Coinbase warns that bankruptcy could wipe out user funds • Hacker News Board

Re: Coinbase warns that bankruptcy could wipe out user funds

#331

Post by DebtDeflation » Wed, May 11, 2022, 4:12 PM UTC

chill1 wrote: post #274

CyanDeparture wrote: post #161

Can anyone tell me how to set up a wallet on my Mac in order to get my coins off coinbase. Is there any clear guide on how to do that. Every link on Google seems to be spam or downloading potentially malicious software. It's very fustrating because so many people seem to know how to set up a wallet on their computer/Mac however I cannot for the life of me find a clear wallet to download and move my funds to or a guid…

I usually don't bother to login to comment, but I felt compelled in this case. The other replies include a lot of bad advice. You sound like you don't have much of experience actually using bitcoin (or cryptocurrencies). So the best (most secure and easiest) solution is to buy a hardware wallet and use the wallet app which they provide. I suggest either Trezor [1] or Ledger [2]. Do not buy a hardware wallet from seco…

If this is what's needed to securely store (not even use) crypto then the future for crypto is even bleaker than I thought.

Re: Coinbase warns that bankruptcy could wipe out user funds

#332

Post by JoeAltmaier » Wed, May 11, 2022, 4:12 PM UTC

olalonde wrote: post #324

prepend wrote: post #2

Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are ris…

> It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are risk adjusted rates for not having insurance. You are missing the point. We are shocked that even if Coinbase keeps users' deposits 100% safe, users could still lose their deposits if a judge decides so.…

Bankruptcy rules are weird, and it's not just crypto companies that work that way. Lots of uninsured companies could lose depositors' accounts in bankruptcy. Witness grain elevators, or storage companies, or safe deposit companies - it took special laws to protect depositors. Which protection Coinbase doesn't have, apparently.

It's always more nuanced than first glance. And (rich) creditors have always had more sway in court than common depositors, unless special rules are enacted that say otherwise.

Re: Coinbase warns that bankruptcy could wipe out user funds

#333

Post by IceWreck » Wed, May 11, 2022, 4:20 PM UTC

theshrike79 wrote: post #8

I just moved all my crypto off Coinbase, just to be sure. Coinmotion seems to be a stable-ish option. At least they're not looking for hockeystick growth and aquisition.

Why do you use an external service ? Just keep the wallet on your own machine.

Re: Coinbase warns that bankruptcy could wipe out user funds

#334

Post by nytesky » Wed, May 11, 2022, 4:20 PM UTC

ahmetrcagil wrote: post #227

mbesto wrote: post #190

Earlier quoted context omitted.

Would you like to explain to my 70 year old mother that she should install a Chrome extension, transfer her coins to it and expect her not to lose that? Oh and then explain to her that she is going to print out a piece of paper with 12 words on it. That's her backup in case she loses everything...so "Mom, do not lose this piece of paper you're screwed!" Yes she'll figure that out easily!

Maaaybe 70 y.o. moms should not invest in crypto then?

Then crypto will never be the future of money. That's their point.

But honestly, most HN uses password managers -- if crypto became primary currency, that would make hacking someplace like Bitwarden or Coinbase enormous world shattering honeypots -- like Nation state targets.

Re: Coinbase warns that bankruptcy could wipe out user funds

#335

Post by olalonde » Wed, May 11, 2022, 4:21 PM UTC

JoeAltmaier wrote: post #332

olalonde wrote: post #324

Earlier quoted context omitted.

> It’s funny to see people shocked (SHOCKED!) when crypto doesn’t have the protections of regular banking and investments. That’s why you don’t invest with stuff that isn’t insured. Those aren’t real rates, they are risk adjusted rates for not having insurance. You are missing the point. We are shocked that even if Coinbase keeps users' deposits 100% safe, users could still lose their deposits if a judge decides so.…

Bankruptcy rules are weird, and it's not just crypto companies that work that way. Lots of uninsured companies could lose depositors' accounts in bankruptcy. Witness grain elevators, or storage companies, or safe deposit companies - it took special laws to protect depositors. Which protection Coinbase doesn't have, apparently. It's always more nuanced than first glance. And (rich) creditors have always had more sway…

It's weird indeed. I admit I believed there was a law that protected depositors (in general) from creditors in the event of a bankruptcy. Are you saying that there's a law that's specifically for grain companies, one specifically for safe deposit companies, etc.? What if you park your car in a garage which goes bankrupt, can you lose your car? I'm kind of mind blown right now...

Re: Coinbase warns that bankruptcy could wipe out user funds

#336

Post by kolbe » Wed, May 11, 2022, 4:24 PM UTC

maxerickson wrote: post #9

eatonphil wrote: post #4

Earlier quoted context omitted.

I do wonder why he's allowed to say on Twitter there is no risk of bankruptcy [0]. While the risk could be minimal and maybe negligible saying "no risk" means zero chance. That can't be true of any company. For a public company ceo to say that, isn't that securities fraud? I guess even if it is fraud and they do get prosecuted by the SEC they'd just get fined for it. And maybe the fine here would be much less than th…

If you don't have significant liabilities you can't really go bankrupt. (I didn't look to see if that was the case, just making the point in general)

Every single user account is a liability.

Re: Coinbase warns that bankruptcy could wipe out user funds

#337

Post by bckygldstn » Wed, May 11, 2022, 4:27 PM UTC

AYoung010 wrote: post #238

pandemicsoul wrote: post #231

Earlier quoted context omitted.

I was on reddit and someone called bitcoin a "useful savings account" and I was like, "NO, STOP. Do not tell people this stuff is for savings!" I was downvoted to hell and people were like "lmao noob." Got into a back and forth where I was trying to delineate an investment and savings and people just kept replying stuff like, "it goes up, that means you beat inflation, do you not understand how this works???" Sigh.

Sadly, discourse on reddit has not been worth the time of day since 2015 or so.

This depends very much on the subreddit. There are still some fantastic communities with top-notch discourse! On the other hand, I don't remember discourse being worthwhile on large subreddits even in the good old days of 2015.

Re: Coinbase warns that bankruptcy could wipe out user funds

#338

Post by alex_suzuki » Wed, May 11, 2022, 4:32 PM UTC

usrn wrote: post #18

I've been messing with crypto long enough to know how this goes and my coins are already in a local wallet. Coinbase had a good run but don't be stupid. Crypto exchanges aren't insured like consumer checking accounts are in the US and when they're gone they're gone. Geth isn't hard to set up for most of us, it took me about 20 minutes to have it up and running after not using a local wallet for nearly a decade. Remem…

Why on earth would the typical customer that is scared by this announcement choose to run a node instead of just withdrawing to Metamask or a hardware wallet?

Re: Coinbase warns that bankruptcy could wipe out user funds

#339

Post by freefolks » Wed, May 11, 2022, 4:33 PM UTC

dragontamer wrote: post #325

tablespoon wrote: post #195

Earlier quoted context omitted.

> Since coinbase isn’t FDIC insured, it makes sense that if coinbase goes bankrupt, the customer currencies will go away as well. And they aren’t SPIC insured in the situations where crypto is a security. Is Coinbase "loaning" out the Bitcoin users have deposited in it? The reason banks need the FDIC is that they loan your deposits out instead of throwing it in a vault and sitting on it, so if they go under they don'…

> Is Coinbase "loaning" out the Bitcoin users have deposited in it? Maybe not Bitcoin, because I don't know if Bitcoin has any staking protocols in it. But things like Anchor / UST / Luna participated in a staking scheme, where if you promised not to sell UST, you'd get 20% APY gains (measured in UST of course, not US-dollars). Coinbase could be participating in those schemes in a group wallet-setting. Ex: UST holdin…

There are many issues here. First is all the crypto that coinbase must hold in order to facilitate trades. If they do not have the inventory, they must source elsewhere. Second is customer funds (cash) which is what they need to facilitate a fiat exchange for crypto for their markets. I'm not exactly sure how their operations work but in a regular stock brokerage, these are segregated from their own cash although in 2010 an incident was shown that even segregated customer funds are not so segregated.

The risk here is always the same. Liquidity in terms of cash. I dont believe there is any regulation stopping coinbase from using or investing customer cash or anything preventing them from acting as a hedgefund (leveraging that cash) to make investments using customer funds. The real risk is there. If they are using crypto as collateral to make investments that are tanking in value, while crypto is tanking in value, they'll be forced to post more collateral in the form of cash or be forced liquidated to take a loss. Insolvency leads to bankrupcy.

Re: Coinbase warns that bankruptcy could wipe out user funds

#340

Post by walderf » Wed, May 11, 2022, 4:33 PM UTC

krono wrote: post #45

When a CEO requires 8 twitter posts[1] to essentially convey the message "Don't worry about this legal clause", it sort of has the opposite effect on me. [1]: https://twitter.com/brian_armstrong/status/15242334800407101...

i don't use twitter that much so i don't know if this type of multi-tweet message is common place on the platform or not. especially for conveying important information in any sort of manner that should be taken seriously.

i recently experienced a ~20 tweet "story" that was explaining a pretty serious and important shift in the posting parties operations. it was the first time i recall ever having encountered this sort of "tweet" and, at least to me, it did not seem like an ideal or effective means of communication.

i get that they want to reach their audience and that's what i feel like twitter is good, well, probably the best at. the whole intent of the platform had always been geared toward sending short, articulate messages. a substance-filled, important message like this one and the one i had to read before no doubt took a few "practice runs in the mirror", so to speak. i read both of these messages from the comfort of my desktop PC using nitter. as difficult as that was, i can't imagine having view it using a phone.

regardless of the topic of the message, my thoughts are, if you have something to say, say it in a single tweet with a link to an officially hosted post or webpage. any more than that, especially on any sort of usual basis, is not only inconvenient for both parties involved, but confusing, unprofessional, and, in a lot of cases, like you said, quite off-putting.