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Comment by cloutchaser | Hacker News Reader

If what he's saying is true, there isn't really anything to worry about, and coinbase will likely be the winner here with a proven track record.

If they are truly holding customer funds and crypto 1:1, then you cannot do a bank run on them. They will just pay out. Which is what Armstrong says.

Frankly, after all this shit if an exchange can prove they are reliable and reputable, which Coinbase has so far, they are likely to emerge quite well out of all this (unless the entire crypto market loses all credibility or gets regulated into nothing).

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> if an exchange can prove they are reliable and reputable, which Coinbase has so far

I have no idea how Coinbase operates, so please forgive my ignorance: How do they prove that they are trustworthy?

They are a public company, they have an actual board, they are also audited by a big 4 accounting firm.

This is MUCH more transparency than some corp in the bahamas.

Obviously it's not complete security, Enron was a public company and audited, but it's still considerably better than FTX or Binance.

> If what he's saying is true, there isn't really anything to worry about

I don't believe that is entirely accurate. Coinbase used to have a pro account with margin trading. Unless they managed to clearly unwind that business there is a risk that something went wrong at one point.

If the allow margin gambles they probably are not selling the cryptos for cash to save transaction cost and just calculate the balance virtually. With all the cryptocoin volatility I don't see how process margin calls without keeping the actual cryptocoins either, so you can give them back to the lender.

Margin trading is safe for the exchange if it works as usually described in the terms: they just act as a bookmaker reallocating customer funds according to which side wins each peer to peer bet. There's usually rules that describe what happens in gaps, closing the winning side with a win that never exceeds what the losing side put down when opening the bet.

If they steal customer funds, then all is off, but same when there is no margin trading involved.

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