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Coinbase to go public on 4/14

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Re: Coinbase to go public on 4/14

#71

Post by BenoitP »

throwaway192874 wrote: post #60
BenoitP wrote: post #54

Earlier quoted context omitted.

Was looking for the same kind of information. Do they publish proof of ownership of underlying assets? Or are they going naked for some amounts? Do they consider themselves as a bank, and vie for a 8% non-naked rate? In the MTGox days, the discrepancy could be viewed in the delay to take out one's coins; as well as in their market, which was displaying a very different prices than on other exchanges. Scary stuff I'm…

There's a 1:1 backing of crypto funds, there is no fractional reserve stuff going on. But lots of internet people like to speculate there due to technical issues that happen from time to time. A delay to take out coins != a fractional reserve. Exchanges operate with hot wallets that have limited throughput, there's a ton of reasons that particular withdrawals may be delayed that don't have anything do with having tho…

> There's a 1:1 backing of crypto funds

Well, this isn't difficult to prove. Do they have a public process to display that 1:1 backing?

Google is failing me, I can't find anything but this:

https://blog.coinbase.com/a-behind-the-scenes-look-at-the-bi...

Re: Coinbase to go public on 4/14

#73

Post by endisneigh »

berberous wrote: post #32
endisneigh wrote: post #28

Earlier quoted context omitted.

I don't understand that. Can you spell out the circumstances in which Coinbase increases in price faster than any of the underlying? For the sake of discussion let's say you can either own some amount of Coinbase or a weighted average of the top 5 coins offered on Coinbase itself. In my view any instrument or tool that leverages a coin with a fixed supply means more popularity which means higher price for the coin. I…

If crypto crashes or stabilized, Coinbase is still (for the time being) making monster spreads/fees on trades. A basket of the top coins also includes garbage like ADA and XRP. Crypto is not the place to market weight IMO given the frequent disconnect between price and quality of projects.

why wouldn't Coinbase crash if crypto crashed? crypto cashing would mean decline in crypto in general, no?

Re: Coinbase to go public on 4/14

#74

Post by throw1234651234 »

Consultant32452 wrote: post #16
nwhatt wrote: post #2

If I were to invest $100 in some allocation of Coinbase stock and Bitcoin - what should the ratio be?

Just my personal opinion.... Normies will be buying their bitcoin on cash app, paypal, etc. In this way I feel CoinBase is a niche product with limited growth capabilities long term. The more CoinBase makes, the more the big names in tech/finance will expand their efforts to compete. CoinBase is a decent short to medium term play imo, whereas bitcoin itself is a longer term play.

This is an interesting outlook, not sure why it got downvoted.

Re: Coinbase to go public on 4/14

#75

Post by throwaway192874 »

BenoitP wrote: post #71
throwaway192874 wrote: post #60

Earlier quoted context omitted.

There's a 1:1 backing of crypto funds, there is no fractional reserve stuff going on. But lots of internet people like to speculate there due to technical issues that happen from time to time. A delay to take out coins != a fractional reserve. Exchanges operate with hot wallets that have limited throughput, there's a ton of reasons that particular withdrawals may be delayed that don't have anything do with having tho…

> There's a 1:1 backing of crypto funds Well, this isn't difficult to prove. Do they have a public process to display that 1:1 backing? Google is failing me, I can't find anything but this: https://blog.coinbase.com/a-behind-the-scenes-look-at-the-bi...

For individuals this isn't hard, but for large institutions it's very non-trivial. There's a reason that none of the major exchanges do this, it's not just incompetence or lack of desire.

Coinbase, and various other exchanges are regulated in the US so they undergo regular audits where having to prove funds is part of it. Some exchanges, I think it was Kraken, has published some version of those results, but the problem with these is at that point you're saying you trust the auditor and the process, which is another thing people would complain about anyways.

Technically, it's also very nontrivial to prove ownership of millions of addresses when they are also constantly changing (due to new address generation). Proving ownership of addresses stored in cold storage is even more involved, and would actually put the funds at risk because you would need to us bring the key out of cold storage to do so. Furthermore, people would likely not be satisfied with a one-time proof, so you need to operationalize this and do it on some regular basis.

Lastly, while this would be nice to have, it's frankly not something I expect any major exchange to do because it's simply not worth the investment. Most customers don't care and are happy to trust the government and regulations to ensure they are good enough. While I understand people are concerned because of what happened with MtGox, that doesn't mean that every other company after is involved in some big conspiracy about lying how much crypto they have. It's just FUD/conspiratorial thinking without real evidence to back it up.

The exchange going down at key moments (read: when the app is seeing peak traffic at new milestones regularly) is basically expected for a young fast growing SV startup, and doesn't support the argument that they are nefarious things going on

Re: Coinbase to go public on 4/14

#76

Post by throwaway192874 »

loceng wrote: post #69
throwaway192874 wrote: post #61

Earlier quoted context omitted.

That's also the time when the system has to scale the most, so it's not exactly surprising to see this. Unfortunate and something that should be improved yes, but doesn't really support an argument of them trying to prevent people from selling since that is exactly when you'd expect the system to fall over.

Yes indeed that's an easy excuse for plausible deniability - yet this person I'm responding to has stated they've greatly improved speed, so why wouldn't they also have improved concurrency, redundancy, etc? We recently know that Coinbase has had bad behaviour of manipulating the price and find a measly $6 million for market manipulation, so it seems not outside their character.

OP said this:

> After not paying attention to cryptocurrency for a few years and then opening a Coinbase account earlier this year, I was SHOCKED how fast and easy everything was.

I read this as having just created the account and impressed by the platform, not a comparison between the past and now shrug

They've definitely done tons of work to try and address scaling problems, have solved many and will continue to do so, but it's not like you just "solve" scaling once and never have to think about it again. The scale they are seeing now is nothing like they saw in previous runs, so it's always new milestones, something new breaks and then something else to fix.

There's also been a lack of a clear vision from engineering leadership at the top for many years which hasn't helped either.

> We recently know that Coinbase has had bad behavior of manipulating the price and find a measly $6 million for market manipulation, so it seems not outside their character.

My understanding of this is that a couple of internal systems accidentally interacted in a way that was later deemed bad, not an intentional manipulation. And when the COO noticed this action was taken to replace the system with a version that fixed this issue [0]. This was in 2015-2018 when they company was significantly smaller with less expertise on that front. If this had had a significant impact on consumers I would expect to see a larger fine, but I'm not at all well informed on the topic.

Having worked at various startups, the old adage of "don't ascribe malice to what can be explained by incompetence" resonates with me. You so regularly see wild speculation happening on the outside when inside you're just like "wtf that was just a bug, not some grand conspiracy". I expect that this issue falls under that category, lack of knowledge rather than part of their "character"

[0] https://decrypt.co/62155/coinbase-fined-6-5-million-over-tra...

Re: Coinbase to go public on 4/14

#77

Post by throwaway192874 »

rory wrote: post #68
tigger0jk wrote: post #66

Earlier quoted context omitted.

I believe coinbase holds a lot of crypto - in the robinhood analogy, coinbase is their own clearing house. So they don't have to post collateral to themselves, but if crypto movement was all in one direction on a given day, they might rely on the market instead of the liquidity they themselves provide. Maybe in such a scenario they would be clever enough to NOT resolve all the trades instantly.

Got it, so in general, they are _actually_ fronting you the asset (although you can't take it out of their control until you've paid up), as opposed to an IOU.

Yeah, they already have the asset when you click buy. On "consumer", the blue one, when you click buy it literally does a direct market order off of Coinbase Pro to purchase the asset, and since it's on Pro they already have the crypto on platform.

Re: Coinbase to go public on 4/14

#78

Post by jobigoud »

endisneigh wrote: post #73
berberous wrote: post #32

Earlier quoted context omitted.

If crypto crashes or stabilized, Coinbase is still (for the time being) making monster spreads/fees on trades. A basket of the top coins also includes garbage like ADA and XRP. Crypto is not the place to market weight IMO given the frequent disconnect between price and quality of projects.

why wouldn't Coinbase crash if crypto crashed? crypto cashing would mean decline in crypto in general, no?

Crypto crashing means a lot of people selling, hence a lot of trades, hence lots of money for CB.

Re: Coinbase to go public on 4/14

#79

Post by loceng »

throwaway192874 wrote: post #76
loceng wrote: post #69

Earlier quoted context omitted.

Yes indeed that's an easy excuse for plausible deniability - yet this person I'm responding to has stated they've greatly improved speed, so why wouldn't they also have improved concurrency, redundancy, etc? We recently know that Coinbase has had bad behaviour of manipulating the price and find a measly $6 million for market manipulation, so it seems not outside their character.

OP said this: > After not paying attention to cryptocurrency for a few years and then opening a Coinbase account earlier this year, I was SHOCKED how fast and easy everything was. I read this as having just created the account and impressed by the platform, not a comparison between the past and now shrug They've definitely done tons of work to try and address scaling problems, have solved many and will continue to do…

Thanks for pointing that out - I misread what they said.

If you have a link to a writeup provided by the SEC's investigation outlying this as an accident - I'd like to see that.

Plausible deniability is used by bad actors, and the existence of investors investing in founders who will do anything to protect their investment isn't a myth - it gets discussed a few times per year in threads on HN and Reddit.

Re: Coinbase to go public on 4/14

#80

Post by endisneigh »

jobigoud wrote: post #78
endisneigh wrote: post #73

Earlier quoted context omitted.

why wouldn't Coinbase crash if crypto crashed? crypto cashing would mean decline in crypto in general, no?

Crypto crashing means a lot of people selling, hence a lot of trades, hence lots of money for CB.

Yes but it also means lowered future demand for crypto, which means less money for CB in the future, which means a lowered stock price.
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