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Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

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Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#151

Post by camgunz »

jcranmer wrote: post #138
throwup wrote: post #90

Earlier quoted context omitted.

Kraken does at least. AIUI their auditor is given a snapshot of all account balances at a particular point in time, and builds a merkle tree. You can then reconstruct your expected merkle leaf and verify that your specific account was included in the tree. You can verify on the auditor's website, or you can do it by hand. Kraken's help page even has code snippets in Python/Go/etc to make it easy! More info: https://w…

At the bottom of the proof-of-reserves page: > The procedure cannot identify any hidden encumbrances or prove that funds had not been borrowed for purposes of passing the audit. In other words, this is a fancier version of the kind of attestation that Tether makes, the ones that leave loopholes you can drive dump trucks through.

> In other words, this is a fancier version of the kind of attestation that Tether makes, the ones that leave loopholes you can drive dump trucks through.

100% and this just drives me bonkers. I'm not entirely unsympathetic to wanting to avoid financial regulation, like while I disagree it's a good idea, I can understand wanting to build a system that is built on math and not people. Fine.

But isn't the whole point of crypto radical transparency? As in: you know at all times where all the coins are and the details of every transaction that has ever occurred? Shouldn't this meet 100% of your auditing needs? Why are audits even useful? Well, they're really helpful if you want to run a shell game off chain, but still assure customers that you're not gambling with their money so they keep giving you more of it.

Like, arguing in good faith here, this is just a worst of both worlds situation. You have an extremely slow financial transaction system that you still have to hand audit.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#152

Post by throwup »

jcranmer wrote: post #138
throwup wrote: post #90

Earlier quoted context omitted.

Kraken does at least. AIUI their auditor is given a snapshot of all account balances at a particular point in time, and builds a merkle tree. You can then reconstruct your expected merkle leaf and verify that your specific account was included in the tree. You can verify on the auditor's website, or you can do it by hand. Kraken's help page even has code snippets in Python/Go/etc to make it easy! More info: https://w…

At the bottom of the proof-of-reserves page: > The procedure cannot identify any hidden encumbrances or prove that funds had not been borrowed for purposes of passing the audit. In other words, this is a fancier version of the kind of attestation that Tether makes, the ones that leave loopholes you can drive dump trucks through.

Their audits operate on the principle of "your keys = your coin". That's good enough for me. But you have a point and that's why they listed it as a caveat. If you want them to open the rest of their books, I guess we'll just have to wait until they go public.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#153

Post by matthewdgreen »

polygamous_bat wrote: post #36

To the crypto-inclined people commenting on every thread about how failing centralized exchanges don't effect you and are actually good for Bitcoin, how are you planning to convert your hard earned crypto into US dollars that you can spend at a grocery store? If your answer is "P2P exchanges," how do you plan to secure your cold wallet against the infamous rubber hose cryptanalysis?

Ugh, please kill me for answering this question because I don't want to join the "everything is awesome" crowd. But from a technical perspective, you are describing two very different functions that are currently provided by "centralized exchanges", but don't need to be:

1. Interfacing with the traditional (fiat) banking system: today this can be done with regulated fiat-backed stablecoins like Paxos USD, Gemini USD or Circle's USDC. It's critical that these institutions be carefully regulated by government entities to ensure the deposits are protected, but this is feasible (Paxos and Gemini are regulated by NYDFS, Circle's regulation story is more complex but there is one.) This regulation is crucial to ensure that "the assets are in the bank", but you only need a few such issuers to be regulated. This is much more scalable than trusting every two-bit crypto exchange in the world.

2. Custody of signing keys: this can also be technically managed by centralized institutions. Anchorage Digital and Fireblocks are examples of this. These centralized solutions can't ever perfectly eliminate risk (they are centralized, after all), but they can make you much resistant to rubber hose attacks. The actual technology is based on hardware security modules and MPC, plus lots of excellent security engineering.

In theory once you have reliable building blocks for these two components, the rest can be achieved using smart contracts without the need for further centralization or trust risk. (You will, of course, risk bugs in the smart contract. But this is a technical problem that we can potentially solve using technical means, not a fundamental problem of human trust.) In general the idea here is to optimize your "trusted human base" so that it is as small as possible (and have those parts carefully regulated), and then you can covert the rest into problems that have purely technical solutions.

Obviously this story only works if you're doing fiat-crypto conversion and storage of assets. The minute you start lending assets to people then you're back to trusting human beings to actually pay you back, so you'd better make good judgements about their (possibly illiquid) collateral.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#154

Post by lavezzi »

mirzap wrote: post #85
polygamous_bat wrote: post #36

To the crypto-inclined people commenting on every thread about how failing centralized exchanges don't effect you and are actually good for Bitcoin, how are you planning to convert your hard earned crypto into US dollars that you can spend at a grocery store? If your answer is "P2P exchanges," how do you plan to secure your cold wallet against the infamous rubber hose cryptanalysis?

Who says they want to spend US $? If bitcoin (or any other) decentralized currency succeeds and gets world-wide adoption you'll not have to convert it into anything else. You'll spend it as money. That's the ultimate goal of bitcoin. With massive adoption price movements will stabilize so price move of 1.5% will look like a huge deal then.

But it's not money because you will potentially be taxed capital gains against any transaction.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#155

Post by throwup »

camgunz wrote: post #151
jcranmer wrote: post #138

Earlier quoted context omitted.

At the bottom of the proof-of-reserves page: > The procedure cannot identify any hidden encumbrances or prove that funds had not been borrowed for purposes of passing the audit. In other words, this is a fancier version of the kind of attestation that Tether makes, the ones that leave loopholes you can drive dump trucks through.

> In other words, this is a fancier version of the kind of attestation that Tether makes, the ones that leave loopholes you can drive dump trucks through. 100% and this just drives me bonkers. I'm not entirely unsympathetic to wanting to avoid financial regulation, like while I disagree it's a good idea, I can understand wanting to build a system that is built on math and not people. Fine. But isn't the whole point o…

You're 100% right, and that bad feeling you have is a sign that you understand where both sides are coming from. This is why so many people say "not your keys, not your coin". Giving up control of your keys is never the best option, but if that's what you choose to do, audits might help you make the least bad choice out of those available.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#156

Post by pessimizer »

alexb_ wrote: post #48
coffeebeqn wrote: post #44

Earlier quoted context omitted.

I don’t really get the point. My dollars are already digital. It’s not like my employer sends a stack of 100s to my banks vault every two weeks

But you can still withdraw that for stacks of 100s if you so please. And these dollars cannot be tracked by large corporations hungry for any bit of data about you.

Having digital dollars is completely unrelated to banning hard currency. I know this because the vast majority of current dollar business is completely digital, and hard currency exists.

I mean, people withdraw bitcoin for stacks of $100s.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#157

Post by jmalicki »

shkkmo wrote: post #118
kmonsen wrote: post #65

Earlier quoted context omitted.

Did any depositors loose money in 2008 from bank failures? If not when was the last time regular depositors lost money?

I don't think that information is public to protect privacy...but any balances over the limit in a failed bank would result in non-insured losses.

That's actually not true [1] - the FDIC has continued the practice of covering balances over the insured limit despite not being required to.

[1] https://www.americanbanker.com/opinion/will-fdic-keep-protec...

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#158

Post by mirzap »

lavezzi wrote: post #154
mirzap wrote: post #85

Earlier quoted context omitted.

Who says they want to spend US $? If bitcoin (or any other) decentralized currency succeeds and gets world-wide adoption you'll not have to convert it into anything else. You'll spend it as money. That's the ultimate goal of bitcoin. With massive adoption price movements will stabilize so price move of 1.5% will look like a huge deal then.

But it's not money because you will potentially be taxed capital gains against any transaction.

Not necessarily. Spend it like a money - no capital gain. Trading is different story. It's like Forex trading. You get taxed on capital gains on Forex transactions as well.

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#159

Post by pessimizer »

CyberDildonics wrote: post #80
tartoran wrote: post #42

Earlier quoted context omitted.

Let’s not shy away, those balances are a speculation on the future price of crypto. If the prices don’t go up they’re affected, simple as that.

That's obviously not what was being talked about in this context. The discussion was about being affected by suspended withdrawals if exchanges never give people their deposits back.

That's because gergov and tartoran were not making woah's point about people who don't have accounts at exchanges. They were making their own related point in reply, also about people who don't have accounts at exchanges, being damaged by price drops in the wake of problems at exchanges.

Are they allowed to do that?

Re: Genesis' Crypto-Lending Unit Is Suspending Withdrawals in Wake of FTX Collapse

#160

Post by [deleted] »

FrobeniusTwist wrote: post #150
automatic6131 wrote: post #101

Earlier quoted context omitted.

If Genesis is found to be operating as a ponzi scheme (lol, lmao), then the bankruptcy court will send you a bill for the money you've withdrawn. You can try to fight that in court - but you'll lose. If you try to fight for it another way, I wish you the best of luck.

Your advice above about maybe not spending recent withdrawals is really good. I just want to point out that recovery of "preferences" (which is what these withdrawals might, possibly, be) doesn't depend on there having been a Ponzi scheme, or any fraud at all, in the underlying business. Identifying and recovering preferential transfers is one of the main jobs of a bankruptcy trustee, and they are given legal superpo…

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