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A Major Coinbase Milestone: 1 Million Consumer Wallets

blog.coinbase.com

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Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#61

Post by torbjorn »

diego wrote: post #42
baddox wrote: post #36

Earlier quoted context omitted.

Lots of people in this thread seem to think that there is either no incentive for Coinbase to conduct their business legitimately, or that the law is the only incentive. That ignores the much more obvious and presumably stronger incentive: they should be able to make a lot more money as a legitimate business than if they just ran away with one lump sum.

That relies on the assumption that they will not suffer a tremendous loss due to a rogue employee, a software bug or a malicious hack. If they found themselves in a situation in which they are certain to go out of business as soon as people find out that they are in trouble, that motivation would cease to exist. It would come down to ethics, reputation, pressure from investors, etc.

Sure, Bad Things™ could happen at Coinbase like they did at Gox. However, I think it is reasonable to trust Coinbase more than Mt. Gox. If you looking to Mt. Gox's history there are many signals that suggest general mismanagement and dysfunction.

This is in no way rigorous but consider User Interface design as a rule of thumb. Gox had an ugly unintuitive site. Coinbase on the other hand has a polished UI. This attention to detail suggests that the people who operate Coinbase are very different from those who operated Gox.

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#62

Post by gnaritas »

diego wrote: post #40
gnaritas wrote: post #31

Earlier quoted context omitted.

> Nothing False. Theft is against the law. Bitcoins don't magically avoid being subject to existing law. The owners are known and subject to US jurisdiction, you have legal recourse through the courts should they try and steal your funds.

The law doesn't prevent you from committing crimes. It certainly did not prevent Mt. Gox from making bitcoins disappear. If that happens and you need to go to court, good luck proving that an exchange stole your coins. We haven't even seen Mt. Gox play out yet. Suppose they actually stole everyone's coins. Can someone prove it wasn't a hacker or a software bug? Time will tell.

> The law doesn't prevent you from committing crimes.

That wasn't the question, the question was what's to stop them and the answer I objected to was "Nothing"; that's false, the law is not nothing. What's to stop most bad behavior... the law.

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#63

Post by gnaritas »

CoachRufus87 wrote: post #38
gnaritas wrote: post #31

Earlier quoted context omitted.

> Nothing False. Theft is against the law. Bitcoins don't magically avoid being subject to existing law. The owners are known and subject to US jurisdiction, you have legal recourse through the courts should they try and steal your funds.

> The owners are known and subject to US jurisdiction Assuming they don't just leave the country

We have jurisdiction in all countries, just ask our politicians and witness our world policing.

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#64

Post by smtddr »

sillysaurus3 wrote: post #18

Quick question: What's preventing Coinbase from shutting down operations tomorrow and walking away with everyone's money, as MtGox walked away with mine? Or, what if the founders orchestrated some sort of disaster wherein all of the coins are claimed to be lost, but in reality they're simply transferred to the founders? I know they wouldn't actually do that. My question is, what's stopping them? Why wouldn't someone…

Here are my reasons:

- They are in SF so I can walk/bike/bus to their office; for whatever good that does me. Didn't do that one dude any good going to MtGox's Japan office. =/

- They are YC backed, so that means pg knows about 'em. That adds a "gold star" in my book in that they must have passed some kind of filter to get into YC; that they're not just plain scammers, unprofessional or woefully uneducated about security on the interwebz.

- I feel very confident about this video: http://techcrunch.com/2013/12/17/foundation-brian-armstrong-...

All that said, you still shouldn't leave a huge amount of coins on an address that you don't exclusively hold the private key to. 1 or 2 bitcoins, meh. Day-trading with 50 BTC? Risky, but okay I guess. Those crazy amounts I saw on that gox-horror Reddit thread, like 100+? Some people in the THOUSANDS?!!! That was a bad decision. That needs to be some place else. Coinbase.com may have the most honest people in the world, but I also believe hackers are extremely talented people and hundreds of bitcoin is adequate motivation for a certain subset of hackers to pour all their energy into breaking coinbase. I'd love for Coinbase.com to talk about all the strange hack attempts they must see against their service every... minute.

I day trade on btc-e.com with 1k USD and my rule is to never have more that 2k on there. If I reach 2K, I buy 1k's worth of bitcoin --> send to coinbase.com --> cash out. Repeat again with the 1k remaining. I could try and turn 2k into 4k, but that's a risk I'm not willing to take. I'm happy with my 1k units of profit.

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#65

Post by makomk »

gnaritas wrote: post #62
diego wrote: post #40

Earlier quoted context omitted.

The law doesn't prevent you from committing crimes. It certainly did not prevent Mt. Gox from making bitcoins disappear. If that happens and you need to go to court, good luck proving that an exchange stole your coins. We haven't even seen Mt. Gox play out yet. Suppose they actually stole everyone's coins. Can someone prove it wasn't a hacker or a software bug? Time will tell.

> The law doesn't prevent you from committing crimes. That wasn't the question, the question was what's to stop them and the answer I objected to was "Nothing"; that's false, the law is not nothing. What's to stop most bad behavior... the law.

The law is fairly obviously not an answer though, given the context. The original question specifically asked what stops Coinbase from shutting down and taking everyone's money like MtGox did. It was just as illegal when MtGox did it, yet it happened anyway. (Actually, most of the other answers have the exact same problem.)

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#66

Post by mcherm »

sillysaurus3 wrote: post #18

Quick question: What's preventing Coinbase from shutting down operations tomorrow and walking away with everyone's money, as MtGox walked away with mine? Or, what if the founders orchestrated some sort of disaster wherein all of the coins are claimed to be lost, but in reality they're simply transferred to the founders? I know they wouldn't actually do that. My question is, what's stopping them? Why wouldn't someone…

Other than their morals?

Well, I suppose there are legal implications: that's known as "theft". Also there are the morals of every other employee... I believe Coinbase is set up with standard controls so no one person can steal funds without it being obvious to (and preferably requiring the cooperation of) other employees.

I would ask a similar question: What's preventing Nationwide Insurance, Chase Bank, and e-Trade from shutting down operations tomorrow and walking away with everyone's money? The biggest difference between these institutions and MtGox is that these institutions all have regulators who have the power to (in extremis) take over the operations of the institution if it begins to show the same kinds of trouble that MtGox showed for quite some time before its collapse. Coinbase is not currently subject to any such regulation.

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#67

Post by patmcc »

singularityyy wrote: post #17
joezydeco wrote: post #2

I realize it's all startup-y to pat yourself on the back about growth, but aren't you painting a target on your back for those that want to perform the next heist?

No security is perfect of course, but Coinbase has over 98% of the funds in cold-storage. See: http://antonopoulos.com/2014/02/25/coinbase-review/

Banks that hold large amounts of cash either insure it against fire/flood/theft or self-insure with other assets - what is Coinbase's plan if these cold-storage coins are destroyed, either by malicious attempt or disaster? That link shows the coins are locked away, are apparently not accessible, but how safe are they against actual loss?

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#68

Post by smtddr »

gnaritas wrote: post #62
diego wrote: post #40

Earlier quoted context omitted.

The law doesn't prevent you from committing crimes. It certainly did not prevent Mt. Gox from making bitcoins disappear. If that happens and you need to go to court, good luck proving that an exchange stole your coins. We haven't even seen Mt. Gox play out yet. Suppose they actually stole everyone's coins. Can someone prove it wasn't a hacker or a software bug? Time will tell.

> The law doesn't prevent you from committing crimes. That wasn't the question, the question was what's to stop them and the answer I objected to was "Nothing"; that's false, the law is not nothing. What's to stop most bad behavior... the law.

>>What's to stop most bad behavior... the law

No... what stops most bad behavior is _consequences_. The law applies to everyone, but the consequences for breaking them don't.

We will see what(if any) consequences are placed upon MtGox. Personally, I still can't see how MtGox will be found liable of anything. Bitcoins aren't protected under any law and nobody said it was okay to trade your hard-earned government-backed fiat for some magical interwebz money. It might as well be fairy wings & unicorn tails. Don't get me wrong, I'm into crypto-coins and willing to lose up to 7k on them... but I fully understand that my coins could disappear in the next 5 mins due to any number of reasons and I have absolutely nobody to blame but myself.

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#69

Post by panabee »

how are they able to guarantee an exchange rate? aren't they exposing themselves to the huge fluctuations in bitcoin price (though the price seems to have stabilized recently)? for instance, there were some days this month where the price fluctuated by more than 40%. somehow the price and volume must work out where this is a calculated risk to cultivate the broader bitcoin ecosystem. would love to see some numbers if anyone has any ...

Re: A Major Coinbase Milestone: 1 Million Consumer Wallets

#70

Post by erikpukinskis »

panabee wrote: post #69

how are they able to guarantee an exchange rate? aren't they exposing themselves to the huge fluctuations in bitcoin price (though the price seems to have stabilized recently)? for instance, there were some days this month where the price fluctuated by more than 40%. somehow the price and volume must work out where this is a calculated risk to cultivate the broader bitcoin ecosystem. would love to see some numbers if…

I suspect they don't need to expose themselves because they are holding large amounts of both Bitcoins and cash, so they can simply sell them to people at whatever price they want to. It's not like they take your USD and then have to run out and buy Bitcoins to cover them. They do have to worry about the value of their Bitcoin and USD holdings becoming worthless, but that's something all Bitcoin and USD investors have to worry about.

If they are taking some risk, by making commitments that they don't have backed with currency, it's trivially easy to calculate their exposure and figure out how high their fees need to be to cover it. That's a problem actuaries solved decades ago. Currency exchange is not a new business.

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