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First U.S. Bitcoin Exchange Set to Open

wsj.com

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Re: First U.S. Bitcoin Exchange Set to Open

#21

Post by lappa »

sillysaurus3 wrote: post #14

Does this exchange offer insurance against catastrophic insolvency? Someone went from millionaire to poor overnight when Mt. Gox failed, so it's a real concern. No one should keep their coins in any wallet except their own, and they need to make sure they have the technical understanding of how to properly manage their wallet. If your personal wallet isn't encrypted and backed up, it's not managed properly. If you wa…

The way Coinbase words it, they may be only insuring 3% of your funds. The online wallet is insured[1], but there may only be 3% online[2] meaning a malicious employee or just a mistake leading to their cold wallet being lost probably isn't protected.

[1] http://blog.coinbase.com/post/95927658922/coinbase-is-insure...

[2] https://www.coinbase.com/security

Re: First U.S. Bitcoin Exchange Set to Open

#23

Post by skue »

Animats wrote: post #18

"As is typical of most bitcoin/fiat intermediaries when promoting their products, the new exchange is being touted as a first and a means to bring legitimacy to Bitcoin." - Qntra. We've heard that story many times before. Kraken makes similar claims. (Kraken uses the same address, 548 Market St, SF, as Coinbase. It's a mail-forwarding service. Few people know where either exchange really is.) So what is this "license…

Is there any significant difference between this exchange and the upcoming Winklevoss exchange?[1]

Both claim to be "regulated," but it doesn't look like the Winklevoss version will offer SIPC protections either.[2]

[1] http://dealbook.nytimes.com/2015/01/22/winklevoss-twins-aim-...

[2] http://www.sec.gov/Archives/edgar/data/1579346/0001193125132...

Re: First U.S. Bitcoin Exchange Set to Open

#24

Post by vasilipupkin »

Animats wrote: post #18

"As is typical of most bitcoin/fiat intermediaries when promoting their products, the new exchange is being touted as a first and a means to bring legitimacy to Bitcoin." - Qntra. We've heard that story many times before. Kraken makes similar claims. (Kraken uses the same address, 548 Market St, SF, as Coinbase. It's a mail-forwarding service. Few people know where either exchange really is.) So what is this "license…

I don't know the specifics, but this being a U.S. exchange, it needs to comply with a whole lot of regulations in order to deal with customer money. So, while I am not sure what exact level of protection it offers, whatever it is, it is higher than non US based exchanges, which should be a positive step for development of bitcoin

Re: First U.S. Bitcoin Exchange Set to Open

#25

Post by beaner »

sillysaurus3 wrote: post #19
bobbygoodlatte wrote: post #17

Earlier quoted context omitted.

"No one should keep their coins in any wallet except their own" That's just not going to fly if Bitcoin becomes mainstream. There's too much dogmatism around this in the Bitcoin community. Sometimes a hosted wallet is the right solution for a particular user.

It's not about whether it's going to fly. It's certifiably insane to trust your coins to any third party unless you either have multisig control to prevent those coins from leaving, or they have insurance to replace your coins. Do not ever trust anyone, or you'll lose your money like I did. They won't replace it unless they're legally obligated to replace it (insurance) or they're technically incapable of losing it (…

This is a religious view speaking. More bitcoin has probably been lost due to people thinking they should handle it themselves, and doing it wrong, than has been lost to all the big hacks including Mt. Gox. A survey from a while ago reflects this likeliness: http://www.reddit.com/r/Bitcoin/comments/2bjefu/results_of_a...

Re: First U.S. Bitcoin Exchange Set to Open

#26

Post by sillysaurus3 »

beaner wrote: post #25
sillysaurus3 wrote: post #19

Earlier quoted context omitted.

It's not about whether it's going to fly. It's certifiably insane to trust your coins to any third party unless you either have multisig control to prevent those coins from leaving, or they have insurance to replace your coins. Do not ever trust anyone, or you'll lose your money like I did. They won't replace it unless they're legally obligated to replace it (insurance) or they're technically incapable of losing it (…

This is a religious view speaking. More bitcoin has probably been lost due to people thinking they should handle it themselves, and doing it wrong, than has been lost to all the big hacks including Mt. Gox. A survey from a while ago reflects this likeliness: http://www.reddit.com/r/Bitcoin/comments/2bjefu/results_of_a...

I didn't say everyone should manage their own bitcoin. I said people should manage it themselves if they have the technical ability to do so. For everyone else, stick with banks. If you're borderline unsure whether you can store your coins in an encrypted wallet and make regular backups and not lose those backups, then keep your money in an FDIC-insured bank.

But sticking your coins into a webwallet like Coinbase without multisig control is a recipe for unmitigated personal disaster. A mental exercise is useful: "I've lost all my money." How would that affect your life?

I strongly disagree with anyone who would push the view that it's okay to sweep the issues under the rug in the name of making Bitcoin more popular. Putting people's fortunes at risk is almost equivalent to putting their lives at risk, because your quality of life is directly proportional to your fortune.

If Bitcoin sounds risky, that's because it is. No amount of regulated exchanges will change that. What will change it is giving consumers multisig control over their coins, or insuring against a total loss of all coins including cold storage.

There's literally no other option. One of those two things must happen, or you must not use the services. Or if you do use them, don't put in more than a quarter of what you're comfortable with losing. If that's $100, then never deposit more than $25 in BTC.

Remember, Bitstamp just lost $5 million USD to hackers, or half their most recent investment round. It's unknown whether they're currently insolvent. Everyone thinks they might have enough money to cover the losses, but nobody knows for sure. They could currently be a fractional reserve.

So Mt. Gox wasn't a one-off. Nobody is safe from hackers, technical issues, or even rogue employees that want to become millionaires. Due to the untraceable nature of Bitcoin, all exchanges and webwallets are extremely attractive targets.

Re: First U.S. Bitcoin Exchange Set to Open

#27

Post by beaner »

sillysaurus3 wrote: post #26
beaner wrote: post #25

Earlier quoted context omitted.

This is a religious view speaking. More bitcoin has probably been lost due to people thinking they should handle it themselves, and doing it wrong, than has been lost to all the big hacks including Mt. Gox. A survey from a while ago reflects this likeliness: http://www.reddit.com/r/Bitcoin/comments/2bjefu/results_of_a...

I didn't say everyone should manage their own bitcoin. I said people should manage it themselves if they have the technical ability to do so. For everyone else, stick with banks. If you're borderline unsure whether you can store your coins in an encrypted wallet and make regular backups and not lose those backups, then keep your money in an FDIC-insured bank. But sticking your coins into a webwallet like Coinbase wit…

The problem is that people who think they have the technical ability to do it right is astronomically higher than reality, not because people overestimate themselves, but because they underestimate the difficulty of "rolling your own bitcoin storage." I mean, you can make these arguments, but the history proves that so far centralized storage has been safer than self storage, on average.

Further, Coinbase does give users access to their private keys with the multisig vault, so one of your two criteria has already been met.

Re: First U.S. Bitcoin Exchange Set to Open

#28

Post by [deleted] »

sillysaurus3 wrote: post #26
beaner wrote: post #25

Earlier quoted context omitted.

This is a religious view speaking. More bitcoin has probably been lost due to people thinking they should handle it themselves, and doing it wrong, than has been lost to all the big hacks including Mt. Gox. A survey from a while ago reflects this likeliness: http://www.reddit.com/r/Bitcoin/comments/2bjefu/results_of_a...

I didn't say everyone should manage their own bitcoin. I said people should manage it themselves if they have the technical ability to do so. For everyone else, stick with banks. If you're borderline unsure whether you can store your coins in an encrypted wallet and make regular backups and not lose those backups, then keep your money in an FDIC-insured bank. But sticking your coins into a webwallet like Coinbase wit…

[deleted]

Re: First U.S. Bitcoin Exchange Set to Open

#29

Post by sillysaurus3 »

beaner wrote: post #27
sillysaurus3 wrote: post #26

Earlier quoted context omitted.

I didn't say everyone should manage their own bitcoin. I said people should manage it themselves if they have the technical ability to do so. For everyone else, stick with banks. If you're borderline unsure whether you can store your coins in an encrypted wallet and make regular backups and not lose those backups, then keep your money in an FDIC-insured bank. But sticking your coins into a webwallet like Coinbase wit…

The problem is that people who think they have the technical ability to do it right is astronomically higher than reality, not because people overestimate themselves, but because they underestimate the difficulty of "rolling your own bitcoin storage." I mean, you can make these arguments, but the history proves that so far centralized storage has been safer than self storage, on average. Further, Coinbase does give u…

Are most Coinbase users using multisig? Since it's not the default, I'm pretty sure the answer is no. So unless multisig is the default at their new exchange, all of those people are at risk. Few are helped by multisig if few people use it.

Since Coinbase has a large cold storage reserve, and since multisig-protected coins can't be put into cold storage, the answer is pretty clear: Coinbase protects few people.

It's a false dichotomy that coins must be stored in a personal wallet that users mess up, or a webwallet that exchanges mess up. There's a third option: Convert those coins back into USD and stick it in a bank. As long as you're storing less than $500,000, you're guaranteed to have it.

Anything else is pure greed. As someone who has been burned by greed, my misfortune stands as a warning to others: please don't make my mistakes.

The reason I lost coins is because I was tempted by Mt. Gox. Their 2FA auth made it seem very unlikely that my coins could go anywhere, just like Coinbase. If I'd researched Mt. Gox, I would have discovered a history of technical problems. Yet if you research Coinbase right now, you'll discover they've had a history of those too. There have been at least two or three high-profile Coinbase incidents over the years which were featured on HN. And if you research Bitstamp, you'll see they just lost $5 million.

The common denominator is that exchanges and webwallets aren't trustworthy.

Re: First U.S. Bitcoin Exchange Set to Open

#30

Post by mirimir »

bobbygoodlatte wrote: post #17
sillysaurus3 wrote: post #14

Does this exchange offer insurance against catastrophic insolvency? Someone went from millionaire to poor overnight when Mt. Gox failed, so it's a real concern. No one should keep their coins in any wallet except their own, and they need to make sure they have the technical understanding of how to properly manage their wallet. If your personal wallet isn't encrypted and backed up, it's not managed properly. If you wa…

"No one should keep their coins in any wallet except their own" That's just not going to fly if Bitcoin becomes mainstream. There's too much dogmatism around this in the Bitcoin community. Sometimes a hosted wallet is the right solution for a particular user.

Bitcoin arguably cannot become mainstream without secure hosted wallets. Most people won't use Bitcoins until wallets start looking like debit cards, with authenticated access, insurance, and so on. Even so, prudent investors will keep large balances in offline wallets, securely encrypted and backed up.

In my experience, it's simplest to use multiple offline wallets, each in its own VM. To start using a wallet, one merely copies its VM to an online host, and appropriately configures network access for the VM.

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