Silk Road forums

Support => Bug reports => Topic started by: heisenberg2.0 on July 10, 2013, 10:15 am

Title: Is this a serious hedging flaw or is it now covered
Post by: heisenberg2.0 on July 10, 2013, 10:15 am
I just put forward the following in a general discussion thread and after doing a bit of searching for answers on how I could possibly be wrong I ended up thinking "Damm this could be a real flaw"

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During the crazy bitcoin price turmoil a few months back I wrote from my old account in the bug reports section  saying that the hedging feature is open to huge abuse in time of high fluctuation in BTC prices.
In a roundabout way I posted that potentially it could be used in an extreme example by BTC speculators to in fact hedge their own losses!

Say for example price of BTC just drops just 10% in a few hours which has happened quite often. Since SR hedging is/was tied to the 24hour floating average price on MtGox I can still trade my BTC for weed on SR where my BTC is still worth 7 - 8% above the current MtGox price. Drugs are currency too and if people notice they can make an arbitrage by buying BTC on MtGox for $60 and it's worth $66 on SR then there are people who flaunt that opportunity every time it arises.
IMO, The hedging system was designed for a sub $30 bitcoin and the rise in price this year has exposed some of it's weaknesses.

After digging around seems people have been long aware of how to use this to their advantage *Even in newbies

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I just had a hard time believing that essentially I could trick the system when a big drop in bitcoin price occurs very fast but now I know I'll be thinking about how to time my orders a bit better if the market stays as volatile as it has been recently.

Also if the hedged price is based on the MT.Gox floating average how will it work now that they have suspended trading. Bitcoins are currently trading well below what the last price was on Mt.Gox and they have suspended trading until 2013-04-12 02:00am UTC
I can buy bitcoins on bitstamp for $79.01 while the MtGox Weighted Avg is : $162.22284 and wont change for some time o_O

 this is from a thread here :  http://dkn255hz262ypmii.onion/index.php?topic=146133.msg1002748#msg1002748
Title: Re: Is this a serious hedging flaw or is it now covered
Post by: Jack N Hoff on July 10, 2013, 10:20 am
Silk Road no longer uses Mt Gox 24 hour weighted average.  The SR bitcoin value is now more of a real time value averaged from multiple exchanges.
Title: Re: Is this a serious hedging flaw or is it now covered
Post by: heisenberg2.0 on July 10, 2013, 11:22 am
Silk Road no longer uses Mt Gox 24 hour weighted average.  The SR bitcoin value is now more of a real time value averaged from multiple exchanges.

That is good to hear but none the less it must have cost them some money in the past