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Comment by AstixAndBelix | Hacker News Reader

Why is it so difficult to just create an exchange that charges commissions and nothing more? Target the first 10-20 cryptos with a simple transparent platform and see the money rolling in with minimal risks of ending up naked

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Because someone else will come along and create an exchange that offers ponzi-like interest rates and run you of out of business. Also promising never to gamble with the depositors' funds etc

This is kind of Gresham's law for crypto. Bad ethics drive good ethics out of the market. Amusingly, this is often studied in the context of how deregulation led to the S&L crisis, i.e. a direct parallel.

Without having done much research, isn't that coinbase's market?

Regardless, it costs money to actually comply with laws, do audits, all that, meanwhile you're losing out on a potentially huge revenue stream by not gambling customer funds. As long as things are going well, you'd expect the shady operators to be winning in the short term.

Without having done any research at all I do wonder how reliably anyone could judge evidence that coinbase is in fact that, and not just the same as others, merely being a little more successful in avoiding too-good-to-be-true territory?

This is Coinbase, more or less.

The problem is you are competing with exchanges that make leveraged bets using customer funds and so can have lower fees.

The normalization of this is embarrassing. Can you imagine if Vanguard did this with Grandma’s GE stocks?

I'm not advocating for this situation, just pointing it out. In the case of stocks regulators have stepped in to prevent the highly leveraged competitor from existing at all.

This is essentially what Coinbase is. More like a old school bank (not modern) where your funds are "earmarked" for your account, rather than fucking around with lending it around to get some extra profits.

Same reason internet services without ads are so hard to come by. There is always more money to be made by adding creative financial products to the mix. Platforms that resist the urge to get creative charge more and don't reach the same scale as the ones that are doing something a little dodgy on the side.

Welcome to another step along the "banking regulation any%" speedrun crypto is going through.

Banks (and crypto exchanges are that for all purposes) have strict rules on what percentage of customer deposits they have to actually hold and what they can do with the rest.

If that fails there is a huge liquidity market, if that fails the fdic (or local equivalent) comes to the rescue and if that fails the central bank (as a lender of last resort) can contain the failure of a single bank. It's far from perfect but history has proven it quite robust.

Crypto (in this case) decided that all those rules are useless overreach.

They're around, they just don't make it into the news. Example: Bitstamp https://www.bitstamp.net/

Greed. They start like that, make a well oiled platform to swap cryptos, but then they think: Why not offer something more exciting? Why leave money on the streets? Even if it's risky.

because it is not profitable as you may think. The money is in derivatives(liquidations) and it has always been.

There is no demand for that. Most crypto money is either libertarians who hold use self custody OR people trying to get rich quick who will put their money wherever they can leverage it the most with the highest APR on deposits.

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