Coinbase Wants Wall Street to Resolve Its Bitcoin Trust Issues
bloomberg.com
bloomberg.com
At times I’ve been unable to access my accounts or have transactions complete in a reasonable amount of time. Coinbase closed my account without notice with no explanation other than a mention of their desire to comply with FinCEN. I never got an answer from them as-to what I did “wrong”. I sure as hell wasnt selling heroin or babies on Silk Road. Imagine if Wells Fargo closed an account without notice or explanation after a customer had a few normal deposits and withdrawals. deep rolls eyes
You don't have to imagine.
https://consumerist.com/2017/08/21/feds-investigating-wells-...
"Feds Investigating..."
BB&T has done this to me in the past. The only recourse is taking your business elsewhere. Coinbase doesn't seem too different in that regard.
Looking for a new exchange, but they're all having problems with staying online or verifying new accounts.
They stole my money and I'm being downvoted for it, ha!
I gave them money , they gave me coin , everything worked ... maybe you made them angry and tried to do something illegal on their site so they shut your user down.
I hear they prioritize "good" users in their system.
There is a section where there is the type of account you add, if you add a bank account you get special treatment
Ahh, crypto-punk-decentralized-liberatrians never seize to amaze with the level of double-think they can achieve. How someone can hold both "the government is evil and might take your money" and "maybe you made this website angry so they didn't give you your money" at the same time is truly impressice.
Woah, nice strawman
Could you imagine living in a world where you had to start every business relationship by only making extremely small "beta test" transactions, be it a trip to Target to opening an account at your local credit union. Like, on your first trip to Costco, you only bought a box of gum because you couldn't ever be sure they wouldn't somehow completely fuck you over and if they did fuck you over the societal response would always be "LOL too bad, so sad.... shouldn't have trusted them!!!"
I dunno about anybody else, but that really isn't the world I would want to live in.
There is value, substantial value, to trust others and when that trust fails, having a solid legal system to back you up. If you cannot trust anybody but yourself, every transaction you make becomes significantly more expensive.
Readers, please enshrine this comment as the canonical example of the Cryptocurrency Corollary of Godwin's Law: "As an online discussion about cryptocurrency grows longer, the probability of a comparison involving Ponzi approaches 1."
Coinbase's entire business is to irreversibly and permanently send you Bitcoin in exchange for you sending them funds that you have months to dispute and reverse. And this is with reasonable fees that put a check-cashing outfit to shame. Of course they're going to err on the side of caution. Based on zero information whatsoever, I'm going to assume you're telling the truth. But for every honest person like you, there are probably at least two who truly are trying to steal Bitcoin from Coinbase.
I don't like it any more than you do when businesses make mistakes. But jumping straight to "Ponzi scheme" is just silly.
I once ordered a computer from Dell. The sealed box arrived empty. I went through few weeks of increasingly enraged emails and phone calls. Should I have assumed Dell was a Ponzi scheme?
> in exchange for you sending them funds that you have months to dispute and reverse
and here we see the limits of crypto currency and the legitimate concerns people have with it.
Because the Corollary is true. At this point to believe otherwise marks you as a credulous dupe.
You were probably defending Mt Gox up to the day of its collapse. The Bitcoin True Believers are the easiest marks for these scams and cons because their ideology blinds them to reality.
That said, it seems closer to the truth to say that they're simply under load. But it's hard not to wonder. There's no way to know there's a problem until it's too late.
It's a good reminder to keep your coins off Coinbase.
I'm finding that keeping coins off of Coinbase is easier to do than keeping cash off of Coinbase. It's fast and cheap to transfer cryptocoins to Coinbase, but takes me days to add cash.
And then Bitfinex is not processing BTC > USD transactions for ">250BTC"...
A VC-funded SV company should do better.
My USD withdrawals always show up in my bank account 2 days later.
If you're not buying with the intent to hold, I recommend depositing USD to their exchange GDAX. Fees are lower and you can sell/withdraw immediately.
Recently logged in to find that previously verified ID documents were somehow wiped out and my account became restricted. Reverified ID without issue, but account still restricted. Been 13 days and nada from their support save for an automated response.
Example:
Ann Rule was on a first name basis with Ted Bundy before he was caught. He didn’t murder her or any of her friends once. Its probably fine to take a car ride from him.
I went with BitPanda. I should leave my referral link here but rather my own words carry the recommendation.
I've had a ticket open for about a month w/o access to those funds.
People are particularly emotional about Coinbase because it touches on their bottom line -- money. But let's not forget the fact that ALL startups have major scaling woes. Bugs in the tech being ironed out, overwhelmed support and engineering teams recruiting and integrating talent to meet the demand -- in Coinbase's case exponentially growing demand. If you've worked in a software startup you know how easy it is to be met with exponential increase in demand, and how impossibly difficult it is to stay above water growing a team at the same rate.
I'm positive on Coinbase due to their backing. YC, Andreessen Horowitz, DFJ, among dozens of high-profile investors. These guys want a $20B valuation, they're not interested in backing a failing company or a scam.
Yup, they're a startup, they're having problems, they're doing their best, actually managing pretty well given the circumstances.
None of that changes the fact that they can't deliver the service as expected.
It can't provide the level of service expected for financial services of this sort. That doesn't imply they should give up and go home, but it does mean that one should temper one's expectations of being taken fully seriously.
You have a point that SV needs to get into the mindsets of the industries they are trying to disrupt and rise to those higher standards.
Let's also not forget while many other otherwise good UI platforms dropped out of NY because well, it was too hard and the fees were too high coinbase continued to integrate and work with lawmakers because they know how important it would be not to disciminate against states and also to have legal integration with Wallstreet, so as much as you may be upset with Coinbase for not scaling fast enough for you and making the government go faster, you should ask why so many other platforms aren't there to offer you an equally good alternative.
That being said, throughout all this bustle lately, I have not experienced issues with Coinbase and have performed a variety of money moving actions to and from multiple bank accounts coinbase and gdax with no delays. This could be because I'm an established user, approved by the Federal Trade Commission and have an established credit history with Coinbase which has led to another increase in what I am allowed to do.
Furthermore, Coinbase has been open apologetic, taken complete responsibility for the lack of being able to instantly gratify as they stayed over 8x the exponentiation of new users trying to register relative to the last spurt in the sunmer and promised to be transparent even if they can't be perfect. They have a ten day backlog on customer support tickets even after hiring 400 new people just for customer support and plan to hire even more.
It sounds like you are a new user who feels entitled to instant gratification, instant approval by the FCC, instant trust from Coinbase who probably doesn't have an established credit history with you and you're mad because things didn't work for you immediately.
I saw the other day Coinbase had an update saying wire transfers we're delayed 2-3 business days but I did not have a delay with mine, which means they probably prioritize established traders.
I wouldn't be so hard on Coinbase, but if you think you can provide a better solution by all means go for it. We need more competition in this space.
I also recommend certifying yourself with a few other platforms and getting your accounts tested and registered and having some money there so if you experience delays with Coinbase you have other options to move money. I am established with multiple platforms in case I experience issues with Gdax, but as it turns out I never have.
Very impressed with them.
They’ve released almost $200 million worth of tether in the last day.
1) Someone who wants to sell $1M USD of BTC may be happy to take $1M USDT instead for legal/tax purposes. This transaction would have zero impact on the BTC/USD price.
2) Tether receives $1M worth of BTC they can slowly disperse back into the market via their own exchange (since Bitfinex owns Tether) in a controlled manner that doesn't push the price down.
3) With USD in hand they can either put it into their reserves (assuming we trust them) or they could also use the cash to further eliminate any selling pressure on the exchange (with a large buy order "wall") or even generate upward pressure.
4) BTC price becomes stable or only moves upward and attracts more outside money and speculation. Repeat the cycle.
> 1) Someone who wants to sell $1M USD of BTC may be happy to take $1M USDT instead for legal/tax purposes.
Can you clarify that you mean for the purpose of tax evasion as opposed to tax avoidance? IANATL but it seems very unlikely that the IRS or any tax jusrisdiction that I’m aware of, would consider a trade into USDT a like-kind transaction [1]. It would still trigger capital gains.
If lots of people really are operating under a different belief then this is going to get really messy. If there’s a crypto-correction, non-HODLers could be left with tax liabilities they can’t cover.
I have no idea on the legal specifics or whether or not Tether/Bitfinex are going to be providing reporting to governmental agencies (like Coinbase+IRS are doing). The discussions I've seen often cite Tether as a way to capture profits in USD and holding off on the "real" USD conversion at a later place or time (taxes or restrictive outflows like China's $50k USD/yr limit). Basically viewing it as a way to operate in USD without creating a banking paper trail.
If conversion to USDT causes a legally taxable event that's going to remove a significant portion of the proposed use-cases for tether.
> If lots of people really are operating under a different belief then this is going to get really messy.
I think "really messy" is a given at this point. I was in Starbucks a few days ago and overhead a non-tech savvy man say: "I need to figure out how to buy some of that bitcoin so I can get rich but all the websites I've found are crooks!"
These exchanges could be pulling all kinds of shenanigans including outright making shit up. What is stopping them from buying / selling more bitcoin then they actually have? If an exchange wanted to pocket some real cash, just sell some bitcoin they don't have. How about just creating fake buy / sell orders to drum up some excitement? Or better, just do real trades back and forth between yourself. Once you add Tether into the mix and abstract away real cash inputs and outputs things get even more exciting. An exchange could start buying bitcoin with unbacked USDT to jack up / stabilize the BTC price--works great so long as everybody doesn't all try to convert their USDT to real cash dollars.
Since they are all completely unaudited, exchanges could be pulling this stuff all the time.
Tether makes this 10x more exciting though.
This sounds extremely foolish. Why would anyone intentionally wish to hold such a large amount of a token that all evidence points towards being actually worthless? (Tethers can only be used to purchase cryptocoins in Bitfinex, which is most likely insolvent -- it is not possible to redeem them for USD).
> 4) BTC price becomes stable or only moves upward and attracts more outside money and speculation. Repeat the cycle.
I think this is the most likely explanation for Bitfinex's behavior. They know that there will inevitably be a bank run when Bitcoin's prices show a sign of going down and that will unravel the scam they have been running so at this point the only thing they can do is continue to push up the price at all costs.
Yep. Which makes the "institutional investors are handing Bitfinex hundreds of millions of real dollars in exchange for Tether" claims people are pushing even more ridiculous.
They have yet to release an actual legal audit, by an official auditing company.
Seems like no amount of verification will ever be enough for a good chunk of the crypto community. The scars of Mt Gox and BFX socialized loss are too deep.
The market seems to think otherwise, you can unload your tether for $1.02 most days if you want.
And I believe that if you want to prove to the world that you have a bunch of money then you should do a full, legal, audit.
That's the bar. If they have all the money, then a legal audit will prove them right.
They may be fraudulent; they may be not. Regardless, they have a lot to lose by revealing their banking partners to the world. The United States probably used the Bank Secrecy Act to force large American banks to not send money to accounts associated with Bitfinex. If Bitfinex reveals its banking partners for Tether, then they risk getting cut off from those partners or those partners getting cut off from western banking.
edit: This seems to show that $180 million was issued in the last 3 days: http://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC3...
https://twitter.com/el33th4xor/status/941707765910818816
I think this is a bearish signal until its clarified.
The Twitter user Bitfinex'd is pretty much solely responsible for starting this trend, with Emil Gun Sirer retweeting pretty much all Bitfinex'd tweets. Often, if you dig into this evidence, you find mostly FUD signals -- taking various data from the internet and interpreting it into something that it isn't.
Basically I don't know nor care if Tether and Bitfinex are fraudulent, but personally I've never seen clear evidence that it is, and people like Bitfinex'd and Emil Gun Sirer seem to push FUD backing their personal anti-Bitfinex agendas without proof.
> “But first, Coinbase...needs to legitimize itself -- and bring in revenue...”
Like it doesn’t have revenue? It’s daily volumes of BTC are around 30k. Sometimes a lot more. Plus ETH. Plus LTC. They must be making at least a million per day in trading fees. They’re a money printing machine at this point.
For comparison, JPMorgan generates around $280MM/day of revenue and $74MM/day of profit.
I saw it riddled with HTML errors, there were buttons that didn't do anything, I got (html) responses that were false, which I only knew was the case because I looked directly at the API response.
I remember I 'sold' some litecoin on Coinbase that never sold. Took me to a couple days just to know it wasn't going to mysteriously disappear.
I find the fact that they want to add new coins even though they haven't solved any of their current issues very alarming.
Yuck, this blew up and I think alot of people took it the wrong way. I think Coinbase is great, and I'm sure everyone who works there is awesome and terrific at their job.
Anyone who has worked on any half way successful project knows just how hard both uptime and security are and I'm in no way upset at Coinbase for having growth issues.
I've done this for years and might not even get an interview with them. They'll be fine, they're just learning how to deal with alot of hard issues all at once.
The question was posed, what do you need to do to get institutional money and I answered.
To clarify...
Coinbase , atleast from a hedge funds perspective has 2 tasks.
1) prime broker or custodian, from this perspective you just can't be hacked and loose anyone's bitcoins.
Not sure how a hedge fund would tell its clients that they lost any amount of their funds due to an exchange being hacked, this is just so foreign to the way the markets currently work. I don't think the funds clients would be too accepting of a loss of any amount due to this.
2) as an exchange, This is probably easy for people to understand. When the volume picks up that's when you make your money. If Volume causes the exchange to go down, you can't make money.
Again this is very rare for most markets now to go down to volume and when it does it doesn't really matter too much because the concept of having your shares with an exchange doesn't really make sense in the equities market.
You'd just start trading at another exchange and none of your shares are actually held with the exchange, nor do you need to send shares to an exchange to trade, you just trade and settle at the end of the day.
EDIT END
I'll preface this by saying, what I'm asking for is hard, very hard, but being a grown up is hard..... You can't just ask people to invest billions of other peoples money and then claim "best efforts" if your exchange crashes under load.
Well what institutional investors want is pretty simple to understand, though very hard to implement.
1) No counterparty risk. Everyone can get hacked, but coinbase being hacked shouldn't every, under any circumstances result in me loosing any bitcoin they hold on my behalf.
A hedge fund can't just go to their clients and say sorry, lost all our money, coinbase got hacked, the hedge fund itself and its principles would be sued into oblivion.
I mean if the Nasdaq, NYSE or prime broker ever got hacked, no one would expect to suddenly loose all their shares, or cash held with their prime broker.
2) The exchange can't go down, like at all. Once a year for 5 minutes is fine, or every day at midnight for 10 minutes is fine, but during regular trading hours you can't just throw your hand up and say "hey, best efforts here there just alot of volume right now, we'll be up in a few minutes"
Hedge funds make their money on volatility, which means the more volatile and busy the exchange is the more they'll want to trade. Going down when times are busy is just can't happen.
Source: I work for a hedge fund.
Strange comment, I think I've confused you.
All this was about exchanges and what hedge funds expect from them, not guarantees about what hedge funds provide.
And you are right, exchanges do go down, and its news when they do because they are so good at what they do that its very rare.
> I don't know what reality you operate in
I operate in the US Cash Equities and options markets. What I've asked for is par for the course there, in that no one mentions it because its the very lowest base, must have requirements.:)
When was the last time you heard of Goldman Sachs begin hacked and all the hedge funds that use them as a prime loosing all their money?
And yet, it has absolutely nothing to do with what we are talking about:)
Which is what exchanges need to do to get institutional investors;)
Goldman Sachs is not an exchange.
> it has absolutely nothing to do with what we are talking about:)
Exactly. You are confusing others by giving GS as an example, while we're talking about exchanges.
Coinbase right now acts in two ways.
1) as an exchange who allows you to trade on it.
2) as a prime broker who holds your coins. In this capacity they are just like Goldman Sachs who can function as a prime broker for hedge funds.
(a prime broker is like a bank who holds your securities for you). So in this case Goldman is relevant as they do the same function that coinbase does with respect to holding securities on behalf of a client.
Does that help clear up the confusion?
No, it adds.
> So in this case Goldman is relevant as they do the same function that coinbase does with respect to holding securities on behalf of a client.
Then why did you write in your other message that Goldman Sachs has got nothing to do with this discussion? It seems to me that you are confused. Please decide whether you think the Goldman Sachs is relevant or not before proceeding.
I used to work for a startup that wrote software for hedge funds (this was back in 05-07). The guys from Fidelity would come in and they'd have a huge checklist of IT best practices that you need to adhere to, everything from security to backups to SLAs with financial penalties for violating them. The guys from Magnetar would come in and be like "Sure, we'll try anything that gives us an advantage in the markets."
I suspect that your idea of what's "par for the course" and the "very lowest base" is pretty far from what's actually the lowest base in the financial industry, and similarly I suspect that brndnmtthws's view of what's typical for a hedge fund isn't typical for all hedge funds.
Yeah, no. Tape is reversed all the time in event of oops. Probably the most famous one was when Knight [NITE] had "oops" and started making markets in itself, tanked the stock, had millions of dollars executed against it and got NASDAQ to REVERSE completed transactions, including the ones painted via SOES.
Getting your Bitcoin back after it drops to $5 isn't much consolation if you were unable to trade at $15,000.
> If you need someone to trust, you’re doing it wrong.
You can't do anything in crypto without having to rely on someone else. Trust is not irrelevant in cryptocurrencies - it matters just as much as in traditional markets.
This point may prove to be very sticky.
It might be solvable with smart contracts... consider ethereum's https://www.etherdelta.com, which operates as an auditable smart contract. Your money literally can't be stolen without your private key; even when it's held in escrow by the contract. (Of course, a bug in the contract code could let someone get through; but that's all out in the open, so easier to check for).
I could see something like that being done, with the individual trade data being signed, but held off-chain until the user wanted to make a transfer (then ALL signed movements related to them could be consolidated on the chain).
---
Short of that, a centralized exchange is gonna run into the fundamental issue that cryptocurrencies have value because of a few properties; Chief among them being that they can be moved atomically, and with non-repudiation. Those two alone make theft a LOT easier to get away with once achieved.
Being able to walk back such thefts would require general consensus of the network. For most coins, the majority of participants would see that as a fatal weakening of the protocol's guarantees, and drop out. The highest profile rollback I can think of was ETH's june 2017 DAO incident. Even that proved rather controversial: though the market voted in favor in the end, it was a messy out-of-band solution, which may not work again.
---
Conversely, some lesser coins such as NAV actually formalized "consensus voting" on such out-of-band issues as part of their network protocol. I could potentially see that being used as a final band-aid, though "tyranny of the majority" issues would seriously need solving. NAV uses proof-of-stake, though, which certainly helps keep their voting in the "put your money where your mouth is" territory.
All in all, I think there are potentially some trustless and "semi-trustless consensus" methods that could solve this issue in revolutionary ways. But none of them are tested... Coinbase may just have to get themselves massively insured using traditional methods, at least for a few more years as the tech expands.
If they can’t insure deposits, then that shows a fundamental weakness in the security model.
(Admittedly the website is housed somewhere, but it's little more than a GUI shell for signing procedure calls, you could run it locally or interact directly).
I think the big issue hindering that model is that they need something allowing users to pipe into traditional currencies. So far all the solutions to that have been IOU tokens like USDT tethers; which end up generating governance headaches of their own, as their value desyncs from their base currency due to arbitrage & supply issues.
I do think the surface area for attack is much more limited, since the code is innately public (unlike centralized trading houses).
That (in theory) should make them more secure, particularly if considered in terms of the transparency provided. I also think theorem proving, and languages amenable to it, can greatly reduce the surface area even further; reducing it down to a matter of reviewing what assertions the theorem prover was handed, along with trusting the VM's implementation itself. (The later is also helped by having multiple independant implementations).
But I don't think the tech is there yet. The languages currently being used aren't the greatest for theorem proving; no one's actually done much of that in practice anyways; there aren't "best practices" for upgrading your smart contract when a bug is found; and there's ALWAYS an assertion someone forgot to add to the test suite.
But I do think smart contracts could remove "server compromise" and "unauditable code" from the list of main dangers of an exchange, which does seem quite useful in the long term (once the ecosystem fleshes out a bit).
Shouldn't be that hard, even using just the features available in Bitcoin today. You'd need a 2-of-2 multisignature wallet for each account holder, with one key held by Coinbase and the other by the user. When the user wants to spend some coins, he or she signs a transaction which Coinbase prepares and counter-signs; neither the user nor Coinbase—or an attacker with access to Coinbase's keys—can transfer the funds unilaterally.
The only thing missing is a convenient UI.
I think the mainly catch would be scaling the speed (etherdelta is limited to the ETH network block rate). I don't know too much about lightning's details, but given that they've demonstrated atomic cross-chain swaps, I bet it's set up to handle something exactly like what's needed.
Which is quite exciting... I just always moderate my enthusiasm because for all complex software projects, the devil (and 80% of the work) is in the details :)
Actually, banks get hacked and lose cash. Permanently. It happens rarely, but it happens. For example in this SWIFT hack authorities were able to recover only $18 out of $81 million with the remainder $63 million permanently lost: https://en.wikipedia.org/wiki/Bangladesh_Bank_robbery
No it is not. Coinbase has clients all over the globe. It is always regular trading hours.
The fact that Coinbase has clients globally is not pertinent to the discussion (or only insofar as the distribution of those clients could influence at what time you'd want to put a daily trading break).
However, granted, a 10 minute trading break daily looks like too much effort to be worth it. A scheduled monthly break of an hour or so sounds reasonable.
If that were peak-trading time for a particular locale that would be unfortunate, but the regularity would be preferred to failing under unexpected load at random times of the day.
It's hard to tell how many layers of security you need when you're holding tens or hundreds of millions of digital assets that don't require a physical breaking and entering, and when the entire blackhat world is eyeing you as a target.
Coinbase is insured by AON Insurance for their hot wallet balance. However, we won't know how Coinbase/AON will handle that until it happens.
I believe any fiat balance is also insured by the FDIC, but I'm less sure about that.
>2) The exchange can't go down, like at all.
Yep. Crypto trades 24/7. It's really surprising they don't have regular planned downtime to address this.
The NYSE is not vulnerable to this kind of attack. Anyone dealing with BTC is.
That's the inherent risk with crypto. You have to resort to "leg-breaking" to get the thief to give up the coin. Otherwise you'd need undue influence on the development and forking of the blockchain to get them back (if I understand it right -- I may not).
That's why many will say to not keep your coins on an exchange, because they are weaker businesses compared to existing financial institutions.
That's not to say you can't secure your investments properly, but to many, it takes a lot of time and effort to get it right.
It really is a "let the buyer beware" landscape.
They can refund in fiat of course, but that's the point. If fiat didn't exist then this would be a potentially insurmountable problem if the theft were large enough.
Now what happens if the thief panics or screws up and deletes their keys. Those Bitcoins are now lost forever. The money supply just went down permanently.
... or ... a really smart thief with enough money behind them might not even need to steal any Bitcoins. They could just destroy cold wallet keys in a very stealthy way and profit from the appreciation of coins they hold elsewhere.
This whole system is just not ready for prime time.
People lose their bitcoins. It's as simple as that. That's a risk everyone should understand before buying.
They might be compensated in some other way, like fiat, and then the insurance company either picks up the bill or goes under. Then it's just business as usual as far as bankruptcy goes.
So yes, you have every reason to be wary of exchange solvency because of how new they are and how little support is provided to them by government and law enforcement compared to the banks. Every investor should understand that as critically as they understand how important their wallets are.
>This whole system is just not ready for prime time.
Yeah, it's one big experiment. I'm sure these problems were encountered before in economic history, but it seems like they are repeating a bunch of blunders within a short time frame, which to me, smells of manipulation (Satoshi probably didn't invent it to just manipulate people)
/s
This is a cool idea but I'm not sure it works (or I don't understand it correctly). In order to reduce the supply enough to appreciably increase the value of the remaining coins, you'd need to freeze/destroy a lot of keys, or keys to wallets with large holdings. If the owners of those keys start reporting their losses and the news spreads, people could start to lose confidence in bitcoin itself and move to other assets, reducing demand.
Hence its deflationary nature.
By only promising depositors -- and only having insurance for the case that -- they will pay out some flat USD amount per bitcoin in the case of loss, so that anyone putting BTC in Coinbase wallets knows the possible downside.
Same logic as with most insurance: they don't write policies that promise to get you that a good-enough copy of that neat classic showerhead fitting when your house burns down, only the money to buy a replacement, even if it falls short of the sentimental value.
Mature markets have thin margins, which is why you see financial institutions salivating over crypto right now. All these risks have been known for years now.
Insurance policies for bitcoins are very new and very tricky. This is not an FDIC or SPIC insurance unless AON is insuring cash balances you should treat this insurance as you would treat mob protection - hopefuly you won't need it because if you do you are kind of screwed and probably won't be able to collect.
2. Exchanges do go down, the only question is how often. If the exchange does go down, you want the exchange to say, "We're doing our best, but volume has exceeded our capacity. We'll be up as soon as we can." The alternative is to continue to accept trades and pretend that everything is okay. Honesty is good.
Same with your comment about exchanges - yes the NYSE and NASDAQ can go down. Once or twice a year. For 20 minutes. Coinbase (and Gemini and GDAX and Kraken and everyone) are going down for about x5 times that in any given week. Which is not a "a small qualitative difference". It's an infinite difference.
SIPC insurance will protect you up to a certain amount. Even then, though, you won't have your shares returned to you -- merely the dollar value of those shares will be reimbursed.
Counterparty risk? What counterparty risk? The minute the funds leave your wallet governed by your private keys then you no longer have control. The moment you transfer funds then they no longer belong to you. By design!
Downtime? What downtime? If individual nodes go offline then the network continues to function. Bitcoin is a decentralized protocol. By design!
Perhaps instead of trying to hack centralized banking models onto decentralized currencies we should be using decentralized models to fit the currency. Perhaps, instead of Coinbase claiming to hold Bitcoin in the name of account holders, it should facilitate the immediate transfer of Bitcoin to the private wallets of people who are purchasing it and refuse purchases of people without wallets set up. Perhaps Coinbase should allow transaction fees to skyrocket as a result (even more than they have currently), due to not processing transactions off-chain, and that this would be fine, because it would push demand towards cryptocurrencies with lower fees.
Bitcoin exchanges won't mature until they're less like traditional stock brokers and more like BitTorrent trackers - they don't actually host the files or the money, but tell you where to find people who do, who you can exchange with directly in a decentralized way.
All exchanges do this to one extent or another. To minimize risks they would need to accept cash and never accept bitcoins to their own wallet which would cause massive transaction fees.
As you point out, this causes massive transaction fees, but that's built into the model. The transaction fees would be lower if they would increase the block size....
you probably should... but it might haven gotten better in the last couple weeks.
Wonder if anyone has an outstanding ticket being ignored that's longer than that
http://penguindreams.org/blog/cloud-at-cost-part-ii-the-unsu...
https://theoutline.com/post/2592/bitcoin-is-none-of-the-thin...
Bitcoin can't operate as a currency without having exchanges between it and other currencies, and those exchanges strip all the benefits of bitcoin.
Edit: show title of article.
Maybe there is hope with Bitcoin Cash (BCH), because it can piggyback on the existing bitcoin integration infrastructure. Or maybe Ethereum or Monero or some other altcoin will take the place of Bitcoin. But more and more, it's looking like the original cryptocurrency has failed to innovate and solve fundamental scaling issues and it's first-mover advantage won't last. If these altcoins can scale better than bitcoin, they only need to match bitcoin's integrations with the existing financial system to win.
It's pretty amusing that Brian was willing to back an altcoin (B2X) that hadn't even performed basic testing before its spectacular failure, and yet coinbase can't manage to enable segwit. Did they implement their own Bitcoin and decide not to port segwit?
Where exactly in the white paper does it state this? I've just looked it up, and don't see any reference to Bitcoin being an experiment.
So some of these servers that were wise have only paid everything (servers, wages, etc.) using the real currency that comes in via credit cards and paypal and have just held onto the btc .. which makes it extremely valuable.
But people don't set prices in btc. The prices are set in fiat currency and are paid for based on the price of btc that day .. meaning you could have spent 10euro for a service last year in btc that would have been worth 100euro .. or that could be worth 0.01 euro depending on where the market goes.
But yes you're right, unless services start pricing actual service in btc, it's not really fungible for goods. It's always going through that translation layer. If anything, if McDonalds started taking mBTC and charged x mBTC for a burger and didn't change that value with the market, you'd start to see bitcoin stabilize (although you might be paying $100 for a burger some days .. if you go by what the exchanges claim the value is).
Is Bitcoin access coupled with one private key or multiple?
Say someone has 10 bitcoin on their computer and a private key so its only accessible from that computer. That computer holds a lot of value. If the computer gets stolen theyve stolen all the bitcoins with it? Given that the secret to the private key can be broken at some point in the future.
Or is there a way for the user to claim back his/ger bitcoin by creating a new key with same secret?
In this case it is similar to a physical lock on a safe: if you lose the key to the safe you just have to accept that you no longer can access the contents of the safe.
You can have wallets that are protected by multiple keys, but there is not a whole lot of wallet software that does this in an easy to use way right now.
An open source wallet by bitpay with good support for multi-sig transactions.
If you generate a new address with a wallet software, it'll have a private key (that is much longer than the deliveryAddress.length) and you can move your funds from an exchange to this address (whereupon you'll have complete control).
If you lose the private key it's [basically] impossible to recover with brute force, which is the point. If someone takes the physical hard disk from you and you have no backup of the info, yes, it's gone.
If you somehow have your info stolen, but still remember it (via air-gapped pc text file or something) you can move the funds before they get swiped. Again, use wallet software to generate a new address with a new private key and repeat.
So either you have a really good way to store your private addresses so you can still use your coins in the future, or you trust an exchange to hold the coins and you don't play in that realm at all. Those are the most popular options currently.
>Coinbase has offered a solution: crypto custodial services, slated to roll out next year. Called Coinbase Custody, it'll be available to investors with at least $10 million in deposits.
Honestly, WTF?
Please explain, in detail, how somebody with $10M in BTC should store it.
You're supposed to store $10M in BTC on the blockchain, which - after all - records ownership of every bitcoin ever mined. And keep access to it in a paper wallet; control of those $10M lies in access to a private key, so if you keep the key secret, nobody can access them (like with Satoshi's $40B or so in Bitcoin).
That people don't seem to want to do this is perhaps a lesson in human nature that crypto-anarchists and other aficionados of "trustless completely-distributed systems" should perhaps heed. This same dynamic comes up over and over again, from open-source to the Internet to P2P and now to cryptocurrency.
Bitcoin maximalist: "Bitcoin, no need to trust evil centralised institutions!"
Actual Bitcoin users: "Oh, hey, could you take care of my Bitcoin balance for me, please? And you have password recovery, right?"
Who knows what will wind up being the dominant use case in the future, or who will be the dominant user population. Maybe the ones who drive early adoption, and who govern the philosophical and technical direction, will turn into a tiny faction of stakeholders in the end, but maybe they continue to dominate technical development because they are the best stewards of the idea. Or maybe they're overthrown and it turns into something else, run by small business owners. Or the governments of third world countries.
The point is that nobody knows how it will shake out. Acting like the current state of things is somehow 'wrong' is arrogant and historically uninformed.
Bitcoin offers the choice and makes trusting a 3rd party completely optional.
For some institutions, they already have legal departments and experience with valuable contracts, so this service presents nothing new. Securing the private keys of a cryptographic currency, however, is not something they have experience with.
There is certainly some truth about reality vs. the cypherpunk vision, but I also think this is largely a strawman; many people in the Bitcoin community don't believe in overthrowing governments or that everyone will participate in completely decentralized systems. Bitcoin can still offer value alongside traditional financial markets and the legal authority of the state.
On a paper wallet? How do I generate that? How do I print it? Where should I store it?
A bootable Linux distro on an air gapped machine could solve the first one. An air gapped printer the second maybe. A cryptosteel the third.
I THINK that will make a safe place to store multiple millions (or billions, or trillions) of $ worth of crytocurrency.
I, unlike many others, don't want to make a $fortune dollar bet that I'm not going to make any sort of mistake (one I could have none about or not) when doing all of this stuff.
I trust coinbase not to run off with my money just like I trust vanguard not to run off with my money.
The AMAZING WORLDCHANGING but much less dramatic, incremental improvement that bitcoin offers me is that now I don't have to. That's a BIG deal.
If my mom doesn't want to figure out what the hell an air gapped bootable Linux distro is, then coinbase is a fantastic solution for her.
"I trust coinbase not to run off with my money just like I trust vanguard not to run off with my money."
As someone with both a CoinBase account and a Vanguard account...your money is much, much safer in Vanguard. And that's the irony. When Bitcoin was distributed, people could at least point to the lack of a centralized institution as an advantage. Now that it has centralized institutions, they're inferior to the centralized institutions in the mainstream financial world.
And I certainly hope your mom isn't putting $10M into bitcoin on CoinBase. Regardless of security issues, that's a very good way to lose $10M.
(On second thought, yes, yes, she should absolutely put her life savings into Bitcoin, so I can take the other side of the trade and sell into this bubble. ;-))
Yes, obviously nonrepudiable ledger schemes are natural allies with governments. But not all cryptocurrencies are the same.
Which is a great flag to never trust any major service's Monero and ZCash offerings.
I think the point most people here are making is–this is the big leagues and if you want to be taken seriously, suspending trading mid-day is unacceptable (happened this week).
Nothing to do with web sockets IMO.
Hell, I worked for a startup FX exchange once with a team of 4 devs working on the actual matching pipeline and our beta product handled much more volume with better latency.
Frankly, this (misplacing a transaction) is more concerning to me than delays or verification issues. Losing a transfer like that puts their whole transactional integrity into question.
Again, delays (something showing as "pending", etc) I could live with, considering their recent spike in usage. But, when a transaction is simply missing, while the ones before and after it are showing in Coinbase, is scary.
I agree with you that they need to handle their support much much better. The bulk of their cases (judging by the publicly visible mentions of @CoinbaseSupport on Twitter) can be handled by simply explaining the situation and telling people to wait. There are only 5 or 6 issue types that can be categorized and routed programmatically even. Instead, they are currently only responding to 0.5% (not a typo) of Support requests on Twitter (not counting DMs). I think that may be the lowest response rate I've ever seen from a company, especially a tech one.
are they just trying to cash in as much as possible, like many of the investors, before the math is settled
or do they publicly state that they believe.. meaning without proof.. that p!=np?
are they resting their future, and the futures of all of their users.. and here apparently the economy writ large.. on faith?
Meanwhile, I ignored your comments years ago and I'm very, very comfortably retired now.
But please, do go on with your smart insightful comments.
Also wtf with this comment. Who are you answering to
Maybe becoming very, very comfortably retired as a bazillionaire has a deleterious effect on reading and attention.
As someone who has been involved with and supportive of Bitcoin for several years (I started mining in 2011), the fact that it's impossible to point out any of the negative aspects of Bitcoin and the community surrounding it without just being downvoted or accused of "not holding any Bitcoin and being jealous" is starting to become incredibly tiresome. Denying the negative aspects of this sector is just going to encourage those negatives to continue. You guys are your own worst enemy.
I know a number of people who won't touch Bitcoin with a 500ft pole because of this shit. These are people with large sums of money that could be flowing into the sector, who are being chased away by the stupidity and shysterish behavior of the Bitcoin community and shady exchanges.
I completely disagree with that. Wallstreet and big banks have lost trillions of dollars investing in "Safe" stuff before.
2) Coinbase needs to make sure they deliver what they say they can deliver. No hacking. No delivery issues. Minor to none technical issues.
That's how you build trust long term. Honestly, Wallstreet won't matter if your goal is to be around in 10 or 20 years.
3) This brings me to my last point, if you really are trying to do this thing long term, why would even care about Wallstreet? Asking them for help just screams to me, "We want to make a shit ton of money right now before everything falls apart"
I am seriously worried about the large exchanges ability to handle the amount and size of the transactions. Especially the growth.
> I am seriously worried about the large exchanges ability to handle the amount and size of the transactions.
One approach to solving hard problems is to enlist the help of people who have a great deal of experience in solving the same hard problems.
You don't have to, of course. It's possible that having a table tennis table is sufficient to help one muddle on through.
But it sounds like Coinbase are taking a more pragmatic path. In the circumstances, that's probably prudent. Unfortunate but prudent.