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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

#401

Post by JBSay »

einpoklum wrote: post #280
chaosbolt wrote: post #150

Earlier quoted context omitted.

I'm almost sure Coinbase practices fractional reserve and other forms of market manipulation, let's see how that bank run works for people. Some examples: - NuCypher goes up quickly on binance (a few months ago) because a whale is buying there, lots of people try to withdraw on CB to sell on binance, withdrawals start off working but then get locked for 5 hours straight, reddit and other social media had people compl…

> 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…

Money is not created through fractional reserve banking. Money is loaned into existence by commercial banks. Similarly Coinbase can sell you coins which don't exist. Like a bank it doesn't have to make good on this IOU until you withdraw your funds.

Re: Coinbase warns that bankruptcy could wipe out user funds

#403

Post by patricklorio »

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…

Coinbase is FDIC insured but that's only relevant for USD. The SEC mandates disclosures of all risk and given that a crypto company like this has not gone bankrupt there, isn't precedent on how bankruptcy courts will consider crypto assets held under custody. Therefore it's a risk that should be made transparent.

Re: Coinbase warns that bankruptcy could wipe out user funds

#404

Post by olalonde »

svnt wrote: post #351
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.…

Sorry to say it, but no, you. You are missing the point. The regulations on banking created and enforce those legally binding separations in assets that you are shocked don’t exist.

Seems like a more robust solution would be to just fix the bad bankruptcy laws instead of "regulating" every possible variant of "company has custody of X which is actually owned by customer Y". There ought to be a simple way to declare: "this is not company property and is off limits to company creditors in the event of a liquidation".

Re: Coinbase warns that bankruptcy could wipe out user funds

#405

Post by guessbest »

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…

You can't download your assets. They are virtual. What you can do is generate an address locally and transfer your bitcoin funds from coinbase to that. Remember to save your secret of you are just throwing (virtual) money in a canyon.

https://github.com/pointbiz/bitaddress.org

https://bitcointalk.org/index.php?topic=43496.0

Re: Coinbase warns that bankruptcy could wipe out user funds

#406

Post by junon »

p49k wrote: post #131
junon wrote: post #94

Earlier quoted context omitted.

This is not a direct quote, please don't use blockquotes. It's disingenuous.

It’s a direct quote from the 2nd tweet in his thread.

Er, no. It's not. And the GP was edited already not to use blockquotes, so my comment is now moot.

Re: Coinbase warns that bankruptcy could wipe out user funds

#407

Post by danans »

nullc wrote: post #388
danans wrote: post #360

Earlier quoted context omitted.

> Is Coinbase "loaning" out the Bitcoin users have deposited in it? I don't understand how they would loan it out. What denomination/form will the loan be transferred in? Bitcoin? If so, how are they creating the Bitcoin to loan out? They can't take it out of their depositors' wallets because by design that would result in a lower balance for the wallet on the blockchain. They can't make a copy because Bitcoin preven…

Their depositors wallets aren't "on the blockchain" -- if they were, they'd be in the the depositors custody not coinbase's. Their users balances are just entries in a database at coinbase. Users expect that coinbase holds coins to back up those balances, but there is no proof of it. Last I checked coinbase doesn't participate in any proof of solvency protocols so there is no way to know if customer balances exceed t…

> Their depositors wallets aren't "on the blockchain" -- if they were, they'd be in the the depositors custody not coinbase's.

If the users' wallet values are really just database entries referring to some miniscule portion of the mega-wallet whose private keys are actually owned by an exchange, then what's the point of using the blockchain at all?

What is the value provided by exchanges other than an asset database that (hopefully) has bank-level security?

Just a way for regular folks to speculate on cryptocurrency?

Couldn't that function be equally served by some kind of high-risk brokerage account that has a crypto investment option?

Re: Coinbase warns that bankruptcy could wipe out user funds

#408

Post by sschueller »

azinman2 wrote: post #389
_Algernon_ wrote: post #6

This boils down to the "not your keys not your coin" mantra that's often repeated in the cryptocurrency community. It is possible to move your coins to your own wallet and manage them on your own. This comes with risks (eg. lost keys). Keeping them on exchange comes with different risks. Anyone holding significant amount of cryptocurrencies should consider the risks of each choice, make an informed decision, and live…

So if I wanted to move stuff to my own wallet, what’s the best way to do that these days? Anything that can support more than just Bitcoin? I assume I’d just stick any private keys in a password manager vault that I already trust, and/or Yubikey. I’m not sure I trust the dedicated hardware wallets as that seems more prone to failure than a pure software approach.

Most hardware wallets use the same standard to generate your keys (BIP39, BIP32 and BIP44 I think) from a long recovery phrase of words. So you could for example restore your wallet in a wallet software if your hw wallets dies. As long as you have all the words and the correct order you should be able to restore your funds somewhere else.

Re: Coinbase warns that bankruptcy could wipe out user funds

#410

Post by arbitrary_name »

rebuilder wrote: post #252
jjgreen wrote: post #172

Earlier quoted context omitted.

The last time I was on a Clapham omnibus, there was an old chap in the back seats in the process of taking his trousers off

Ah, an institutionalized investor.

But obviously recently escaped from the institution, if he is on the omnibus...
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