
Revisiting the Risks of Bitcoin Currency Exchange Closure [pdf] - gwern
https://tylermoore.utulsa.edu/toit17.pdf
======
Animats
_" The overall failure rate of Bitcoin exchanges is 48%, and the median
lifetime of exchanges is 451 days."_

~~~
jstanley
By similar reasoning, only about 93% of humans who ever lived went on to die.

~~~
gwern
The median isn't affected by the right-censored datapoints (ie you only need
to observe half of humans to find the median life expectancy, by definition),
which is why it's used so much in survival analysis.

Failure seems to mean 'closed' but there's no reason to expect such a short
lifetime of exchanges that they would all close already (an exchange can be
immortal) and even if you think that, the exact number of 48% is useful as it
gives you an idea of how informative the dataset is due to right-censoring
(the closer to 100%, the closer to a complete dataset in which all deaths have
been observed).

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mikro2nd
As the crypto-asset world keeps warning newcomers: Don't keep assets in
exchange-hosted wallets for longer term holding. Move them to a wallet under
your own control. And back it up really, really well.

~~~
empath75
Yeah I definitely want to invest my life savings in something I need to keep
on a USB key.

~~~
lyk
I don't get the point of this comment. Are you criticizing the current state
of cryptocurrencies, or are you implying that investing your life savings in
an exchange is somehow safer than keeping it on a USB key?

~~~
bpicolo
> is somehow safer than keeping it on a USB key

I'm not entirely convinced it isn't for some people. USBs can break, keys can
be lost. Exchanges _can_ be insured and put a lot more time and energy into
keeping things secure.

There have definitely been a few tremendous failures, but there's an argument
for keeping it in a trustworthy big exchange, if such a thing exists. Same
reason banks hold money - you don't want your house burning down or burglary
to pose a problem. If someone stumbles upon your recovery keys it's game over.

~~~
freejulian
As someone who just had funds removed from their bank account via a skimmed
debit card, I trust my bitcoin savings infinitely more than my dollar savings.

To protect myself from fire or flood, I have one of these:
[https://cryptosteel.com/](https://cryptosteel.com/) in a safe deposit box.

Hardware wallet sits in my desk and is protected by a pin.

Both the 24 security words and hardware wallet are protected by a password.

I can use a different password to access different wallets.

I can back up my account balance by simply saving a copy of the blockchain.

Banks suck. I can't wait for them to die.

~~~
bena
If your debit card was in a safe deposit box, it would have been just as safe.

And yeah, cryptosteel. What's the difference between that and a post-it? It
seems like pretty much a really small movable type. Their site reads like a
Franklin Mint commercial.

If bitcoin becomes currency like you hope, you're going to run into the same
problems, security versus convenience.

~~~
freejulian
> If your debit card was in a safe deposit box, it would have been just as
> safe.

Um, no. When I spend bitcoin, I'm not exposing myself to the risk of someone
having complete access to my account. When I use a debit card I am. Huge
difference.

> What's the difference between that and a post-it?

Post it notes burn. Also, cryptosteel is only for the security words. It still
won't give access to my wallet's private key.

> If bitcoin becomes currency like you hope, you're going to run into the same
> problems, security versus convenience

First, it already is a currency. Second, the security model of bitcoin is
infinitely better than that of a bank.

~~~
bena
So, it's not spent from your wallet?

So it's a post-it that won't burn.

And if it doesn't give access to your wallet, how does it protect your wallet?
If it can be used to gain access to your wallet, then how is writing it down
safe?

~~~
freejulian
> So, it's not spent from your wallet?

Huh? I think this comment shows you don't know what a hardware wallet is. When
I spend bitcoin, I spend it using my hardware wallet.

> If it can be used to gain access to your wallet, then how is writing it down
> safe?

You need a passphrase along with the security words to figure out the private
key. Passphrase = something long that I can easily remember.

------
neuro_imager
Is there a way for moderators on HN to limit the amount of emotional rhetoric
on cryptocurrency discussions?

It would be great if comments here could be limited to substantiated technical
and market analysis. Comments on ideology (again if substantiated) would be
useful too but right now these discussions just degenerate into shouting
matches with very low signal:noise.

------
yashksagar
Don't worry keep HODLing!
[https://www.youtube.com/watch?v=rg2oukQZ6dg](https://www.youtube.com/watch?v=rg2oukQZ6dg)

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naveen99
Kind of a solved problem with high leverage. Keep 10% of your trading stack on
the exchange, trade with 10x leverage. If mt gox and cryptsy allowed high
leverage, it wouldn't have been as big of a disaster when they closed.

------
lawlessone
"Bitcoin has enjoyed wider adoption than any previous cryptocurrency;"

Was there anything before bitcoin that could have been defined as such?

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gaetanrickter
¯\\_(ツ)_/¯ it's the wild west. Do you think I want to trust my money on Wall
Street instead?

~~~
bryananderson
You’d be wise to. First-world stock exchanges are not in the habit of
disappearing, and volatility is significantly lower (yeah, yeah, the past
week, I know, but I’m assuming we’re talking about a long time horizon like
retirement).

~~~
gaetanrickter
There are more crooks on wall Street (including the Banks) than in crypto.

Edit: Source: The 2008/09 financial crisis. You really don't need a specific
source here as it's clear to everyone that Banks have done great dishonest
disservices to their customers. Wells Fargo's latest news is case and point.

~~~
ceejayoz
> There are more crooks on wall Street (including the Banks) than in crypto.

This is a fun statement, because it's vague enough to be defended with "oh,
but I meant <foo>".

Yeah, Wells Fargo got caught making accounts people didn't know about. There
are cases like Enron. Financial crises, overdraft fees inflated by ordering
transactions maliciously, etc.

In the grand scheme of things, though, Wall Street tends to work, and fairly
well, and when it has an issue it winds up recovering eventually so you're
fine if you're well diversified and don't need to retire next week. The
various stocks in the DJIA and the NASDAQ are making real products, have real
value, and will mostly still be here in a few years.

You can't say the same for the ICO world.

