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Ask HN: How can Coinbase make good on deposits/withdrawals?

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Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#31

Post by aaavl2821 »

bdamm wrote: post #26
aaavl2821 wrote: post #20

Earlier quoted context omitted.

naive question: does coinbase really make markets in BTC??

What's the question? I assume you're asking if Coinbase actually buys BTC when you ask them to? Coinbase isn't publicly audited as far as I know so we don't really know. A related question would be... what fraction of Coinbase customers actually send or receive bitcoin, and what fraction of Coinbase customers simply buy and hold bitcoin that never goes anywhere. With this question answered, we would know how much Coi…

i was wondering whether coinbase itself actually buys or sells bitcoin, or if they just pass along orders to exchanges or market makers that execute the trade, and then keep a record of the transactions that are executed.

if coinbase fills orders by buying and selling bitcoin on its own account, then that is a very different business model from what i assumed they did

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#32

Post by ethagknight »

wereHamster wrote: post #11

Replace BTC for EUR, CHF, GBP or any other currency (or even a physical good, like an ounce of gold) and see what changes. The fact that BTC is a cryptocurrency doesn't change anything in how trades happen. And the fact that 1BTC used to be 10USD but now is 10k USD is no different than 1USD being 0.95EUR one year ago and 0.85EUR today. The difference is larger, yes, but that doesn't matter.

While you may be right, the difference to me, and the main reason why I originally asked the question, is that USD has the full force and guarantee of the us government. AAPL has a discounted future cashflow. Gold has industrial, sentimental and government consensus value. BTC has none of that, just a consensus of value based on active trades, which (side note) may well be the best thing about BTC.

I recently sold my little stash of BTC because I just realized that I don't understand at all what is happening regarding BTC, why it is happening, and whether it will continue to happen. All this BTC has no where to go but into other prospective wallets. I also had a sudden concern that there is no reason to trust Coinbase, let alone the market or BTC in general, and why would I leave money with people I have no reason to trust and have no means of penalizing should they fail to honor their terms with me.

The reality, as others point out, is that Coinbase has people dumping real money into their system to get in on BTC, and thats what Coinbase use to pay my withdrawal, which is as simple as I could have imagined it. I just dont know why.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#33

Post by ethagknight »

Many thanks to all these responses. I know this question has been hashed out ad nauseam on HN but given the dramatic rise over the last week, I needed a reality check that im not missing something. I find this discussion interesting.

Screenshot of Coinbase quote before the site crashed this morning before price "fell" "back" to $16,000. https://imgur.com/a/FClNZ

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#34

Post by thedragonslayer »

Thespian2 wrote: post #10

To get your fiat cash out, you'd have to sell that 1 BTC for $10,000. Someone needs to be on the other side of that trade buying it. You get their $10K, and they get your 1 BTC (and coinbase takes a small percentage for facilitating the transaction). If nobody wants to buy your BTC at $10K, you don't get "your" money out, until coinbase can find a buyer to match with your sale. In your example, all 10 of you start lo…

I find this hard to believe that coinbase is doing this with no regulation. I don't know if you all saw what happened to Full Tilt Poker, look it up. I'm afraid something like that could happen to coinbase. FTP got an influx of deposits and used that to fund players for when they withdrew. FTP was using the fund pool for other reasons and pocketing some of it, while still being able to payout players. The day came the gov't shut down the site but the company did not have the funds to pay back the players.

Now this might be different because bitcoin is what it is this is, while you control your wallet and this occurs more like a stock market rather than full tilt poker. Still I'm somewhat skeptical because coinbase could be doing something more complex to where they take on risk. Just my opinion, have to research more but this is a thread I was looking for.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#35

Post by thedragonslayer »

ethagknight wrote: post #32
wereHamster wrote: post #11

Replace BTC for EUR, CHF, GBP or any other currency (or even a physical good, like an ounce of gold) and see what changes. The fact that BTC is a cryptocurrency doesn't change anything in how trades happen. And the fact that 1BTC used to be 10USD but now is 10k USD is no different than 1USD being 0.95EUR one year ago and 0.85EUR today. The difference is larger, yes, but that doesn't matter.

While you may be right, the difference to me, and the main reason why I originally asked the question, is that USD has the full force and guarantee of the us government. AAPL has a discounted future cashflow. Gold has industrial, sentimental and government consensus value. BTC has none of that, just a consensus of value based on active trades, which (side note) may well be the best thing about BTC. I recently sold my…

I'm with you ethagknight. Look at my comment below. I think it's a different ballgame at these prices, counting even more on coinbase that they are doing the rational things.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#36

Post by ethagknight »

thedragonslayer wrote: post #34
Thespian2 wrote: post #10

To get your fiat cash out, you'd have to sell that 1 BTC for $10,000. Someone needs to be on the other side of that trade buying it. You get their $10K, and they get your 1 BTC (and coinbase takes a small percentage for facilitating the transaction). If nobody wants to buy your BTC at $10K, you don't get "your" money out, until coinbase can find a buyer to match with your sale. In your example, all 10 of you start lo…

I find this hard to believe that coinbase is doing this with no regulation. I don't know if you all saw what happened to Full Tilt Poker, look it up. I'm afraid something like that could happen to coinbase. FTP got an influx of deposits and used that to fund players for when they withdrew. FTP was using the fund pool for other reasons and pocketing some of it, while still being able to payout players. The day came th…

If you look right now at both Bitfinex and GDAX/Coinbase, there is a $1000 discrepancy in price between the two. I know that these are separate markets, but they both represent bitcoin, and I wish I knew how to arbitrage between the two if a Bitcoin is a Bitcoin the world over.. My guess is that is exactly what Coinbase is doing: showing its exchange price, but executing sale orders on different exchanges.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#37

Post by toomuchtodo »

jaderobbins1 wrote: post #18
Thespian2 wrote: post #10

To get your fiat cash out, you'd have to sell that 1 BTC for $10,000. Someone needs to be on the other side of that trade buying it. You get their $10K, and they get your 1 BTC (and coinbase takes a small percentage for facilitating the transaction). If nobody wants to buy your BTC at $10K, you don't get "your" money out, until coinbase can find a buyer to match with your sale. In your example, all 10 of you start lo…

I think this is also a basic concept of the stock market that many people don't understand as well.

In the stock market, there exists counterparty risk mitigation; in the event your counterparty is insolvent at the time clearing/settlement occurs, your trade will be made whole by a clearing/settlement corp.

No such guarantee exists with cryptocurrencies.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#38

Post by mancerayder »

Coinbase is an automated mechanism that matches buyer to seller, although it does you the extra favor of storing your private keys for you (something a lot of people don't trust, probably for good reason).

I don't know what external hooks there are that add liquidity, perhaps some of the other exchanges including the one it owns. Otherwise it would feel more like an E-Bay auction than a fast-paced market.

If everyone withdraws at once, you'll have 10 sell orders at the same time that need to be filled 'someplace' on the other side.

If no one wants it anymore, the asking price will have to get lower and lower. Coinbase shows you some sort of average price, but you can see a list of the orders put in if you log on an actual exchange like Bittrex. When I saw the sell and buy orders sitting in a queue waiting to be filled, some low-ball, etc., things starting to click for me.

The above is what I've gleaned from observation and reading. I could be wrong - and if there's one thing about this crypto bubble craze, is it's motivated me to learn about markets/exchanges, money, cryptography, and more. And to think about this things more abstractly and even critically.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#39

Post by mancerayder »

Thespian2 wrote: post #16
sk2code wrote: post #9

Earlier quoted context omitted.

The way things are moving it seems no one is selling and that's what baffles me. Crypto market is something we have never seen before where people are buying and not selling that is what is driving the price of Bitcoin.

Not true. For each buy that happens, there must be a sale. There are more buyers than sellers right now, not no sellers. Each time the price goes up, that's a sale _that happened_ This is something we've seen many times before. It's not new. It's a classic bubble where demand (buyers) greatly outstrips supply (sellers). The big question is why . Crypto currencies haven't suddenly gotten more useful. The current rise…

I think a large part of the answer is scope. The scope is international, and the scope of average, retail investors and their ability to do this ... well, unprecedented. Next, you have a lot of people with a lot of cash, tens, maybe hundreds of millions of potential people, in China, Korea, Japan, U.S., Europe, and so forth.

That's my hypothesis as to the 'unprecedented' aspect to all of this.

What other bubbles are there that were so lightning-quick, vast in geography and 24/7 operation.

Tulips at least required some sort of hand waving at auctions (presumably) and some transportation at some point after 'settlement'.

This is as fast as a video game connected to your bank account.

Re: Ask HN: How can Coinbase make good on deposits/withdrawals?

#40

Post by dmurray »

toomuchtodo wrote: post #37
jaderobbins1 wrote: post #18

Earlier quoted context omitted.

I think this is also a basic concept of the stock market that many people don't understand as well.

In the stock market, there exists counterparty risk mitigation; in the event your counterparty is insolvent at the time clearing/settlement occurs, your trade will be made whole by a clearing/settlement corp. No such guarantee exists with cryptocurrencies.

What? Coinbase and other exchanges go a step further than that, and require the counterparty to have deposited 100% of what they will deliver to you up front. So you will be made whole unless the exchange itself steals your money or gets hacked.
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