Kraken.com: Proof of Reserves | Hacker News Reader

Kraken.com: Proof of Reserves

kraken.com

57 pointskkm20 comments

This is great, because I was expecting a list of assets and instead I got an explainer on merkle trees. Honestly, it's pretty funny. Anyone who puts a penny in Kraken deserves to have it stolen if they believe stuff like this.

The problem is we all know that this really doesn't mean anything. One of the funnier stories that went round this week was that in an effort to shore up their reputation one company actually published an address for their deposits that highlighted they'd accidentally sent a huge amount out of that address and then brought it back, when questioned they claimed they'd sent the transaction in error and the recipient later returned it. The obvious shell game being played here - you send the money over, they do the audit, you send it back, suddenly two insolvent companies both pass audits.

It's just unfortunate because we all kind of know, you can't really trust these audits, because audits only really work when the people are being audited aren't highly motivated scam artists. Even if the funds do currently exist and are safe now, that doesn't help you if they disappear next week. The question isn't "are the funds there right now" the question is "can we trust you" and the answer is probably no.

> The question isn't "are the funds there right now" the question is "can we trust you" and the answer is probably no.

Why is the answer probably no? Because of what happened with FTX?

Let's face it, operators in the crypto space have generally proven to be untrustworthy. In an ironic twist to the "trustless decentralized..." we've ended up with highly centralized untrustworthy operators. It turns out companies that operate in a deliberate regulatory grey zone tend to... you know... not operate with integrity. Let's face it, there are some stable coins out there we know aren't backed, but haven't blown up yet.

They say “backed by assets”

Are those assets cash or cash equivalents? If not then they aren’t really backed at all.

Saw a tweet from the kraken CEO stating they didn’t have exotic things on their balance sheet, only things like bitcoin. Well a bitcoin backing is pretty much just as bad.

Do they convert customer deposits to bitcoin or not?

I would assume that if someone has a certain amount of bitcoin in their kraken account, then kraken has the same amount of bitcoin backing that, and the same for everything else.

Why would you assume that when every other exchange is starting to prove that they don’t

I'm trying to explain what people mean when they say that they are “backed by assets”. Whether they actually are is another matter.

Customers deposits must be backed by cash, not assets. Because the second those assets lose value the deposits are no longer covered.

Any exchange that doesn’t publish their full balance sheet can be considered fraudulent at this point. Because it’s such an easy win for them if they do and everything’s kosher

I’ve heard good things about Kraken. I’d be interested to learn more about who the founders are and how reputable they seem, as well as learning more about where the funding originates.

Along with Coinbase, my understanding is they are one of the more reputable exchanges. Looks like they are the 3rd largest exchange now behind Binance and Coinbase. https://coinmarketcap.com/rankings/exchanges/

The founder moved from CEO to Chairman earlier this year. He's always said they never have traded with customer funds, though they have offered leverage to customers, I'm not sure how that was accomplished, or what backed it.

https://techcrunch.com/2022/10/11/kraken-jesse-powell-crypto....

> though they have offered leverage to customers, I'm not sure how that was accomplished, or what backed it.

Margin's pretty easy to offer on crypto exchanges. Most of the ones I've seen will do a market sell as soon as your positions become illiquid. I doubt the computation involved in doing that for all accounts perfectly is tractable though.

Interesting. So the max that can be lost is 100%? Seems like a feature that would benefit from being explained better, if that is how it works.

Yeah but they can get in real trouble if they market gapped over and went straight to 0 or illiquid

> I’ve heard good things about Kraken. I’d be interested to learn more about who the founders are and how reputable they seem, as well as learning more about where the funding originates.

Jesse is and has been a solid member of the BTC community for over a decade; he doesn't do as much PR as that clown Armstrong does, especially not in the SV/VC circles until recently since he's stepped down, but the guy is sharp and he knows why he got into it.

Kraken still remains after all this time and was around since the latter days of MTGOX.

And just so it's clear PoR has been something exchanges have been independently verifying since the final goxxing in 2014, but ultimately you are trusting that they won't restrict withdraws which is ALWAYS a gamble regardless of situation or circumstance hence why 'not your keys, not your coins' has become a mantra for over a decade.

Anyhow here are a few interviews:

Stance on RU: https://www.youtube.com/watch?v=K3kdKkvkCZo

Anti-woke BS: https://www.youtube.com/watch?v=_gkEsvff9k8

Stepping down as CEO: https://www.youtube.com/watch?v=1eWX4AqS3B8

On FTX and SBF scam: https://www.youtube.com/watch?v=LHdhXEJ4yTY

Funny, imagine something like this would actually be regulated.

Mmhhh regulation to protect consumers... Mmhhh how could we make this possible? Sounds unrealistic to regulate something as big as a financial sector.

Perhaps PoR could be a solution to something so unregulatable? Or perhaps just use what we have fine-tunes the last 100 years?...

What is stopping them from just bribing the auditor?

“Anything you can’t buy with money you can buy with more money.” - my friend

Anyone holding crypto on exchanges is nuts.

Reply on news.ycombinator.com