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Bitcoin Exchange Had Too Many Bitcoins

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Re: Bitcoin Exchange Had Too Many Bitcoins

#201

Post by thanatropism »

notyourday wrote: post #194
Twisell wrote: post #96

Earlier quoted context omitted.

Maybe I'm too "left wing", but if you ask me short selling, complex products and high frequency trading are among technological "improvements" that have led actual stock exchange to an ugly mess where biggest profits are made by "scamming" efficiently other users. Should regulators forbid (or tax more) some (or all) of this mechanisms markets will quickly resume to what they should be, places for people to invest mon…

> Maybe I'm too "left wing", but if you ask me short selling, complex products and high frequency trading are among technological "improvements" that have led actual stock exchange to an ugly mess where biggest profits are made by "scamming" efficiently other users Short selling is what keeps the cheerleaders in check.

This. The market is supposed to be about circulating information (not necessarily making everyone well-off or saving San Francisco's Castro District or, or, or). And information that something might be overvalued is valuable information.

I'm not radically against regulation -- precisely because too often there are information asymmetries that markets (not only in capital but labor, consumer goods, etc.) can't penetrate -- but most people who think market economics should make things good (and be repressed otherwise) also think reality can be sustainably manipulated by good will, hope and faith in unicorns.

Re: Bitcoin Exchange Had Too Many Bitcoins

#202

Post by mikeash »

jstanley wrote: post #4

Great writeup. Almost anything written by Matt Levine is worth reading. This is a concise and accurate description of the fun that occurred with Bitfinex's handling of the BCH fork. At least, it's fun if you weren't involved. If you naively held BTC on Bitfinex and were hoping to receive an equal amount of BCH you probably didn't think it was fun. If you carefully read Bitfinex's statements and decided to take advant…

Thanks for pointing out that it's a Levine article. I need to remember that bloomberg.com articles on HN are likely to be him, and actually click through.

Re: Bitcoin Exchange Had Too Many Bitcoins

#203

Post by mikeash »

Twisell wrote: post #118
rrdharan wrote: post #105

Earlier quoted context omitted.

Short selling is an incredibly important piece of any reasonable stock exchange. It also dates back to 1609 so it's not exactly a new technological innovation. https://en.wikipedia.org/wiki/Short_(finance)

From the very article you reffered to me : Short sellers were blamed for the Wall Street Crash of 1929.[15] Regulations governing short selling were implemented in the United States in 1929 and in 1940.[citation needed] Political fallout from the 1929 crash led Congress to enact a law banning short sellers from selling shares during a downtick; this was known as the uptick rule, and this was in effect until 3 July 20…

There's a really big difference between blaming short sellers for the crash, and short sellers actually being the cause for the crash. Short sellers got blamed, but weren't necessarily at fault. There's a further implication that the crash is the cause for the Great Depression, which is likewise fairly unfounded.

Re: Bitcoin Exchange Had Too Many Bitcoins

#204

Post by and0 »

goodplay wrote: post #117
gregschlom wrote: post #91

"There is no single obviously correct solution to these issues. Instead, each decision was sort of weird and contingent and reversible: not the immutable code of the blockchain, but just humans sitting around and trying to figure out which approach would cause the fewest complaints. In that, it's a bit like the Dole settlement process -- only instead of a neutral judge making decisions based on written contracts and…

>they're very valuable if and only if you cannot use the protection [..] I don't think that's entirely fair. They're also valuable to those who want to transfer money without ridiculous fees, excessive bureaucratic friction, and many mandatory middlemen. What other system would allow you to instantly be able to accept payments without giving an exorbitant portion of your revenue?

I'd really love to step into this magical world cryptoconcurrency advocates invented where modern banking is impossibly terrible for most people to utilize, and Bitcoin is easier and has lower fees (it doesn't).

This invention or exaggeration of issues with modern banking just shows how weirdly desperate these people are for a problem their get-rich-quick scheme actually solves.

Re: Bitcoin Exchange Had Too Many Bitcoins

#205

Post by andy_wrote »

thisisit wrote: post #197
andy_wrote wrote: post #41

Earlier quoted context omitted.

I'm not knowledgeable about BTC; this is the part that confused me. If you short a stock, and it distributes dividends or stock or ponies, as Levine says, you have to return that to the borrower. I'm not sure if this is law or just the overwhelming common practice of the markets, but either way we agree on this. You _could_ devise a short agreement where you say "no distributions are owed," but that's not the standar…

I would check the notes to see what happened with Dole before drawing a conclusion. There is more at stake here than a judge with backing. One of the problems with Dole was tracking shares with DTC - It takes, I think, T+2 for settlement ie I sell you something today it gets updated two days later in DTC. This coupled with day trading and shorts (where btw "borrowing a share" is hypothetical) can cause a lot of heada…

It seems like it can be construed as a cash handout to owners of BTC, not a spinoff. At least there seems to be disagreement elsewhere on this thread, and from Levine's article.

I don't think refusing to require shorts to deliver BCH opens the door to any other complications. In fact, I think it's the simplest interpretation. You borrowed one BTC, or share, or pony, or whatever, and later you have to return one BTC. If someone else starts a new currency, fine, but that's nothing to do with your borrowing agreement. There's no mention of the price of anything; for all this simple agreement knows, BTC is the only asset in the world. (Though in practice I'm sure you'd have to post margin. Maybe some ponies?)

For shorting stock, the return of dividends and spinoffs is, I believe, a consensus agreed upon by the market as more closely reflecting what people would want - you can start a different stock-lending market that doesn't do this, but there doesn't seem to be much demand for it. To draw a clean analogy between BTC and an equity spinoff, you have to suppose this kind of agreement exists and the contracts signed. I'm not sure what it is that BTC shorts agreed upon, and it seems there isn't widespread agreement, but to me, the simplest and narrowest interpretation of a short, in case of any confusion, is "I borrow 1 BTC, I must return 1 BTC."

(Again, I have no BTC experience, just finance experience, so if someone out there really is short BTC and has wrangled with this stuff, I'd be happy to hear from them.)

Re: Bitcoin Exchange Had Too Many Bitcoins

#206

Post by thisisit »

andy_wrote wrote: post #205
thisisit wrote: post #197

Earlier quoted context omitted.

I would check the notes to see what happened with Dole before drawing a conclusion. There is more at stake here than a judge with backing. One of the problems with Dole was tracking shares with DTC - It takes, I think, T+2 for settlement ie I sell you something today it gets updated two days later in DTC. This coupled with day trading and shorts (where btw "borrowing a share" is hypothetical) can cause a lot of heada…

It seems like it can be construed as a cash handout to owners of BTC, not a spinoff. At least there seems to be disagreement elsewhere on this thread, and from Levine's article. I don't think refusing to require shorts to deliver BCH opens the door to any other complications. In fact, I think it's the simplest interpretation. You borrowed one BTC, or share, or pony, or whatever, and later you have to return one BTC.…

I had to re-read your post again to understand what you are getting at. It is not about what BTC shorts agreed upon rather what does Bitfinex agreement say about people shorting BTC on their platform. As jackgavigan pointed out - 2010 Global Master Securities Lending Agreement is clear on what the obligations should ideally be.

So did Bitfinex create an agreement along those lines for their short sellers? This requires looking into their T&C. A wild guess is they did not and never included a condition about such situations. That means asking BTC shorts to cover BTC cash had no legal legs at all. The best they could do is to pay the long BTC holders and exempt shorts.

You can bet they must have learned their lesson after this fiasco and updated their terms accordingly.

Re: Bitcoin Exchange Had Too Many Bitcoins

#207

Post by mikeash »

endgame wrote: post #73
cletus wrote: post #35

Earlier quoted context omitted.

I hate to be That Guy [tm] but can you please not indent quotes like that? It's a PITA to read on mobile.

Get a better phone browser?

Indentation is for code blocks. Such blocks are supposed to be rendered monospaced and unwrapped. A browser that didn't render them that way would be broken. The solution is to format quotes in a way that's appropriate for quotes, not using code formatting.

(The real solution would be for HN to support an actual quote style, like Markdown's leading > style, but alas....)

Re: Bitcoin Exchange Had Too Many Bitcoins

#208

Post by mcherm »

phlo wrote: post #183
slg wrote: post #132

Earlier quoted context omitted.

But the "ridiculous fees, excessive bureaucratic friction, and many mandatory middlemen" are what buy you the protection. The fees from necessary middleman seem ridiculous when nothing goes wrong, but that is how Visa pays for a chargebacks or fraud protection. The governments bureaucratic friction might seem excessive, but that is how they ensure people are paying their taxes which goes to fund the court systems tha…

Regulation can greatly improve things. Within the Single Euro Payments Area, credit transfers (i.e. bank transfers) have been free for almost a decade and will be instant ( Relatedly, the EU also limits interchange fees for credit and debit cards (to 0.2 and 0.3%, respectively). This is the reason why integrators like Stripe charge 1.4% for European and 2.9% for non-European cards. Payments can be quick, simple and c…

Yes, but that comes at a price. It means that banks and financial institutions cannot make the same level of outrageous profits -- or at least not without finding different income streams.

Re: Bitcoin Exchange Had Too Many Bitcoins

#209

Post by Twisell »

nostromo95 wrote: post #199
Twisell wrote: post #111

Earlier quoted context omitted.

Ok so how on earth does the fact that derivatives permitted the tulip Bubble is an argument in favor of derivatives? It might a question of point of view. Maybe you focus more on tulip frenzy financial opportunities while I focus more on people that have been burned by it... And yeah if you want to trace it back to 1500 no problem with that, old does not always equal good. It like copyright laws written prior to wide…

Simple derivatives like calls and puts are unbannable . Observe that I can replicate the payoff of a call option by borrowing money to buy the stock [1] or replicate a put by shorting a stock and lending money. [1] http://people.stern.nyu.edu/adamodar/pdfiles/eqnotes/optionb...

But it's way more risky cause you could end up loosing more than the price of the option.

Thus people would be more careful which is an improvement in my point of view.

Re-establishing the uptick rule would be a middle ground between banning totally and current speculative frenzy.

Re: Bitcoin Exchange Had Too Many Bitcoins

#210

Post by harryh »

shlinx wrote: post #123
harryh wrote: post #59

Earlier quoted context omitted.

If you're going to try to look like a legitimate exchange, this kind of thing looks pretty unseemly. Oh I agree! The whole thing has bitfinex looking a little foolish. It was step #1 that was the problem though. Steps 3 and 4 were them fixing it as best they could. Those parts weren't mistakes, it's just them keeping you from stealing Bitcoin Cash from their other customers.

Steps 3 and 4 were not fixing it as best as they could. They are just doing another wrong thing trying to cover the earlier mistake by sacrificing another group of their customers instead of Bitfinex itself. This group of their customers are also innocent as they are just lured by the foolish policy. They could transfer their BTC to the personal wallet to get BCH if they were not lured. Everyone playing game in Bitfi…

You are ignoring the underlying sense of fairness that bitfinex was trying to achieve and overfocusing on the precise letter of what they wrote. This is a common problem among engineers. It turns out that the former is more important than the latter to the vast majority of humans.
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