2 ms·
Many poker sites do this for their fiat reserves. They hold player funds in a separate bank account that is regularly audited by a trusted third party. For the
by jamoes 13y ago
Many poker sites do this for their fiat reserves. They hold player funds in a separate bank account that is regularly audited by a trusted third party.
For the exchanges crypto-currency reserves, a trusted third party isn't even necessarly. The exchange can use gmaxwell's "prove how (non)-fractional your Bitcoin reserves are” scheme [1], which allows them to cryptographically prove they are not fractional reserve.
The Mt. Gox bankruptcy will have positive long-term repercussions on the bitcoin community, because it will pressure honest exchanges to do the above to prove they have the funds to cover their deposits. Coinbase has already done this for their bitcoin reserves [2], albeit through a trusted third party rather than the cryptographic way.
[1] https://news.ycombinator.com/item?id=7277865 https://news.ycombinator.com/item?id=7277865
[2] http://antonopoulos.com/2014/02/25/coinbase-review/ http://antonopoulos.com/2014/02/25/coinbase-review/
- leoc 13y agoIn the longer term (assuming Bitcoin survives so long) the question is whether exchanges will start to openly fractionally reserve their deposits. It might seem crazy today, but if and when the exchanges develop a strong reputation for financial soundness it may be very hard for them to resist the profits from a small, very safe under-reserving. Customers are likely to go along with this because 1) after all, the BTC exchanges have a strong reputation for safety and competence! and 2) some will likely share in the profits through interest on their deposits. Of course, these small, very safe overcommitments will likely turn out to be the first step on a slippery slope, but so it goes. (I am not an expert on anything.)