
Winklevoss Twins Aim to Take Bitcoin Mainstream with a Regulated Exchange - jvoorhis
http://dealbook.nytimes.com/2015/01/22/winklevoss-twins-aim-to-take-bitcoin-mainstream-with-a-regulated-exchange/
======
sillysaurus3
This may be tangential, but it's been on my mind for awhile, so I was hoping
to get your thoughts. If it's slightly offtopic, I apologize.

It doesn't seem like you can regulate BTC, and the reason is because of
something unexpected: arbitrage.

(To be clear, you can create a regulated exchange, but that doesn't really
help you. I'll explain why.)

When exchange A's price is different from exchange B's, that represents an
opportunity. As the difference grows, that opportunity becomes more lucrative.
That's why, at any given time, all exchanges are at roughly the same price.

But that means if one exchange is playing by some bad rules, or is acting in a
shady way, like the behavior described in
[https://willyreport.wordpress.com/](https://willyreport.wordpress.com/), then
that directly affects every other exchange.

So unless all exchanges are playing by the same rules, having a single "safe"
exchange won't save you. One exchange's shadiness will always affect every
other exchange.

Whether this is a fatal flaw is a separate question. I don't think it is, but
it seems hard to know.

What do you think? It _seems_ true, but perhaps I'm overlooking something
obvious.

Also, this is strictly about price manipulation. It's probably true that no
amount of bad behavior at exchange A can result in a catastrophic failure of
exchange B. But one question I've been trying to figure out the answer to is:
does price manipulation even matter?

~~~
vanzard
What you say is true and applies to ANY commodity market (or in fact any non-
centrally regulated market): FX, precious metals, oil, textiles, fruits, etc.

I can set up my own independent exchange to trade, say, gold in the same way
there are thousands of online gold exchanges. Then I can artificially inflate
the gold prices on my exchange, using fictitious money (like the willy bot
did), leading customers to come to me to trade their gold for high prices, and
therefore impacting the worldwide market price of gold... at least a tiny
little bit for a tiny little while... until customers find out that they can't
withdraw their fictitious money from my exchange, so my sham and its impact
ends right there. This is what happened to MtGox in February 2014.

The bigger the market you are attacking is, the less time it takes for the
sham to be discovered, because the tiny percentage of people who try to
benefit from the fictitious high prices quickly overwhelm your ability to fake
solvency. A huge market like gold would pretty much suffer no effect due to
its size. And as the Bitcoin market continues to grow, the hypothetical impact
of such a sham should diminish over time.

~~~
vanzard
I wanted to add that naturally it is very costly to run this sort of attack.
Because as you are artificially manipulating the prices, you have to keep
paying out the customers' arbitrage profits. This is why willy caused MtGox to
lose tens of millions of dollars in the end. Mark Karpeles was simply clueless
or naive in thinking willy would help him. So don't do it, or you will lose
money :)

In summary, I do believe regulation can and already does help BTC. They bring
finance professionals in the market who have a clue (unlike Karpeles). They
bring trust. They bring more trading volume. These are all things that make
BTC less manipulable, hence less manipulated.

------
DigitalSea
Considering just how much Bitcoin the Winklevoss twins own, it is in their
best interests to do right by Bitcoin holders and create a secure and
accountable exchange. Historically every bad thing that has happened to
Bitcoin mostly indirectly has affected its price which from an existing
investment perspective obviously sucks, but is great for new buyers to get
into the market.

I have no doubt if they can pull this off that it'll be a successful venture,
especially after the horrible year of 2014 which saw tonnes of cryptocoin
exchanges (including Mt. Gox) get hacked and disappear, driving down the price
each time. They have a bit of competition in the space, I think overcoming the
regulation issues and having actual proper accountability will help bolster
the credibility of the exchange.

~~~
drzaiusapelord
>get hacked and disappear

Is this the accepted narrative? It seems overly generous to bitcoin and the
various exchange operators. A lot of these exchanges were shutdown by their
owners so they could, with impunity, steal the coins of their customers and
other dirty dealings. Hacker attacks, which are often used as cover for these
criminal activities, seem to have been the least of bitcoin's problems.

> I think overcoming the regulation issues and having actual proper
> accountability will help bolster the credibility of the exchange.

If I wanted to use an easy and stable regulated currency why not the USD? I
can trivially pay using a variety of sources: my own bank, paypal, my credit
cards, direct deposit, wire, etc. If bitcoin gets turned into a strongly
controlled and regulated currency then I don't see its competitive advantage
outside of very, very narrow use cases (darknet purchases, investing,
ransomware, illegal activities, etc).

------
Animats
The regulated exchange thing is interesting, but I want to see the details.
The expected way to do this would be to register with the SEC as a
broker/dealer, like every stockbroker does. That gets SIPC insurance
protection (for which the broker pays), and means FINRA enforcement and
audits, background checks on the principals, and such. It also eliminates the
need for state by state approvals.

So far, no Bitcoin exchange has done this. Over half of them have gone bust,
often taking the customers' funds with them. This is not a coincidence.
There's a lot of big talk about how some exchange is safe. Coinbase doesn't
have a real business address and has "it's not our fault if we lose your
money" terms of service. Most of the others are worse. After seeing the terms
of the Winkelvoss EFT, which are awful (if they lose the Bitcoins, they're not
responsible), I suspect this new exchange may be equally sleazy.

~~~
IkmoIkmo
In fairness, Coinbase has

1) A multi-sig product, meaning you can store money using their product purely
as a software layer. You control the private keys and you have full autonomy.
If they disappear or go bankrupt your money is still as safe as you kept it.

2) USD wallets are kept in an FDIC insured bank account. As a money
transmitter without the proper licenses they're not allowed to invest
custodial funds or use them to finance business operations.

3) They're pretty reputable. Fred Ersham is one of their principle agents and
on their board, just like Chris Dixon. They've got a great legal team, guys
from big startups like Facebook or AirBnb as well as big finance firms like
Goldman Sachs and Visa. They've received $106m in funding at close to half a
billion in valuation and partner with Paypal and process payments for fortune
100 companies worth tens of billions of dollars, their investors include top
VC firms, the New York Stock Exchange, a megabank and one of Japan's largest
telecom companies. they're registered with Fincen and have licenses in 15+
states. That may not protect them from tech failures, but these aren't the
type of people who operate an anonymous company that's super shady and will
disappear and leave you with no recourse.

4) They store the vast majority of funds in cold storage. I can't argue how
safe this is as not much is disclosed. But I do know that cold storage is
pretty easy to set up and that their basic descriptions include a lot of
redundancy and distributed trust. The gist of it is that keys never hit any
network (not hackable) and are stored physically, encrypted, in locked vaults
in the same banks we've trusted with storage of value, and require multiple
people in different geographical locations to unlock funds. No system is
perfect but this is a very secure system. 97% of funds are stored in this way,
you can read a bit about it here:

[https://www.coinbase.com/security](https://www.coinbase.com/security)

5) Their bitcoin funds are insured. The insurance includes cyber security,
accidental loss and employees going rogue. Insurance is through Aon ($11b
revenue in insurance premiums) and they claim only to use A+ underwriters
according to S&P ratings.

Again, they're not perfect and there are certainly issues I can point out and
more details I'd want to receive more information on. But if I could make a
bet on (or an investment into) Coinbase I'd be very comfortable making it.

I do share the sentiment that many exchanges and bitcoin services just aren't
anywhere close to bank-grade security. That's just a function of a new and
nascent ecosystem. It happens in every industry and it takes a long time to
get up to speed. The problem is that bitcoin is extremely sensitive because
it's about carte-blance value tokens essentially, it's an extremely sensitive
industry for this reason, so there's not much room for amateur-hour. But I
think Coinbase, and the likes of say Xapo or Circle, and potentially Gemini,
show that we're seeing an entirely different class of entrepreneurs from the
likes of say last year's Mt. Gox, already.

Completely holding judgement on Gemini. I know the twins are going to strive
for complete regulatory compliance, and that they're already rich and want to
build a solid long-term reputable business, not a get-rich-quick scheme, and
that they've got the funds to hire the right people and besides financial
capital have some human capital in the VC/Tech space in their networks. So
there's certainly the potential for this to work out, but we'll have to see.

~~~
Animats
Their terms: "THE LIABILITY OF COINBASE, ITS AFFILIATES AND SERVICE PROVIDERS,
OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS, JOINT VENTURERS,
EMPLOYEES OR REPRESENTATIVES, TO YOU OR ANY THIRD PARTIES IN ANY CIRCUMSTANCE
IS LIMITED TO THE _LOWER_ OF (A) THE ACTUAL AMOUNT OF DIRECT DAMAGES; OR (B)
FEES PAID TO COINBASE BY YOU IN THE PRECEDING THREE (3) MONTHS."*

So if you deposit with them, and they lose it, the limit of their liability is
limited to the fees you paid them. Which is zero for their so-called "vault".

That's a totally unacceptable EULA for a depository institution.

Their insurance only helps you if you are a beneficiary of the insurance.
That's the case with SIPC (all US stockbrokers) and FDIC (all US banks)
coverage, but not at Coinbase.

Live by the EULA, die by the EULA. Those guys are no better than the other
low-rent Bitcoin exchanges.

~~~
IkmoIkmo
Yeah yeah I've heard that convo before. Look I'm not going to argue their EULA
puts liability on Coinbase for losses of your funds. And yes I fully agree
that in time it'd become ridiculous if they hold on to this part of their TOS
(and will probably let it go because large institutions won't be comfortable
with the lack of assurance).

But I will argue that if they insure customer funds and say $5m of them get
stolen by a malicious engineer (again, noting their security practices this is
extremely unlikely) they're not going to tell their customers 'sorry you're
all losing money' when they get that money reimbursed and it'd destroy their
business to do a greedy one-time money grab like that. Hell we even saw this
with Bitstamp who paid for the $10m of lost customer funds themselves, despite
zero such liability in their TOS, and despite the fact they were not insured
and had to pay it out of their own pockets. (amounting easily all of revenues,
let alone profits, for all of 2014 by the way, paid in full by themselves,
without any obligation to do so).

To think Coinbase would then not give back these funds to the consumer despite
it not costing them and being insured for that is a ridiculous assumption. It
goes completely against them continually claiming that customer funds are
insured against non-user related losses (e.g. not when a user gives his PW to
his friend and he gets his money stolen, but rather say when Coinbase has a
fuckup). And yes, I know technically Coinbase is the recipient of the
insurance and that the EULA claims it's not liable, it's besides the point.

I mean, what do you think that insurance is ultimately going to be there for?
Do you really think Coinbase will insure customer funds, and when they're lost
say 'sorry, they're lost', and then keep whatever amount was lost after the
insurance pays them out? It's a ridiculous assumption and much less likely
than 'we've got you covered, we're not perfect but your funds are safe with us
either way'.

So while I appreciate that you're not granted protection strictly by law
(although I have my doubts about whether this part of the EULA stands up when
it conflicts with so many written and implied statements by Coinbase which
yes, do matter in the court of law), I hope you also appreciate that a
statement like this:

> Their insurance only helps you if you are a beneficiary of the insurance

Is absolutely myopic. It's more likely that Coinbase will make their customers
whole, especially with their insurance policy, than not. To say that Coinbase
is no better than other low-rent bitcoin exchanges is also completely
ridiculous, even if neither of them were insured, there's a gigantic
difference between Coinbase and say Mt. Gox.

------
nly
I don't see the lack of a regulated exchange as a show-stopper for mainstream
adoption. I remember when people were generally uncomfortable with PayPal
because the whole idea of an online wallet that wasn't provided by a bank just
seemed unsafe. It was pull of eBay, the killer use case, that overcame that in
the minds of everyday people, not regulation coming along and making it safer.
Online wallets added value.

Imho, Bitcoin is and will continue to be an interesting niche until someone
comes up with something truly compelling to do with it that you can't do with
traditional currency or banking. A regulated exchange is nice for traders and
financiers, but it's still just a boring old exchange... another friction
ordinary consumers have to overcome to walk the blockchain life.

~~~
ssharp
I've never been that bullish on Bitcoin because I don't see why the
mainstream, developed world would have much demand for it. It certainly has
it's uses, but they are limited. I suspect the number of people transacting in
Bitcoin are far out-numbered by the people who are mostly hoarding Bitcoin,
which illustrates it's lack of valid use-cases.

~~~
minthd
I once thought that bitcoin's usage as a secure decentralized database, not as
a currency, would be the source of some major use. But there are no big
results here, so now, not so sure.

~~~
nly
Namecoin is promising but then whoever can afford the most ASICs will just buy
up all the popular names.

------
wmf
Wasn't CampBX the first US Bitcoin exchange? And then TradeHill and then
Coinsetter and then Digital Currency Group? And then there's LedgerX...

------
bduerst
What competitive advantages does a bitcoin-based exchange in the U.S. have
over other [U.S. or otherwise] exchanges?

~~~
GigabyteCoin
It's easier to hold any fraudulant owners accountable if you are an American
account holder, for one.

Also some clients feel safer knowing that financial regulators of some kind
are overlooking the accounts and transactions of the business they are working
with.

~~~
bduerst
I guess I should have been more specific. Other U.S. exchanges already have
this, so what competitive advantage does bitcoins give an exchange?

~~~
corin_
If I'm reading you correctly: it gives the advantage that you can buy or sell
bitcoins... which if you're someone wanting to do that is a significant
advantage over exchanges that don't.

------
cpwright
I found it interesting that they chose Gemini as a name for an exchange; given
that the ISE runs already runs an options exchange named Gemini.

------
logn
What's the motivation for the twins to hold so much bitcoin? They're already
taking on a lot of risk with their BTC business investments. Is it just to
show faith in themselves and the coin? Or are they so confident that it makes
sense to them? Personally I'd want to diversify.

~~~
Synaesthesia
They bought a lot of bitcoin before the late 2013 bubble. I think they're
quite diversified - they're just Bitcoin proponents who are taking a chance,
kind of like venture capitalism.

------
stream_fusion
They should carefully consider the possibility of creating a decentralized
exchange (like bitshares or nubits) and not merely a new centralized exchange
for a decentralized currency (bitcoin). There will be a future for blockchain
technology that can eliminate MtGox type events.

~~~
RemoteWorker
Why would they want that? You know they aren't working _ad honorem_ , right?

------
cb18
_The twins say none of this has dented their faith in the promise of the
technology — they say they continue to hold every Bitcoin they ever purchased_

This is a common refrain seen around /r/bitcoin as well.

If few people use it as a currency now, and the majority of people that buy it
simply sit on it hoping it will appreciate, why do people think lots of people
will want to use it as a currency in the future?

If cryptocurrencies were to become significantly more user friendly in the
future and there was an economic niche revealed where their use made sense for
lots of people, wouldn't people be more likely to choose a cryptocurrency that
didn't come with a built in rentier class of people who have piled up large
amounts of the cryptocoin while praying that a vapor future demand be made
manifest?

 _The twins have placed themselves firmly in the camp of those who believe
that Bitcoin will survive only if it has regulatory oversight._

At present bitcoin's two main use cases seem to be buying recreational
drugs[0](which I have no problem with) and paying for things related to
computer fraud(which I think is a destructive waste of time by misguided
minds.) Both of these things are presumably things that regulators would like
to regulate out of existence as best they could. So if they are even partially
successful in doing that, what is going to drive the demand for bitcoin?(tell
me something other than remittances, or if you insist on remittances then
please explain why if it is not a suitable option for many now, how it could
become one in the future.)

\- - - -

[0] As a side note on this, bitcoin does seem to be very well suited to the
online drug trade, it of course has already proven itself in this area, but
from my outside perspective it seems current or potential future problem areas
are the on and off ramps, the exchange between fiat and crypto. But imagine if
the loop could be closed between the drug buyers and sellers.

So after a drug dealer has accumulated a large amount of crypto, he'll need to
convert it to a more widely accepted currency to pay for the
cultivation/production of more drugs, food, housing, etc. I guess the current
method is to use a mixer then cash out at Bitstamp or btc-e or something, but
say that bitcoin becomes regulated to the point that this becomes much more
difficult to manage. So to close the loop, using bitcoin or another crypto,
the drug dealer with the accumulated crypto sells to a network of crypto
dealers, these crypto dealers then sell to a smaller hub in the network and on
and on until the drug buyer instead of going over to the neighborhood weed
dealer, goes over to the neighborhood crypto dealer, then buys his weed online
with the crypto.

There would likely need to be some profit incentive in this, so maybe the drug
dealer would sell their cryptocoin to large hubs in the crypto dealing network
at a discount in exchange for not dealing with more onerous regulated off-
ramps, that discount then gradually being reduced as the crypto radiated out
through the network.

Of course with the way drug laws are being re-developed, hopefully all of this
becomes moot in the not to distant future.

~~~
RemoteWorker
Ah, the good old "if no one uses it as a currency it will die, so you have to
spend it!" argument. The answer is that we _are_ using it: as a store of
value. But every time we explain this, detractors will invariably reply either
that it's not a good store of value because it went down in <insert cherry-
picked timeframe>, or that saving is bad for the economy because central
bankers say so.

For these sort of questions, simply compare it to gold: Is it dying because
"no one is using it" to buy groceries? Does it sometimes go down, and yet a
lot of entities, including central banks, consider it a great store of value?

~~~
justincormack
See the Capitol Hill Baby Sitting Co-op[1] for how real life hoarding of
stores of values mean that exchange completely stops. It is a classic currency
story.

[1] [https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-
op](https://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op)

~~~
jafaku
It doesn't seem like exchange is stopping:

[https://blockchain.info/charts/estimated-transaction-
volume-...](https://blockchain.info/charts/estimated-transaction-volume-
usd?showDataPoints=false&show_header=true&daysAverageString=7&timespan=all&scale=1&address=)

I love how Bitcoin is destroying all these economic "theories".

------
YesThatTom2
While I hope Bitcoin ultimately succeeds I know the early investors will lose
millions building infrastructure that gets thrown away when late arrivers come
and blow away the early adopters.

It couldn't happen to a more deserving set of twins.

------
cyphar
I don't understand why you would want to have a regulated exchange for a
currency that's designed to be deregulated. That seems counter-productive for
the entire BitCoin community.

~~~
beaner
"deregulation" isn't a religion. Just because there are options to use it in a
way outside of regulation, does not mean all uses have to fall under it.
Forcing that is like forcing anything else, and would be more statist than
libertarian.

Bitcoin provides the _option_ to remove yourself from the system _if you
decide that for you, in your personal context, it is the right thing to do_.
It's the option that matters, not just doing it for the sake of it to follow
someone else's concept of what's important.

------
largote
Hasn't this been known for months now?

~~~
jvoorhis
Not to be confused with the forthcoming ETF [1], Gemini [2] is the first US-
regulated bitcoin exchange.

[1]
[http://www.sec.gov/Archives/edgar/data/1579346/0001193125144...](http://www.sec.gov/Archives/edgar/data/1579346/000119312514457552/d721187ds1a.htm)

[2] [https://gemini.com/](https://gemini.com/)

~~~
ForHackernews
I think it's widely assumed that the ETF is a way for the Winklevii to cash
out their bitcoin holdings.

Also:
[http://www.reddit.com/r/Buttcoin/comments/2rv44y/the_winklev...](http://www.reddit.com/r/Buttcoin/comments/2rv44y/the_winklevoss_sec_filing_is_an_absolute_comedy/)

~~~
toomim
No it's not.

------
hueving
After the losses they must have taken with the price decline this is probably
a desperate attempt to boost the price.

~~~
laichzeit0
Well, if I remember correctly, all the Winkelvii Bitcoins were bought for
under $70, I'd say the average price is around $35-40, so no, they're still
trading at 300-400% above what they bought them for. Not bad for a 2 year
investment.

~~~
justincormack
Unsaleable in volume while maintaining that price though. Thats why they are
concocting these schemes to actually get an exit eventually.

~~~
laichzeit0
I think if they were in it for a quick buck, they'd have exited during the run
up to $1200. But they didn't.

Actually when they were buying Bitcoins it ran up to $250 over the course of a
few weeks, then crashed down to $75. That's my recollection of events.

------
kolev
No news here. They keep high hopes that if they pull this off, they can save
their huge investment in Bitcoin, but a legit marketplace does not equate to
an evergrowing price.

------
snitko
_> "Our philosophy is to ask for permission, not forgiveness", Cameron
Winklevoss said._

So, a complete opposite of what Bitcoin philosophy is. Gotcha.

~~~
obstinate
One could easily argue in response that there's no such thing as bitcoin
"philosophy." There's only what you can and can't do with the protocol. If
they can implement their ideals under the strictures of what the protocol
allows, that's their prerogative.

~~~
jedunnigan
So one might argue that that is a philosophy in and of itself. An agnostic one
that is founded on technical specification, not moral imperative.

~~~
colordrops
No, not really. The entire purpose of bitcoin network's design is to reduce or
completely remove the need for trust amongst participants. It was designed so
that it operates in the same fashion regardless of the moral, political and
regulatory climate surrounding it. That is not philosophy, but fact.

~~~
jedunnigan
Philosophical inquiry doesn't necessitate an adjudication on morality,
politics or regulatory climate. It can simply be a formalization of concepts
observed in a system.

Bitcoin doesn't exist without human input, it requires active agents to engage
it. So even if the rules are set in the code there is an element of humanity
embedded in the protocol. Just look at the core developers. I can guarantee
you they have a philosophy on what should and should not be done during
maintenance and major upgrades to the protocol.

But if you want to reduce the definition of philosophy to those things you
mentioned, I'm happy to rephrase: the philosophy of Bitcoin is thus that there
is no philosophy. Think of it this way: if you have a rule that says you have
no rules, you still have one rule that there are no rules.

~~~
colordrops
You are begging the question. The design of Bitcoin has a philosophy. The
instantiation of Bitcoin, the Bitcoin network itself, does not. Saying that
bitcoin has a philosophy because the developers have a philosophy is like
saying that air has a philosophy because the developers breath air. No matter
what the developers do, the Bitcoin network will continue to exist on its own
and act in an exacting way, despite your claims to the contrary. The miners
are in control of the network, and not the developers. But no single miner is
in control either. If the developers or miners could freely enact change on
the network, then there would be a fuzzy line between the design and the
implementation, and you could lay the philosophy on the implementation. But
interestingly, of all technologies ever created by man, the bitcoin design and
implementation may be the most decoupled in history, as bitcoin is built to be
resilient to tampering. It is not a representative democracy. Until someone
controls hashing power over a certain percentage, or the majority of miners
agree to a serious protocol modification, no real change will occur to the
bitcoin network's behavior.

From another angle, would you say that a car engine has a philosophy? No. But
the designers had a philosophy when they designed it.

edit: Further analogizing with human designed artifacts, such as a towel or a
laptop, I think this is a debate on semantics. An object can't have a
philosophy, but it can embody or reflect one.

~~~
jedunnigan
No, you have missed the essence of my post. Technology doesn't pick a side.
I'm not arguing against that.

In the relationship between Bitcoin and it's users/developers/miners/nodes
there are of course the ideologies of each individual interacting with the
protocol (libertarian, anarchist, etc...). Then of course there is the
protocol itself. Then you can step back and look at the whole set of
individuals each having their own (potentially hostile) philosophies, but
still interacting with the protocol in the same way (i.e., they are following
the rules) to achieve distributed consensus. How do you categorize that
phenomena (embedded was the wrong word choice)? That is the question that I
was referring to with the comment "philosophy of Bitcoin."

Now, let's address some points in your post.

>If the developers or miners could freely enact change on the network, then
there would be a fuzzy line between the design and the implementation, and you
could lay the philosophy on the implementation.

Not one miner is in control? The two largest pools (Discus, ANT) are both
located in China. Ghash just shut down it's cloud mining to take back control
of the hashing power because of low prices.

Eligius, a pool known for extending the will of Luke Jr. (submits to Bitcoin
Core frequently) can change IsStandard to exclude OP_RETURN or Mastercoin
transactions or whatever else. That is emergent behavior that is a result of
someone's will.

Blockstream has a handful of core devs and many influential minds in the space
on their team to work on sidechains. Who knows what that will end up causing?
Maybe a split in allegiances and a hard fork? You give Bitcoin more credit
then is due. It still requires human input, after all.

edit: we are arguing different points here, let's leave it at that.

------
digital-rubber
Is there already a company that tied the 'donated' cpu power to a real product
with revenue/profit to a crypto currency?

I mean all these hashes are nice and all, but the little magic math hash.. is
about as valuable as a painting. Whatever the idiot gives for it.

Imho, if there is a real product developed with the donated cpu power in
exchange for crypto coins which stand for a money value in relation to the
developed product/medicine etc.

Like combining distributed computing, crypto currency and a product (e.g.
medicine) which we could all benefit from. And those miners aren't simply
wasting electricity.

Yes i consider bitcoin, and sort in current form, mining a waste of
electricity.

~~~
maxerickson
This has little to do with the linked article and has been gone over
repeatedly. Stack Exchange points out some of the problems securing a
blockchain with 'useful work':

[http://bitcoin.stackexchange.com/questions/20879/why-cant-
we...](http://bitcoin.stackexchange.com/questions/20879/why-cant-we-design-a-
bitcoin-that-does-useful-work/20886#20886)

~~~
digital-rubber
It's about bitcoin, exchange of value, etc. Seems quite related to me. Thanks
for the link though.

And just because something has been discussed more often, doesn't mean it
should not be mentioned at all?

~~~
maxerickson
It's not a yes/no binary rule, it's a sliding scale. For this story, your
comment is over towards the "ugh, not again, they didn't even bother to
understand the basic responses to their criticism" side of my scale.

What it comes down to is that I don't think every story about bitcoin needs to
have a bunch of facile criticism of bitcoin attached to it. Criticism specific
to the story is great, as is well thought out, deeper criticism.

------
Ologn
Warren Buffett said Bitcoins are a mirage and I agree. They are worthless
hashes. Why do they have any value? The answer is they have no value. I said
so here when they were worth over twice what they are now. If there is any
sign of a bubble in tech, it would be Bitcoin market cap. Which is $3 billion
at the moment.

Who are the fools who exchange cash for them? Why do they have any value? Some
people say you can use them as currency. You can use dollars as currency. Or
gold. Some say it can transfer money, but so can wire transfers. Perhaps it is
decentralized (who cares? Not I. Wire transfers work for me) etc. But gold has
value, while Bitcoin has nothing. I remember during the dot bomb days when
there were commercials for Flooz and Beenz.

The leaders in the Bitcoin community are being sued and jailed for fraud, the
price has gone from $1100 to $230, yet suckers are still bamboozled to trade
cash for these worthless hashes. It will go to $115, then $57, then eventually
$0. I doubt all those who already lost money or who are being jailed will
learn anything.

~~~
donatj
How is a piece of paper any more valuable than a hash though? They're all just
place holders.

~~~
discodave
The piece of paper is more valuable than the hash because more people will
accept it as legal tender.

~~~
jafaku
Actually, Bitcoin is already accepted by more people than many fiat
currencies.

~~~
jafaku
Downvoted for stating facts. Way to go, HN!

