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Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

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Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#391
post #222

Coinbase will either cave in on this or be sued and lose. Especially since they're sluggish about large withdrawals. The real risk for Coinbase comes if they don't have 100% of the Bitcoins on deposit. If they don't have all those Bitcoins, like Mt. Gox, we're going to find out.

I agree. Frankly I'm shocked it even got this far. Who on Coinbase's legal team gave the okay for such an insane directive? You can't just give customers a 10 day ultimatum to withdraw their funds or forfeit them. An exchange in the public market that attempted that would be sued into oblivion. Furthermore how are they getting by on their justification? You don't need to allow trading for new cryptocurrencies to be d…

People with Coinbase accounts effectively had an IOU in the amount of X BTC.

After the fork, people with Coinbase accounts still have an IOU in the amount of X BTC.

What funds were lost?

Are you claiming that if I owed someone X BTC before the fork, I owe them both X BTC and X BCH afterward?

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#392
post #294

Earlier quoted context omitted.

Yes, Coinbase should be required to support disbursal for every one, with the proviso that it either passes a certain price or passes a number of customers who want to withdraw it.

Why? By using Coinbase you are saying, "I don't want to hold any bitcoins myself, I want a bank to hold some value, denominated in BTC, on my behalf". For all depositers care, Coinbase might have zero Bitcoins issued before the fork. It's like depositing a dollar to a bank, and then finding out that it had been signed by Andy Warhol in invisible ink and asking for the specific dollar back. Sorry, you shouldn't have d…

Exactly.

The only argument you can make is Coinbase not givint a "reasonable" amount of foresight to users (who would pressumble have the right of advanced time/knowledge to convert to USD, etc and then back to BTC (on another "exchange").

I have no idea is this is true or not, but this is the only criticism of Coinbase you can have here.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#393
post #294

Earlier quoted context omitted.

Yes, Coinbase should be required to support disbursal for every one, with the proviso that it either passes a certain price or passes a number of customers who want to withdraw it.

Why? By using Coinbase you are saying, "I don't want to hold any bitcoins myself, I want a bank to hold some value, denominated in BTC, on my behalf". For all depositers care, Coinbase might have zero Bitcoins issued before the fork. It's like depositing a dollar to a bank, and then finding out that it had been signed by Andy Warhol in invisible ink and asking for the specific dollar back. Sorry, you shouldn't have d…

Let's say there is a court case where the judge awards all shareholders of AAPL $100 of compensation for every share held (It's to the shareholders, but not the company, because the court case involved shareholders vs management). The government sends $100 per share to each registered holder. Your investment fund is the registered holder of AAPL securities instead of you. Do you get $100 per share that was held on your behalf, or do the operators of the investment fund get it?

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#394

Earlier quoted context omitted.

I think about it in a different way. The fact that a certain amount of BTC is also the same amount of BCC is tied to a specific way of owning bitcoins (i.e. "physical" bitcoins in a wallet). But when you buy a certain amount of BTC on coinbase, you will just buy that abstract amount, there is no wallet tied to you, in the same way that when you have money in a bank you don't own any specific bill. The bank may not ev…

That's a fair analogy. I think implementing the features some people are asking for creates a myriad of additional issues that should be individually considered. Dealing with this on a case-by case basis (as they seem to be doing) makes more sense. It might have been nice if they gave more advanced notice, but in my opinion they shouldn't be expected to give ANY notice of this type of thing. I think they're handling…

I would agree, and I would add that people seem to be ignoring that BCH is extremely unstable right now. They've only mined ~18 blocks since inception two days ago (Normal is ~144/day), and the fact that a single Reddit post was capable of keeping miners for mining for a full 12 hours seems to indicate that the hashing power is hardly distributed. Even exchanges that are supporting BCH aren't allowing deposits or withdrawals right now for this reason.

So even if Coinbase did allow people to withdraw BCH, they currently couldn't use it for anything (Because Coinbase is not trading BCH), and they'd be waiting hours or more likely days to reach enough confirmations to have any sense of security over the coins. So doing something about it now vs. considering doing something about it in a couple days after the dust settles makes little difference.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#395
post #262

Earlier quoted context omitted.

As one of the btc nouveaux rich, help me understand something I see reoccurring among my other btc-rich friends. Generally, when you're up big (and in some cases extremely wealthy), you diversify your investments in order to preserver your wealth. However, almost without exception my btc friends are such believers that they are holding on for the ride forever. Is it just that the risk-averse were initially drawn to b…

I've seen the same -- I know someone who got in early to BTC, then moved it all into Ethereum early, such that he has enough to comfortably retire today. But he won't cash any of it in except for a small amount each month to live on, while he lives rent free with others. When I explain the logic of hedging and mitigating risk and locking in gains, he was insistent that the right strategy is to hold because it's going…

This isn't that terrible. However its much much less risk and at worst only tiny bit less upside to put 34% in Ethereum, 33% in Bitcoin, and 33% in a basket of all else possible.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#396
post #393

Earlier quoted context omitted.

Why? By using Coinbase you are saying, "I don't want to hold any bitcoins myself, I want a bank to hold some value, denominated in BTC, on my behalf". For all depositers care, Coinbase might have zero Bitcoins issued before the fork. It's like depositing a dollar to a bank, and then finding out that it had been signed by Andy Warhol in invisible ink and asking for the specific dollar back. Sorry, you shouldn't have d…

Let's say there is a court case where the judge awards all shareholders of AAPL $100 of compensation for every share held (It's to the shareholders, but not the company, because the court case involved shareholders vs management). The government sends $100 per share to each registered holder. Your investment fund is the registered holder of AAPL securities instead of you. Do you get $100 per share that was held on yo…

I think that's a great analogy for each of us thinking about our own ethical intuition. But if you're literally asking what would actually happen, I'm guessing the answer is...there would probably be a lawsuit and the courts would figure it out. Which is probably exactly what will happen here, if Coinbase continues to not support the Bitcoin fork and its value holds long enough.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#397

Earlier quoted context omitted.

Heck, you can see this in US coinage today. A quarter feels like about half the weight it was when I was a kid. The cost of the metal gets to a point where it doesn't make sense to use it in the currency anymore. For example, if the metal in a quarter was worth more than $.25, you could simply melt it down and sell it for more than the face value (assuming the cost of melting etc. could be brought down at volume).

> A quarter feels like about half the weight it was when I was a kid. I felt the same, but as far as I can tell the current quarter composition weighs 84% as much as the heaviest quarter ever produced and 90% as much as any quarter made since 1873. The quarter's composition has only changed three times in the history of the United States.

I can think of another reason why a handheld object would seem bigger and heavier when you're young and small, as opposed to when you're old and big...

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#398
post #237
post #184

Earlier quoted context omitted.

When you put your fiat currency into a traditional bank, the bank doesn't hold it for you either. They also issue IOUs. Coinbase is more similar to a bank than it is to a wallet.

Well, if you want to extend the analogy... Let's say that JimBob came along offering a lollipop to everyone for every $1000 they could prove they held in a US bank on a particular day. (The BCH network is offering credits to everyone on the BTC network in proportion to how much BTC they can prove they had on a particular day.) You, as a customer, tell your bank, "yes, confirm to JimBob that I had $30,000 in my accoun…

Well, really, the problem is that JimBob is in total control of the interaction here. Maybe your bank says, "Sure, here's an affidavit showing you had $30,000 on date X", but that's not good enough for JimBob; he needs to see the actual, physical bills and needs proof that _those specific bills_ were in your bank's vault at the time.

This process puts a fair amount of burden on the "bank", because they need to deal with JimBob's byzantine lollipop claims process _directly_ with their own cash, rather than issuing a standard affidavit that'll work equally well for MarySue's pop-tart claims process. Or, in more technical terms, _every time_ anyone comes up with a new coin, coinbase would have to dust off the cold vault, generate the proofs of ownership, reassign them to the new owners, then move the bitcoin over into newly generated cold addresses to restore the security posture of the cold vault coins.

Moreover, creating new types of altcoins is a process that can be easily automated, and at little cost to whoever is instigating this creation process. Of course, most of these coins won't ever gain any popularity or value - but then what's the threshold? At what level of popularity does a broker need to do anything? What happens if a coin is totally unpopular initially but gains popularity later - do brokers need to backfill? What if the key material has been rotated away and destroyed in the meantime?

For that matter, how do we measure popularity? Volume? It's easy to spam volume if you control the first exchange for your altcoin. Market cap? It's easy to fake market cap and unrealized gains when nobody can transfer coins yet. Hashrate? Who knows when that'll settle down. In any case, it's not the sort of thing that can really be objectively determined too quickly after a split.

These don't become an issue with normal securities because, in normal stock market securities there is only one authorized issuer who is able to issue splits, and this issuer incurs real, significant administrative costs for doing so. They also must involve credentialed third parties, and all participants face regulatory scrutiny, fines, or even jail time if they deliberately set out to abuse the system.

Compare to the creation of an altcoin, where the costs of creating a new altcoin are tiny, but the costs of dealing with the fallout by brokers can be quite large. And, of course, there is effectively zero regulation that would give penalties to deliberate abusers. There's therefore a large cost and risk imbalance between altcoin creators and brokers who have to deal with the new altcoins. This sort of cost/risk imbalance results in, effectively, a sort of denial of service threat against bitcoin brokers if it's allowed to stand.

For this reason, the precedent set by this split is going to be of great importance in the future of bitcoin and altcoin brokers - if brokers must deal with splits, it will mean that they will need to segregate coins and keep them online ("hot") at all times in order to be able to deal with any split immediately and/or retroactively. This in turn will hurt the security posture of these currencies substantially. The risk of screwing a split up will also hang over any service that holds *-coins on behalf of their customers or other third parties.

This will also impact the legal feasibility of off-chain transaction aggregation schemes (e.g. lightning) not feasible, as there's no guarantee that the next harebrained altcoin split will be able to deal with redeeming the complex transaction scripts involved with e.g. an unsettled lightning channel - and if it doesn't, who is liable?

So, in short, _requiring_ brokerages to deal with altcoin splits and redemptions opens up a huge legal can of worms that is probably best left closed, for the viability of the overall altcoin landscape. Yes, it sucks that coinbase didn't do something for this particularly public split, but if they did they'd have to be processing splits every other day, or perhaps even more frequently.

Disclaimer: I have no position, long or short, in bitcoin or any other similar "altcoin" assets, nor do I have any plans to open such a position in the forseeable future. However, I do find it fascinating to watch this legal/economic experiment evolve from a safe distance.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#399
post #396
post #393

Earlier quoted context omitted.

Let's say there is a court case where the judge awards all shareholders of AAPL $100 of compensation for every share held (It's to the shareholders, but not the company, because the court case involved shareholders vs management). The government sends $100 per share to each registered holder. Your investment fund is the registered holder of AAPL securities instead of you. Do you get $100 per share that was held on yo…

I think that's a great analogy for each of us thinking about our own ethical intuition. But if you're literally asking what would actually happen, I'm guessing the answer is...there would probably be a lawsuit and the courts would figure it out. Which is probably exactly what will happen here, if Coinbase continues to not support the Bitcoin fork and its value holds long enough.

not likely. corporate payouts happen all the time based on share ownership.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#400
post #229

Coinbase is in a bad situation here. If they set a precedent that all BTC forks will be available to their users, then they open themselves to some pretty obvious DOS attacks. 10 new "bitcoins" could fork every day. Are we really going to expect coinbase to support them all? That's absurd. I think it's pretty obvious that they're going to just issue the BCH to people eventually. Here's another thought experiment: I a…

There's logic in these arguments; however, they ignore securities laws. If BTC is a security, which the regulators probably think it is, then yes—you have to have a mechanism to bring concepts like splits, tenders, dividends to holders of the security if you are going to hold them for their benefit. Developers considering forks will likely be required to follow yet unclarified rules around how much, how often, waitin…

the cftc has ruled that bitcoin is a commodity.
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