Consider this: They paid $0.00 for the transfer of $150 million dollars.
A direct (i.e. not based on third party credit, regulations, etc.) transfer of wealth of this magnitude between two entities usually consists of a heavily guarded, insured, physical shipment of cash or gold. Depending how safely you want to make the transfer, and how far the entities are on the globe, it can cost hundreds of thousands to millions of dollars.
Bitcoin has real value. It solves problems on an incredible scale. I wish I realized this months ago.
Your point stands, but most thefts occur on third party sites/applications where the address of the coins and their private key are stored in a central location. Owners of the bitcoin should transfer their coins to a private wallet.
I don't understand how so many sites can't use password hash generation to secure the private keys, or something to keep it more secure. The first link you posted was a site run by an 18 year old.
Sorry to digress a little, but I'm sensitive on age issues :)
Pinkie Pie won his first $50k award by creating a 0-day sandbox escape on Chrome, by chaining 10 different vulnerabilities. He was 19 (now almost 21). Two years before, at 17, he released jailbreakme.com, all by himself, which was a 0-day able to jailbreak all iOS models shipped to date by just visiting a website.
Age means nothing by itself, but the point is correct. The problem is that we don't know how much we can trust bitcoin site owners, as most of them are relatively new with no history to inspect, closed source, and sometimes even run by anonymous users whose experience we can't inspect.
Anecdotes don't negate stereotypes, which are themselves generalizations across numerous anecdotes. And stereotyping is not by itself an invalid source of information, just less reliable than, say, a study. Everyone knows one person who negates a stereotype -- any stereotype. The existence of that person doesn't reduce the usefulness of that stereotype.
Outliers exist, this doesn't make them likely, age does matter far far more often than not. Generalizations have value, but they're not expected to always be true.
Sorry, didn't mean to put down the skills of young people! I'm 28 and I work on lots of security related systems, and although I understand most all of it, I wouldn't attempt to build a Bitcoin exchange without someone with years and years of hardened workplace experience. That's all I meant ;)
This is a good point and one that I considered and wish I followed up on. I'm in the "support queue" with Coinbase right now because they absconded with 10% of my bitcoin holdings for no discernible reason. In case you're concerned, I'm not the one with $150M in bitcoin - it was 1 btc that went missing (greatly appreciated in value from when I acquired it).
Because "online wallet" sites are the sort of bad idea that _needs_ to have access to the private keys. If you can spend bitcoin out of an "online wallet", the person in control of the software managing that wallet _does_ have access to your bitcoin. Even if they've tried to set things up "securely", the very best they can do is achieve Lavabit levels of security - if they (or someone coercing them) wants to, they'll get full access to your funds anytime you try to access them.
Think of them as like keeping your change on the bar - the security relies _purely_ on social conventions encouraging the bar owner, bar staff, other customers, and your friends to not take your money.
You would no more store your weekly pay, your rent money, or your new car savings on the counter at a bar - why the hell are people storing those sorts of values of bitcoin in other people's webservices?
Sure, online wallets might be _useful_, but anyone keeping any more value than they can afford to lose in one is insane (or, less critically, very poorly informed).
I may be wrong here - but is the private key only required to send the money? So, if the user kept the key and it wasn't recorded on the server...or if they use some type of password hash for encrypting it, then there wouldn't be hundreds or thousands of wallets stolen at once. The user would enter their password when they want to transfer funds, the hash is calculated, private key decrypted, transaction made, and the private key is never recorded anywhere.
But, this would require the user to NEVER forget their password, or else they lose their money.
If the user kept the secret key, that's not much of an online wallet - you might as well just use your secret key at home and send it directly yourself. They could encrypt it with a password or a pin that isn't saved on their site so that you would have to enter it to decrypt the secret key. That still counts on the site not just lying and keeping it or you getting it keylogged or otherwise compromised on your side. Many online wallets do nothing of the kind, they simply have the secret key and use it to send. Someone with your password or access to the site could do the same. It's the same as a normal bank really, you have no physical/technical control over what they or someone who snuck into the bank does. You can control your access credentials (passwords, cards, account numbers, ID info, etc) and that's good and well, but there's nothing preventing it from disappearing on their side besides what they (not you) do for security.
It's possible to sign transactions offline, so that the private key never touches a device that's connected to the internet. Check out http://www.bitcointrezor.com/
How about the users keeping the key and supplying each time its need from a separate secure app? And that app wouldn't even contain the complete key, but requires they supply the last three digits each time. And they can tattoo that somewhere on their body.
but this does not mean that it is impossible to avoid having either stolen.
I agree that long term storage of both of these can be done very securely, but the risk for both is when trading or using them. Additionally, Bitcoin does require a lot of worry about security - how many people do you think have airgapped wallets?
Aren't the facts that you shouldn't store Bitcoin at exchanges, should use an airgapped storage mechanism, and are otherwise out of luck if your computer is compromised, enough to demonstrate that you also have to worry a lot about the security of Bitcoin transactions? Your stack of gold ingots won't vanish if you take one from the pile in your safe, but your Bitcoins can if you don't take stringent precautions.
If you view a Bitcoin transaction as only what happens on the blockchain, you're missing the context of where it occurs - which gives both gold and Bitcoin risk.
Good point, the minimum security of Bitcoin is that of gold; i.e. a safe guarded by people with weapons.
But since Bitcoin is digital, its maximum security is far, far higher. Your private keys can be encrypted and safely stored with any desired level of redundancy. Paper wallets are a big step backwards.
Also, if secret sharing is used, Bitcoins cannot be stolen unless the attacker gets to k of the n involved parties.
Not really. It is much easier to lose or make illegible a piece of paper or data than it is to lose large heavy gold or to damage the gold to a degree that severely reduces its value.
The difference is Bitcoin can be secured much more cheaply than gold. You can't encrypt gold, setup "n-of-m" multisig transactions, etc. Unless you want to transport gold yourself you're always going to have to trust someone.
From where I stand, this seems to be true of Bitcoin as well. I've never had any Bitcoins personally, but don't you have to store them in a wallet, which you're either going to have to worry about backing up, keeping secure, etc on your own. Or you're going to have to trust someone else to do it for you.
There is a difference in how the two scale, because one is physical.
Adding a BTC to a transaction doesn't really require any additional infrastructure. But once you've packed your first tanker with gold, you kind of have to hire a second boat.
Given the way each scales, it seems that BTC transfers are easier, at least at some values.
The word "tanker" was evocative, I wouldn't get hung up on it.
All I was saying was that physical stores of value increase in awkwardness (principally through weight and volume) when you increase their number, not so for digital.
As with _all_ security, there's a tradeoff between security and convenience. Inline wallets are spectacularly convenient - and guess what that implies security-wise?
Paper wallets are much more hassle. But a paper wallet in a bank vault is arguably up there with the most secure bitcoin storage techniques.
As the stored value of your bitcoin varies - so should your security requirements. If I need to keep under $100USD available to pay for my anonymous vpn or my torrent-box vps - an online wallet (who's operator could make off with my half or quarter of a bitcoin at any time) might be a sensible choice. If I'd been mining bitcoin at a reasonable rate since 2009 and was sitting on a house-worth of bitcoins, I'd make a _very_ different choice.
Consider the value of your wallet(s) - if they were piles of $50 notes, how much would you spend securing that? Would you leave it in your pocket? Hide it under you mattress? Buy a lockbox or a safe for your home? Rent a safe deposit box? At what stage is a never-internet-connected laptop a perfectly sensible expense to incur? I'd suggest a lot of people I see posting in forums about how much they lost in onine-wallet-hack-de-jour who should be kicking themselves for not having a dedicated $300 laptop fr storing their wallets on.
This is a point that I can't help thinking about regularly. Gold and cash, at least 147 million dollars worth is physically difficult to store and transfer. In most cases it is also difficult to steal.
The equivalent commodity value in BTC can be stored on a tiny rom, and transferred anywhere in the world for free from anywhere with network access.
I hate to be cynical, because the ideals behind this currency seem nobel -- but I can't help but feel dread that it is only a matter of time before bad things start happening here.
Central banks moving gold reserves is very different from everyday financial transactions because reserves have a special status tied to their physicality. They act as a form of physically controlled collateral.
Corporations and individuals generally do not move wealth via physical assets.
- A deep, pervasive culture of gold hoarding and gold wealth transfer for dowries (yes, even in 2013) for Indians.[1]
- Persians/Iranians who have a deep cultural link to carpets as a store of value that can be used in day to day life, but also transported and stored as value.
How about any middle american over the age of 50 who counts his or her "vehicle" as an asset and shops/deals in used cars every 12-18 months. A lot of people think about cars this way.
As for corporations just consider casino counting rooms and exxon tankers full of crude oil.
I think you need to google the definition of 'generally'. A list of narrative exemplars does not refute an assertion of proportion.
Like the first google result for payments volume yeilds this: http://www.gfmag.com/component/content/article/119-economic-... As you can see, credit transfers dwarf everything. It's worth noting that all of these payment types are cleared electronically (including checks).
I sincerely doubt gold bugs and Persian carpet fans are trading at total volumes of 100's of trillions of fucking dollars globally.
True but these are both transferring gold so that the gold is in a different physical location, not transferring gold to pay someone. I'm sure both cases would much rather sell the gold in place A and buy it in place B, but that's just not possible at this quantity of gold.
The same can be done with bitcoins - because they do exist in physical locations (as many physical locations as you want, actually, but you probably don't want too many...)
That's only if the two entities can both interact with the global banking infrastructure (i.e. they hold money in reserve currencies, their accounts aren't frozen, etc.)
If someone in Argentina wanted to buy something from anywhere else in the world in 2000, for example, they'd basically have to trade natural resources or gold for access to foreign currency, and then spend that.
Still today in fact. Not sure exactly of all the details, but Argentinians are simply not allowed to change their currency.
They need to fill documents to officially ask the government, which will likely refuse you the right if it is for a huge amount (remember, this 'non-change' policy is exactly for that, avoid flights of capitals).
AFAIK, the government does allow the exchange of currency, it just mandates an unrealistic exchange rate at which there is practically no supply. However, there is a lively black market that is tolerated (probably because it's cash based and thus does not scale but serves average people well enough) - newspapers publish the rates, traders operate quite openly.
In an interesting validation of basic economy, the black market rates are much closer to the official ones in rurual tourist hotspots, presumably due to the much bigger supply of foreign currencies.
I think they use reserve accounts with each other backed against gold held in larger central banks. At the end of the day it's still a plain bank wire (I owe you x) hoping for an opposing (we owe you x) to cancel it off. Or for the reserves to build up of what is owed..
2013 Argentinian here. To buy a house right now you usually have to pay dollars cash because nobody accepts a currency that devaluates 25% per year.
The political class here is crazy corrupt and rich like in every third world country, and they are known for using piles of 500 euros bills to stay out of the bank system because euros have more wealth density than dollars.
In all of Latin America, the closest countries to Chile in that transparency ranking are Costa Rica, with the 48th place, then Cuba 58th and then Brazil 69th.
Edit: added justification data with links / I'm proud of Chile
Chile will probably stop being third-world soon enough, though (I heard something about startup accelerators popping up there?)
There should be a term for "third-world country that's probably going to stay third-world for the forseeable future, excepting a revolutionary change of government." Maybe... dystopia? Argentina is a dystopia.
Checkout http://startupchile.org they've made a lot of noise. There are quite a few cool (and successful) companies that have come out of there. My two favorites: Padlet (padlet.com) and Admetricks (admetricks.com). Padlet was also in YC and Imagine K-12 (after StartupChile)
>Chile will probably stop being third-world soon enough
Sorry, I don't think so. Chile is doing good nowadays but basically their only export is copper. Copper is a semi-precious metal right now and thats why that country suddenly has so much wealth, but the difference between rich and poor is abysmal and their economy is tied to the price a single non-renewable resource.
Compared to Chile, Argentina still has a huge tech industry capable of exporting value-added products like cars.
Chile is in the top-10 freest countries in the world right now, alongside Switzerland, Hong Kong, Singapore and other economic successes. Taxes are low, and there are huge incentives for people to start their own businesses. You can register a new business in 3 days, and registering trademarks is one of simplest processes in the world. This is in very sharp contrast to Argentina.
Yes, copper is selling very well, and it takes up a large proportion of the country's exports, but you are mistaken to think that this is the driving cause of the country's increase in wealth over the last 20 years.
The increase in wealth comes from the fact that incentives now exist for people to create wealth. Where wealth is created, there is more wealth. It's the same principle we have seen working throughout history.
The other big issue is how hard it is to exchange pesos for dollars. The government is doing all they can to make it nearly impossible for the average Argentinian to avoid the massive devaluation.
Yes, in 2000, because that was during the period Argentina's currency was collapsed. Any other country's currency could collapse at any time, putting some other group in the same situation.
The parent comment said direct transfer. Bank wire involves intermediate parties, is subject to various capital limits, account closures, funds freeze etc.
Isn't this what happens at the Reserve in downtown Manhattan?
Everyone just keeps (a huge portion of) their gold in a single vault. A gold transfer involves carrying gold bars from one compartment of the vault to a second compartment in the same vault.
Reminds me one of Michael Lewis' anecdotes from The Big Short. Something along the lines of one of the big Wall Street banks transferring tens of billions of dollars to the Fed by literally gathering up a set of bonds from their safe, putting them in a briefcase and giving them to a secretary and an armed guard to carry to the building across the street where the Fed had set up an impromptu office.
Utterly incorrect. They did not transfer a single dollar. For them to turn those Bitcoins into dollars, they will have to pay more than $0.00. Possibly A LOT more. They may not even be able to turn those bitcoins into dollars for a while, and in all likelihood it will not be $150 million dollars.
This is the correct answer. People rave about how "cheap" it is to transfer bitcoin. What about actually buying anything with that 'money'? Sure, you might be able to buy some crap on the internet with bitcoin, but it won't put food in your table anytime soon without you having to pay a good % in fees to convert it to real currency.
The same is true of any foreign currency. I could send $150 million in Russian rubles to my sister, and she wouldn't be able to do jack with it until she finds someone willing to give her dollars for it. With the amount of money involved, getting it all converted at once would be extremely difficult.
That doesn't mean that what's transferred doesn't have real value. Just that the assets involved aren't terribly liquid.
The same is true of any foreign currency. I could send $150 million in Russian rubles to my sister, and she wouldn't be able to do jack with it until she finds someone willing to give her dollars for it. With the amount of money involved, getting it all converted at once would be extremely difficult.
That's exactly the point. If you had $150 million in rubles, you could transfer it for only a nominal fee ($20 for my bank, although you can get a lot cheaper if you regularly did transfers like that) to any account in the world that could hold rubles. Exactly the same with bitcoin.
The only real cost in transferring sums of money is either extreme convenience, transferring to a country with an extremely poor banking service or exchanging currencies. None of which bitcoin solves yet.
> If you had $150 million in rubles, you could transfer it for only a nominal fee ($20 for my bank, although you can get a lot cheaper if you regularly did transfers like that) to any account in the world that could hold rubles.
I have no counterproof, but I find this hard to believe.
If you had $150 million in rubles, you'd almost certainly have an account with the private banking side of whichever bank you use. Private accounts generally come with perks like free wire transfers.
Source: Someone I trust who works in Private Client Services at JP Morgan (not sure if other banks offer free wires, but I'd be surprised if they don't).
Telegraphic Transfer (TT) Request $20.00 per transaction or item
Pretty sure that would be fine up to ~$1 million. Anecdotally I know TT happen for sums in the range of $10-$100 million (there was a case where ~$150 million was stolen by a rogue TT in Australia to overseas bank accounts).
"it won't put food in your table anytime soon without you having to pay a good % in fees to convert it to real currency"
False. Last summer, I ate at EVR, a bar/restaurant in New York City accepting Bitcoin. I paid in bitcoins and their processor (BitPay) only charged a 1% fee.
Fees from Bitcoin payment processors are actually quite good compared to credit card fees.
Actually you can here in the Netherlands. We have a website called thuisbezorgd.nl that allows you to order food from thousands of shops through the country with Bitcoins, and have the food delivered at your house.
Although I agree with the point you are making, saying "you might be able to buy some crap on the internet with bitcoin" is slightly short of the truth. While you might not be able to live off 100% bitcoin purchases (although some people are doing it), acceptance is growing every day.
A lot of people who are claiming that you will need to pay a large % in fees in order to spend your coins are missing the point.... as bitcoin gains traction, you wont need to convert it to USD first.
How about you provide a scenario an average person can use? Like, say, County Market accepting bitcoin?
I can't afford a sub-orbital tour in USD, let alone bitcoin. Is there any leading supermarket that accepts bitcoin? Literally allowing me to use bitcoin to put food on the table?
To chime in here, one of the largest sites for ordering out in Germany, lieferservice.de, accepts Bitcoin. They have hundreds of participating restaurants.
Here's a picture of the food on our table, paid with Bitcoin:
My guess: Bitcoin is just facilitating the transaction. Restaurants are likely settled in Euros. I wonder how they hedge the volatility. There needs to be a BTC hedging market.
Call me crazy but if I am ever in a position to transfer $150M I'd probably also want a third party involved to make sure the transaction goes smoothly, like a bank. Like we do today. With wire transfers.
You're not actually under the impression that Bitcoin value will maintain value over time, are you? If you use banks because of the "cost" of holding cash then you will very well have to engage in the same type of speculation as the "cost" of holding Bitcoin. At least the bank can effectively guarantee your investment will be worth more in numerical terms over time, raw Bitcoin can guarantee no such thing.
Well, you can still have a 3rd party provide oversight for a bitcoin transfer and insurance against failure. Because bitcoin is simple and reliable, these 3rd party fees would be very cheap.
Those third party fees having nothing to do with bitcoin's simplicity or reliability, but with the amount of the insured transfer, the perceived risk of the failure, and the expected costs and complexity of recovering any losses from either party involved.
Whether it is in bitcoin, CHF, EUR, USD, gold, platinum, Amazon Coins, Zorkmids, yams or sheep skins, insuring a transaction will depend on those factors.
It's not instantaneous, therefore you have to have faith in the system (as opposed to faith in your bank). Sender sends $150 million and receiver needs to wait 30 minutes for enough verifiers to trust the transfer went through.
How often is there a direct transfer of this size? Fedwire moves about 2.7T/day and I believe it would have cost $0.26 to transfer this amount, assuming that its at the upper end of their sliding scale ($0.08 - $0.26/transfer).
I believe it also requires that you put your assets one of their accounts if you're going to use it, so you're relying on the credit of the U.S. government (which is pretty good, but still adds risk, and subject to U.S. laws) until you withdraw your funds. And there's probably a lengthy process to deposit and withdraw funds.
Besides cost there is also risk- a transfer of this size in the light of day would raise a lot of questions- Where did this money come from? Was tax paid? And depending on the reason for the transaction regulators may interfere or freeze the funds.
Yes, because making sure someone isn't buying a nuke on the black market and is paying the taxes they owe is just terrible. Don't get me wrong, the regulatory framework for money transfers seems to suck, but I don't want to go from "shitty regulation" to "zero regulation", I want to go from "shitty regulation" to "smart regulation".
I'm tempted to conclude this is something that happens so rarely you may as well count the times it happens as a rounding error.
Everyone's tempted to conclude things like that, but there's a subtle fallacy happening when we do. Generally speaking, we notice government programs of all stripes when they get in our way. When they don't get in our way, we don't. It's very easy for someone paying attention to the news to be able to rattle off incidents where the FDA and FEMA and the SEC screwed up, because the screw-ups are in the news. But when they do their job correctly we never hear about it. Basically, the dataset we carry around in our heads about How Well Government Works is substantially biased toward instances of failure.
The only way to really measure how useful a regulation is or isn't is to determine what it is the regulation is supposed to address and examine a substantial set of "before and after" data points; trotting out vivid but essentially anecdotal examples of WHEN REGULATORS GO BAD makes for great editorializing, but it doesn't actually tell us very much.
Keep in mind though, this transaction was nearly instantaneous. Bank Wire transfers take 3-4 days to complete (at least, as far as I know with normal-person quantities of money). Instant international money transfer is amazing!
Fedwire and other real time gross settlement services (RTGS) are almost instantaneous.
SWIFT transfers usually are not: SWIFT is a way to communicate messages about transfers between banks, but they would still need a way to do the actual settlement. This could be very fast in the case of two large banks in different countries: if you are a customer in bank A, which has a correspondent account with B, and the recipient is also a customer with bank B. Then bank A can use SWIFT to say “please transfer $1 trillion from our account to the recipient’s account”, and that could happen instantly. (It usually doesn’t.)
But if the final recipient is actually a customer at bank C, then the money needs to get from B to C somehow. That could happen in the recipient country’s RTGS—Fedwire if it’s the United States—but it might also be slower, through ACH or an equivalent.
One problem with fast transfers is that many banks don’t have straight through processing for RTGS. This means that the money can get instantly from bank A to bank B, but may not get posted to the recipient’s account with bank B until a clerk gets around to verifying and booking the transaction.
My guess is the previous commenter is in US. There's an excellent episode of the podcast "planet money" which addresses exactly this question, and which also explains why the system in the UK is much faster.
Not exactly. To be sure it isn't a double spend it needs to be part of the block chain at least six down from the most recent block generated. Each extra block on top of the block where your transaction exists is a confirmation. For smaller purchases, ie not $150 million worth it's near instantaneous.
Yeah, I would bet that credit card fraud with chargebacks is probably more likely than the double spend scenario so it would make sense for a company just not care about verifying.
As far as I can tell, the $50 million limit only applies to the Fedwire Securities Service for transferring Treasury and certain other securities, and there is no such limit for the Fedwire Funds Service that transfers money.
And they received $0 worth of assurance that it would be successful. If it were my $150M I would not want to leave it up to the block chain and hope it works.
They received a mathematical assurance that it would work. The relying nodes, blockchain, miners and priority rules are all well-known and straightforward to account for. If you pay enough fees given your transaction priority, it'll get into a block eventually. If you want it to be mined sooner, you can pay higher fees.
And even if it won't be mined, the worst case scenario is that you would keep your Bitcoins and can try re-sending them later, they won't disappear to anywhere.
There have been more than one block chain splits. I think you are talking about the hard fork that happened in May, which was planned for and not an unexpected accident. If you conduct a transaction and it is included in the shorter block chain, then by definition the network doesn't recognize the transaction and you keep your money and just send again.
That hard fork was rolled out over a period of two months, with warning (whilst older clients were sent messages to upgrade) and smaller splits are part of the protocol and happen quite regularly. as expected (like when two miners hit the same block within seconds and they wait for the network to recognise the block).
That is the justification Satoshi Naakamoto gave in the original paper for waiting for 6 blocks for a full confirmation.
"They received a mathematical assurance that it would work"
No they did not. Mathematics is about proofs; Bitcoin does not even have the rigorous definitions needed for that.
To put it another way, what you said is the equivalent of saying that Hacker News gives you mathematical guarantees of security because it happens to use TLS.
I hear you, but I also notice the developers still have not assigned bitcoin-qt a 1.0 version number. I might go ahead and transfer those millions anyways but the beta status would give me pause for thought.
Not true. The transaction has to be verified by multiple other people before it can be trusted. If you spend the same bitcoin twice in a short time period, it's a toss-up as to which one gets accepted into the official blockchain.
If you were worried about how it would go through, you could break the transaction into many small transfers (which would've been very smart in this context).
Unfortunately for me right now bitcoin has zero value.
Until I can use the millions in coins to pay off my house, buy a car easily, pay my taxes and go out to eat with them, or hassle free convert them to cash in my bank, it is still funny money.
You could say the same for gold, stocks, or bonds. But at least Bitcoin has the ability to be cheaply, easily, and quickly transferred to anyone else in the world, meaning it has the potential to be useful for paying for your house, car, taxes, food, and be easily converted anywhere, once enough people are using it.
I can relatively easily convert large amounts of gold, stocks or bonds to cash currently unlike bitcoin. Also I don't care about potential use in the near future (20 years? 2 months?).
Unless you provide me a way to realize bitcoin to actual USD in non trivial amounts with the same amount of effort it would take to convert my stocks or bonds, it is as useful a currency for real life as is my current GTA V Online bank account.
"Unless you provide me a way to realize bitcoin to actual USD in non trivial amounts with the same amount of effort it would take to convert my stocks or bonds, it is as useful a currency for real life as is my current GTA V Online bank account."
So it's either as easy as stocks or it's useless?
Hmmmmm.
I think you're overstating your case a wee bit there.
I think you might be missing the point. Bitcoin right now operates more like gold. You can't pay off your house, buy a car, pay your taxes or go out to eat with gold. However, there is a healthy market for exchanging gold for currency. You wouldn't call gold funny money. I think it would be more appropriate to compare bitcoin to gold right now. I have no idea how healthy the market is for exchanging bitcoin for other currency, though.
Gold is a physical good with actual useful value. It is hugely overvalued right now, and anyone telling you to "buy gold" usually holds gold and benefits a lot from that.
Those cable "invest in gold" deals are exactly this but worse - they sell you gold more expensive then the commercial market that can never be redeemed for that price.
But it has a real cost of production that represents its relative industrial worth.
Bitcoin is valueless though. Created Bitcoins do not have any industrial value - you can't use them for anything else, even though they have a cost to create. There's no reason, if they lose value, for anyone to buy them from you - whereas with gold if you sit on it long enough, it will become valuable when someone needs gold for some type of industry at minimum.
Fiat currency is valueless and can only be used because people trust the government issuing it. If Bitcoin can gain the trust of enough people, it can easily become more 'valuable' then many currencies in existence at the moment.
Fiat currency is backed by the legal obligations of the country that issues it that it is a suitable means to extinguish debts.
Bitcoin is not. No one is obliged to accept Bitcoin as a currency for settling debts anywhere in the world, it has to be converted to something else. Similarly to gold - you don't have to accept gold as payment for debt, but you do have to accept USD.
This is where the problem lies: BTC acts like a commodity, not a fiat currency - and people are treating it like one buying into it. The problem is it has no value as a commodity other then being Bitcoin.
It does have value. It's long lasting, pseudonymous, secure, and it costs less to make transfers between two parties. These are qualities that are hard to find in a physical commodity. What gives value to an individual bitcoin is the Bitcoin network. There is real value there.
You're missing the point that all kinds of symbolic wealth can be easily converted into other kinds of symbolic wealth. If this weren't true, it wouldn't be symbolic wealth.
While that is true, Bitcoin is far from a bulletproof preserve of wealth. Gold has other uses if it isn't used as a currency anymore.
Bitcoin on the other hand can be made completely useless if some critical flaw is found, or the wealth is too concentrated in a few users and the majority decides to switch to a newer crypto-currency.
Gold's other uses wouldn't make gold worth much on their own.
"Legitimate" uses of a commodity that trades more for its properties as money should be thought more of a really crappy put option, that is it sets a low price floor.
For example, it's been estimated that gold's industrial uses would only allow it to be traded in the low double digits per ounce if people didn't desire it for other reasons.
It's just in the case of something that isn't physical and isn't "backed" by any alternative uses, the floor is 0% of the current price instead of 1%, or similar.
Indeed, without gold, modern electronics would not be the happy place it is now. I am old enough to have had to use a pencil eraser to periodically clean tin plated contacts. Even silver oxidizes under normal conditions. I like my gold (plated contacts).
Just as people say, "the market can act crazy, longer than you can remain solvent" about trading stocks on Wall Street, so I would point out that gold's value "as money" has been around a lot longer than even the lifetime of Methuselah.
People have been using gold in some form for thousands of years - I don't see that changing anytime soon.
People still buy silver as an investment, I hesitate to say "as money" ; although I told in Mexico you can buy and sell silver in many banks (I don't know the details however).
In the USA, gold was demonetized (1933) before silver (1965) in the currency when used in the USA. The dollar was convertible into gold internationally however.
The international gold window was closed by Nixon in 1971.
Gold's price is sensibly on the order of the price of silver (which gets classed as money but has a pile of uses).
Gold's magickal role is largely cultural bias. There's lots of metals that are rarer and pricier than gold, but you don't hear about scandium-bugs or rhodium-bugs.
I'm pretty sure that if we consider only the industrial uses of gold, and the available supply, it would have a low value. Probably even if we count jewelery as a non-currency use.
Almost all the value is because it's shiny, yellow, and traditional.
Gold asteroid mining isn't too implausible, either.
> Gold asteroid mining isn't too implausible, either.
More plausible than some hacker news post 'bitcoin 2.0 is here - look it's shinier!', though? Or 'new crypto currency approved by the US govt?' You think people won't reinvent this wheel to death?
Sure, you could also synthesize gold from some nuclear reaction, or mine it from space... You pays your money (and you takes your chances)
I really am not a bitcoin fan, but my hatred towards PayPal's payment monopoly may one day weigh more heavily than my reservations about cryptocurrency. :)
Not that $350 would have meant much - your point stands and is well taken. I was convinced of this money transmission use case as the most important when I was writing up something on Bitcoin a while back and talked with a few experts. They were all psyched about this kind of thing, not about "you can buy your groceries with a bitcoin card" stuff, which will have better solutions than this. Global liquidity is what it adds, really.
Finally, someone mentioning good reasons why bitcoin is actually great. You're absolutely correct, and this is why bitcoin will continue to remain relevant. Taking service fees out of transactions is a huge boon for businesses and consumers everywhere. My mother is the CFO for a large retailer, and I believe service fees are the third largest cost they have after rent and personnel.
So maybe I'm ignorant here, but did they do the transfer over the Internet, or was it a thumb drive taken out of "cold storage" and handed off to someone else. Do we even know? Don't you think there are vulnerabilities in the system for transferring Bitcoins just like there are vulnerabilities in the system for transferring other valuable things?
> So maybe I'm ignorant here, but did they do the transfer over the Internet, or was it a thumb drive taken out of "cold storage" and handed off to someone else.
Every bitcoin is controlled by a private key. The private key can be put in 'cold storage', but if I hand you the USB key with a private key stored in a text file on it, you have no way of being sure that I didn't keep a copy elsewhere and in a few minutes will make a transaction sending it to some other private key (which you don't have). So unless you trusted me an extraordinary amount, you would immediately want to make a transaction transferring from the private key on the USB to a new private key you generated just that moment.
> or was it a thumb drive taken out of "cold storage" and handed off to someone else
A transaction like this is invisible to the bitcoin network. This would be equivalent to me handing you a 20 USD bill, no one but us (well, there is surveillance, but you get the point) knows what happened. Unlike handing over 20 USD, if I had you a USB drive with a wallet containing 20 BTC, you need to move that money from that wallet to another, because you can't trust it's my only copy. If I have another copy of the private key somewhere I can take that money back at any point by announcing a transaction before you do.
So exchanges like this are done via the bitcoin network by specifying a from address and a to address (simplified, other more detailed explanations are out there detailing the actual cryptographic tools and protocols) and an amount. So you provide me an address, I use my private key to encode a transaction from an address containing my 20 BTC to your address. Everyone knows about this, though they may not know who we are as the addresses are pseudonyms and the connection to our real identities may be virtually non-existent. Now, you control that 20 BTC and its spending, and my 20 BTC are gone from my address, I can't spend them again (legitimately at least). Supposing that address now has less than 20 BTC. If I try to spend 20 BTC again the network will consider it an invalid transaction since I can't spend BTC I don't have.
That is the side I think many in the financial world are realizing and what hits banks the most. It hits the fees. Daily transfer fees, rates, management etc.
It could be beneficial to banks to move money more rapidly and make some coin just like funds they have do with their holdings even though it strikes the core of the business model.
If used right it could be helpful like torrent is to distribution, cheaper, faster ways to move things. It would be nice one day when regular bank transfers don't take 3-5 business days or a fee for same day.
Solving problems is nice in the abstract, but I can't really get excited that someone has solved the problem "I wanna move $150 million without paying for it." In terms of things that actually make a positive difference in the world, it's right up there with "that breastplate I want for my Warcraft paladin won't drop."
A slight correction, he paid zero fee. The 0.5 bitcoin is change, that he got back.
You can see the fee amount further down the page. If he had paid a fee, 0.0001 BTC, or $0.04 worth of BTC, would have been enough to ensure the transaction was included in the next block.
If this was an actual transfer of ownership of Bitcoin at all near that value, this would trigger money-transfer reporting requirements under the laws of most countries,[1] especially if this was an international transfer of ownership. I see that all the other comments here are speculating about what exactly happened here, and one astute comment before this one pointed out that the actual owner of the Bitcoin may still be the same individual person both before and after this blockchain transfer. It will be interesting to see how the regulatory environment keeps up with the implementation of Bitcoin, which so far is a very tiny percentage of the world economy.
There were also statements in some previous comments that this transfer was made for free. It is true enough that a Bitcoin transfer doesn't inherently incur a processing charge from a merchant payment processor, but as merchants learned back in the Middle Ages when charging interest was formally illegal, the price of a transaction can hide financing and processing costs. We don't know what was agreed with whom by whom to make this transfer happen. The transfer may have occurred at a higher than list price for something that was bought, to make up for the ongoing inconvenience of receiving a payment using the new Bitcoin payment mechanism.
If this were a transfer of ownership, it would trigger the reporting requirements of any country that has reporting laws. The odds are overwhelming that it is not a transfer of ownership, but if it is, here are some guesses:
1) The feds have finally cracked wallet(s) used by Silk Road, or he managed to give his keys to someone (he had a bail hearing today - it's an odd coincidence);
2) Drug cartels are now accepting BTC for major payments; or
3) Macau-based junket operators, that provide casino credit to Chinese gamblers because they cannot easily move money out of China, have begun accepting it for payment.
Personally, I think it was just one of the exchanges moving some money internally.
Given the transfer of ownership could just as well have occurred by transferring the private key of the address, these requirements are going to get pretty hard to enforce.
I think that scenario is pretty unlikely for large exchanges.
If someone gave me a copy of a private key, corresponding to some bitcoins, I wouldn't consider it payment, as they still have the private key as well (meaning they could still spend the bitcoins at any time).
Can you tell the difference between a secure hardware token and a fake secure hardware token?
I suppose if you try to extract the secret key and the token destroys it, it's pretty secure. Of course, you just lost all your money. I can't think of a non-destructive test.
For example Trezor hardware wallet ( http://www.bitcointrezor.com/ ) generates its private key when it is first initialized. This way, the key never exists outside of the wallet.
Not sure that solves he upthread probem. If I give you a Treznor hardware wallet containing a private key to $150million worth of bitcoins - would you trust me not to have anther copy of that key? Or would you transfer them immediately to a wallet with a private key I could never possibly have known?
It might be harder for authorities to monitor bitcoin transactions. But, as the very fact that this HN article exists illustrates, the blockchain is a public record that's available for anyone to monitor, analyze, cross-reference with other sources of data, etc. Particularly for large movements like this, I'm inclined to say that it would be downright foolhardy to assume that BTC transactions are anonymous.
It might be foolhardy to assume that BTC transactions are anonymous, but that doesn't mean that it wouldn't be EXTREMELY EXTREMELY EXTREMELY difficult to figure out who was involved.
Here’s who (probably) did that massive $150,000,000 Bitcoin transaction (washingtonpost.com)
From the article: "Who was responsible for the transaction? I asked Sarah Meiklejohn, a computer scientist at the University of California, San Diego, for her thoughts. She's the author of a recent paper demonstrating that sophisticated analysis can reveal a lot of information about who is responsible for Bitcoin transactions. She has combined a large database of Bitcoin addresses tagged with their likely owners."
Case in point: Supposedly the money from a lot of cases of major Bitcoin theft is still sitting in the same wallets. Implication: The thieves are having a hard time figuring out how to spend the money without outing themselves.
That certainly is kind of a dark prospect. Random people a mixture of varying degrees of foresight, money, and luck, suddenly becoming the richest people on the planet.
Gates built an empire. Yet the Winklevoss' will eclipse his wealth if BTC goes up just a few factors.
I don't begrudge people their gains, I'm just thinking about the seismic shift in power.
I know humor is forbidden, but I laughed out loud at this anyway. I felt compelled to comment because this is a difficult joke to setup in every day conversation.
I think the point is that the only reason to transfer such a large sum of money is either buying/selling something or stealing. And considering there probably aren't many (if any) things one can buy with that many bitcoins, theft seems to be most likely scenario.
Another option: Perhaps the security of the private key of the old address was in question, so a new address was created with a new, secure private key.
Bitcoin is pseudonymous by default, not anonymous.
Anonymity is a choice. CoinJoin [1] and other trustless mixing software projects are aiming to make anonymity a push of a button. This is being implemented into DarkWallet [2] where mixing happens automatically in the background.
The legislators can make whatever they want illegal, but that doesn't make it necessarily enforceable.
Thing about mixing is, since any person (or autonomous process) can generate wallets and send BTC to those on the fly, how do you prove that you used a tumbling service and not that you gave coins to a guy who gave coins to a guy who split them up into separate wallets who each gave coins to a guy, etc etc etc.
As Bitcoin picks up steam, this problem only gets harder. Remember that the block chain only consists of hashes and signatures. Proving who owns those is a much more difficult process.
It's trivial to make it enforcable. Whenever BTC leave the mixed wallet into a regulated area, bust the person doing so for violating money laundering laws if they used mixing. If they didn't use mixing, but received mixed funds you can probably impound some fraction of their funds to.
Either way you now have enough evidence to raid their PC to check for further laundered funds and generally make their lives miserable. When people complain just find a fraction of a BTC that was used at some point in the past to fund the social demon of the day (child porn, terrorism, drugs, sex trafficking, etc.) to justify it.
How do you prove that circulated coins are the product of a mixing operation and not just normal transactional flow?
Someone mines coins and gives coins to a guy who gives coins to a guy who gives coins to a guy (repeat n times) who gives coins to you, and every link in the chain is following best practices by generating new wallets for each transaction, how would the adversary prove that you're doing something untoward (and since we're discussing law at this point, beyond a reasonable doubt?)
You didn't really answer my question. Assume you're in some position of authority. With the knowledge that bitcoin wallets can be generated out of thin air, how do you prove that a given transaction chain was the product of a mixing operation and not the product of normal transactional flow?
Physical wallets can also be created out of thin air. I'm not a forensic accountant, so detailing precisely how is not in my area of expertise, but we successfully prosecute people for laundering cash, and bitcoin only has more information, more accessible than cash. I am not saying it can be done with just the block chain, but the block chain is a piece of evidence that is far more easily accessible than a criminal enterprises' individual ledgers.
It is much easier to enforce than money laundering with cash. It still takes investigation beyond staring at the block chain, quite obviously, but that isn't anything new. Consider some simple undercover work. If I send you coins to be mixed, we can track what happens to those coins. Now we know every address that participated in a mixer, and can tie the addresses to people when coins are spent (with, fully acknowledged, a certain amount of elbow grease).
I don't think there is a single topic that exists right now, that people are willing to debate while being completely ignorant of it, more than Bitcoin right now. That applies to HN/reddit, TV talking heads, and real life.
It's like the AOL search-data leak. It's anonymous until you do a bit of research; then you can narrow it down to general area, maybe gender and perhaps eventually who exactly it is. Now, since one person can have multiple wallets and addresses... I'd recommend this person to never use this address again! ...because people(and authorities) will be watching and gathering clues on it from now on. I'm sure the folks at 4chan/neogaf/reddit would love to put on their sherlock-homes hat and find this person.
The thing though is that all transactions are available to be seen. So even if you don't use the same wallet ever again, you can follow the trail of the money - FOREVER. This is not something I am comfortable with. This was also primary reason why I never considered bitcoin as serious alternative, but then again I don't see a way around it.
Well, you can't just never use a wallet with millions of dollars again.
The main way to get out of that wallet though is money laundering. Convert the BTC to some real asset, and slowly (and untraceably) funnel to a variety of places.
Not necessarily. Anyone with a bitcoin client can sign whatever message they want into the transaction. Just like you can write in anything you want on the memo of a check. It's the same.
Hardly. If you tried to sell 195,000 coins you'd wipe out all the exchanges and cause a crash.
Talking numbers, you could sell them all on BTC-E right now, bagging you just $7M, and take the price down to ~$36. You can spread that around the exchanges of course, if you're quick, but you're still nowhere near $147M at current market depth.
Exactly this! What the heck would you do with $150 million in cash... stick it in a $250,000 FDIC insured bank?
Most people with this level of wealth diversify their holdings, which makes the total amount less liquid, but much more secure, as well as providing protection from inflation or returns on investments. Real wealth often does not have perfect liquidity, and I would argue in these amounts, almost never does.
Selling 100s of thousands of dollars worth of bitcoins a year for USD would hardly put a dent in the markets, and is probably the most anyone would want to do. The purchase of an asset would instead be made directly with bitcoins in a transaction such as this.
I'm actually serious, there's a service called CDARS [0] that balances a large number of individual CD accounts of varying expiration times and maintains the 250k per individual per institution invariant. It acts like as single (albeit illiquid) bank account.
I don't think grandparent comment is arguing that.
The post is about a transfer of 195k bitcoins (not dollars) from one wallet to another, all at once. However, as grandparent comment points out, the title is inaccurate: even if this transaction indeed involved an exchange of dollars, it's incorrect to assume that the dollar amount was 195k × (current BTC/USD rate).
You could probably make such an assumption for, say, JPY/USD, because the daily volume of yen trading is measured in hundreds of billions U$. Not so with bitcoin.
Even in 10,000 BTC chunks you're looking at dents in the market price of ~30% at most exchanges. How long would you plan on selling off these coins if you chose to do so?
That's the case with anything in large amounts. I can say I have $147M in Microsoft stock, but that doesn't mean I can sell the stock suddenly in one minute without making the price tank.
> I can say I have $147M in Microsoft stock, but that doesn't mean I can sell the stock suddenly in one minute without making the price tank.
Actually you can. Bill Gates sold off over $700M of stock over the course of a week at the end of Oct/beginning of Nov[1] and took a price that deviated by only $0.16 (~0.5%).
But you're actually agreeing with me anyway. Absurd valuations for quantities not readily absorbable by the market can't be priced until someone actually tries to sell/buy that quantity. There's no doubt however that if someone want to cash this volume out today their not looking at the market price. Who's going to buy at $700 when someone is trying to rid themselves of 2% of the entire currency base? To put that in perspective, Bill Gates currently owns only 0.4% of MSFT and wouldn't be able to (publicly) sell that much in a day without crashing the market.
Should this be regarded as capital gains from currency speculation, when it comes to taxation, or how does something like this look to a tax attorney or accountant?
It should be noted that all we can know about an arbitrary transfer like this is BTC was moved. We do not know if ownership of said BTC changed; people can own many bitcoin addresses.
One of the many wonderful elegant qualities of Bitcoin.
It's actually a very public way of transferring value between endpoints but in a way that lets you "tune" the tradeoffs to just the right mix between privacy/anonymity and full-disclosure, to taste. You can't do that with government/bank/fiat systems.
Wow. I had no idea that complying with the tax laws would be so much more difficult than just ignoring them and concealing your Bitcoin activities from anyone beholden to the authorities.
If there is anyone in Congress with even a quarter of a brain, they might want to take a look at how to keep Bitcoin users in the system. Otherwise, as more people read that guide, say "WTF?!", and decide to pay it all as much heed as "use tax" on interstate retail transactions, they will be forced to lean more heavily on debasement of the currency they can control.
Hint: Complying with tax laws is much more difficult than just ignoring them and concealing your activities from anyone beholden to the authorities without bitcoin too.
That's not unique to bitcoin, I'm surprised you were surprised. Ask any small business owner around tax time whether filing your taxes is more 'difficult' than simply... not filing your taxes.
At least unless-until you get caught and prosecuted, then you might re-evaluate which path involved more 'difficulty', depending on how difficult you find fines, hearings, trials, jail, etc.
Traditional banking rules require attachment of identities to accounts, and automatically trigger reporting to the tax authority for any significant movement of cash. Any account can be frozen and seized with an official-looking piece of paper. The system has tax compliance built into it.
Bitcoin has no such requirements. It is actually possible to be secretly, anonymously wealthy. Your accounts cannot be seized or frozen unless you give up your private keys.
It is true that people evade taxes in other ways. These often involve foreign accounts in countries that do not strictly comply with tax-reporting demands. Assuming the tax authority cares, it would also have to present evidence, which is somewhat harder to get out of the Bitcoin system.
And it is also true that for most people with dollar income, taxes are as simple as filing 1040EZ. There is no need to calculate basis or holding period or do a million lookups of tax code minutiae. If you make $50000 a year, compliance is easy and the risk is low. If you buy something with 10BTC, you have to hire an accountant to strictly comply with the law.
Not exhaustive enough. From the link: "Miners of Bitcoin face a host of unique tax issues that are outside the scope of this discussion." If I were mining I'd want to know the tax and legal implications, and there are no good sources out there from what I understand.
The most burning questions: (1) for a miner based in the U.S., does the BTC miner realize a short-term gain the moment a bitcoin is awarded? or can they defer all gains until perhaps a year+ after mining and realize the whole sale as a long-term gain? (2) If short-term gains are due upon mining award, and the value at the time of award is US$1000/BTC, and the tax due on short-term gain would be US$300, and then BTC crashes to be worth $10/BTC before the miner sells the coin and never recovers, is the miner left holding the bag on the $300 short-term tax bill? (Similar things happened to stock option exercisers in the dot-com bust, people who held their exercised stock.) (3) Does tax treatment differ for solo- and pool-mining? I can see pool-mining being treated as offering a service to the pool, and any awards are immediately taxable as revenue, whereas in solo-mining perhaps one could argue the award isn't realized until one actually sells the BTC.
1) It depends on whether the mining reward is treated as compensation. It probably should be considered compensation, in which case it is taxable ordinary income when received. However, on a subsequent sale, it should be taxable gain only to the extent that the sales price exceeds the value already taxed as ordinary income.
2) If the value of BC crashes between the time earned and the time the tax is paid....then yes, you're SOL and still owe taxes on the value of the BC when received. However, usually there is a corresponding deduction to help alleviate that.
3) Pool mining almost certainly is taxed differently, since it is more akin to investment income than to compensation income.
Probably capital gains, like striking it big in the stock-market. e.g., someone selling a bunch of Apple stock they purchased back before iPods became popular.
Can you even imagine trying to file this on your taxes? Unless you're a mega-corp, the first thing that will happen is that within 24hrs of the deposit, your bank would call you to say how much they appreciate you using $BANK_NAME for your banking needs and assign you a personal banker that you can reach at anytime to answer any questions. You'll probably also be sent flowers & a mug & all kinds of swag. They'll send you a birthday & holiday cards too..... then a few days later the police will show up....
The government would have to consider Bitcoins as a currency for it to be taxed like a currency. Right now it has no status identified for legal purposes so no way to tax it.
I am sure that several governments are looking in to it as we speak. Death and taxes
The government can tax anything it wants. For example, barter exchanges are taxable by the government, even if no actual money changed hands. They would just put a dollar figure on the barter, and then tax it accordingly. Bitcoin doesn't have to be a currency in order for the government to tax any gains made on its sale or transfer.
The IRS purposely keeps the definition of income loosely defined so that they can broadly apply it as new schemes and technologies arise. I am sure the IRS could bust you for income tax evasion if you didn't declare your bitcoin appreciation as income.
I am sure the IRS could bust you for tax evasion even if you were the world's only completely honest person. The tax code is so needlessly complex that there is always some hidden land mine that could be used to nail you to the wall.
Just don't reveal your Bitcoin activities to the authorities, purposefully or accidentally, and they will never find any reason for their flagging algorithm to elevate your account to human scrutiny. Nor will they have evidence that could be used against you.
Anything passing through an exchange that follows state banking rules might get you into trouble, but you don't necessarily need to use an exchange to turn BTC into USD.
You would have to declare income at sale on a difference between bought and sold prices. You wouldn't have to declare appreciation as long as you were just holding.
Good point. If they outsourced the enforcement to a private contractor, the contractor could charge the government 10 times the actual operating expenses, keep any tax actually collected as an incentive bonus, and their employees would be underpaid with worthless benefits, so they will be constantly surly and take out their frustrations on the filthy tax evading scum. There's no downside!
Not even close. Anytime you buy low and sell high you owe taxes on the difference. This applies to everything from antiques to livestock.
It doesn't matter if the stuff is tangible or imaginary. You would owe taxes for mining World Of Warcraft coins if you sell them. You would owe taxes for picking up cans off of the street and recycling.
How much you owe can change with how you earned the money, but if you earned money you owe taxes. Only two things in life are certain. Taxes is one of them.
Tax over selling a property are not dependent on the property (ok, it depends sometimes, like real estate) but in principle they exist regardless of the nature of the property.
Nothing by the looks of things. I tried a few and it looks like the target URL you put in must contain the address somewhere, otherwise it's not verified. I guess it's to stop people flooding spammy names.
Yep - the default client won't let you send to an invalid address. And even if you used client software that was broken and performed the check incorrectly, the transaction would still be rejected by the other nodes in the network.
Not necessarily. The protocol itself doesn't use base58 or the typo checksum, AFAIK. If your client sends out a hash it derived from a typoed base58 string, nobody on the network will know it was a typo, they just see a 20-byte hash that could be anything.
It's not hugely different to if you had $150m in Albanian lek or Abkhazian apsar. You would find it ridiculously hard to convert into an alternative currency in one go and even if you did you'd probably be getting a bad deal (and could even devalue the currency in those two examples).
Ultimately, there's always a price that you can convert ("cash out") anything at. For example, I'd be willing to pay $100 for 100 bitcoins right now. Eventually a seller and buyer will find a meeting ground, a transaction is made, and value is defined.
If the map is correct, the first node that saw the transaction is located roughly in Frankfurt, Germany which is a major financial centre. The transaction was made at 5:38 local time which is right around the time the Frankfurt exchange closes. Might be this transaction was done by a larger financial institution closing up shop for the week.
Remember this is the first node that the Blockchain.info website saw. This relay information is extremely misleading. So that German node could have relayed the transaction from another node before Blockchain.info became aware of it. (Blockchain.info is connected to about 1% of all the active Bitcoin nodes)
Well, how does the propagation of transactions in the BTC network work? I honestly don't know, but I would assume that it is more likely for the originating node to be near to the relaying node than not.
Every peer makes an announcement that they've seen a new transaction to every one of it's 8+ peers, if a peer doesn't know about the transaction that's announced, they send back an inventory request to get it for themselves.
There's never really many degrees of separation between nodes, but you're probably incorrect in that blockchain.info knows anything about the originator of the transaction. They connect to a large number (abusively) of nodes, but not enough to do this sort of discovery. There's a reasonable portion that never expose themselves to the public network at all.
Well, this is just another reason why bitcoin will not work - you can track money changing hands.. Certain three letter agencies would have not trouble tracking most of the transfers, all over the world.
this is just another reason why bitcoin will not work
5 years later; several orders of magnitude later, so many arbitrary "milestones" met (parity with dollar, can i buy airplane tickets with it?, well we'll see when the government recognizes it)
when do you decide that bitcoin 'works'? i mean; it is absolutely undeniable 100% certainly no-matter-what-you-say currently working RIGHT NOW; the mental dissonance around bitcoin naysayers is becoming hilarious
Size of the current bitcoin economy is "just" $8bln. While it sound like a lot of money, comparing to the rest of the economy it does not even qualify as a pocket change.
Or why it would be ideal to be used by the government - so we could track how they move money around, prevent corruption and generally keep an eye on the untrustworthy ones.
Let's say that you pay for Virgin Galactic ticket - that will be a fairly large transaction pointing to your wallet. Someone will be able connect the dots and find out that you also bought Viagra, and a penis enlargement pump. Do you really want that connected to you?
Another case - you buy something from one of the stores that accept bitcoins. That store may have the address of your bitcoin wallet. They will be able to use some clever algorithms to see how much money do you have available there, what did you use your bitcoins for, and more stuff like that..
every transaction has a new 'address' (if you choose to.. and this is what happens by default); so when i send a tx to virgin; no one (other than virgin and anyone they tell) will know i sent a tx to virgin.
wallets are made up of lists of addresses; so while the network analysis can be done it is actually no where near the issue you seem to believe it is
@Watty even if you create new bitcoin wallet you need to fill it out with bitcoins. You either have to mine them, or get from someone else. Since we can safely assume that mining is out of the question the only other option is to use exchange.. There will always be a point of entry that the transaction can be traced to..and this place/person/organization will know who the user is. From that point forward they can track you..
You can wash BTC of any identifying information by sending them through a conduit -- someone that is willing to operate an address used to obfuscate the eventual destination of transactions.
Wallets generate addresses and prove ownership of them. On the other hand, it's very difficult (impossible) to prove that a given address is controlled by the same person who controls another address.
In other words, you don't have to generate a new wallet, just a new address.
Or why it was created by the government. We still have no idea who Satoshi is, and bitcoin is obviously robust enough that it had to have been peer reviewed.
Except that Zerocoin and Coinjoin are being developed and may one day become default in Bitcoin. This is still early days. Satoshi did amazing novel things, but he couldn't do everything.
You clearly don't have a clue about how bitcoin works. If two parties want to make their transactions totally untraceable it is possible. As far as I can tell, this transfer could be made by the same wallet, from generated address to the other in order to initiate speculations and show that BTC can actually be used for big un-taxed, non-stoppable money transfer, or it was just a way to show to the IRS what money is missing by not endorsing bitcoin asap.
Bitcoin is in Washington[1]. Washington will try to tax bitcoin if it gets accepted as an asset/currency. Moving the discussed amount of money, means that maybe someone (inside?) the USA has a huge amount of money not taxed. This is something regulatory authorities might want to change, as soon as possible.
Wait, the traditional argument is that its so poorly regulated and occult it cannot succeed. Instead it has quite of bit of transparency and that's suddenly a liability?
Yeah, try moving 150m out of any bank in the world and not having lots of people knowing you just did it. Secret fund transfer on this level is very, very uncommon.
Bitcoin has kind of a backwards privacy model compared to conventional finance. All transactions that have ever been made are public forever, but it's not so easy to prove that any particular person or organization controls any particular address. At least, assuming your client is mixing addresses and handling change transactions properly.
I think this is why it's more likely to work - you can decide who you want to trade with -- and if there's "bad money" discovered, then you can decide to not accept it. That system doesn't exist yet to help facilitate that ecosystem however. I'd like to see it though.
I had some one steal my laptop, which had all of information on it and also had a wallet with well over $300,000 worth in bitcoins. My laptop was stolen back in April, right when it was beginning to soar. I had written everything down on paper and had it in the laptop case which they took too. I looked for a verification email and it was no where to be found. I am so depressed about this. Right now I am in a struggle losing my home to foreclosure, never did I think I would miss out on an opportunity like this. Its like winning the lottery, but losing your ticket. Sighhhhh......... Now... all Ive got is an empty wallet. 16syUE7aoGTM6BTvn1N9zf6UUCcUcRaHfL
I dont even want to mention how much time I spent online searching for my wallet. Sucks!
If you don't understand why, then thank God you are not working in a bank. Banking is one of the most innovative, talent hungry industries in the world, with the anomaly of (and exception in) the US retail market due to legal idiosyncratic US regulation..
This stage of BTC growth is lovely. If you have a lot of it, you can issue transactions that might increase the total value. Not claiming this was the aim here, but certainly an effect :)
If this same owner splits the holdings up slowly, transfer wallets, and then recombine it again, it might spike up once more. People will definitely catch on, but it might bring up the value a couple hundred dollars in the hype.
can someone do any further checks on the information below as a lot of people have lost out on a lot of bitcoins, including myself. Please check the magento company and if possible further info on 50BTC.
It is possible to know 194,993.50000004 BTC changed between two addresses - these could be owned by the same individual, could be different accounts for the same individual. Anything else, USD, goats, Yuan, securities, etc that may have been traded would not be reported/recorded in the BTC transfer.
people are building (and/or have already built) systems that allow parties to transfer both pure-digital-only assets (images, videos, music, ebooks, etc), and, the rights to RL assets (eg. a goat, a painting, a vehicle), both "on top of" the Bitcoin network/architecture as well as via completely separate but Bitcoin-like systems. Systems which are also distributed, anonymity/privacy-optimized, resilient, globalized, bureaucracy-routing-around, efficient, automation-friendly, fee-less, built/run by engineers & entrepreneurs rather than by politicians/lawyers/bankers/aristocracies, etc.
Changed hands? There's no way of knowing if that happened. This is likely just a wallet being consolidated rather than actual purchase of goods of currency. The only thing we know is that a large number of Bitcoin moved from somewhere to somewhere and it's worth a lot.
Looking at where the funds went from there, they seem to be breaking it up into 4000BTC sections, probably onto paper wallets.
Let's see, there are approximately 1.22 trillion US dollars in circulation [1], so that would amount to a massive .001% of outstanding dollars. It may not come from "nowhere", but neither is it such a massively huge amount of money that it would necessarily register. Heck, that hedge fund (Knight Capital?) lost that in about 3 minutes a few years ago...
If you're the federal reserve, it "pops up out of nowhere" in a sense, but on a public balance sheet. If this was the Fed going long bitcoin, we'll know...
You know the amount of Bitcoin, which you can multiply by the current exchange rates. The actual monetary value you'd receive by selling all at once is different, of course
Everybody is suddenly a currency expert. Remember the days when everybody was a real estate investor? Yup. I'm gonna enjoy the show from the sidelines.
If the key was randomly generated (not derived form a passphrase), it is impossible to crack the key. Usually when people talk about cracking a "key", they refer to brute forcing a passphrase that either protects the real key (encrypted wallet), or is used to derive the key (brainwallet).
In theory a single transaction cannot involve more BTC than exists, but that's not a practical limit since you couldn't buy all the BTC that exists anyway.
Just sayin -- quoting everything related to Bitcoin constantly as if it's USD in your pocket is so misleading. For a group that loves BTC so much and eschews the US Dollar, they sure love to quote it.
roughly 5pm europe time, past the 9-5 general business hours . If all the parties or just the reciepients are based in europe, between legal and illegal.. I would tap this as illegal. It just doesn't make sense.. for someone doing a legal transfer of this size, after business hours, unless.. senders were based in US.
Going through the direct senders (1 step back), the time with least 1k BTC+ transactions was 0200, 0400, 0500.. while with most big transactions were made around 1300, 1500, 2100 .. suggesting that these transaction were roughly either made from US to Europe, if of legal nature.. or within europe.. suggesting something shady. Very very crudely speaking.
Yeah, everything is possible, and the above is not necessarily true, but it appears so, at least to me.
Amount: 194k bitcoins
Multiple connected accounts who sent to the above address seems to have had 220k+ in total recieved and looking at denomination, it didn't seem like lot of normal people were involved. Besides, with this kind of money involved it is wise to have 10 or less people involved who are highly trusted. This appear so also, with how countable no of bitcoin addresses were used to say "bounce" the trace of that money. Skill wise, these are not normal people.. but given HOW this ended up in public domain, they could have done slightly better.
I get the feeling you get from govt hired people doing such things, no offense.. but somewhere below the elite, but above the average joe. It is also possible that a bigger or equal (more likely) sum was also transferred elsewhere.
Movement seem to have stopped.. due to attention it has already garnered or is it the actual resting place? If it would be illegal, one would have had no problem keeping it in multiple bitcoin wallets in smaller amounts. But if it is someone, with legal force on side.. say govt agency, it would not have problem leaving the bitcoins in such limelight, for a long time, as long as they believe that bitcoin is actually 100% and not 99.9999999% impregnable.
Motive, as discussed slightly above, can be mainly either "convenience of centrality" > or > "hiding a bigger sum" .. well I at least won't be putting my money in BTC for my own reasons. I got that feeling today to use it.. but I resisted.
BTC is genuine, but the currently it seems like a pyramid fraud system which is perfectly legal strictly speaking. More people putting in money in BTC system.. already rich getting richer.. tickle down effect :? Well 150 million.. has really left a lot of questions .. or its nature, motive, ownership, moral, etc. Who would answer? No one.. ironically.. thats a big problem as well a big benefit of BTC. I'm sorry.. lot of things I said above are based on feelings, but to tell you the truth, before today, BTC was in a nutshell somewhat easy to understand.. but 150 million.. is a figure that can give any guy a lot of different vibes, speculative as well as wild goose chase type.
You're so open to scammers that it isn't even funny.
Lets say I give you a "physical" BTC worth 1 million BTC. Is there any way for me to prove to you that I have erased the private key to this BTC address?
No, there isn't. Anyone who is caught using physical BTC coins is a sucker who doesn't understand the system. They can be very easily scammed by the very man who created the "physical BTC coin". After all, all I need to do is keep a copy of the private address, and transfer the money sometime after I've "sold" you the BTC.
Precisely. Pseudonymous is not the same as "anonymous".
Lets say the IRS are watching this (and why wouldn't they be?). They now know a multi-million dollar transfer has happened, and are beginning to track it down.
I wouldn't be surprised if multiple investigations were launched. The downside is that they lose a few thousand to a few hundred thousand dollars in employee time. The upside is that they potentially collect millions in taxes.
How the heck are you going to put new BTCs into this new address?
Unless you have some anonymous way of depositing BTCs into random addresses, all transfers into and out of that address will be stored into the BTC Blockchain _for life_.
No, seriously. Forever, for the rest of Bitcoin's history, there will be a record that two addresses transferred BTC between each other.
This will be timestamped, cryptographically signed, and archived by the BTC Network. That is... what Bitcoin is after all. It is the ultimate ledger.
No. I was under the impression that the same wallet can have an arbitrary number of addresses. https://en.bitcoin.it/wiki/Address seems to support this idea.
You can have multiple addresses per wallet but BTC is still stored in addresses, not wallets. So if you have some BTC in address A and none in address B then you can't use B to buy anything. If you transfer money from A to B that leaves a record.
But you have no idea if address A and B belong to the same wallet, right? As in, I can create address A, get coins into it, then create addresses B-Z, disburse coins into them, then collect them again? Could I reasonably create enough addresses to create plausible deniability that I actually owned all the coins at all times?
Alternatively, could I use a web wallet to bounce coins around to obfuscate ownership?
Researchers can easily track such trivial ways of "attempted anonymization".
>>> We found out that there is a huge
number of tiny transactions which move only a small fraction of a single bit-
coin, but there are also hundreds of transactions which move more than 50,000
bitcoins. We analyzed all these large transactions by following in detail the way
these sums were accumulated and the way they were dispersed, and realized
that almost all these large transactions were descendants of a single transaction
which was carried out in November 2010. Finally, we noted that the subgraph
which contains these large transactions along with their neighborhood has many
strange looking structures which could be an attempt to conceal the existence
and relationship between these transactions, but such an attempt can be foiled
by following the money trail in a suciently persistent way
--------
ALL BTC transactions are FOREVER archived in the bitcoin ledger. Its how it works.
Unfortunately, the authors of the paper did not understand the relationship between wallets and addresses very well either.
The recommend use of Bitcoin is that every payment you receive should be to a new address. This maximizes privacy and its necessary when you may have multiple concurrent payment in order to sort out which one you've received. Common wallet software (including the reference client) also always pays change to a new address.
... so it's a bummer that the authors of the paper went on to describe every coin assigned to an address which has never spent as in savings (roughly 60% of them), if not for a couple things engaging in the bad practice of address reuse they would have found 100% in "savings".
The real problem occurs when you want to buy something that costs X, and all the addresses you control have fewer than X coins. You have to join the coins from multiple addresses within the wallet, and this joining provides very strong evidence that the same user controls all these addresses. So if one address is known to belong to a particular user, we now know (more or less) that all addresses belong to that user.
This joining means that even if you've been super careful to never link address A to you because you've done sketchy things with A, if at some point in the future (even distant future) you join A with another address that the someone CAN track, they now know you own A.
> this joining provides very strong evidence that the same user controls all these addresses. So if one address is known to belong to a particular user, we now know
A direct (i.e. not based on third party credit, regulations, etc.) transfer of wealth of this magnitude between two entities usually consists of a heavily guarded, insured, physical shipment of cash or gold. Depending how safely you want to make the transfer, and how far the entities are on the globe, it can cost hundreds of thousands to millions of dollars.
Bitcoin has real value. It solves problems on an incredible scale. I wish I realized this months ago.