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Coinbase isn't some random website made in a basement. It's a well funded, YC backed, known-founder company that complies with relevant banking law. There's abs

by nwh 13y ago

Coinbase isn't some random website made in a basement. It's a well funded, YC backed, known-founder company that complies with relevant banking law. There's absolutely nothing to suggest that they hold a partial reserve or have any ill intention whatsoever.

megatron7 13y ago
There's one reason to believe they have ill intention: their habit of ignoring serious user problems (lost deposits, security problems) until they're widely public. Their actions make clear that they are enormously untrustworthy.
- nwh 13y ago
  That doesn't really suggest malice so much as ill attention. From their posts it sounds like they are stretched a little thin under the load, if they wanted to steal they would just be gone not occasionally unresponsive.
  - waterlesscloud 13y ago
    It doesn't matter one bit if it's malice or inattention once your coins are gone.
sillysaurus3 13y ago
You're right, there isn't anything suggesting that they hold a partial reserve. And there won't be even when they do. And when they close due to massive theft / loss of coin, and take all of their users' funds with them, that will be the first suggestion that any user hears of. It happened to me. It's not fearmongering, it's fact.
- nwh 13y ago
  So ask them to prove their reserves if it bothers you so. Other large services have in the past.
  - sillysaurus3 13y ago
    Proving reserves doesn't help at all. They can die at any time from massive loss. Proof of reserve reveals whether there's a problem; it doesn't prevent any problem from happening. To use a metaphor, a failed proof of reserve is like detecting that someone who's riding a motorcycle without a helmet has been launched into the air due to a car crash, and is about to hit the ground. That doesn't change the fact that they're not wearing a helmet in the first place. And in bitcoin's case, no such "helmet" exists. There is no protection for consumers against losing their funds by the exchange. There's always going to be this massive risk of the coins disappearing due to any number of reasons: that they get hacked, that the founder steals them, that they lose them to some massive technical problem, that they experience another undocumented bitcoin protocol issue like malleability, that they lose access to their cold storage wallets, etc. This has happened at, what, a dozen exchanges so far? They've all died due to one of the above reasons. Who's next? It's completely possible that Coinbase is next, and that you're recommending users throw their money away by trusting them. There's no reason to trust Coinbase. Keep your funds in your own secure cold storage wallet, and you'll have them forever. Keep them in Coinbase and you'll have them exactly as long as Coinbase lasts.
    - genwin 13y ago
      > Keep your funds in your own secure cold storage wallet, and you'll have them forever. In regards to Coinbase, if only because their terms make it clear they aren't liable for a customer loss of any cause whatsoever.
sciguy77 13y ago
MtGox was the biggest Bitcoin exchange with the largest trade volume. I still lost all my BTC when it went under.
- sillysaurus3 13y ago
  Same. It seems like it can't happen until it happens, and then you face the reality that it happened. It sucks, and there's absolutely no protection for consumers from it. There's not even any insurance policy that exchanges can purchase yet, which is pretty much the only hope at this point.
  - bduerst 13y ago
    Wouldn't that add a transactional cost to bitcoin, not unlike PayPal or Visa?
    - sillysaurus3 13y ago
      I've spent a couple months trying to come up with ways to protect bitcoin consumers, and the only thing I can think of is for exchanges to purchase some kind of high-risk insurance which will cover losses by the exchange. Nothing else will protect users, as far as I can tell, precisely because of bitcoin's irreversible transactions. Honestly, the best thing for the bitcoin ecosystem is to learn from Paypal and Visa, and to emulate their good qualities. I know it's popular to hate on the existing ways of doing things, but the existing ways have a lot of hidden wisdom embedded in them.
      - bduerst 13y ago
        Well, you could create a certification program in which member exchanges agree to a set of financial standards between each other - e.g. they would automatically do charge backs on disputes within the system. This could lower the transactional-risk cost between doing business with certified exchanges, and still allow users to do business outside but with the increased transactional costs. But then again you're just building another financial exchange system controlled by the certificate issuer - except it would need to be backed by some form of international enforcement (e.g. WTO?). Where is the benefit to bitcoins then?
elefont2 13y ago
YC-backed startup means a culture of 'move fast and break things' - works for facebook, but definately not something I would want to store my bitcoin on, since 'break things' means 'losing all my money with no recourse'
rahimnathwani 13y ago
Which relevant banking law? AFAIK Coinbase is not a bank.

by nwh 13y ago

megatron7 13y ago

There's one reason to believe they have ill intention: their habit of ignoring serious user problems (lost deposits, security problems) until they're widely public. Their actions make clear that they are enormously untrustworthy.

nwh 13y ago
That doesn't really suggest malice so much as ill attention. From their posts it sounds like they are stretched a little thin under the load, if they wanted to steal they would just be gone not occasionally unresponsive.
- waterlesscloud 13y ago
  It doesn't matter one bit if it's malice or inattention once your coins are gone.

sillysaurus3 13y ago

You're right, there isn't anything suggesting that they hold a partial reserve. And there won't be even when they do. And when they close due to massive theft / loss of coin, and take all of their users' funds with them, that will be the first suggestion that any user hears of. It happened to me. It's not fearmongering, it's fact.

nwh 13y ago
So ask them to prove their reserves if it bothers you so. Other large services have in the past.
- sillysaurus3 13y ago
  Proving reserves doesn't help at all. They can die at any time from massive loss. Proof of reserve reveals whether there's a problem; it doesn't prevent any problem from happening. To use a metaphor, a failed proof of reserve is like detecting that someone who's riding a motorcycle without a helmet has been launched into the air due to a car crash, and is about to hit the ground. That doesn't change the fact that they're not wearing a helmet in the first place. And in bitcoin's case, no such "helmet" exists. There is no protection for consumers against losing their funds by the exchange. There's always going to be this massive risk of the coins disappearing due to any number of reasons: that they get hacked, that the founder steals them, that they lose them to some massive technical problem, that they experience another undocumented bitcoin protocol issue like malleability, that they lose access to their cold storage wallets, etc. This has happened at, what, a dozen exchanges so far? They've all died due to one of the above reasons. Who's next? It's completely possible that Coinbase is next, and that you're recommending users throw their money away by trusting them. There's no reason to trust Coinbase. Keep your funds in your own secure cold storage wallet, and you'll have them forever. Keep them in Coinbase and you'll have them exactly as long as Coinbase lasts.
  - genwin 13y ago
    > Keep your funds in your own secure cold storage wallet, and you'll have them forever. In regards to Coinbase, if only because their terms make it clear they aren't liable for a customer loss of any cause whatsoever.

sciguy77 13y ago

MtGox was the biggest Bitcoin exchange with the largest trade volume. I still lost all my BTC when it went under.

sillysaurus3 13y ago
Same. It seems like it can't happen until it happens, and then you face the reality that it happened. It sucks, and there's absolutely no protection for consumers from it. There's not even any insurance policy that exchanges can purchase yet, which is pretty much the only hope at this point.
- bduerst 13y ago
  Wouldn't that add a transactional cost to bitcoin, not unlike PayPal or Visa?
  - sillysaurus3 13y ago
    I've spent a couple months trying to come up with ways to protect bitcoin consumers, and the only thing I can think of is for exchanges to purchase some kind of high-risk insurance which will cover losses by the exchange. Nothing else will protect users, as far as I can tell, precisely because of bitcoin's irreversible transactions. Honestly, the best thing for the bitcoin ecosystem is to learn from Paypal and Visa, and to emulate their good qualities. I know it's popular to hate on the existing ways of doing things, but the existing ways have a lot of hidden wisdom embedded in them.
    - bduerst 13y ago
      Well, you could create a certification program in which member exchanges agree to a set of financial standards between each other - e.g. they would automatically do charge backs on disputes within the system. This could lower the transactional-risk cost between doing business with certified exchanges, and still allow users to do business outside but with the increased transactional costs. But then again you're just building another financial exchange system controlled by the certificate issuer - except it would need to be backed by some form of international enforcement (e.g. WTO?). Where is the benefit to bitcoins then?

elefont2 13y ago

YC-backed startup means a culture of 'move fast and break things' - works for facebook, but definately not something I would want to store my bitcoin on, since 'break things' means 'losing all my money with no recourse'

rahimnathwani 13y ago

Which relevant banking law? AFAIK Coinbase is not a bank.