Crypto exchange AAX suspends withdrawals • Hacker News Board

Re: Crypto exchange AAX suspends withdrawals

#181

Post by michaelt » Mon, Nov 14, 2022, 3:02 PM UTC

anticristi wrote: post #109

Pardon for living under a rock, but why are crypto exchanges affected by the mood in the crypto market? I thought that a crypto exchange functions like a currency market: I put an offer to sell 10,000 EUR for 1 BTC and someone else puts an offer to buy 10,000 EUR for 1 BTC. When orders cross, a transaction happens and the exchange gets a fee, whether in currency or crypto units. What are crypto exchanges fundamentall…

Well, a lot of people will keep some $$$ and some cryptocurrency in their account at the exchange. Maybe because they want to play the day trader, being able to buy and sell at a moment's notice.

So the exchange ends up with a big account of client funds containing cash, and a big wallet of clients' cryptocurrencies.

If a bit of that money goes missing, they can cover it up for a long time, if cryptocurrencies are growing and there's net more money flowing in than flowing out. You just pay departing customers' withdrawals from new customers' deposits.

It is only when the tide goes out we find out which swimmers have lost their trunks.

And once a company's demise becomes inevitable, perhaps insiders decide to help it along. If you've already been hacked for $10 million, why not make it $100 million given the company's going under anyway and you'll be the prime suspect?

Re: Crypto exchange AAX suspends withdrawals

#182

Post by jasonwatkinspdx » Mon, Nov 14, 2022, 3:02 PM UTC

smcl wrote: post #158

benjaminwootton wrote: post #117

Earlier quoted context omitted.

Firstly, people keep their Crypto with the exchange for trading purposes and because it is easier than self custody. This means if the exchange goes bankrupt they potentially lose their money. Secondly, as it is an unregulated space, we have instances such as FTX where they were using clients funds which should be segregated. This arguably crosses into fraud, and we do not really know which exchanges have been doing…

Re point #2 - this is one of the crazy things for me. When you work in finance, in the UK at least, you get it drilled into your head what "client money" is, what that implies, what you can do with it, and notably you get reminded during any training session the size of the fines that get imposed on people who fuck with client money. So to me it suggests that they simply don't employ anyone with any experience in ban…

It's worse than that. FTX's regulation and compliance officer was previously the legal representation for a shady online poker operation that used a bunch of offshore shell companies and whatnot to avoid US law for years. It's clear FTX's posture was to maximally avoid regulation.

Re: Crypto exchange AAX suspends withdrawals

#183

Post by willturman » Mon, Nov 14, 2022, 3:03 PM UTC

numlock86 wrote: post #43

lbriner wrote: post #7

Forgive my ignorance but it seems that one major problem with crypto-exchanges is that they don't necessarily have any assets other than the crypto that has been deposited there, which means all overheads (which I am assuming for some of these guys is $Ms/year) can only come from trading crypto unless they are charging reasonable money for the privilege of using their exchanges. In the FIAT world, banks make tonnes o…

> If this is true, how does it get fixed? The root problem is people buying to pyramid schemes (read as: crypto).

It's time to pivot to tangible long term assets, like tulip bulbs.

Re: Crypto exchange AAX suspends withdrawals

#184

Post by pjc50 » Mon, Nov 14, 2022, 3:03 PM UTC

smcl wrote: post #158

benjaminwootton wrote: post #117

Earlier quoted context omitted.

Firstly, people keep their Crypto with the exchange for trading purposes and because it is easier than self custody. This means if the exchange goes bankrupt they potentially lose their money. Secondly, as it is an unregulated space, we have instances such as FTX where they were using clients funds which should be segregated. This arguably crosses into fraud, and we do not really know which exchanges have been doing…

Re point #2 - this is one of the crazy things for me. When you work in finance, in the UK at least, you get it drilled into your head what "client money" is, what that implies, what you can do with it, and notably you get reminded during any training session the size of the fines that get imposed on people who fuck with client money. So to me it suggests that they simply don't employ anyone with any experience in ban…

Well, yes, it was a startup by a bunch of twentysomethings with no real banking experience. There was no partitioning.

> the size of the fines that get imposed on people who fuck with client money.

This is crypto, law doesn't apply here.

Well, that's the marketing pitch at least. So far a lot of exchanges and such like have gone bankrupt or been blatently stolen by their operators and nowhere near enough people have gone to jail.

Re: Crypto exchange AAX suspends withdrawals

#185

Post by fritzo » Mon, Nov 14, 2022, 3:04 PM UTC

febusravenga wrote: post #159

gzer0 wrote: post #119

"At this point I'm convinced Satoshi Nakamoto was actually a public administration professor trying to teach kids why financial institutions have the rules in place that they do. Given enough time, the entire crypto space will have reinvented every regulation they tried to get rid of and understood why they existed in the first place."

I like to call it "eventual civilisation" ...

Nice, like there's a CAP theorem for finance. Pick two:

- civil: transactions are just

- accessible: customers can withdraw their assets

- partitioned: customers can exchange assets with other customers

Re: Crypto exchange AAX suspends withdrawals

#186

Post by gjvc » Mon, Nov 14, 2022, 3:04 PM UTC

contaigon

Re: Crypto exchange AAX suspends withdrawals

#187

Post by disruptalot » Mon, Nov 14, 2022, 3:04 PM UTC

gzer0 wrote: post #119

"At this point I'm convinced Satoshi Nakamoto was actually a public administration professor trying to teach kids why financial institutions have the rules in place that they do. Given enough time, the entire crypto space will have reinvented every regulation they tried to get rid of and understood why they existed in the first place."

This was a failure of traditional financial institutions and people who are ok with them, not of crypto.

Satoshi wouldn't be encouraging people to put their coins on a trusted third party like that. All fundamental crypto values say this.

Re: Crypto exchange AAX suspends withdrawals

#188

Post by MichaelCollins » Mon, Nov 14, 2022, 3:05 PM UTC

tootie wrote: post #175

gzer0 wrote: post #119

"At this point I'm convinced Satoshi Nakamoto was actually a public administration professor trying to teach kids why financial institutions have the rules in place that they do. Given enough time, the entire crypto space will have reinvented every regulation they tried to get rid of and understood why they existed in the first place."

People look at all the market failures and declare the system is broken. Crypto is here to show us all the market failures that didn't happen.

That's the way I see it. Anarcho-libertrian cryptobros who think government regulation is a net negative are like people who don't wear seat belts because they know somebody who died in a crash despite wearing one. It is true that sometimes these safety measures don't prevent the bad thing from happening, but if you focus on those cases then you miss all the times it did work.

Re: Crypto exchange AAX suspends withdrawals

#189

Post by dmitriid » Mon, Nov 14, 2022, 3:06 PM UTC

kinnth wrote: post #149

danaris wrote: post #118

Earlier quoted context omitted.

And that's largely because of the lack of regulation that so many cryptocurrency fans tout. If it's not legally regulated as a currency, or a security, or anything of the sort, then why would it be considered to belong to you, and not Mt Gox, once you've given it to them? All you have is a digital account that's basically the legal equivalent of an IOU on a napkin. Welcome to your libertarian utopia.

Defi is not this. In defi exchanges you place your coins into a smart contract or have them always on your account. If anything a crypto exchange is a misnomer as it's not even needed. The only reason it exists is because smart contracts didn't exist when they first started.

> In defi exchanges you place your coins into a smart contract

Oh, you mean the "smart" "contracts" (which are neither) that routinely have trivial exploitable errors that even their authors are unaware of?

Re: Crypto exchange AAX suspends withdrawals

#190

Post by hwbehrens » Mon, Nov 14, 2022, 3:06 PM UTC

gzer0 wrote: post #119

"At this point I'm convinced Satoshi Nakamoto was actually a public administration professor trying to teach kids why financial institutions have the rules in place that they do. Given enough time, the entire crypto space will have reinvented every regulation they tried to get rid of and understood why they existed in the first place."

The best large-scale example of Chesterton's Fence that I've seen so far.