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Mt. Gox Files for Bankruptcy Protection

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Re: Mt. Gox Files for Bankruptcy Protection

#231

Post by snorkel »

fab13n wrote: post #192
JumpCrisscross wrote: post #71

When you make a deposit you are extending credit. In the case of Mt. Gox, or any other Bitcoin exchange, that credit is secured by nothing and insured by noöne. Advice, going forward, for managing counterparty risk: (1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure a…

The main feature of BTC is that it's unregulated, so indeed, if you don't provide the security usually enforced by governments, there isn't any. Usually, when using online services such as MtGox, you're secured by the fact that their reputation is worth more than what they can scam out of you. It's vital for eBay, AirBnB, the Silk Road etc. that you trust them, so they won't let an horror story unfold publicly just t…

What boggles the mind is Mt Gox started as a site for trading Magic The Gathering cards. I suppose in the code btc was just a special type MTG card? Incredible it got this far.

Re: Mt. Gox Files for Bankruptcy Protection

#232

Post by wtvanhest »

zAy0LfpBZLC8mAC wrote: post #219
gamblor956 wrote: post #205

Earlier quoted context omitted.

A Ponzi Scheme is legally defined as a fraudulent investment operation that pays earlier investors returns out of the investments of subsequent investors. A promise of returns is not necessary.

Well, and how is "give us your money and you'll later get it back, just minus some fees" possibly an investment operation, be it fraudulent or not? I mean, where did MtGox ever suggest they would pay any returns, let alone where did they ever pay returns?

You bring up an interesting point. I reviewed a wiki list of Ponzi schemes and assuming that is an exhaustive list I have to agree with you that the generally accepted definition is that you must say you are doing something with the money to benefit the investors for it to be a 'Ponzi Scheme'.

http://en.wikipedia.org/wiki/List_of_Ponzi_schemes

The fact that it doesn't fit the wiki or generally accepted definition of a Ponzi Scheme does not rule out the possibility that it still may be considered one but after spending some more time considering it, it does not look like a true Ponzi Scheme, even if the CEO did directly steal the money and use new money to pay old BTC buyers.

Re: Mt. Gox Files for Bankruptcy Protection

#233

Post by whyenot »

sillysaurus3 wrote: post #15

Should the owner Mark Karpeles go to jail? On one hand, there may be a chilling effect if Karpeles is sent to jail, because fewer companies may be willing to participate in an area where the penalty for failure is time behind bars. On the other hand, it feels very inequitable and unjust that Karpeles made millions off of MtGox, lost our money and then is free to enjoy life. But that's a vengeful mindset, and it seems…

I think it's far to early to have a meaningful discussion about this. There are so many rumors and poorly sourced "facts" floating around right now. We have almost no concrete information about what actually happened at Mt.Gox and what role Karpeles may have played.

Re: Mt. Gox Files for Bankruptcy Protection

#234

Post by M4v3R »

cyphunk wrote: post #173
M4v3R wrote: post #149

Earlier quoted context omitted.

Mt. Gox and many other exchanges have put into people's minds that you HAVE to forfeit your rights to your Bitcoin when using online services. It doesn't have to be that way, though. You could just use a system like we use at Bitalo [1], where fractional reserves or funds misuse are impossible because of use of multi-signature Bitcoin addresses, which means funds are specifically tied to user wallets and exchange ope…

Why would bitalo ever require users ID themselves or provide bank details? multisignature scheme already adds a latency on transaction. just not clear how this exchange works. Is it P2P where users transact between each others bank accounts. If so the AMA/KYC seems unnecessary.

The reason is two-fold. One is legal/regulation stuff, as jccooper said (for seller account especially). Second is seller protection - if a buyer wants to scam sellers, we can blacklist him based on his ID, so he cannot scam anyone again.

Re: Mt. Gox Files for Bankruptcy Protection

#235

Post by dangrossman »

snorkel wrote: post #231
fab13n wrote: post #192

Earlier quoted context omitted.

The main feature of BTC is that it's unregulated, so indeed, if you don't provide the security usually enforced by governments, there isn't any. Usually, when using online services such as MtGox, you're secured by the fact that their reputation is worth more than what they can scam out of you. It's vital for eBay, AirBnB, the Silk Road etc. that you trust them, so they won't let an horror story unfold publicly just t…

What boggles the mind is Mt Gox started as a site for trading Magic The Gathering cards. I suppose in the code btc was just a special type MTG card? Incredible it got this far.

There was never a MTG trading card site on that domain. This is a myth you should stop spreading.

Re: Mt. Gox Files for Bankruptcy Protection

#236

Post by M4v3R »

nadaviv wrote: post #172
M4v3R wrote: post #149

Earlier quoted context omitted.

Mt. Gox and many other exchanges have put into people's minds that you HAVE to forfeit your rights to your Bitcoin when using online services. It doesn't have to be that way, though. You could just use a system like we use at Bitalo [1], where fractional reserves or funds misuse are impossible because of use of multi-signature Bitcoin addresses, which means funds are specifically tied to user wallets and exchange ope…

This isn't realistic for an exchange. They have an enormous transaction volume, which is represented as internal/off-chain transaction in an internal accounting system. Using multi-signature transactions requires every fund transfer to be represented as a Bitcoin transaction, which the Bitcoin neAtwork simply can't handle.

Since we are a P2P exchange, we don't foresee to have more than few dozens transactions per minute when we grow big. I'm sure the Bitcoin network can handle such volume.

Re: Mt. Gox Files for Bankruptcy Protection

#237

Post by nostromo »

steven2012 wrote: post #155
JumpCrisscross wrote: post #71

When you make a deposit you are extending credit. In the case of Mt. Gox, or any other Bitcoin exchange, that credit is secured by nothing and insured by noöne. Advice, going forward, for managing counterparty risk: (1) Split a $100 transaction into 10 $10* transactions executed incrementally (send $10 of BTC to Mt. Gox, exchange it, transfer it out, and only then send the next $10 of BTC over). This keeps exposure a…

I believe MtGox users have unfortunately learned the definition of "counterparty risk". This is one of the major overlooked risks that almost took down the global financial system in 2008. People would hedge their worthless bonds using AIG as a counterparty, and once things blew up, these people realized their insurance policies were completely worthless because AIG was about to go under itself, causing them to almos…

The collapses we've seen with traditional currencies stem from the inherent risks of fractional-reserve lending.

Is this a risk with Bitcoin? According to my limited understanding, it doesn't seem to be. That should in theory reduce the need for things like FDIC and complicated risk calculations, like counter-party risk.

MtGox doesn't seem like a "bank failure" or "bank run" to me. It seems like a bank that forgot to lock the doors at night.

Re: Mt. Gox Files for Bankruptcy Protection

#238

Post by [deleted] »

dangrossman wrote: post #235
snorkel wrote: post #231

Earlier quoted context omitted.

What boggles the mind is Mt Gox started as a site for trading Magic The Gathering cards. I suppose in the code btc was just a special type MTG card? Incredible it got this far.

There was never a MTG trading card site on that domain. This is a myth you should stop spreading.

[deleted]

Re: Mt. Gox Files for Bankruptcy Protection

#239

Post by wmf »

btcfn wrote: post #118
mtgoxloser wrote: post #37

In this incident I lost a bit more than $500,000 USD that was in my MtGox account. I sold my Bitcoins a few months back, but the USD have been sitting in my account waiting to be withdrawn. This was a massive fuck up by MtGox, but I really do feel sorry for Mark Karpeles. He seemed really enthusiastic about Bitcoin. Right by MtGox's offices in Japan was a Bitcoin Cafe being built. You can [see here]( http://si.wsj.ne…

I have little sympathy for Mark. Assuming he didn't straight up stole the money, it all happened because of his incompetence. How do you not notice a leak of 850,000 BTC? How do you not have most of it in cold storage? How do you not have all kinds of alert systems warning you about even a 500 BTC discrepancy, let alone hundreds of thousands?

Hence the theory that the missing BTC is in cold storage but the private keys have been lost.

Re: Mt. Gox Files for Bankruptcy Protection

#240

Post by strebler »

panarky wrote: post #171
enscr wrote: post #115

I feel bad for Mark Karpeles but the way MtGox communicated & lied to its users makes me sad. It's those nameless individuals who believed in him, whose trust was betrayed - those are the ones that deserve the affection of the community. I've been following the news and I think MtGox was handling so much money that they should have focused on better security practices and audits. Few examples of their lackadaisical a…

"There was some weakness in the system, and the bitcoins have disappeared." They've "disappeared". Curious choice of words. Karpeles didn't say they were stolen, or misplaced, or destroyed. And he didn't say when the mysterious disappearing act occurred. The most likely explanation is that Gox's crappy system lost the private keys to cold storage long ago, and they've been running fractional reserve since then, hopin…

That's the first explanation I've read that makes any sense.
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