
Facebook Security Director Joins Bitcoin Startup Coinbase - ssclafani
http://techcrunch.com/2014/03/19/facebook-security-director-joins-bitcoin-startup-coinbase/
======
hendzen
I'll be honest, I am a Bitcoin fan. But I realize there is a relatively large
chance that it might just fail entirely (or only be used by criminals and just
be regulated to death).

Venture Capital investment in Bitcoin has been fairly massive - and from many
top tier VCs e.g. a16z, USV & Accel (but notably not Sequoia nor Greylock).
Some key investments: 75m for Coinbase, 20m for Xapo, 9m for Circle (still
haven't launched) and many smaller investments.

VCs have also been putting massive amounts of money in to BTC itself.

If Bitcoin fails, SV will collectively look pretty silly. Its going to be
interesting to see what happens when either the US economy takes a dump, or
interest rates rise and VC funding dries up...

~~~
saraid216
> Some key investments: 75m for Coinbase, 20m for Xapo, 9m for Circle (still
> haven't launched) and many smaller investments.

That barely breaks a billion. It doesn't seem massive to me in relation to the
rest of Silicon Valley. For comparison: Instagram.

~~~
rahimnathwani
I'm not sure of your point. According to Crunchbase, Instagram took $7.5m
funding at seed/A and then another $50m not long before it was acquired.

If you're taking about Instragram's exit valuation, I don't see the relevance.

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consz
I hope he gets them off MongoDB. I still can't believe they let me double sell
without even contacting me afterwards (I sold ~10 bitcoins when it was around
$800 and the site was exceptionally busy -- had USD in my Coinbase account
afterwards and the bitcoins never left, and I was able to transfer both the
USD and BTC out afterwards).

~~~
bowmessage
This happened to me and many others on Reddit. It's something that they
manually audited it seemed and I got emails about it letting me know that they
would be correcting the issue about a week after it happened. Sounds like in
your case they never contacted you though? Wow.

Still, it made me wonder if I could have just ran with the money and drained
the bank acct they had access to... Not a good thing for an exchange to be
doing.

~~~
jedanbik
Manual audits? What is this, the Cretaceous period?

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trendspotter
I recommend to use Blockchain.info or BitGo or GreenAddress over Coinbase if
you already have Bitcoin.

With those services you hold the keys to your Bitcoin, not Coinbase. With
Coinbase they are in control over your Bitcoin, not you.

GreenAddress is the only wallet for Bitcoin with a 2-2 model Multisig offering
a Bip0032 wallet with nLocktime on the Bitcoin blockchain.

* [https://greenaddress.it/en/](https://greenaddress.it/en/)

~~~
gnaritas
Most people aren't going to want to hold their own keys as most people can't
stop their computers from being constantly infected by malware. Just as people
don't want to keep large amounts of cash in their safe, they will want someone
else to take the responsibility of securing their coin.

Pretty much only the tech savvy will care to even understand what a key is or
care to hold their own.

Bitcoin isn't a political movement to the masses, it's just a useful new
technology; they aren't using it to kill banks or government and they don't
care about the politics of the early adopters.

~~~
huangc10
agreed. but coinbase isn't a bank/authority. it's like letting some random
company holding your money. meh.

~~~
jdangu
Less random than paypal when it originally started. States had to come up with
laws designed just for paypal, because an e-wallet was something completely
new.

 _“We’re in uncharted territory, so hard to say if this stuff falls under a
particular state’s MTL [money transmitting license] statutes,” says co-founder
Fred Ehrsam. “We’re still talking to states to figure out how each responds,
but Coinbase is prepared to get licensed where a regulator deems it’s
necessary.”

In the meantime, he is continuing to do business, relying on the fact that
Coinbase has its AML and KYC processes established._

[1] [http://www.coindesk.com/coinbase-gmail-
bitcoin/](http://www.coindesk.com/coinbase-gmail-bitcoin/) (Oct 28 2013)

~~~
teacup50
Paypal isn't pretending to be a cryptocurrency.

It's not much of a cryptocurrency if you hand the plaintext keys over.

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exelius
I was initially not a Bitcoin fan. But I saw Fred Ehrsam (one of the founders
of Coinbase) speak at SXSW, and it's clear that he gets it: he said one of the
biggest things harming perception of Bitcoin is that the media keeps calling
it a "currency", which it clearly is not. He seems to view it as a better
transaction process that's more efficient than credit cards (the justification
being that a credit card transaction cost is 1.5-3.0%, while Bitcoin is closer
to 0.5-1.0%).

Viewed in this manner, Bitcoin starts to make sense to me. When all you're
doing for a transaction is USD->BTC->USD, it doesn't matter what the price or
volatility of BTC is. You're buying $30 worth of BTC which the seller is going
to almost immediately convert it back to USD. It's cheaper than credit cards
for two reasons: one, the risk of loss in the event a vendor is compromised is
limited to the amount of the transaction, and two, the blockchain makes it
really easy to automate transaction auditing.

Ehrsam was also pretty adamant that Bitcoin isn't a way around existing laws.
The first generation of Bitcoin firms were run by amateurs; the second gen
(which he considered Coinbase a part of) are run by people who have spent
their lives working in banking and securities. This means they will operate a
lot more like banks, which includes complying with all the legal regulations
as well as the operational processes like outside auditing and information
security. This also means that governments will still be able to restrict the
flow of Bitcoin: if China decides that BTC->CNY transactions are forbidden, no
trustworthy Bitcoin exchange is going to process them. Any that do are likely
to be flagged as money laundering operations by the US Govt which will make it
very hard for them to do business with a legitimate bank.

Again, when you look at it like this, Bitcoin is a disruptive new technology
-- but it's not revolutionary. As always, the guys making the big money in a
gold rush aren't the gold miners, it's the guys selling the shovels...

~~~
TeMPOraL
> _Ehrsam was also pretty adamant that Bitcoin isn 't a way around existing
> laws. The first generation of Bitcoin firms were run by amateurs; the second
> gen (...) are run by people who have spent their lives working in banking
> and securities. (...) As always, the guys making the big money in a gold
> rush aren't the gold miners, it's the guys selling the shovels..._

This. Anarchists (crypto- and not) developed Bitcoin environment as a way to
go around the laws, but now as it matures into a real tool, it's being taken
over by people who are serious about making money. It's both a victory and a
failure of Bitcoin - we have a potentially interesting new financial tool, but
all the promises that "Central Banking / Feds can shove it" remain
unfulfilled.

~~~
exelius
I think that's just a truth about the world: government and banking will
always exist because the vast majority of the population believe the benefits
of central banking outweigh the tiny bit of "sovereignty" you have to give up
to achieve it.

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astrowilliam
I'm a fan of BTC and use coinbase as my central wallet of choice. Super
excited about this news.

I recently switched from regular banner advertisements on my site (
[http://www.spaceindustrynews.com](http://www.spaceindustrynews.com) ) - cheap
plug - to taking BTC donations. The BTC community has been amazingly
supportive throughout the whole thing.

~~~
sillysaurus3
_I 'm a fan of BTC and use coinbase as my central wallet of choice._

Please transfer your BTC to a wallet under your control immediately. Run,
don't walk. Take it from me: it's a terrible feeling to lose your money
because someone else lost it on your behalf.

~~~
blhack
This is such stupid advice.

I don't run my own mail servers. Nor do I run my own DNS, generate my own
power of, gasp, keep my money stashed in a jar in my back yard.

And neither should you.

Pay somebody else to do the _awesome_ things that coinbase is doing to keep
your coins safe.

\--

(This advice is void for people holding HUGE sums of coins. For people holding
<10 coins or so, I don't see a problem using coinbase. At all.)

~~~
gphilip
> This is such stupid advice.

Is it, even after MtGox?

As far as I know (IANAL) there is no law or precedent which takes the _value_
of stolen bitcoins into consideration while sentencing. There is also no
history (AFAIK) of prosecution, of serious prosecution which takes the effort
to follow up on stolen coins may have been "mixed" etc., in cases of BTC
theft.

Given this, does not an online service (like Coinbase) which holds a large
amount of bitcoin in "stealable" form present, to potential criminals, a lot
of incentive to break in and take it all away? I, for one, wouldn't keep up to
5000 USD in such a place, at least till the time there has been some serious
prosecution and proportionate sentencing of BTC thieves. But of course to each
their own.

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arasmussen
This is huge. Congratulations to Coinbase and to the Bitcoin community in
general. To the latter because the risk he's taking means he believes a lot in
Bitcoin which is exactly what the currency needs to survive.

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rdl
Wow, that's a pretty big hire -- congtratulations!

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habosa
Does Coinbase make money by speculating in the bitcoin purchase/sell interval?

For instance, when I buy 1BTC at $600 they have ~4 days to get it to me. I
assume that if they believe Bitcoin is trending down, they will wait to buy at
$550 or lower and then give me the "cheaper" Bitcoin and take home the spread.
I haven't heard any confirmation of this but I'd assume they are doing this.
Does anyone know for sure?

~~~
sputknick
Brian Armstrong said "no" in a talk he did with Kevin Rose. He basically said
they make money on that as often as they lose money on it, so not counting it
as a profit center and assuming in the end it will all even out.

[http://www.youtube.com/watch?v=ZwG1roO70co](http://www.youtube.com/watch?v=ZwG1roO70co)

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RegW
Does Mr McGeehan's move signal a move by FB into currency exchange?

Just imagine what FB would know: when and where you were born; who you are
related to; who you know; where you shop; what you buy; how much you paid and
how much money you have got left. Basically, your whole credit history is up
for grabs.

That's got to be the most lucrative data set ever.

Damn - too late again. Back to the day job ...

