it strikes me that you're essentially trading some nominal portion of Blizzard's net worth.
In an abstract sense, I wouldn't argue with this, though it's hard to say exactly how much. Even to get a price for the currency is difficult due to the lack of an open, fair market; your best approximation would be shady 3rd-party sites, whose prices vary considerably and are likely inflated due to the risk of being banned.
I'm only speaking from a legal/tax/accounting perspective. When Blizzard issues new currency or processes transactions, they aren't required to report them or collect tax on them. When an adventurer scores a big bundle of loot, it doesn't count as a real-world income for tax purposes. etc.
Holy shit, 4100? Is that ALL the bitcoins!?!? XD
No, but it is about $1.23M at current exchange rates.
It's like the leaf you stepped on. Find enough, and I can pick up your trail.
I would look at it differently. It's like the leaves are stepped on by many people. If I can identify the exact set of leaves that you stepped on, I can pick up your trail. But if you're mixed in with a lot of other people, identifying that set is much more difficult, and maybe simply economically infeasible.
Now, if I understand you correctly, I believe a significant part of your argument is that there are many "side trails", shall we say, each obviously tied to your persona in some way, and those can all be grouped together which can provide a much more accurate picture than any single data point alone. This is a good point and pretty important for anyone who is looking to stay anonymous for a long time.
However, if each side trail which links to you is obviously you only at the moment it leaves the main trail of heavily trodden leaves, the best I can do as an investigator is to make note that you're (for example) receiving money from many seemingly random sources, and that I should ask you where that's all coming from, since, you know, money laundering is illegal and all, so you're not doing that, right? That's a problem for you in its own right, but it isn't necessarily enough for me to tie you to other stuff.
The accounts were legitimate to begin with. Money isn't inherently good or evil. It doesn't develop bad karma because it was used to buy drugs with, or a child for sex.
Certainly the money itself isn't good or evil, but pretend for the moment you're an investigator who's identified some illicit transaction, and now you're tracing it. You might say informally that some of the money is "tainted" in the sense that it is involved with (or is the same as) the money used in the original transaction. That is what I meant by legitimate/illegitimate accounts.
but everything you do online leaves a trace of you behind.
Yes, but if you take care, that trace is tied only to what you intended it to be tied to. For example, you can create new usernames and passwords at any time; these are not necessarily automatically tied to your other leaves. On top of that, mixers are intended to help untie things. Your point that they also tie together all the people who would use mixers is a good one; ideally, a mixing transaction would be indistinguishable from a regular one so this would be less of a problem.
That said, "taking care" is often incredibly difficult. It is usually enough to sacrifice some security in exchange for some convenience, but it depends on who you are and what you're doing, of course.
You (and the crypto people too) need to understand that if you take a hundred people, walk them into a room, and they all empty their pockets and record the cash they throw into a giant bin on a ledger, and when everyone has gone through, they line up again and take money back out... which is effectively what the 'perfect' mixer would do... you aren't improving the anonymity of your cash expenditures by that much.
You're right. In security parlance that's known as the anonymity set. For bitcoin mixers, this set is usually pretty small--not only are not many people using them anyway, but you also have to find people using them at the approximately the same time. For the silk road, at least some transactions I looked at, the size of this set was basically one. (Oops.) I think the "ideal" for coinjoin would be to have these transactions going on all the time in the background, and for every transaction, so that the set is much larger.
Your anonymity is not dependent on where you got the money from but rather who you're giving it to. It's the spending of money that destroys your anonymity, not the acquisition of it.
Yeah, this is often true. However, there are some counterexamples, e.g. virtual goods and services. The point of the coin mixers is to disassociate all illicit activity from all legitimate activity, such that any real world names, addresses, or other PII are tied purely to legitimate accounts.
So I really, well and truly, want to know how you plan on...
Supposedly, like this. It has its limitations, of course, but it's pretty neat.
The Silk Road tried the same thing. It failed.
Silk Road allegedly mixed some coins but, also allegedly, did so poorly. Not surprising given the amounts it was trying to mix. It did not, afaik, use the coinjoin method linked above. Also, the founder wasn't tracked down due to coin mixing or lack thereof anyway.
What's wrong with this open outcry system of old?
It is slower, more prone to error, and requires humans to do work that we can just automate. Because of that, humans doing the task are just out-competed by computers programmed to do it. That said: algorithms can be kind of dumb sometimes, so humans still do it but just not as much percentage-wise, and you can still put up asks and bids, of course.
Why can't a seller call out their price and wait for a buyer to produce a matching bid?
This is how it works, it is just done with computers now instead of humans, and over Ethernet instead of with sound waves.
Why can't the exchange be the middleman?
It can be. Some exchanges run their own algorithms to help provide liquidity. It is just a separation of duties issue--some people are good at making really smart algorithms and want to do that, other people don't want to deal with the risk and algorithmic competition, so they just run the exchange. Also, as an exchange, you may run into increased regulatory issues if you're trading on your own exchange. I don't know. But if so, I could imagine some exchanges just not wanting to deal with that.
Because the traders aren't there at the exact same time, so they can't just trade with one another.
Aren't they, though? [...]
You're absolutely right. I was, however, talking about the hypothetical situation where we don't have any middlemen. But you're right, there can be other regular people who are using limit orders. Part of the issue is just in defining what, exactly, is a "middleman" in this context.
In your example, you say you are moving to buy a share of stock, and there are plenty of asks available. Some of those people are selling because they want to turn around and buy it back on the bids. I'd call those middlemen. Others are selling for other reasons, e.g. they are thinking longer term and don't intend to buy back soon or ever. Without the middlemen, you'd only have the latter. In general, those people are not traders, they're not all updating their orders all the time and outbidding one another, so there won't be as many competitive offers.
This means you're unlikely to get as good a price as you would with the middlemen--there just aren't as many offers to choose from. It sounds backwards that middlemen actually reduce your costs, but it is because they provide increased competition. People take the best prices available first, so there's demand for better prices. That's why human market makers could make a living in the first place, and it is why computers are now able to make money doing the same thing (albeit with much tinier spreads).
Really, the spread was merely an example.
I know, it's just that I think a 10% spread gives the misleading impression that these traders are gouging people. In practice, they can't get a 10% margin, unless we're talking about some market with very low trading volume, because competition will see these great opportunities and just come in with better offers.
I'm assuming you got your numbers backwards, and ask is down to $10.499 and bid is up to $10.501, leaving us with a $0.002 spread.
No, if the asks are at $10.501 and the bids are at $10.499, that would be a $0.002 spread. If it were the other way around, the exchange would *immediately* fill some orders, even before telling others about the overlap. A "proper" exchange should never give you an order book with an ask less than or equal to a bid, i.e. it should always leave a positive gap (the spread).
However, why is it better for HFT to pocket this $0.002 instead of the two participants merely splitting the difference and completing the transaction at $10.500?
It's not better. In fact, that would suck. But that's not what happens. Instead, a trade will occur at the price of whichever offer was entered first. So if the bid was already at $10.501 (using your numbers) and then suddenly someone wants to sell at $10.499, instead of putting it on the asks-list, the exchange would just fill the sell order at $10.501. In this case the buyer pays $10.501 (the maximum he was willing to pay) and the seller gets $10.501 even though she would have accepted as low as $10.499.
Prove that there is a benefit to this.
Nice try at shifting the burden of proof. You're the one wanting it outlawed. It is your job to prove that it actually "steals money from people".
Time to take stock. Go home with some office supplies.