5 ms·

Can you provide reasons/evidence for why I should not trust Coinbase?

by boyaka 12y ago

mdemare 12y ago
Not trusting is the default. It is up to Coinbase to prove that they can be trusted.
- boyaka 12y ago
  Yeah, and a clean record up until now is at least a theory? I'm wondering if there is any evidence to back up the untrustworthiness OP is accusing Coinbase of.
- deleted 12y ago
  [deleted]
flatline 12y ago
Bitcoin was meant to be a trustless system. You are handing over your private keys to a third party, and hence all the direct control over your funds. How do you know they are solvent? How transparent are their security measures? There are many, many examples of this going horribly wrong with people who could supposedly be trusted by the community, and there are more popping up on a regular basis. You are asking the wrong question -- why should you trust Coinbase or anyone else?
- boyaka 12y ago
  Ease of use. Exactly the same thing all the bitcoin fanatics are talking about improving. Exactly the reason Coinbase was created. I'm lazy.
  - dublinben 12y ago
    That's an argument for why you're willing to use it, but not for why anyone should trust it. If you're lazy, it's easier to not have locks on your doors, but that's not secure.
  - sillysaurus3 12y ago
    It's worth noting that this is exactly, word-for-word, how I wound up losing money in the Mt. Gox collapse. I was lazy. I liked their two-factor authentication. It felt safe, and I liked that no thief could steal my coins without access to my phone. I simply didn't stop to think: what if Mt. Gox failed tomorrow? And then it did. The problem with Bitcoin right now is that it isn't convenient, even if you use these third party services. It's not convenient having to trust the services to provide you with convenience because if they fail, you fail. But, ultimately, if you don't mind losing your money, it doesn't matter whether you trust Coinbase.
  - StavrosK 12y ago
    Use Electrum for the bulk of your funds and Coinbase or another provider for the ease of use. Don't store all your money with a third party.
sillysaurus3 12y ago
Indeed: https://hn.algolia.com/#!/comment/forever/0/author%3Asillysaurus3%20coinbase https://hn.algolia.com/#!/comment/forever/0/author%3Asillysa... (I want to preface this by saying that I'm talking about people storing their savings in Bitcoin. If you don't care about what happens to your money, then it doesn't matter whether you trust Coinbase.) The most convincing argument, I think, is that you're putting your faith in an entity that's not FDIC insured to hold onto your entire future and keep it safe. Your savings is your future. If you lose it, you lose your future. You'll have to exchange months or years of your life to get it back, as I now have to. There are many reasons that businesses fail, and it's important to never forget that Coinbase is a startup, and the fate of startups always hang in the balance. There's no reason not to trust an entity that's ensured by the government (banks) with your savings. They won't vanish. The only reason right now to trust Coinbase with a lot of money is if you're hoping the price will rise, as far as I can tell, because there's no other realistic application of Bitcoin right now unless you want to send some money to a friend, in which case you can just buy it as-needed. So it's essentially long-term gambling. Now, there's nothing wrong with that. I knew when I did it that there was a chance things could turn out horribly awry (though I don't think I fully appreciated how "down" the downside could be for me). But if you're going to do it, at least be smart about it: The coolest thing about Bitcoin is that you don't have to trust anybody but yourself to keep your coins safe. There are secure cold storage wallet solutions. Find one, use it. I've heard good things about Armory, for example.
- pbreit 12y ago
  So Coinbase is fine for the amounts that everyone would actually consider storing there? Nice hedge.
  - sillysaurus3 12y ago
    Look up some of the stories of people literally becoming homeless due to losing their coins when they were stolen from Silk Road 2. People aren't rational. They don't store "just what they can afford to lose and no more" in a webwallet, apparently. You could counter that by saying "Oh, those are just drug addicts. Normal people aren't that dumb." To that, I can point at the example of the Mt. Gox collapse. There you have a case of people going from millionaire status to "looks like I'll have to find a job and keep it for a long time" status in the blink of an eye. One of the bigger losses was 4,700 BTC: http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_story_thread_how_much_did_you_lose http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_s... And lastly, you can't have it both ways. Either Coinbase is trustworthy enough to keep your personal savings safe, or it's insane to trust them with any amount of money that you care about not-vanishing.
deleted 12y ago
[deleted]
michaelt 12y ago
Two words: Mt Gox. In April 2013, Mt Gox handled 70% of bitcoin trading [1] - they were a widely trusted, well known brand, operating in a stable legislative environment. Coinbase today has what Mt Gox had a year ago. Admittedly, coinbase also has some VC investors. If you believe, should they be hacked or robbed by an insider, that the VCs are going to throw good money after bad to compensate customers, you are much more optimistic than I am. [1] http://www.wired.com/2013/11/mtgox/all/ http://www.wired.com/2013/11/mtgox/all/
- LyndsySimon 12y ago
  You're mostly correct, but there were lots of warning signs about MtGox, far before they folded - the repeated suspension of USD withdrawals chief among them.
  - sillysaurus3 12y ago
    There's plenty of warning signs for Coinbase right now, but people dismiss those. The difference is that Coinbase hasn't failed yet. It's easy to try to dismiss Mt. Gox as a one-off, but something like a dozen exchanges have already collapsed due to insolvency. It's the norm, not the exception.
selmnoo 12y ago
I'd say they've thoroughly wrecked any reason to be trusted, see https://news.ycombinator.com/item?id=6929705 https://news.ycombinator.com/item?id=6929705 -- they were other threads by other users too, dealing with transfer failures of 5-figure US dollars that weren't dealt with by the Coinbase CEO, unfortunately those were killed by HN.
gphilip 12y ago
To add to what sillysaurus3 says, and copying from my comment from an old thread: As far as I know (IANAL) there is no law or precedent which takes the value of stolen bitcoins into consideration while sentencing. There is also no history (AFAIK) of prosecution, of serious prosecution which takes the effort to follow up on stolen coins may have been "mixed" etc., in cases of BTC theft. Given this, does not an online service (like Coinbase) which holds a large amount of bitcoin in "stealable" form present, to potential criminals, a lot of incentive to break in and take it all away? I, for one, wouldn't keep up to 5000 USD in such a place, at least till the time there has been some serious prosecution and proportionate sentencing of BTC thieves. But of course to each their own.
jbaudanza 12y ago
Coinbase is hosted on Heroku. So you are also trusting that Heroku and AWS don't have any disgruntled employees with production access that want to be instant millionaires.

Can you provide reasons/evidence for why I should not trust Coinbase?

by boyaka 12y ago

Can you provide reasons/evidence for why I should not trust Coinbase?

mdemare 12y ago

Not trusting is the default. It is up to Coinbase to prove that they can be trusted.

boyaka 12y ago
Yeah, and a clean record up until now is at least a theory? I'm wondering if there is any evidence to back up the untrustworthiness OP is accusing Coinbase of.
deleted 12y ago
[deleted]

flatline 12y ago

Bitcoin was meant to be a trustless system. You are handing over your private keys to a third party, and hence all the direct control over your funds. How do you know they are solvent? How transparent are their security measures? There are many, many examples of this going horribly wrong with people who could supposedly be trusted by the community, and there are more popping up on a regular basis. You are asking the wrong question -- why should you trust Coinbase or anyone else?

boyaka 12y ago
Ease of use. Exactly the same thing all the bitcoin fanatics are talking about improving. Exactly the reason Coinbase was created. I'm lazy.
- dublinben 12y ago
  That's an argument for why you're willing to use it, but not for why anyone should trust it. If you're lazy, it's easier to not have locks on your doors, but that's not secure.
- sillysaurus3 12y ago
  It's worth noting that this is exactly, word-for-word, how I wound up losing money in the Mt. Gox collapse. I was lazy. I liked their two-factor authentication. It felt safe, and I liked that no thief could steal my coins without access to my phone. I simply didn't stop to think: what if Mt. Gox failed tomorrow? And then it did. The problem with Bitcoin right now is that it isn't convenient, even if you use these third party services. It's not convenient having to trust the services to provide you with convenience because if they fail, you fail. But, ultimately, if you don't mind losing your money, it doesn't matter whether you trust Coinbase.
- StavrosK 12y ago
  Use Electrum for the bulk of your funds and Coinbase or another provider for the ease of use. Don't store all your money with a third party.

sillysaurus3 12y ago

Indeed: https://hn.algolia.com/#!/comment/forever/0/author%3Asillysaurus3%20coinbase https://hn.algolia.com/#!/comment/forever/0/author%3Asillysa... (I want to preface this by saying that I'm talking about people storing their savings in Bitcoin. If you don't care about what happens to your money, then it doesn't matter whether you trust Coinbase.) The most convincing argument, I think, is that you're putting your faith in an entity that's not FDIC insured to hold onto your entire future and keep it safe. Your savings is your future. If you lose it, you lose your future. You'll have to exchange months or years of your life to get it back, as I now have to. There are many reasons that businesses fail, and it's important to never forget that Coinbase is a startup, and the fate of startups always hang in the balance. There's no reason not to trust an entity that's ensured by the government (banks) with your savings. They won't vanish. The only reason right now to trust Coinbase with a lot of money is if you're hoping the price will rise, as far as I can tell, because there's no other realistic application of Bitcoin right now unless you want to send some money to a friend, in which case you can just buy it as-needed. So it's essentially long-term gambling. Now, there's nothing wrong with that. I knew when I did it that there was a chance things could turn out horribly awry (though I don't think I fully appreciated how "down" the downside could be for me). But if you're going to do it, at least be smart about it: The coolest thing about Bitcoin is that you don't have to trust anybody but yourself to keep your coins safe. There are secure cold storage wallet solutions. Find one, use it. I've heard good things about Armory, for example.

pbreit 12y ago
So Coinbase is fine for the amounts that everyone would actually consider storing there? Nice hedge.
- sillysaurus3 12y ago
  Look up some of the stories of people literally becoming homeless due to losing their coins when they were stolen from Silk Road 2. People aren't rational. They don't store "just what they can afford to lose and no more" in a webwallet, apparently. You could counter that by saying "Oh, those are just drug addicts. Normal people aren't that dumb." To that, I can point at the example of the Mt. Gox collapse. There you have a case of people going from millionaire status to "looks like I'll have to find a job and keep it for a long time" status in the blink of an eye. One of the bigger losses was 4,700 BTC: http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_story_thread_how_much_did_you_lose http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_s... And lastly, you can't have it both ways. Either Coinbase is trustworthy enough to keep your personal savings safe, or it's insane to trust them with any amount of money that you care about not-vanishing.

deleted 12y ago

[deleted]

michaelt 12y ago

Two words: Mt Gox. In April 2013, Mt Gox handled 70% of bitcoin trading [1] - they were a widely trusted, well known brand, operating in a stable legislative environment. Coinbase today has what Mt Gox had a year ago. Admittedly, coinbase also has some VC investors. If you believe, should they be hacked or robbed by an insider, that the VCs are going to throw good money after bad to compensate customers, you are much more optimistic than I am. [1] http://www.wired.com/2013/11/mtgox/all/ http://www.wired.com/2013/11/mtgox/all/

LyndsySimon 12y ago
You're mostly correct, but there were lots of warning signs about MtGox, far before they folded - the repeated suspension of USD withdrawals chief among them.
- sillysaurus3 12y ago
  There's plenty of warning signs for Coinbase right now, but people dismiss those. The difference is that Coinbase hasn't failed yet. It's easy to try to dismiss Mt. Gox as a one-off, but something like a dozen exchanges have already collapsed due to insolvency. It's the norm, not the exception.

selmnoo 12y ago

I'd say they've thoroughly wrecked any reason to be trusted, see https://news.ycombinator.com/item?id=6929705 https://news.ycombinator.com/item?id=6929705 -- they were other threads by other users too, dealing with transfer failures of 5-figure US dollars that weren't dealt with by the Coinbase CEO, unfortunately those were killed by HN.

gphilip 12y ago

To add to what sillysaurus3 says, and copying from my comment from an old thread: As far as I know (IANAL) there is no law or precedent which takes the value of stolen bitcoins into consideration while sentencing. There is also no history (AFAIK) of prosecution, of serious prosecution which takes the effort to follow up on stolen coins may have been "mixed" etc., in cases of BTC theft. Given this, does not an online service (like Coinbase) which holds a large amount of bitcoin in "stealable" form present, to potential criminals, a lot of incentive to break in and take it all away? I, for one, wouldn't keep up to 5000 USD in such a place, at least till the time there has been some serious prosecution and proportionate sentencing of BTC thieves. But of course to each their own.

jbaudanza 12y ago

Coinbase is hosted on Heroku. So you are also trusting that Heroku and AWS don't have any disgruntled employees with production access that want to be instant millionaires.