crime

Mind your wallet: why the underworld loves bitcoin

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By Jeremy Wagstaff

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Yeah, sure... Just feed us any scare stories to undermine the new currencies...

This is all part of the government and government-controlled media campaign to try and stamp out Bitcoin and the currencies that follow will it.

The governments, America in particular, are terrified of them. That's why they attacked Mt. Gox (it wasn't criminals it was a government agency).

Currencies with no central bank for the banksters to control as they like?... Of course they'll try to block it.

But it won't work. A currency which no country or government or central bank can control will certainly emerge... It might not be Bitcoin but it is unstoppable and finally help us to start escaping from the banksters grip...

-2 ( +5 / -7 )

This isn't scaremongering. These concerns are entirely real and justified.

The bitcoin is just a bad idea. It is a commodity, but a very high risk commodity. Here's a scenario for bitcoin enthusiasts to contemplate. Some company comes up to you and promises to sell you gold. It works like this, you send them money and they'll send you the serial number of the gold bar. They'll hold the physical gold bar for you, but you can trade the serial number with other people via them. Except that here are the catches: When you go to vet the company it isn't even a paper shell, it exists entirely virtually, and there's no contract specifying that they owe you a gold bar, the size of the gold bar or even where the gold bar exists, just this serial number which isn't listed on any global registry and only supposedly exists in the vaults of this virtual company.

You would have to be an idiot to buy into that scheme. Sadly the world is full of idiots, and a fool and their money are easily parted. Given the rising price of cocoa internationally you'd be better off investing in gold chocolate coins... at least you can eat them and their value is real.

0 ( +6 / -6 )

choiwaruoyaji: "The governments, America in particular, are terrified of them. That's why they attacked Mt. Gox (it wasn't criminals it was a government agency)."

Wow, someone's paranoid. How much do you have invested in the new currency, Choi? My guess? you have nothing invested in it.

-3 ( +3 / -6 )

banks must be freaking out given that their own business scams pale in comparison and given that Bitcoin value recovered so quickly. The currency itself wasn't the issue but the software linking to it. With a fixed money supply like Bitcoin and some security updates it could hopefully get rid of a lot of "banks"

1 ( +2 / -1 )

Some company comes up to you and promises to sell you gold. It works like this, you send them money and they'll send you the serial number of the gold bar. They'll hold the physical gold bar for you, but you can trade the serial number with other people via them. Except that here are the catches: When you go to vet the company it isn't even a paper shell, it exists entirely virtually, and there's no contract specifying that they owe you a gold bar, the size of the gold bar or even where the gold bar exists, just this serial number which isn't listed on any global registry and only supposedly exists in the vaults of this virtual company.

The flaw with this theory is that you are basing it on gold having value. It's essentially just a rock that comes from the ground. The only thing that gives it value is that people believe it to have value, and are therefore willing to pay more for this rock than for other rocks. There is nothing else about gold that gives it value. Simply that people believe it to have value.

And this is the same thing that gives bitcoin value - people believe it to have value. And same as gold, as long as people consider it to have value, it does. If one day people stop believing gold to have value, it will suddenly have none. Of course that day is not likely to come. Bitcoin is the same - if people suddenly stopped believing it to have value, then it wouldn't. But as long as people believe it to have value, it will. And the more entrenched it becomes, the more likely it is to persist for a long time. If the collapse of Mt Gox wasn't enough to shake people's belief in its value, then it's not likely much else will be. So bitcoin is likely here to stay.

-1 ( +1 / -2 )

" The flaw with this theory is that you are basing it on gold having value. It's essentially just a rock that comes from the ground. The only thing that gives it value is that people believe it to have value, and are therefore willing to pay more for this rock than for other rocks."

Diamond is a rock. Gold is a metal. Both are highly valued.

Bitcoin scares the pants off central bankers because they can't manipulate it like fiat currencies, and it's true that the alphabet soup agencies are on the attack because bitcoin threatens their control of the sheeple.

-3 ( +0 / -3 )

In 2012-13, says Danny Huang, another researcher at the University of California, San Diego, they earned at least 4,500 bitcoins, a relatively small sum.

The gains have been impressive: he and academics from Politecnico di Milano speculate that up to 6,757 bitcoins - then worth around $6 million - could be linked to those behind CryptoLocker late last year.

So 4500 coins generated from "mining" is a "relatively small" sum, but 6500 coins stolen by internet pirates is "impressive"? Not really following that logic.

-1 ( +0 / -1 )

One of solutions for protecting Cryptocurrency stealing from Company deposit box is issuing with Digital Serial Numbers. If they wrote digital serial numbers on Cryptocurrency when they Mining Cryptocurrency and then they can trace lost Cryptocurrency. Later the Company can cancel those Digital Money serials numbers from trading. Also victims can be seeking compensation for lost or asked for replacement for lost Cryptocurrency with proven of lost.

Current Digital Money or Cryptocurrency system has many flaws and it does not worth to use like physical money transaction. If they want to expand Cryptocurrency and then they need to some kind of Uniform for all Cryptocurrency currently trading on Internet.

If Cruptocurrency was continuing going like that and then all Governments can be barred Cryptocurrency transaction in near future. I believe US and other Governments wanted to ban Cryptocurrency but they think it’s a bit too late. If they declared it illegal and then many innocent users will lost their money.

For Government, Cyrptocurrency does not benefit to Government but all Government is closely monitoring and observing on Cyrptocurrency. I’m sure all Governments are concerning about funding and money laundering via Cyrptocurrency transaction by Terrorists and drug traffickers.

It’s time for all Cryptocurrency Exchangers to regulate their business and find more secure technology for Cryptocurrency. You can not stop Criminals using Cryptocurrency for money laundering but you must able to stop stealing Cryptocurrency from deposit boxes.

I want to see new Cryptocurrency issue with digital serials numbers and new mining technology for new Cyrptocurrency.

-4 ( +0 / -4 )

Diamond is a rock. Gold is a metal. Both are highly valued.

Both are valued, but only because people believe them to have value. They have almost no inherent value in and of themselves.

-2 ( +1 / -3 )

@Kobuta,

I wonder if you realize that all Bitcoin have a history for transaction tracking already built in, unlike regular cash? This ability to verify itself is why only the software ends were affected, not the main algorithms. This allows for no government needing to manage it.

-1 ( +1 / -2 )

StrangerlandMar. 16, 2014 - 03:28PM JST The flaw with this theory is that you are basing it on gold having value. It's essentially just a rock that comes from the ground. The only thing that gives it value is that people believe it to have value, and are therefore willing to pay more for this rock than for other rocks. There is nothing else about gold that gives it value. Simply that people believe it to have value.

You missed my point with such elegance that I am reluctant to comment, but allow me to clarify. It wouldn't matter if what you were trading was secured with gold, with fairy dust or with pizza, because you'll never see it. The fact is that the company securing the value of your transactions has no real existence outside of the internet. Much like fairy gold the company could fold tomorrow and your bitcoins would be worthless and you would have no recourse to any court of law since the company would be the sole source of information about whether those strings of numbers you have are in fact valid bitcoins.. and that company would be gone.

This is a real example of "faerie gold", and it has already happened with MtGox. MtGox claim they were hacked, many investors believe MtGox was the hacker/thief, but at the end of the day there's simply no recourse. The bitcoin is the ultimate example of the triumph of greed over the tiniest iota of common sense.

Banks, much though I despise them, are backed (in almost all countries) by the government, which promises to pay their debts if they suddenly fold. Had MtGox been a regular bank then the relevant government would have stepped in, secured their records and paid everyone out. MtGox wasn't a bank though, it was just a company selling faerie gold.

-3 ( +1 / -4 )

I do get your point, but I still think that bitcoin's value is based on the same thing as the value of a currency - belief that it has value. What matter does backing by a bank have if the currency collapses? Look what happened in Argentina a few years back when the currency collapsed - the money people had became worthless, because people stopped believing it to have worth. A string of number is no more or less worthless than pieces of paper with numbers on them. Both require the belief of value by a number of people, in order to have value.

As for your claims that there is no recourse, there are two class action suits against Mt Gox right now in Canada and the US. Depending on the outcome, we may find that there indeed is recourse.

-2 ( +0 / -2 )

" Both are valued, but only because people believe them to have value. They have almost no inherent value in and of themselves."

Right.... and that's why governments keep hundreds and thousands of TONS of that inherently valueless "rock" with a bright yellow hue in extremely well guarded vaults. Go ahead and keep believing in your Flat -Earth monetary misconception.

Meanwhile, if you have any gold, silver, or gems in any form, just add them to the soil in your garden.

-1 ( +0 / -1 )

You appear to be under the misconception that I'm saying they don't have value. I didn't say that, so your entire post makes no sense.

-1 ( +1 / -2 )

StrangerlandMar. 17, 2014 - 08:27AM JST I do get your point, but I still think that bitcoin's value is based on the same thing as the value of a currency - belief that it has value. What matter does backing by a bank have if the currency collapses? Look what happened in Argentina a few years back when the currency collapsed - the money people had became worthless, because people stopped believing it to have worth. A string of number is no more or less worthless than pieces of paper with numbers on them. Both require the belief of value by a number of people, in order to have value.

For a currency to collapse requires monumental mismanagement across an entire country, for your bitcoin's value to collapse one company's CEO just needs to get greedy. Of course any currency has a degree of risk associated with it, but trying to argue that the risk inherent in a currency like the dollar is the same as the degree of risk in a bitcoin is ridiculous. The bitcoin is inherently a very, very risky investment with returns that simply don't justify that risk.

As for your claims that there is no recourse, there are two class action suits against Mt Gox right now in Canada and the US. Depending on the outcome, we may find that there indeed is recourse.

Mt Gox has already filed for Chapter 11 bankruptcy. The money is gone, the company has placed its remaining assets in curatorship and investors would be lucky to a penny on every dollar, if not less. Which is why they're going after an actual BANK, Mizuho, because Mizuho has insurance and is backed by the reserve bank. So at the end of the day this just illustrates that when it hits the fan only recourse is to banks. Personally I strongly suspect that Mizuho won't pay a penny since the essence of the lawsuit seems to be that Mizuho allowed bitcoin buyers to spend their money in stupid ways. That isn't Mizuho's fault, but they might possibly have some luck in the U.S. where personal responsibility seems to be a foreign concept.

-5 ( +0 / -5 )

I am amuse to see the hard support to this electro-currency (or digital currency).

"No government controls it, so it is safe"... wrong. Because there is no control over it no one will claim responsible for it either.

"It is safe"... sure it is safe until a computer virus take it apart or a strong EMP hit us (Earth) and all electric systems fails.

"it is reliable"... with a exchange fluctuation that the Bitcoin has shown during its short life, I could say it is reliable as a third-word currency. What you could have bought with 2 bitcoins yesterday, it will cost you 3 today.. and tomorrow it may cost you only 100 micro-bitcoins.... that for currency is as stable as bridge made of cardboard.

0 ( +1 / -1 )

For a currency to collapse requires monumental mismanagement across an entire country, for your bitcoin's value to collapse one company's CEO just needs to get greedy.

If that we're true, then bit coin would have collapsed when Mt Gox did.

trying to argue that the risk inherent in a currency like the dollar is the same as the degree of risk in a bitcoin is ridiculous

You obviously don't understand how currencies work then. The reasons behind the risk are exactly the same. The only thing that differs is the degree of risk.

-3 ( +0 / -3 )

"I still think that bitcoin's value is based on the same thing as the value of a currency - belief that it has value."

Nope, real currencies are used to pay taxes and meet other crucial financial obligations. Bitcoin? No way.

When the govt hands you a tax bill, it's creating demand for its own currency, because you're under legal obligation to acquire that currency. This process is key to a fiat currency, and bitcoin isn't even in the ballpark.

0 ( +1 / -1 )

StrangerlandMar. 17, 2014 - 10:30AM JST If that we're true, then bit coin would have collapsed when Mt Gox did.

The bitcoins traded by Mt Gox did. You're mistaken in viewing all bitcoins as equal and universal. They're not. Each bitcoin is, in effect, a seperate currency, with a value that fluctuates depending on the company issuing it.

You obviously don't understand how currencies work then. The reasons behind the risk are exactly the same. The only thing that differs is the degree of risk.

... I'm sorry, where did you stop quoting my post, because the last line is just a paraphasing of what I wrote. Did you perhaps not understand what I wrote?

-6 ( +0 / -6 )

all Bitcoin have a history for transaction tracking already built in.

If this is true, and I keep hearing that it is, why doesn't an expert such as yourself track down the missing coins? Should be easy peasy, right?

0 ( +1 / -1 )

You said,

" The flaw with this theory is that you are basing it on gold having value. It's essentially just a rock that comes from the ground. The only thing that gives it value is that people believe it to have value, and are therefore willing to pay more for this rock than for other rocks. There is nothing else about gold that gives it value. Simply that people believe it to have value."

And,

" Both are valued, but only because people believe them to have value. They have almost no inherent value in and of themselves."

" They have almost no inherent value in and of themselves."

Don't even try to walk that back.

0 ( +0 / -0 )

Don't even try to walk that back.

I'm not. I said they don't have inherent value. I didn't say they don't have value. In fact I even said "both are valued", and you even quoted that.

You still seem to be harboring the mistaken belief that I said they don't have value.

The part you aren't understanding is that they have value for the exact same reasons that bitcoins have value.

-1 ( +0 / -1 )

I'm with choiwaruoyaji, the big banks and currency exchanges governments etc have a lot to lose from currencies outside their greedy control. Its not paranoia, its called lots of money at stake.

2 ( +2 / -0 )

" The part you aren't understanding is that they have value for the exact same reasons that bitcoins have value."

No, you're just trying to walk back your claim of having no inherent value and only "perceived" value. It's you who doesn't comprehend the fact that PM have inherent value due to their extremely limited quantities on the planet as well as the difficulty in mining them, as well as their chemical/elemental natures. And in a similar, but virtual, way Bitcoin has value though I obviously prefer PM, gems, etc..

-1 ( +0 / -1 )

No, you're just trying to walk back your claim of having no inherent value and only "perceived" value.

Are you reading someone else's posts? I haven't 'walked back' anything. I've been saying the same thing from the start. They (bitcoin, gold and diamonds) don't have an inherent value, and only have perceived value. If you really think that I've been 'walking back', then show me a single contradiction I've made in this thread anywhere.

It's you who doesn't comprehend the fact that PM have inherent value due to their extremely limited quantities on the planet as well as the difficulty in mining them

Rarity alone is not inherent value. It only gives perceived value. That perceived value comes from the belief of some people that because it's rare, it should be value. Without that belief, there would be no value.

For example, gold has a value of about $1400/oz right now. But I would never buy an ounce of gold, because I don't believe it to be worth that, and I wouldn't spend that on it. And will my life change as a result? No, I could go the rest of my life without ever buying a gram of gold and live just fine. If I bought that ounce of gold, would my life change? No, because it would just sit there and do nothing. There is no inherent value. We don't need it to live, it's not essential for much of anything, and for the most part it's only used to hold (perceived) value, and/or make jewelery.

But for all your blustering and denial, your last comment actually seems to suddenly agree with what I've said:

in a similar, but virtual, way Bitcoin has value though I obviously prefer PM, gems, etc..

Which is exactly the same as what I said in what you quoted:

[diamonds and gold] have value for the exact same reasons that bitcoins have value.

0 ( +0 / -0 )

StrangerlandMar. 17, 2014 - 10:40PM JST Rarity alone is not inherent value. It only gives perceived value. That perceived value comes from the belief of some people that because it's rare, it should be value. Without that belief, there would be no value.

Except that gold doesn't have value from rarity alone. Gold is used in the manufacturing almost every major electronic device, and is an essential component. It is also used in the pharmaceutical and petrochemicals industries, and about a dozen other industries.

For example, gold has a value of about $1400/oz right now. But I would never buy an ounce of gold, because I don't believe it to be worth that, and I wouldn't spend that on it. And will my life change as a result? No, I could go the rest of my life without ever buying a gram of gold and live just fine. If I bought that ounce of gold, would my life change? No, because it would just sit there and do nothing. There is no inherent value.

You have already bought gold, you already own products with gold in them, and in the future you will buy products either made with gold as part of the process or with gold in the final product.

I, however, can state with 100% confidence that I have never bought any product containing "bitcoin" or that requires "bitcoin" to make. This is the difference between bitcoins and gold. Bitcoins have no utility apart from their perceived value, whereas gold has industrial and practical applications in addition to its perceived value that set a lower limit on how far the value of gold can fall. The value of bitcoins is, on the other hand, entirely illusionary, based on a set of people who collect these items. There are people out there who will pay a small fortune for "rare" smurf figurines, but that doesn't mean that smurf figurines are a good investment, because the demand can disappear overnight. Bitcoins are a lot like smurf figurines, inherently valueless.

-2 ( +1 / -3 )

And cash isn't easy enough to steal? More cash has been stolen than Bitcoins yet nobody talks about that

I have no idea how to steal a Bitcoin but plenty on how to steal cash......

0 ( +0 / -0 )

Except that gold doesn't have value from rarity alone. Gold is used in the manufacturing almost every major electronic device, and is an essential component. It is also used in the pharmaceutical and petrochemicals industries, and about a dozen other industries.

You make a good point, and I do recognize that golf is used in electronics. This is why I said "almost no inherent value'. But I do have to wonder what percentage of mined gold is used in electronics as compared to gold simply to hold value, or make jewelry.

Also consort that gold has been considered to have value since long before it was being used for these other purposes.

0 ( +0 / -0 )

StrangerlandMar. 18, 2014 - 12:19PM JST You make a good point, and I do recognize that golf is used in electronics. This is why I said "almost no inherent value'. But I do have to wonder what percentage of mined gold is used in electronics as compared to gold simply to hold value, or make jewelry.

Well gold was originally used in making jewelry because of its unique physical properties, namely that it was easy to work with, the color was appealing and it can be easily alloyed with other metals at reasonably low temperatures to produce different colors. One cannot regard jewelry as the same holding gold stocks. Jewelry is a manufactured product that serves a social and decorative function, for example in India 24 carat gold is always used for the bride's dowry.

Not as to your original question, it is hard to track down numbers on historical gold since it is scattered around the globe, but the U.S. Geological survey does maintain statistics per year on gold end-use. It appears that about 52% is used for making jewelry, 5% for industry, 5% for dental work, 6% for coins and 32% for investment (gold buillion). (Source: G.R. Matos, E.B. Amey, and M.W. George, 2005).

If gold suddenly went out of fashion for jewelry and investment overnight (an almost impossible proposition, but one we will entertain here for the purposes of illustration), then gold would still retain at least 10% of its value from the dental and industrial applications, and there would still be a demand for gold. As gold became cheaper industrial demand would probably increase as gold is an almost perfect conductor and the value would probably stabilize at around 15%~20% of current value, so you'd lose between 80~85% of your investment.

If bitcoins became unpopular for investment purposes (a very likely proposition given the connection of this currency to organised crime and concerns over its security and practicality), then bitcoins would lose 100% of their value, perhaps retaining 1% of their value as curiosities, but in reality and given the currently inflated value of bitcoins this would probably be 0.1% or less.

Therefore, even under the most extreme analysis based on the ridiculous assumption that gold could "go out of fashion" for jewelry - talk to your local rapper, this ain't gonna happen) gold is still 10 to 20 times safer as an investment. In reality gold is probably about 100 to 10000 times safer as an investment option. Standard ROI calculations then require us to balance risk against return, and no matter which way you run the math the bitcoin is a bad investment based on the risk to return. You'd be better off investing money in some third world country where they offer high-risk/high-return investments.

Also consort that gold has been considered to have value since long before it was being used for these other purposes.

And this really a key point. If bitcoins had an established market presence and were widely regarded as having value then that would help to protect them as many people in positions of power would have a vested interest in not seeing their value disappear, however bitcoins are simply too new, too rare and too unstable to survive. In a way the creators of bitcoins didn't think this through. By limiting the supply so rapidly, before the bitcoin achieved market penetration as the exchange method of choice for significant percentage of the population, the bitcoin never achieved stability and was always a fringe commodity. As a result the commodity lacks a lobby group, lacks wide-spread support and is an easy target. Persumably the next digital currency developers will learn from bitcoins' mistakes, but the bitcoin is fundamentally doomed. It will linger for a while longer, but increased regulation, increased pressure from law enforcement and increasing unpopularity will slowly strangle it until it reaches the 1% mark and then the 0.1% mark. The writing is on the wall.

-3 ( +0 / -3 )

" Are you reading someone else's posts? I haven't 'walked back' anything. I've been saying the same thing from the start. They (bitcoin, gold and diamonds) don't have an inherent value, and only have perceived value."

Flip-flop, waffle, walkback, obfuscate, call it what you will. It depends on what your definition of "is" is ... at the moment.

As Frungy pointed out, gold has many properties which have made it a highly valued commodity in all ages. Just a rock to you.

1 ( +1 / -0 )

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