Well, with different issues. FDIC insurance is probably better than whatever Coinbase has. You are also open to technical f-ups on Coinbase's end, which can move the price down if they are bad enough.
On the other hand, Coinbase cannot print BTC. This characteristic is what draws a lot of people to Bitcoin, beyond just "nobody can take my keys".
Agree it's a false equivalency, disagree that holding BTC in Coinbase defeats the purpose.
If you use Bitcoin, then you remove the bank, and you don't need FDIC.
FDIC is there to protect bank customers from a bank going insolvent. Banks go insolvent if they lend too much money out, and then all customers demand their money back at once.
Your Bitcoin wallet doesn't lend your money out. It can't go insolvent. You don't need FDIC for it.
Here's a clear example of why lacking this is Bad For Bitcoin: https://www.google.com/search?q=hacked+site%3Ahttp%3A%2F%2Fr...
Bitcoin is more like having a pile of cash. The FDIC doesn't protect you against a pile of cash in your house getting stolen. Keeping a large amount of cash has advantages and disadvantages and risks. If you aren't willing to understand and mitigate those risks, then don't do it.
Banks don't go insolvent because they lend "too much" money out. They go insolvent because the collateral on those loans is less valuable than they estimated. E.g. the assets are lower than the liabilities. That is the only possible way that any business can go insolvent.
So when you take a loan on a house, the house is the asset the money lent is the liability. Housing prices drop enough, people walk away from the loan, the bank goes insolvent. That is true if it has a big balance sheet or a small balance sheet as these numbers just scale out.
> and then all customers demand their money back at once.
That is applicable to the era portrayed in the Mary Poppins movie, but not in a modern banking system. Even in the early twentieth century "bank runs" was something people would talk about when what was really going on was asset deterioration and breakdowns in the capital market.
But Hollywood preferred the more intuitive story and also the story in which the survival of the bank was in the hands of common people's choices rather than in the hands of the capital markets, where it truly lives. Thus you get It's a wonderful life where a stirring speech to not withdraw money can actually effect the P&L margin of a bank rather than the less exciting story of whether the bank's cost of funding exceeds its cost of borrowing.
Today banks borrow at a low rate and lend at a higher rate.
This includes borrowing whatever cash they need to meet outflows. In fact some banks don't even accept deposits at all, they just borrow from capital markets and don't even deal with depositors. Most big banks are depository institutions and tap both depositors and short term funding markets.
All that matters is that the interest received from inflows is less than the interest paid on borrowing to satisfy outflows. It is all about making money on that spread. When banks can no longer make money on the spread, they go insolvent even if no one makes a withdrawal. If banks are making money on the spread, then withdrawals are not a concern to the bank.
Not quite. Yes, bank runs nowadays are very rare, but they can still happen, as exemplified by Northern Rock in 2007[1]
"On 14 September 2007, the bank sought and received a liquidity support facility from the Bank of England, to replace funds it was unable to raise from the money market. Reporting of this complex scenario led to panic among individual depositors, who feared that their savings might not be available should Northern Rock go into receivership. The result was a bank run – the UK's first in 150 years – where depositors lined up outside the bank to withdraw all of their savings as quickly as possible, particularly since many others were doing the same."
[1] https://en.wikipedia.org/wiki/Northern_Rock#2007_crisis_and_...
The value of cryptocurrency is inversely proportional to how functional the regular digital banking system is.
The actual user experience of SEPA is 2-5 business days just like America's oh so antiquated ACH system.
There are some very specific edge cases where SEPA instant exist, and that edge case may work for a large number of people that live in that walled garden.
That garden seems to be same country to same country transfers, where both banks have SEPA instant.
But to make it seem like the Eurozone or SEPA participant network has this solved has been very disengenious.
I frequently sent money to foreign countries and never experienced taking it longer than one day.
Oh, and it's free too.
This happens. Both are (most of the time) reversible in standard banking.
Fortunately the sum was trivial, but nevertheless ...
EDIT: For clarity, I was referring to an actual online wallet, a wallet on a website, but it’s not too different to ask the same question about a software wallet on a computer-connected device that does automatic OS or wallet software updates.
Secondly, you can use computer hardware from before even the invention of Bitcoin, and then code the software on that hardware, developing the libraries yourself.
Third, you can use computers simple enough that it’s not feasible to hide any management engine trickery in it.
Fourth, yes, you CAN actually build your own computer, which I’m trying to do. :)
But to further your point, I still haven’t proven to myself the argument that the elliptic curve used by Bitcoin hasn’t been intentionally compromised like the NIST curves were. I take the word of the Internet for granted there... But I suppose I could prove that myself.
You can track the bitcoin reserves on exchanges here: https://cryptoquant.com/overview/full/247?window=day
I'm not sure how to even understand this comparison.
FDIC protection ensures that if your bank fails, your money isn't lost; you can move it to another bank. This vulnerability doesn't exist with Bitcoin, so there's no need to protect against it (though obviously it has other risks that are mitigated by the presence of a bank in the first place, like loss of access due to poor secret handling).
And the clearing feerate, which correlates to mempool queue depth, incoming transaction velocity, and cohort feerates, would increase dramatically.
But if there was a run to convert BTC to USD, the exchanges would not be able to cover the USD required. They'd limit or suspend withdrawals immediately. At some point someone would have to start buying with fresh USD for the exchanges to be able to pay out the sellers. With big enough news, there could be tens of thousands of dollars gap between bid and ask, which would take a long time to ease.
https://www.npr.org/templates/story/story.php?storyId=102384...
> But on the other hand, check these FDIC folks out. They know what they're doing. And every week they get more experience. In the 10 weeks since the FDIC took over the Bank of Clark County, 18 more banks have failed. That brings us to a grand total of 20 since the start of this year — a number that will likely grow tomorrow.
edit: The reason wire fraud is so popular is basically, because once the money leaves the account, the recipient has to agree to return it. You can imagine fraudster likely will not.
For the average person, I wonder if this means that if your mortgage servicer or your say student loan servicer does the same thing and inadvertantly pays off your loans that they then can't come back at you.
FDIC does not protect you from sending money to the wrong person. It only protects you from a bank going insolvent because it lent out more money than it has. That can't happen in Bitcoin, because your wallet doesn't lend your money out to other people.
Bitcoin wallets don't lend your money out to other people because they aren't corporations trying to make a profit. They are just wallets, doing a service for you.
We've come to rely on using banks when we want to send money to other people because USD alone doesn't know how to send itself to other people online. So banks have stepped in to fill that role. Now we can't even pay for things without a for-profit bank existing in the middle of the transaction. And that bank tries to make money by lending out your money to other people, and that gives it a risk of going insolvent, and so FDIC was created so that the government takes the risk of banks going insolvent.
If you send money to the wrong person, a bank may or may not be able to get your money back. It depends on the bank, and how well they know the other person, and what method they used to send the money, and how strong the threat of lawsuits is between the two parties. None of this has anything to do with FDIC, which becomes totally irrelevant when you use Bitcoin.