Fact of the matter is, the infrastructure was not ready

Allow me to quote from my own PR :

Prosperity is in general the result of the working of free markets. The one caveat to this observation is that market participants have to be responsible. It doesn't matter so much if they are intelligent or not, it doesn't really matter if they're good christians or devout muslims or anything else, but they do have to be responsible.

When some people behave irresponsibly the result is that they lose their money, which flows, albeit indirectly and circumvolutedly but nevertheless unerringly, to more responsible participants.

When a small majorityⁱ of participants behave irresponsibly however the net result is not just pain to their own fortunes, but pain spread across the board. All of a sudden you have to be very intelligent, and very experienced, and very well informed to manage to keep your money safe, and often enough even that's not going to suffice.

Giving over half a million bitcoins to a random idiot has the unpleasant effect of creating a high powered idiot. He can now wreak havoc on the exchange rate, which increases volatility and on the long term hurts everyone involved in bitcoins, because volatility is, much like inflation, an indirect tax on users.

Giving over half a million bitcoins to a random idiot has the unpleasant effect of creating half a million bitcoins' worth of valueless receipts, which are pretty much indistinguishable to the naked eye from valid receipts. Thus, if you pay on anyone's credit you are basing your judgment not on actual fact, but on an unknown and pretty much unknowable mixture of fact and hogwash.

Giving over half a million bitcoins to a random idiot is a bad idea. There are people whose personal responsibility in this matter is greater than that of most everyone else, people who have in effect acted as lieutenants for the random idiot. This thread is a convenient spot for all of them to avoid the indignity of being called out, and instead freely and willingly admit their mistake, and by admitting it learn from it. Specifically, learn that they aren't nearly as qualified as they thought to play the "banker", and by this make one step towards maybe one day actually being bankers.

The story that unfolded is retrospectively easy to summarize :

I. Cca February I wanted to turn my rather successful options trading page into a BTC virtual public company. At that time, and for the year or so prior, the infrastructure for doing this was provided by GLBSE, the Global Scam Exchange. It quickly became clear GLBSE has little to no future, and it also became clear that either I make one or there's none.

II. Early March a MPEx beta was deployed.

III. Mid April a fee to register on MPEx was introduced and the service came out of beta. BitVps had its IPOⁱⁱ. MPOE and MPEx were merged through a peppercorn aquisition at the end of April.

IV. In August Satoshi Dice had it's IPO, which was so successful it actually overshadowed the Romanian Stock Exchange on that day. That same month, the very large ponzi scheme discussed in the introductory quote collapsed, leaving about half a million BTC unaccounted for (about 5% of the total monetary mass at that time).

V. All through September a litany of Ponzi schemes battle for the top spot in what has by now become a "respectable HYIP marketplace". Some people make money by shorting themⁱⁱⁱ, but the vast majority of naive investors get slaughtered. The culmination is the listing of an "asset" purporting to invest in mining "bonds" with the dividends "invested" in Canadian Lottery tickets. Negative expectation investment (even before accounting for likely fiat depreciation in BTC terms), go figure.

VI. In early October GLBSE, The Global Scam Exchange goes offline, after a few days of ridiculousness, to wit :

1. Theymos, btctalk.org owner and GLBSE shareholder announces the sale of a 23% interest in GLBSE (partially his own). The trade if closed on his proposed terms values GLBSE at ~20`000 BTC (about 5% of S.MPOE market valuation at the time).
2. Nefario, GLBSE CEO, PR, COO and CTO (also CFO and so forth) proceeds to surprise-delist the assets of the main (surviving) lister, a bizzare fellow calling himself Goat. Scammer tags are called for in the forum, an entire scandal erupts. Many people discover for the first time what the disadvantages of a non-gpg "exchange" are : there's literally no way to delist stocks.
3. Nefario, GLBSE CEO, PR, COO and CTO (etc) takes down GLBSE website, without warning. A message posted in plain text states that the entire thing reopens in three days (would be tomorrow). Many people discover for the second time what the disadvantages of a non-gpg "exchange" are : if the exchange goes away, everyone's left hanging.
4. Theymos, btctalk.org owner and GLBSE shareholder announces that he will accept bids below his stated asking price.

And this brings us just about up to date. The fact of the matter is, the infrastructure was not ready. Some douchey bum is no more prepared to handle such an endeavour than his "Bitcoin Consultancy^iv" partners were prepared to handle Bitcoinica. Sure, it worked fine for as long as nobody was really interested, and two dozen hobbyists traded fifty BTCs worth of sillyness back and forth. Once the news of Pirate's fearsome haul hit the wires and every scammer on the interwebz was angling for a shot at Bitcoin's pot of virtual gold things changed, and the infrastructure collapsed at its weakest point.

The moral of this story is, of course,

When a small majority^v of participants behave irresponsibly however the net result is not just pain to their own fortunes, but pain spread across the board. All of a sudden you have to be very intelligent, and very experienced, and very well informed to manage to keep your money safe, and often enough even that's not going to suffice.

PS. May 30th :

Nefario: You are obviously unqualified to be anywhere near a project of the complexity of an exchange, even for play money (which I suspect BTC are, for most of you here, at least judging on behavior records). I will make you precisely one offer to buy the thing from you, so you get to actually make some money for all your effort over the past year, as misguided and mismanaged as it may have been, rather than have to walk away from a worthless wreck (like Zou Thong/Amir&co have with Bitcoinica). If you have half the maturity you should have to be involved in all this you will take this offer seriously, and consider your options carefully. Feel free to make contact via pm or in #bitcoin-otc-eu.

1. This term of... art, let's say, will go down in BTC history. [↩]
2. Article in Romanian, because at the time this blog was written in that language. [↩]
3. Sep 22 04:24:33 (mircea_popescu) !ticker obsi.hrpt
   Sep 22 04:24:48 (assbot) [GLBSE:OBSI.HRPT] [Bid: 0.08900001] [Ask: 0.09447999] [Spread: 0.00547998] [Last: 0.089] [24hVol: 279.61173141] [7dAvg: 0.09946976]

   [...]

   Sep 23 18:41:12 (BTC-Mining) OBSI.HRPT sure is going down
   Sep 23 18:42:03 (BTC-Mining) ASICMINER too
   Sep 23 18:42:03 (mircea_popescu) yeah.

   [...]

   Sep 24 18:49:34 (assbot) OBSI.HRPT [1@0.11BTC] (since: 2012-09-15) paid: 0.0075 BTC. Last price: 0.0769 BTC. Capital gain: -0.0331 BTC. Total: -0.0256 BTC. (-23.3%)

   [...]

   Sep 25 01:44:33 (assbot) [GLBSE] [OBSI.HRPT] 28 @ 0.05500001 = 1.54 BTC [-]
   Sep 25 01:44:33 (assbot) [GLBSE] [OBSI.HRPT] 100 @ 0.055 = 5.5 BTC [-]
   Sep 25 01:44:35 (assbot) [GLBSE] [OBSI.HRPT] 1 @ 0.0521 BTC [-]
   Sep 25 01:44:36 (assbot) [GLBSE] [OBSI.HRPT] 10 @ 0.052 = 0.52 BTC [-]
   Sep 25 01:44:37 (assbot) [GLBSE] [OBSI.HRPT] 4 @ 0.05101542 = 0.2041 BTC [-]
   Sep 25 01:44:38 (assbot) [GLBSE] [OBSI.HRPT] 7 @ 0.051 = 0.357 BTC [-]
   Sep 25 01:44:54 (mircea_popescu) i guess that was the best short i ever did.
   Sep 25 01:45:32 (smickles) did you buy to close yet?
   Sep 25 01:45:48 (smickles) or were you able to settle in cash :o
   Sep 25 01:46:14 (BTC-Mining) You shorted OBSI?
   Sep 25 01:46:32 (mircea_popescu) smickles im not closing.
   Sep 25 01:46:39 (mircea_popescu) BTC-Mining well yes.
   Sep 25 01:46:43 (BTC-Mining) I should have done that. I always forget about the possibility of shorting.
   Sep 25 01:46:58 (BTC-Mining) When I don't want to invest in something, I should short it.
   Sep 25 01:47:01 (mircea_popescu) well it's a pain to arrange share loands
   Sep 25 01:47:15 (BTC-Mining) Yes, but it's worth it with good picks.
   Sep 25 01:47:33 (copumpkin) BTC-Mining: is it, with such shallow bid depth on all the assets?
   Sep 25 01:47:46 (mircea_popescu) copumpkin obsi is like the #1 by volume on glbse
   Sep 25 01:48:00 (mircea_popescu) which in itself is a sad statement
   Sep 25 01:48:00 (copumpkin) which is like saying you're the smartest retard in the room!

   [...]

   Sep 28 10:39:00 (BTC-Mining) lol... OBSI now pays 0.00001 per day? instead of 0.001?
   Sep 28 10:39:05 (BTC-Mining) It's down to 1%
   Sep 28 10:44:18 (mircea_popescu) yup
   Sep 28 10:44:28 (mircea_popescu) i'm glad i waited to close.
   Sep 28 10:44:51 (mircea_popescu) shorting glbse is practically speaking free money.

   [...]

   Oct 01 01:47:42 (mircea_popescu) Obsi ty, but it doesn't seem like anyone has a choice. glbse is going away. now's everyone's change to learn gpg.
   Oct 01 01:47:43 (Bugpowder) I don't think GLBSE is going to survive

   [...]

   Oct 02 05:07:00 (BTC-Mining) I'm pretty sure it was expected by now. Didn't you short some OBSI?
   Oct 02 05:07:33 (mircea_popescu) BTC-Mining cvovered in the meanwhile. but yes, shorted 8-9 covered at 02 lol [↩]

4. Also in Romanian. [↩]
5. This term of... art, let's say, will go down in BTC history. [↩]