Topic: oh great, MTGox is under attack again right now (Read 4114 times)

You can't make money by convincing MTGox to lower their price since their income spikes by paying 90% of the money yourself.  I still think the most logical answer is they were trying to DOS MTGox.  And then a week later some dumbasses hacked the forum so MAYBE there's some malicious ass clowns out there doing stuff like this.  By the way, I've heard rumors that SA was behind this.  They attacked another forum I was junior administrator at and they are damn lucky I didn't ever get enough info to identify them.  So I've got a real chip on my shoulder towards them and if it turns out that they were behind the forum hack and this little almost-attack at MTGox, IT'S AAAAAAWWWWWWNNNNNNN!

They're trading themselves to a better trading fee so they can buy or sell lots...

You lost me.  The devil is the one who made bitcoins rise, after a bidwall at 6.66 with only 2500 coins made it really.

I think you're saying people make these trade bots do all these trades that only make them lose money with trading fees so they feel powerful.

No, you are doing it to yourself so that you don't feel so powerless.  You are staring at the static of a dead TV channel (if you are old enough to remember those) and seeing the devil.

I don't get it?  Is Mt. Gox doing this to make investors feel powerless?

Because the feeling of powerlessness is much more palatable if you assume (invent) a powerful agent.

Why do these bots trade back and forth at basically so near each other the trade fees cancel out any possible profit?

Ha!  Humans haven't traded directly on any market since the 80s.

The matrix is imploding

I don't encounter problems like this when I buy and sell stocks on my REGULATED by the FEDERAL GOVERNMENT exchanges.  Hope you guys like the true reality of libertarianism!  Suck it!

just FYI, they are under a phishing/account hijacking account right now just for the record and yeah, I didn't mean to imply the above ideas were shady.  I just meant that basically selling it from $9 down to $8 and then buying a bunch of them at $8 since you just drove the price down nets you exactly $0 before fees.  The only alteration in profit or loss is due to other people's trades during that time, which would have affected you in precisely the same way had you not bought or sold anything and just sat on your BTC.  The only way to profit from buying and selling is to get other people to do something that benefits you.

But just remember, my point is, a bot is not magic nor is it smart.  Bots don't create new trading strategies, humans do.  Bots are just the tools that make those trades go faster or high volume trading possible.  Not even the smartest one can actually "learn."  They pretend to learn but humans programmed them how to pretend to learn.  Every bot is just carrying out whatever idea their human owner told it to do.  So people are going to come up with some pretty evil stuff with or without a bot.

Using a bot to imitate thousands of people in a fake sell off over a short period of time when a human could never input that many trades is certainly exploitative though.

I didn't read this as him calling me shady.  I just saw him saying that he wasn't shady, not in contrast to anyone, but in general.

My posting history is a mixed bag.  In one post, I'll be a complete jackass.  In the next, I'll be patient and helpful.  In the next, I'll be both.  And so on.

In the spirit of disclosure, I'll say that my join date on these forums was essentially the day that I learned more about bitcoin than just the name.  In that time, I've mined about 100 bitcoins, and I've spent about 25 of them on various things like shirts, tokens, computer parts and dollars.  I wrote and operate my own bot, which is not at all like a traditional trading bot.  It has been far more useful than profitable.  Since it started, it has made a profit of about a half bitcoin (minus the value of my time, which is apparently zero), and hasn't made a trade in several weeks.

My question to Desolator was, and remains, "What about these trades makes them unfair?".

The larger point that was I was getting at was this:  On the exchanges, each party gets to set the exact conditions for the trade.  You tell mtgox, or tradehill, or whatever, that you want to buy or sell, how many bitcoins, and the worst price you'll accept.  You never pay more than you specified when you buy, and you never get less than you asked for when you sell.

In what possible way could anyone consider a trade which happens under the exact conditions that they specify to be unfair?

I do wonder why you are calling out a hero member as a shady strategist, but I haven't read all of kjj's posts, so he could be I guess.


I love how people can claim I overstate the importance of bots, and then back it up with an example of how a bot caused a massive price shift for the benefit of the few at the expense of the many.  Ideas like this are proof that the bot paradigm needs to be seriously addressed due to it's power.


Maybe, it certainly seems like a possibility.  I think probably a bot set an ask wall to get the bid to meet it, then sold into an average price, and the $8.50 cost is "market correction" or whatever the speculative equivalent of correction is.

I'm no shady strategist so I bet I'm missing a lot simpler ideas and also, ones proposed above do not actually work out to a profit mathematically.
One basic examples would be anything that involves posting offers then buying your own offers back after whatever you were trying to do was done.  Also, making bots pretend to be multiple people to anyone watching just the anonymous stats.
One implementation of that would be let's say I operate some kind of company thing or whatever so I have 100,000 BTC sitting around.  I actually have 14 BTC sitting around myself so no, this isn't me this is hypothetical me lol.  I want to make some money using that 100,000 so I use a bot to post a ton of very close to each other groups of 50 at a couple cents above the price.  That prevents the price from going up for a few days and makes it appear, from the volume, that the price is really stable and not going to raise any time soon.  That encourages buyers to pick up some of my BTC sell offers.  As soon as 50% of the offers have succeeded or 2 days have passed, whichever happens first, that's 2 days at let's say $9.00 and quite a few people bought in at the new stabilized price since they know it's a safe time to buy when the price hasn't changed a lot lately.
Then I immediately change the sell offers at like $9.01 to $7 and drive the price down the toilet and sell off all my BTC for probably an $8.75 average on the way down since a higher number of trades would occur closer to the current price than farther away.  So then the tail end of my sell off results in let's say a $7.50 price.  Except here's the catch: my bot artificially delayed all the trade orders so they occur over several hours and it looks like a mass sell off, not just one guy offloading 50,000 coins instantly.  Everyone panics and assumes the market is crashing and sells.  Before people even have time to see the graphs, you wait for the price to bottom out from the additional sell offs then buy 100,000 coins back at a $6 ea average.  Now you're back with your 100,000 coins which you sold for an average of $8.75 and bought back for $6 just by scaring the crap out people with your bot and faking a sell off after faking 2 days of price stability.

I'm pretty sure that's what just happened a week or so ago by the way.  It was in the low $11 range for a looooong time and then someone dumped off a TON of coins and then suddenly a gigantic buy offer came in to shoot it eventually to $8.50 where it sits now.

Tell me more about these unfair trades.  Start with exactly what about a trade makes it unfair.

I may be overstating the importance of bots.  It's possible.  But this entire thread is about a bot that may have attacked the dominant exchange, so they're at least very important in the security sense.


There are plenty of other strategies that could only be executed by bot in the current environment, like stop-loss order bots.


This could be an actual attack on mtgox, absolutely.  That doesn't mean that it is an attack on mtgox.


In order to know this you would have to know how many BitCoins they had, how much fiat they had, what fee rate they were paying, and that it was in fact one bot and not the cross-section of multiple unrelated bots.

You're overstating the importance of bots.  The only inherently bad or unfair part is when they outbid you purely based on speed and get a deal you wanted.  Otherwise bots do precisely what a human tells them to so they can program it to trade fairly or like a jerk.  A human can manually set up unfair trades and scams and that sort of thing, just not as quickly.  So really the bot isn't that important.

I guess if your scheme involves 1000 trades, you'd have to use a bot but other than that, people are going to try and exploit the exchange with or without bots.

But nobody is explaining why a bot script would grab random values from a list and use them in buy orders.  That's no strategy.  It was obviously an attempt to crash the exchange.  This makes sense if you think about it.  Someone just sold off enough BTC to drop it from $11 to around $8 and then suddenly a few days later, there's a massive trade volume attack.  It was supposed to crash so everyone gets scared and sells off their BTC on mtgox.  Then when it hits like $5, the guy who originally sold off the massive amount of BTC buys it again for a lower price and waits for the price to normalize a week or two later.  Seems like the most logical explanation to me.

By the way, this was no price scheme.  This person easily lost 10x their money in fees.  That was like 1000+ cycles of their BTC.

Maybe this is a high-capital scalper trying to minimize costs over the long term.  Maybe it's a business model that requires a certain rate to get off the ground.  Maybe it's an idiot who hasn't done their math (although this is relatively unlikely).  Maybe it's an early miner looking to get a good rate for a big sell-off, or a new fiat investor looking to do the same.  Maybe it's two bots going back and forth, or more than 2.  Maybe it's a HFT bot.

But these point to the same fundamental market truth - bots will rapidly become more dominant players than humans without bots.

In order to minimize the effect this has on small- to average-sized BitCoin users, the only potential solutions are:

1) Disallowing all bots on the exchanges.  It is unlikely the exchanges will ever take this step, as bots provide their customer base with more options to pay fees.

2) Leveling the playing field by releasing open-source bots to the public with the appropriate documentation to utilize them.  This is doable, but not simple.

As bots become available to the public general market behavior changes, which will scare off some investors.  Others will join the market since they now have more powerful tools available to them.

But bot behavior (while ultimately definable by the end user) is inherently more stable than human behavior due to their programmatic nature.  The more BitCoin users who use bots in the markets, the more likely the market will begin to move towards a stable price.  The closer it gets to a stable price, the less risk taken by businesses who accept it as a currency.  The less risk businesses take on using BitCoins, the greater the rate of adoption.  The greater the rate of merchant adoption, the more real purchasing value BitCoins represent.

Even humans making flawed decisions through a bot do so in a more controlled way than humans alone.

Let's take the example of an early miner or hoarder that wants to cash out some (but not all) of their BitCoins:

Without a bot, that user merely sets a price point, aims for it, and waits for transactions to execute into their price wall.  If they set the wall at a low price, they lose a ton of potential income, and risk causing a panic following a sudden price drop.  If they set the wall too high or too strong, they show their hand and sway the market away from their target price to a point lower than they wish to sell at.

With a bot, the hoarder can sell off all of their BitCoins without causing waves in the market.  The user would set a price point (or range, or average price point, or minimum price point, or moving price point), and the bot can place only the orders that will be filled immediately - thereby executing trades at a better sale price for that user without destabilizing the market and devaluing the rest of their holdings.

Let's take the example of a new investor to BitCoin:

Without a bot, that investor would follow a process very similar to the hoarder trying to sell.  Set a price point, and buy into it.  With a bot, the new investor can buy in at a price point they set, or an automatically determined one weighted against past performance and price history.  The average cost per BitCoin of the investor's entry is lower, with the result of lowering the effective barrier of entry to new money into the BitCoin economy.

Let's take the example of a local BitCoin exchanger:

In order to get the best prices on trades, without bots an exchanger has to day-trade the market heavily or take on large extended-exposure risk by holding BitCoins for a long period of time while they are volatile.  With a stable of bots to handle buying and selling, the exchanger can focus on meeting new clients or promoting BitCoins with their time instead of sitting in front of mtgoxlive.com.

Bots add to net profitability in any market.  The only question is whether or not the BitCoin community will build a suite of functional bots for the general public to use, or leave them in the realm of the big money that already uses them to dominate the other world markets.

Wait, if he can push up the price, why bother with the first part?

Buying a better rate on Gox isn't practical, because it costs more than it gains*.  So why dilute the gains from manipulating the market by first doing something that is a certain loss?  Wouldn't it make more sense to skip straight to manipulating the market?

* - This might not be true under certain rare circumstances, and depending on the exact way the discount calculation is coded by the exchange.

Someone is buying a better rate for fees from Gox.

They waited for a nice flat floor with a little bit of space and shuffled around a bunch of BitCoins in a very constricted price range, then selling off a few at the end at slightly higher prices to recoup their at least some of their loss to fees after the flurry of trading causes the volume stat to spike, (raising appeal to prospectors or speculators) and by slowly (bot slowly) moving their asks out to higher price points.

This could be a hoarder or early miner getting ready to release a bunch of the silent hoarded Bitcoins into the market.  It could be a BitCoin business about to open that is "investing" in good rates.  It could be a lone local exchanger or speculator doing the exact the same thing.  We may not ever know.

But it proves one thing:

A digital currency, handled over a digital, automated, purely electronic exchange in 2011 will be run by bots.  Individuals will still be able to buy and sell as they like, but businesses, criminals, and governments (classic big money) will interact with the BitCoin economy through bots.  And yet people still think of it as "being like the stock market", with little guys running around and yelling buy/sell.

The stock market, the precious metals markets, and any other market you can think of that uses a computer or not is already traded by bots.

Bots don't always trade.  Many bots are modeling bots to help determine market trends, for instance, or tracking bots that feed data to other programs for use elsewhere in that organization's data chain.

One of the reasons it is such a powerful paradigm, is that (when written well) bots can execute highly efficient trades at speeds the human mind can barely think about.  The computer's (honestly, even a cell-phone's) ability to process data and send out orders is easily a hundred times the power of a human's by any stretch of the imagination.

We can all agree bots are a powerful tool - that much is plainly obvious.  Many people will tell you they are dangerous - and bots can be dangerous.  Certainly a bot that is buggy could cost you (theoretically as much as) 100% of your money.  Bots can be malicious, to facilitate or even operate pump-and-dump schemes.  But bots are not inherently malware.

In my mind the real dangers of bots is the fact that they are "unavailable" to the common man - BitCoin is not a currency for people who can write php, it's a currency for everyone. In that light  they can be seen as a tool to manipulate the economic system in ways that the have-nots can't, and the groups with the server-grade hardware and piles of cash are going to walk in and step all over the relatively insignificant amount of wealth represented in BitCoin (as compared to the total world economy, the target audience for BitCoin).

If BitCoin is about democracy, then the tools that we grow up around it will either support it or destroy it.  It's certainly an open enough design that the cards could come up either either way.  As human beings, we're sick of the money lenders.  We don't want some rich Wall Street guy walking out to his Ferrari with bags full of our money to drive home to his martinis and supermodels.  Banks and corporations have caught a ton of heat in the last few years, and probably for a good reason, largely because of the sense that these guys have ALL of the money and are showing record profits, and the rest of us get to eat double dip recession, popping bubbles, crashing markets, metal fevers and the ever-tightening belt.

And nothing can stop it.  We're on the verge of assistant programs that can handle human language with 95% accuracy - on your smartphone (see also: Siri / Nuance, iOS)  Bots are here to stay, now and forever, and they're impossible to get rid of.

This proves to me that the BitCoin community will require, in order to remain a democratic environment for all users of BitCoin: a library of open source bots.  Bots would obviously have to be approved as goodware before being posted to the list by whatever commission of linux programmers who live and die for that kind of stuff.  Talk to Mozilla, they've got a stake in it ideologically.

If there's a public domain mtgox script that allows a sole BitCoin owner to automatically monitor, track, and place sell orders mathematically, that bot can get a better sale or purchase price than a human - and it can do it with way less work than it would take an individual human..  If this bot were free for every man woman and child using BitCoin, overall profit margins for BitCoin users would rise.  This is an instant bonus for business.  "Guarantee" yourself a few cents profit just because you had a computer cash out your BitCoins to the free market for your local fiat, instead of setting a simple sell order yourself and wasting man-hours to do it.  Stop-loss bots to prevent the loss of excessive value in the case of sudden market swing.  Bots that allow regular people to automatically get the lowest price when buying BitCoins.  Calculates math, waits for a buy window, buys.  Calculates math, finds a good wall to sell into, sells. Calculates math, predicts trend, indicates buy point or sell point.  Outputs JSON feed, shiny animated graphs like goxlive, and tracks coins through the block chain.

But one way or another, the future of BitCoin is clear - and it looks like an army of bots.