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Coinbase is positioning themselves to be the first legit cryptobank. Fidelity now feeds their customer portfolio data (on BTC, LTC and ETH holdings) from their

Coinbase is positioning themselves to be the first legit cryptobank. Fidelity now feeds their customer portfolio data (on BTC, LTC and ETH holdings) from their user cold storage holdings at coinbase. Its extremely risky to hold client keys that hold money. Making a CryptoBank is like making a regular bank on hard mode.

JumpCrisscross 9y ago
I don't think they're going for bank, but the more-lucrative exchange model. "Bank" means ongoing fees but lots of risk. "Exchange" means low-risk transaction fees.
fpgaminer 9y ago
> Making a CryptoBank is like making a regular bank on hard mode. Back in "the old days" bank security was based around metal vaults and guns. That I would also consider doing banking on hard mode. Coinbase just needs good specialist engineers and a good insurance policy. Not much different from a traditional bank. At least Coinbase has an advantage over traditional banks. Good engineers would probably rather work at Coinbase where they get to play with cool Bitcoin tech, rather than a stuffy old banking system which still limits passwords to 8 characters...
- 45h34jh53k4j 9y ago
  Insurance on cryptocurrency holdings? might be hard to find a provider that would accept that level of risk and volatility. Would the premiums increase with the value of the BTC? What if there just isn't enough bitcoin in circulation to cover the loss (there is a 21 million cap on BTC). Bank robberies don't usually leave the bank with nothing :-) Exchange gets rolled, it might not even afford the claim. Agree about advantage as being a great place to work vs traditional banks. They will attract better talent for sure.
  - fpgaminer 9y ago
    > What if there just isn't enough bitcoin in circulation to cover the loss (there is a 21 million cap on BTC). It's being defacto established that when a cryptobank gets robbed, the funds are repaid to customers using local currency, not BTC, priced at the time of the loss. So, from the underwriter's perspective, it's just insuring whatever total USD value Coinbase currently holds, with consideration given to Coinbase's ability to prevent theft. Not any different from a bank insuring itself against loss due to cybertheft.
    - Domenic_S 9y ago
      Read that again and see why it makes no sense
    - dajohnson89 9y ago
      FDIC makes this analogy a tad more difficult, afaik.
      - fpgaminer 9y ago
        How so? FDIC doesn't cover theft.

JumpCrisscross 9y ago

I don't think they're going for bank, but the more-lucrative exchange model. "Bank" means ongoing fees but lots of risk. "Exchange" means low-risk transaction fees.

fpgaminer 9y ago

> Making a CryptoBank is like making a regular bank on hard mode. Back in "the old days" bank security was based around metal vaults and guns. That I would also consider doing banking on hard mode. Coinbase just needs good specialist engineers and a good insurance policy. Not much different from a traditional bank. At least Coinbase has an advantage over traditional banks. Good engineers would probably rather work at Coinbase where they get to play with cool Bitcoin tech, rather than a stuffy old banking system which still limits passwords to 8 characters...

45h34jh53k4j 9y ago
Insurance on cryptocurrency holdings? might be hard to find a provider that would accept that level of risk and volatility. Would the premiums increase with the value of the BTC? What if there just isn't enough bitcoin in circulation to cover the loss (there is a 21 million cap on BTC). Bank robberies don't usually leave the bank with nothing :-) Exchange gets rolled, it might not even afford the claim. Agree about advantage as being a great place to work vs traditional banks. They will attract better talent for sure.
- fpgaminer 9y ago
  > What if there just isn't enough bitcoin in circulation to cover the loss (there is a 21 million cap on BTC). It's being defacto established that when a cryptobank gets robbed, the funds are repaid to customers using local currency, not BTC, priced at the time of the loss. So, from the underwriter's perspective, it's just insuring whatever total USD value Coinbase currently holds, with consideration given to Coinbase's ability to prevent theft. Not any different from a bank insuring itself against loss due to cybertheft.
  - Domenic_S 9y ago
    Read that again and see why it makes no sense
  - dajohnson89 9y ago
    FDIC makes this analogy a tad more difficult, afaik.
    - fpgaminer 9y ago
      How so? FDIC doesn't cover theft.