The Bitcoin exchange Mt. Gox appeared to be undergoing more convulsions Tuesday [February 25], as its website became unavailable and trading there appeared to have stopped, signaling a new stage in troubles that have dented the image of the virtual currency. . . .
Investors have been unable to withdraw funds from Mt. Gox since the beginning of this month. The exchange has said that a flaw in the bitcoin software allowed transaction records to be altered, potentially making possible fraudulent withdrawals. No allegations have been made of wrongdoing by the exchange, but the potential for theft has raised concern that the exchange wouldn't be able to meet its obligations.
The apparent collapse of Mt. Gox is just the latest shock to hit Bitcoin, the price of which is now off more than 50% from its December 2013 peak:
For those better acquainted with the dead-tree/dead-president variety of money, Bitcoin is a virtual currency not backed by any government. Rather than being printed or minted by a central bank, Bitcoins are created by a computer algorithm in a process known as "mining" and are stored online or on your computer. They are bought and sold on various exchanges, including until recently Mt. Gox (whose troubles have been reported for a few weeks now).
There are many reasons, some of them even lawful. Bitcoins can be regarded as a medium of exchange, an investment, a political statement...or a way of avoiding capital controls and other pesky laws like bans on drug trafficking and human smuggling.
But the criminal potential of Bitcoin is probably overstated. The Chinese have gotten wise to its use for avoiding capital controls. Using Bitcoin for criminal or fraudulent activity would be difficult at scale (PDF). The Walter White method is still far and away the best way to ensure your criminal proceeds retain their value and anonymity.
I don't share the utopian fervor for Bitcoin expressed in tech and libertarian circles (see, e.g., this supposedly non-utopian cri de coeur), but it may have some positive potential as a decentralized and lower-cost electronic payments system. We'll see if that ever gets off the ground.
In the meantime, the Mt. Gox collapse is pretty huge news for Bitcoinland. Unlike the NYSE (the failure of which would be hard even to imagine), Mt. Gox does not benefit from any systemic significance and thus is unlikely to receive a lot of official-sector help. The situation has some early adopters running for the Bitcoin exits, like this leading Bitcoin evangelist.
Despite (because of?) my agnosticism on the currency, I'll be writing more about Bitcoin soon. (Mainly, I wanted to stake a claim to being the first to write about Bitcoin on The Conglomerate.) If your Palo Alto cocktail party can't wait, however, this explainer (PDF) from the ever-impressive Chicago Fed should tide you over.
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Like Urska, that's how I've been the past week. No school, 3 children at home, Tuesday-Thursday. Cooped up because of ice 2 of those days. It was brutal, I'm not going to lie to you.
Two technological innovations made the weather burdens a tiny bit easier to bear. First, an app: Fitstar, which aims to deliver a personalized workout based on a fitness test and nearly continuous feedback you provide as to your goals and how hard or easy you perceive each exercise to be. I am not a fitness freak by any means, but I do like to exercise at least every other day. Ideally I am outside running, but a torn meniscus had me searching for other options all fall. Even now, blessedly cleared to run again, there are some times when weather keeps you indoors. Enter Fitstar, which gives you a pretty good, and varied, workout without the need for space, weights, etc. It helped keep me sane this past week.
Second, school closings perforce means that I'm behind on my lectures. In my Lifecycle of the Corporation class in particular that's a problem, since it's a seminar with a pretty tight schedule. So Thursday after the kids went down I recorded a lecture that approximates the introduction to IPOs class. It's not perfect, since there's no student interaction, and the production value is a bit lacking, but I think it gets the job done.
An unlooked-for benefit is that I am implementing, at least for one class, the flipped classroom that has intrigued me so much in theory, but for which I've lacked the initiative to try on my own. I used the Photobooth function on my Mac and was able to upload the resultant video to TWEN with only a minor amount of inconvenience. Generally I'm a late adopter, but needs must.
Finally, let me emphasize, although the uses of technology might be sweet, I am all done with cold weather adversity. All done.
OK, so I'm more late-adopter than Luddite, but it makes for a pithier title. And late-adopter I am--I broke down and bought a smartphone only when my faithful flip-phone's charger died. And yet I'm here to tell you that the iPad has rocked my innovation-resistant little world. I offer these thoughts for those few readers out there more retrograde than I.
If you've ever stepped into my office, you'll understand the problem. Awash in paper, it oscillates between relatively orderly piles of paper on my desk and bookshelves (in the month after my more-or-less annual spring cleaning) and disorderly piles of paper littering every available surface, including the floor.
I have two main problems. 1) I'm a tactile reader--marking up, pen in hand, is how I process what I read. Reading on a computer screen, even a laptop, is no good for me. 2) I have an irrational fear that "I may need that," hampering my ability to purge the many pieces of paper an academic collects. I've tried file folders, I've tried binders. They work in moderation. But when time is short, the terrible piles accumulate.
Enter the iPad. Guided by a knowledgeable and kindly colleague, I have used a combination of Dropbox and the GoodReader app to create folders for colloquia, hiring, and various research projects. Now when I get an electronic something I need to read, I convert it to PDF, save it to Dropbox, sync with the iPad, and voila: I can mark up documents on a screen, and save the markups.
This may seem like a simple change, but it has revolutionized my working world. Here are some benefits:
- I no longer download, print, read, and mark up the same article 4 different times because I keep misplacing it.
- I print a lot less, assuaging my environmental guilt and reducing paper clutter exponentially.
- If you sync regularly your notes are preserved on Dropbox and available to you wherever you go.
- Indeed, your research is available wherever you go. No more kicking yourself as you frantically prepare in your hotel room the night before your next morning's talk because you left behind the Seminal Article that makes the point you want to refer to. Not that I ever do this. But still.
- If you're at home with a crappy printer for the semester, you can quickly download and mark up law review edits or articles that friends send to you. Before you'd have to drive by the office or make do at home.
- Travel benefit #1: All the conference papers fit easily on an iPad. No paper cuts.
- Travel benefit #2: You can't read said conference papers until you reach cruising altitude.
- Travel benefit #3: If someone emails the paper after you've left, or refers you to an article while you're at the conference, you can access it and read it while on the road.
- Travel benefit #4: Airport security? Keep it in your carry-on, baby. This ain't no laptop.
I'm sure I'm not using one-tenth of the iPad's capabilities. To take but one example, despite repeated efforts I can't seem to get my iTunes password to work, so my iPad is registered to my husband and I get all of his apps. If I want one, I have to ask him to get it. Even still, it's technology that's changed the way I work.
Ah, January. Here in Champaign, January for me means running on the indoor track here at the U of I (5 times around is a mile, can't beat that!). Yesterday, I was running and listening to This American Life on my iPod. I am never disappointed by TAL, but the epidsode I listened to yesterday beat even my high expectations. When I clicked on the app, I was a little hesitant because the title, "Mr. Daisey and the Apple Factory" didn't instantly suggest anything to me. I was quickly engrossed though by Mike Daisey, a comedian-actor, giving a 40-minute monologue on his trip to China to see where iPods and other Apple products are made.
Daisey has a two-hour one man show on the trip called "The Agony and the Ecstasy of Steve Jobs," returning to the stage in NY, but I had not heard about it until the condensed TAL podcast. In the monologue, Daisey confesses himself to be a true follower of the Apple religion and lover of all things Apple. Then, he was inspired to travel to Shenzhen, a city in China (bordering Hong Kong) where consumer electronics are manufactured for devices from the most popular companies. His first stop is a factory called Foxconn, which employs 400,000 people at that location. Daisey, risking arrest, interviews hundreds of workers and (as you can probably guess) hears as many stories of harsh working conditions, work-related illnesses and injuries, retaliation and general oppression by employers and the government. These stories are hard to hear, but I think it is only right that as an iPod/iMac owner, I have to hear them.
Now, I'm not anti-globalisation or anti-trade, and I'm from a right-to-work state. I understand that the alternative ways to make a living for some Foxconn workers may be even worse than working for Foxconn. I know that as horrible as it is to imagine 12, 13 and 14 year-olds working long hours in a factory doing repetitious work, there are worse fates for pre-teens in many developing countries. But none of that takes away from the fact that developed societies, who benefit from these ultra-cool technology devices, have all determined that these types of working conditions are intolerable and codified that determination into law. In a perfect world, China would experience the same legal transformation that occurred in Western countries during our industrialization to prohibit child labor and unsafe working conditions and provide workers legal remedies for pay disputes. That transformation seems a long way off for China, though.
Anyway, I have no development answers, but I do recommend the podcast or play. It is not preachy or ideological. It's even funny.
On Sunday, January 8th, the AALS Section on Financial Institutions and Consumer Financial Services will be holding a panel discussing featuring an impressive list of papers selected from an annual Call for Papers. The panel will take place from 9 am to 10:45 am in the Marriott Wardman Park in Maryland Suite B. It is part of a full weekend of programs by the section, including a Saturday lunch speech by Federal Reserve Governor Sarah Bloom Raskin.
In advance of that panel, let me showcase the papers one by one. (The Conglomerate is all about emphasizing the scholarly aspects of the AALS Annual Meeting.) Each of the four papers deals with a different set of foundational challenges to the regulation of financial institutions. The first paper I will preview looks at three interrelated problems:
- Which regulator should be responsible for consumer/investor protection; and
- How to allocate regulatory responsibility generally, when innovative financial services do not fit neatly within traditional regulatory silos.
In many ways, the first challenge – disintermediation -- is an echo (an extremely loud one) of an old problem. Starting over 30 years ago the cozy world of depository banking was rocked first by the rise of rival intermediaries – money market mutual funds, deeper bond markets and more sophisticated structured finance, as well as other elements of shadow banking.
Now scholars are looking at another competitive wave coming from radical disintermediation, in which the web facilitates direct connections between lenders and borrowers. This is the subject of the first paper, Regulating On-line Peer-to-Peer Lending in the Aftermath of Dodd-Frank, by Eric Chaffee (Univ. of Dayton School of Law) and Geoffrey C. Rapp (Univ. of Toledo College of Law). Eric will be presenting the paper, which is forthcoming in the Washington & Lee Law Review. Andrew Verstein (Yale Law School) will serve as discussant. Andrew has also written a fantastic paper on the same topic, The Misregulation of Person-to-Person Lending, which is forthcoming in the U.C. Davis Law Review.
Chaffee and Rapp outline the business model and current regulatory treatment of peer-to-peer lending, which includes platforms like Prosper Marketplace and Lending Club. They examine how securities laws govern the investment by lenders and banking law regulates the borrower end. The Dodd-Frank Act required the GAO to look at the regulation of p2p lending, and the GAO responded by formulating two alternatives. The first was continued regulation of investors on p2p sites by the SEC and regulation of borrowers by agencies responsible for consumer financial regulation (i.e. the CFPB). The second is assigning regulation to a unified consumer regulator.
In the end, Chaffee and Rapp argue that regulatory heterogeneity is not bad, but actually the way to go. They argue for an “organic” approach to regulating P2P lending, allowing different regulators to govern different aspects of the business. Here is their abstract:
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act called for a government study of the regulatory options for on-line Peer-to-Peer lending. On-line P2P sites, most notably for-profit sites Prosper.com and LendingClub.com, offer individual “investors” the chance to lend funds to individual “borrowers.” The sites promise lower interest rates for borrowers and high rates of return for investors. In addition to the media attention such sites have generated, they also raise significant regulatory concerns on both the state and federal level. The Government Accountability Office report produced in response to the Dodd-Frank Act failed to make a strong recommendation between two primary regulatory options – a multi-faceted regulatory approach in which different federal and state agencies would exercise authority over different aspects of on-line P2P lending, or a single-regulator approach, in which a single agency (most likely the new Consumer Financial Protection Bureau) would be given total regulatory control over on-line P2P lending. After discussing the origins of on-line P2P lending, its particular risks, and its place in the broader context of non-commercial lending, this paper argues in favor of a multi-agency regulatory approach for on-line P2P that mirrors the approach used to regulate traditional lending.
Verstein comes out the other way and argues against SEC regulation of P2P lending and for unified regulation of p2p lending by the CFPB. Here is his abstract:
Amid a financial crisis and credit crunch, retail investors are lending a billion dollars over the Internet, on an unsecured basis, to total strangers. Technological and financial innovation allows person-to-person (“P2P”) lending to connect lenders and borrowers in ways never before imagined. However, all is not well with P2P lending. The SEC threatens the entire industry by asserting jurisdiction with a fundamental misunderstanding of P2P lending. This Article illustrates how the SEC has transformed this industry, making P2P lending less safe and more costly than ever, threatening its very existence. The SEC’s misregulation of P2P lending provides an opportunity to theorize about regulation in a rapidly disintermediating world. The Article then proposes a preferable regulatory scheme designed to preserve and discipline P2P lending’s innovative mix of social finance, microlending, and disintermediation. This proposal consists of regulation by the new Consumer Financial Protection Bureau.
This should be a lively discussion and of interest to our securities law junkies. Disintermediation is of course a topic a challenge for securities regulation generally, as other platforms are linking equity investors and companies seeking capital. Usha has been blogging about Sharespost and friend of the Glom Joan Heminway is working away on disintermediation too, looking at “crowdfunding” from the securities regulation angle (See her working paper here, see also, among others, Pope )
Two days ago, I received my new Galaxy Nexus. Reviews of this great new phone are easy to find on the internet, so I won't attempt one here, but I will say that it is a Google user's dream phone. Goodbye, Droid. Hello, Ice Cream Sandwich!
I have been reading Steve Jobs by Walter Isaacson, and tonight I covered the chapters creation of the Macintosh. Like many others who are reading the book, I ended up on YouTube, searching for the iconic "1984" Super Bowl commercial ...
More interesting to me, however, was the video of Jobs at the Apple annual meeting two days after the Super Bowl. The memory in the Macintosh was only 128k (plus 64k of ROM) and the graphics are primitive by modern standards, but look at the frenzied reaction of the audience!
A few years ago I shared with Glom readers an exercise I use to expose law students to the concept of present value. Given the current state of affairs, I guess I should try and get a slot for this talk during Accepted Student’s Day. But whatever the true cost-benefit calculus of a legal education may be, one concept every lawyer should leave school equipped with is present value.
It’s simple for me. If you do not understand deep down in your soul how it is that a dollar today is worth more than a dollar tomorrow, you cannot intelligently take out a mortgage, plan for your retirement, settle a case or, yes, negotiate an earn out provision. The mistake law schools make is that we tend to teach present value in the context of talking about earn outs or debentures or other such esoterica. We should be talking about life's little NPVs from day one of orientation (or as I said above maybe even earlier).
So I just got an iPhone4! This is big news, particularly because I've catapulted from a clamshell, old-school phone (yes, all of you who'd send me charmingly conversational text messages only to receive in reply "OK," I was painstakingly pressing buttons repeatedly to come up with each letter of my response). Here I am, at long last, enjoying the brave new world of the the smartphone. Longtime readers, I know you are not shocked by my Luddititude.
I've been aware for some time that Apple automatically appends a "Sent from my iPhone" message to the end of emails. How do we feel about this? Is it a status symbol? A sign of slavish devotion to the Big Apple? A plea to excuse typos, along the lines of the old " dictated but not read" (which a partner I worked with joked meant, "dictated but not thought about")? A marker of apathy? Technological naivete?
Should I change it? Is this no big deal? What does it say about me? Give a late-adopter some guidance, here.
Since last week I've been cheering Blockbuster's bankruptcy--I'm old enough to remember Friday nights wasted in a line snaking up and down aisles, and its selection was always pitiful. I'm a huge Netflix fan. But a WSJ article yesterday foretold some collateral damage from the rise of the DVD, i.e., the demise of the independent video store. This is a departure I'll lament. The article also triggered some reflection on how changes in movie delivery technology affected the evolution of my relationship to movies. Look below the fold for Usha's Cinematic Enjoyment Evolution.
Stage 1, the Dark Ages: dominated by mainstream Hollywood fare, delivered via multiplexes--scratch that, there weren't any multiplexes back then, just movie theaters--and Blockbuster Video stores. I was an innocent who referred to "Mel Gibson' Hamlet" when the movie came out, not "Zeffirelli's Hamlet". Hey, I was in high school!
Stage 2, the Age of Discovery: In college I worked at a campus video store. I worked the early afternoon shift and got to watch a video as I helped a handful of largely hungover, and thus passive, customers. As a bonus, I received a "shift video" at the end of the work day. This was the core of my movie education, such as it was, and inspired in me a passion for independent video stores. It was also possibly the best job of my life.
Stage 3, the Age of Enlightenment: Post-college found me declaring that I couldn't live in a town unless it had an independent video store and independent theater. Happily, Madison WI and Charlottesville VA qualified.
Stage 4, the Age of Netflix: I love Netflix. I love its flattening affect. Foreign films, indies, obscure classics, all available anywhere the good old USPS delivers. It blew Stage 3's rule out of the water: I could get almost any film, at any time, all thanks to the transformative effect of the fantastically mailable DVD. Longtime readers of the blog know I'm a luddite (status update: still no iPod or iPhone). But this technology changed my world. Sidenote: I teach a case study of the Netflix IPO and in the highlight of my career as a practicing attorney I actually participated in a phone call with Netflix's CEO. I believe I said, "yes" followed by "uh-huh." Glory days.
Stage 5, the Age of Parenthood: After our daughter was born, my husband pointed out, increasingly stridently, that Netflix DVDs were collecting dust on our entertainment center. It was hard for me to let go, but I have suspended our membership, accepting the reality that we just aren't watching movies regularly anymore. Plus a Netflix membership was hard to justify when there's a great independent video store literally 2 blocks away. And with pallid, unhealthily skinny clerks in funky glasses, laminated homemade cartoon posters depicting the fate of late-returners, and those employee picks that feel like windows into strangers' hearts, it still feels like home to this law professor. The threat of closure will only make visits that much sweeter.
My efforts to prepay my summer rent in Berlin have been a fascinating tour of modern payment systems and foreign currency risk. Here’s the scoop: my rent is due in full June 1st. My landlord would like the money early and agreed to pay the transfer fees if I could prepay. One additional complication, I need to use my University’s credit card.
Xoom is just one of a bevy of new payment systems that have emerged in the last several years. Glompetitor Tim Zinnecker has already pointed out the great article in Wired magazine two months ago on the future of payment systems. When I agreed to prepay, I thought the fees I saved would more than offset the time value of money. What I didn’t anticipate was that little ‘ole me would also be subject to foreign currency risk; I guess I need to read Kim Krawiec’s posts over at the Glompetition on the Greek debt crisis on a more regular basis. In all seriousness, I do feel blessed though that my personal stakes in the foreign currency swings are so trivial (so far) compared to what many in Europe are going through.
While we are on the subject of pure bets, when will there be a prediction market on the outcome of this case? When will you be able to place your bets?
I am not ready to take an official position - "Goldman is liable" or the "SEC will lose." What law professor would given that we are only at the beginning of learning the facts?
But that doesn't stop you from making educated guesses and bets. There is of course an active arbitrage market on Wall Street betting on the outcome of things like high profile litigation and whether a regulator will allow a merger to go through.
When there is a Goldman prediction market, prices will change as new facts come up.
Is there any social value to this type of bet? -- you can probably predict what I will say if you read a previous post -- depends if any party to a bet has a pre-existing risk.
And there is entertainment value.
Would there be any intellectual value to a prediction market beyond giving me something to blog about? Remember Oliver Wendell Holmes' old adage that law is just a prediction of what a court will do.
Does that mean a prediction market is the law?
Addendum: I wouldn't be at all shocked if lawyers -- even law professors -- will be hired by arbitrageurs to evaluate bets on the case. There may be a lot less professional risk if you are placing a bet without putting your name in writing or on a blog.
Here is a more gossipy question: if you were hiring a lawyer or law professor to help you place a bet on the outcome of the case, who would you pick?
Here is a half serious legal question: could there be market manipulation if a professor then writes statements to influence the price without disclosing her interest?
Last month I acquired a Droid, and I was immediately enamored with it, but my admiration for the device has only grown. Earlier this week, when my wife moved the Droid from the place where I had set it, I anxiously asked, "Where's my Droid?!"
To which my 16-year-old daughter observed, "Sheesh ... 'My Precious' much?"
Guilty as charged. I love the Droid.
While it's easy enough to find lists of Droid apps, I thought some new Droid users might find it helpful to read a brief description of apps that are actually useful, rather than simply cool. Here is my list:
- Gmail. The Gmail app is simple, but it is the most useful app on the device. I use the Droid's slide-out keyboard much more than I expected to write emails, even though the screen keyboard is fairly easy to use, too.
- Google Calendar. Amazingly slick. This is the best calendaring software I have used, and I have been hooked on it now for a couple of years, even more so now that I have a Droid.
- Google Listen. I don't use an iPod anymore. All of my podcast subscriptions are on Listen, and they update automatically without my needing to connect the device to a computer.
- Navigation. Wow! I used this for the first time in Philadelphia a couple of weeks ago, and it was flawless. No need for TomTom or Garmin now.
- Google Contacts and Gesture Search. The Droid automatically syncs with my Google Contacts, which makes those much more useful to me. And Google has a new app allowing for gesture searches. Placing a call has never been easier.
- Google Voice. This is the best thing to happen in telephony since fiber optics. I have just recently started distributing my Voice number in place of my mobile and office numbers. Of course, I can also have calls ring on my home phone, and I have done that a few times.
- CardioTrainer. This is perfect for a walker/jogger like me. Using GPS and Google Maps, it tracks my movements by time and distance, calculates my speed and calories burned, and keeps it all in a history log. On my way to work this morning, was listening to Marketplace on Google Listen and getting updates on my progress through CardioTrainer. Maybe I am just easily impressed, but that is just astonishing to me.
- Camera. The Droid comes with a 5 mp camera that is simple to use and produces pretty decent photos. Much better than any mobile telephone I have used.
My wish list for Droid apps is relatively short, though I am certain to discover new apps that I didn't even know I was missing. Here is the current list:
- Google Tasks. SSI has a gTasks app that is functional, but not great. Tasks is my favorite ToDo list because it is simple and it interfaces with other Google software. I assume a Google, Inc. app will be rolling out soon.
- Google Reader. Droid has all manner of RRS readers, but nothing I have found does a great job with Google Reader. Again, I assume a Google, Inc. app will be rolling out soon.
- Voice Recorder. Voice recorders are essential for doing interviews and quite useful more generally to get down thoughts. My Droid has a recorder app that is more or less functional for recording one person's voice (when speaking directly into the device), but the app is not good at recording conversations. Perhaps that is a hardware problem?
- News Apps. Reading the WSJ, NYT, and WaPo through the web brower is clunky. The best news app on the Droid is USA Today, with BBC coming in a close second. I can't believe that Rupert Murdoch will allow the WSJ to fall too far behind here, and I hope the others will follow quickly.
- Streaming Radio. The Droid has some radio apps that seem to work fine, but I would really like to listen to BYU games on KSL, and I haven't been able to get that.
- Xmarks. Browsing the internet without Xmarks is a royal pain.
Finally, although this isn't an app, I have "battery life" on my wish list. My Droid usually makes it through an entire day, but not always, and I have already had a couple of close calls while traveling.
My experience with the Samsung was so bad that I reverted to a clamshell two years later. I wanted an iPhone, but I wasn't willing to switch to AT&T, so I suffered in 1990s Mobilephoneland for two more years.
Until last week, when I acquired a Droid. Wow!
(Note to iPhone users: the term "Wow!" is not intended to be a claim that the Droid is superior to the iPhone, but is intended rather to convey a generally favorable impression of my new device.)
I have read many reviews extolling the virtues and shortcomings of the Droid, but I want to focus on a particular benefit to me that I didn't see emphasized enough in the reviews that I consulted. As longtime readers of the blog know, I went all in with Google in 2007. While a couple of Google's products that I emphasized then -- the personalized homepage and Notebook -- have fallen off my list, I have added others, like Google Tasks. The wonderful thing about the Droid is the way in which Gmail, Calendar, Contacts, and Tasks update almost simultaneously on both my phone and my computer. Moving from one device to the other is seamless.
Also, other Google apps on the Droid are outstanding. Google Maps is fast and easy, and I am looking forward to using the navigation feature, though I haven't had occasion to do that, yet. I have started using Google Listen in place of iTunes, which I use primarily for podcasts. Google Sky may be the coolest app available on the Droid, but Google Goggles is fun, too.
Lots more to explore, but my first week with the Droid has been a revelation.