Crypto exchange AAX suspends withdrawals • Hacker News Board

Re: Crypto exchange AAX suspends withdrawals

#531

Post by rglullis » Mon, Nov 14, 2022, 5:31 PM UTC

bboygravity wrote: post #489

rglullis wrote: post #445

Earlier quoted context omitted.

2008 wasn't caused by a finance scam. It was caused by an already heavily-regulated banking industry, supported by governments addicted to growth. Not that different from what is happening now with the crypto "exchanges", by the way.

Wow, you must've missed that little something about Glass Steagal.

Wow, you must've missed the point entirely.

I'm talking about how both bubbles were a consequence of all the money being pumped relentlessly by governments. That it was going to pop, we should not have no doubt. If it wasn't for crypto "exchanges", it would be a dot-com v2 (which is also happening, but without crypto to take all that capital this crisis would be bigger still), or it would be something else entirely... but at the end of the day, as long as we have governments addicted to growth, we will have boom and bust cycles.

Re: Crypto exchange AAX suspends withdrawals

#532

Post by zeroclip » Mon, Nov 14, 2022, 5:32 PM UTC

Nursie wrote: post #397

zeroclip wrote: post #328

Earlier quoted context omitted.

Different category of risk. CEX and DEX can both have hacks. An open source DEX can be verified, formally tested, and made immutable and un-upgradable on chain, like Uniswap. Uniswap V2 contract is 2 years unchanged, $3.8B TVL and $1B daily volume, close to 10 year old Coinbase CEX. Not bad for being a joke.

So we’ve gone from “Everyone is learning the value of DeFi” to “I can come up with a single example of a DeFi system that hasn’t been hacked (yet)” Hardly says that DeFi as a category is reliable.

Here's a bigger list for you[1], the top 10 all have $1B+ TVL.

[1] https://defillama.com/

Re: Crypto exchange AAX suspends withdrawals

#533

Post by PKop » Mon, Nov 14, 2022, 5:34 PM UTC

VBprogrammer wrote: post #521

coconut08 wrote: post #503

Earlier quoted context omitted.

anyone who claims to know is lying to you. historically speaking, a good heuristic would be: not your keys not your coins, no matter what the exchange is. if you control your own keys then you don't need to wonder about whether binance is solvent or not.

Honestly, I've never really understood crypto so maybe I'm mistaken, however if pretty much all of the major exchanges disappear off the face of the earth, can there be any other outcome than the value of crypto going, as near as makes no difference, to zero? You may still be able to transfer ownership of your coins but for what purpose?

New exchanges will emerge, plus there is Coinbase and Gemini and other regulated ones. You don't need to store your coins on the exchange if you're not selling them. If you want to buy, other people who want to sell will have their coins on the exchange, and after you buy you can withdraw them. I'm not sure why people conflate "liquidity" for trading with people just leaving them there when they're not selling them. Even when people do leave them on the exchange, these coins are not contributing to trading liquidity because they are not up for sale.

The fact that crypto severely and relatively quickly punishes bad custodians who fractionally reserve and trade customer funds is a feature not a bug. And the reason this punishment happens quickly to crush bad actors is the "bank runs" necessary to trigger the event can occur within minutes of rumors or information being revealed to the market, and assets can be withdrawn globally very quickly. No other "banks" or exchanges or brokers are exposed to this much pressure punishing insider schemes like this.

Even the gold and silver markets have a lot of people claiming there is paper leverage way in excess of physical supply, and that large geopolitical interests suppress the price of gold so as to defend against it taking value from sovereign debt and currencies. I think there is some truth to this, but the reason it is allowed to persist and that there may not be true "price discovery" in gold and other commodity markets is that no one takes delivery, and so many simply leave their physical asset on custodian banks. Who knows what they are doing with this, or if their asset is truly allocated. It would require a crypto style "bank run" to punish these potential bad actors. Only crypto has this over and over again at scale.

Re: Crypto exchange AAX suspends withdrawals

#534

Post by cortesoft » Mon, Nov 14, 2022, 5:34 PM UTC

amalcon wrote: post #406

jacknews wrote: post #77

This all seems like less a problem of crypto as such, and more that exchanges are making a virtual fractional reserve currency by leveraging customer deposits for loans/investments. ie it's a 'banking' problem, specifically a 'fractional reserve banking' problem, not a crypto problem. This is exactly why fractional reserve banking is heavily regulated.

None of these collapses have been due to fractional reserve banking, because fractional reserve banking requires being open about what you're doing. These collapses have been about fraud . There are lots of other kinds of fraud; getting rid of this type would barely make an impact. While there's nothing intrinsic about cryptocurrency that would make it more prone to fraud than anything else, the culture around it see…

> While there's nothing intrinsic about cryptocurrency that would make it more prone to fraud than anything else

There are absolutely intrinsic things that make cryptocurrency more prone to fraud. The inability to reverse transactions, quasi-anonymity, and lack of any central authority to resolve disputes.

To limit fraud to the levels you see in traditional finance, you would need the regulations and oversight by centralized organizations that you have in the traditional space. The entire purpose of cryptocurrencies are to avoid those things, so while you technically could have them with a cryptocurrency, you would end up with no good reason to have a cryptocurrency at all.

Re: Crypto exchange AAX suspends withdrawals

#535

Post by zeroclip » Mon, Nov 14, 2022, 5:35 PM UTC

dhruval wrote: post #515

Not super knowledgeable on this but Decentralized exchanges exist why are they not more widely used by the crypto community?

They are widely used and process billions per day.[1]

There are other problems with DeFi: protocol risk, transaction fees, speed, UX. They are newer and less known than CEXes and most users who buy and hold crypto on FTX or BlockFi do not know how to use the blockchain. Most of these problems can be overcome, like see L2 development, but it will take some time.

[1] https://defillama.com/chain/Ethereum

Re: Crypto exchange AAX suspends withdrawals

#536

Post by mtsr » Mon, Nov 14, 2022, 5:35 PM UTC

tinco wrote: post #108

constantcrying wrote: post #85

Earlier quoted context omitted.

An exchange shouldn't count deposited crypto as their asset. It is an asset of their customer. I do not think the actual problem here is crypto exchanges being unprofitable. Even if a crypto exchange goes under, it could (and frankly should ) still be able to go under gracefully, e.g. letting all customers withdraw their assets for a month (and E-Mailing private keys as a last resort). The issue here is crypto exchan…

You can say that, but when MtGox went bankrupt, and also lost 4 fifths of its stored crypto, the court just heaped together all assets into one big pile and all creditors into one big pile and let them fight it out. So now there's a bunch of assholes including but not limited to Peter Vessenes, that are suing the bankrupt entity for billions (completely frivolous of course) and all the depositors have waited for 8 ye…

To do this legally, one can have a separate legal entity to hold on to third party assets. In the Netherlands this can be done using a foundation (stichting derdengelden).

Any transactions of third party assets go through this entity and don’t touch the company at all. And this entity doesn’t take on any risk, whatsoever.

Fees etc, of course, happen separately and are paid to the company.

So in closing: this has nothing to do with fairness and everything with the exchanges (whether purposefully or through negligence) not working this way.

Re: Crypto exchange AAX suspends withdrawals

#537

Post by edwnj » Mon, Nov 14, 2022, 5:36 PM UTC

dhruval wrote: post #515

Not super knowledgeable on this but Decentralized exchanges exist why are they not more widely used by the crypto community?

There is no on/off ramps to the fiat world.

Other issues like complexity/bad ux are being rapidly fixed but the on/off ramp issue is one thing that technology can't fix. Its a legal issue.

Re: Crypto exchange AAX suspends withdrawals

#538

Post by nordsieck » Mon, Nov 14, 2022, 5:36 PM UTC

VBprogrammer wrote: post #521

coconut08 wrote: post #503

Earlier quoted context omitted.

anyone who claims to know is lying to you. historically speaking, a good heuristic would be: not your keys not your coins, no matter what the exchange is. if you control your own keys then you don't need to wonder about whether binance is solvent or not.

Honestly, I've never really understood crypto so maybe I'm mistaken, however if pretty much all of the major exchanges disappear off the face of the earth, can there be any other outcome than the value of crypto going, as near as makes no difference, to zero? You may still be able to transfer ownership of your coins but for what purpose?

> if pretty much all of the major exchanges disappear off the face of the earth, can there be any other outcome than the value of crypto going, as near as makes no difference, to zero?

Presumably someone will make a new one; it seems unlikely to me that all crypto will go to zero in the near to mid future, even assuming what you say.

Re: Crypto exchange AAX suspends withdrawals

#539

Post by asoneth » Mon, Nov 14, 2022, 5:37 PM UTC

rufusroflpunch wrote: post #457

horsawlarway wrote: post #342

Earlier quoted context omitted.

Can we acknowledge that both of those options are utter trash compared to conventional banking, though? The system that the crypto advocates hate on, but provides 250k per person + per bank + per account type as insurance by default to all registered financial institutions?

In Lebanon, people are robbing banks to get their own money out. Maybe they are a little bit more comfortable than you are with holding keys to an unseizable asset.

If you live in the US and are hedging against the collapse of the FDIC you may be better served by investing in things like dried goods and seeds than cryptocurrencies.

Re: Crypto exchange AAX suspends withdrawals

#540

Post by NovemberWhiskey » Mon, Nov 14, 2022, 5:38 PM UTC

cortesoft wrote: post #524

JumpCrisscross wrote: post #177

Earlier quoted context omitted.

> match orders and they also hold client money Matching orders is what brokers canonically do. Exchanges came about to consolidate their activity. There is nothing resembling a true exchange in the crypto space.

Isn’t the blockchain itself the “true exchange” of the crypto space?

No; that's a ledger. In the context of traditional securities flows, that's more like the post-trade process and share registration etc.

If you think about Bitcoin; the blockchain can literally only tell you about how Bitcoin was transferred between addresses.