Winklevoss Twins’ Bitcoin Exchange
gemini.com
gemini.com
I'm a little disappointed that they only have level 2[1] HSMs in the cloud, as I would be uncomfortable protecting my hot wallet keys with only tamper evident protections, rather than level 3+ that actually attempt to detect intrusion and delete keys. Bitcoin makes for very quick stealing once you have keys, so reactive defenses against key loss don't help much as you're literally in a race condition with the attacker to empty the wallet (you into a non-compromised one, the attacker into their own). But I would assume they weighed cost/risk and I've never heard of a security compromise of Amazon's HSMs so it was probably a reasonable choice.
edit: I should also applaud their use of PGP and (explicit) respect for responsible disclosure.
HSM for the hot wallet probably provides greater security than no HSM for the hot wallet but I don't think it gives you that much extra security.
> Amazon says they don't have access to your HSM but presumably they do if they wanted to.
I wouldn't be so sure. As far as I can tell, once you've provisioned an HSM from Amazon you have full administrator access. That includes control over all trusted SSH certs, users, etc. Of course Amazon has physical access, but that doesn't give them access to the HSM's crypto functions or the key material.
If Amazon is a bad actor they trivially have access to the HSM because they could just write some software that pretends to be the HSM. However, this is probably not in the threat model because the amount Amazon loses by fucking a client like this is much more than the amount they would gain by fucking a client. The real thread is rogue Amazon employees and I guess it would be be hard for them to MITM the HSM from the start.
Your only protection for the hot wallet is to obscure the credentials you use to connect to HSM. Good luck with that against and a determined adversary that has a lot to gain from dumping the HSM key. (if it is not clear this 'only protection' thing is when the adversary has root access to your machine)
Oh.. and if you are a gemini dev. Obscure your code encrypt your HSM credentials in memory. :) Security through obscurity is actually a useful thing against attackers.
> If Amazon is a bad actor they trivially have access to the HSM because they could just write some software that pretends to be the HSM.
I believe SafeNet HSMs protect against attacks of this nature.
> This manufacturer-validated devicee identification mechanism enables a strong trust model whereby customers can be assured that they are communicating with specific SafeNet hardware units in a way that cannot be spoofed.
Also, there was a great post on /r/bitcoinmarkets by the CTO of another exchange, picking apart Gemini's technical setup. Worth a read if you're into modern frontend web development.
https://www.reddit.com/r/BitcoinMarkets/comments/3nkxh3/gemi...
Gemini is a spot exchange (simple buy/sell) while we're a derivatives exchange with much more complex requirements, so you'd expect a different set of decisions and tradeoffs, which is what I found. Gemini's real value (at this point) is in its ability to navigate regulatory capture, not necessarily in its technology. But their technology is a cut above what you usually see in Bitcoin exchanges. The exchange landscape has been plagued with unreliable/buggy exchanges, like the late Mt.Gox and the still-limping Bitfinex (which is much more complex).
On the whole, basic spot exchanges without leverage are relatively easy to create. I would love to do a more complete analysis but of course I don't have any inside information. I would be very interested in their backend, which appears to (possibly) be Scala. No clues as to whether they're using a SQL database or something more specialized like KDB+, which we use and love.
Not running a bitcoin cafe out of customer funds...
According to Coinbase, the total value of all Bitcoin is currently about $3.5 billion. This is a tiny, tiny market for "Fortune 500s and Wall Street" and is equivalent to the value of a single (smaller) mid-cap company. Even at its peak, the total value of all Bitcoin was only around $14 billion.
Daily Bitcoin transaction volume hasn't exceeded $100 million since July and has been as low as $33 million recently[1]. For comparison, daily volume in the FX markets exceeds $5 trillion.
Blockchain technology might be important but Bitcoin itself is about as interesting as the Burmese kyat or Gambian dalasi.
[1] https://blockchain.info/charts/estimated-transaction-volume-...
EDIT: those currencies you mention are under prolonged inflation and are tied to the economic output of some small countries... bitcoin isn't either of those
The problem with Bitcoin is liquidity and market depth. Even if you're a small-time trader, there are better trading markets to focus your time and energy on.
Regarding the random currencies I mentioned in jest: I was making the point that any obscure currency or security is just about as interesting as Bitcoin.
No, it doesn't. Major financial institutions invest significantly in technology and many are already actively exploring the blockchain[1].
I wouldn't go so far as to say that the Winklevii can't stake out a position in the broader blockchain market, but a Bitcoin exchange isn't likely to help them establish a meaningful position.
[1] http://www.bloomberg.com/news/features/2015-09-01/blythe-mas...
> Major financial institutions invest significantly in technology...
That they may be, but that's no guarantee of success or domination. That's the whole point of the risk of startup. Also the reason for the explosion of interest. I'm not suggesting that Gemini will win, but they are in the space, at the beginning, unencumbered by old tech (as the larger institutions are) and are making overtures to the established order. We don't know where that will lead.
That's not to say that some of the technology they develop can't be repurposed for resale to other institutions, but a lot of others are already playing in the blockchain technology space and they don't have the burdens of trying to create and manage exchanges, ETFs, etc. for an "asset class" that is miniscule and heading in the wrong direction.
* The malleability attack: a transaction relayer is able to change the hash of the transactions, thus confusing senders or receivers who rely on this hash to check if the transaction has confirmed. This creates a nuisance, but all money arrive where they are supposed to. This attack does not affect memory usage on nodes, and it's an old and well-known issue.
* A transaction spam attack (misleadingly called a "stress test") where a shady group called coinwallet.eu creates a large amount of big transactions. These mostly have appopriate fees so that regular users who want their transactions to confirm in a timely manner has to out-bid the spammer. All the unconfirmed transactions are stored in the memory of nodes, so this severely affects memory usage (currently about 1 GB on some nodes).
I'm still holding out for a BTC ETF. :-)
Instead of requiring a scan of your driver's license or other identifying document, they ask you for questions about your history. I've seen a similar process used at etrade.
Is this just for the cash balance with the exchange or the bitcoin balance as well? I can't imagine it does, but it would be a strong selling point if it did. If its not, its pretty misleading as written.
> FDIC insurance covers all types of deposits received at an insured bank, including deposits in a checking account, negotiable order of withdrawal (NOW) account, savings account, money market deposit account (MMDA), time deposit such as a certificate of deposit (CD), or an official item issued by a bank, such as a cashier's check or money order.
> FDIC insurance covers depositors' accounts at each insured bank, dollar-for-dollar, including principal and any accrued interest through the date of the insured bank's closing, up to the insurance limit.The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if these investments are purchased at an insured bank.
Nothing wrong with wanting to invest in bitcoins without fully understanding them.
Yes and no. They initially wanted to open up the bitcoin market to institutional investors who want exposure without having to change anything in the trading software they use, the accounting structures etc. This meant: provide a bitcoin security that can be traded by wall street typically, such as an ETF on the NYSE or NASDAQ or something to that effect.
Barry Silbert's Second Market (definitely a wall street player) got there first in terms of accounting structures. They created a bitcoin security that anyone can buy and put on the books just like any other security (like some oil or wheat derivatives or whatever). But that was still sort of an old-fashion security that you buy on the phone rather than on an automated exchange. Not something that pension funds, university endowment funds etc can easily get into and scale up, but it opened up the bitcoin market to say small family wealth funds that wanted some exposure to the bitcoin price. Bitcoin is one of those things that is likely to either go to $0 or become 3 orders of magnitude more valuable. So if you believe there's a 10% chance that'll happen, investing $100k has an expected value of $9.9m, of course these are just made up numbers but this is often the rationale for investing even modest amounts of money. Silbert's GBTC (marketed under Grayscale) did fairly well but in wall street terms it's a really tiny fund (iirc about $50m or so).
The 'holy grail' for bitcoin investment right now would probably be an ETF. Basically the above security, but then traded on an exchange, a derivative of bitcoins trading on mainstream exchanges (i.e. exposure to bitcoin's price potential traded on exchanges where anyone can easily and automatically buy in without having to know anything about bitcoin or change accounting/audit practices). The Winklevoss's pitch was always to set up that ETF, which they're still working on, and the fact they just launched a normal exchange tells me they're either 1) building up the orderbooks, building relations with investors and building up liquidity etc a bit for a potential ETF launch later down the line or 2) the ETF is facing major, perhaps insurmountable roadblocks so they're pivoting to something less ambitious which is launch their own exchange. (which generally sucks because 1) there are major established players, like Coinbase, which are true software companies with half a billion dollar valuations, solid engineering teams and a big headstart, and 2) because none of the big players, like an investment fund, will be likely to register for your tiny exchange just to trade some bitcoin. They did get a lot of the legal frameworks right though, so it may be an interesting partner for investors nonetheless.)
As for security... well bitcoins are obviously not FDIC insured, but their security looks really tight, I'd feel very comfortable trading with them. [0][1] They still offer the 'you don't need to know anything about bitcoin or worry about security' pitch, but you still need to register with them rather than just select their security on the NYSE and click 'buy', and that doesn't fly for most big investment funds with strict auditing and accounting practices and automated trading teams. We'll see how it works out.
[0] https://exchange.gemini.com/security [1] https://www.reddit.com/r/IAmA/comments/3nu7gj/we_are_cameron...
Also, FDIC insurance isn't for "if" your assets are lost, it's for "when". You can trust security and safety all you want, it's when things go wrong that you need insurance.
I really hope they get private insurance, because just like making sure there are enough lifeboats on the Titanic, hindsight is always 20/20.
Accepting pre-paid cards is fine too
That may be, but they no longer have my money.
Though, for what its worth, the biggest reason I left them is because they wanted to charge me a fee to deposit cash that my kids had saved up. "Because that's what Loomis Fargo charges us." So? Cost of doing business.
The irony that they were CHARGING ME TO GIVE THEM MONEY was completely lost on that particular teller.
https://www.reddit.com/r/BitcoinMarkets/comments/3nkxh3/gemi...
Love the interface, but would even greater if they would let you short somehow.
Bleh.
Not to say that he can't buy other properties (and all their surrounding properties as well)
http://www.bloomberg.com/news/articles/2015-06-02/zuckerberg...