In the cryptocurrency wild west, there are no government regulations, no deposit insurance, no SIPC.
But a new kind of exchange could hold themselves accountable and publish their assets and liabilities every day.
They could publish the addresses that hold cryptocurrency and sign messages to prove they control these addresses.
They could authorize their banks to confirm deposits of national currencies.
With this data, audits of their positions could be automated and updated every day.
Why would traders risk losing their funds to sketchy, secretive exchanges?
A radically transparent exchange would have an enormous competitive advantage and attract large volumes.
This liquidity would drive down spreads and the exchange could operate profitably with lower fees, further driving up volumes.
So why doesn't this exist?
There are thousands that are boycotting Coinbase because their KYC systems take too long, or their deposits/widthdraw take 2 weeks sometimes. Just today I was reading a thread on Reddit where someone was claiming to be currently sueing Coinbase because their account was closed due to them depositing from a bank account that didn't match the name on the coinbase account...
Or people don't use them because the fees are marginally higher.
I just don't get it. If I'm going to put my money somewhere, I want the place to be following every US law, and charge enough fees that I'm not worried they will go bankrupt or resort to shady tactics to make money.
I used to be pretty Randian/anti-regs but I now see that places like this need to operate under some level of regulation to ensure they aren't massive conduits for money laundering, and are subject to basic rule of law (e.g. following court orders).
The real question is the extent to which people see operating outside the law as a good thing. Sure, it may be cheaper in the short run, but in the long term, having recourse to courts, police, and other standard norms of civilized society might be worth more than people realize.
Rand speaks of an ethos of personal accountability versus one that hides their crimes behind a facade of claimed social norms. It's not an issue of private business vs public regulation other than the sort of people each group tends to attract.
Rule of law is pretty important to having a fluid economy. I've looking into starting businesses in parts of the world with fewer regulations - hard-to-attain power becomes the defacto currency in those economies. In crypto, the corollaries are Tether-like frauds and electricity-theft driven mining pools.
I say, fine - run it anonymously from Hong Kong for all I care, just be transparent about assets and liabilities so everyone can see that you're solvent.
If someone did this, wouldn't they quickly take the lion's share of volume away from the sketchy exchanges?
Bitfinex has been undergoing third party audit from Friedman for months now. No one cares though and still throw accusations around like confetti.
Anyone who knows this fact and doesnt trust Friedman as a multinational auditor/accountant should say as such, rather than repeating blatant falsehoods.
It quite easy to see what others have to gain from the negative coverage.
Exchanges ddos each other all the time, its a shady industry, 15mins downtime for poloniex can double the weekly income of small exchanges.
I'd hope hn readers see between the lines a bit more rather then jump on bandwagons.
Is there proof of this? All I've seen (and I may be ignorant of the rest, so this is a legitimate request :) ) is that "note" from Friedman LLP that explicitly stated it was not an audit.
3rd result from googling "friedman bitfinex":
http://www.friedmanllp.com/insights/auditor-engagement
Now you said Friedman "explicitly stated it was not an audit", I searched and all i can find is blog posts and reddit threads. Any chance you could procure this explicit statement? Thanks.
The url I provided says the compete opposite and itself links to the original source I offered.
http://www.mcclatchydc.com/news/politics-government/article2...
http://www.chicagotribune.com/news/chi-0209010315sep01-story...
They seem symbiotic to me (exclusively mutual?).
http://fortune.com/2017/03/19/irs-bitcoin-lawsuit/
Though the claim was lowered to 20k:
http://fortune.com/2017/07/10/bitcoin-irs-coinbase/
But with BTC prices increasing even this might prove troubling and net more than 14k customers which coinbase reported earlier: https://blog.coinbase.com/coinbase-irs-update-ed9c966c7747
People want to believe. They're willing to risk lots of money to obscure systems for that. The last thing they want is transparency ruining the illusion.
I think Gemini was trying to be the most legitimate of Bitcoin exchanges, but without the shadow puppets trading producing fake volume on other exchanges it looks very empty.
As a store of value, you’re depending on its continued use as a tool for criminals for it to appreciate in value beyond pure beanie baby-style speculation, so you depend on you still depend sketchy exchanges to drive the price.
When the futures contracts come out, there is going to be a massive price correction as bitfinex isn’t going to be able to print enough tether to counteract all the shorts.
Once the price of bitcoin starts dropping, people are going to try and cash out of bitfinex en masse, causing a run on the bank and collapsing the whole house of cards. I wouldn’t be surprised to see sub-1000 bitcoins by January.
Bitcoin is actually terrible for these use cases since the blockchain is public and more traceable than your credit card. If you're really trying to hide your financial transactions then a better option would be something more anonymous like cash, or one of the other cryptocoins that actually does provide anonymity.
Your inaccurate and misconceived perception of what bitcoin's use case is would be laughable if it weren't so popular and wrong. I fear you're completely misunderstanding the new world economy. You think that bitcoin is a sideshow for criminals, and seemingly failed to see that maybe a large parallel economy is being created digitally.
You see, Bitcoin was created after the 2008 crash where the banks, the organizations we've trusted with our money for a century, made some deliberate and knowingly poor decisions and they lost a lot of money for many of us.
Bitcoin was invented so that never has to happen again, so that we can have a secure storage for our money without someone else controlling that money. You might say that bitcoin was created to get away from the wall street criminals. I suggest you pick up some cryptocoin (of any kind) so you're not completely left in the dust as the centralized banks lose power and the decentralized economy reigns.
I hadn't heard about that. Which banks lost their customers' money in the 2008 crash?
Banking involves a lot more than simply money in checking accounts so I didn't think it needed to be established that a lot of people lost value in different ways in 2008. A number of banks packaged subprime mortgage lots that were misrepresented, sold and when they defaulted, they crashed the lending market which rippled through other parts of the economy causing job loss, real estate price crashes, stock value crashes and other types of lost equity for millions of people.
But I guess if you want to take it literally, then you're right... nobody had cash go missing from their checking account. I personally lost about $60,000 in equity, but my checking account was not affected if that makes you feel warm and fuzzy about saying no banks lost anybody's "money".
If I were to rob you, claiming that the overall robbery rate was lower that year, so you weren't robbed by others, so your expected losses were lower does not change the fact that I robbed you.
If it succeeded in displacing existing currencies as you attest, it would amount to an unprecedented and catastrophic redistribution and concentration of wealth.
80% of all bitcoins that can ever exist have been mined and are already owned; this is a monstrous design decision far more unjust than the inflation bitcoin sought to prevent.
Our current corrupt and stinking financial system is far preferable to the neo-feudal world of bitcoin where all spending power is concentrated in the hands of a tiny number of tech overlords who had the sheer good fortune to literally own all the money.
Not saying there aren't a lot of dodgy transactions going on, or that the legitimate use cases will take off, but ignoring the practical use cases is misleading.
The reason banks are regulated in the US is because the banking system pre 1930s wasn't too dissimilar from crypto now.
I think it's somewhat realistic to envision a future where there is substantial transaction value of legitimate, legal uses. Maybe that future isn't probable, but the idea that the price of bitcoin would ever reach its current price seemed rather unlikely at one point, too.
Bitcoin cannot crash because you cannot sell and cash out in timely manner.
I meant libor as in a futures price that was disconnected from anything meaningful not a direct comparison. The comparison was to how libor was easily rigged by those submitting quotes that weren't correct. Libor wasn't just a vote but a collection of informal (and incorrect) quotes.
When financially settled against a manipulated number the standard ways a future affects the spot (by taking delivery) doesn't apply.
Go read the proposed contacts for the future and real time BTC index. If the index is being manipulated the future doesn't stand a chance at correcting it.
This reminds me of potential VIX options manipulation. Not quite the same thing, and probably not as susceptible to manipulation, but a similar concept nonetheless: https://www.bloomberg.com/view/articles/2017-05-24/vix-tradi...
My experience is equity options, btw.
I'm going to hit you up on linkedin. Always good to have good tech contacts.
So, with Bitfinex (1) trading 10 times more currency pairs than GDAX, (2) being older, and (3) having somewhat smaller fees, it's perfectly plausible they have manage to trade (only!) twice the volume of GDAX.
BTW the fact that GDAX has high fees doesn't mean it's expensive for them to create fictitious trades... they don't have to pay themselves fees!
Besides, I personally day-trade an average daily volume of ~$200k on GDAX's BTC/USD pair. And I am just one small fish. Imagine about a thousand other persons like me and it would easily explain their $250M daily volume...
There are whale volume discounts available on almost every exchange. Mid-level whales can get 0% rate for trading over certain number of Bitcoins. Back in 2013-14 you could even get NEGATIVE rates for trading large amounts. I.e., if I trade a certain number of BTC, I get a rebate at the end of the month. High volume boosts exchange's rating and brings more customers, so it is a no brainer to offer rebates.
If you remember early days of Chinese exchanges, they were doing millions of coins a day in first week of their launch. That was clear example of Exchanges themselves doing wash trading. All volume data is available in public domain for verification.
Bitfinex has traded 1 trillion (not billion) dollars in volume. How did a hacked exchange with no USD deposit or withdrawal method did it? Answer: wash trading and self-manipulation.
Bitfinex traded $1 billion, not $1 trillion: https://coinmarketcap.com/exchanges/bitfinex/ ($1,168,128,071)
«First, I know of at least one instance where it appears that a wash trade was not charged a fee for a trade.»
Absolutely zero evidence is provided. Just the author saying "trust me, I've seen it."
«Second, even if a fee is charged, that doesn’t mean a wash trader paying fees is really paying fees. If you’re a shareholder in Bitfinex, you’re allegedly paid dividends.»
This is mathematically false. Even if you hold, say, 10% of the shares (huge shareholder) you will still lose ~90% of your fees.
That's it. It's a thousand+ words post with ZERO evidence of massive wash trading.
The rest of the post is just ramblings on unrelated things.
I don't disagree there are shady/unethical practices occurring at Bitfinex, but wash trading is not one of them.
Re Tether-Bitfinex-washtrading, the paper trail indicates that Bitfinex and Tether have the same controlling interests. Dividends aren't the deciding factor - figuring out how both businesses can generate income (Tether via issuing unbacked USD; Bitfinex by driving real volume via pretending to have fake volume).
Unlike the issue of unaudited bank accounts, the wash trading issue isn't as easy to point out, since it requires (a) knowledge of trades taking place behind a black box, (b) high volumes capital to test these trades that requires sending that capital to these exchanges you're skeptical of.
If not, then you should definitely not let British Virgin Islands based Bitfinex hold them either. Use less risky options based in USA or EU, so you are at least protected by a decent legal and regulatory system.
https://coinmarketcap.com/exchanges/bitfinex/
I put some btc on bitfinex to quickly buy some NEO and move it off the exchange this year.
> BTC is failing as a currency because
> it's in a speculating bubble
It's also -- comparative to fiat or commodities -- massively untested, so price shocks seem inevitable. Regulatory or technical risks that could reduce (or massively inflate) the value seem almost certain.
https://multicoin.capital/2017/09/21/bitcoin-better-digital-... https://medium.com/@tuurdemeester/bitcoin-digital-gold-or-di...
It seems too volatile to use as a unit of account or store of value, but almost perfect as a medium of exchange.
So the best digital currency is one that is valuable to be _held_ but still has high transaction counts.
The article that stimulated my thoughts on the matter: https://docs.google.com/document/d/1-ix9BDmGie8tPAwrfRKqe9CN...
That is a common misconception on HN, almost repeated on every Bitcoin thread. There is, in fact, evidence usage for payments is sharply increasing:
The increases in transactions are due to HFTs speculating: https://www.bloomberg.com/news/articles/2017-01-16/high-spee...
Also, 70% of bitcoins won't be moved for 6+ months, making it more speculative than currency: https://www.coindesk.com/analysis-around-70-bitcoins-dormant...
Please go back and read the article, or just look at their homepage...
Source: I ran exchanges before. That's one of the first trick you learn.
It would be somewhat surprising if bitfinex doesn't go down in a spectacular ball of fire within the next 4 years.