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Coinbase warns that bankruptcy could wipe out user funds

fortune.com

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Re: Coinbase warns that bankruptcy could wipe out user funds

#361

Post by _Algernon_ »

uncomputation wrote: post #319
einpoklum wrote: post #280

Earlier quoted context omitted.

> I'm almost sure Coinbase practices fractional reserve I'm not a crypto guy, so excuse the naive question: Can coinbase loan out money without actually transferring some sort of single-ownership keys for the amount loaned? If so, then indeed, they should be able to engage in fractional reserve "banking". > and other forms of market manipulation Modern money markets are based on fractional reserve banking. That's how…

The issue isn’t that modern banks all do this. It’s that crypto was supposed to be different, a response to the financial crisis where people were affected that didn’t even gamble on housing, a way to truly own and prove your money is your money. > Modern money markets are based on fractional reserve banking Bitcoin was developed to solve this. > That's how most money gets created these days Bitcoin is a deflationary…

> It’s that crypto was supposed to be different

It is different. Nothing is stopping people from moving their crypto from the exchanges, and at least with crypto people have the opportunity to do that. What hasn't changed is human behavior and our affinity for the path of least resistance.

No technology is going to change that.

Re: Coinbase warns that bankruptcy could wipe out user funds

#362

Post by orwin »

matheusmoreira wrote: post #353
its_ethan wrote: post #345

Earlier quoted context omitted.

I'm not sure who first said it, but crypto feels like a solution in search of a problem. Something akin to "when all you have is a hammer, everything looks like a nail" - forcing crypto/blockchains as solutions to problems that are either already solved, or could be solved in other more traditional ways, only acts as a disservice to wider adoption imo.

> crypto feels like a solution in search of a problem Well, to me the problem is absolutely real. Decades ago, my country suffered from hyperinflation. We went through several inflationary currencies like it was nothing until some economist managed to dupe everyone into believing it was gonna be different this time. Not before desperate attempts to control inflation were implemented, though. In the 90s the president…

Or you make that your central bank is independent from your president, and that only qualified majority + accords from your judicial power can modify the target of your central bank. (Edit: to be clear: target and not policy. The central bank can still choose how they will reach their target).

But you need an effective republic for this, and one that have a hint of democracy.

Re: Coinbase warns that bankruptcy could wipe out user funds

#363

Post by blihp »

patwolf wrote: post #90
sureglymop wrote: post #50

Earlier quoted context omitted.

What i don't understand is why don't people create their own wallet and keep their funds there? Isn't that the entire purpose? Of course they could still use coinbase as an exchange. But if everyone let's another party "manage" their wallet in what way is it really decentralized...

It takes discipline to keep a wallet safe. I used to discount the risk of that, but over time I feel less and less confident in the average person's ability to not lose a wallet or have it hacked. To me Coinbase feels more like bank. Once I deposit money I no longer worry about the physical security of that money. Clearly that isn't the case given it's not FDIC insured, but the fact that it's a multi-billion dollar p…

Unless Coinbase is regulated like a bank or brokerage, what it feels like is irrelevant if you're in the U.S. Short of your deposits being FDIC or SIPC insured you know all you need to know: every cent and/or coin you have with them is at risk.

Re: Coinbase warns that bankruptcy could wipe out user funds

#364

Post by [deleted] »

mattwilsonn888 wrote: post #254
mkr-hn wrote: post #119

As someone without 250k in the bank (or generally), FDIC insurance is quite reassuring. Banks pay into it like any other insurance, so it would take a huge money-doesn't-matter-anymore shock to overwhelm it. 2008 was pretty close! Crypto wouldn't do any good for me since the utility bills for all the internet infrastructure are paid for with real money (in the "most people exchange it for goods and services" sense).…

> You could execute a 51% attack on a solar-powered NetBSD toaster. I don't think you understand the basics of Bitcoin.

[deleted]

Re: Coinbase warns that bankruptcy could wipe out user funds

#365

Post by legalcorrection »

uncomputation wrote: post #319
einpoklum wrote: post #280

Earlier quoted context omitted.

> I'm almost sure Coinbase practices fractional reserve I'm not a crypto guy, so excuse the naive question: Can coinbase loan out money without actually transferring some sort of single-ownership keys for the amount loaned? If so, then indeed, they should be able to engage in fractional reserve "banking". > and other forms of market manipulation Modern money markets are based on fractional reserve banking. That's how…

The issue isn’t that modern banks all do this. It’s that crypto was supposed to be different, a response to the financial crisis where people were affected that didn’t even gamble on housing, a way to truly own and prove your money is your money. > Modern money markets are based on fractional reserve banking Bitcoin was developed to solve this. > That's how most money gets created these days Bitcoin is a deflationary…

Bitcoin has no opinion on fractional reserve banking. If entrust your assets to someone else, your contract with them can specify what they do with those assets until you ask for them. If you don’t like that, find someone else to hold your assets who doesn’t ask for those terms, or hold your assets yourself. But then you become responsible for preventing theft and destruction.

Re: Coinbase warns that bankruptcy could wipe out user funds

#366

Post by maxerickson »

formerkrogemp wrote: post #189
maxerickson wrote: post #14

Earlier quoted context omitted.

Okay, but that isn't a liability in an accounting sense, it is a cash flow. Edit: looking at the 10K, other than customer assets (where they have a net holding), they have like $6 billion in cash and equivalents against less than $5 billion of debts and other obligations). So if they shut it all down, there would be funds left over.

On paper, you have and can report a lot of assets. However, many companies go bankrupt with current ratios greater than one with either overinflated or overvalued assets or undervalued or understated debts or some combination. Financial reports a la 10-Ks and 10-Qs are 'boring,' difficult for most people to read, contain specialized jargon, and contain significant lag time where a going concern is, well, a concern. A…

If "cash and cash equivalents" is wrong, that's fraud, not something I should have taken with a grain of salt.

Re: Coinbase warns that bankruptcy could wipe out user funds

#367

Post by shapefrog »

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…

They could simply have a ringfenced seperate legal entity hold the customer funds. Begs the question, why not...

Re: Coinbase warns that bankruptcy could wipe out user funds

#368

Post by TheOtherHobbes »

kolbe wrote: post #336
maxerickson wrote: post #9

Earlier quoted context omitted.

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.

Every single user account is an IOU.

There is - as some people seem likely to discover - a difference.

Re: Coinbase warns that bankruptcy could wipe out user funds

#369

Post by pyuser583 »

prepend wrote: post #76
pjc50 wrote: post #59

Earlier quoted context omitted.

Check your cloud storage user agreements. A lot of them involve handing a perpetual irrevocable right to the data to the company storing it.

For purposes of operating the service. Not for commercializing IP. If I on Titanic and upload it to Dropbox. A creditor during bankruptcy couldn’t use those rights to sell streams of Titanic. For coinbase, a creditor could sell the crypto stored.

A while back Facebook was accused of requiring users to give them copyright “ownership.”

They said they wanted to be able to sue someone who scraped it. And that required ownership.

Suing people for violating the copyright goes well beyond simple cloud operations.

It means they can reach settlements, etc.

It was less clear whether they could sue the author.

Re: Coinbase warns that bankruptcy could wipe out user funds

#370

Post by kolbe »

TheOtherHobbes wrote: post #368
kolbe wrote: post #336

Earlier quoted context omitted.

Every single user account is a liability.

Every single user account is an IOU. There is - as some people seem likely to discover - a difference.

The vast majority of bankruptcy courts place customer accounts ahead of creditors.
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