This page has been archived and commenting is disabled.

Will Bitcoin Go the Same Way as Liberty Reserve?

Pivotfarm's picture




 

Virtual currencies were hailed as revolutions. They were the way forward., the way to overhaul the system and the way to replace the Dollar, Sterling, the Euro and the rest of them.  But, just last week Liberty Reserve was closed down for illicit transactions and money-laundering activities that could have nothing more than repercussions for the rest of the companies living quietly in the auspices of cyberspace doing more or less the same sort of activity.

Now, it’s Bitcoin that has its knees knocking. Bitcoin is in the same sort of business as Liberty Reserve. It’s a cryptocurrency (digital currency, with no inflation). It has been around for a few years now (since 2009) and it’s now trying to get its act together and prepare the rocky road ahead just in case it goes the same way as Liberty Reserve and gets bumped out of the market by being busted. How? It has just announced that it will ask for all account holders to prove their identities.

Liberty Reserve and Bitcoin are not twin brothers. There are indeed similarities but they are not exactly the same. Bitcoin is not managed by a central authority, as was the case with Liberty Reserve. Bitcoins are exchanged and traded on networks that are peer-to-peer.

Liberty Reserve Effect

Liberty Reserve’s forced closing came as a welcome moment for Bitcoin. Trading increased as news broke. The value of a traded Bitcoin increased significantly. They had already seen a rise in their value when there was a swing from January to April 2013, with an increase from $13 to $190. This was in the face of the rising European sovereign-debt crisis and the Cypriot financial crisis, in particular. Bitcoin currently has a total market value of almost $1 billion. People were wary of banks and Bitcoin saw a massive surge in the value of its exchange rate. Bitcoin became the darling of the economic experts and businesspeople around the world as their confidence and trust in the banking sector drip-dried. Being the star of the moment, however temporary it might be, is like having your name up there in red lights, and flashing to boot.

Bitcoin Solution

It’s doubtful that Bitcoin will suffer from the Liberty Reserve scandal and it’s doubtful that they will go the same way. But, running checks on customers is just what people hate the most, isn’t it? Aren’t we always wary of companies that want to know too much information about us and that need to know who, when, why and what? Isn’t that like Big Brother of Orwellian fame?

Will it work?

One thing is for sure, if Bitcoin’s aim is to save their demise and stop the criminal activity that may or may not be going through their exchange doors, then the criminals will pull the plugs and move on somewhere else? If the customers are bona fide ones, they too might be dead set against having too much information shared over the tanoid? Whatever happens, perhaps the end is nigh, anyhow, for Bitcoin.

Bitcoin: Right Choice?

Maybe their only attraction for the moment is that they are still a good hedge against inflationary pressure. The digital currency is a limited one (22 million bitcoins, of which half are in circulation) and so inflation can’t bring Bitcoin holders down as other currencies might. At least, that’s the way things stand right now. Things are never set in stone though, are they? Their value is really non-existent and depends very much on whether people actually want to use them or not. Pull out, the price will drop. A downside might be that like any currency Bitcoins can be stolen as they can be sold on to someone else and exchanged for real currencies. On April 3rd 2013, Instawallet was hacked and 35, 000 of the things were swiped (worth $4.6 million).

Bitcoin is a stateless currency and that should be telling us something about how we are prepared to use money in exchange transactions today. It makes for interesting analysis of how currencies are driven by confidence and that goes for stateless or non-stateless currencies, wherever they are. What’s happening to Bitcoin is no different to what’s happening to the Greenback or the Euro these days. Lose confidence and people pull out.

Originally posted Will Bitcoin Go the Same Way as Liberty Reserve?

You might also enjoy

Joseph Stiglitz Was Right: Suicide

Move Over Marx, Here comes Obama Death of the Dollar

Phillippines Waiting in the Wings  Big Bond Sell-Off

The Dreaded Curse of the IMF! The Biggest Sell-Offs in History

HyperInflation - 10 Worst Cases China Fakes Trade Surplus

It's Not the Dollar that's dead, It's the USA!

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 06/04/2013 - 11:13 | 3623555 ultraticum
ultraticum's picture

Tylers . . . . this is the most factually incorrect article ever posted on this site.  Probably worth a recall . . .

Tue, 06/04/2013 - 07:37 | 3622954 laomei
laomei's picture

Bitcoins and other coin thingies are honestly pretty different than liberty reserve, egold, whatever.  It's decentralized, that's the key to it.  There's no single company running it making it possible.  There's nothing illegal about accepting them as a form of payment, and an exchange is pretty easy to run.  Even if, for whatever reason they killed all financial connections within the US, it's not hard to use an exchange in another country.  Even if they don't have US bank accounts, money can still be wired, money can still be spent.  Setup a buyer/seller thing using paypal or whatever if you want to for the fiat trading.  That's the difference.

Tue, 06/04/2013 - 06:39 | 3622879 bluemaster
bluemaster's picture

What is point of arguing it is exponentially superior vs fiat 

I don;t know what will happend and is it good but I own BitCoins and accept bitcoins .

If everyone do that imagine what will happend!

www.ac.com.au

 

 

Tue, 06/04/2013 - 04:32 | 3622826 malikai
malikai's picture

"Now, it’s Bitcoin that has its knees knocking. Bitcoin is in the same sort of business as Liberty Reserve."

Thanks for a completely useless article that exposes your complete ignorance to the subject matter.

I wonder why people bother to write up shit like this when they don't even know what the hell they're talking about.

Tue, 06/04/2013 - 04:14 | 3622813 BlackVoid
BlackVoid's picture

At one point Bitcoin will be made illegal in the USA and businesses accepting it will be prosecuted.

It is a competition to the dollar and have to be killed. The other alternative is that Bitcoin will be the new currency and then it will be controlled and inflated. 

Tue, 06/04/2013 - 04:43 | 3622833 The Abstraction...
The Abstraction of Justice's picture

The problem with that idea is that there are many virtual currencies driven by different US corporates. If bitcoin is banned, it could only be part of a general ban, and that would be the time to leave the US anyway. Given the number of aggressive Mexicans swarming across the US border, one wonders whether it will be any sort of a player in world events in five years time.

Tue, 06/04/2013 - 00:31 | 3622668 e.blair
e.blair's picture

Bitcoin was probably created and is almost certainly controlled by the banksters to take pressure of gold and silver.  When the gold and silver vaults are close to empty, they can hype bitcoin.  Then, a couple of weeks later they can crash it.  It will never be as good as gold and silver because it is much easier to shut down bitcoin than it is to confiscate gold and silver.  What's the most expensive thing ever purchased with bitcoins?  Maybe a blowjob.

Tue, 06/04/2013 - 01:34 | 3622726 not applicable
not applicable's picture

A plausible explanation indeed...but difficult to substantiate

Mon, 06/03/2013 - 21:56 | 3622329 SmittyinLA
SmittyinLA's picture

Liberty Reserve hasn't conceded anything, will they play the privacy card?

Mon, 06/03/2013 - 20:37 | 3622054 Divine Wind
Divine Wind's picture

 

 

When the SHTF you will be hard pressed to find people in large numbers who want to mess around with any non-tangible medium of exchange.

In this regard, BitCoin is worse than a paper IOU.

Nifty concept though.

Tue, 06/04/2013 - 00:00 | 3622632 dark pools of soros
dark pools of soros's picture

yeah cool story bro..

 

shit been flying all over the place and more and more trust btc than fiat

 

 

Mon, 06/03/2013 - 20:29 | 3622040 d2themfi
d2themfi's picture

You might have well wrote a serioes of random letters. That would have been as useful as this piece

Mon, 06/03/2013 - 22:23 | 3621720 quietdude
quietdude's picture

I have an idea for a new currency! Take one quart canning jars, fill with wheat, rice, beans, lentils, dried peas, pasta, salt and sugar. Add the proper sized oxygen absorber and screw the lid on firmly. You have now created a FOODCOIN. A few pounds of staple food will be very valuable soon. Low tech, lasts almost forever, hard to outlaw, impossible to counterfeit, and everybody needs what you are selling. WHISKEYCOINS and VODKACOINS will also be popular. Buy your BOOZECOINS in glass bottles and they will last forever, unless your lush relative finds your stash.

Winter is coming

Tue, 06/04/2013 - 01:32 | 3622727 not applicable
not applicable's picture

Yep, these all sound like viable, fungible alternatives. I wonder if tobacco leaves might have a place in such a currency market.

Mon, 06/03/2013 - 18:07 | 3621670 Capitalist Cripple
Capitalist Cripple's picture

The author is either ignorant or is deliberately misrepresting the facts. The Feds are going after MtGox, which is an exchange. MtGox is not Bitcoin itself.

Mon, 06/03/2013 - 18:10 | 3621683 CapitalistRock
CapitalistRock's picture

I believe you are correct. Why did ZH post this crap?

Mon, 06/03/2013 - 21:01 | 3622124 0z
0z's picture

ZH posts a lot of crap.

But these guys, Pivotfarm or whatever ... 

I think it's time the admin shows them the door.

Mon, 06/03/2013 - 20:26 | 3622028 paint it red ca...
paint it red call it hell's picture

I am wondering the same. Bitcoin is catching way too much positive air time on ZH considering all the unknowns associated with it's creation. Details of which I have not seen discussed or even aired anywhere.

It just appeared on the scene to save the world, developed a followers and roared off to 190$ on shameless promotion. I will not accept it at face value.

Mon, 06/03/2013 - 23:59 | 3622631 dark pools of soros
dark pools of soros's picture

you're a fucking nimrod and thank god there is a really hot piece of ass asking me to marry her on the sidebar or I would keep attacking you

Mon, 06/03/2013 - 17:53 | 3621612 el Gallinazo
el Gallinazo's picture

How Blythely you use the phrase criminal activities as the greatest criminals are the heads of the central banks and the Fed in particular.  And notice how quickly they shut down convicted drug money  laundering operations such a Wells Fargo and HSBC.  And of course those Franklins are still the anonymous currency of choice for the drug lords and the CIA (assuming that they are not completely identical).  So maybe the Fed should shut itself down as the largest nexus of criminal and laundering activitry just after they outlaw ferns.

Mon, 06/03/2013 - 17:53 | 3621609 ebworthen
ebworthen's picture

If the Goons at the Treasury, I.R.S., B.A.T.F., D.H.S., F.B.I., and D.O.J. have their way Bitcoin will suffer the fate of Liberty Reserve.

Tue, 06/04/2013 - 01:36 | 3622732 not applicable
not applicable's picture

Yeah. So the big question is: if BC continues to gain widespread acceptance by vendors all around the world, can the gang of goons contain BC??

Tue, 06/04/2013 - 05:45 | 3622862 Skin666
Skin666's picture

They can't stop bitcoin, which means they won't

Mon, 06/03/2013 - 17:35 | 3621549 Mine Is Bigger
Mine Is Bigger's picture

As long as the value of bit coin is judged based on how many dollars and euros it is worth, I don't think CBs would care much.

Mon, 06/03/2013 - 18:00 | 3621634 el Gallinazo
el Gallinazo's picture

Well, Bitcoins are not just based on USD or Euros but a score of currencies.  The dollar could disappear tomorrow and Bitcoins would have value.  But the point is that the goons care because they want to control EVERYTHING and Bitcoins are anonymous.  Next thing you know, people will be demanding to pull down their window shades before they fuck their wives.

Mon, 06/03/2013 - 19:17 | 3621844 Mine Is Bigger
Mine Is Bigger's picture

I suspect you are not understanding my point.  Borrowing from your example, the bitcoin could disappear tommorrow, and there still would be exactaly the same number of dollars.  And the size of the credit market would also remain unchanged.  The bitcoin has not done anyting to impair central banks' ability to control money supply.  That is my point.  By the way, this is not my attempt to talk down the bitcoin.  I have had some bitcoins for some time now.

Mon, 06/03/2013 - 22:49 | 3622474 Unpopular Truth
Unpopular Truth's picture

A small correction: yes, BitCoin could disappear tomorrow. But no, there would not be exactly the same number of dollars around; there would be $2.85bn dollars more. And another the next day, etc.

Mon, 06/03/2013 - 17:28 | 3621526 snblitz
snblitz's picture

Another content free article. :-(

I have mined bitcoins myself and I am a current holder.  I have been keeping an eye on bitcoins since 2009.  I am also a mathematician.

Bitcoins are infinitely divisible.  People are already trading in milli and micro bitcoins.  Some will tell you that bitcoins are not infinitely divisible but they are.  Infinite divisibility is how you implement inflation in bit coins.

A very interesting aspect of bitcoins is that they can be lost.  Given any loss rate eventually there will be no bitcoins.

I, myself, have most of my troubles with bitcoins in their relationship to other worthless currencies.  Say you have digital worthless dollars, and digital worthless bitcoins, how do you value them relative to each other?  and all the other worthless currencies?

I guess it comes down to how do you value worthless currencies?

Mon, 06/03/2013 - 19:22 | 3621863 Non Passaran
Non Passaran's picture

Your comment isn't a big improvement over the value of the article, I must say.

Bitcoins are NOT infinitively divisible (and that is also pretty much irrelevant for the subject at hand). That also has nothing to do with bitcoin inflation.

Which currency cannot be lost?

As others observed, Bitcoin is valued based on the readiness of people to accept it in exchange for something else. Their exchange rate to other money does not need be derived directly.

Maybe out are a mathematician, but you sure don't understand Bitcoin and currencies.

Mon, 06/03/2013 - 22:54 | 3622487 Unpopular Truth
Unpopular Truth's picture

Can you please explain bitcoin inflation? The theoretical supply is fixed, but the practical supply is decreasing, as people lose theirs, which would make for deflation. Unless you mean the ones that have not yet been mined, in which case you are correct, there will continue to be inflation for the next few more years - and then deflation. Yes? No? Thanks.

Tue, 06/04/2013 - 05:09 | 3622841 Treason Season
Treason Season's picture

"The theoretical supply is fixed,..." Isn't that a contradition of terms?

Mon, 06/03/2013 - 18:33 | 3621746 LostAtSea
LostAtSea's picture

I'm pretty sure btc value is represented by 64-bit double-precision value:

https://en.bitcoin.it/wiki/Proper_Money_Handling_%28JSON-RPC%29

So, as a mathematician, please explain how a value contained in a finite field of 64-bits be 'infinitely divisible' ?

Mon, 06/03/2013 - 18:59 | 3621808 granolageek
granolageek's picture

The original (and still far most popular) Bitcoin client processes transactions based on an integer number of "Satoshis", which are 10**-8 bitcoins. If you read that article, there is a 64 bit field in each transaction to hold its value in satoshis. The floating point biz is for some sort of JSON interface.

Finally, as far as infinite divisibility, it would be a trivial extension to add as many bits as necessary to the 64. Some interop issues during the conversion, but nothing unmanageable.

Mon, 06/03/2013 - 23:57 | 3622629 dark pools of soros
dark pools of soros's picture

people keep bringing this up but they are the same people who want 'freegold' to happen and have it be like $200k oz and act like they can use gold dust to the grocery store or just buy the grocery store with their handful of gold...

like the rest of everything won't fly up in value as well

 

 

Mon, 06/03/2013 - 17:38 | 3621559 All Out Of Bubblegum
All Out Of Bubblegum's picture

> I guess it comes down to how do you value worthless currencies?

Just a guess, but I value them by what people I'm trading with are willing to offer in exchange. They're not worthless if I can get something for them.

Mon, 06/03/2013 - 17:25 | 3621517 flacorps
flacorps's picture

What's technically infeasible about controlling the internet to the point that it's hardly more usable than the old French Minitel? Repression isn't going to go in for half-measures.

Mon, 06/03/2013 - 17:05 | 3621443 thurstjo63
thurstjo63's picture

Good article, but I think that you miss one key thing about any new development. It is never created absolutely perfect at the beginning. The issue which allowed for the theft has been addressed. Next will be complete anonymity when doing a transaction. Yes, the US wants to be able to track everything, but do you really think that will last once the dollar is no longer the reserve currency? Whose going to want to bear those costs when their is little incentive for them to do so (i.e. how many will be routing their transactions through the dollar and US based system). It's already disappearing now and when the Chinese have accumulated sufficient gold (around 2014-2015) for their renminbi to be partially backed by gold, the dollar will be finished. At that point, bitcoin will become alot more important than it is now. 

Mon, 06/03/2013 - 20:54 | 3622095 therover
therover's picture

"t's already disappearing now and when the Chinese have accumulated sufficient gold (around 2014-2015) for their renminbi to be partially backed by gold, the dollar will be finished. At that point, bitcoin will become alot more important than it is now. "

I would imagine gold would too. 

Mon, 06/03/2013 - 17:00 | 3621427 Lmo Mutton
Lmo Mutton's picture

but what if they short sale your bitcoin with paper bitcoins and stuff??

Mon, 06/03/2013 - 17:03 | 3621437 imbtween
imbtween's picture

there actually is a website in sweden that sells futures for digital currencies. icbit dot se

Mon, 06/03/2013 - 16:57 | 3621407 medium giraffe
medium giraffe's picture

No, because it's decentralised and encrypted.

There, I've answered the question and saved myself the bother of reading yet another Pivot Farm article that has nothing to offer but hyperbole and glossy magazine style condescension.

Mon, 06/03/2013 - 17:27 | 3621525 Fuh Querada
Fuh Querada's picture

The top section of Z H has become 90% crap with Pissit Farm, Phoenix, Technical Half-bake and Fart to Market in the lead, leaving the comments as practically the only redeeming feature.
Notable exceptions Banzai, Krasting and occasionally Testosterone.

Mon, 06/03/2013 - 23:53 | 3622622 dark pools of soros
dark pools of soros's picture

pour one out for Leo...

Mon, 06/03/2013 - 16:42 | 3621351 Yen Cross
Yen Cross's picture

   I'll take Shitcoins over this rigged, roulette wheel, we call a market.

Mon, 06/03/2013 - 17:00 | 3621424 espirit
espirit's picture

I foresee a problem with .Gov going after those that accept BTC as payment.

Like going after the ammo in gun control.

Mon, 06/03/2013 - 19:26 | 3621874 Non Passaran
Non Passaran's picture

What IS Bitcoin?
In order to make that illegal they need to declare it a currency.

Mon, 06/03/2013 - 20:46 | 3622074 Urban Redneck
Urban Redneck's picture

No they don't need to declare it a currency, "negotiable instrument" is the only they standard they need to meet, and the Secretary of the Treasury already has the power to make that determination any time it's in his best interest to do so...

BTW the legal prohibition on ex-post facto laws only only applies to criminal laws, and certainly not the IRS's ability to execute civil forfeiture and use an armed SWAT to implement compliance under threat of criminal (or lethal) penalty.

 

Mon, 06/03/2013 - 16:39 | 3621310 New World Chaos
New World Chaos's picture

If everyone's identity gets attached to their BTC, you can be sure the IRS will wage unholy jihad.  Good thing BitCoin isn't a centralized corporation that can say "use our new anti-laundering patch or shrivel and die".  The majority of the BTC community would have to support identity tracking for it to happen.  It will never happen.  How about providing a link when you say this:

[BitCoin] has just announced that it will ask for all account holders to prove their identities.

I could see an exchange doing this if forced, but a new exchange would pop up overnight in Iceland and everyone would move accounts.  Central planners suck at whack-a-mole.  Anything that forces them to play whack-a-mole is liberating.

Mon, 06/03/2013 - 16:54 | 3621396 imbtween
imbtween's picture

I think it's perferctly reasonable of governments to wish to tax them, and (the ethics of taxation aside), if you're earning income with BTC, you should pay taxes on it like everybody else. In my view, it isn't the bitcoin economy's anonymity that is its strength, it's the size-limited ponzi scheme nature of it that gives it value. In this case I think its ponzi structure is a strength as long as there are still believers, because once the last bitcoin has been mined, it will be purely faith based with no potential for further dilution. The analogy to gold is an apt one in my mind, as gold has little utility, but almost all of humanity collaborates in the ponzi scheme of gold being worth $1400/oz.

Tue, 06/04/2013 - 07:44 | 3622973 Mike Hunt III
Mike Hunt III's picture

You went full retard with that comment.

Do NOT follow this link or you will be banned from the site!