21 ms·

Warning Signs About Another Giant Bitcoin Exchange

360 points by donohoe 9y ago

randywaterhouse 9y ago
One thing I have been remarking recent conversations with other long-interested crypto-friends hasn't been about the price action, or about the drama, or about the lack of transparency on exchanges like Bitfinex -- but rather about the comparability of discussions today to those we were having in 2013. (Disclaimer: I attempt to avoid holding strong opinions in this space) There are certainly patterns in the environment (maybe marketplace) which are repetitive and reminiscent of the early days. Confusion around price is one. Two viscerally opposed schools-of-thought is another. One thing I think, though, that has suffered is the availability of information assessing the market structure or environment on it's merits/deficiencies without bias. This is likely hard to achieve, in general, but these days you cannot find reliable news without being sucked in to the swirl. Coindesk is pulling a CNBC-of-crypto, articles flying out every hour with opposing themes. I totally understand the model, captivating the audience, but it makes it hard to observe what's happening fundamentally (without having a grasp on the core narrative). I continue to follow, in a casual way, but as I said continuously impressed by how the environment remains young -- trends from '13 persist to '17 and probably '18 (still young!).
- goialoq 9y ago
  BTC is special because it's designed and desired to be a pure transaction system, separated from all of the "soft" skills like human trust. It's EVE Online with real money. Thus, everything that makes BTC interesting for use the real world -- trying to use it to buy stuff, to put it somewhere safely, etc, it fundamentally broken by design, because none of that real world stuff has the mathematical strength of the core bitcoin protocol, and all the players are trying to operate on the assumption that none of the stuff that makes the real world work is important in the BTC world. It's an anarchic paradise, bubbles and scams as far as the eye can see.
  - peteretep 9y ago
    > it fundamentally broken by design Literally three comments up you are blaiming speculators for the fact it isn't being used as currency, rather than design.
  - travisjungroth 9y ago
    This has no relevance to the comment you’re replying to except that it’s about cryptocurrency.
- CyberDildonics 9y ago
  Coindesk is intimately linked with blockstream, the company that has gone to great lengths to take over the github repository, censor /r/bitcoin, and ultimately keep the block size limit at 1 MB so that they can profit from fees on their own 3rd party chain.
  - dane-pgp 9y ago
    The controversy surrounding BlockStream is fairly well known, but what is the connection between them and Coindesk? I've not been following that side of things.
    - kobeya 9y ago
      As far as I can tell, they both share a minor investor, Barry Silbert. And anyone who thinks that means anything hasn’t been paying attention to what went down regarding the New York Agreement, where Blockstream (standing alongside many others) opposed Barry and won.
  - kobeya 9y ago
    Have a shred of evidence to back up your rediculous conspiracy theories? This isn’t Reddit. If you make wild accusations, back them up.
    - CyberDildonics 9y ago
      Which part do you think is a theory? Censorship on /r/Bitcoin is trivial to test, just go there and post something about censorship, criticism of blockstream, the high fees on the main chain due to block size restrictions, etc. See if your comment stays. Don't forget to log out and check that it wasn't silently grey listed.
      - sanxiyn 9y ago
        Theory part is this: "Coindesk is intimately linked with blockstream". As far as I know, there is no evidnece of this.
- alt2501 9y ago
  Kudos to you for not having strong opinions. Is there ANY place you recommend for information in this space?
- mancerayder 9y ago
  Is it possible that a large part of the back and forth of mixed article opinions is to drum up volatility? Because if that were the case it'd most benefit people who make money buying and selling on exchanges. They don't just make money when it goes up.
  - mancerayder 9y ago
    AND not to mention it makes money for those who own the exchanges -- volatility == more transactions and hence transaction fees.
cvsh 9y ago
Is it wrong that, as a non-Bitfinex customer, I'm kind of rooting for an exit scam so that the price of BTC tanks and offers a perfect buying opportunity?
- ericls 9y ago
  That's probably why the price goes up.
  - deleted 9y ago
    [deleted]
- anonymous5133 9y ago
  Problem is that strategy is not as solid anymore since you have bitcoin cash on bitcoin's heels. If BTC doesn't innovate then BCH will eventually over take it. BCH is more user friendly for people who want to do daily transactions while BTC is not. If legitimate users switch to BCH then the only thing that will hold up BTC is the long-term people. All the speculators are just going to follow where they can get quick profits.
  - kobeya 9y ago
    There is plenty of innovation going on in bitcoin space. Schnorr signatures, MAST, lightning, client efficiency improvements.
    - hudon 9y ago
      Yup. Also Confidential transactions, mimblewimble, sidechains, drivechains,... even bigger blocks. People forget that bigger blocks could come to BTC too, but devs are making the safe choice to try scaling with ways they know won’t compromise security or decentralization first. People have had cheaper alternatives to Bitcoin for a while now (ETH? LTC?) and yet BTC is still valued significantly higher. There’s more to this game than a cheap digital payment.
- bodegajed 9y ago
pfisch 9y ago
Honestly it sucks that these incredibly sketchy exchanges do so much volume. Poloniex and Bitfinex are sketchy as hell, but I guess their fees are low so no one cares. It would be somewhat surprising if bitfinex doesn't go down in a spectacular ball of fire within the next 4 years.
- cperciva 9y ago
  Is there any independent evidence that they do in fact do so much volume? I know bitfinex in particular has been accused of creating fake wash trades in order to manipulate prices; this would also have the effect of increasing their reported trading volume.
  - pfisch 9y ago
    I mean that is definitely possible. https://coinmarketcap.com/exchanges/bitfinex/ https://coinmarketcap.com/exchanges/bitfinex/ I put some btc on bitfinex to quickly buy some NEO and move it off the exchange this year.
  - mrb 9y ago
    Why do you suspect volume is faked? Bitfinex's volume is not even that high. It's only twice the volume of GDAX ($550M vs $250M in last 24h: https://coinmarketcap.com/currencies/bitcoin/#markets https://coinmarketcap.com/currencies/bitcoin/#markets) and we know GDAX isn't faking volume or wash trading because of all exchanges in the world GDAX are the most law-abiding/professional, plus they have high taker fees (~0.25%) which make wash trading expensive/impossible. So, with Bitfinex (1) trading 10 times more currency pairs than GDAX, (2) being older, and (3) having somewhat smaller fees, it's perfectly plausible they have manage to trade (only!) twice the volume of GDAX.
    - cperciva 9y ago
      I don't have any reason to be suspicious beyond "they have been accused of this". BTW the fact that GDAX has high fees doesn't mean it's expensive for them to create fictitious trades... they don't have to pay themselves fees!
sturmeh 9y ago
The stolen Tether are unredeemable, and thusly worth nothing. They pose a certain risk with accepting dodgy transactions though.
- deleted 9y ago
  [deleted]
- kobeya 9y ago
  We don’t know for certain how much was really stolen. We just have Tether at their word. And if more was stolen than the amount frozen, it certainly is redeemable—for bitcoin on an exchange.
  - lug0r 9y ago
    or do we? http://omnichest.info/lookupadd.aspx?address=16tg2RJuEPtZooy18Wxn2me2RhUdC94N7r http://omnichest.info/lookupadd.aspx?address=16tg2RJuEPtZooy...
modeless 9y ago
It is certain that US law enforcement will come down hard on Tether eventually. Anyone pretending to transfer dollars outside the banking system will meet the same fate as Liberty Reserve. When it happens Bitfinex will be toast, and Bittrex and Poloniex may fall too.
- aero142 9y ago
  Why would Bittrex be hit by this?
  - burger_moon 9y ago
    I believe the parent commenter is referring to other exchanges that trade tether.
  - modeless 9y ago
    Tether is a large fraction of their volume and likely deposits as well. If all that money vanished overnight their customers would be extremely upset. Also, without Tether they could no longer pretend to have USD support. So many people are fooled by "USDT" into thinking that they have dollars. Could Bittrex push all the blame onto Tether and just keep operating as if nothing happened? I don't think this would work very well. At the very least this would suddenly point a ton of law enforcement scrutiny in Bittrex's direction which might end the unlicensed money transmitter party over there.
  - deleted 9y ago
    [deleted]
- Xx_motocross_xX 9y ago
  Yes and no. With the 'owner' of BTC-e now facing extradition to Russia instead of the US, it appears that the US is rapidly losing control of the world monetary system. BTC-e was back up within a month as WEX, so it appears the US effort had no effect. There is nothing stopping someone from opening and operating a cryptocurrency exchange from a country without an extradition treaty. Even countries with extradition treaties are less keen than ever to extradite to the US, especially with the US facing war crimes charges in international courts. The US has made their position on torture clear. Other countries are concerned that by sending their citizens to a nation complicit in torture, they might face legal penalties or lawsuits themselves. It's ironic, since the US gloated heavily when they took over the BTC-e domain. They thought that this would be another cut and dry Liberty Reserve, but this time they're caught in an international tug of war.
chisleu 9y ago
Don't forget that someone has been using Tether to wash trade bitcoin on bitfinex... https://medium.com/@bitfinexed/are-fraudulent-tethers-being-used-for-margin-lending-on-bitfinex-5de9dd80f330 https://medium.com/@bitfinexed/are-fraudulent-tethers-being-... https://medium.com/@bitfinexed/wash-trading-bitcoin-part-ii-who-and-why-is-someone-wash-trading-on-bitfinex-e1c7b5e0b3bb https://medium.com/@bitfinexed/wash-trading-bitcoin-part-ii-... It was widely believed that the tethers being "sold" weren't really backed by anything and were being used to inflate BTC prices. Now they are claiming 30M were stolen? I'm betting it's going to end up being a lot higher. They are using 30M to soften the blow of the higher number. I believe this tactic has been using by Yahoo and others in announcing the number of stolen accounts as well.
- ActsJuvenile 9y ago
  We also have some proof of this belief now. Wells Fargo stopped Wires to Tether on March 30, 2017 and Taiwanese banks stopped all international wires from Tether on April 18, 2017. Tether has since issued 600 mill new tokens. Source: https://tether.to/announcement/ https://tether.to/announcement/
  - Yizahi 9y ago
    I noticed that NYT wrote "Since then, it has moved between a series of banks in other countries, without telling customers where the exchange’s money is stored." but afaik there is zero evidence that there was any bank that interacted with Bitfinex after Wells Fargo dropped them.
    - CamelCaseName 9y ago
      But the comment above suggests that Taiwanese banks worked with them after Wells Fargo. Is it sloppy research on NYT's part or is BFX's claim unverifiable?
      - racont 9y ago
        NP@NYT summarized a long-standing Twitter discussion - he's put in little to no independent work on the story. Tether has claimed to have audited bank statements from the start. To date, they've never performed a real audit from an internationally recognized auditor. In Sep '17, Tether paid for Friedman to state that they had ~$350m in USD in certain bank accounts. The bank names and locations were blacked out. If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity). Over the past two months, Tether has issued another $300m in USDT while transparency remains opaque
aresant 9y ago
To see adoption go as wide as current HODLERS hope BTC can go newbies need to be insulated from the type of insanity laid out in this article. Like at bare minimum and for the survival of crypto nobody should trade on unaudited exchanges. Or a step further despite Coinbase's scaling issues the fact that they have both insurance coverage and FDIC coverage on all accounts makes me much more likely to refer people interested in starting w Bitcoin there than anywhere else. But this is also the kind of centralization that Crypto is designed to avoid. https://support.coinbase.com/customer/en/portal/articles/1662379-how-is-coinbase-insured- https://support.coinbase.com/customer/en/portal/articles/166...
- deleted 9y ago
  [deleted]
- root_axis 9y ago
  > they have both insurance coverage and FDIC coverage on all accounts makes me much more likely to refer people interested in starting w Bitcoin there than anywhere else. Very misleading statements. The FDIC coverage does not include any bitcoin wallets. The bitcoin insurance only covers their hot wallets (something like 2% of all the bitcoin they hold). Yes, cold storage is a bitcoin security best practice, but it obviously does not eliminate the chance that a breach could occur, and if it does, none of that 98% is covered. With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape.
  - ActsJuvenile 9y ago
    > With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape. They have been victims of massive USD chargebacks. I think Coinbase is bleeding so much money to chargebacks that co-founder Fred Erhsam figured out company is never going to turn a profit and resigned.
    - c0nducktr 9y ago
      I thought AHC transfers were very difficult to get chargebacks on. How much could they actually be losing on these events? Are they actually not that rare?
slacka 9y ago
As someone who lost over 100 bitcoins in a sketchy mining pool, for the love of god, please be careful. I was in early on this madness, and dedicated my gaming rig for a couple of years. Basically forgot about it, until one day I went to move my coins only to find the site just a Cloudflare mirror. Learn from my mistakes and be careful.
- ringaroundthetx 9y ago
  How did you lose money in a mining pool? Hopped in a cloudmining scam? Mining pools don't store funds, you tell them your payout address.
  - kobeya 9y ago
    Not all pool software was, or even still is so enlightened.
  - whyenot 9y ago
    I seem to remember that in some pools you had to initiate a payout to your wallet through the pool website. Payouts weren't automatic.
  - ww520 9y ago
    They used his machine for mining over the years but never paid?
  - pmorici 9y ago
    They used to store funds.
  - stordoff 9y ago
    In the early days, I fairly sure you had to manually request a payout. Even when automatic payouts were added, the default thresholds to trigger a payment were at what would now be a fairly significant amount.
- Nicholas7900 9y ago
  Some times, i don't code programs. I know that's a typical of someone perceived as a hacker, but my techniques have always been a typical. For instance, it might surprise readers to know that all of the widely publicized hacks I was involved in - let's call that the "Adrian Classic" period :p - were done using a web browser and Notepad, on dialup, on Windows 98. If you stop to think about it, this is really a true meta-hack. People who ask to learn how to hack are generally told to install Linux, learn how to code, and experiment with various hacking tools. Much how network administrators learning to secure their systems tend to get the same certifications, read many of the same books. This results in activity that's really more like jousting than hacking - a predefined pattern of attack taking place against a predefined pattern of defense. When i started Hacking, I learnt how to code, I learned to read code, and I learned how programmers thought, which assumptions they tended to make, and what mistakes their common training tended to cause them to make in common across completely different systems. One example of this is writing access code with the assumption that if failure = no then access = yes. On many systems, I found that by simply removing a username or password field, access would be automatically granted - because there had been no username or password failure, since there had been none to fail, so access was granted. Because my methods were and are unorthodox, they are rarely detected by intrusion detection systems. They don't resemble common attacks because they aren't common attacks. I often make them up on the spot. Which is why the question "teach me to hack" is so frustrating. This is particularly emphasized by a meme pic I got a Google Alert for this morning: I always give readers free Access to reach me for all kinds of Hacking Issues though : compositehacks@gmail.com
perseusprime11 9y ago
With so many issues, how does one invest in Bitcoin safely?
- smacktoward 9y ago
  Buy stocks of GPU manufacturers.
  - noitsnot 9y ago
    AMD is very cheap. Morgan Stanley recently downgraded because they believe mining crypto will fade by 50% in 2018.
    - prewett 9y ago
      Considering AMD has lost increasingly large amounts of money every year since at least 2013, I'd say AMD is pretty expensive.
      - noitsnot 9y ago
        Fair enough. They will pull into the black in the 4th quarter if they hit estimates.
  - tehlike 9y ago
    or options.
  - kobeya 9y ago
    Relevance? Bitcoins aren’t mined on GPUs.
- keypusher 9y ago
  Buy on a trusted exchange (ie coinbase), move coins to your own private wallet.
- sowbug 9y ago
  Buy $1,000 worth from Coinbase, assuming you have $1,000 to lose. Move it immediately to a paper wallet. Store the paper safely and forget about it for five years.
tryingagainbro 9y ago
NYT in 1997 about him: PHILIP G. POTTER, who develops investment products for high-net-worth clients of Morgan Stanley, Dean Witter, Discover & Company, likes to think of himself as an ''uberconsumer.'' Last year, he spent his bonus on a 50-inch TV and a $3,500 Rolex watch. He wears custom-made $800 suits, custom-made $80 shirts -- always with white collars and white French cuffs -- and $200 shoes. He is ''totally wired,'' as he puts it: His home phone forwards messages to his pager; he answers them over a tiny $800 cellular phone." ...'I can continue to come up with new products, to add value, [in a downturn market]'' he said. ''I'm not responsible for getting money. Getting it's hard when the market goes down. But there will still be products to sell. It'll just force me to be a little more creative.'' http://www.nytimes.com/1997/10/19/business/faces-of-the-new-york-economy-big-earner-big-spender-little-burden.html http://www.nytimes.com/1997/10/19/business/faces-of-the-new-...
- derwiki 9y ago
  > Last year, he spent his bonus on a 50-inch TV That made me chuckle
  - pault 9y ago
    Sorry to go OT, but ten years ago we needed five guys and a truck to move my friend's $2000 55" rear-projection TV. It weighed as much as a small piano and we almost dropped it off the deck. I just got a 55" 4k LED TV for $400 and it weighs as much as my dog. The mind reels.
- TheCapn 9y ago
  In a somewhat matter of his defense, in 1997 he was 25 years old... that was 20 years ago. I know my ideals and opinions have changed from 25 to 30, I can only hope he has grown a bit in those 20 years and only to take that article as a small matter of his personality.
bringtheaction 9y ago
I moved the crypto funds I had on Bitfinex to other exchanges a couple of days ago because the tether situation was making me uncomfortable and distrusting of Bitfinex.
mrwong 9y ago
Its interesting to see how hostile HN is towards Cryptos. Completely ignoring the opportunities that it offers for fund raising Start Ups. At the same time HN likes to bash VCs that are uptight and how hard it is to find capital. I think this is a sign that even the tech world is not resistant to legacy thinking. Just like the legacy thinkers of other industries, like print and brick and mortar commerce were dismissing the new innovation that is happening on the internet. This time the "internet guys" that are so familiar with the legacy VC model are dismissing the new innovation in VC. As with most legacy thinker its almost impossible to change there mind with arguments, they like to ponder on the risks and counter arguments, just to stay comfy in the status quo. Banking, Finance, VC is one of the oldest industries with the least innovation in the last century. The really smart VCs did already realize that and instead of shuffing their head into the sand. They started proactivaly getting involved into the field Tim Draper of DFJ, (Tesla, SpaceX, Skype Early Investor) holds over 1B$ in the crypto space. https://www.youtube.com/watch?v=obKtE1in7NA https://www.youtube.com/watch?v=obKtE1in7NA
- paulgb 9y ago
  HN was actually pretty pro-crypto 4-5 years ago, I think the tech world in general has started to see crypto and ICOs as a bubble within the last year or so.
  - MengerSponge 9y ago
    Probably not wrong: I've started seeing crypto investment posts from friends who are musicians, teachers, and baristas. https://blogs.cfainstitute.org/investor/2014/02/10/top-anecdotal-signs-of-a-market-bubble/ https://blogs.cfainstitute.org/investor/2014/02/10/top-anecd...
- arcticfox 9y ago
  I would say HN is very pro-crypto in the sense of projects that are actually useful or novel. And only hostile about the mainstream media "get rich quick by speculating on crypto" narrative.
- root_axis 9y ago
b1daly 9y ago
It's surprising to me that the rather straightforward question of whether Tether (Bitfinex) is actually holding the dollar reserves against the issued tether tokens is so difficult to answer. Just the fact that the company has not definitively disproved the accusations of fraud against it, which have been instesifying for weeks, is evidence that there is something to the charges. There is a not much discussed point I'm curious if anyone here has a perspective on. Tether has claimed that their business model is based, in part, on earning interest on the reserves they (supposedly) hold to back the issue tether tokens. It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.) This strikes me as rather suspicious: that a significant part of the explanation for how Tether earns money doesn't make sense.
- jraines 9y ago
  It's probably part of their agreement with the bank(s) -- if they're even traditional banks -- not to reveal the relationship except to certain parties. And yeah, assuming all the funds do exist, I'd be amazed if they were being held in a risk-free non-interest bearing form. Which is why it's a bit crazy that Tether sticks to the peg so well -- the NPV of a Tether accounting for even non-conspiratorial risks has got to be less than $1
  - panarky 9y ago
    > It's probably part of their agreement with the bank(s) The point is that Tether and Bitfinex have the power to publish their bank balances, and they could authorize their banks to confirm the deposits if they wanted to. Why would they refuse to do this, even while under intense suspicion of actually not controlling 1:1 reserves, unless the accusations were true? The question of interest is a distraction. Businesses usually hold cash in money market accounts or do short-term repo agreements to get a little yield with very low risk. But that yield would be at most 2% a year, so not relevant to the real question.
- pg314 9y ago
  > It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.) Even zero-risk loans (usually) have a non-zero return. The yield on 1 month US treasuries is about 1% [1]. That is about the lowest risk asset you'll be able to find. Certainly lower risk than a business account at a bank. [1] https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...
sebringj 9y ago
These exchanges are running off of traditional programming, not decentralize programming correct? Isn't it possible to run them decentralized like with Ethereum or something? Maybe that's too slow? Just wondering as trust mixed with trustless seems tainted by design. I imagine getting some encrypted thing passed with a one time transaction id to transfer from a real fund that when completed, verifies transfer and notes that in the blockchain. I don't know though, haven't done programming DAP stuff yet.
- zencash 9y ago
  Yes, it's called Etherdelta.io

360 points by donohoe 9y ago

One thing I have been remarking recent conversations with other long-interested crypto-friends hasn't been about the price action, or about the drama, or about the lack of transparency on exchanges like Bitfinex -- but rather about the comparability of discussions today to those we were having in 2013. (Disclaimer: I attempt to avoid holding strong opinions in this space) There are certainly patterns in the environment (maybe marketplace) which are repetitive and reminiscent of the early days. Confusion around price is one. Two viscerally opposed schools-of-thought is another. One thing I think, though, that has suffered is the availability of information assessing the market structure or environment on it's merits/deficiencies without bias. This is likely hard to achieve, in general, but these days you cannot find reliable news without being sucked in to the swirl. Coindesk is pulling a CNBC-of-crypto, articles flying out every hour with opposing themes. I totally understand the model, captivating the audience, but it makes it hard to observe what's happening fundamentally (without having a grasp on the core narrative). I continue to follow, in a casual way, but as I said continuously impressed by how the environment remains young -- trends from '13 persist to '17 and probably '18 (still young!).

goialoq 9y ago
BTC is special because it's designed and desired to be a pure transaction system, separated from all of the "soft" skills like human trust. It's EVE Online with real money. Thus, everything that makes BTC interesting for use the real world -- trying to use it to buy stuff, to put it somewhere safely, etc, it fundamentally broken by design, because none of that real world stuff has the mathematical strength of the core bitcoin protocol, and all the players are trying to operate on the assumption that none of the stuff that makes the real world work is important in the BTC world. It's an anarchic paradise, bubbles and scams as far as the eye can see.
- peteretep 9y ago
  > it fundamentally broken by design Literally three comments up you are blaiming speculators for the fact it isn't being used as currency, rather than design.
- travisjungroth 9y ago
  This has no relevance to the comment you’re replying to except that it’s about cryptocurrency.
CyberDildonics 9y ago
Coindesk is intimately linked with blockstream, the company that has gone to great lengths to take over the github repository, censor /r/bitcoin, and ultimately keep the block size limit at 1 MB so that they can profit from fees on their own 3rd party chain.
- dane-pgp 9y ago
  The controversy surrounding BlockStream is fairly well known, but what is the connection between them and Coindesk? I've not been following that side of things.
  - kobeya 9y ago
    As far as I can tell, they both share a minor investor, Barry Silbert. And anyone who thinks that means anything hasn’t been paying attention to what went down regarding the New York Agreement, where Blockstream (standing alongside many others) opposed Barry and won.
- kobeya 9y ago
  Have a shred of evidence to back up your rediculous conspiracy theories? This isn’t Reddit. If you make wild accusations, back them up.
  - CyberDildonics 9y ago
    Which part do you think is a theory? Censorship on /r/Bitcoin is trivial to test, just go there and post something about censorship, criticism of blockstream, the high fees on the main chain due to block size restrictions, etc. See if your comment stays. Don't forget to log out and check that it wasn't silently grey listed.
    - sanxiyn 9y ago
      Theory part is this: "Coindesk is intimately linked with blockstream". As far as I know, there is no evidnece of this.
alt2501 9y ago
Kudos to you for not having strong opinions. Is there ANY place you recommend for information in this space?
mancerayder 9y ago
Is it possible that a large part of the back and forth of mixed article opinions is to drum up volatility? Because if that were the case it'd most benefit people who make money buying and selling on exchanges. They don't just make money when it goes up.
- mancerayder 9y ago
  AND not to mention it makes money for those who own the exchanges -- volatility == more transactions and hence transaction fees.

cvsh 9y ago

Is it wrong that, as a non-Bitfinex customer, I'm kind of rooting for an exit scam so that the price of BTC tanks and offers a perfect buying opportunity?

ericls 9y ago
That's probably why the price goes up.
- deleted 9y ago
  [deleted]
anonymous5133 9y ago
Problem is that strategy is not as solid anymore since you have bitcoin cash on bitcoin's heels. If BTC doesn't innovate then BCH will eventually over take it. BCH is more user friendly for people who want to do daily transactions while BTC is not. If legitimate users switch to BCH then the only thing that will hold up BTC is the long-term people. All the speculators are just going to follow where they can get quick profits.
- kobeya 9y ago
  There is plenty of innovation going on in bitcoin space. Schnorr signatures, MAST, lightning, client efficiency improvements.
  - hudon 9y ago
    Yup. Also Confidential transactions, mimblewimble, sidechains, drivechains,... even bigger blocks. People forget that bigger blocks could come to BTC too, but devs are making the safe choice to try scaling with ways they know won’t compromise security or decentralization first. People have had cheaper alternatives to Bitcoin for a while now (ETH? LTC?) and yet BTC is still valued significantly higher. There’s more to this game than a cheap digital payment.
bodegajed 9y ago

pfisch 9y ago

Honestly it sucks that these incredibly sketchy exchanges do so much volume. Poloniex and Bitfinex are sketchy as hell, but I guess their fees are low so no one cares. It would be somewhat surprising if bitfinex doesn't go down in a spectacular ball of fire within the next 4 years.

cperciva 9y ago
Is there any independent evidence that they do in fact do so much volume? I know bitfinex in particular has been accused of creating fake wash trades in order to manipulate prices; this would also have the effect of increasing their reported trading volume.
- pfisch 9y ago
  I mean that is definitely possible. https://coinmarketcap.com/exchanges/bitfinex/ https://coinmarketcap.com/exchanges/bitfinex/ I put some btc on bitfinex to quickly buy some NEO and move it off the exchange this year.
- mrb 9y ago
  Why do you suspect volume is faked? Bitfinex's volume is not even that high. It's only twice the volume of GDAX ($550M vs $250M in last 24h: https://coinmarketcap.com/currencies/bitcoin/#markets https://coinmarketcap.com/currencies/bitcoin/#markets) and we know GDAX isn't faking volume or wash trading because of all exchanges in the world GDAX are the most law-abiding/professional, plus they have high taker fees (~0.25%) which make wash trading expensive/impossible. So, with Bitfinex (1) trading 10 times more currency pairs than GDAX, (2) being older, and (3) having somewhat smaller fees, it's perfectly plausible they have manage to trade (only!) twice the volume of GDAX.
  - cperciva 9y ago
    I don't have any reason to be suspicious beyond "they have been accused of this". BTW the fact that GDAX has high fees doesn't mean it's expensive for them to create fictitious trades... they don't have to pay themselves fees!

sturmeh 9y ago

The stolen Tether are unredeemable, and thusly worth nothing. They pose a certain risk with accepting dodgy transactions though.

deleted 9y ago
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kobeya 9y ago
We don’t know for certain how much was really stolen. We just have Tether at their word. And if more was stolen than the amount frozen, it certainly is redeemable—for bitcoin on an exchange.
- lug0r 9y ago
  or do we? http://omnichest.info/lookupadd.aspx?address=16tg2RJuEPtZooy18Wxn2me2RhUdC94N7r http://omnichest.info/lookupadd.aspx?address=16tg2RJuEPtZooy...

modeless 9y ago

It is certain that US law enforcement will come down hard on Tether eventually. Anyone pretending to transfer dollars outside the banking system will meet the same fate as Liberty Reserve. When it happens Bitfinex will be toast, and Bittrex and Poloniex may fall too.

aero142 9y ago
Why would Bittrex be hit by this?
- burger_moon 9y ago
  I believe the parent commenter is referring to other exchanges that trade tether.
- modeless 9y ago
  Tether is a large fraction of their volume and likely deposits as well. If all that money vanished overnight their customers would be extremely upset. Also, without Tether they could no longer pretend to have USD support. So many people are fooled by "USDT" into thinking that they have dollars. Could Bittrex push all the blame onto Tether and just keep operating as if nothing happened? I don't think this would work very well. At the very least this would suddenly point a ton of law enforcement scrutiny in Bittrex's direction which might end the unlicensed money transmitter party over there.
- deleted 9y ago
  [deleted]
Xx_motocross_xX 9y ago
Yes and no. With the 'owner' of BTC-e now facing extradition to Russia instead of the US, it appears that the US is rapidly losing control of the world monetary system. BTC-e was back up within a month as WEX, so it appears the US effort had no effect. There is nothing stopping someone from opening and operating a cryptocurrency exchange from a country without an extradition treaty. Even countries with extradition treaties are less keen than ever to extradite to the US, especially with the US facing war crimes charges in international courts. The US has made their position on torture clear. Other countries are concerned that by sending their citizens to a nation complicit in torture, they might face legal penalties or lawsuits themselves. It's ironic, since the US gloated heavily when they took over the BTC-e domain. They thought that this would be another cut and dry Liberty Reserve, but this time they're caught in an international tug of war.

chisleu 9y ago

Don't forget that someone has been using Tether to wash trade bitcoin on bitfinex... https://medium.com/@bitfinexed/are-fraudulent-tethers-being-used-for-margin-lending-on-bitfinex-5de9dd80f330 https://medium.com/@bitfinexed/are-fraudulent-tethers-being-... https://medium.com/@bitfinexed/wash-trading-bitcoin-part-ii-who-and-why-is-someone-wash-trading-on-bitfinex-e1c7b5e0b3bb https://medium.com/@bitfinexed/wash-trading-bitcoin-part-ii-... It was widely believed that the tethers being "sold" weren't really backed by anything and were being used to inflate BTC prices. Now they are claiming 30M were stolen? I'm betting it's going to end up being a lot higher. They are using 30M to soften the blow of the higher number. I believe this tactic has been using by Yahoo and others in announcing the number of stolen accounts as well.

ActsJuvenile 9y ago
We also have some proof of this belief now. Wells Fargo stopped Wires to Tether on March 30, 2017 and Taiwanese banks stopped all international wires from Tether on April 18, 2017. Tether has since issued 600 mill new tokens. Source: https://tether.to/announcement/ https://tether.to/announcement/
- Yizahi 9y ago
  I noticed that NYT wrote "Since then, it has moved between a series of banks in other countries, without telling customers where the exchange’s money is stored." but afaik there is zero evidence that there was any bank that interacted with Bitfinex after Wells Fargo dropped them.
  - CamelCaseName 9y ago
    But the comment above suggests that Taiwanese banks worked with them after Wells Fargo. Is it sloppy research on NYT's part or is BFX's claim unverifiable?
    - racont 9y ago
      NP@NYT summarized a long-standing Twitter discussion - he's put in little to no independent work on the story. Tether has claimed to have audited bank statements from the start. To date, they've never performed a real audit from an internationally recognized auditor. In Sep '17, Tether paid for Friedman to state that they had ~$350m in USD in certain bank accounts. The bank names and locations were blacked out. If you know how to read audit statements, Friedman bent over backwards to make sure they're not culpable for fraud (whereas normally their function is to rubber-stamp for authenticity). Over the past two months, Tether has issued another $300m in USDT while transparency remains opaque

aresant 9y ago

To see adoption go as wide as current HODLERS hope BTC can go newbies need to be insulated from the type of insanity laid out in this article. Like at bare minimum and for the survival of crypto nobody should trade on unaudited exchanges. Or a step further despite Coinbase's scaling issues the fact that they have both insurance coverage and FDIC coverage on all accounts makes me much more likely to refer people interested in starting w Bitcoin there than anywhere else. But this is also the kind of centralization that Crypto is designed to avoid. https://support.coinbase.com/customer/en/portal/articles/1662379-how-is-coinbase-insured- https://support.coinbase.com/customer/en/portal/articles/166...

deleted 9y ago
[deleted]
root_axis 9y ago
> they have both insurance coverage and FDIC coverage on all accounts makes me much more likely to refer people interested in starting w Bitcoin there than anywhere else. Very misleading statements. The FDIC coverage does not include any bitcoin wallets. The bitcoin insurance only covers their hot wallets (something like 2% of all the bitcoin they hold). Yes, cold storage is a bitcoin security best practice, but it obviously does not eliminate the chance that a breach could occur, and if it does, none of that 98% is covered. With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape.
- ActsJuvenile 9y ago
  > With that said, to Coinbase's credit, they haven't been hacked yet, which is actually quite an achievement considering the landscape. They have been victims of massive USD chargebacks. I think Coinbase is bleeding so much money to chargebacks that co-founder Fred Erhsam figured out company is never going to turn a profit and resigned.
  - c0nducktr 9y ago
    I thought AHC transfers were very difficult to get chargebacks on. How much could they actually be losing on these events? Are they actually not that rare?

slacka 9y ago

As someone who lost over 100 bitcoins in a sketchy mining pool, for the love of god, please be careful. I was in early on this madness, and dedicated my gaming rig for a couple of years. Basically forgot about it, until one day I went to move my coins only to find the site just a Cloudflare mirror. Learn from my mistakes and be careful.

ringaroundthetx 9y ago
How did you lose money in a mining pool? Hopped in a cloudmining scam? Mining pools don't store funds, you tell them your payout address.
- kobeya 9y ago
  Not all pool software was, or even still is so enlightened.
- whyenot 9y ago
  I seem to remember that in some pools you had to initiate a payout to your wallet through the pool website. Payouts weren't automatic.
- ww520 9y ago
  They used his machine for mining over the years but never paid?
- pmorici 9y ago
  They used to store funds.
- stordoff 9y ago
  In the early days, I fairly sure you had to manually request a payout. Even when automatic payouts were added, the default thresholds to trigger a payment were at what would now be a fairly significant amount.
Nicholas7900 9y ago
Some times, i don't code programs. I know that's a typical of someone perceived as a hacker, but my techniques have always been a typical. For instance, it might surprise readers to know that all of the widely publicized hacks I was involved in - let's call that the "Adrian Classic" period :p - were done using a web browser and Notepad, on dialup, on Windows 98. If you stop to think about it, this is really a true meta-hack. People who ask to learn how to hack are generally told to install Linux, learn how to code, and experiment with various hacking tools. Much how network administrators learning to secure their systems tend to get the same certifications, read many of the same books. This results in activity that's really more like jousting than hacking - a predefined pattern of attack taking place against a predefined pattern of defense. When i started Hacking, I learnt how to code, I learned to read code, and I learned how programmers thought, which assumptions they tended to make, and what mistakes their common training tended to cause them to make in common across completely different systems. One example of this is writing access code with the assumption that if failure = no then access = yes. On many systems, I found that by simply removing a username or password field, access would be automatically granted - because there had been no username or password failure, since there had been none to fail, so access was granted. Because my methods were and are unorthodox, they are rarely detected by intrusion detection systems. They don't resemble common attacks because they aren't common attacks. I often make them up on the spot. Which is why the question "teach me to hack" is so frustrating. This is particularly emphasized by a meme pic I got a Google Alert for this morning: I always give readers free Access to reach me for all kinds of Hacking Issues though : compositehacks@gmail.com

perseusprime11 9y ago

With so many issues, how does one invest in Bitcoin safely?

smacktoward 9y ago
Buy stocks of GPU manufacturers.
- noitsnot 9y ago
  AMD is very cheap. Morgan Stanley recently downgraded because they believe mining crypto will fade by 50% in 2018.
  - prewett 9y ago
    Considering AMD has lost increasingly large amounts of money every year since at least 2013, I'd say AMD is pretty expensive.
    - noitsnot 9y ago
      Fair enough. They will pull into the black in the 4th quarter if they hit estimates.
- tehlike 9y ago
  or options.
- kobeya 9y ago
  Relevance? Bitcoins aren’t mined on GPUs.
keypusher 9y ago
Buy on a trusted exchange (ie coinbase), move coins to your own private wallet.
sowbug 9y ago
Buy $1,000 worth from Coinbase, assuming you have $1,000 to lose. Move it immediately to a paper wallet. Store the paper safely and forget about it for five years.

tryingagainbro 9y ago

NYT in 1997 about him: PHILIP G. POTTER, who develops investment products for high-net-worth clients of Morgan Stanley, Dean Witter, Discover & Company, likes to think of himself as an ''uberconsumer.'' Last year, he spent his bonus on a 50-inch TV and a $3,500 Rolex watch. He wears custom-made $800 suits, custom-made $80 shirts -- always with white collars and white French cuffs -- and $200 shoes. He is ''totally wired,'' as he puts it: His home phone forwards messages to his pager; he answers them over a tiny $800 cellular phone." ...'I can continue to come up with new products, to add value, [in a downturn market]'' he said. ''I'm not responsible for getting money. Getting it's hard when the market goes down. But there will still be products to sell. It'll just force me to be a little more creative.'' http://www.nytimes.com/1997/10/19/business/faces-of-the-new-york-economy-big-earner-big-spender-little-burden.html http://www.nytimes.com/1997/10/19/business/faces-of-the-new-...

derwiki 9y ago
> Last year, he spent his bonus on a 50-inch TV That made me chuckle
- pault 9y ago
  Sorry to go OT, but ten years ago we needed five guys and a truck to move my friend's $2000 55" rear-projection TV. It weighed as much as a small piano and we almost dropped it off the deck. I just got a 55" 4k LED TV for $400 and it weighs as much as my dog. The mind reels.
TheCapn 9y ago
In a somewhat matter of his defense, in 1997 he was 25 years old... that was 20 years ago. I know my ideals and opinions have changed from 25 to 30, I can only hope he has grown a bit in those 20 years and only to take that article as a small matter of his personality.

bringtheaction 9y ago

I moved the crypto funds I had on Bitfinex to other exchanges a couple of days ago because the tether situation was making me uncomfortable and distrusting of Bitfinex.

mrwong 9y ago

Its interesting to see how hostile HN is towards Cryptos. Completely ignoring the opportunities that it offers for fund raising Start Ups. At the same time HN likes to bash VCs that are uptight and how hard it is to find capital. I think this is a sign that even the tech world is not resistant to legacy thinking. Just like the legacy thinkers of other industries, like print and brick and mortar commerce were dismissing the new innovation that is happening on the internet. This time the "internet guys" that are so familiar with the legacy VC model are dismissing the new innovation in VC. As with most legacy thinker its almost impossible to change there mind with arguments, they like to ponder on the risks and counter arguments, just to stay comfy in the status quo. Banking, Finance, VC is one of the oldest industries with the least innovation in the last century. The really smart VCs did already realize that and instead of shuffing their head into the sand. They started proactivaly getting involved into the field Tim Draper of DFJ, (Tesla, SpaceX, Skype Early Investor) holds over 1B$ in the crypto space. https://www.youtube.com/watch?v=obKtE1in7NA https://www.youtube.com/watch?v=obKtE1in7NA

paulgb 9y ago
HN was actually pretty pro-crypto 4-5 years ago, I think the tech world in general has started to see crypto and ICOs as a bubble within the last year or so.
- MengerSponge 9y ago
  Probably not wrong: I've started seeing crypto investment posts from friends who are musicians, teachers, and baristas. https://blogs.cfainstitute.org/investor/2014/02/10/top-anecdotal-signs-of-a-market-bubble/ https://blogs.cfainstitute.org/investor/2014/02/10/top-anecd...
arcticfox 9y ago
I would say HN is very pro-crypto in the sense of projects that are actually useful or novel. And only hostile about the mainstream media "get rich quick by speculating on crypto" narrative.
root_axis 9y ago

b1daly 9y ago

It's surprising to me that the rather straightforward question of whether Tether (Bitfinex) is actually holding the dollar reserves against the issued tether tokens is so difficult to answer. Just the fact that the company has not definitively disproved the accusations of fraud against it, which have been instesifying for weeks, is evidence that there is something to the charges. There is a not much discussed point I'm curious if anyone here has a perspective on. Tether has claimed that their business model is based, in part, on earning interest on the reserves they (supposedly) hold to back the issue tether tokens. It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.) This strikes me as rather suspicious: that a significant part of the explanation for how Tether earns money doesn't make sense.

jraines 9y ago
It's probably part of their agreement with the bank(s) -- if they're even traditional banks -- not to reveal the relationship except to certain parties. And yeah, assuming all the funds do exist, I'd be amazed if they were being held in a risk-free non-interest bearing form. Which is why it's a bit crazy that Tether sticks to the peg so well -- the NPV of a Tether accounting for even non-conspiratorial risks has got to be less than $1
- panarky 9y ago
  > It's probably part of their agreement with the bank(s) The point is that Tether and Bitfinex have the power to publish their bank balances, and they could authorize their banks to confirm the deposits if they wanted to. Why would they refuse to do this, even while under intense suspicion of actually not controlling 1:1 reserves, unless the accusations were true? The question of interest is a distraction. Businesses usually hold cash in money market accounts or do short-term repo agreements to get a little yield with very low risk. But that yield would be at most 2% a year, so not relevant to the real question.
pg314 9y ago
> It was pointed out by Bitcoin analyist Tone Vays the other day that such a business account should not be interest earning, as it is not supposed to be put at risk (by being lent out.) Even zero-risk loans (usually) have a non-zero return. The yield on 1 month US treasuries is about 1% [1]. That is about the lowest risk asset you'll be able to find. Certainly lower risk than a business account at a bank. [1] https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...

sebringj 9y ago

These exchanges are running off of traditional programming, not decentralize programming correct? Isn't it possible to run them decentralized like with Ethereum or something? Maybe that's too slow? Just wondering as trust mixed with trustless seems tainted by design. I imagine getting some encrypted thing passed with a one time transaction id to transfer from a real fund that when completed, verifies transfer and notes that in the blockchain. I don't know though, haven't done programming DAP stuff yet.

zencash 9y ago
Yes, it's called Etherdelta.io