Is Poloniex is the next Mt. Gox?

Some people on the internet are saying Poloniex is the next Mt. Gox.  (As you probably know, Mt. Gox was the first big failed bitcoin exchange.) Well I don’t know if this is true, but if people think it is true, it may become true.

Cryptsy was an interesting example of unjustified fears becoming reality. Cryptsy had cryptocurrency stolen from them. This meant that if everyone withdrew their digital currency from Cryptsy, they wouldn’t have enough to cover all the deposits with them. (This meant they were operating similar to a traditional bank with fraction reserve banking.) Or in other words, they didn’t have the cash on hand to pay everyone that has deposited money (Cryptsy, however, was insolvent as well). They continued business as usual and did not announce the theft for fear of causing a scare. As Cryptsy made money, their capital was essentially restored. (In banking terms, Assets - Liabilities = Bank’s capital).  Once Cryptsy made enough money, they would no longer have to worry about a run on the “bank.”  An unrelated, unjustified rumor caused people to question Cryptsy. People simply questioning Cryptsy caused a mass panic which caused Cryptsy to fail and the stealing to come to light.

Now people are questioning Poloniex, just like they questioned Cryptsy in the past. Just the questioning of Poloniex could cause a scare, which could cause people to withdraw their Cryptocurrency. If enough people withdraw, it could bring to light other problems with Poloniex which could bring the exchange down. However, if there is no real issue, this might not affect them.

An additional reason Poloniex could be in trouble is that upward prices also increase credit risk. If a lender has traded cryptocurrency for fiat, the increase in price may make it difficult to repay a loan denominated in crypto. So if Poloniex has borrowed from his users, this may be an issue.

Lastly, it looks like many people are very delayed in when they can withdraw their money from Poloniex. This is a bad sign, and could be a sign of eventual shut down. Ultimately, I don’t think Poloniex will shut down right now, but only time will tell.

Woes of Cryptsy

My money might be stuck in Cryptsy. Everyone says not to keep your money in an exchange. It’s a known fact you shouldn’t do it. Just like how everyone should know you need to backup your wallet. But have I used an unbacked up wallet? Yes, and I learned my lesson. Have I kept money in an exchange longer than I needed to? Well yes, that is true as well, and I might now be paying the price.

For a few months now people on Reddit have been warning of the dangers of Cryptsy, and encouraging people to not use the exchange. It seems that they were right. The exchange has just recently put up this message on their site.

In essence, it describes that one of the altcoin wallets they used had a trojan that stole roughly 13,000 BTC and  300,000 LTC. Depending on the exchange rate at the time, it is about $6 million dollars (using 400 for BTC and 3 for LTC). This event happened over a year ago.

Like a bank, Cryptsy didn’t actually need to have all its bitcoins on hand to in order to continue to operate. As long as it had enough for day-to-day operations, it could get by. However, as I mentioned before, many people raised questions about Cryptsy and its ability to continue to operate. This in essence caused a run on the bank. For the past few weeks bitcoin withdrawals have been restricted, and now the entire site seems to be stopped. Fortunately, I got most of my assets off the exchange. I just have a few fragments of a bitcoin that are stuck.

Another writer has provided a more in-depth analysis if you are interested, which can be viewed here.

In the Exchange ( buying Dogecoin or Bitcoin or whatever!)

On the exchange you have a sidebar with the different markets. Cryptsy has so many markets its confusing. Let's say you want to look at the dogecoin market, you have quite a few options. First you can look under USD and find USD/DOGE and exchange doge for real money. Note, you will need a verified account for this.

You also can look under BTC and find the BTC/DOGE exchange.

 

Here the price is denoted in satoshi with 44 satoshi being the price to buy doge at and 43 being the price to sell doge at.

This is a very active market and there is no price gap. You can also trade litecoin for doge in the LTC/DOGE market. This is a comparatively less volume market. It also features a generally larger price gap. The price here is listed in litoshi ( i.e., satoshi for litecoin).

One thing to remember is your order doesn't need to be at the current price. You can put any price into your order. But if the price is too high, you won’t sell it right away ( or maybe even ever).

To the exchange!

In order to go far with any Cryptocurrency, you need a way of buying and selling it. For most of us, this means it's time to go off to the exchange! One of the most popular exchanges is Cryptsy! This is my referral link. Based on your volume of trade, you give Cryptsy points to your referrer. If you have enough points, you can enter drawings for hardware and goodies! Or if you don’t, you can trade it for straight up bitcoins!

Now, I just use the crypto to crypto markets. In other words, I don’t deal in US dollars. To trade in USD you need to have ID, SSN and all sorts of personal information I frankly don’t want to give.

The best part is, making your account is totally free. The exchange takes a modest .27% fee for transactions. If you compare this to typical costs for stocks and other somewhat comparable examples, it is a steal!

Bigger, however, is not always best! Other exchanges are arguably better. https://poloniex.com/ for instance has lower trading fees.  Currently, it looks like it is .2%. Some users assert the interface is much nicer too.

The last feature I wanted to look at on Cryptsy was Trade keys. With a trade key you can send other exchange users any time of currency with no fees and it requires no confirmations. For example my trade key is: 05f8991eb7ce90a2c059f215b079c0402c0e5282 .

Well that is what an exchange is! Next post, I will talk about using the exchange to trade!

Triangles are my favorite shape

I would advise you to scroll to the bottom of this article and listen to some Alt-J as you read this.

I have found a new cryptocurrency to add to my collection! Generally when we think of coins, we think of circles. However, the best coins are not circles at all; rather, they are another shape: Triangles!

The Technical details of this new coin ( and by new, I mean new to me) are:

X13 PoS over TOR

- now with secure messaging -

coins in circulation: ~50.000 TRI

total coin cap: 120.000 TRI

confirmations: 4

annual PoS interest: 33%

minimum stake age: 1 hour

maximum stake age: 12 hours

maturity: 7 blocks

block target interval: 120 seconds

No ICO, no premine, no scam!

Source

Well what does all this mean though?

Well, let me tell you. So I was sitting on my wallet, when suddenly a transaction appeared for .006 TRI. Immediately I wondered what is was, as I hadn't expected any money to come in. I looked a little closed on my wallet and was it was from “mining”. But this only left me more confused as I hadn't mined anything… or did I?

I inquired about this on Reddit and learned, that as you keep your wallet open, you get an “ annual PoS interest: 33%” which in other words means the balance in your TRI wallet increases by 33% a year if it is open. This seems like a relatively fair way to add new coins. Naturally things get lost. In a way, its almost like a stock dividend. There is new shares, or coins produced. But the percent ownership doesn't change.

The subreddit is small than other Cryptos, but is here if you are interested. They seem to have some interesting plans for the coin there, including getting on Cryptsy. So, lets Tessellate.

Bitcoinless

After blogging about bitcoins for over a year, I have now done... the unthinkable.
I have, for the very first time, sent bitcoins... all of them....
That's right, I have basically emptied both my wallets.
Don't worry, its not forever! I just am using an exchange for the first time. Cryptsy in fact. Here is a referral link, although I am not sure  what it does...

I was actually a bit surprised at the transaction fees I paid to transfer my bitcoins. It was something like 40 cents in total, and I only transferred 4 dollars. I talk about low transaction fees all the time as a perk of bitcoin,so I must have done something wrong... ( as I mentioned before, the formula for transaction fee is a bit complex)


In other news a bill regarding bitcoin passed in Utah.  One of the most interesting idea of the article reads, "[The bill]... will allow the residents to pay their taxes in Bitcoin." Paying your state taxes in bitcoin is now a thing! At least in Utah that is.


Well the adventure will continue tomorrow as I explore my first exchange!