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Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

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51–60 of 86 posts

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#51
post #30

> for the first time, you can have fast, convenient trading without custodial trust. Really? From your description it sounds like I would have to trust Sparkswap and some other unknown bank with my fiat. > In just the first half of 2019, almost $500M^3 was stolen from custodial exchanges. And why would you be immune to this? > product that solves a real problem What problem? To buy LN coins instead of Bitcoins?

[replying because I previously downvoted and another respondent didn't know why people were downvoting.]

> Really? From your description it sounds like I would have to trust Sparkswap and some other unknown bank with my fiat.

Fiat transactions have extremely high reversibility often for months after the fact, and law enforcement is actually responsive around fiat theft in a way they haven't been around cryptocurrency theft. As a result, at least so-far, exchange thefts have not centered around the fiat side of the operations, and in the rare cases fiat has been lost it seems to have always, AFAIK, been cases where the exchange self-traded in order to cover up a cryptocurrency loss. But perhaps as the cryptocurrency side gets derisked we'll see more fiat shenanigans.

>> In just the first half of 2019, almost $500M^3 was stolen from custodial exchanges.

> And why would you be immune to this?

They'd be immune because those thefts targeted huge standing balances of highly liquid, irreversible cryptocurrencies, that users left on exchanges for convenience in trade. It sounds like their intent is to eliminate all large standing cryptocurrency balances. I have no idea if they will be successful, but if they are it should be a substantial derisking.

> What problem? To buy LN coins instead of Bitcoins?

There is no such thing as "LN coins", lightning is a bitcoin smart contract that allows effectively instantaneous transfers of Bitcoin between users. It works by telling the bitcoin network that some collection of your coins will be governed by a programmatic contract between you and another user, then you can trade your coins back and forth as fast as you want at no cost, and you only need to go back to the network if there is a dispute between parties (where the network then forces correct handling) or you want to remove the coins from the agreement.

This is conceptually similar to how you enjoy the protection of the law and the courts while virtually never going to court yourself-- except more powerful because taking your dispute to the network is completely automated, radically cheaper than a court, and not so subject to making a wrong decision. :)

(The network part of the name comes in because the lighting contracts allow transitive trade, e.g. if Alice and Mallory have funds subject to lightning contract, and Mallory and Bob have funds subject to lighting contract-- then Alice can pay Bob, transitively via Mallory without posting transactions in public. This is possible because the protocol is constructed so that multiple trades can be made cryptographically atomic-- where either all succeed or all fail.)

Part of the reason that you're being downvoted is because misinformation claiming that lightning issues some kind of additional or alternative cryptocurrency is a dog whistle of some well known cryptocurrency scammers, such as Craig Wright and his staff.

Downvoters may have been assuming that you were employed by one of these scammers, but it's just as possible that you simply picked up some of their terminology in ignorance.

Cheers.

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#52
post #30

> for the first time, you can have fast, convenient trading without custodial trust. Really? From your description it sounds like I would have to trust Sparkswap and some other unknown bank with my fiat. > In just the first half of 2019, almost $500M^3 was stolen from custodial exchanges. And why would you be immune to this? > product that solves a real problem What problem? To buy LN coins instead of Bitcoins?

[deleted]

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#53

aka, buy bitcoin instantly once you've deposited your USD into some partner bank account which you don't have access to but Sparkswap absolutely does. This isn't really new or interesting and has been shut down repeatedly before because most crypto companies can't handle the fraud mitgation, here's a clue, it's not cheap or easy and can't be automated at this small scale. Instant access to the coins has never really…

I want to say it means more like the on ramps to crypto are kind of fucked. Coinbase and other on ramp providers have terrible fees, its almost exclusively the primary reason I don't swap fiat into crypto currency.

Those fees exist to cover risk mitigation - i.e. a certain percentage of on-ramps are fraudulent and the fee disperses the loss spread to everyone who is on-ramping.

Unless this service has invented some new technology in fraud prevention, it's going to eat that risk at a loss to themselves.

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#54

Earlier quoted context omitted.

what would you say are the real pain points that are being solved here?

Namely that Im not using coinbase, who are essentially the facebook of the crypto world.

How do you know AnchorUSD, Zap, Abacus, or Sparkswap are not doing the same as Coinbase either?

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#56

aka, buy bitcoin instantly once you've deposited your USD into some partner bank account which you don't have access to but Sparkswap absolutely does. This isn't really new or interesting and has been shut down repeatedly before because most crypto companies can't handle the fraud mitgation, here's a clue, it's not cheap or easy and can't be automated at this small scale. Instant access to the coins has never really…

I want to say it means more like the on ramps to crypto are kind of fucked. Coinbase and other on ramp providers have terrible fees, its almost exclusively the primary reason I don't swap fiat into crypto currency.

Poloniex has zero fee wire transfers (other than the wire fee you pay) into USDC which you can then trade on Polo with (paying fees) or withdraw the USDC anywhere you like that has better fees.

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#57
post #50

So I need to trust 1.AnchorUSD 2.Their trust company where escrow is held 3.Zap for lightning network wallet 4.Abacus for identity verification 5.and you (sparkswap) I'd say this is neither direct nor instant (just abacus verification adds crazy friction). And the trust issue is real, I'd personally feel better with one large custodial institution than a number of startups in this chain that I know nothing about (or…

> I'd say this is neither direct nor instant You're correct in other ways as well: The "lightning" network (heh) still requires slow Bitcoin transactions to initiate and close. And it's between two trusted parties anyway, so this negates the need for a trustless network like Bitcoin. A far better "lightning network" has existed for many years. It's called a shared SQL database.

No it's not between two trusted parties. If those parties disagree, they have recourse to the blockchain, and so don't have to fully trust each other.

The lightning network couldn't be built without having a lower level trustless party. Bitcoin actually lets us bootstrap trust.

More thoughts on bootstrapping trust:

https://www.nemil.com/crypto/why-cryptocontracts-matter.html

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#58
post #15

Earlier quoted context omitted.

We have guards in place to protect against fraud by verifying your identity in a few different ways, but this is something we'll monitor and make improvements to over time. It's critical to the survival of the business that we have strong fraud detection methods. However, we also think that the experience of instant transfers is valuable, so on a risk-based approach we allow instant transfers using ACH for certain cu…

> However, we also think that the experience of instant transfers is valuable, so on a risk-based approach we allow instant transfers using ACH for certain customers and certain transaction sizes. You have a fundamental misunderstanding how ACHs work. There's no such thing as an ACH that is "completed". At +180 days the state is "It is probably going to be fine". At +365 days the state is "It is probably most likely…

You might have a fundamental misunderstanding of their business model.

They don't need to classify an ACH as "completed" or "not completed", they only need to place a confidence interval on its completion state, which becomes easier as they process more transfers.

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#59

aka, buy bitcoin instantly once you've deposited your USD into some partner bank account which you don't have access to but Sparkswap absolutely does. This isn't really new or interesting and has been shut down repeatedly before because most crypto companies can't handle the fraud mitgation, here's a clue, it's not cheap or easy and can't be automated at this small scale. Instant access to the coins has never really…

> This isn't really new or interesting [...]

The list of HN posts that this comment has been applied to is almost as long as the list of successful YC startups.

Re: Launch HN: Sparkswap (YC S18) – Buy Bitcoin Instantly over the Lightning Network

#60
post #9

Earlier quoted context omitted.

AnchorUSD is our payment partner who operates the API we interact with (it's a custom API that they built for us). The escrow account is held with a trust company in AnchorUSD's name, but is designed so that only the users they onboard can access the funds. Funds cannot be legally used for any other purpose.

> The escrow account is held with a trust company in AnchorUSD's name, That means the total FDIC insurance on all the money in all accounts is capped at $250K between all the users of your platform . One Bitcoin quoting at $10,288, means that at most money needed to buy 24.3 bitcoins are insured across the entire platform.

Our partner has clarified that FDIC insurance is per user (per Tax ID) rather than for the whole platform
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