[edj]

Questions I have now:

1) How likely is a cascade of bank runs on other exchanges?

2) Do other exchanges have security issues or insolvency that make them particularly vulnerable?

3) Will one of the other cryptocurrencies wax as confidence in BTC wanes?

[dnautics]

1) unlikely, since cascading bank runs are usually a result of fractional reserve banking. Depositors in a collapsed bank are unable to pay off loans in another bank, causing collateral damage to this other bank.

2) do other exchanges have security issues? Yes. Are they vulnerable? Only time will tell. I would take Mandelbrot's modeling of insurers (banks are "insurers" of sorts) in "the (Mis)behaviour of markets[0]" to heed: Collapses are levy-distributed with fat tails (infinite variance) so they will happen more frequently than you think, especially if you are operating with a model that uses the normal distribution. Best practice is to diversify.

3) I doubt it. ADDENDUM: But in a rational world this incident (might take a bit of time for the market to realize this) should actually INCREASE confidence in BTC, since a large, irresponsible player was knocked out, and the rest of the players on the field have a net higher level of responsibility (for now).

[0]http://www.overstock.com/Books-Movies-Music-Games/The-Mis-Be...

(I'm linking it via overstock so you can buy it with BTC - which is, hilariously, what I did)

[ryanobjc]

Bitcoin exchanges will have a run - they resemble fractional reserve banking, because all exchanges dont have enough USD (or other currency) to cover every bitcoin that people might want to trade thru the exchanges (that could be every single bitcoin in existence).

This obviously results in the crash of the exchange rates, and probably a reduction in the usage of the currency as well. Getting paid in something that has little use of it's own doesn't help you.

Now, on #3, you said "in a rational world"... But this isn't a rational world, so the rest of this sentence doesn't apply.

The reality is like loss of confidence is very powerful, and it could, as the document noted, destroy BTC for the near and possibly medium term.

[plaguuuuuu]

I thought that the bids/asks were all from individual people

Unless the exchange is taking btc/money from users and investing it somewhere then every btc/$ should be totally within the system, yes?

so you can either withdraw your btc or your $ as the case may be.

[ryanobjc]

That's the problem with mtgox - there was a divorce of BTC and mtgoxBTC account values, and that divergence, due to poor accounting/theft/whatever ultimately lead to a situation where mtgox is now acting like a fractional reserve bank.

In theory everything at mtgox is fine, UNLESS everyone want their real BTC back now, aka bank run. As long as people just trade between mtgoxBTC or only withdraw in reasonable amounts, it might be ok.

But that won't happen, because of the expectation of full BTC convertibility, people are freaking out and wont cease to freak out.

There are so many parallels between the gold-backed currency and bank runs in that era. Just rumors, or facts of insolvency and inability to produce either specie or gold for deposit values could drive a run and that would be that.

All that annoying bank regulation is there for a reason. It's a good thing we don't have bank runs anymore. Right? RIGHT?

[dnautics]

1) agreed, but that run doesn't necessarily cascade to another exchange. If the value of btc collapses and people make a run on it, those other exchanges will likely be able to cover the bid/ask spread in any case because by and large they are merely mediating exchanges of $/btc that other people are holding.

3) the 'rational world' was meant to apply to the rate at which bitcoin recovers. In a rational world it would be instantaneous, we're not. It's certainly possible that bitcoin will go to zero as a result of this, but I treat that as a separate case. If you think that bitcoin will survive in the medium-term, my point is the resulting value should be higher than before Mt Gox. In a 'rational world' everyone would figure this out tomorrow, for certain values of irrationality it takes longer for this to suss out, and for extreme values, it goes to zero too fast.

[jamesaguilar]

An exchange shouldn't be able to have a run, unless their assets are less than their deposits. They don't give you BTC or USD at the spot price. You buy the one you want from another person, and then you withdraw it from the exchange.

[mcv]

Bitcoin and USD are not the same thing. Bitcoin exchanges need to have enough BTC to cover any accounts in BTC. They only need to have USD if they also have accounts in USD, which I suspect they don't.

If nobody wants to exchange your BTC for USD, then the value of the coin collapses, but not the exchange.

[dragonwriter]

> Bitcoin and USD are not the same thing. Bitcoin exchanges need to have enough BTC to cover any accounts in BTC. They only need to have USD if they also have accounts in USD, which I suspect they don't.

If they are going to function effectively as exchanges where BTC can be traded for dollars (which necessarily implies trading dollars for bitcoins), they have to maintain both BTC and USD denominated accounts (which is why, indepedently of the treatment of BTC under applicable laws, they generally are subject to whatever the local equivalent of money service/trasnmitter laws are, because they have to maintain and distribute funds from fiat currency accounts.)

[AJ007]

1) A "bank run" on an exchange should be a non event because all exchanges should have the money they claim to have.

2) I'm skeptical of any exchange I don't know a lot about

3) Is there another cryptocurrency that offers significant additional features over BTC? Right now I don't see it. In the future there is certain to be.

Tomorrow Mt Gox's failure should hit the mainstream press. There should be very harsh coverage and panic selling. The more speculators who are cleared out of the system, the better.

[lmm]

> 3) Is there another cryptocurrency that offers significant additional features over BTC? Right now I don't see it. In the future there is certain to be.

I think doge offers more future liquidity (because they're allowing inflation) and a more user-friendly community. Is that enough to matter? I don't know.

[AJ007]

I think what you listed is marketing fluff.

Things I am looking out for:

a) Contributes some sort of additional benefit on the part of the computations being performed, e.g. seti@home b) Backed by a physical medium such as gold c) Very anonymous as opposed to public

I think the future will involve many different crypto currencies. There could be compelling business reasons for a company to issue their own currencies.

For example, lets presume there is a cloud AI brain. You can send inquiries to this brain for complex questions you have. This AI is composed of the miners. Like BTC you either can purchase to "AI Coins" or mine them.

In this respect the crypto currency could create its own self-sustaining entity with a real value. Yet it would not really owned by anyone. If the currency got too expensive, at some point you could have a competitor and the prices would balance out.

Speculators can fuck themselves, in the literal sense. For example, the dot com/domain name market had a handful of people buy up most of the good generic domain names. They parked them and earned pay per click revenue from Google and Yahoo. Google realized how much traffic was coming from "direct navigation" and basically put an end to type in domain traffic (and arguably consumers were trained to go elsewhere.) Had these domain names been developed in to good businesses rather than sat on, we would actually expect to see a good web site behind (insert keyword).com. When Google started hijacking the browser there would have been many more complainers.

BTC and other crypto-currencies right now have an outsized proportion of speculators verses those who are actually doing things. When prices rise, you get rich just by buying. Why devote any of your work to anything other than buying?

Right now the best thing that can happen for BTC and crypto-currency is for people to build software that uses it and actually works. Marketing is just painting the same thing over in a new color.

[jafaku]

Please stop spamming your copycoin. Doge offers nothing new other than the picture of a dog. If you think more coins is better (whatever that means, for an infinitely divisible currency), you might as well just used Infinitecoin or whatever.

[lmm]

Nice, anyone who disagrees with you is a spammer? (And it's not "mine"; I'm not involved with or holding any cryptocoin)

It's not about the number of coins, it's about how the number changes over time. I think bitcoin's regressive, pyramidal exponential decay is a very bad thing. I'm much more willing to support a currency that has e.g. a constant mining reward/year. Doge is the only one I'm aware of that departs from the bitcoin model.

[jafaku]

> Doge is the only one I'm aware of that departs from the bitcoin model.

It's not. Maybe you should try to get informed a bit before sharing your opinions based on whatever meme you saw on reddit.

[goldilox]

Maybe try and add something to the conversation or educate him instead of trying to show how big your dick is because you shit on reddit/dogecoin.

[lmm]

Maybe you should try making a positive contribution rather than just throwing insults? If there are other altcoins offering better production models, what are they? (Not that it matters when none of them have the popularity of doge)