
Silk Road Founder Says Bitcoin Booms And Busts Won't Kill His Black Market - Lightning
http://www.forbes.com/sites/andygreenberg/2013/04/16/founder-of-drug-site-silk-road-says-bitcoin-booms-and-busts-wont-kill-his-black-market/
======
mrb
It is ridiculous to talk about the Bitcoin "bust" when it is still trading at
$60-70 which was the _all-time high_ as of March 20, a mere 4 weeks ago ?!

"Bust" means "a complete failure". Bitcoin, so far, is an incredible success.
Let's not let the temporary bubble of the past week blind us from the big
picture.

Edit: the only failure are the buyers who lost money because they failed to
realize it was stupidly dangerous to buy during a price bubble.

~~~
dmix
Yep big vendors such as OKCupid (today) announced they were accepting bitcoins
[1]. A ton of hype was created thanks to the "boom" and people started paying
attention.

The only losers were the speculators who hoarded BTC at higher prices and
didn't cash out.

The average consumer used it as a decentralized [2] transactional tool and not
a rational capital investment.

There is still, very much so, legitmate value in bitcoins. Assuming legitimate
value exists, stability always comes after bubbles.

[1] [http://thenextweb.com/insider/2013/04/16/okcupid-partners-
wi...](http://thenextweb.com/insider/2013/04/16/okcupid-partners-with-
coinbase-to-become-the-latest-web-service-to-support-bitcoin/)

[2] [http://paulbohm.com/articles/bitcoins-value-is-
decentralizat...](http://paulbohm.com/articles/bitcoins-value-is-
decentralization/)

~~~
Nursie
The 'average consumer' has almost no way of obtaining bitcoins, AFAICT,
without going through long validation processes at an exchange or paying
significantly (50%) more to some other service.

Huge barrier to entry there.

~~~
dmix
What? When was the last time you tried?

In Canada you signup at <https://www.cavirtex.com/> then go to any of the big
banks and deposit cash into an account with an account number. No validation
required, takes 2-4 hours to complete.

In the USA with <http://bitinstant.com/> you go to CVS/Walmart or other
vendors and use MoneyGram to deposit cash. No validation required, takes 30-60
minutes to complete.

Or just use <http://bitlocal.com/>

It's as easy as paying a bill...

<http://howdoyoubuybitcoins.com/>

~~~
Nursie
UK here.

Localbitcoins relies on someone close by selling at near market rate, which
seems unlikely (bitlocal.com is not a bitcoin site, btw.)

------
drewblaisdell
_To insulate those sellers against Bitcoin fluctuations, the eBay-like drug
site also offers a hedging service. Sales are held in escrow until buyers
receive their orders via mail, and vendors are given the choice to turn on a
setting that pegs the escrow’s value to the dollar, with Silk Road itself
covering any losses or taking any gains from Bitcoin’s swings in value that
occur while the drugs are in transit._

I was wondering exactly how vendors could have withstood a > 50% loss of value
while their Bitcoins were in escrow. Silk Road is a remarkable service and
provides an experience that will keep the value of Bitcoin alive at some level
for a long time.

~~~
corin_
_So while Bitcoin’s crash last week from $237 to less than $100 means that the
Dread Pirate Roberts was likely forced to pay out much of the extra gains Silk
Road made from Bitcoin’s rise, most of his sellers were protected from those
price changes and continued to trade their drugs for Bitcoins despite the
currency’s plummeting value._

Is that a good assumption that most sellers would have taken this protection?
Given how Bitcoin was rising I would have thought at least some would have
taken the gamble (and lost), but no idea how many.

~~~
eof
I think many were taking the gamble. What ended up happening is that a bunch
of vendors who did not take the hedging canceled the orders. Since hedging
doesn't protect buyers, the buyers just get their original btc back; this made
a lot of people upset and their are multiple threads on reddit and the silk
road forums calling out these vendors who essentially cheated the
escrow/hedging system.

I wonder if it will have an effect with buyers demanding hedging as well.

~~~
dmix
> I think many were taking the gamble

The article says many _didn't_ take the gamble:

> As a result, only about 1,000 sales listings out of more than 11,000 were
> taken off the site during the crash, according to DPR. “Those were from
> vendors who didn’t protect themselves,” he (or she) says. “The volatility
> only hurts vendors who don’t hedge their escrow balance.”

~~~
corin_
Did the 10,000 take the protection, or did some of them gamble, but chose to
honour they sales (and/or had already shipped product with funds still in
escrow before the price dropped)?

------
corin_
_“If I spend $100 on drugs now and the price of [Bitcoin] doubles in a week,
then I’ve effectively spent $200 on those drugs by next week.”_

Even if you're buying drugs with hard cash on a street corner, the fact
remains that you would probably be financially better off by investing that
money rather than trading it for drugs - hell, you could buy some Bitcoins
with it as your (somewhat risky) investment if you so wish!

From the same person: " _Addicts. People who need their drugs and will pay for
them, despite knowing that they could buy twice as much for the same money in
a week._ "

I don't get why he is ignoring the fact that Bitcoin could also halve in value
in a week's time (errr, like it just has!), or why Forbes are quoting someone
who seems to think that investing in Bitcoin is guaranteed to make you money.
Or why that person is a user on Silk Road if he thinks that every week he
doesn't spend on there he can double his money.

~~~
InclinedPlane
> _the fact remains that you would probably be financially better off by
> investing that money rather than trading it for drugs_

False. Investment is risky, the higher the return the riskier. Dealing drugs
has potentially a lower rate of return but also a lower financial risk,
typically.

~~~
corin_
I was talking buying drugs, not selling drugs, as the question in the article
was "do I buy these drugs, or hold onto my Bitcoins".

~~~
glomph
Many people who buy drugs on SR buy them to sell.

------
a_bonobo
I'd like to speculate that the name of the founder(s) is a small hint towards
them being US-Americans:

The Dread Pirate Roberts is a fictional character from The Princess Bride
(book and movie), who in the novel turns out to be not one person, but a title
given from one retiring pirate to the next successor because it's easier to
work as a pirate when everybody is scared of you.

In this case, it's a fun way to hint that Silk Road is not operated by a
single person, but by a group from what I think are US-Americans. There I
merely speculate: I think the movie was a success in the US but not much in
any other country. In fact, the only people who've quoted the movie to me are
US-Americans.

Can people from other countries weigh in on this? Would non-Americans choose
this as a pseudonym?

~~~
samegreatsleeve
The Princess Bride is extremely popular among 20-40 year olds in the
Anglosphere. Australia, Canada, USA, UK.

This narrows down your search for the Dread Pirate Roberts to like 150 million
people. So the fact that this English speaking Silk Road founder is from the
English speaking world and was probably a child or teenager in the 80s is not
really narrowing it down much.

~~~
a_bonobo
150 million people out of 7.079 billion possible candidates? In my view that
is narrowing it down a lot!

~~~
leoedin
It does narrow it down, but not to any useful level. For all intents and
purposes, trying to pick someone from a pool of 150 million vs 7 billion is
essentially the same level of impossible.

~~~
daeken
Really interesting article on using information theory to narrow down suspects
of crime: <http://www.gwern.net/Death%20Note%20Anonymity>

~~~
leoedin
That is pretty interesting. The wikipedia edit time example is particularly
revealing. The AC hum stuff is truly fascinating!

