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Comment by CydeWeys | Hacker News Reader

> From a "blockchain enthusiast"'s perspective, this is exactly why Bitfinex and other centralized Bitcoin businesses are idiotic.

Speaking as a fellow "Bitcoin enthusiast" who's been involved in it for five years, exchanges are useful for selling Bitcoin. The key is to limit your exposure to hacks by leaving your money with them for as little time as possible. So my balances are always sitting at zero, right up until I want to sell some, at which point I deposit it, wait the six required confirmations (roughly an hour), immediately sell it, then immediately initiate a withdrawal. Even assuming a very pessimistic situation of the exchange I'm using suffering a full loss every year, that still puts my % loss from hacks at well under 1%. That's a risk worth taking considering how much more inconvenient all other ways of selling Bitcoin are.

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Agreed. This is pretty much how I use exchanges.

sounds like a PITA.

its not, its a different best practice just like online banking has different best practices than using checks.

bitcoin is the slowest of all cryptocurrencies and many people use alternate cryptocurrencies (colloquially called altcoins) that transfer to exchanges faster than bitcoin (2-10 minutes compared to 10-60 minutes)

so storing more securely in your own altcoin's wallet and transferring is very fast.

most people aren't selling bitcoin for national currencies when they are using an exchange, they are trading between altcoins and other cryptoassets.

In the 5% of the time you actually need a national currency, you deal with those fiat exchanges on the far edge of the cryptocurrency economy, and deal with their slowness and questionable security for a brief amount of time.

Also, although less true now, exchanges can't be relied on to broadcast transactions to pay for things as well as a software wallet does. So when you aren't speculating and trying to buy something in a time sensitive way (such as using bitpay or shapeshift.io), using an exchange as a personal bank account for online shopping results in a horrible user experience.

> most people aren't selling bitcoin for national currencies when they are using an exchange, they are trading between altcoins and other cryptoassets.

I'd actually like to know if this is the case. It certainly isn't what I'm doing. I did hold some Litecoin/Peercoin for a while, and I still have Namecoin, but I have enough Namecoin that I'll probably never have to buy one again to keep my .bit domains, and I haven't held anything else except Bitcoin in over a year. So my typical use-case for an exchange is just to exchange national currency for cryptocurrency.

I suspect that I'm not the only one, but I don't have any evidence for that. If you have evidence that my use case is actually the 5% use case as you claim, I'd be interested to see it.

Well first, I will concede that although I used 'many people' earlier in the post, I did write 'most people' in that sentence, which was an accident. I'll stick with 'many people' to refrain from quantifying it.

Secondly, my extrapolation came from the daily volume of trade on the exchanges, from what I see on Coinmarket cap and other sources

http://coinmarketcap.com/currencies/bitcoin/#markets

As of time of writing, Ethereum/Bitcoin pair is 20% of bitcoin trade volume. Where Ethereum Classic/Bitcoin pair is another 6.5% of bitcoin trade volume.

Feel free to calculate all of the pairs to see which percent is national currency pairs. This is useful if I was here to defend the "most" assertation, but the point I intended to make stands. Altcoins are fast, more practical to move to exchanges, many people use them.

And finally, 'many people' aren't trading in and out of the currency pairs to acquire goods and services, just for speculation. As such I'll stick to my '5% of the time' statement about when people actually need national currency.

Whoa. The way you're using those stats doesn't make sense. Trade volume is heavily skewed toward the use cases of those who make trades often; i.e., day traders. A user who makes a $100 trade once a month comes out to affecting trade volume an average of $3ish per day. Meanwhile a user who makes $100 trades 10 times per day is going to affect trade volume by $1,000 per day. So trade volumes could easily overrepresent a day trader by 33,333%. In other words, a day trader could easily have 333 times as much effect on trade volume as a once-a-month investor.

So maybe people who make frequent trades are doing it between cryptocurrencies, which makes sense, because if you're day-trading cryptocurrencies it makes sense to trade for other cryptocurrencies, as that avoids regulation. But we don't have any data about what percentage of users are day-traders. If anything, the fact that Eth/BTC trades are only the percentages they are on that chart indicates that this isn't the case.

And incidentally, people who make frequent trades are the ones least likely to pull their money out of the exchange to somewhere safe, because it's going to be the biggest PITA for them, since they'd have to do it so often.

Valid points

Maybe decentralized exchanges like Bitsquare can alleviate them soon

It's a bit annoying, but there are benefits to decentralization, too. If the banking system collapses, my Bitcoin are safe. If I get arrested, the government can't seize my assets. If I travel to another country, I don't have to pay any different fees to transfer my money there.

It's really not though? All I have to do is two things spaced roughly an hour apart (from the comfort of my own home). Buying a money order or mailing a check are more involved.

Look, I'm a big Bitcoin enthusiast, but Bitcoin isn't easier than traditional banking.

I sent ~8 checks at the beginning of the month without doing literally anything, because they were set up with automatic bill payment. When I get paid it goes directly into my account, again without me doing anything. Unless you're going to claim that Bitcoin is easier than literally not even thinking about getting paid or paying my bills, ease of use is not really a selling point for Bitcoin.

There are real reasons to use Bitcoin that aren't provided by traditional banking. We don't need to persuade people it's easier, especially since it's not easier.

I don't know who you think you're arguing against, but it isn't me. My point was that exchanges are useful for exchanging the cryptocurrencies that you already have for fiat currencies, and I presented a best practice that minimizes exposure to loss. That's all. I was pointing out that saying it's a pain in the ass is seriously overblown, because it's actually really simple, and a large number of common types of transactions that people never think about are actually more inconvenient.

Okay, that wasn't at all clear from what you said, because you used a very bad example (sending checks--this is much easier than sending Bitcoin these days). But if your point is that Bitcoin isn't difficult in some general sense, sure.

I keep my money as cash, in a vault that I had to design and build from scratch in my own home. It's probably not secure against robbery, but it's how I have to store my money to avoid the fact that all the banks are being robbed blind all the time. When I do actually have to transfer money to someone, I go to a bank where I keep a zero-balance account, make a deposit and physically stay there until it clears. Then I initiate the transfer, and as soon as that clears I immediately withdraw any leftover funds from the account and go back home to put it in my vault.

If someone had seriously proposed this as a way they use traditional cash + banks, you'd be laughing at them.

Many laughable things become fine with technology. Look at various encryption or network protocols. If someone had seriously proposed to Caesar that to keep their messages truly safe they needed to work out the math of a one time pad for every communication (or maybe more practically by modern standards, AES), they'd be executed. Rather than dismiss things on analogy, look at things as they actually are. The total amount of friction for the bitcoin equivalent is very little which makes it not a problem at all.

If I have to transfer my money into an exchange, wait for it to clear, and then immediately transfer it out into a wallet with a long random address with a random key that I then have to protect, that's not "very little friction" compared to traditional banking. There are many benefits to cryptocurrency, but ease of use is not one of them, and when you claim it is, you come across as out-of-touch with the average user.

The analogy fails because it's different in a substantial number of ways. That's the problem with arguments by analogy in general -- they're weak.

I'm not proposing an alternative to cash and banks here, I'm just pointing out that, if you have Bitcoin and want to sell it for fiat currency, using an exchange is definitely the easiest way to do so, and a best practice for doing so is to hold your cryptocurrencies yourself and only move them to the exchange when you're selling them, rather than holding them in the exchange.

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