Oh look, a bank-like entity failed and people lost money. Good thing the FDIC is there to--
Oops.
If cryptocurrencies are going to repeat the last 100+ years of economic history, can they hurry up and rediscover monetary policy too?
To be fair I don't think that foreign investment accounts are covered under the Federal Deposit Insurance Company either. Or for that matter, there are plenty of charter banks that aren't FDIC insured domestically. Even if MtGox wasn't based in Japan, there's no requirement (except as provided by state law) for a bank to be FDIC insured. In short, if you're worried about your money you probably should have some caveats about putting it into an organization that has no official policy for how it's going to compensate you if they screw up, monetary policy or no.
Several reasons:
1) OK, has anyone - preferably someone with solid crypto/math credentials - ever audited the fscking crypto behind Bitcoin? Anyone? Not that I know of.
The basic crypto behind bitcoin is sha256 it's the same crypto used behind TLS and SSL, PGP, SSH, S/MIME, and IPsec. If sha256 is compromised the fact that your bitcoins are now double spendable is the least of the world's problems.
2) Even if the basic crypto is sound, what about the wallet software? Surprise, surprise, it seems this is how Mt Gox was attacked... And wasn't a TV talking head wallet hacked after he showed the number on the air? Oooops...
The 'official' wallet software is open source, and is not subject to the sort of transaction malleability that affected MtGox. In short the official software is sound, however, the official wallet software is not designed to handle the volume of transactions that an enterprise environment like an exchange needs to be able to process. It simply isn't fast enough to keep up with hundreds to thousands of transactions per second. To this end MtGox like most exchanges used the official source code as a reference point and created their own custom wallet software to interact with their exchange. Unfortunately they made shortcuts in their coding to do this, which allowed this particular vulnerability to be exploited.
3) Any "market" where the majority of the "product" is owned by a very small group of people is not a free market - it's a cartel. And cartels usually are up to no good...
So, no, Bitcoin IMHO is not to be trusted.
And that's different from the over all distribution of USD how? Most of the people with large bitcoin fortunes are early adopters, and frankly why shouldn't early adopters be rewarded for taking a risk on something that ultimately may not pan out. You don't have to go far to find plenty of people who think Bitcoin is a scam, scheme, or otherwise 'no good'. You yourself imply as much. Like anything early adopters take a big risk, if BTC never got to be worth more than chump change they're out time and possibly money if they invested anything heavily into it. As another analogy, 25-35 years ago there were plenty of people who insisted personal computers would never be popular and there was no market for them. You don't begrudge people like Steve Jobs, and Bill Gates who took a risk on fledgeling technology and came out on top do you? Maybe in 10-20 years BitCoin will have gone the way of the betamax and vhs, but then maybe it won't.
I trust that bitcoin will continue to be a currency with value and use until something else comes along that replaces it (and given BitCoins incumbent status as king of the cryptocurency world is I believe, unlikely in the near future. There are a number of 'altcoins' which each seek to improve upon BitCoin's core functionality in some way or another, but none of them have successfully come close to dethroning BTC).
Bitcoin has a lot of functional benefits as a system for transferring value, even if it is eventually determined that its volatility ultimately makes it unsuitable as a currency for conducting day to day business with. This is especially true when it comes to international transactions. Currently the fees for transmitting USD across international wires, not to mention conversion to local currency (if needed) are significant, and time consuming (I've oft seen quotes of international wires taking 2-3 weeks to complete, depending on where it's going and what not). On the other hand, a bitcoin transaction is instantaneous, and after roughly 60 minutes is pretty much irrevocably entered into the block chain so that there is no possibility of the funds being lost or otherwise delayed in transmit.
Now does this mean that I trust bitcoin to go up, or down, or sideways, or do anything else? Well, I'd like to say I'm hopeful for a strong future for the currency, and I trust that in the long run bitcoin will eventually stabilize as it matures more, but in the short term, we're still in the wild west so to speak.
And as usual, people who trust their Crypto Currency to a web based service (especially one with such a short history to it, and no clearly defined security practices) end up getting their shit stolen. Really now, if you want your crypto coins (be they BTC LTC or whatever) safe keep them in a private wallet and encrypt it, don't load your fortunes onto some website, then complain when they get hacked.
This is kind of like carrying around a giant wad of cash in your pocket and then being mad when someone mugs you, keep a small amount of 'working cash' readily available, and keep the rest of it in a safe place. The same logic that you'd use with real money should apply to virtual money.
Potentially Unwanted Programs are not quite malware, though in many cases I'd argue are worse. PUPs are generally stuff like 'WOMG Awesome Toolbar', 'Internet Coupon Printer 3000', "Free smilies wacky mouse pointers' and Java.
They're legitimate in the sense that they won't exploit vulnerabilities in your system to install themselves, or (generally) ignore (or interfere with) attempts to remove them from your computer. They might even propose to have some sort of functionality that a user could want. The reality is that the functionality they generally offer is limited at best, and may even be inferior to the native functionality of the computer. They often slow your machine down, eating up your CPU cycles, opening up your computer to additional vulnerabilities, stealing your personal information to sell to advertisers, and generally speaking are not really useful to or needed by the people who have them installed on their computers.
Imagine for a moment that a government decided they were going to go and take half of their fiat currency in existence out of the economy, this wouldn't actually mean that there was now less value worth of money in the economy, only that the individual currency denominations are individually worth twice as much as they used to be.
If an entity with the financial capability to buy $4.8 billion worth of BTC went on that much of a buying spree the price of individual BTC would skyrocket, as the demand for the product would rise while the entity was purchasing them. Then, presumably since the goal of this entity is to destroy BTC, they would not reintroduce the coins they'd purchased back into the economy, thus causing a decrease in supply, that would have the ultimate result of simply stabilizing the remaining BTC at their new higher value.
The really stupid thing is that such an "exchange" does not offer "sketchy investments". The "sketchy investment" is the actual Bitcoin. I've seen no sites offer actual interest or anything: they just offer to keep your Bitcoins.
There are sites which offer interest (paid as a % of the exchange's revenue as a way to attract new members). As well as places that offer investments/loans.
While I agree that the best way to safeguard your BTC is with an encrypted private wallet, there are valid reasons to consider storing them online. Granted you should certainly do your research first, and even if everything is on the up and up, accept that there is some risk involved if the site owner turns out to be a sleaze, or doesn't properly secure his servers against hackers etc. If you're adverse to that kind of risk then keep it in your private wallet.
"Why can't we ever attempt to solve a problem in this country without having a 'War' on it?" -- Rich Thomson, talk.politics.misc