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I don't think this is reasonable. They have their online coins insured, so if they lose them, they can reimburse you. This is a serious, professionally-run com

by javert 12y ago

I don't think this is reasonable. They have their online coins insured, so if they lose them, they can reimburse you. This is a serious, professionally-run company backed by a lot of VCs we all recognize, plus banks and the NYSE. And regulated. They also have an overall good track record for a small company (all such companies have some growing pains). They have everything to gain by honesty and everything to lose by committing fraud, including prison (and dishonesty is the only reason they would become insolvent). The whole situation could not be more unlike Gox, and it is not reasonable to judge them by that standard.

sillysaurus3 12y ago
They have their online coins insured, so if they lose them, they can reimburse you. That's a little irrelevant, because their hot storage wallet (their online coins) should be a small subset of their total coins. The whole point of a hot storage wallet is that if you lose them, it doesn't matter. So insuring those is pointless except as a marketing stunt to confuse people, which is why saying "We're insured" is bad faith. This is a serious, professionally-run company backed by a lot of VCs we all recognize, plus banks and the NYSE. Indeed, and if Coinbase loses all the coins, none of those people will step in to replace them, because nobody is going to put up hundreds of mullions or a billion dollars just to reimburse customers. They have everything to gain by honesty and everything to lose by committing fraud, including prison (and that is the only reason they would become insolvent). I disagree that technical problems can't make them insolvent. All it would take is an unhappy accident in their cold storage procedures. But beyond tech problems, consider a thought experiment: If you're a gambling person, would you trade 20 years of your life in exchange for becoming a billionaire? Banks are nice because if someone takes money, the money can be retrieved. Not the case for bitcoin. Someone is in charge of the cold storage procedures, so that person is in control over all the coins. If they decide to take all of them, there's nothing anyone can do about it except throw them into prison. Obviously, bitcoin may be completely irrelevant by the time you're out of prison. In fact, emptying Coinbase's cold storage reserves might even cause that. But money does strange things to people, and this technology has changed the power dynamic. Some of those changes are good. But are you sure you want to trust a single person with your entire fortune? Worse, you're trusting multiple people where any single person can take your fortune. Even if they require several people to sign off, that's a very small number of people in complete control of your fate. It probably sounds like I'm anti-Coinbase. I'm not. I'm pro-consumer. As soon as Coinbase insures all of their coins or offers true protection to consumers (by default!) then I'll be their biggest fan, because they'll have become an awesome bank.
- tlrobinson 12y ago
  "But are you sure you want to trust a single person with your entire fortune? Worse, you're trusting multiple people where any single person can take your fortune." Coinbase is hopefully not entrusting individual employees with cold storage keys. Their security page suggests they're using Shamir's Secret Sharing or similar (https://www.coinbase.com/security https://www.coinbase.com/security), though multisig would be even better.
  - jafaku 12y ago
    I can't believe they aren't using multi-signature internally. This is crazy.
  - danielweber 12y ago
    Can they demonstrate the procedure works well enough that an insurance company would underwrite them for the full value of the cold wallet?
  - tedunangst 12y ago
    What happens after an accident when they come up one secret short? The 98% are apparently not insured.
    - tlrobinson 12y ago
      Shamir's Secret Sharing and multisig Bitcoin transactions support arbitrary n-of-m pieces/keys, e.x. a 3-of-6 scheme would require 3 of the 6 pieces to reconstitute the key/sign a transaction, so any 3 pieces could be lost. 2-of-3 is common for end-user multisig. Generally you'd have 1 key physically backed up on paper in a secure place, 1 key on one of your devices (phone or computer), and 1 key either on another device (hardware wallet or phone) or controlled by a 3rd party that does risk analysis/fraud detection on your transactions.
- javert 12y ago
  > So insuring those is pointless except as a marketing stunt to confuse people, which is why saying "We're insured" is bad faith. I don't think it's in bad faith. Bitstamp just lost its hot wallet recently, and people were panicking, because they didn't know what the situation was. Now, with Coinbase, if that happens, we don't have to panic. It's hard to tell people something that is true and have it be "in bad faith." > I disagree that technical problems can't make them insolvent. I agree with you here, I just think the chance is so low that it's not worth mentioning. I don't have any insider info, but I seem to recall reading a post a long time ago where they explained having some kind of x-of-y system of paper wallets stored in bank safety deposit boxes all over the country with a lot of redundancy. If you are willing to assume they have even a minimal level of common sense and competency, they have an offline storage system that is very robust. > But beyond tech problems, consider a thought experiment: If you're a gambling person, would you trade 20 years of your life in exchange for becoming a billionaire? I think this is an interesting thought experiment. I don't completely disagree, but I am still willing to trust coinbase with my money.
tedunangst 12y ago
> This is a serious, professionally-run company backed by a lot of VCs we all recognize, plus banks and the NYSE. So nothing like mtgox. More like Enron? "serious professionally run" isn't some magic ward of protection.
- serf 12y ago
  what I take from that phrasing is : "Like Mt.Gox but on the East Coast near Wallstreet, so HFT should push the nobodies out." It doesn't make me feel any more secure on that particular exchange.
- javert 12y ago
  What about the vast majority of large, publicly-traded American companies that are honest and do good business? Pointing out Enron is cherry-picking. I can point out 499 other business on the Fortune 500 that aren't Enron. The point is, they, maybe Coinbase is just as corrupt and shady and incompetent as Mark Karpeles (i.e. Mt. Gox), but there is just no reason to assume that. Its a leap of faith. It's much more likely that they are not exceptionally shady/incompetent/dishonest/whatever Karpeles is.
  - tedunangst 12y ago
    The point isn't to decide whether they are good people or not; it's about the protections in place that should make that irrelevant. I buy all sorts of stuff from some surely shady characters, but I do so through amazon who I'm confident will make things right when they go wrong. Coinbase is promising that if something goes wrong, they can make as much as 2% of it right. Let's hope that when something goes wrong, it's with that 2%.
celticninja 12y ago
I bet the $ value is insured. Will that be at the price they were when they were stolen or at the price they are when they pay out your claim? I'm betting which ever is the cheapest. What I mean is if they are stolen today priced at $200, let's say you have 100btc on there,that is $20k. You claim but it is 2 months later any payout is made. Now bitcoin is only worth $100 each so you they give you $10k to rebuy your 100btc or do they give you the $20k it was worth when it was stolen. How about if the price of btc goes up? 100btc might now cost $200k to replace, so now they want to give you the dollar value at the time it was stolen. I would not want the be the person putting it to the test regardless of the outcome.

by javert 12y ago

sillysaurus3 12y ago

They have their online coins insured, so if they lose them, they can reimburse you. That's a little irrelevant, because their hot storage wallet (their online coins) should be a small subset of their total coins. The whole point of a hot storage wallet is that if you lose them, it doesn't matter. So insuring those is pointless except as a marketing stunt to confuse people, which is why saying "We're insured" is bad faith. This is a serious, professionally-run company backed by a lot of VCs we all recognize, plus banks and the NYSE. Indeed, and if Coinbase loses all the coins, none of those people will step in to replace them, because nobody is going to put up hundreds of mullions or a billion dollars just to reimburse customers. They have everything to gain by honesty and everything to lose by committing fraud, including prison (and that is the only reason they would become insolvent). I disagree that technical problems can't make them insolvent. All it would take is an unhappy accident in their cold storage procedures. But beyond tech problems, consider a thought experiment: If you're a gambling person, would you trade 20 years of your life in exchange for becoming a billionaire? Banks are nice because if someone takes money, the money can be retrieved. Not the case for bitcoin. Someone is in charge of the cold storage procedures, so that person is in control over all the coins. If they decide to take all of them, there's nothing anyone can do about it except throw them into prison. Obviously, bitcoin may be completely irrelevant by the time you're out of prison. In fact, emptying Coinbase's cold storage reserves might even cause that. But money does strange things to people, and this technology has changed the power dynamic. Some of those changes are good. But are you sure you want to trust a single person with your entire fortune? Worse, you're trusting multiple people where any single person can take your fortune. Even if they require several people to sign off, that's a very small number of people in complete control of your fate. It probably sounds like I'm anti-Coinbase. I'm not. I'm pro-consumer. As soon as Coinbase insures all of their coins or offers true protection to consumers (by default!) then I'll be their biggest fan, because they'll have become an awesome bank.

tlrobinson 12y ago
"But are you sure you want to trust a single person with your entire fortune? Worse, you're trusting multiple people where any single person can take your fortune." Coinbase is hopefully not entrusting individual employees with cold storage keys. Their security page suggests they're using Shamir's Secret Sharing or similar (https://www.coinbase.com/security https://www.coinbase.com/security), though multisig would be even better.
- jafaku 12y ago
  I can't believe they aren't using multi-signature internally. This is crazy.
- danielweber 12y ago
  Can they demonstrate the procedure works well enough that an insurance company would underwrite them for the full value of the cold wallet?
- tedunangst 12y ago
  What happens after an accident when they come up one secret short? The 98% are apparently not insured.
  - tlrobinson 12y ago
    Shamir's Secret Sharing and multisig Bitcoin transactions support arbitrary n-of-m pieces/keys, e.x. a 3-of-6 scheme would require 3 of the 6 pieces to reconstitute the key/sign a transaction, so any 3 pieces could be lost. 2-of-3 is common for end-user multisig. Generally you'd have 1 key physically backed up on paper in a secure place, 1 key on one of your devices (phone or computer), and 1 key either on another device (hardware wallet or phone) or controlled by a 3rd party that does risk analysis/fraud detection on your transactions.
javert 12y ago
> So insuring those is pointless except as a marketing stunt to confuse people, which is why saying "We're insured" is bad faith. I don't think it's in bad faith. Bitstamp just lost its hot wallet recently, and people were panicking, because they didn't know what the situation was. Now, with Coinbase, if that happens, we don't have to panic. It's hard to tell people something that is true and have it be "in bad faith." > I disagree that technical problems can't make them insolvent. I agree with you here, I just think the chance is so low that it's not worth mentioning. I don't have any insider info, but I seem to recall reading a post a long time ago where they explained having some kind of x-of-y system of paper wallets stored in bank safety deposit boxes all over the country with a lot of redundancy. If you are willing to assume they have even a minimal level of common sense and competency, they have an offline storage system that is very robust. > But beyond tech problems, consider a thought experiment: If you're a gambling person, would you trade 20 years of your life in exchange for becoming a billionaire? I think this is an interesting thought experiment. I don't completely disagree, but I am still willing to trust coinbase with my money.

tedunangst 12y ago

> This is a serious, professionally-run company backed by a lot of VCs we all recognize, plus banks and the NYSE. So nothing like mtgox. More like Enron? "serious professionally run" isn't some magic ward of protection.

serf 12y ago
what I take from that phrasing is : "Like Mt.Gox but on the East Coast near Wallstreet, so HFT should push the nobodies out." It doesn't make me feel any more secure on that particular exchange.
javert 12y ago
What about the vast majority of large, publicly-traded American companies that are honest and do good business? Pointing out Enron is cherry-picking. I can point out 499 other business on the Fortune 500 that aren't Enron. The point is, they, maybe Coinbase is just as corrupt and shady and incompetent as Mark Karpeles (i.e. Mt. Gox), but there is just no reason to assume that. Its a leap of faith. It's much more likely that they are not exceptionally shady/incompetent/dishonest/whatever Karpeles is.
- tedunangst 12y ago
  The point isn't to decide whether they are good people or not; it's about the protections in place that should make that irrelevant. I buy all sorts of stuff from some surely shady characters, but I do so through amazon who I'm confident will make things right when they go wrong. Coinbase is promising that if something goes wrong, they can make as much as 2% of it right. Let's hope that when something goes wrong, it's with that 2%.

celticninja 12y ago

I bet the $ value is insured. Will that be at the price they were when they were stolen or at the price they are when they pay out your claim? I'm betting which ever is the cheapest. What I mean is if they are stolen today priced at $200, let's say you have 100btc on there,that is $20k. You claim but it is 2 months later any payout is made. Now bitcoin is only worth $100 each so you they give you $10k to rebuy your 100btc or do they give you the $20k it was worth when it was stolen. How about if the price of btc goes up? 100btc might now cost $200k to replace, so now they want to give you the dollar value at the time it was stolen. I would not want the be the person putting it to the test regardless of the outcome.