Monday 6-20-2011 Reading List

Bitcoin prices plummet on hacked exchange – Bitcoins are the geek’s version of a pyramid/Ponzi scheme and we’re not seeing the instability first-hand.  Just one compromised account on MTGOX trying to cash in at the maximum allowable $1000/day triggered a massive drop in bitcoin speculated prices.  See a video of the live crash of bitcoins down to 1 penny in real-time.  The bitcoin bubble has risen from $0.003 in April 2010 to $30 two weeks ago and then to some unknown value with one of the few and major bitcoin exchanges.  The fact that the typical customer is limited to a $1000/day withdraw limit should set off some serious warning signs.  Someone could “invest” $100 in Bitcoins a few months ago and they might have gotten back $800 last week.  Thinking that this is a great investment strategy, they dump in $10,000 thinking they’re going to be rich only to find out that they can only withdraw $1000/day which triggers a burst in the bubble.  If this isn’t a scam — a system that lets you put a lot of money in but only (unless you are one of a handful of special people) lets you take a little bit out while triggering a massive decline in price — what is?

A laptop, its head in the cloud – Speaking of scams, this doesn’t strictly qualify but you might think it is after you read David Pogue’s review of the Samsung Google Chromebook.  Pogue summarized the Chromebook as “With very few exceptions, when the Chromebook isn’t online, it’s a 3.3-pound paperweight.”.  A $500 paperweight to be more precise.

The 3 most undervalued stocks in tech: Google, Apple, and IBM – Somewhat disappointing analysis from CNN’s Philip Elmer-Dewitt.  If we’re supposed to value stocks based on the ratio of P/E divided by EPS growth, Microsoft and Intel with depressed forward P/E ratios of less than 9 with equal or better EPS growth should be far more undervalued than Google.  The fact that all the media pundits keep saying that Microsoft, Intel, and the PC are dead while neglecting the reality probably has something to do with that.

Special report: Government in cyber fight but can’t keep up – This isn’t surprising, given the fact that any computer with all security patches installed regardless of whether it runs Windows, Mac, or Linux will fall within hours to hackers competing for a few thousand dollars price money every year.  It is possible to write very secure software, but the vast majority of software aren’t written to these standards.  With the sheer amount of applications running on a typical computer, it’s extremely likely one or many of those applications are vulnerable to a “zero day” attack that exploits an unpublished vulnerability.  In military circles, the “air gap” (where a critical device is not connected to a network) is the only thing that is deemed secure from network attacks but that excludes physical attacks.  In reality, most of our government and corporate systems and even our core infrastructure systems that run the nation’s electric grid are not air gapped.

Japanese ‘K’ Computer Is Ranked Most Powerful – While undoubtedly impressive, the FLOPS (Floating Point Operations Per second) metric is highly theoretical and should be taken with a grain of salt.  The test assumes best case parallel performance without any regard to memory performance constraints or the clustering overhead of “672 cabinets filled with system boards”.  These benchmarks essentially measure who can string the most number of computers together in a cluster.  These super computers are good for some tasks but not necessarily for others.

Kinect: Microsoft’s accidental success story – Microsoft’s initial fear of  device hackers modifying its 3D video gaming accessory turned into exuberant support when the Kinect unleashed a revolution scientific experimentation and innovative applications.

Skype Fires Executives, Avoiding Payouts After Microsoft Buyout – Skype, a company that effectively sold itself twice to Ebay and then a third time to Microsoft, has apparently found a way to split the loot between fewer people.

  • TraderTimm

    The facts are easily obtained here:

    http://support.mtgox.com/entries/20208066-huge-bitcoin-sell-off-due-to-a-compromised-account-rollback

    For those who can’t be bothered to click, some highlights:

    The exchange was compromised ironically via an auditor’s machine which had database access.

    Bitcoin itself hasn’t been compromised, only a single exchange. The blockchain is still secure, and the clients are fine.

    Trade has resumed at one exchange, where we are in the 12 – 13 USD range. Hardly the end of the world.

    Mt. Gox will be online soon, after all affected trades that were caused by the dumping of over 250,000 bitcoins are reverted.

    It should also be interesting to note, that even after huge volume, before the exchange had to close – price had bounced from 0.01 to 13. Again, amazing for a market that supposedly is a ‘bubble’. Bubbles tend to stay popped.

  • Darnell A

    Also, Bitcoins are not a Ponzi scheme. Nobody is being promised future returns on their investments. They may be expecting them, but anyone who sees Bitcoins as anything more than either a transferrable digital commodity or a speculative purchase, at this point, are making false promises to themselves. Early developers and adopters do have a large share of the existing coins, but that is their reward for supporting this emerging technology early-on.

    I did manage to get in when coins were trading below $10, but that hardly puts me in the “early adopter” category. I just have enough sense to understand the technology before judging it harshly.

  • George Ou

    The point is that the exchange has some very rigged rules that let you put money in but make it impossible to take any significant amount of money out. And when one small incident like this happens, the exchange value of bitcoin is severely impacted which should set off some alarm bells.

  • George Ou

    @Darnell A

    I hope you don’t depend on whatever money you put in. Even if you are making money on paper, you’d better have a plan to take money out at a rate less than $1K a day.

    • Carl

      Less than $1k per day. Oh my god! How could I possibly live on under $365,000 a year!

      Oh yes, I could use other bitcoin marketplaces as well.

      • George Ou

        Pulling out $1K a day seems to have triggered a massive burst in the bitcoin bubble from $17 down to a penny. You’ll pull out $1K the first day and your remaining bitcoins won’t even be worth $1K the second day.

  • dacoinminster

    MtGox.com is just one exchange. I use http://www.TradeHill.com,
    which has lower fees and seems more professional to me. I have a code
    that will get you 10% off your fees there if anybody wants to buy or
    sell bitcoins on TradeHill.com: TH-R1168