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I don't understand why audits aren't easy. You just need a list of all the accounts and a list of all the holdings. You can tell if the accounts list is complet

I don't understand why audits aren't easy. You just need a list of all the accounts and a list of all the holdings. You can tell if the accounts list is complete by spot checking a few entries (create an account with a random holding a week before and see if it's on the list). You can tell if the coins were borrowed recently as the Blockchain is public for major coins. What am I missing here?

maria2 4y ago
Liabilities
- LatteLazy 4y ago
  Customer fund liabilities are easy to do.
  - maria2 4y ago
    How is it easy? You could have a wallet that holds customer funds that you don't disclose to auditors.
vba616 4y ago
How do you identify borrowers, lenders, or custodians of cryptocurrency based on "the Blockchain"? I'm not keeping up on all the latest news, but I had the impression that people use "oracles" to incorporate off-chain information, and many if not most of the exploits recently involve subverting those trusted sources. If auditing was trivial, people would've figured it out in the last couple of thousand years.
- LatteLazy 4y ago
  The exchange will have a wallet or collection of wallets they control. They can prove they control them by announcing they will move the coins in them at such and such a time and then doing it. I am stuck between "there must be some reason this is more difficult than it should be" and "they won't do it because they also have their hands in customer accounts."...
  - vba616 4y ago
    I think I agree with you on the point that there is no excuse for the absence of a proper audit. However I don't think there is a shared understanding here of what an audit is. You can find audited financials of public companies on sec.gov, and see for yourself that they are not lists of "wallets" controlled by the company. It makes me think of Three-card Monte, a classic con. You see the target card, so you know it exists in a certain place at a certain moment. But the whole con is making you think you know where it will be. Which you don't, since it's a con.
tinus_hn 4y ago
The hard part typically is that you have some kind of outstanding debt and it’s anyone’s guess whether they will ever pay it back. That is why there are these risk valuations of creditworthiness. For instance in the mortgage crisis banks had loaned money to other banks considered ‘too big to fail’ and the loaners were very confident they would be paid back. But they didn’t and because the creditworthiness of the loaning banks was based on the practical guarantee the money would be paid back, the system collapsed. And then here you have a system where you can’t even say you own some value, all you know is you have a private key, some code that allows you to spend the value. There is no way to know if someone else doesn’t have the same code, or you could be hacked and have it copied or destroyed. It’s not clear cut at all.
- LatteLazy 4y ago
  But you can prove you have X Bitcoin and that your customer deposits of BTC are about the same amount. Whether you have borrowed from third parties to fund general activities is separate from that no? I'm not asking for proof these companies are profitable. Just that they actually have the coins they're customers think they own...

maria2 4y ago

Liabilities

LatteLazy 4y ago
Customer fund liabilities are easy to do.
- maria2 4y ago
  How is it easy? You could have a wallet that holds customer funds that you don't disclose to auditors.

vba616 4y ago

How do you identify borrowers, lenders, or custodians of cryptocurrency based on "the Blockchain"? I'm not keeping up on all the latest news, but I had the impression that people use "oracles" to incorporate off-chain information, and many if not most of the exploits recently involve subverting those trusted sources. If auditing was trivial, people would've figured it out in the last couple of thousand years.

LatteLazy 4y ago
The exchange will have a wallet or collection of wallets they control. They can prove they control them by announcing they will move the coins in them at such and such a time and then doing it. I am stuck between "there must be some reason this is more difficult than it should be" and "they won't do it because they also have their hands in customer accounts."...
- vba616 4y ago
  I think I agree with you on the point that there is no excuse for the absence of a proper audit. However I don't think there is a shared understanding here of what an audit is. You can find audited financials of public companies on sec.gov, and see for yourself that they are not lists of "wallets" controlled by the company. It makes me think of Three-card Monte, a classic con. You see the target card, so you know it exists in a certain place at a certain moment. But the whole con is making you think you know where it will be. Which you don't, since it's a con.

tinus_hn 4y ago

The hard part typically is that you have some kind of outstanding debt and it’s anyone’s guess whether they will ever pay it back. That is why there are these risk valuations of creditworthiness. For instance in the mortgage crisis banks had loaned money to other banks considered ‘too big to fail’ and the loaners were very confident they would be paid back. But they didn’t and because the creditworthiness of the loaning banks was based on the practical guarantee the money would be paid back, the system collapsed. And then here you have a system where you can’t even say you own some value, all you know is you have a private key, some code that allows you to spend the value. There is no way to know if someone else doesn’t have the same code, or you could be hacked and have it copied or destroyed. It’s not clear cut at all.

LatteLazy 4y ago
But you can prove you have X Bitcoin and that your customer deposits of BTC are about the same amount. Whether you have borrowed from third parties to fund general activities is separate from that no? I'm not asking for proof these companies are profitable. Just that they actually have the coins they're customers think they own...