Bitcoin debacle: 850,000 bitcoins gone or half a billions dollars

Kramodlog · Feb 28, 2014

The trading site mtgox filled for bankruptcy. Apparently 850k bitcoins are gone. Maybe hackers are involved.

What do you think this means for cryptocurrencies? Is this a blow toward libertarian dreams of decentralized currencies? Did you own some bitcoins? At least for now the value of a bitcoin hasn't budged much.

Derren · Feb 28, 2014

People who think Bitcoins are currency are deluded. They are speculation objects like stock options or even the "evil" mortages which caused the 2009 crash. Actually they are worse. Those mortages still, in some twisted way, represented some tangible value. Bitcoins do not. They are completely made up with no real world equivalent.

Umbran · Feb 28, 2014

Well, there's a good argument that all currency is really based on little more than mutual belief. It is simply that we tend to believe in currencies issued by nation states a whole lot more than others, both out of tradition, and out of the real resources nations have at their disposal.

Bitcoin had far too little backing to be an effective, dependable currency. That left it a speculative investment.

Zombie_Babies · Feb 28, 2014

Derren said:
People who think Bitcoins are currency are deluded. They are speculation objects like stock options or even the "evil" mortages which caused the 2009 crash. Actually they are worse. Those mortages still, in some twisted way, represented some tangible value. Bitcoins do not. They are completely made up with no real world equivalent.

Are you aware that legitimate businesses started taking Bitcoins before all the hullabaloo?

Umbran · Feb 28, 2014

Zombie_Babies said:
Are you aware that legitimate businesses started taking Bitcoins before all the hullabaloo?

In theory, you can pay a legitimate business in anything they agree to take. Dollars, euros, chickens, whatever. That doesn't mean it was smart for them to do so. Nor does their doing so mean that chickens are solid, dependable currency

Zombie_Babies · Feb 28, 2014

Umbran said:
In theory, you can pay a legitimate business in anything they agree to take. Dollars, euros, chickens, whatever. That doesn't mean it was smart for them to do so. Nor does their doing so mean that chickens are solid, dependable currency

What it does mean is that Bitcoins 'represented some tangible value'. Last I checked you could hold a cup of coffee in your hands.

Dannyalcatraz · Feb 28, 2014

I actually had to study the history of currency.

To me, bitcoin and other cryptocurrenies look a lot like a hyper technological version of some of the pre-currency means of transporting wealth long distances without having to resort to shipping things like precious metals or gemstones.

Wile many of those are still around- promissory notes, cashier's checks, money orders, etc.- there are real reasons why they are no longer the *ahem* gold standard for doing business. Problems like the question of what happens when someone refuses to pay or accept them in satisfaction of the debt. What happens if the non-currency payment is fraudulent?

I think they'll find their niche- we know the black market loves them- but I don't forsee them overtaking government-issued & backed currency in my lifetime.

Umbran · Feb 28, 2014

Zombie_Babies said:
What it does mean is that Bitcoins 'represented some tangible value'. Last I checked you could hold a cup of coffee in your hands.

Well, I think it might be an inaccurate statement.

The coffee itself has tangible value (for a while, while it is still hot and fresh, at least - that tangible value is transient). That does not mean that someone taking bitcoin to give you coffee means the bitcoin represents tangible value, any more than it means the coffee represents bitcoin. There was an instance where I literally sang for my supper - I exchanged a song for a meal. Does that song now represent tangible value? Hardly.

Lacking something like a gold standard, forms of currency represent tangible value only insofar as we all agree they do. Sure, maybe you can buy a coffee. But can you buy all your groceries and pay your utility bills with it? Then, I question how tangible a value they represent. Their applicability was still too undependable, I'm afraid.

Of course, "currency" isn't actually solidly defined in the first place, so opinions will vary.

Kramodlog · Feb 28, 2014

Derren said:
They are completely made up with no real world equivalent.

Krugman compared it to gold. Basically it has the value we give it, just like gold. The problem with it is more that it has no backing by some central agency. The mtgox issue would be one if a central bank or say a big corporation with huge cash reserves *cough* Google *cough*.

And some dude makes actual physical bitcoins. Well sort of, he has to use a loophole to make them now.

Derren · Feb 28, 2014

goldomark said:
Krugman compared it to gold.

Except that gold is real and also has industrial applications (including jewelry).
Bitcoins are a complete fantasy product.

Bitcoin debacle: 850,000 bitcoins gone or half a billions dollars

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