Catch up on stories from the past week (and beyond) at the Slashdot story archive

 



Forgot your password?
typodupeerror
Bitcoin The Almighty Buck News Technology

BitCoin Gets a Futures Market 467

Posted by timothy
from the prices-are-information-units dept.
fireballrus writes "There is one more way to use your BitCoins rather than buying weed or socks. Recently, a Bitcoin Exchange called ICBIT quietly introduced a futures market, obviously using Bitcoins as its main currency. Gold futures trade roughly at 137 BTC/tr.oz and Sweet Crude Oil at 7.3 BTC/bbl. This may play a positive role in the Bitcoin economy which needs more ways to actually use coins instead of mining them." While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.
This discussion has been archived. No new comments can be posted.

BitCoin Gets a Futures Market

Comments Filter:
  • Not sure I follow. (Score:3, Insightful)

    by Kenja (541830) on Sunday September 30, 2012 @06:56PM (#41509271)
    So you use this, and you either lose or gain bitcoins. That seems like a circular system where bitcons beget bitcoins. That is NOT a "use" for bitcoins, not when the end result is ideally more bitcoins.
  • by hawks5999 (588198) on Sunday September 30, 2012 @07:06PM (#41509313)
    I love bitcoin, but so far every exchange or market turns out to be a way to lose your coins to poor security or straight fraud. Add in gold and oil futures and it sounds like another great fraud opportunity.
  • Futures Markets (Score:4, Informative)

    by the eric conspiracy (20178) on Sunday September 30, 2012 @07:19PM (#41509409)

    Well, futures markets in general are quite useful because they help provide economic stability if you have an economic interest in the underlying commodity.

    For example if you are an airline you can buy futures in oil. If the price of oil goes up you make a profit in the oil futures that helps offset the cost of your fuel.

    If you are a farmer you buy futures in the crop you produce. So if your crop fails due to weather you will likely make a profit in your futures because the price of your crop futures has gone up.

    So if I were a producer or buyer of bitcoins, a solid futures market would be of great interest.

    • by AK Marc (707885)
      That's a hedge. Gold and real estate are hedge investments for stocks. In general, as stocks decline, gold goes up as people shift money from one market to another. So if you buy both, when one goes down, the other will go up faster, helping limit losses.

      If your crop is good, then the futures would likely not be worth that much, so you'd have more money if you didn't buy the futures. And if there's a problem with all the crops such that your futures are worth lots more, the value of the futures is depen
    • futures markets in general are quite useful because they help provide economic stability

      From the investors point of view, that usefulness is kinda dubious---it can create instability in the markets due to misinformation. For example, oil goes up in price, you expect airlines to suffer, so you short airlines. But suddenly, airlines are up due to profits from their oil hedging operation. Similarly, oil goes down, you expect airlines to do well due to cheaper flights, and they suddenly all file for bankruptcy

  • by Okian Warrior (537106) on Sunday September 30, 2012 @07:30PM (#41509477) Homepage Journal

    I've never understood the vitriol heaped on BitCoins in this forum. None of the stated reasons for "It'll never work" seem to hold under examination.

    1) It's not based on anything

    Well, neither are any of the major currencies, especially the dollar. The Euro is teetering on the brink of disaster, the Fed has been spraying money with a firehose, numerous South American currencies have gone bust - I just don't see any difference. ...except, that bitcoins are immune to *some* of the problems typically found in national currencies.

    2) No one is using them

    There was a time when no one used the internet, either, and look how big that got.

    I'm not sure there is a point here - lots of things didn't get big and no one uses them (pets.com, anyone?), and lots of things got big and *everyone uses* them (google.com).

    If you're saying that not enough people will *ever* use them, so that the idea won't take off, then that's an opinion. A lot of people are predicting success, so why are they wrong and you right?

    3) It's a scam

    All of the scams reported so far have been, effectively, companies trying to be a bank without banking regulation.

    It's not a problem for BitCoin if someone convinces you to deposit your coins in their bank and then loses them, any more than it's a problem for US currency if someone convinces you to give them your money and loses it. People get scammed all the time, but it's not the fault of the currency.

    Again, I don't see the difference. BitCoins are like money, and can be stolen like money. Why is having money any different?

    ==================

    BitCoins doesn't solve all the problems of money, but it does solve a fair number of them. Logic and reason would seem to indicate that this is a better way to do currency.

    I must be missing something.

    Can one of the economists explain why it won't work?

    I mean, explain it without appealing to emotion and irrational fear. Like, by using logic and evidence.

    • Short answer: it won't work because it is not backed or protected by a sovereign nation, adequately described or protected by law, and the whole "crunching numbers with massive parallel processors" thing is a huge waste of energy.

    • by humanrev (2606607) on Sunday September 30, 2012 @08:18PM (#41509731)

      I mean, explain it without appealing to emotion and irrational fear. Like, by using logic and evidence.

      Fine.

      I have yet to encounter a business which uses BitCoins as a means of payment. They must exist and I could look them up, but I have yet to encounter one as part of my regular Internet usage. None of the big businesses use it, none of the smaller businesses use it, even geeky sites don't use it. This makes BitCoins rather pointless compared to regular coin.

      Also, perhaps more importantly, BitCoins has yet to prove itself. Why invest in a shakey implementation of an Internet-based currency when so many other attempts died before it? I'm not going to touch it unless I actually see mainstream usage.

      Simply put - I have nothing to lose by not bothering with BitCoins. I also have very little to gain, if anything at the moment, if I did. It's just not worth the time.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      1) It's not based on anything
      This is mostly bunk, but not entirely. The US dollar, for example, isn't backed by gold or anything similar, but it is backed by 300 million people and a large number of companies that need to pay taxes in US dollars. Even if I decide that dollars are bunk and I'm going to use Euros or bitcoins or whatever, at the end of the year I must turn some of my wealth back into dollars to pay taxes. And the day I go hunting for dollars to pay taxes... the dollar suddenly has value, t

    • by martin-boundary (547041) on Sunday September 30, 2012 @08:43PM (#41509849)

      1) It's not based on anything

      Well, neither are any of the major currencies, especially the dollar.

      Incorrect. The major currencies, especially the dollar, are based on the threat of extreme violence. If you live in America, 1) you are forced to accept dollars at face value for services and trades. And 2) you are not allowed to counterfeit them. If you try, expect black SUV and helicopters, people breaking down your door at 6am, being slapped around a bit, and then put in jail for a good chunk of your remaining life.

      2) No one is using them

      As a gauge of current popular interest, the fact that not a lot of people are actually using them for anything is a big negative. Slashdot should be reporting things that interest its readership.

      3) It's a scam

      It's not a problem for BitCoin if someone convinces you to deposit your coins in their bank and then loses them, any more than it's a problem for US currency if someone convinces you to give them your money and loses it. People get scammed all the time, but it's not the fault of the currency.

      Nice strawman. Real currencies are recognized and backed by governments, bitcoin is only a pretend currency, like monopoly money. It may in fact be illegal, if it tries to substitute for legal tender, in various parts of the world.

      Again, I don't see the difference. BitCoins are like money, and can be stolen like money. Why is having money any different?

      No, bitcoins are like property, and can be stolen like property. That means they can have value, but it doesn't make them like money.

    • by mdfst13 (664665)

      1) It's not based on anything

      Well, neither are any of the major currencies, especially the dollar.

      The US dollar is valid for paying US taxes. BitCoins aren't.

      There is a common assertion that the Fed has been printing loads of money. Ignoring that it isn't the Fed that prints money but the Treasury, it's worth noting that we aren't experiencing particularly high inflation. Inflation is higher than it should be, but not ridiculously so. It's also worth noting that the estimated M3 is smaller now than it was in 2008. M2 is about the same as it was in 2008. Only M1 is higher. The likely reason is tha

    • by Fred Ferrigno (122319) on Sunday September 30, 2012 @08:45PM (#41509861)

      The US dollar is the only currency you can pay US taxes with and the only currency the US government issues debt in, so as long as the US government exists, there is a guaranteed demand for US dollars.

      I know, I know, "But the US is about to implode any day now!" And if it does, the entire world economy will go with it. BitCoin depends on the Internet and the Internet depends on a functioning economy. BitCoins won't do you any good if your ISP and your power company are bankrupt.

      So in any realistic scenario where BitCoins have value, so does the US dollar. However, it's entirely plausible that BitCoin will fail but not the dollar. Congress could prevent law-abiding businesses from dealing in BitCoins, shutting down the major exchanges and effectively isolating BitCoin from the traditional financial system. The illicit market would still exist, so you'd still be able to convert cash to BitCoins to buy drugs with... but most people will just buy drugs with the cash directly.

    • by dbIII (701233)

      I've never understood the vitriol heaped on BitCoins in this forum

      There's a simple answer: it's an old fashioned scam but this time the bait is set for computer and crypto geeks. That makes it relevant on this forum IMHO and pisses off the people that see it as a scam aimed directly at them. That means it gets taken personally.

    • by Type44Q (1233630)

      1) It's not based on anything

      Well, neither are any of the major currencies, especially the dollar.

      Well then, let's replace our arbitrary [and effectively guaranteed to be worthless] fiat currency for another even more arbitrary currency! :p

    • there are many examples of utopianists. people who were fed up with society, and wanted to start a new one from scratch. usually these were religious in nature. heck, mormonism is a surviving example of this utopianist era

      http://en.wikipedia.org/wiki/Utopia [wikipedia.org]

      they run the range from this:

      http://en.wikipedia.org/wiki/Harmony_Society [wikipedia.org]

      to this:

      http://en.wikipedia.org/wiki/Peoples_Temple [wikipedia.org]

      with thousands of other examples, some harmless, some malignant

      but nowadays, there is no more new world. so the pioneer utopianists

    • by westlake (615356)

      1) It's not based on anything
      Well, neither are any of the major currencies, especially the dollar.

      The value of the dollar is based on economic and political reality.

      The US has a $15 to $17 trillion dollar GDP, depending on how you measure these things. List of countries by GDP (nominal) [wikipedia.org]

      The US has land, material resources, and a population of 311 million.

      It remains the world's dominant military power,

      Unemployment rate 8%.

      For Greece and Spain, the unemployment rate is 25%.

      The US is politically and socially stable, center-right, by any reasonable definition.

      The EU is close to fracture.

    • by Ksevio (865461)
      Well at least with my US dollars I can use then to pay taxes to the US government which in turn gives me all sorts of great things. I don't think you can exchange your bitcoins back to your GPU to get back more processing power.
    • Taxes. You can't pay taxes in BitCoins. Whatever profits you make, you either "don't pay taxes" (in which case, you'll get into trouble with pretty much any government on this planet), or you have to convert your profits from BitCoins into "whatever local currency" just to pay taxes.

  • by Yvanhoe (564877) on Sunday September 30, 2012 @07:32PM (#41509497) Journal
    What the bitcoin economy needs is not another financial market but more people accepting it as a payement for real goods and services.

    I still offer a 5% discount for bitcoin users, but until now, no clients have been interested. However I do not despair as I am getting clients from all around the world and a lot complain about the difficulty to make international payement.

    So, if you have bitcoins and need computer vision development, contact me : IV-devs [iv-devs.com]
    • by bloodhawk (813939)
      In what sense are international payments difficult? they are about as easy now as they have ever been, I can go online and do an international money transfer in seconds to just about anywhere in the world, not only that I can trace it and in many cases even reverse the payment depending on the type of transfer (try that with a bitcoin). As for why no one accepts bitcoins, just take a look at the bitcoin coin values over the past 12 months, even the worst currencies in the world look like a shining example o
      • by Yvanhoe (564877)
        It takes several days for money to arrive and it arrives with a few percents of fees removed from the transaction. The fact that the sender can cancel the transaction may be viewed as a problem instead of a feature.
  • Why? Good question! (Score:5, Interesting)

    by pla (258480) on Sunday September 30, 2012 @07:46PM (#41509557) Journal
    While this sounds intriguing, I'd like to hear a good case for why BitCoin makes sense in this context.

    I'll give you a positive and a negative.

    Positive - This make sense because "futures" relate back to the (expected) scarcity and surplus of real-world material goods, the availability of which has no connection to the value of the Euro vs the Yuan. It would make more sense to hedge crude in terms of soybeans than in dollars, yet we only really have the option of doing it in dollars.

    Negative - Bitcoin lacks even the connection to reality that Dollars have by virtue of the latter's use in trade for otherwise-real-world products and services.

    Now, you could take that in two ways - Connecting Bitcoin to commodities may make it more "meaningful" than most government-issued currencies, because it can float against the rest of the world's currencies to maintain an accurate reflection of the reality underlying production, rather than some random economic policy put in place by a central bank. On the flip side of that, you currently can't actually take delivery of 50 tons of pork denominated in Bitcoins, so this looks like a "futures" market in the worst speculative sense, without the faintest connection to the underlying commodities.
  • Bad idea (Score:5, Funny)

    by stephanruby (542433) on Sunday September 30, 2012 @07:56PM (#41509615)

    Actually, I only emitted the idea as a joke [slashdot.org]. Not only that, but what they're really talking about is not a futures market for bitcoins as the summary tries to imply, but a futures market [twitter.com] for oil and gold in which the transactions are done in bitcoins.

    That's hardly the same idea, so I'm not sure if I should be offended that they took my half-baked idiotic idea and tried to implement it, or that I should be offended that they took my half-baked idiotic idea and tried to copy it badly.

    Either way, I'd recommend against investing in this market, and as the inventor -- I should really be the one to know.

  • by IgnitusBoyone (840214) on Sunday September 30, 2012 @07:56PM (#41509617)

    I find myself wondering how the producer of the socks makes any financial gain. According to the check out page the socks cost -2.00 USD. I'm heavily thinking of investing in some sock storage because at 2.00 for every sock I adopt I could make a fortune. I'm sure the initial investment will more then pay for the shipping and afterwords I can resale them for additional capitol.

  • Can you leave your editorial comments to the comments section please?

  • Links (Score:2, Interesting)

    Why obscure the links behind a link abbreviation service, so we can't see where they're leading? This isn't Twitter, and it's not like the submission itself is particularly long.

    That right there stopped me from clicking on them. Which is sad, because I haven't had a chance to mock a BitCoin story in several days now.

    • by PPH (736903)

      Why obscure the links behind a link abbreviation service,

      Obscure what links? The https://icbit.se/ [icbit.se] link is the actual domain name of the Bitcoin exchange, ICBIT. The URLs point to various futures pages on ICBIT.

      • Obscure what links? The https://icbit.se/ [icbit.se] link is the actual domain name of the Bitcoin exchange, ICBIT. The URLs point to various futures pages on ICBIT.

        Hahaha, you're right - I screwed up!

  • by mathimus1863 (1120437) on Sunday September 30, 2012 @08:33PM (#41509799)
    Yes, there's a lot of people who are in Bitcoin because of become-a-billionaire-overnight fantasies. But you remove all that and you're left with a really fascinating system that should appeal to everyone on Slashdot. It's a mix of cryptography, freedom of speech, computing, networking, finance, economics, and even politics -- most of us here dig that stuff.

    Get over the hype and take Bitcoin for what it really is: a fascinating experiment that has, so far, withstood the amazing barrage of publicity, hacking attempts, legal uncertainties, and remains valuable for reasons completely contrary to everyone that says it's worthless. It may become worthless one day, but consider the possibility that Bitcoin is disproving all your wildly oversimplified assumptions about what makes something valuable. It is completely different, and there's plenty of reasons to believe that it could succeed as much as it could fail.

    Why does gold have value? Nothing is backing gold. Yet it has value, mainly because of its properties: scarcity, fungibility, density, beauty, etc. Bitcoin is really quite similar but some different properties. Ease of transfer over the internet, fungibility, scarcity, storage efficiency, near-anonymity and built-in escrow.

    I don't think it's any more ludicrous for Bitcoin to have value than it is for gold to have value. And in the end, when I want to sell WoW weapons, buy webserver space, or play a few games of poker online, why would I use gold, credit card or paypal, which all require me to remember log-in creditials, give away information and/or pay a bunch of third party fees. There's plenty of value in being able to pay people across the world, instantaneously, without sacrificing your privacy, and without paying any fees. Why is that not valuable? Seriously... quit focusing on the get-rich-quick kids, and start appreciating Bitcoin for it's unique properties and philosophy.
  • by PPH (736903) on Sunday September 30, 2012 @09:19PM (#41510039)

    ... what got Saddam Hussein killed? Trying to trade oil in Euros?

    • by Doc Ruby (173196)

      No, what got Saddam killed was having a country that would make Bush/Cheney cronies $TRILLIONS if the US invaded it.

  • And how many BTC will it cost me to get /. to add a -1 Dumbass moderation option?
  • "I'd like to hear a good case for why BitCoin makes sense in this context."
    It's anonymous.
  • by lindseyp (988332) on Sunday September 30, 2012 @11:27PM (#41510639)

    I haven't found a single post that doesn't miss the point.

    Being able to buy/sell futures of commodities such as oil ties the bit coin to the real world in a way we haven't seen before. A potential user of bitcoins may be put off by the volatile nature of the value of the bitcoin itself, but if he can pin it down to the value of oil or gold by trading those futures, it makes holding bitcoins a much more sensible, or at least much less financially treacherous prospect.

    Imagine... I could sell 1000 USD and buy 100 bitcoins (no idea how this compares to the real exchange rate, bear with me...)
    I could then, with my 100 bitcoins, buy gold futures. Even if the value of a bitcoin plummetted meanwhile, I'd be making all that money back as the price of gold (expressed in bitcoins) skyrocketed. I'd be essentially immune to the fickle price of a bitcoin and merely invested in gold. I could further stabilise my finances by SELLING gold futures in USD. If I did this right away, for a small cost, I would essentially have pegged the value of my bitcoins at 1 per every 10 USD.

    The creators of bitcoin have been very smart to introduce this market. It enables the use of bitcoins without the fear of volatile price moves. Surely the biggest barrier to entry for most potential users.

  • by Animats (122034) on Monday October 01, 2012 @12:56AM (#41510829) Homepage

    OK, let's take a look at one of their derivative contracts. [icbit.se] Read, especially, Margin Call. [icbit.se] The example given is buying a derivative contract, but the real issue is selling one. (There must be an equal volume bought and sold; this is a zero sum game.) Buying a contract costs you a known amount up front,which you may lose. Selling a derivative contract implies that, at some specified future time, you must deliver what you sold, even if you take an arbitrarily high loss doing so.

    This is implemented by draining the account of the seller as necessary to pay off the loss. That would be OK if it was a cash account, with no margin. But this exchange permits selling derivative contracts on margin, where the seller is effectively borrowing from the exchange. They currently require 75% margin. Does the exchange take the risk of a counterparty defaulting? No. They write "your profit is always limited by ability to pay of counterparties to your contract." Actually, that's incorrect - it's limited by the cash counterparties have on deposit with the exchange, not their total assets. (That's probably just as well.) However, as a contract buyer, you don't know, and aren't allowed to find out, who the counterparty is or how much money they have on deposit.

    The way this is set up, a seller of a derivative contract can escape part of a loss by draining their account. If the value of a derivative is increasing, the seller can cut their losses by draining their account up to the margin limit. This will force the exchange to drain out the rest of their account and close out the derivative contract. The derivative contracts can't change price by more than 10% per day, so there's a maximum loss when selling a derivative contract. This makes derivative contracts less valuable than they would otherwise be.

    Then there's the issue of allocating losses when a counterparty defaults. Everything is anonymous, so you have no idea if the exchange is screwing you. On top of that, of course, you're relying on a pseudo-business with no identifying information to pay you money at a future date.

    If you don't understand everything above, you should not be in this market.

"Hey Ivan, check your six." -- Sidewinder missile jacket patch, showing a Sidewinder driving up the tail of a Russian Su-27

Working...