
A Major Coinbase Milestone: 1 Million Consumer Wallets - wglb
http://blog.coinbase.com/post/78016535692/a-major-coinbase-milestone-1-million-consumer-wallets
======
sillysaurus3
Quick question: What's preventing Coinbase from shutting down operations
tomorrow and walking away with everyone's money, as MtGox walked away with
mine?

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?

~~~
diego
Nothing, so most people should use Coinbase the same way they use a grocery
store: buy what they need and take it somewhere else. Unfortunately most
people do not know enough to do that. I wrote a blog post about it if you're
interested.

[http://diegobasch.com/do-you-know-enough-to-securely-own-
bit...](http://diegobasch.com/do-you-know-enough-to-securely-own-bitcoins)

~~~
gnaritas
> Nothing

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.

~~~
diego
The law doesn't prevent you from committing crimes. It certainly did not
prevent Mt. Gox from making bitcoins disappear.

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.

~~~
gnaritas
> The law doesn't prevent you from committing crimes.

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.

~~~
makomk
The law is fairly obviously not an answer though, given the context. The
original question specifically asked what stops Coinbase from shutting down
and taking everyone's money like MtGox did. It was just as illegal when MtGox
did it, yet it happened anyway. (Actually, most of the other answers have the
exact same problem.)

~~~
gnaritas
> The law is fairly obviously not an answer though, given the context.

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.

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singularityyy
Considering any positive comment will be buried deep under in HN, I think it's
important to celebrate this success. Price of Bitcoin is meaningless, all
other metrics seem to point to higher and higher adoption of this new
technology. Great news!

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cassetti
The main reason I chose to buy BTC through Coinbase is because they're funded
by A16Z and USV. Very prominent and influential investors that would also come
under scrutiny if anything nefarious happened internally.

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thinkcomp
That's one million consumer accounts with no FDIC insurance, no surety bonds,
and no other backstop in the event of a problem.

I'd love to see a Coinbase blog post about why Coinbase doesn't need to be
licensed like every other MSB registered with FinCEN.

~~~
natrius
FDIC insurance is aimed at banks that make loans, which Coinbase does not.

~~~
erikpukinskis
This is the correct answer. FDIC insurance is needed because when you give
your money to a bank, they turn around and lend it out to other people, so
when you want to withdraw they may not be able to collect enough to pay you
out.

I suspect when you deposit 10 BTC in Coinbase, they actually just hold it for
you. Honestly, given how volatile Bitcoin is, and the general upward trend, it
would basically be insane for them to try to invest it in any other assets.

~~~
wmf
Maybe FDIC insurance specifically doesn't make sense for Bitcoin, but it can
still be lost or stolen in a full-reserve model and thus should be insured.

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panabee
how are they able to guarantee an exchange rate? aren't they exposing
themselves to the huge fluctuations in bitcoin price (though the price seems
to have stabilized recently)? for instance, there were some days this month
where the price fluctuated by more than 40%. somehow the price and volume must
work out where this is a calculated risk to cultivate the broader bitcoin
ecosystem. would love to see some numbers if anyone has any ...

~~~
erikpukinskis
I suspect they don't need to expose themselves because they are holding large
amounts of both Bitcoins and cash, so they can simply sell them to people at
whatever price they want to. It's not like they take your USD and then have to
run out and buy Bitcoins to cover them. They do have to worry about the value
of their Bitcoin and USD holdings becoming worthless, but that's something all
Bitcoin and USD investors have to worry about.

If they are taking some risk, by making commitments that they don't have
backed with currency, it's trivially easy to calculate their exposure and
figure out how high their fees need to be to cover it. That's a problem
actuaries solved decades ago. Currency exchange is not a new business.

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Istof
I have a few empty (never used) wallets

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joezydeco
I realize it's all startup-y to pat yourself on the back about growth, but
aren't you painting a target on your back for those that want to perform the
next heist?

~~~
singularityyy
No security is perfect of course, but Coinbase has over 98% of the funds in
cold-storage. See: [http://antonopoulos.com/2014/02/25/coinbase-
review/](http://antonopoulos.com/2014/02/25/coinbase-review/)

~~~
waterlesscloud
Gox claimed 95% of their coins were in cold storage.

Unproven claims aren't worth much.

~~~
jonknee
Technically that still appears accurate. The inaccurate portion was that they
didn't have anywhere near the correct number of coins (cold or hot).

