Quote from: JoelKatz on September 17, 2012, 07:08:19 PM

Quote from: DeathAndTaxes on August 26, 2012, 11:32:30 PM

Quote from: JoelKatz on August 26, 2012, 10:04:21 PM

It makes *no* sense for him to buy Pirate debt. It costs him money. How would he get that money back? From himself?

Well that isn't exactly true.

Person sells x BTC worth of ddebt.
Person creates uncertainty in the market and buys that debt back for y BTC.
Persons profits (x-y) BTC.

Not saying Pirate is doing that but there it isn't correct to say there is no sense in rebuying your own debt.

How is that better than this:

Pirate sells x BTC worth of direct debt.
Pirate profits x BTC.

Or this:

Before he defaults, Pirate buys x BTC of PPTs.
Pirate gets those x BTC back because they pass through.
Pirate defaults.
Pirate sells those x BTC of PPTs for y BTC.
Pirate profits y BTC.

Both of these scenarios are more profitable than yours and neither of these require Pirate to buy his own debt. Notice that they both require him to sell it.

If you do accounting outside of the blockchain, you can "counterfeit" bitcoins sort of like fractional reserve banking. But, if you perform a transaction through a bitcoin client and have it record on the blockchain, then is it really possible for pirate to do what you suggested?