | (#46561329)

making money without working for it

How many of them on the Congressional Hill work for the people who pay them their salaries ??

The last two POTUS also never had the interest of the Americans in their minds.

Re:hmm, people out to make a quick buck (4, Insightful)

ShanghaiBill (739463) | about 9 months ago | (#46561177)

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.

A curious question ... (0)

Anonymous Coward | about 9 months ago | (#46561445)

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

Are there other inefficiencies within the trading system that are still awaiting to be ironed out ?

If so, what ?

Re:hmm, people out to make a quick buck (5, Interesting)

dbIII (701233) | about 9 months ago | (#46561549)

They made money by squeezing inefficiencies out of the system

Nice euphemism for a timing based man in the middle attack.
Alice asks for shares. Bob has shares for sale. Speedy buys shares from Bob and sells them to Alice before Bob can get the message that Alice is buying and before Alice can get the message that Bob is selling. Of course it can be argued that it's just a "sharp" business practice, the "American Way you commie" or whatever and that a man in the middle attack that adds zero value to the market is perfectly fine.

Re:hmm, people out to make a quick buck (2)

JDAustin (468180) | about 9 months ago | (#46561275)

People are 3 things: greedy, lazy, and stupid. Those out for a quick buck on the *coin exchanges prove this point.

Re:hmm, people out to make a quick buck (2)

PopeRatzo (965947) | about 9 months ago | (#46561279)

are frequently criminals.

And people involved in "cryptocurrency" are frequently a little questionable themselves.

http://en.wikipedia.org/wiki/S... [wikipedia.org]

http://en.wikipedia.org/wiki/S... [wikipedia.org]

Personally, I've decided to put my money in tulip bulbs. My tulip bulb fortune is the fastest growing in the world. Friday, I had two tulip bulbs and at the close of business today, I have fifty, having cleaned out the local garden shop. That's a 2500% increase in two days!!.

Clearly, tulip bulbs are the next big thing, since their value does not depend on any government and they can be used anonymously. I keep mine safely buried underground in my front yard.

Re:hmm, people out to make a quick buck (0)

Anonymous Coward | about 9 months ago | (#46561343)

Clearly, tulip bulbs are the next big thing, since their value does not depend on any government and they can be used anonymously. I keep mine safely buried underground in my front yard.

That's what you think..... you didn't notice the two guys sneaking around, one with a shovel, and another carrying a great big box of harvested tulip bulbs?

Ponzi scheme (-1)

Anonymous Coward | about 9 months ago | (#46561075)

Ponzi scheme, definitely. They have no backing to anything - not military force, or tangible goods, or any realistic form of scarcity control.

They purely operate on the next greater fool principle.

Re:Ponzi scheme (1)

Anonymous Coward | about 9 months ago | (#46561161)

That's not the definition of a Ponzi scheme, jackass.

Re:Ponzi scheme (-1)

Anonymous Coward | about 9 months ago | (#46561237)

Explain how Bitcoin isnt a Ponzi scheme, because it sure as fuck looks like one.

Re:Ponzi scheme (3, Informative)

Dagger2 (1177377) | about 9 months ago | (#46561311)

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.

Re:Ponzi scheme (0)

Anonymous Coward | about 9 months ago | (#46561341)

Copied and pasted from the Bitcoin FAQ,

So, according to a website biased in favor of Bitcoin, it is not a Ponzi scheme. And you don't see any problem with that.

Re:Ponzi scheme (1)

Dagger2 (1177377) | about 9 months ago | (#46561393)

Not if it's not wrong -- and nobody who has ever said that to me has been able to explain why it was wrong.

Maybe you'll be the first. Can you explain why that FAQ entry is wrong, and explain what it is about Bitcoin that makes it a Ponzi scheme?

Re: Ponzi scheme (1)

Anonymous Coward | about 9 months ago | (#46561475)

The (purely virtual and irrational) value of bitcoins are highly dependant on demand. More than normal currencies.

Bitcoiners remind me of religious cultists pretending that everything is alright, nothing ever wrong and you should be enlightened by buying into Bitcoins. All while everything around them burns and falls apart.

While its not a classic ponzi scheme, it certainly is stupid to buy and invest in bitcoins these days.

And to compare early cult members (bitcoin syphon anyone?) with investors is laughable at best. Without recruiting news believers those bitcoins would be the worthless bits they are.

Re: Ponzi scheme (4, Interesting)

AudioEfex (637163) | about 9 months ago | (#46561685)

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 imbedded in human behavior than anything else.

Sure, I wish to heck I'd bought up a bunch of BitCoins a few years ago when they were like $20. But if I had, if my coins hadn't been with MtGox and I lost them, I would have sold out the moment these dominoes began to fall. It's those who still are remaining ardent BitBelievers that confound me - they must just be so attached to this fantasy of retiring in a few years with BitMillions they refuse to let their fantasy go, and can't just take the tidy profit they already made and move on with their lives.

Re:Ponzi scheme (1)

dryeo (100693) | about 9 months ago | (#46561509)

Late adopters, and indeed, society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.

It depends on this sentence being true and so far it does not seem stable nor widely accepted.

Re:Ponzi scheme (1)

bloodhawk (813939) | about 9 months ago | (#46561673)

Late adopters, and indeed, society as a whole, benefit from the usefulness of a stable, fast, inexpensive, and widely accepted p2p currency.

It depends on this sentence being true and so far it does not seem stable nor widely accepted.

interestingly it actually fails all its own tests. It isn't stable, certainly isn't fast or inexpensive and it most definitely isn't widely accepted. and assuming the early people will benefit from rise in value sounds dangerously close to being a Ponzi, the only thing saving them from being one is they aren't making a guarantee on the rise.

Re:Ponzi scheme (3, Interesting)

Sarten-X (1102295) | about 9 months ago | (#46561651)

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.

Re:Ponzi scheme (-1)

Anonymous Coward | about 9 months ago | (#46561385)

Early adopters make their money purely from people coming in later on, the generation curve is skewed to give them a huge profit for much less work. When combined with the facts that there's no value being created and that the currency is designed to be massively deflationary, you wind up with really only the conclusion that it's a type of Ponzi scheme.

Re:Ponzi scheme (1)

Dagger2 (1177377) | about 9 months ago | (#46561421)

Do you really think there's no value in being able to move money around? To make payments to people who aren't in the same room as you?

If so, then I disagree; I believe that's useful. A lot of people use services to make payments online, so I don't think popular opinion is with you either.

Re:Ponzi scheme (0)

Anonymous Coward | about 9 months ago | (#46561455)

Do you really think there's no value in being able to move money around? .

Actual bitcoin transactions are extremely small when compared with the hype. Any look at any bitcoin forum proves that nearly everyone is involved as speculators. They're all looking for a bigger sucker to come along and buy their "investment". It might not be a classic ponzi scheme, but it reeks of a huge pump=n=dump.

In any case, bitcoins need only to be of minimal value to support the amount of network transactions needed. If they were $1 each, it would still work fine. The value (theft potential) is entirely based on hype and speculation.

Re:Ponzi scheme (1)

Dagger2 (1177377) | about 9 months ago | (#46561669)

Are you attempting to claim that Bitcoin is a scam because there are people pulling scams with it? (In so much as "gambling on something with a volatile price" is a scam.) This is like arguing that US dollars are a scam because Charles Ponzi pulled his eponymous scam using them.

Bitcoins can actually be of any value and Bitcoin will still function just fine. The price is completely irrelevant, which means it doesn't matter if there's hype, speculation or whatever driving the price up (or down). Your $10 transaction is still a $10 transaction, whether it happened to use 10 BTC or 10 mBTC behind the scenes.

Re: Ponzi scheme (0)

Anonymous Coward | about 9 months ago | (#46561489)

All this can be done with real money. And contrary to bitcoin trash, real money is accepted everywhere.

Contrary to nerd tunnel vision, most people don't have bitcoins, don't know what bitcoins are and most shops do not accept bitcoins. For a very good reason.

Re:Ponzi scheme (1)

bloodhawk (813939) | about 9 months ago | (#46561679)

Do you really think there's no value in being able to move money around? To make payments to people who aren't in the same room as you?

If so, then I disagree; I believe that's useful. A lot of people use services to make payments online, so I don't think popular opinion is with you either.

and what does bitcoin add that isn't already possible with the existing system? I can do all of that without bitcoins, don't get me wrong I see plenty wrong with the existing monetary systems and the way they are manipulated, but bitcoin adds absolutely nothing while taking away plenty of the benefits and safeguards.

Re:Ponzi scheme (0)

Anonymous Coward | about 9 months ago | (#46561515)

I wonder if that FAQ says anything about pre-mining.

That's a biased source (1)

dbIII (701233) | about 9 months ago | (#46561569)

That's a biased source and I disagree. Look up Ponzi scheme on wikipedia (or anywhere) then compare it to Bitcoin for an unbiased perspective.
Personally I see it as a scam baited for geek - deliberately preying on people like us and those we work with. However I'm biased just as a sheepdog being asked about wolves would be biased.

Re:Ponzi scheme (1)

Holi (250190) | about 9 months ago | (#46561677)

and exactly what is stable about bit coin? Certainly not it's value, and that one fact makes it almost useless as a currency today.

Re:Ponzi scheme (1)

wiredlogic (135348) | about 9 months ago | (#46561319)

So, basically the same as stock exchanges and future markets.

Re:Ponzi scheme (1)

rudy_wayne (414635) | about 9 months ago | (#46561367)

So, basically the same as stock exchanges and future markets.

Not really.

Yes, if you buy Bitcoins and then the price goes down you lose money, just like with stocks and futures. However, most of loses with Bitcoin has not been from normal trading activity. Almost all of the losses have been from the Bitcoin exchanges stealing people's money. That's very rare with stocks and futures due to regulation specifically designed to prevent that sort of thing. I'm not saying it never happens, but it's rare.

First? (1)

Anonymous Coward | about 9 months ago | (#46561081)

I suspect the only reason no other comments are showing up yet, (at least for me) is that all the bitcoin fanboys are desperately trying to cash out their reserves before the bubble pops.

But it might just be another case of Slashdot being fucked up.

But there's nothing wrong with Bitcoin! (2)

oscrivellodds (1124383) | about 9 months ago | (#46561105)

It's the people, goddammit!

Re:But there's nothing wrong with Bitcoin! (1)

chromaexcursion (2047080) | about 9 months ago | (#46561181)

you mean all the criminals that have been arrested recently?

Re:But there's nothing wrong with Bitcoin! (4, Insightful)

labnet (457441) | about 9 months ago | (#46561413)

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.

Re:But there's nothing wrong with Bitcoin! (1)

fnj (64210) | about 9 months ago | (#46561513)

an apple is worth 1 dollar from year to year, not 1 dollar today, then 10 dollars next week

Actually, capitalism only works because inflation is built in. An apple that is $1 this year, under GOOD conditions, will be ariund $1.05 next year, $1.10 the year after, year after year after year. There are variations. And sometimes hyperinflation, when there are times an apple is worth $1 this year and $1 million next year. Don't be so sure hyperinflation won't hit your home.

See if any of these mean anything to you: Weimar Republic 1923, Bolivia 1985, Greece 1944, Hungary 1946, Ukraine 1995. I could go on. The list is long.

Re:But there's nothing wrong with Bitcoin! (1)

Rick in China (2934527) | about 9 months ago | (#46561561)

You're forgetting that any fiat currency is given value artificially and that includes BTC. As trust fades in BTC, value drops. It can be manipulated on the dime via cyber attacks - and there have been so many recent cases demonstrating how quickly lack of trust can set in - this article just being a recent example. What happens when all the trust in your currency of choice fades, and your BTC is no longer accepted by vendors - and there is no gov't backing that currency as an acceptable payment? Zero wealth? Enjoy.

Re:But there's nothing wrong with Bitcoin! (-1)

Anonymous Coward | about 9 months ago | (#46561661)

Then by your theory, NXTcoin should take off like a rocket, since it's a limited resource by definition.

Re:But there's nothing wrong with Bitcoin! (1)

Anonymous Coward | about 9 months ago | (#46561443)

I have some tulip bulbs you might be interested in.

Re:But there's nothing wrong with Bitcoin! (1)

Flwyd (607088) | about 9 months ago | (#46561527)

Bitcoin by itself has no intrinsic value. It only has value because people decide it should.
Money is just shorthand for people doing stuff [youtube.com] .
Without people, there's no economy. Money is just a useful fiction.

I mentioned several times.. (1)

Rick in China (2934527) | about 9 months ago | (#46561137)

In comments about the BitCoin exchanges in China, that this _is the norm_ for exchanges or wallets here, and if you're keeping any money in any BTC storage or transaction services in China, expect to get fleeced. Just another day another dollar for these sneaky bastards.

Re:I mentioned several times.. (1)

mysidia (191772) | about 9 months ago | (#46561363)

Except in China... it's not just BTC exchanges... banking not so safe [cnbc.com] ; it's normal banks [bangkokpost.com] defaulting on their loans, too.

depositors in some of Yancheng City's largest farmers' co-operative mutual fund societies ("banks") have been unable to withdraw [zerohedge.com] "hundreds of millions" in deposits in the last few weeks. "Everyone wants to borrow and no one wants to save," warned one 'salesperson', "and loan repayments are difficult to recover." There is "no money" and the doors are locked.

Re:I mentioned several times.. (2)

Rick in China (2934527) | about 9 months ago | (#46561485)

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.

Counter Party Risk (0, Insightful)

Anonymous Coward | about 9 months ago | (#46561151)

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.

Kevin Bacon (-1)

Anonymous Coward | about 9 months ago | (#46561165)

Must be in this.

Tiny "Exchange" (5, Informative)

Bob9113 (14996) | about 9 months ago | (#46561169)

Vicurex is tiny. They only did US$30,822 of business [bitcoincharts.com] 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.

Re:Tiny "Exchange" (1)

Marginal Coward (3557951) | about 9 months ago | (#46561349)

Vicurex is tiny. They only did US$30,822 of business [bitcoincharts.com] in the past 30 days. The corner pawnbroker is probably a bigger business. The corner gas station definitely is.

You forgot the corner hooker. Unless she's really ugly.

Re:Tiny "Exchange" (1)

mysidia (191772) | about 9 months ago | (#46561375)

Vicurex is tiny. They only did US$30,822 of business

Indeed they are... Why the heck is this even news?

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?

Or is it news, in order to provide the Vircurex with free desperately needed advertising, or what?

Re:Tiny "Exchange" (1)

dbIII (701233) | about 9 months ago | (#46561595)

Slashdot editors have an agenda to keep bringing up articles on the smallest negative event happening to anyone somehow related to Bitcoin

It used to be the smallest event that could be spun positively and it's a chicken or egg argument as to whether that was due to the ads for bitcoin mining rigs here or if the ads came because of the large number of bitcoin stories.
I think it's perspective - personally I think bitcoin is a disgusting old style ponzi scam with new window dressing to bait it for geek so I notice the positives and get annoyed. A participant or perpetrator would notice the negatives and get annoyed.

Re:Tiny "Exchange" (1)

westlake (615356) | about 9 months ago | (#46561429)

The corner pawnbroker is probably a bigger business. The corner gas station definitely is.

and both are more likely to well-managed and solvent,

Re:Tiny "Exchange" (0)

Anonymous Coward | about 9 months ago | (#46561703)

VCX does not have any way to deposit or withdraw USD/EUR ("yet"), so their main volumes are between various crypto-currencies (I think they are one of the largest in DOGE-BTC), don't even look at the USD trade volumes.

I have these invisible objects (0)

Anonymous Coward | about 9 months ago | (#46561179)

They're relatively easy to come into possession of early on. But later, it will be very difficult to obtain these invisible objects and they total number of these objects is limited! So act now! Buy them up quickly before they are worth more than you can afford!

I have no vested interest at all in increasing the value of these invisible objects, save for the fact I have several thousand of them in my personal possession!

Please be sure to send me actual money for these as they most certainly will be more valuable than real money in good time!

Re:I have these invisible objects (1)

oscrivellodds (1124383) | about 9 months ago | (#46561193)

No! Buy my poop! I make a limited quantity per day and when I die there won't be any more of my brand. It is scarce and will become even more so in time. My poop is worth more than your nothing! You can fertilize plants with my poop! You can play nasty pranks with my poop! You can collect it and exchange it with others! What can your nothing do?

Re:I have these invisible objects (0)

Anonymous Coward | about 9 months ago | (#46561481)

Um... Eww?

Re:I have these invisible objects (1)

antifoidulus (807088) | about 9 months ago | (#46561243)

Eh, the same thing can be said about gold as well. There was a lot more gold in the ground 1000 years ago than there is today and every day it gets harder and harder to find more gold.

*Ok, unlike bitcoin gold does have some industrial applications(monster cables notwithstanding), but most people use gold much like they use bitcoin. Maybe if they could make bitcoin bling....

Re:I have these invisible objects (0)

Anonymous Coward | about 9 months ago | (#46561449)

Have you tried to make a necklace out of bitcoins? At least gold is pretty to look at if you're not using it industrially.

Basic Math (2)

laughingskeptic (1004414) | about 9 months ago | (#46561183)

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?

Re:Basic Math (3, Insightful)

ghn (2469034) | about 9 months ago | (#46561263)

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.

Re:Basic Math (1)

laughingskeptic (1004414) | about 9 months ago | (#46561423)

I don't think these exchanges are managed quite this simply. They seem to have large numbers of both dollars and bitcoins on-hand and in-process and lots of upset customers. It sounds like they are operating as both bank and exchange -- which is a bad thing.

Re:Basic Math (1)

Dagger2 (1177377) | about 9 months ago | (#46561277)

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!

This is not how exchanges work. Exchanges operate as markets; if somebody decides to sell their v-coins, they need a buyer to sell them to (that is, another user of the exchange, not the exchange itself.) If nobody else on the exchange is willing to pay that price, then nobody goes insolvent -- the seller just has to take their v-coins to wherever the people willing to pay $2 are.

Re:Basic Math (2)

mysidia (191772) | about 9 months ago | (#46561399)

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.

No... that's totally false. A proper exchange always profits from every transaction, once they have build their business.

The exchange isn't a party to a trade. When two traders enter an order, and the seller's ASK is met (after adding half the exchange fee [spread] to the asking price) by a buyer's BID (after subtracting half the exchange fee [spread] from the buyer's bidding price), then a trade occurs, and the exchange pockets their fee from both sides of the trade.

An exchange might do some market making, where the exchange itself occassionally uses collected fees to act as a buyer or seller, for the purpose of facilitating liquidity on the exchange, BUT it is unnecesary that the Exchange itself take on any market risk regarding the direction that BTC/USD moves in.

Re:Basic Math (1)

hey! (33014) | about 9 months ago | (#46561635)

Well, sure. But if it were the kind of exchange you were talking about, then they wouldn't have any user funds on hand to freeze.

The fact that they *do* have customer funds to freeze means that even if they call themselves an exchange, they're functioning as a bank. They're taking deposits for customers which then have to be frozen when they lack sufficient reserves to cover current operations. If they accept only crypto currency deposits they can function like a bank without being regulated.

Bad Analogy (5, Insightful)

SuperKendall (25149) | about 9 months ago | (#46561185)

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.

Re:Bad Analogy (1)

ColaMan (37550) | about 9 months ago | (#46561299)

The exchanges dying is good for bitcoin, because the bad ones will be replaced by more solid and upright entities.

You hope.

Re:Bad Analogy (1)

jhol13 (1087781) | about 9 months ago | (#46561435)

Track record this far is ... can I use enron as an adjective?

Re:Bad Analogy (2)

Eskarel (565631) | about 9 months ago | (#46561411)

If it were just the exchange failing, that might not be a problem, but when the exchanges are, for all intents and purposes, either seizing assets from their customers or losing those assets to theft left right and center, it sure as hell does affect Bitcoin.

Keeping a private wallets require a degree of know how which is beyond most tech savy people, let alone regular folks, exchanges(banks) are as necessary to the Bitcoin ecosystem as they are to cash. When the banks can't be trusted and can't be prosecuted, the ecosystem and therefor the currency itself is hopelessly broken.

Re:Bad Analogy (0)

Anonymous Coward | about 9 months ago | (#46561439)

a private wallet is easy to set up for a person who can use a computer, just install bitcoin core. It just takes several days to get the blockchain and a few GB of hard disk space. But once it is there it is pretty straightforward.

Re:Bad Analogy (1)

tlhIngan (30335) | about 9 months ago | (#46561585)

Keeping a private wallets require a degree of know how which is beyond most tech savy people, let alone regular folks,

We've hit the third evolution of malware.

First malware spammed people because spam was highly profitable. Second, malware infected people's computers because hijacking user data such as banking information was highly profitable.

Now, malware simply scans a computer for a bitcoin wallet. If it finds one, it merely empties it and moves onto the next PC. Because that's highly profitable - mining is gone, botnets are OK, but not as profitable, but stealing one or two bitcoins well, it's a jackpot.

The irony of the bitcoin situation is that governments can step in and fix the exchange problems because exchanges work under regulations. But then that raises a catch-22 because it means government gets involved in bitcoin, which a lot of people are against because it's the whole anti-government anti-snoop anonymous thing. And yeah, while it's anonymous, the government regulations can state that all transactions have verifiable information per regular banking regulations, which goes counter to the entire point.

The only way around it is to kickstart a completely bitcoin economy where everyone solely works in bitcoin, from the farmers that grow food, to the transport and logistics companies that move stuff around, to the raw materials, producers, landlors, etc., all done using bitcoin. Which is very difficult to do because it's globalized - it's way easier to kickstart if you had a small autonomous island to which everyting is done using bitcoins.

Re:Bad Analogy (1)

ArcadeMan (2766669) | about 9 months ago | (#46561641)

Let's try using Bitcoins planet-wide right now. After all it's only one planet in one solar system in one galaxy.

Re:Bad Analogy (-1)

Anonymous Coward | about 9 months ago | (#46561447)

Saying *an* exchange failing is indeed like saying *a* corner store is failing. When one can reliably say that, by volume, *most* exchanges are failing, then one gets into trouble.

BTC is indeed a bubble/ponzi scheme.

Re:Bad Analogy (0)

Anonymous Coward | about 9 months ago | (#46561505)

So just like every other blind fucking idiot, bad thing that happens to Bitcoin to you is Good Thing Happens! BITCOIN up Up UP!!!!

Fuuuuuck me, you people are more idiotic and blind that that Phelps guy.

Re:Bad Analogy (-1)

Anonymous Coward | about 9 months ago | (#46561521)

Yeah, because Mt. Gox was such a minor player ... oh wait ....

Invest in shitcoin or any of the currency like it, get shit on like you deserve.

More proof that potheads and money don't mix (0)

Anonymous Coward | about 9 months ago | (#46561197)

We're talking about problems involving drug dealers, drug addicts, and the currency of choice for criminals.
No surprises that it's been nothing but an endless chain of fuck-ups.

Re:More proof that potheads and money don't mix (0)

Anonymous Coward | about 9 months ago | (#46561593)

We're talking about problems involving drug dealers, drug addicts, and the currency of choice for criminals.
No surprises that it's been nothing but an endless chain of fuck-ups.

The currency of choice for criminals is the US Dollar.

Currency vs. bank (1)

Todd Knarr (15451) | about 9 months ago | (#46561207)

I'd note that the question of the solvency/stability of a Bitcoin exchange has as much bearing on the viability of Bitcoin as a currency as the question of the solvency/stability of say Bank of America has on the viability of the US dollar as a currency. I can keep Bitcoins in my own wallet on my own computer just like I can keep dollars in my own wallet, use both to pay for things, and never be worried about whether any particular exchange or bank will go belly up. And if I choose an unstable institution to store my currency for me, I run the risk of losing my money whether it be Bitcoins or dollars or yen. The only reason banks don't deal with cryptocurrency is that, unlike most currency, cryptocurrency has a mathematical underpinning that makes it difficult for them to loan it out to other people and make money off it while you aren't actively using it.

Re:Currency vs. bank (2)

jerquiaga (859470) | about 9 months ago | (#46561285)

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.

Re:Currency vs. bank (1)

Todd Knarr (15451) | about 9 months ago | (#46561535)

So if I store my dollar bills in a jar and it gets destroyed in a fire, I can go to the FDIC and get my money restored by them? No, I can't. That's because the FDIC doesn't insure dollars. It insures deposits (in whatever currency, at it's value in dollars when it was deposited) at institutions that're equivalent to a Bitcoin exchange. As far as gaining/losing value, shall we discuss the bank and financial company bailouts? They were all needed precisely because the banks and financial companies did deal heavily in assets that could and did lose value that quickly and got burned by it. As far as backing, riddle me this: what precisely can you trade a dollar bill in to the US government in exchange for? Nothing but another dollar bill, or a note promising to pay you some number of dollar bills at some point in the future. We haven't had a hard currency in ages, it's all fiat money that's worth exactly what someone else will trade you for it. Just like Bitcoins. If someone won't accept Bitcoins then they're worthless, just like a New Zealand dollar would be in a grocery store here. Technically an NZ dollar's worth some number of US dollars, but if the merchant won't accept it as payment it's a piece of scrap paper for all the good it'll do you. And if someone will sell me a $2000 computer for BTC 4, then a Bitcoin's worth about 500 US dollars.

Re:Currency vs. bank (0)

Anonymous Coward | about 9 months ago | (#46561459)

Yeah, but no one can pick your pocket just because you saw a banner ad and got pwned by a zero-day wallet stealer. If some one wants to rob you, they have to physically interact with you. That makes it both easier to defend against as well as guarantees that SOMEONE has jurisdiction over the theft. Not to mention, CC's can be cancelled and have a liability limit of $50. Someone gaining access to your BTC can spend everything with NO way to reverse it. Even if the person is caught, they could always claim to have lost/spent the coins. Yeah, they might get a higher sentence (unlikely) and you might win a civil suit against them, but there's no way you're getting your money back any time soon.

Mix drinks, not metaphors... (4, Insightful)

fuzzyfuzzyfungus (1223518) | about 9 months ago | (#46561209)

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.

Silence from Bitcoin leaders (0)

Anonymous Coward | about 9 months ago | (#46561353)

Although your analysis is completely accurate, it's not surprising to see so much criticism of Bitcoin whenever exchanges collapse, and the reason isn't hard to identify. The developers and leaders of the Bitcoin community are almost totally silent on the stupidly insecure architecture of the exchanges and how this harms Bitcoin's reputation, and their silence gives tacit approval to the continued use of such a broken exchange model.

Why are they silent? There must be a reason why they choose not to criticize the design of the exchanges in the very strongest of terms, and the most likely one is that they profit from the exchanges operating, and maybe even from their collapse. Not surprisingly, this fuels highly critical speculation about their motives.

This highly negative perception of Bitcoin is only going to get worse, unless respected Bitcoin leaders make it crystal clear that the exchanges are a disgrace and a liability to the Bitcoin community if they continue to operate as centralized proxies instead of adhering to the original distributed security model.

An exchange should never lose money. (1)

thesandbender (911391) | about 9 months ago | (#46561427)

By definition a true exchange should never lose your money. You can lose your money, but they won't. An exchange is a barter system, you trade X for Y. Legitimate exchanges charge for a "seat" on the exchange, a percentage of the transaction, or both. However, they never just take your money. They may require that you put money in escrow to cover your position but this is set aside, usually drawing risk free interest (or as near as you can get to it) unless you specify otherwise.
No one should be able to prevent you from putting your money into unregulated vehicles/investments but if consider it any more than gambling and expect any protection then you're an idiot. In the US, gambling is actually more regulated than bitcoin transactions (at this time). If you hand off your "wealth" (of any kind) to any unregulated, un-vettted nob who managed to register a TLD then I would like to discuss a long-term, can't lose investment in the Brooklyn Bridge with you.

Let me repeat this. If you just hand over your wealth to someone with no legal safeguards in place, you're a dumba$$. Clear?

Why do people keep their bitcoins at exchanges? (0)

Anonymous Coward | about 9 months ago | (#46561431)

Could someone explain why people put bitcoins in an exchange? I mean isn't the point of bitcoin that you have a copy of the blockchain on your own computer?

Re:Why do people keep their bitcoins at exchanges? (1)

rudy_wayne (414635) | about 9 months ago | (#46561523)

Could someone explain why people put bitcoins in an exchange? I mean isn't the point of bitcoin that you have a copy of the blockchain on your own computer?

Why do people open an account with a stock broker? You're saying to someone "I want to buy (or sell) X, go find me someone who has X to sell (or who wants to buy it)". The whole point of an exchange, whether it's stocks or Bitcoins, is to do the work of finding buyers and sellers so you don't have to.

And it works reasonably well if the exchanges are honest (or forced to be honest by regulations). Bitcoin exchanges are not regulated in any way so they attract people who are specifically looking to rip you off. Just look at the past year. Nobody has lost any significant money from actual trading on Bitcoin exchanges. All the loses have been from exchanges taking people's money and then disappearing.

In days of yore... (1)

meglon (1001833) | about 9 months ago | (#46561433)

Used to be, some years ago now, you could go onto Ebay and sell those Wu's Fighting Gauntlets for $4-5. The difference between those gloves and bitcoins is: bitcoins are absolutely useless against giant spiders the size of small huts.

The Exchanges Aren't Cryptocurrency (5, Interesting)

Baldrson (78598) | about 9 months ago | (#46561463)

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.

The cost of an unregulated currency (1)

gman003 (1693318) | about 9 months ago | (#46561537)

Bitcoin became popular in no small part because many people believe government-backed currencies are overregulated or poorly managed. Because there was a market demand for a non-government-controlled currency, Bitcoin took off. Other things definitely played bigger roles, but being unregulated was a feature, not a bug.

To an extent they were right. It's very difficult to handle money electronically without a middleman, and there are few enough middlemen that the costs can be prohibitive. That's just one thing that an unregulated currency could do better - there are dozens more, but they would be a bit complex to explain even though they boil down to "a managed currency can be ruined by bad management".

But an unregulated currency is also inherently risky, at a much lower level. Nobody with brains is saying that Bitcoin isn't risky to use. Bitcoin exchanges and banks will continue to fail, or be scams, or so on. While never good, they are a sign at least that the currency is working as designed - uncontrolled by any governing body. And eventually things may stabilize - the intense speculation is likely the driving force behind many recent failures and scams.

Is it worth it, to have a currency that is beyond the reach of all but the most oppressive of governments? I think it is, but that's a question that's subjective enough that there is no wrong answer.

Re:The cost of an unregulated currency (-1, Troll)

rudy_wayne (414635) | about 9 months ago | (#46561587)

Bitcoin became popular in no small part because many people believe government-backed currencies are overregulated or poorly managed.

No, Bitcoin became popular because a bunch of crackpots bought into a bunch of anti-government bullshit. Despite all the problems and imperfections with governments and regulations, the bitcoin nutjobs are too busy drinking the anti-government kool-aid to understand that it's precisely those governments and regulations that create stability which in turn makes a currency actually worth something.

And a few speculators looking to get rich quick.

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