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Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

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Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#411

Post by irascible »

vkou wrote: post #374
dsacco wrote: post #293

Earlier quoted context omitted.

Yes. (And as I stated in the comment - with a proviso that the price or adoption of the cryptocurrency pass a very low but nontrivial bar.)

Sounds like bdcravens and I should launch Billycoin, but only have it trade on an exchange we control, with no liquidity, so we could push its price through the roof. I've also just sold 0.000001% equity in my startup to my dad for $10. Does anyone want to invest in my billion dollar idea? Am I a unicorn?

Or.. just tell coinbase you're going to launch billycoins, but you may be convinced not to, for a nominal fee somewhat less than the costs coinbase will incur for the resulting lawsuit.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#412

Post by jdmichal »

danmaz74 wrote: post #357
jdmichal wrote: post #326

Earlier quoted context omitted.

Sufficient guarantees are just a contract. The result is the same either way if something goes wrong -- you take the counterparty to court.

In this case, by "sufficient guarantees" I meant the automation of exchanges, where you need to have collateral to trade on margin, and the lender is automatically repaid (unless something goes very wrong) without courts.

So then write a contract that requires collateral. This is what escrow exists for.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#413

Post by mikeash »

chii wrote: post #410
mikeash wrote: post #105

Earlier quoted context omitted.

Coinbase users don't have a private key for their Coinbase balance. They have an account with Coinbase, and Coinbase has their own private keys for their internal wallets. When you withdraw money from Coinbase, you're asking them to use their private keys to sign a transaction sending bitcoins to an address you specify. What users could have done was withdraw their Coinbase balance into their own wallet, then they'd…

Users of coinbase have no real right to complain because they have given up their control of their bit coin when they sign up for coin base. Unless this wasn't made clear by coin base at the beginning, i don't see how the law suit has any legs.

They're giving up control of their bitcoin for specific purposes. Coinbase can't just do whatever they feel like with it, any more than your bank can one day just declare "Hey, we decided to keep all of your deposits, FOAD, thanks."

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#414

Post by colordrops »

bdonlan wrote: post #408
colordrops wrote: post #405

Earlier quoted context omitted.

That's a lot of text that dances around the problem. Wouldn't the issue be solved if exchanges just offer IOUs for a particular chain instead of claiming to be a "wallet" or "bank" holding your asset? If they want to claim they are holding a user's "coins" (which is a misnomer to be honest and is an inaccurate representation of how blockchains work), then they better have a particular address and private key somewher…

Well, the problem is that this means exchanges need to actually implement support for every chain. If I tomorrow go muck around with my bitcoin node and make it fork, why shouldn't they be required to issue you IOUs for that altcoin as well, after all? What if they didn't know that a fork happened, went and rotated all their cold storage keys, destroyed the old private keys, and later you ask for your coins on the se…

> Well, the problem is that this means exchanges need to actually implement support for every chain

No, read my comment again, carefully. If they are providing IOUs for BTC, that means there is no private key associated with the debt. If say for instance they owe a user 10 BTC, they could give them any 10 BTC. if a new chain pops up, it doesn't matter, because the contract is explicitly an IOU for 10 BTC, not BCH or BCC.

the problem arises when the exchange implies they are holding "your coins" for you like a safe deposit box, which means there's a private key associated with the coins, and thus that key would work with any chain splits, including BCH/BCC.

just curious, do you understand how blockchains work? i.e. private keys and the transaction protocol? if you weren't familiar with it, then that would explain why you are having a hard time understanding my comment.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#415

Post by bdonlan »

colordrops wrote: post #414
bdonlan wrote: post #408

Earlier quoted context omitted.

Well, the problem is that this means exchanges need to actually implement support for every chain. If I tomorrow go muck around with my bitcoin node and make it fork, why shouldn't they be required to issue you IOUs for that altcoin as well, after all? What if they didn't know that a fork happened, went and rotated all their cold storage keys, destroyed the old private keys, and later you ask for your coins on the se…

> Well, the problem is that this means exchanges need to actually implement support for every chain No, read my comment again, carefully. If they are providing IOUs for BTC, that means there is no private key associated with the debt. If say for instance they owe a user 10 BTC, they could give them any 10 BTC. if a new chain pops up, it doesn't matter, because the contract is explicitly an IOU for 10 BTC, not BCH or…

I think I misread your comment - I had interpreted it as suggesting that exchanges should be required to issue IOUs for new forked assets, which has serious practical issues.

Of course, saying that coinbase balances are IOUs for bitcoins is basically what happened here, and apparently people aren't happy about it. While you could change the marketing material, I don't think it would do much to change the outrage in this case; I very much doubt people will pay attention to such a nuance when they apparently couldn't be bothered to temporarily withdraw their coins.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#416

Post by SilasX »

bdonlan wrote: post #398
SilasX wrote: post #237

Earlier quoted context omitted.

Well, if you want to extend the analogy... Let's say that JimBob came along offering a lollipop to everyone for every $1000 they could prove they held in a US bank on a particular day. (The BCH network is offering credits to everyone on the BTC network in proportion to how much BTC they can prove they had on a particular day.) You, as a customer, tell your bank, "yes, confirm to JimBob that I had $30,000 in my accoun…

Well, really, the problem is that JimBob is in total control of the interaction here. Maybe your bank says, "Sure, here's an affidavit showing you had $30,000 on date X", but that's not good enough for JimBob; he needs to see the actual, physical bills and needs proof that _those specific bills_ were in your bank's vault at the time. This process puts a fair amount of burden on the "bank", because they need to deal w…

Then how about this: JimBob constructed a perfect copy of everyone's bank safety deposit box key and its contents, including the keyhole[1]. The contents of the copy are free for the taking if you can open it with the key.

Your bank happens to have an access control policy where they hold the safety deposit box key for you and you have to pick it up from them each time (after authenticating).

You ask the bank for your key so can go to the JimBob version and get your copied stuff. They refuse because of a security policy about taking keys offsite.

You offer to close the box account and take your (original) stuff out so that there will be no security compromise. They refuse because that would compromise the box and cost them a usable one.

You offer to pay for the cost of replacing the box with an uncompromised one. They still refuse.

That is the position that Coinbase is in. (Users haven't offered to pay for the replacement of the private keys that coinbase uses, but this is a trivial cost, and establishes the barrier that prevents coinbase from facing unbounded costs to deal with every fork.)

EDIT: And for an analogy that favors "Coinbase doesn't owe you anything": Assume we're under a gold standard. Assume that some goldsmiths just give you regular dollar bills as your warehouse receipt "since they're redeemable with the government banks anyway". Most people don't care much about the difference, but each goldsmith keeps a list of the serial numbers they gave out so they don't have to honor arbitrary demands.

Then (of course) the government goes off the gold standard. But some goldsmiths are like, "no, that's BS, we will still honor your claims, just bring us a dollar bill that's on our serial number list". So there's a mad dash to get dollar bills that were used as goldsmith receipts, and some people ask for their deposits back from their bank, but the bank (like Coinbase) insists that they only have to give you banknotes of their choice, not the original ones you deposited, which was all they ever promised.

(Modified scenario: you kept the dollar bills from the goldsmith in a safety deposit box, and the bank replaces them with new dollars and never redeems them for gold.)

[1] You can further assume that the copy is some debased, lower value version of arbitrary percentage and it doesn't affect the analogy.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#417

Post by ringaroundthetx »

woodman wrote: post #369
ringaroundthetx wrote: post #320

Earlier quoted context omitted.

As someone that deals with political parties and regulatory regimes in many countries at once, diversify your political isn't silly at all. Or at least I feel like being unsubscribed from one countries politics has only given me advantages, even if it is less common to not be married to a political flavor.

> ...diversify your political isn't silly at all. It is, as most political differences are rooted in mutually exclusive ideas. If you are advocating for simply being open to considering alternative positions and measuring them against your own present position - then I agree with you, that is nice. But I would describe that as "diversify your politics", I'd describe that as being intellectually honest.

> It is, as most political differences are rooted in mutually exclusive ideas.

The reason I disagree is because I get to be exposed to these mutually exclusive interpretations in several different countries. My lack of indoctrination and context gives me an additional perspective based on the present, which primarily reveals an inefficiency that gives me an advantage.

For example, the first mutually exclusive topic that came to mind was ..... some extremely polarizing human rights topic you feel passionately about? I bank on you spending all of your energy on that while I try to get a say in the 900 other things lawmakers - or the agencies they delegated authority to - actually do.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#418

Post by WorldMaker »

meric wrote: post #393
erikpukinskis wrote: post #383

Earlier quoted context omitted.

Why? By using Coinbase you are saying, "I don't want to hold any bitcoins myself, I want a bank to hold some value, denominated in BTC, on my behalf". For all depositers care, Coinbase might have zero Bitcoins issued before the fork. It's like depositing a dollar to a bank, and then finding out that it had been signed by Andy Warhol in invisible ink and asking for the specific dollar back. Sorry, you shouldn't have d…

Let's say there is a court case where the judge awards all shareholders of AAPL $100 of compensation for every share held (It's to the shareholders, but not the company, because the court case involved shareholders vs management). The government sends $100 per share to each registered holder. Your investment fund is the registered holder of AAPL securities instead of you. Do you get $100 per share that was held on yo…

Isn't that just a dividend at that point? In the real world investment funds have fairly complex dividend rules (how much is reinvested in the fund, how much is skimmed for fund manager fees, etc), and regulations have managed to force such funds to disclose all of those policies up front (prospectus) and keep them up-to-date.

In the other fork in this discussion thread, the banking analogy: we're talking about an exotic interest payment of sorts. Again here, banking regulations require banks to disclose interest rates and payment details and management fees up front for accounts. But banks in the real world are largely allowed to reap the majority of profits from an investment that goes well, and doesn't have to apply much if any of that back to the savings accounts from which it utilized stored funds to fund that investment.

Which is to say that Coinbase may be doing nothing wrong according to either real world analogy, with the big difference being the "wild frontier" of existing in an under-regulated space with fewer up-front disclosure guarantees.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#419

Post by nylonstrung »

wolco wrote: post #382
zeroxfe wrote: post #253

Earlier quoted context omitted.

> 10 new "bitcoins" could fork every day. Are we really going to expect coinbase to support them all? That's absurd. Of course it's absurd, and nobody expects them to support 10 forks a day. If that was actually happening, Coinbase would be in a much better position to say no. But this is a single fork, and one where the new currency has a lot of value, enough that customers are threatening to sue.

Anyone can sue but therr is no case. You are responsible for who you let hold your coins. If someone gives everyone who is holding a coin a new coin whoever is holding your coin doesn't have to accept it; Unless you agreed beforehand. In this case they told you before they will not accept it and you still left the coins with them.

>You are responsible for who you let hold your coins

The SEC has said that ICO tokens are securities. Do you really think intermediaries and wallets have no legal restrictions or obligations dictating what happens to them?

You can't categorically say that the fact they stated they won't accept BCC makes it completely legal for them to withhold millions of dollars worth of crypto. Terms of service ≠ securities law.

Re: Bitcoin Cash Soars to $700, Coinbase Customers Threaten to Sue

#420

Post by colordrops »

bdonlan wrote: post #415
colordrops wrote: post #414

Earlier quoted context omitted.

> Well, the problem is that this means exchanges need to actually implement support for every chain No, read my comment again, carefully. If they are providing IOUs for BTC, that means there is no private key associated with the debt. If say for instance they owe a user 10 BTC, they could give them any 10 BTC. if a new chain pops up, it doesn't matter, because the contract is explicitly an IOU for 10 BTC, not BCH or…

I think I misread your comment - I had interpreted it as suggesting that exchanges should be required to issue IOUs for new forked assets, which has serious practical issues. Of course, saying that coinbase balances are IOUs for bitcoins is basically what happened here, and apparently people aren't happy about it. While you could change the marketing material, I don't think it would do much to change the outrage in t…

> I very much doubt people will pay attention to such a nuance when they apparently couldn't be bothered to temporarily withdraw their coins.

That's a very good point. It would avoid any legal ambiguity and save face with the more technical minded though.

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