Chinese Slumber stuff coming next.  Think of it as the nightly chamomille tea of this thread, it will bore you to sleep.

Oops, sorry, my apologies.


Well, OK, then.  That is why I put that in my signature.

I did not bring up the topic of my personal life here, others did.   For some reason, that topic seems to absolutely fascinate some people here, far more than photos of triple bottoms and dead bulls.   

But if you must know, like most Brazilian computer scientists (and many other scientists) of my generation, I got my PhD overseas, paid by a grant from the Brazilian Government; and I was lucky to be acepted at Stanford.  So?

No need to gamble; Stanford U. has its own coal-fueled power generation plant in the middle of campus.  But the only coal I ever put my hands on was a small chunk that I found on the sidewalk next to that plant, once.

Before I do that I must create that "jorgeology" thread, so that you can all share my experiences and feelings at using bitcoin and watch my conversion to the cult concept.  Wow, it will be so Californian, will bring back some sweet memories... 

Seriously, what do you expect that I will learn, what opinons you think I will recant,  if I tried using some bitcoin?

Surely I am entitled to have an opinion on global warming and energy sufficiency, even though I have not burned a single poud of coal in my life?

Sounds more like "when they have never sung at the opera." 

Seriously, how many times do I have to write that I believe that cryptocoins can be great payment methods, and wish them all the success at that?  My skepticism has nothing to do with those aspects of cryptocoins, and me using bitcoin cannot possibly tell me anything relevant to the sources of my skepticism.

Sorry if this was posted already:

Jesse Powell's Blog
Unilateral Statement Regarding Fucked Up Shit, and the Greater Good
http://jesse.forthewin.com/blog/2014/02/unilateral-statement-regarding-fucked-up-shit-and-the-greater-good.html

This plan is intriguing.  Are there any antecedents?  Examples of failed companies that were taken over by co-ops of their former retail clients?

I see two problems with this plan:

* If there is going to be a haircut on withdrawals, any BTC or USD in the accounts is worth only a fraction of their nominal value.  Suppose MtGOX's current assets are only 20% of the total balance of their clients' accounts: then the exit haircut would have to be 80%, so having 100 BTC and 2000 USD in your account is the same as having 20 BTC and 400 USD elsewhere.

In that case, the inverse haircut would have to be applied on deposits: if someone brings in 20 BTC, he should have 100 BTC credited to his account.  (Otherwise only naive investors would deposit, and they would lose 80% of their money when they did that.  It would be a scam, pure and simple.)

But then, if one had haircuts on exit and their inverse ("wigs"?) on entry,  the clients would be trading fictitious goxBTC and goxUSD that are worth 20% of their real counterpats.  What would be the point of that?

It would be more sensible to take the haircut right away, that is, all current account balances are reduced to 20%.  The net effect would be the same, but your balance at the new MtGOX would be in real BTC and real USD, not in fictitioulsy inflated goxBTC and goxUSD.

* Some clients may choose to sue MtGOX for their whole balance in real USD, instead of joining your plan that effectively haircuts 80% of it.  If the lawsuit suceeds, the fact that the company has new owners will make no difference, and money would be subtracted in full from its assets, before these are distributed among the new owners.  

Uttimately, 80% of the money recovered by litigating clients would have to come out of the balances of the clients who joined the plan.  Thus the haircut of the latter would end up being more than 80%.

Ah.

Is that the reason why so many people are so anxious to save MtGOX, even with a radical haircut on their balances, rather than liquidating it?

But any part of that revenue that is left over from expenses will be taken out by the owners as profits.

So you were thinking of the individuals investing in SaveMtGOXco, rather than their companies?

The links were truncated in the cut-and-paste.  (Is any of them about TelexFree?)

One reason to believe in the future of bitcoin is that their salesmen are very good at winning the hearts of potential customers and skeptics. 

If you think that only a sick mind could imagine such a scenario, read this, for example:

http://www.assetrecovery.org/kc/node/b7b13256-28f7-11de-900c-81c63910293a.0;jsessionid=9697605F2890DC6814DA990ADC28D28C

Technically that would not be fractional reserve banking, or even banking at all.  While the price remained constant, the exchange would still have on its hands enough capital to honor all the clients' account balances -- except that it would temporarily be in the form of stocks or other investments, rather than bitcoins. 

There is no law that requires an exchange to store clients' dollars as dollars and bitcoins as bitcoins, unless that is stated in the user agreement.   Converting coins to dollars would have been a terrible risk, but they may have thought that it was OK.
 

That is just a theory, of course (I still think that it is more likely than the stupid malleability hack.  Both theories depend on sheer stupidity, but mine also has a greed motive.

Frrom the charts, I see that there were long periods when the price was stable.  Perhaps MtGOX expected the price to remain stable for another couple of months, or that it would rise slowly so that they would have time to reverse the deal.

In my theory, the sale would probably have happened off-market, in large lots.  Suppose that a big investor contacted MtGOX and offered to buy 1,000,000 BTC from their cold storage at 15$ each, when the market price was 10$.  Would they let that opportunity pass?

Of course it is OK to buy coins on other exchanges from the exchange's customers and withdrawing them.

What is not OK is buying a big lump of those coins in private from the exchange without the clients' knowledge. 

Thanks.

I have one nit about your document: you suggest that the company that would rescue MtGOX could buy coins from the other exchanges.  But the coins in the exchanges' wallets do not belong to the exchanges, they belong to their clients.  

In fact, my preferred explanation at the moment for how MtGOX "lost" all those coins is that they sold them off-market in order to play with the cash, confident that they coudl re-purchse them if and when needed; but then the BTC price jumped from 100$ to 800$  in november-december, and they could no longer do that.

So, I think that it would be too risky (if not criminal) for the exchanges to sell those coins to the Save-MtGOX company.  Ditto for any bitcoin investment funds.

Does this make sense?

Didn't they replay a segment of the transaction log and price charts, several times, during the December crash --- so that their clients could not see the real depth of the plunge?  (I read that in a customer's blog at the time.)

If the customer base of MtGOX could generate enough money to cover its debts, they would not be insolvent.  They could get loans to pay those debts with pressing deadlines, and eventually get back into the black.

Being insolvent means that they have more debts than assets, and their expected revenues in the medium term (say, two years) are not enough to fill the gap.

A company that acquires MtGOX will inherit their debts, and cannot expect to make more money than they did a month or two ago.  That means net losses (and big losses, while the clients withdraw their balances), for years perhaps.  What is the point of the takeover then?

Thus, I would be very surprised if MtGOX gets rescued.

 

I wasn't paying attention to bitcoin then, but I would think that the Silk Road closeure was good news because it allowed bitcoin to free itself from the image of "coin of criminals and drug addicts", and therefore became acceptable to the vast majority of people who would rather not get involved with those things.

But the messages of the MtGOX headlines are "thousands of investors have lost their savings by investing in bitcoin" and "even the largest and oldest exchange may close without warning and disappear with your coins and money".  How can anyone possibly consider that "good news for bitcoin"?


Perhaps the Silk Road closure helped, but that rally was obviously due to the opening of the huge Chinese market.  Increased demand, fixed supply = higher price, isn't that obvious?

So much so, that the price crashed when China put restrictions on bitcoin, and partially recovered when Huobi and OKCoin found a partial workaround that kept that market alive.

To me it is obvious that arbitrage from the main Chinese exchanges has had a strong (mostly, but not entirely, stabilizing) effect on the price in western exchanges, all the time.  For example, it was probably the main contributor to the fast recovery after the damage done by that 10 kBTC whale on Bitstamp.  Huobi and OKCoin are large reservoirs that can absorb or supply coins to the (much smaller) western exchanges without much effect on their own price.

(Why do bitcoiners keep saying that the Chinese exchanges are all fake and irrelevant?  It is like saying that Apple sales are fake and therefore the company is irrelevant to Silicon Valley...)