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47 commentsBitcoin mining risks
Let's now go over how the trick works for the rest of us normal people. The problem has to do with how positive BTC balances are unconditionally rewarded with BCC, while negative balances are not accounted for properly.
In particular, imagine our favorite player Alice. Suppose that she has 1 BTC, and she deposits it at Bitfinex. Stuart the Scammer reads the rules above, and creates an account on Bitfinex. He then margin-shorts 1 BTC. That is, he borrows Alice's 1 BTC, and sells it. He now owes 1 BTC to Alice. Stuart then, in a funny trade, buys his own margin-short with cash. His position is market neutral and he carries no risk. Alice also owns 1 BTC.
Then the split happens. That is, Bitfinex erroneously creates a liability of 2 BCC. Meanwhile, they only actually own 1 BCC. This goes counter to all kinds of established accounting principles, including Bitfinex's own guidelines for how to account for coin splits. It is a terrible outcome for BCC. BCC price will be lower than its natural level as a result of this fraudulent accounting practice.
But of course, the market will not know how to compare or price in the bankruptcy risk. As a result, this will depress the actual BCC's price. It is also terrible for Bitfinex, in that they can lose money and even go bankrupt, because they are creating more liabilities for themselves than assets see update 2 below, it's actually worse than what I wrote here. But Bitfinex are old pros at running a bankrupt exchange.
Their Tether contracts ended up growing in "assets" at a time when their banking operations were interrupted, leading many to conclude that Tethers were unbacked and untethered securities despite their marketing and name.
The next exchange on the Fed's radar for flaunting laws, accounting practices and plain old ethical behavior, after BTC-E, ought to be Bitfinex. As one trader puts it Short 1 btc. Get 1 bcc free: The short interest at Bitfinex is at historical highs. And yet it's not due to negative sentiment -- these are neutralized short positions, where the same person is both shorting and going long, just to game the system.
As a result, the Bitcoin price is unaffected even while huge short positions are being developed just to game the broken accounting. The real losers at the end of this will be all of us , regular cryptocurrency enthusiasts. The SEC, in its landmark decision where it rejected the notion of a Bitcoin-backed ETF, cited specifically the unprofessional way in which most Bitcoin exchanges are run.
The end result of all these small games is that, yes, some people make a few coins in the short run, but the cryptocurrency cause is set back, and the reputational damage punishes everyone for years to come. In crypto protocols, Alice and Stuart are principals, who are potentially independent actors. This does not mean that they are necessarily different people.
They are abstract names. Alice and Stuart can very well be the same person. I thought everyone would get this, but I'm seeing some comments of the form "Alice and Stuart are the same person you idiot!!! Please act the part. I evidently overlooked an aspect of Bitfinex's plan.
They are indeed doing everything I mentioned above, except, to not create a liabilities to assets imbalance, they plan to multiply all credited BCC with a coefficient. The coefficient is going to be determined by the amount of open interest. This are the coins people want to exit and dont be bag-holding at this point. The only strange coin loosing people here is ICN, rest is pretty much predicted and they may not go back into their "pump prices" ever again.
Thanks for sharing and I also follow the flow of this trend affecting the world of cryptocurrencies, Bitcoins being the so-called leader, yet not the leading edge of it Let's see if the general populace will come to the realization that, even if Bitcoins falls apart, the world of cryptocurrencies still has monumental potential of success in bringing about democracy and justice for all.
Bitcoin investor right now. Im seeing this as transaction spillover. All the handwringing about blocksize isnt needed, Bitcoin already forked hundreds of times, there is plenty of TX space. If the crypto-community see it this way all coins can gain value together. No more coin infighting, lets all join the crest of the wave. Bitcoin checkup Let's now go over how the trick works for the rest of us normal people. Normally that would mean all altcoins should go down but this time its not the case.
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