4 ms·

I'm not necessarily pro-bitcoin, but there's a difference between bitcoin:the protocol and bitcoin: services offered around this. I think this is more another

by rtpg 13y ago

I'm not necessarily pro-bitcoin, but there's a difference between bitcoin:the protocol and bitcoin: services offered around this. I think this is more another case of pretty incompetent people going into this (probably linked to the fact that a lot of proponents of bitcoin are in it for the ponzi-scheme like qualities of the current environment). Maybe we'll get some people who've taken an accounting class and a concurrency class(necessary but not sufficient conditions) to implement these exchanges one day. The public ledger in particular could be used to establish a good amount of trust with an exchange (publicly-auditable). The only problem being that many bitcoin proponents buy into the myth that bitcoin allows you to remain anonymous, and that the exchanges should be built in the same way as money laundering services. We'll probably see a lot of this so long as the current environment is based around bitcoin being some sort of investment vehicle like gold. Maybe if enough people actually start wanting to use it as a currency, the quality of these services will go up, and we can trust them a bit more. Maybe actually having exchanges bail each other out (see Japanese banks in the 80s/90s) and supplying safety nets would increase trust.

sillysaurus3 13y ago
The problem, which I can't figure out a way to solve, is that any exchange can die at any time due to massive theft or failure. When this happens, customers will lose all of their funds. People have mentioned m-of-n transactions as one possible solution, which means that the customer and the exchange both have to approve of any transaction involving the customer's funds. But this may preclude realtime trading, which is usually one of the main purposes of an exchange. It's a tough problem, and there may be a solution. I'm continuing to think about it.
- M4v3R 13y ago
  Yes, m-of-n addresses are the solution, we use it on Bitalo [0]. It's true that it is less suitable for day traders, and while they make the most of network volume, they are not the only purpose that exchanges exist. Some people just want to buy Bitcoin occasionally, i.e. once a week, month or less frequently. They also want a secure place to store them. I believe that for those people, our service is the perfect answer :). [0] https://bitalo.com/why_bitalo https://bitalo.com/why_bitalo
  - sillysaurus3 13y ago
    Someone brought up that Bitalo isn't really an exchange, but an OTC marketplace, and that fraud is possible. A fraudster in the US can reverse the bank payment in a Bitalo transaction up to 6 months after the BTC has been released from escrow: https://news.ycombinator.com/item?id=7432635 https://news.ycombinator.com/item?id=7432635 You should probably specify that Bitalo is perfect for non-US customers.
    - M4v3R 13y ago
      That's true, in the US only SWIFT transfers should be used to prevent fraud.
  - MichaelGG 13y ago
    Can you explain how this works? I read the page, but I don't quite get it. If Bitalo has one key and I have one key, what's the benefit? - If Bitalo loses their key, I lose my money. - If I lose my key, I lose my money (so I still need backups). - Still need my own keystore device, so it's not more convenient. - If I have a single device and it gets hacked, the attacker can emulate me to Bitalo. - If I have multiple devices, why can't I use m-of-n without Bitalo? I'm not trying to be negative, I just feel I'm overlooking something simple.
    - bandushrew 13y ago
      it reduces the chance of deliberate theft by the service. One problem with bit coin, is that an exchange service can suddenly find itself with millions of dollars worth of bitcoin, dwarfing the possible income available via fees and start thinking really, really hard about where the most money is to be made. and then the service might go out of business, and the customers lose their property. Not to mention the target the service might represent for hackers etc. Having a dual key system ensures that, for all parties, the best possible outcome of attempted theft is nothing at all for anyone. Not a great outcome for any specific customer, but an outcome that aligns the motivations of the service provider and the customer.
- socillion 13y ago
  Insurance.
  - riffraff 13y ago
    this, a thousand times. Bank deposits are insured and yes it's a government thingy, but there is nothing that precludes *coin exchanges from setting up a private insurance policy.

by rtpg 13y ago

sillysaurus3 13y ago

The problem, which I can't figure out a way to solve, is that any exchange can die at any time due to massive theft or failure. When this happens, customers will lose all of their funds. People have mentioned m-of-n transactions as one possible solution, which means that the customer and the exchange both have to approve of any transaction involving the customer's funds. But this may preclude realtime trading, which is usually one of the main purposes of an exchange. It's a tough problem, and there may be a solution. I'm continuing to think about it.

M4v3R 13y ago
Yes, m-of-n addresses are the solution, we use it on Bitalo [0]. It's true that it is less suitable for day traders, and while they make the most of network volume, they are not the only purpose that exchanges exist. Some people just want to buy Bitcoin occasionally, i.e. once a week, month or less frequently. They also want a secure place to store them. I believe that for those people, our service is the perfect answer :). [0] https://bitalo.com/why_bitalo https://bitalo.com/why_bitalo
- sillysaurus3 13y ago
  Someone brought up that Bitalo isn't really an exchange, but an OTC marketplace, and that fraud is possible. A fraudster in the US can reverse the bank payment in a Bitalo transaction up to 6 months after the BTC has been released from escrow: https://news.ycombinator.com/item?id=7432635 https://news.ycombinator.com/item?id=7432635 You should probably specify that Bitalo is perfect for non-US customers.
  - M4v3R 13y ago
    That's true, in the US only SWIFT transfers should be used to prevent fraud.
- MichaelGG 13y ago
  Can you explain how this works? I read the page, but I don't quite get it. If Bitalo has one key and I have one key, what's the benefit? - If Bitalo loses their key, I lose my money. - If I lose my key, I lose my money (so I still need backups). - Still need my own keystore device, so it's not more convenient. - If I have a single device and it gets hacked, the attacker can emulate me to Bitalo. - If I have multiple devices, why can't I use m-of-n without Bitalo? I'm not trying to be negative, I just feel I'm overlooking something simple.
  - bandushrew 13y ago
    it reduces the chance of deliberate theft by the service. One problem with bit coin, is that an exchange service can suddenly find itself with millions of dollars worth of bitcoin, dwarfing the possible income available via fees and start thinking really, really hard about where the most money is to be made. and then the service might go out of business, and the customers lose their property. Not to mention the target the service might represent for hackers etc. Having a dual key system ensures that, for all parties, the best possible outcome of attempted theft is nothing at all for anyone. Not a great outcome for any specific customer, but an outcome that aligns the motivations of the service provider and the customer.
socillion 13y ago
Insurance.
- riffraff 13y ago
  this, a thousand times. Bank deposits are insured and yes it's a government thingy, but there is nothing that precludes *coin exchanges from setting up a private insurance policy.