http://diegobasch.com/do-you-know-enough-to-securely-own-bit...
False. Theft is against the law. Bitcoins don't magically avoid being subject to existing law. The owners are known and subject to US jurisdiction, you have legal recourse through the courts should they try and steal your funds.
If that happens and you need to go to court, good luck proving that an exchange stole your coins. We haven't even seen Mt. Gox play out yet. Suppose they actually stole everyone's coins. Can someone prove it wasn't a hacker or a software bug? Time will tell.
That wasn't the question, the question was what's to stop them and the answer I objected to was "Nothing"; that's false, the law is not nothing. What's to stop most bad behavior... the law.
You're free to think that, I'm free to think you're wrong. MtGox is in Japan, Coinbase isn't; the contexts are different.
No... what stops most bad behavior is _consequences_. The law applies to everyone, but the consequences for breaking them don't.
We will see what(if any) consequences are placed upon MtGox. Personally, I still can't see how MtGox will be found liable of anything. Bitcoins aren't protected under any law and nobody said it was okay to trade your hard-earned government-backed fiat for some magical interwebz money. It might as well be fairy wings & unicorn tails. Don't get me wrong, I'm into crypto-coins and willing to lose up to 7k on them... but I fully understand that my coins could disappear in the next 5 mins due to any number of reasons and I have absolutely nobody to blame but myself.
> Bitcoins aren't protected under any law
False. Just because something is new doesn't mean existing laws don't apply to it. Bitcoins are property and property is protected by law regardless of when said item was invented. We don't have to create new law to cover every new invention man decides to own.
In the eyes of the law, I don't think bitcoin is your property anymore than buying a special weapon on Eve Online with fiat-money is your legal property. Maybe it should be, maybe it will be, but today that's not the case.
Or maybe I'm completely wrong... Has anyone sought legal action on financial loss related the value of an item inside Eve Online? Or any virtual item in any system?
A straight scam I understand, but say you purchased a bunch of rare swords & armor in some online game then next month the server crashes and all players lose their virtual items and the gaming company goes bankrupt. Is the company liable?
If they found themselves in a situation in which they are certain to go out of business as soon as people find out that they are in trouble, that motivation would cease to exist. It would come down to ethics, reputation, pressure from investors, etc.
This is in no way rigorous but consider User Interface design as a rule of thumb. Gox had an ugly unintuitive site. Coinbase on the other hand has a polished UI. This attention to detail suggests that the people who operate Coinbase are very different from those who operated Gox.
With Mt. Gox I am more inclined to think their problems stemmed incompetence rather than malevolence.
Assuming they don't just leave the country
These guys are known — like the guys at Mt Gox. They're not anonymous, and they would run a real risk of bodily harm by such a public crime.
That's exactly the same argument I used to justify why MtGox wouldn't shut down, almost word for word. It's the same argument I used to convince myself why they wouldn't shut down. They still shut down.
They're not anonymous, and they would run a real risk of bodily harm by such a public crime.
So we're relying on mob justice? Also, Mr. Karpeles hasn't been harmed and probably won't be.
(No, I don't want to see harm come to him, and I don't mean that comment above as a threat. What I do know is that there's a very strong chance that at last some of the BTC he lost/stole/squandered/etc. was owned by people who don't settle things with a lawsuit and a lawyer. Maybe it is unlikely, but it's something that I would be concerned of, if I was in his shoes right now)
I'm not saying we should rely on mob justice. I'm saying that the risk of reprisal is a perfectly understandable reason not to commit certain crimes. These guys are public figures and would be easy targets for people who want to harrass or harm them, unlike for example a mask-wearing bank robber whom nobody can identify and who stole only the bank's money.
Keep the bulk of your BTC in a private wallet under your exclusive control and only use the intermediary provided wallet when you need to make a trade through their platform/exchange. You're still exposed while a trade is being executed but your maximum exposure is never more than the amount you are trading at that time.
You wouldn't deposit your life's savings with a new, unknown bank based out of a tiny island state with lax/non-existent regulation. Don't do the same with your BTC.
I see two problems with this point. Firstly, while I'm not entirely sure how the legal system in the US works, but I suspect it would be illegal for Coinbase to shut down and run away with everyone's Bitcoins. I doubt that USD is the only asset that is legally protected from theft/fraud. Secondly, I suspect that Coinbase has a huge incentive to not do this even if it were legal to do so. Namely, they should be able to make a lot more money by conducting their business legitimately and continually than if they ran off with one lump sum.
You're not the first person to make this point. It is not necessarily true. What if the amount they could run off with is huge and their margins are tiny, or they are losing money?
Well, I suppose there are legal implications: that's known as "theft". Also there are the morals of every other employee... I believe Coinbase is set up with standard controls so no one person can steal funds without it being obvious to (and preferably requiring the cooperation of) other employees.
I would ask a similar question: What's preventing Nationwide Insurance, Chase Bank, and e-Trade from shutting down operations tomorrow and walking away with everyone's money? The biggest difference between these institutions and MtGox is that these institutions all have regulators who have the power to (in extremis) take over the operations of the institution if it begins to show the same kinds of trouble that MtGox showed for quite some time before its collapse. Coinbase is not currently subject to any such regulation.
Seriously, though, Coinbase and other online wallets and exchanges need to get with the program and prove they're not running a fractional reserve.
Radical transparency is a big part of the answer, and it's much more feasible with Bitcoin's public blockchain than with the dinosaur monetary system.
I don't think it's the best regulatory framework, but it's all we've got.
I've advocated for an FDIC-like system for money transmitters, run by CFPB or some other entity, for three years. Congress is hard to reach these days.
http://www.thinkcomputer.com/corporate/whitepapers/heldhosta...
- They are in SF so I can walk/bike/bus to their office; for whatever good that does me. Didn't do that one dude any good going to MtGox's Japan office. =/
- They are YC backed, so that means pg knows about 'em. That adds a "gold star" in my book in that they must have passed some kind of filter to get into YC; that they're not just plain scammers, unprofessional or woefully uneducated about security on the interwebz.
- I feel very confident about this video: http://techcrunch.com/2013/12/17/foundation-brian-armstrong-...
All that said, you still shouldn't leave a huge amount of coins on an address that you don't exclusively hold the private key to. 1 or 2 bitcoins, meh. Day-trading with 50 BTC? Risky, but okay I guess. Those crazy amounts I saw on that gox-horror Reddit thread, like 100+? Some people in the THOUSANDS?!!! That was a bad decision. That needs to be some place else. Coinbase.com may have the most honest people in the world, but I also believe hackers are extremely talented people and hundreds of bitcoin is adequate motivation for a certain subset of hackers to pour all their energy into breaking coinbase. I'd love for Coinbase.com to talk about all the strange hack attempts they must see against their service every... minute.
I day trade on btc-e.com with 1k USD and my rule is to never have more that 2k on there. If I reach 2K, I buy 1k's worth of bitcoin --> send to coinbase.com --> cash out. Repeat again with the 1k remaining. I could try and turn 2k into 4k, but that's a risk I'm not willing to take. I'm happy with my 1k units of profit.
Or, what if the founders orchestrated some sort of disaster wherein all of the coins are claimed to be lost, but in reality they're simply transferred to the founders?
I know they wouldn't actually do that. My question is, what's stopping them? Why wouldn't someone try to do that, other than their morals?