1. Technology people are presented with a social/cultural/government situation that seems inelegant, irrational and overly complex.
2. They decide to "solve" that problem using technology.
3. Even with the new technology, it somehow appears everything is not miraculously better.
4. Technology people propose layering a few small social fixes on top of their technology to address the "minor issues" left by their brilliant technology.
5. They fail to realize all of their kludgy human-level patches on top of the technology are merely less-mature forms of the social structure they claimed to have replaced in step 2. Now we have an even less elegant, more irrational, more complex social institution, mixed with non-helpful technology.
6. Now the problem is not fun to work on any more (too much squishy inelegant human stuff), so they wander off to "solve" some other cultural malady.
No, there are many reasons why I do want regulation. I just try not to get too religious about any of my opinions, and that lets me still see some reasons why regulation can be a bad thing.
Let the market work this out. Coinbase exists to legitimize the industry. If they turn, someone will step in to take their place. Blockchain and crypto aren't going anywhere.
Now, in the world of large-scale personal finance and institutional investment, not many are going to risk redecorating the insides of their pants every few days. They're sticking with McDonalds, which may still cause some level of bowel décollage now and again, but in much safer, more predictable ways. I'm not saying that makes crypto a "fail", only that the next few months will really determine if it's going to be a future behemoth or a niche asset class that risk-tolerant portfolios occasionally take a piece of.
>If they turn, someone will step in to take their place.
There's a lot of stuff going on in that 'someone will step in' though. How many people lose their money when CoinBase turns? Do quick movers get out with all their BTC intact and slow movers go bitcoin-bankrupt? 'Someone will step in' may be an assurance to the long-term future of crypto but it says nothing to the fates of many of the individual investors who currently hold that crypto.
And in return, each bank account cost of regulatory compliance is pretty large.
Im not saying all bank regulations are bad, but its not like bank regulation is an example of policy success.
The crash was the result of speculation and improper risk assessment, followed by the inevitable correction.
to say that 2008 happened as proof that these regulations don't work is kind of erroneous, as many of the regulations were revised or implemented as a result of that crash, to avoid it happening again.
Cryptocurrencies certainly have their problems but the last 10 years have been a case study in how horrible fiat currencies and the current global financial system really is. Japan's central bank has printed so much money they own something like 65% of all the ETF's on the Nikkei.
China, EU, U.S. and Japan have printed something like $16 trillion dollars since the crash. If banks leverage that at a conservative 12X that's $192 trillion. The world is awash in fantasy money.
I agree, however, that our legal system lacks an adequate punishment for companies that allow such poor governance practices. I don't feel it is necessary to throw people in jail for it, though.
In my opinion, we ought to be able to convict a company of "governance failure" which would carry the concomitant punishment of mandatorily ejecting all officers and directors without severance and without the ability to exercise options.
https://www.propublica.org/article/us-attorney-asks-court-to...
If <exchange> gets hacked, tough luck.
Not as clear cut as you think it is. If the government insured bitcoin 'for free' you would also see a major surge in confidence.
Update: By "everything" I mean not all kinds of financial instruments are insured by the FDIC. They do not cover mutual funds, annuities, bonds, etc. They cover pretty much just cash and cash equivalents.
None of this applies to securities. Presumably you could insure them. It's not obvious to me from first principles that the cost of insurance would wipe out any incremental appreciation value, but I've never heard of anyone doing this so probably it does.
There are still edge cases, but capital ratio requirements and accounting standards, compared to none? Huge difference.
One of Bitcoin's selling points is that it's decentralized. By keeping coins in a cloud operated wallet that you don't fully control, you're willfully giving up control over your own wealth, and needlessly putting your coins at risk.
Never advice your family anything. If they don't get it, they shouldn't be playing with it. This was certainly my last time, I even think I'm flat out going to refuse to talk about anymore. This week I even received texts that I should act "before Amerika wakes up". It's stopping right now, he either learns the Gdax or I will transfer what's left of his money to his normal bank account (he should be happy it's still almost everything.)
If the user is only willing to learn enough to keep the coins in Coinbase, then this person has no business dealing with Bitcoin at all.
I've had half a dozen non-technical friends ask me about getting into Bitcoin in the last month or so. Media attention, get-rich-quick, scams, etc. are all attracting hordes of people, to the point where the Coinbase app was #1 on the App Store for a while.
Even the people running exchanges are getting hacked. What chance does a normal user have?
I agree that actually securing a wallet, independently, as a non-technical user, is difficult. It is further exacerbated by, as you mentioned, the general hype around crypto related apps that promise to do this in a trivial way, which can often be traps.
I also, however, think your final question presents a false dichotomy, as the two (Exchanges and users) have different threat models.
Exchanges present a larger, highly lucrative target, meaning they are ammenable to expensive, targeted attacks as they can still be possible.
The security model for an individual user can be to secure their coins in a way that is relatively secure (Maybe not as absolutely, as they are not experts), but more importantly to secure their coins in a way which a scalable attack against many users is not tenable.
In this way, just because exchanges get hacked doesn’t necessarily imply that normal users don’t have a chance, as they have different threat models with their own nuances.
Edit: Cleaned up some wording
"Only techies can use it!"
Pick one.
Someone's ability to use a smartphone doesn't mean they're capable of patching the thing to keep it secure.
I've told friends for years about Bread[0], a wallet app for both smartphone platforms that I've used before with great success.
Only 0.5% of Android devices are running the latest OS. https://developer.android.com/about/dashboards/index.html#
This is about the cloud wallet service provider having the ability to basically do whatever it wants with your funds (including using them to pad their fractional reserves), charge you whatever fees it wants for whatever dumb reason they can think of, and do all the other things the banking system does today to peoples' wealth.
If this is what you want to do with your Bitcoin, then you're better off putting your money into fiat because that's a system that was actually designed to be used in our current currency/banking scheme.
Yes, it is. The question is "which place to store your coins is riskier?" I'm of the opinion that a decently run exchange with a full security team in place is going to be better at managing security than virtually any individual attempting to do it at home.
You, for example, suggested an Android app as a wallet, which seems to conflict with the best practice of storing wallets on an air-gapped offline system or on a dedicated hardware device.
Where did you get that idea from? Not from my OP, that's for sure:
> One of Bitcoin's selling points is that it's decentralized. By keeping coins in a cloud operated wallet that you don't fully control, you're willfully giving up control over your own wealth, and needlessly putting your coins at risk.
Please, do not misrepresent my views. I do not have much of an opinion on the security of wallets, because I know that unless you go cold storage, any other wallet approach is about as safe as the one in your back pocket.
You can't seem to stop injecting your own totally unrelated arguments and also seem to refuse to actually comprehend the complaint I aired in my OP.
The concern I raised was one of centralization. The Bitcoin white paper is pretty explicit when it comes to explaining its rationale, and in fact mentions negating centralization in the very first sentence of the abstract[0]:
> A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
[0]https://bitcoin.org/bitcoin.pdf
So there's really no reason to continue to ignore what I am actually saying, because it's a valid concern that strikes at the core tenants of Bitcoin's intended use case. Your concern, on the other hand, is splitting hairs on a subject that does not at all address the actual, fundamental issue of using a Coinbase wallet. This has nothing to do with Coinbase the exchange, this is about the Coinbase service which offers wallets, to which they and only they control the private key.
You keep claiming I'm misreading you, but this is the precise bit I'm focused on. For most people, and non-technical folks in particular, storing their own Bitcoin is "needlessly putting your coins at risk". They'd be better off having it on Coinbase and letting their security folks handle the risk.
I couldn't care less about the decentralization aspect of the argument, as none of that matters as a user if my coins all got stolen off my phone. It's already quite clear that Bitcoin is moving towards more centralization with stuff like the Lightning network, as the fully decentralized approach is already creaking under the current load.
However, the point you keep missing is the needless part.
This is not needless risk - this is a calculated risk, which you take based upon the fact that it will make access and use of those bills easier than if you didn't take your cash with you when you went out. If you use common sense, you can still be reasonably sure that your wallet will remain with you and will not have any money stolen out of it.
I've lived in New York City since the crack epidemic, and not once has this strategy failed me, but I do knowingly walk around the street with the knowledge that a crafty pickpocket could probably get away with my wallet if they really wanted to. But with my success rate, it looks like my strategy is paying off, and this is an important thing to judge because money is an important component to one's survival.
Let's look at the benefits of not placing your Bitcoin in a centralized wallet which you do not control. The benefit is that you have access to your coins, can move them however you'd like, and pay whatever fee structure you want. Coinbase only offers you the former. By not storing your wallet on a centralized service, your money is not at the whim of that centralized service. That's a HUGE gain. That's the crux of bitcoin's value.
Leaving your bitcoin in the hands of Coinbase is needless risk because your coins are just as accessible and just as easy to steal from Coinbase as they are to steal from any other wallet accessible via the internet. The added risk Coinbase presents is that they control your funds, they own the private keys, and they dictate all the rules for storing and moving your money. Not to mention, they don't give you freedom from the world financial institutions, they make you an ever-larger cog in the wheel of the current financial system. Why the hell would you want that? If you would actually want that, buy some Swiss Francs or some other fiat currency and stop speculating in Bitcoin.
This flies in the face of the entire purpose of having Bitcoin. If you remove decentralization from Bitcoin, then you remove Bitcoin's power and value. So the people who would prefer to not store their Bitcoin in cold storage should not be getting heavily invested in it. If they have real money on the line that could be ruinous to lose, then they should learn how to be a responsible patron of Bitcoin. Any less would be downright irresponsible.
If this is actually a problem for anyone investing serious money into Bitcoin, then they should stop investing in Bitcoin and figure out something else to do with their time. This is not a plaything, this is cash and people who want to invest in it need to do so responsibly. All this reckless behavior being espoused in threads like these all across the internet are just asking for huge, overbearing regulation of the cryptocurrency industry. Watch it flounder and suffer as a result.
I could personally care less. I sold off the 224 Bitcoins I acquired back in 2008 a few days ago and fed the mania. I refuse to participate in this financial moshpit and I will not contribute to this nonsense any further.
This is so transparently false.
Coinbase has a security team that I lack. They have experts in the field that I lack. They have insurance for their holdings that I lack. They have the infrastructure and knowledge to keep cold wallets secure that I lack. None of these lacks can be easily remedied by an individual like me.
They have no ability to use my coins at their "whim". They're a US corporation in a heavily regulated space, money transmission, subject to a whole bunch of laws, both state and Federal. I have far more recourse against them than someone who puts a keylogger on my phone and siphons off my holdings.
That was when I was initially setting up accounts, and it was enough to scare me away. I use Gemini. They've had unplanned outages too, but they're much rarer -- only one that I recall over the same timespan (against 10+ for Coinbase).
Gemini's spread used to be pretty bad and they didn't do much volume outside their daily auction. They really aren't focused on retail investors so they don't see the same scaling issues as Coinbase.
Coinbase is not immune from failure, government intervention, or fraud. The insurance no doubt has limits, and if you've ever filed an insurance claim you'd know that if something goes wrong you'll probably be up a creek without a paddle.
Insurance companies almost always win, that's how they make money.
The problem here for most of the people currently FOMOing in, is that there are no "good ideas" as far as coin storage goes. Storing on shady exchanges is risky, but due to lack of knowledge / technical skill, many/most would also be at risk of losing their coins one way or another if they held the keys themselves.
What this tells us, is that this technology isn't ready for mainstream use.
It's not as if people are born with innate knowledge of personal finance skills. These are skills which must be learnt like anything else.
Not exactly. They make money off pricing their insurance higher than the chances of it happening.
Just look at how health insurance works: without government regulation, most of the day to day healthcare you actually need isn't covered under the terms of the insurance. For example, contraceptives.
Insurance runs on the same premise of making money a casino does. If there was no casino edge, there would be no cash for the casino 'float' back into bets.
https://news.ycombinator.com/item?id=15988939
It seems Coinbase's go to strategy every time markets are volatile. In case people are wondering why is this a recurring problem - this simply perils of Market Making in a volatile market. As a market maker for customer orders Coinbase needs to fulfill both sides. So to make money they buy from customers at low price and sell back at a high price. So they are collecting spread between bid and ask to make money.
But what happens if the market moves rapidly in one direction? They end up selling low and buying high.
So, they need to reset the market making algorithm. Or shutdown the site for a "fix", long enough that the volatility comes back in their range.
And what was wrong with the BCH rollout?
Check out these videos for what a market maker actually is:
So, they need to reset the market making algorithm. Or shutdown the exchange for a "fix", long enough that the volatility comes back in their range.
Disabling a feature during live trading in order to ensure your company doesn't lose out on profitability, which in effect impacts market trend and activity implies manipulation. As a neutral platform whose sole purpose is to provide a place for people to buy and sell, you're essentially influencing the market by disabling/enabling buy/sells, especially at heightened times of flux.
As many have pointed it out on this thread, GDAX - the exchange works just fine. So people who are worried about selling/buying can find a willing participant on the exchange.
But, Coinbase's main site is just another willing participant just like you and me in a given trade. It can refuse to take the other side of the trade if it affects their profits.
If you still insist it is "manipulation" then I digress.
Volatility is traditionally where many styles of traders actually make money.
I use GDAX to buy coins but I transfer them out right away.
Now they stopped BCH/BTC trading and it appears that they also freeze the prices to control drops (https://www.reddit.com/r/CryptoCurrency/comments/7lch2d/coin...).
Except this isn't even remotely true! This is the sloppiest and most scammy financial institution that I've ever interacted with. They claim to abide by KYC guidelines then happily ignore your identity when you come to recover the account they gleefully have locked you out of. Every user, on a long enough timeline, will experience some kind of lockout. Then you will have to work ceaselessly to try to recover access. Actually that crumpled paper wallet that's been through the wash and was forgotten in a random drawer in your old house will be much safer to use than this company's support.
And this screed doesn't even touch on their incredibly shady exchange practices. They have how many VCs backing them and couldn't manage to make an exchange that scaled to meet demand at a crucial juncture? Either their funders haven't done due diligence or the technical faults were all part of their plan.
Coinbase puts a lot of work and effort into their security models. Storing coins yourself means that you now have to:
1) Physically secure your private key
2) Secure the machine that you use to interact with that private key
3) Ensure that that private key was generated in a secure way
4) Ensure that the ways that you interact with that private key don't cause any problems.
etc.
Storing your own keys is a bet that you are better at security than coinbase's team. That's not a bet I necessarily want to make.
You can take your old phone or tablet, apply any available upgrades, factory reset it, use it only for crypto currency stuff.
Our mobile operating sysmtems are pretty secure (in the grand scheme of things)
> Our mobile operating sysmtems are pretty secure (in the grand scheme of things)
Not yet. Maybe after Android One / Project Treble runs on the majority of smartphones in the world. Which won't happen since Google made Android Go for low-end devices.
That's three problems. Security of the device(s), the lack of redundancy, and the physical security of the device.
A hardware wallet (such as Trezor or Ledger Nano S) together with a smartphone (or PC) yields you 2FA. "(Or PC)" could mean an offline Linux distribution on a USB key which is used as backup. The hardware key suggests a paper backup which should be safely stored at a notary or safety deposit box. Same for the USB key with the backup Linux distribution. Though it can also just contain some config files (stored encrypted).
Such a hardware key costs <= 100 USD/EUR (plus the costs of the notary or safety deposit box) so for any amount of cryptocurrency _above_ the cost of that it is worth it.
These costs are peanuts for the average BTC user, but for people in poorer countries its sadly quite an investment. Worth it though.
All these people recommending phones or hardware wallets as being easy, and not mentioning the complexity and opsec of offsite backup....
Since you're probably wondering, the passphrase mnemonic on my Ledger is a group of 24 words that represent a translation of the primary secret key. All accounts on my Ledger are derived from it. I've tested wiping and restoring, and the passphrase now lives in my bank deposit box.
By the nature of cryptocurrency, if you had all the public keys from your hardware wallet you could use it as a bank by dropping the wallet itself in a safe deposit box. You don't need it in your physical possession to receive, only send. I'm considering buying a second for exactly this purpose, though at that point, a paper wallet would be just as functional.
For years I've told people to just store their coins on coinbase. I've been a big fan of their "vaults", and I've been saying that they are the shining beacon of legitimacy in this whole thing.
I honestly don't know that I still agree with that. This whole rollout of BCH has made me honestly start questioning if I can trust coinbase anymore. I expect stuff like this from sketchy exchanges like what btc-e was, but not coinbase. That makes me really sad, since they were (still are, for now) such an incredible success story.
I think there is going to be a lot of regulation coming and I'm not entirely sure that that is a good thing. It makes me pause for the same reason I wouldn't be sure that regulators telling me what webservers or programming languages I'm allowed to use would be a good thing.
I really hope all of the "never keep anything on an exchange!" people aren't proven right again by coinbase of all people.