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

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

#61

Post by nickpsecurity »

d-d wrote: post #50
freediver wrote: post #38

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.

Or centralized operation with decentralized checking that can be implemented with SQL databases and/or logs. So much more efficient. One can use non-profits/foundations with the protections built into their charters, policies, and contractual agreements with steep penalties for violations. As in, use existing tools with tons of operational experience and case law supporting that they work. Also, these have basically none of the drawbacks of the fully-decentralized solutions.

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

#62

Post by wheelerwj »

tg3 wrote: post #35
wheelerwj wrote: post #25

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 definitely agree that fraud mitigation is the key factor in a business like this succeeding or failing. Instant access to coins is certainly something that can attract the wrong type. There are certainly pros and cons to self-custody - it's not for everybody. Given the value proposition of Bitcoin and the huge amounts of cryptocurrency stolen from exchanges, it's important for many people to hold their own keys. We…

why don’t you just one of the many other providers?

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

#63

Post by thrwn_frthr_awy »

tg3 wrote: post #35
wheelerwj wrote: post #25

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 definitely agree that fraud mitigation is the key factor in a business like this succeeding or failing. Instant access to coins is certainly something that can attract the wrong type. There are certainly pros and cons to self-custody - it's not for everybody. Given the value proposition of Bitcoin and the huge amounts of cryptocurrency stolen from exchanges, it's important for many people to hold their own keys. We…

> the huge amounts of cryptocurrency stolen from exchanges, it's important for many people to hold their own keys

Can you cite the data for your claim that there is less loss of Bitcoin from holding keys vs an exchange? I'd image the number of Bitcoins lost people people don't have their keys is large.

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

#64

Post by xur17 »

tg3 wrote: post #18
otoburb wrote: post #17

Congratulations on launching! How are you handling AML/KYC? Is this something that AnchorUSD will front first, and is there a fee that they take for the deposit? Also -- do you have to restrict usage for certain jurisdictions (e.g. NY state residents)?

We have an AML program in place and do identity verification on users that want to buy Bitcoin. We are restricted to 22 states in the US right now (which excludes NY state) but we're expanding that number rapidly, and hoping to expand internationally in the coming months. There are no fees for deposits.

Do you have a list of states you operate in?

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

#65

Post by notyourday »

tg3 wrote: post #60
notyourday wrote: post #33

Earlier quoted context omitted.

> 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

I'm sorry, but your response is a strong indicator that anyone and everyone needs to stay as far away as humanly possible from your company in its current form because:

1) company's leadership does not understand how FDIC insurance works -- trusts have their own tax ID which are not customer's tax id. Trusts cannot currently be created in real time.

2) company's leadership does not know what they are getting from a "partner" -- some random person who ran a couple of companies and consulted for some financial institutions should not know more about what is and what is not possible than a leadership of a company in a space

3) there's a lack of understanding among the leadership what are the implications of customer account being insured by FDIC.

4) leadership does not understand that ACH credit has a liability attached to it which needs to be managed very carefully ( especially with points 1-3 )

5) In no even should the points 1-4 stand should a company ever trade from its own inventory to satisfy customer's order.

Drop whatever you are currently doing and immediately hire a compliance person from a large commercial bank that does not have any reason to leave his or her position i.e. overpay for one of 100-200 experts that exist in this field so you can at least ensure that you don't blow up in the most spectacular fashion with a potential criminal prosecution.

This is not an Uber or AirBnB. If you mess up you will create potentially criminal problems not just for yourselves but for your customers.

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

#66

Post by xur17 »

First of all, this is very neat. I just tried this with $15, but I'm receiving the error message "your account must be approved prior to trading". At the same time I received an email from AnchorUSD stating "We expect your USDx to post to your account by September 25, 2019". Does it really take 6 days for the funds to be available in my account, or am I misunderstanding?

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

#67

Post by notyourday »

jstanley wrote: post #58
notyourday wrote: post #32

Earlier quoted context omitted.

> 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.

> 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

They ignore financial regulations to the level of Uber ignoring taxi regulations. The difference between the taxi commission or whatever its name is in San Fran and US Department of Treasury is that the later relies on people with guns and can block customer's ability to do any financial transactions.

The reason why in the standard custodial scheme ACH transactions are fine ( but still are frowned upon ) is because the appreciating asset can be reclaimed from a custodian via courts.

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

#68

Post by 40four »

tg3 wrote: post #47
40four wrote: post #43

This looks promising. Looking forward to trying it out! I do wish there was more information on the website about how it works, fees etc. I am admittedly a crypto currency novice, so I'm not real familiar with the lightning network and how it works. I am curious how your product differs from the Bitcoin feature on Square Cash app? I have had a good experience buying Bitcoin with USD from Square. It's fast, there is n…

The product is very similar to the Square Cash app. The main difference is that when you buy Bitcoin with Sparkswap, the Bitcoin goes instantly (and without paying on-chain fees) into a wallet for which you hold the private keys (rather than a company holding the keys on your behalf). And that Bitcoin is available for spending on the Lightning Network. The downside is that you have to be comfortable being responsible…

Great, thanks for the information! Depositing straight into my own wallet is very appealing.

I'm just starting to get into buying crypto, but for someone like me, I'm ONLY interested in managing my own private keys.

I don't typically buy large amounts of bitcoin at a time, so when I do it is advantageous to reduce the fees as much as possoble.

Excgange fees and/or network transaction fees can take a painful percentage from small transactions, so I will certainly be happy to give Sparkswap a try!

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

#69

Post by xur17 »

lawn wrote: post #22
tg3 wrote: post #20

Earlier quoted context omitted.

Sparkswap opens the channel to the user, so Sparkswap will incur the channel opening and closing fee.

That's nice. So similar to how a regular exchange pays for your withdrawal transaction. (And of course if it's better or worse depends on how much they'll charge).

One advantage is that your funds are already in a lightning channel, so you can immediately use it for payments within the lightning network with very low fees (vs having to pay onchain fees).
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