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> Banks won’t protect you from wire fraud either. This is half-true. A wire transfer can't be reversed due to end-user error, which can be abused by fraudsters

> Banks won’t protect you from wire fraud either. This is half-true. A wire transfer can't be reversed due to end-user error, which can be abused by fraudsters. However, Incorrect input on the bank's behalf does warrant a reversal. I'd compare my bank screwing up vs a crypto exchange screwing up (Like getting hacked). I'm still not protected if the exchange gets hacked and my coin is exfiltrated. I am protected if my bank fatfingers a wire transfer. Also, banks are insured by the FDIC against financial catastrophes. Savings accounts held in FDIC-regulated banks are insured up to $250k if the bank fails for some reason. I get no such protection holding crypto with an exchange. The FDIC turns around an audits banks to make sure they're compliant with liquidity requirements, loan quality measures, etc. Nobody in crypto is watching anyone else in crypto to make sure everything is kosher because that is fundamentally impossible in a system that is meant to be decentralized. Scammers are everywhere and not nearly enough is being done to address it. It's not even clear whether it's possible or not to even address crypto scams.

gonehome 5y ago
You’re right about FDIC protection. The wire fraud example is really the least important part of my comment (it was just showing risk exists with some traditional financial transactions too). Exchange risk is tempered somewhat by Coinbase which is more comparable to a standard bank in terms of risk (imo). The true value and capability that’s distinct with crypto is self-custody and that is the important part of my comment.
- thr0wawayf00 5y ago
  > Exchange risk is tempered somewhat by Coinbase which is more comparable to a standard bank in terms of risk (imo). The fine print does not bear this out at all. Coinbase states in their TOS that your funds may not replaced in the case of a breach because they do not insure the entirety of accounts, nor do they stipulate a guaranteed insured amount:[0] > In case of a covered security event, we will endeavor to make you whole. However, total losses may exceed insurance recoveries so your funds may still be lost. Comparing the risk profile of Coinbase to a bank is no different than blindly trusting a big bank not to fail. These are not analogous institutions from a risk management standpoint. 0: https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
  - gonehome 5y ago
    FDIC insurance is capped at 250k. The recovery there is also limited and it’s a bad idea to keep large amounts of money in a bank account. > “Comparing the risk profile of Coinbase to a bank is no different than blindly trusting a big bank not to fail.” That’s kind of my point? They share a similar risk. The most interesting thing with crypto is the new capabilities it enables for self custody of wealth. There’s also the non-government controlled supply and global store of value which are interesting too, but easier self-custody is the prerequisite differentiator imo. It’s also one of its core advantages over gold (the others being easier to transact with, easier to move/store which is related).
    - thr0wawayf00 5y ago
      But your individual losses are covered when a bank fails, you're not protected when an exchange fails. They're just gonna try their hardest to make you whole. Look at that worked out at Mt Gox. > The most interesting thing with crypto is the new capabilities it enables for self custody of wealth. Serious question: what are the new capabilities that this opens up? These tokens are really unstable which makes them poor candidates to use as actual currency, research shows that decentralized networks are no less susceptible to market manipulation than traditional financial markets and there's an unbelievable amount of fraud everywhere in this space. The whole reason the Federal Reserve was created was to weed out endemic fraudulent activity around the country during the era of "Wildcat Banking"[0], when banks were essentially creating their own currencies. Crypto is largely the digital reincarnation of this philosophy, and isn't really doing anything about shitcoins and other scams. Now, we're starting to see the legitimization of shitcoins through sports team fan tokens that provide no tangible value beyond the purely speculative "hodl" mentality. 0: https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking

gonehome 5y ago

You’re right about FDIC protection. The wire fraud example is really the least important part of my comment (it was just showing risk exists with some traditional financial transactions too). Exchange risk is tempered somewhat by Coinbase which is more comparable to a standard bank in terms of risk (imo). The true value and capability that’s distinct with crypto is self-custody and that is the important part of my comment.

thr0wawayf00 5y ago
> Exchange risk is tempered somewhat by Coinbase which is more comparable to a standard bank in terms of risk (imo). The fine print does not bear this out at all. Coinbase states in their TOS that your funds may not replaced in the case of a breach because they do not insure the entirety of accounts, nor do they stipulate a guaranteed insured amount:[0] > In case of a covered security event, we will endeavor to make you whole. However, total losses may exceed insurance recoveries so your funds may still be lost. Comparing the risk profile of Coinbase to a bank is no different than blindly trusting a big bank not to fail. These are not analogous institutions from a risk management standpoint. 0: https://help.coinbase.com/en/coinbase/other-topics/legal-policies/how-is-coinbase-insured https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
- gonehome 5y ago
  FDIC insurance is capped at 250k. The recovery there is also limited and it’s a bad idea to keep large amounts of money in a bank account. > “Comparing the risk profile of Coinbase to a bank is no different than blindly trusting a big bank not to fail.” That’s kind of my point? They share a similar risk. The most interesting thing with crypto is the new capabilities it enables for self custody of wealth. There’s also the non-government controlled supply and global store of value which are interesting too, but easier self-custody is the prerequisite differentiator imo. It’s also one of its core advantages over gold (the others being easier to transact with, easier to move/store which is related).
  - thr0wawayf00 5y ago
    But your individual losses are covered when a bank fails, you're not protected when an exchange fails. They're just gonna try their hardest to make you whole. Look at that worked out at Mt Gox. > The most interesting thing with crypto is the new capabilities it enables for self custody of wealth. Serious question: what are the new capabilities that this opens up? These tokens are really unstable which makes them poor candidates to use as actual currency, research shows that decentralized networks are no less susceptible to market manipulation than traditional financial markets and there's an unbelievable amount of fraud everywhere in this space. The whole reason the Federal Reserve was created was to weed out endemic fraudulent activity around the country during the era of "Wildcat Banking"[0], when banks were essentially creating their own currencies. Crypto is largely the digital reincarnation of this philosophy, and isn't really doing anything about shitcoins and other scams. Now, we're starting to see the legitimization of shitcoins through sports team fan tokens that provide no tangible value beyond the purely speculative "hodl" mentality. 0: https://en.wikipedia.org/wiki/Wildcat_banking https://en.wikipedia.org/wiki/Wildcat_banking