Topic: Is Dwolla The Manipulator? (Read 2656 times)

You should probably be more concerned about MtGox/Tradehill insider manipulation than you should Dwolla, IMHO. Veridian Credit Union probably doesn't even know what Bitcoin is, it seems pretty clear from some of the things the Dwolla guys have said they don't fully understand it, either.

OK, thank you for that clear answer.

Well, btcbtc113, I didn't try to make them tangents. You sounded concerned that there was a nebulous force at work pulling strings at Gox based on data from Dwolla. I am trying to say that the deposit history for the account at Dwolla that is Gox would just be one sound in all the noise of their daily transactions. It would be as useful to a Dwolla employee as a manipulative tool as knowing how much went into the Blaine's Farm and Fleet account to predict the cost of horse feed in Wisconsin, or electric fence wire in Iowa. Gox is one of many thousands of merchants using Dwolla as one of many sources for clearing their transactions, in the case of Dwolla, specifically for those Gox customers that want to transact in US$. So it would possibly give them a view of what the US$ traders on Gox, who use Dwolla are doing, but I can't accept that this level of information could ever be useful for any meaningful manipulation.

There are too many other Gox customers that trade in Euros, Yen, Rubles, Rupees, and Zlotys to make knowing the American dollar slice of pie that is coming exclusively from Dwolla useful. Not to mention other exchanges, dark trading, alt-coins, and off-market transactions. You just can't get enough information from one source to control one exchange.

I believe that there is manipulation going on, and I suspect that the good folk at Gox know damn good and well where it is coming from. They don't need outside sources to give them that info.

And in the interest of disclosure, I do not trade on Gox, I have only used their services to convert a couple of times and those amounts were laughably small.

It's Fred Wilson's fault.  He's a VC who is super influential and has a highly trafficked blog.  Wired ran a story about bitcoin, Fred read it and did a glowing blog post.  Just count the number of comments.  Almost every one of those people are fairly new to bitcoin (you can tell by their undue exuberance or posturing), and a lot of them are invariably VCs who have money and pride themselves in how smart they are.  My guess is over the next week (due to Dwolla's huge-ass lag time in doing Bank-to-Bank transfers) you'll see more investment in Bitcoin as a result of new people looking to get in and see what the hype is about.  

Dwolla most definitely keeps records of all their transactions. And I would guess there is some guy/girl who gets a report on their desk showing them where money is going. If they saw alot of transfers into or out of Mt Gox, it would be information useful in predicting the future price of bitcoin. No, it would not be perfect information.

Maybe you keep going on these tangents because I mentioned "the manipulator" in the title. I only used that term because I think its funny. I am serious, however, about people working at Paxum/Dwolla/etc having insider information. I don't necessarily think anything should be done about it, but I could not find discussion anywhere and don't see why the implications of insider bitcoin trading should not be discussed. If I understand correctly, Mt Gox and Bitcoinica have given assurances that they do not trade based off insider info. I don't know how trustworthy these assurances are, or what measures are being taken by the community to ensure they are true. Perhaps a similar "assurance" should be requested from those who are one step removed from actual bitcoin speculation. Perhaps not.

No, I don't believe that people with access to aggregate data cannot legally trade in bitcoins. The question would be in how they accessed that aggregate data. It would presume that they are somehow monitoring individual accounts (all of us) sending payments to and from a certain account (Mt. Gox) and somehow able to determine whether that flow of money is for active trading, or being used for some other purchase. It would also mean that they did this out of the multitude of transactions that they manage every hour without involving the parties involved in the to and fro with Mt. Gox.

By the same token, somebody with access to the block-chain (again, all of us) if they wanted to, could theoretically track a specific transaction that an individual user made with a merchant (let's say through Silk Road for example!) and follow that amount through the block-chain until it showed up for conversion to fiat so that merchant could procure additional merchandise to sell to like-minded consumers. Knowing that there is a demand for illicit product X in city Y would allow that merchant to unfairly raise the prices on his dime bags, and make it more expensive for dime bag consumer Z to purchase said dime bag.

Again- Dwolla is a clearinghouse for transactions to and from a huge variety of buyers, sellers, merchants and markets. They do not have a direct connection to Mt. Gox per se, they accept deposits and withdrawals from Mt. Gox and tens of thousands of other customers, the vast majority of whom have absolutely nothing to do with bitcoin. If you really want a fascinating study of tracking your dollars, you would be far better off at www.wheresgeorge.com

So do I understand correctly that it would be a crime for people with access to aggregate data on how many people are transferring money into mt Gox (and how much) to also trade bitcoins?

My bad... https://www.veridiancu.org/. So not even a bank, but rather a credit union, the depression era, Wobblies-like, anti-bank collectivist movement. These folks have to hold a coffee-klatch to decide of Peggy-Sue is going to get that $500 student loan to go to Local State U. (I know because I am a board member for a credit union.) They couldn't organize a manipulation of a crypto-based currency if it came with printed instructions in 12 languages, a demonstration video, and helpful English speaking tech support.

Damnit! Dwolla manipulated me again yesterday. They made me buy a few more sub $3 coins.

Veridian...?

It is much more likely that Mt. Gox is the manipulator. Take a look at their website update, they are trying hard to rake in as much money as they can. This could all end if bitcoin dies out and fades away.

I think it was Chuck Norris who was in cohoots with the Sasquatch. Then the chupacabra got in on it who of course takes its answers from.... you guessed it ALIENS!

1. Aliens

2. Aliens

To be fair- I'll tackle both of these too...

1) No. I cannot imagine a bank, or a subsidiary of any bank in the US being willing to violate banking law by giving out stats on one particular account or set of accounts without having a pretty damn ironclad warrant for the information. And if they did, the people whose accounts were compromised by releasing this information would have really impressive grounds for a lawsuit.

2) Perhaps. That would mean some of the folks who work for a limited set of roles for a bank in Iowa, are willing to commit a crime by tracking individual transactions for their own personal gain, have accounts on Mt. Gox, and are able to see into the intentions of their customers who deposit and withdraw money from their accounts, sometimes for transactions on Mt. Gox, other times to buy other things, sometimes just to pull cash out of their account to go buy a cheeseburger, or to pay off a loan on a new combine for their farm in Hardin, IA. If they are that clairvoyant, they are going to kick our asses at this speculation game anyway, so I don't worry about it. But it could happen, sure.

2a) Find an alternate conspiracy. Is Mt. Gox actually a front for the CIA? Tracking all of this money that is being used for international narcotics trade, and using it to launder the money that they are funneling to Quebecois separatists who will fund the revolution to liberate Canada, and turn it into the Northern border states of the US? Is it actually a sneaky plot by the Fed to find all of the people in the world that dont like fiat currency so they can round us all up and send us to re-education camps? Think about it... BTC = Bernacke Takes Control? Could "Satoshi" just be a cover name for a dark cabal of Keynsian madmen who want to take every last bitcoin from us? Wondering minds want to know.

It's quite possible.

But I'm not so certain the advantage is as huge as one might think. A lot of the movements on the exchanges are caused by big players picking a strategy at some arbitrary point in time -- not so easy to predict from only the fiat money flow on some not even international payment processor.

But yea, if you're very much into short-time movements, better be wary that there might be insiders around.

I bought some BTC last night. I funded my account with Dwolla. I can see no way they could have manipulated anything?

So the question in the title has been addressed. What about the other two?

^ this

You do realize the Dwolla is just a convenient clearing house for US$ for Mt. Gox, right? They are not involved in the active bitcoin markets, and the Mt. Gox business that they do is just one account of thousands. They don't have any actual involvement with btc at all. It is just the last mile that converts your US dollars into a form that you can have deposited into a US account without outrageous wire transfer fees.

Dwolla is actually just the clever techie version of a bank run by a group of Iowa farmers called Veridian. Veridian specializes in out of the envelope credit card programs, riskier lending, and now, with the Dwolla initiative, trying to grab some of that interwebz cred. Its a marketing gimmick, not a conspiracy.

The Manipulator is a group of traders who adopted early enough to be sitting on massive amounts of btc when the price hit $30, and they converted it into enough US$ to play whatever damn games they please. Some of them might even think that they are doing the bitcoin world a favor by supporting prices that free market action might allow to fall even further.

1) Is there a way to see or estimate the number of people putting money into dwolla at any one time?
2) Do the people who have direct access to those numbers play on mt gox?

Sorry if this has been covered before.