4 ms·
Not really. If the exchange says "We have 500,000 BTC" and they publish their wallet, but their actual customer liabilities are 2M BTC, everyone can still lose
by steven2012 13y ago
Not really. If the exchange says "We have 500,000 BTC" and they publish their wallet, but their actual customer liabilities are 2M BTC, everyone can still lose a lot of money. What they really need is to be externally audited and undergo consistent regulation.
- drcode 13y agoI'm talking about a more sophisticated solution that addresses this- See https://github.com/olalonde/blind-solvency-proof https://github.com/olalonde/blind-solvency-proof
- runako 13y agoDisclaimer: I only skimmed this solution. However, it looks like you don't/can't address all of the counterpart's liabilities. So salaries, tax dues, rents, loans, and other obligations denominated in fiat currency don't appear in the calculations. But any of these can destroy a counterparty as surely as insufficient reserves. Crucially, depositors don't really care where the risk is, they care that there is some external entity (like the SIPC or FDIC) that can insure that risk.
- drcode 13y agoYou are right, those other factors cannot be accounted for with this approach, it only proves that the business is not running with fractional reserves.
- rch 13y agoYou can only lose what you give them, which should be no more than is necessary to complete a set of near-term transactions.