Coinbase Wants Wall Street to Resolve Its Bitcoin Trust Issues

Yuck, this blew up and I think alot of people took it the wrong way. I think Coinbase is great, and I'm sure everyone who works there is awesome and terrific at their job.

Anyone who has worked on any half way successful project knows just how hard both uptime and security are and I'm in no way upset at Coinbase for having growth issues.

I've done this for years and might not even get an interview with them. They'll be fine, they're just learning how to deal with alot of hard issues all at once.

The question was posed, what do you need to do to get institutional money and I answered.

To clarify...

Coinbase , atleast from a hedge funds perspective has 2 tasks.

1) prime broker or custodian, from this perspective you just can't be hacked and loose anyone's bitcoins.

Not sure how a hedge fund would tell its clients that they lost any amount of their funds due to an exchange being hacked, this is just so foreign to the way the markets currently work. I don't think the funds clients would be too accepting of a loss of any amount due to this.

2) as an exchange, This is probably easy for people to understand. When the volume picks up that's when you make your money. If Volume causes the exchange to go down, you can't make money.

Again this is very rare for most markets now to go down to volume and when it does it doesn't really matter too much because the concept of having your shares with an exchange doesn't really make sense in the equities market.

You'd just start trading at another exchange and none of your shares are actually held with the exchange, nor do you need to send shares to an exchange to trade, you just trade and settle at the end of the day.

EDIT END

I'll preface this by saying, what I'm asking for is hard, very hard, but being a grown up is hard..... You can't just ask people to invest billions of other peoples money and then claim "best efforts" if your exchange crashes under load.

Well what institutional investors want is pretty simple to understand, though very hard to implement.

1) No counterparty risk. Everyone can get hacked, but coinbase being hacked shouldn't every, under any circumstances result in me loosing any bitcoin they hold on my behalf.

A hedge fund can't just go to their clients and say sorry, lost all our money, coinbase got hacked, the hedge fund itself and its principles would be sued into oblivion.

I mean if the Nasdaq, NYSE or prime broker ever got hacked, no one would expect to suddenly loose all their shares, or cash held with their prime broker.

2) The exchange can't go down, like at all. Once a year for 5 minutes is fine, or every day at midnight for 10 minutes is fine, but during regular trading hours you can't just throw your hand up and say "hey, best efforts here there just alot of volume right now, we'll be up in a few minutes"

Hedge funds make their money on volatility, which means the more volatile and busy the exchange is the more they'll want to trade. Going down when times are busy is just can't happen.

Source: I work for a hedge fund.

Strange comment, I think I've confused you.

All this was about exchanges and what hedge funds expect from them, not guarantees about what hedge funds provide.

And you are right, exchanges do go down, and its news when they do because they are so good at what they do that its very rare.

> I don't know what reality you operate in

I operate in the US Cash Equities and options markets. What I've asked for is par for the course there, in that no one mentions it because its the very lowest base, must have requirements.:)

When was the last time you heard of Goldman Sachs begin hacked and all the hedge funds that use them as a prime loosing all their money?

Where exactly in the white paper does it state this? I've just looked it up, and don't see any reference to Bitcoin being an experiment.