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Bitcoin ETF research finds that 95% of Bitcoin volume is fake (twitter.com)
586 points by mlerner on Mar 22, 2019 | hide | past | favorite | 135 comments

>CoinBene is reported to be the largest bitcoin exchange in the world

I literally never heard of this exchange before today. If some random exchange popped up and overtakes all of long time "legitimate" incumbents (eg. coinbase, bitstamp, kraken) combined, I'd be suspicious of that too. The same applies for most of the other exchanges near the top of the list on slide 22. In reality, I don't think seasoned traders are affected by this, only newcomers and the occasional journalist.

"Reported" by CoinMarketCap (and it's dropped to #11 now):


I think it's pretty well known within the crypto community that CoinMarketCap exchange volumes are bullshit - other than Binance, the top 45 basically consist of exchanges I've never heard of. They're bullshit because there is a ranking, one that many newbies would refer to, and it's trivially easy to fake volumes through wash trading or just lying if you own an exchange. It's been like that for at least a couple years too - when I first found CoinMarketCap, the top exchange was BitMEX by a large margin, which everybody said to stay away with and doesn't even appear today.

BitMEX isn't a spot exchange. It offers derivatives and futures products. It does has its share of issues (namely system overload) but it is probably the only legitimate platform (i.e. no fake volume) on Coinmarketcap that doesn't get volume counted because it is not spot volume.

The elephant in the room is that the liquidity and trading on BitMEX is legit and many times higher than spot, yet BitMEX is unregulated. Big players can and has used BitMEX to manipulate spot prices (arbitrage/market maker bots will move the price on regulated spot exchanges accordingly). It used to be that most of the manipulation happens on Okcoin futures products. Since the China fiasco in 2016-2017 they lost almost of all of their traders to BitMEX.

CoinMarketCap simply reports what exchanges report. There's no way for them to get real data.

It's a shady industry to be sure, but not hearing of something doesn't mean it doesn't exist or isn't functional in some context.

I'd think the only way to bring honesty to this is to make exchanges report what their inbound/outbound wallets are, apply the ratios of in/out to reported volume gathered from "trustworthy" exchanges, and then you have a fuzzy guesstimate of the volume of these exchanges.

Those exchanges that don't submit data are either doing shady stuff, or don't care to be listed (which is perfectly fine).

Yup. CMC tries to account for this in its pricing (which is volume-weighted btw) by ignoring those exchanges (which it discloses in the "Markets" section).

what would you say are the top exchanges right now?

In the original twitter thread: https://twitter.com/BitwiseInvest/status/1109114665240616962

"5/ Only 10 exchanges have >$1M real daily bitcoin trade volume. @binance, @bitfinex, @krakenfx, @Bitstamp, @coinbase, @bitFlyerUSA, @Gemini, @itBit, @BittrexExchange, @Poloniex / @circlepay You can see the daily BTC trade volume on these exchanges at: http://www.bitcointradevolume.com "

Note: Not verified by me, just relevant to the source.

Yeah. Subjectively (and this is with a U.S. bias), I would've ranked them as Binance, Coinbase, Bitstamp, Gemini, Bitfinex, Bittrex, Kraken, Poloniex, Bitflyer, Circle, ItBit.

[Now I'm going to peek at the actual volume rankings. Hmm, not bad - Kraken is doing better than I thought, and I underweighted Bitfinex and Bitflyer per U.S. bias, but it's otherwise quite close.]

Those match my extremely anecdotal observations in this arena.

https://www.blockchaintransparency.org/ put some good insight into it - haven't updated since December though

Are people even pretending these days that bitcoin is not pure speculation?

Is it fraud to report false data to the pubic to make your business more successful?

My gut reaction is "this should be illegal"

This presentation was given with regards to a proposed "Bitwise Bitcoin ETF Trust" that the SEC is considering for approval.

Direct link to ETF research PDF linked from the thread:


Interesting things to see in the hundreds of pages:

page 24: What Do Real Exchanges Look Like?

page 43: Trade Size Histograms For Suspect Exchanges

page 57: Applying All Three Analyses: BitForex

page 111: We Have Reached The Point Of Diminishing Returns For Improvements In Efficiency

Thanks for looking through it!

Is the SEC going to approve it?

The SEC has not been enthusiastic about Bitcoin ETFs. On another recent application (VanEck):

>Bitcoin ETF is “absolutely not” going to be approved by the SEC, says CSO of CoinShares

> The whole cryptocurrency market has been eagerly waiting for the approval of a Bitcoin ETF by the U.S. Securities and Exchanges Commission [SEC]. The reason the exchange-traded product is of much importance to the community is that it is considered as the gateway to drive the institutional investors into the space.

>So far, the commission has rejected all the proposed rule changes with the main reason stated as concerns over market manipulation... https://ambcrypto.com/bitcoin-etf-is-absolutely-not-going-to...

There have been a bunch of applications, all turned down so far.

I'd imagine the SEC doesn't leak that info in advance on HN.

You can go to any crypto-trading forum (i.e. /r/bitcoinmarkets) circa 2012 and find that this was common knowledge. Everyone knew/knows that 'Chinese' volume was mostly fake because the exchanges made it easy to do so with low fees. Whether the exchange simply let this happen or actually deliberately created the fake volume was immaterial.

UTXOs remain the best way to track overall market use and movement. Through this, you can plainly see that the last year of market activity has been thin, just traders competing with each other. With one notable exception in Nov/Dec of 2018 causing the big dump. This was one of the most singular events in Bitcoin history, with old coins fueling a major drop in price.

  UTXOs remain the best way to track overall market use and movement.
UXTOs can be mass produced in bulk from single users controlling and scripting multiple wallet addresses.

Looking at the Winter 2017 UXTO transaction logs, it's pretty clear a single entity was (can/is) coordinating upwards of 10%-50% of the volume, the clearest examples of this are throughout December of 2017.

What happens on exchanges doesn't have to be settled on the blockchain and higher exchange volume is not necessarily reflected in utxo volume.

That being said, it looks like the whole 2018 had more utxo activity than 2017, and things seem to get even more intense lately: https://utxo-stats.com

This is by far the best analysis of the Bitcoin market I have ever seen. Super interesting. As the Twitter thread mentions, this could actually be good news in the eyes of regulators as it means the Bitcoin price is likely controlled almost entirely by legitimate trading on legal and regulated exchanges rather than the fly-by-night places that are faking their volume.

Well, the study shows that there are legit exchanges, so there is some place for the usual market forces to apply (and indeed, the price of Bitcoin on these exchanges lies in a tight band, too small for arbitrage opportunities). That doesn’t mean the price of Bitcoin can’t be manipulated by pump & dump or other price manipulation schemes.

But still, the study (at least the highlights given in the twitter thread) looks solid and well-presented.

pump and dump can take place in small cap equities as well. it will never be impossible - the thing thats needed is the regulation / surveillance to do enforcement on those who perpetrate it

The difference is here it’s totally legal and an intrinsic part of the decentralized, deregulated coin ecosystem. It is bitcoin.

I expect the bitcoin case will remain dubious to the SEC because Bitcoin has no fundamentals. I.e no relationship to anything tangible.

Further, volume on unregulated exchanges does effect price on regulated ones ... so you don’t have to manipulate a regulated exchange to move price.

Really what crypto needs is a trustless blockchain based exchange. Something like an Ethereum based limit order book. Then no other exchange is relevant.

These already exist, eg. Idex and other distributed exchanges.

People use them - Idex is one of the most-used Ethereum dApps - but they suffer from ease-of-use problems. Either you go through a web interface (which defeats the purpose of them being decentralized, since you have to trust the website you're making the trades on) or you put up with the hassle of sending individual transactions to smart contracts with your Ethereum wallet, which is pretty error-prone for most ordinary users.

money is consensus and not backed by anything other than a government promise. bitcoin is backed by hash power = money. it's 2019 we are past tulip phase. you can pay taxes in usa with it.

The government promise that it will be directly accepted as payment for taxes, and to settle judgments in it's courts. That's a lot of backing, not a triviality that can be dismissed.

But you can't pay your US taxes or judgements in Yen or Euros either. In that way, it's no different from the standpoint of a US citizen to any other alternate currency.

You could also pay taxes with tulips, if you exchanged them for the correct currency, yeah...?

What other analyses have you read? This was one of the worst "research" resources I read. Did they write off all exchanges that they identified to show abnormal trading patterns? Huobi and Bitmex are considered to trade $0 according to this research? This is a waste of everyone's time.

BitMEX is not a spot exchange. Huobi fakes volume.

Yes, it's widely known exchanges wash trade. This does not mean that all their volume is fake. And it's true mex only trades contracts, but I'd note they're traded only with BTC collateral so bitcoin is still exchanged.

For the most part, this report basically ignores Asian exchange volume.

It's likely that a vast majority of their volume is fake. Why would you fake it to add 10%? In the absence of real numbers, treating it as 0 is likely more accurate than taking it at face value.

It would certainly be interesting to see an analysis of BitMEX.

Unregulated exchanges fake volume to stay competitive with the other unregulated exchanges. Treating those as 0 means you may as well say "only 5% of exchange volume is traded on regulated exchanges, and we don't have the slightest clue about the rest."

You can't pass this drivel as research.

Re BitMEX it wasn’t included in this report because the report focuses on spot markets but agree it’s very relevant and will be the topic of future research.

Re Huobi, there is strong evidence of material falsified

One villain here is CoinMarketCap, which obviously knows most of its listed exchanges are fake yet continue to show their reported volumes. I believe they are paid by fraudulent exchanges to do this. CMC's product is solid but its values are corrupt.

It’s product is the values. So the product is shit.

I think moral values rather than numerical values were intended as the interpretation of 'values'.

They do their best to remove fake volume as far as they can tell. And in my opinion it's best to list the exchanges and assets and let the users form their own conclusions than to be a centralized gatekeeper.

I work in this industry, and they do not do their best. The Blockchain Transparency Institute lists OKex as only 11% real volume[0] yet it is the 6th biggest exchange[1]. Repeat for many other exchanges. Simply put, they need to remove most of the exchanges.

[0] https://www.blockchaintransparency.org/

[1] https://coinmarketcap.com/rankings/exchanges/

If I have taken anything away from 2018, it's that people generally do not form their own conclusions. We need gatekeepers more than ever today because fraudulent data and information is so easily created.

When 95% of volume was studied to be fake, even if they were 50% off in their estimate there is an absolute need for Coin Market Cap to be a gate keeper.

it's even more tragic that they now sell API access to this "data"

They actually filter out many exchanges for exactly this concern...

Faking volume is an issue with exchanges, not Bitcoin. Exchanges are in the business of trading. They have incentives to transact Bitcoin. Bull market produces more volume. Bear market has less volume. I take this as most Bitcoin people now are HODLers. They actually see it as a Store of Value.

With this research, the Bitcoin ETF group is telling SEC: Our ETF will better than other exchanges. Please approve.

True, but when 88% of the large ($1M+) exchanges and 95% of transactions are mostly fake volume, that's reflective of Bitcoin as a whole, wouldn't you say?

If I may, let me apply your comment to something else:

50% of phone calls made each day in the US are fake robocalls, that’s reflective of the phone system as a whole, wouldn’t you say?

The fake volume may be reflective of bitcoin price or the lack of regulation of bitcoin exchanges but I don’t think thenfake volume is reflective of bitcoin as a whole.

>50% of phone calls made each day in the US are fake robocalls, that’s reflective of the phone system as a whole, wouldn’t you say?

Yes, I would! I think that deregulation has enabled the phone system to become a terrible system. That's not a good analogy if you were trying to prove the opposite.

> 50% of phone calls made each day in the US are fake robocalls, that’s reflective of the phone system as a whole, wouldn’t you say?

Yes, it is reflective of the phone system. If the phone system had appropriate safe guards to prevent faking of ANI data and other abuse prevention mechanisms, robocalling wouldn’t be an issue.

I’ll leave it to others to decide if you picked a bad analogy or if you just proved the point of GP, I’ve got no skin in that game and don’t care.

Oh absolutely. It’s because nobody uses phones anymore for calling each other, so the malicious use cases account for a massively disproportionate amount of network use. Just like Bitcoin.

If the phone system keeps trending as it is, people will shut off service and it’ll eventually disappear.

What does it say about Bitcoin or cryptocurrency?

To me it shows that: 1) Anyone can start an exchange (unregulated market) 2) Some exchanges are shady and untrustworthy

It's not that "most transactions are fake volume". Its that if you aggregate the data, you include a lot of bad data.

Also true, but these are not long-tail new entry exchanges or even just "some" exchanges, they're the vast majority of major $1M+ exchanges.

I think you misread/misquoted me. It's that 85% of the major exchanges are mostly fake volume, and that 95% of all transactions are fake volume. It's in the article.

Personally I consider major exchanges those that have had solid public presence for several years, with public executives and in general their actions.

So, it's not 85% of the major exchanges, it's 85% of the exchanges top ranked by CMC's volume as reported by the exchanges themselves. Anyone could create an illusion of an exchange and do a fake-generated behemoth of an exchange within a couple months.

The majority of the top-ranked CMC exchanges are just fake-volume generators making money from all those ICO tokens/altcoins that hope that getting listed will help their price, or most commonly just sell more of their tokens to more uninformed victims.

For most of those exchanges you can't even find a single human name throughout their site. There was a big rise of using white-label crypto-exchange products, so you don't need much to get one of those online, they even provide "liquidity" network.

It's a shitshow, but it's irrelevant or a useless detail to bitcoin's value and trading, most big firms like DRW/Cumberland etc. breath this things and I'm sure they have talked to their SEC buddies about it.

Can you cite the 85% figure?

Was not able to see it here: https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca2...

No, because these fake transactions occur of-chain, in a database managed by the exchange.

In part because there’s no capacity on chain. Off chain solutions are the thing y’all are into these days aren’t they?

100%! There are on-chain scaling projects in the works though.

Such as? There’s no plan to increase block size and LN is off-chain. I haven’t heard of any other credible plans.

I am working on one https://github.com/solana-labs/solana

But also take a look at the most promising sharding project: https://github.com/nearprotocol/nearcore

Two complete different approaches.

Store of whats left of its value. If AAPL shares went down to $8 or gold hit $120/oz nobody would be yelling about how great a store of value they are. Bitcoin holds its value about as well as an egg salad sandwich in the hot summer.

I find the title a little misleading, "95% of Bitcoin exchange volume is fake." to differentiate from transactions performed inside the network.

Transactions in the last 24 hr were 10% of the market cap (i.e. ~$7b USD), so the on-chain activity is therefore much higher than what's being claimed as "real" volume here.

"When you remove fake volume, the real BTC volume is quite healthy given its mkt cap. Gold’s market cap is ~$7T with a spot volume of ~$37B implying a 0.53% daily turnover. Bitcoin’s $70B market cap would imply a 0.39% daily turnover, very much in-line with that of gold"

So people are using it as a store of value, rather than a medium of exchange? This would count against it being used just to buy drugs etc wouldn't it?

I think that's right. It's anecdotal but everyone I know who owns some BTC owns a small amount and sees it as a sort of (a) hedge against major turmoil in fiat and (b) possibly long-term upside if more and better uses for the tech materialize.

So it's digital gold, and maybe being digital means it has long-term upside.

Why buy drugs/illicit things on an open, immutable and transparent ledger?

Best use cash and leave no trace.

Because you don't want to go meet drug dealers in an alley.

Out of curiosity, why is RandomBacon's sibling comment hidden and marked [dead]?

It's true that Bitcoin doesn't have a lot of transaction volume, but this isn't where you'd see that. "Spot volume" (trading volume) is taking place on centralized exchanges -- not on the blockchain.

As I understand it, it's primarily used for money laundering after the fact, rather than sales.

Money laundering would imply short term parking of assets before moving them on? Which would tend to inflate trading volume?

I don't have any money to launder so I'm not an expert, but that's seems right?

It's doesn't have to be short term. Previous processes mostly were, by necessity.

I'm thinking that if it becomes long term, isn't it then a store of value?

I might be arguing semantics but if you put dirty money in to a box, and 5 years later it spits out clean money. That's different to a box where you put dirty money, it immediately spits out clean money, but you leave it there for safe keeping.

On the other hand, if you have regular movement of money through a system, it becomes easier to trace the start and end points. If moneys just sitting there, you cant follow it.

It's also different to a box you put dirty money in, that spits out clean money immediately, and is also a secure place to store money.

It's just solving both the fundamental problems of handling blood money at the same time, ergo Lambos and HODL genius.

is it easy to buy drugs with bitcoin anymore? i would guess drug addicts are not that patient

Traditionally bitcoin has been held to a new higher impossible standard than other asset classes, when put on the same level of them it functions similarly.

For example, when looked at as a currency it acts similarly. Where the small tiny faction of the asset (M0) is used as a medium of exchange where people buy consumer goods and services. With M1 M2 M3 and MB being illiquid parts of the supply used for investment into other assets or for stores of value.

> So people are using it as a store of value, rather than a medium of exchange?

Just like currencies and metal commodities, both, and in similar proportions.

Bitcoin is traded less than gold. Gold isn't really used to buy consumer goods, and tends to be used as a store of value, thus the low trading volume. So it doesn't seem as if bitcoin is being used to buy things.

I wasn't making any judgement on what Bitcoin is good or bad for. I'm just inferring from the data how it is actually being used.

Right I wasn't talking about just gold.

Bitcoin is held to a higher standard than actual currencies with regard to how much or little of it is used for purchases, and it is held to a higher standard than precious metals like gold with regard to how much or little of it is not moved at all.

The people educated in those asset classes commenting on bitcoin don't seem to notice, the people not-educated in those asset classes commenting on bitcoin aren't familiar with the economics and velocity of any asset class. That contributes to the state of the conversation today.

To move this discussion a little further, M0 of any currency would be a similar fraction of a percent as the trading portions of any commodity like gold.

With bitcoin, we also have to understand that trading volume on exchanges won't illuminate whether bitcoin is used for buying anything, as that likely would not be a transaction volume reported on exchange, but directly on chain itself and on secondary routing networks like Lightning.

Some of the shady bitcoin exchanges and Bitcoin derivatives product offerings really do remind me of bucket shops that were popular in the early 20th century (https://en.wikipedia.org/wiki/Bucket_shop_(stock_market))

One difference is that the obvious remedy that was applied to bucket shops at the time (regulation) doesn't seem to be as effective this time around due to the international nature of Bitcoin markets.

BitMEX isn't like a bucket shop, it is a bucket shop. Complete with price manipulation to blow out shorts/longs when too many people are stacked on one side of the action to pocket the margin deposits, repeat ad infinitum.

Check out some 15/30 min or 1h BTC charts, look for 'bart' patterns. Pumping and dumping to wipe out shorts/longs, it's blatant and obvious.

Already posted as https://news.ycombinator.com/item?id=19462894 (EDIT: although this link is from the horse's mouth rather than the WSJ)

I have a couple questions!

Please correct me if I’m wrong, but it appears 9 of the largest exchanges are regulated under New York laws.

1. Is there a scenario where to US could now immediately stop almost the entire bitcoin exchange process?

2. If that’s the case, isn’t that entirely against the point of a “decentralized” currency - in that it’s not worth much if you can’t effectively trade it.

3. If 95% of volume is being faked, which according to the histograms is likely, what other discoveries about Bitcoin could be waiting to be revealed?

Bitcoin is resilient against shutting down the exchanges, it just means people start new ones elsewhere. Value isn't (or shouldn't be) stored in exchanges so there is no real damage.

I'd be far more concerned with the majority of the mining power being centralized in China if I was invested in bitcoin... that's what can actually shut it down.

It’s telling to me that they speak of bitcoin only in reference to value stores like gold and not in reference to utilities like p2p payments. Clearly no one is using bitcoin to spend, and very few people are using it as savings (at negative interest!).

So what is the takeaway here? Is this ETF fund trying to make their plan/offering more favourable or attractive by calling out this "fake" volume?

They are showing that the methodology that they have for computing the NAV (net asset value) is solid and based on exchanges that do not have fake volume. Also that the effective volume and price sensitivity on those exchanges is reasonable for the asset class. And finally that in order to manipulate those exchanges sufficiently to affect the price and win an arb against the ETF is infeasible.

Well said

These are the slides that accompany their SEC filing. So, no. They’re just presenting the facts of their business.

As an occasional crypto trader I've noticed a lot of fake volume. On the coin I follow https://coinmarketcap.com/currencies/dragonchain/#markets most of the volume is fake - most of the real trading is on Kucoin and the stuff on Fatbtc and COSS mostly fake. They do it because they want to be seen as the successful exchange so people use them. It's soon apparent if you actually try trading that it doesn't work as advertised and then you often have to pay a steep charge to get your money back or sometimes have problems getting it back at all.

What I do not understand: what is fake? The graphs these exchanges report? What does it matter? I do not quite get it.

Fake exchanges will probably use this report to improve their wash trading algorithms and make them look more legit.

a security researcher recently claimed that it was massively, overwhelmingly, not-even-close, prices driven by monetary exchange policy within the PRC (china), that caused the jump in BitCoin price.. because bitcoin was used to move money out of the PRC.. but, things changed..

Got a source on that? Keen to read up on it.

Anyone feeling like explaining why this is important to a cryptodummy?

It's not.

Duh... Any exchange can pretend it's a large reputable player by showing fake volume, it has nothing to do with blockchains.

Further, any with a substantial amount of bitcoin, e.g. $1m, who might gain from their assets having a reputation as a means to transfer money, can create $1b in daily volume at the cost of $1 per year on the blockchain, fully automated.

The expectation that nobody on the planet will do this is obviously zero. So you naturally get fake volume. I'd be surprised if it wasn't >90%.

Binance standing strong. I'm glad to see what I already believed. The company leadership is solid, and, CZ, continues to build a robust, secure exchange. Removes coins that are crap, always keeps up to date with posts, maintenance updates, new listings, etc.. and hardly ever crashes under extreme loads. (remember 2017?).

CZ, keep up the great work!

This is well known/suspected in the cryptocurrency circles.

The problem is correcting for bad volumes.

Kind of a dumb headline though. One exchange can post 1e1000 btc of volume.

It also doesn't even mean the exchange is malicious. Some exchanges have 0 fees. So if someone using the exchange trades with themselves, it's 0 cost.

That sounds surprising. How would you fake trades if blockchain is by definition public? Can't people see the amount of actual bitcoin going to and from exchange's bitcoin addresses?

I doubt Bitfinex's volume is real, either. Tether is their fractional-reserve-backed-by-loans-to-ourselves shitcoin.

The only volume that matters is the amount of BTC transferred everyday on-chain.

Over 200 slides. Clearly a different culture of use at the SEC for powerpoint than in Silicon Valley. Is this common?

yes, one is academic the other is for people who “are changing the world.”


We've banned this account for posting unsubstantive comments and ignoring our requests to stop.

If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future.

for anyone that actually wants to take the time to email, all they do is tell you to keep making comments that others vouch for and maybe one day you’ll get unbanned. they won’t actually do it just based on you agreeing to follow the rules. kinda condescending and misleading.

We unban people in the majority of cases when they email us. Not always, though—it depends on whether we believe they sincerely mean to use HN as intended. Even then, though, there's nearly always a way for someone to demonstrate that. It just might take a bit longer.

I don't think it's misleading. That's why I use the phrase "give us reason to believe". Most do, and those we're happy to unban right away. Some don't, for whatever reason, and for them we offer a slower but doable alternative. (Except in rare cases where we've already given someone a dozen chances or whatever.)

I hate having to make judgment calls like that, btw; it sucks. But we don't have a choice. Serial trolls are a thing, and the alternative is to turn HN over to the flames.

If you demonstrated your inability or unwillingness to follow the rules and got yourself banned in the first place, don't you think you owe the community some proof that you can do better?

Blind trust is what forced us to ban you in the first place.

Invest in us and we'll consider re-investing in you.

I read the comment as email us with the reason you should be unbanned and we will consider it. instead you are told that the email was a waste of time.

my point is why make the users email? just explain that you’ve been banned but the users can unban you. there’s no point in tricking the user into thinking emailing can get you unbanned.

it would be like going to a parole board hearing and being told there’s no way we’re letting you go free, we’re not in charge of it. ok well then why did you invite me here?

Maybe as a way to stop bots from trying to get unbanned. You still need to mail a human being before the unban process can start.

I don't understand how that is "condescending and misleading". Sometimes even adults need a bit of hand-holding, and this decentralizes the activity of reintegration, if I'm reading your comment correctly.

Why would mere agreement be enough, after repeated requests to improve behaviour have been made and ignored? Sounds like a demonstration of improvement its about the right bar...

Talk is cheap. Actually making substantive comments is harder.

If you are banned you can still comment? What is the actual ban?

Banned user comments are initially only displayed to users who have opted in to see them with the showdead option in their profile. It's made visible to everyone if it gets enough upvotes or replies.

Minor correction -- it's only made visible if a trusted user vouches for the comment. "Dead" comments cannot be voted on or replied to.

They've detected that 95% of the volume of their somewhat dubiously selected bitcoin speculation markets doing trades off-chain are fake.

This has nothing to do with Bitcoin blockchain or Bitcoin itself. It's all about the speculation markets.

It's not dubiously selected, it's just 95% of all markets worldwide that offer trading BTC. And their main point is that the remaining 5% is real and very well arbitraged, suggesting a mature enough market for an ETF.

What kind of trading would you say is on-chain?

I'm not saying trading should or even could be on chain. I'm saying the title of this post is misleading and should be changed.

>This has nothing to do with Bitcoin blockchain or Bitcoin itself. It's all about the speculation markets.

Really? Nothing to do with Bitcoin? Really?

But is it really? It would seem to depend on what you define as “trading”. If I sell on an exchange, and someone on the same exchange buys, there’s no reason for them to actually force transactions through the network. It only needs to go through the network if the exchange doesn’t have enough on hand to complete the transaction. This kind of net trading is fairly common. Just because it didn’t go through the network doesn’t mean it didn’t happen.

You're misunderstanding what they're saying. They're literally saying that entire exchanges are clearly faking their trading volume because the data can be observed to be fraudulent - volume doesn't has no time correlation with other exchanges and the distribution of trades by volume is clearly fake.

Fake volume is not someone selling and someone else buying. It's just the exchange lying and saying that someone bought and someone else sold when nobody actually did. Or, it's someone who owns two accounts trading back and forth between themselves. (Some of these exchanges have zero fees, so this doesn't cost any money.)

The idea of a Bitcoin "exchange" is already weird, as most attributes of crypto don't apply if exchanges are involved.

But if those exchanges don't even bother to execute trades on the real blockchain, if the involved steps are just too much of a hassle, if they are content with storing and processing those "transactions" in their SQL Database, then...what is left of that old White Paper, is it anything else than a sacred book of a religion no one believes in anymore?

The saying goes bitcoins on an exchange aren't yours. All exchanges (that I know of) allow you to pull tokens into your private wallet, at which point they belong to you. It would be sort of foolish for the exchange to execute trades on the real blockchain because it would be slow & expensive. Makes way more sense to do that part with database transactions.

If it is impractical for professional organizations to handle crypto transactions then it is impractical for anyone. If the blockchain works, if it's good for anything, then ... use it!

But nobody is saying the blockchain is good for anything. The scaling problems of on-blockchain transactions have been known since it started, and there has been quite a lot of work done on ways to scale cryptocurrencies without giving up many of the properties it has.

One of these is called Lightning Network for bitcoin, where (in VERY oversimplified terms) the blockchain becomes an arbiter of sorts, and is only used when there is a disagreement or someone tries to cheat someone else out of money, or for very large transactions (large in terms of value, not transaction size).

Saying "If the blockchain works, if it's good for anything, then ... use it!" is like telling someone who wants to fly across the country to just drive it since you were told that cars can drive anywhere in the country...

You could technically use the blockchain for all transactions, but it has a number of tradeoffs that most don't want to use for every single transaction. And that's okay! Having the ability to make a choice between the "zero trust" nature of the blockchain and trusting an exchange for faster/cheaper transactions is awesome!

Hopefully things like Lightning Network will keep continuing and can add an additional choice which combines just about all of the "zero trust" benefits of a blockchain with the speed and cost of off-chain transactions.

"But nobody is saying the blockchain is good for anything."

I think crypto proponents very much said otherwise. The blockchain was of course hyped as a practical, usable thing. Zero trust transactions, an alternative to "fiat" currency, smart contracts, Venezuela, privacy and all that. Those were real promises and arguments by the crypto community. What's up with all that?

It seems the Blockchain is unusable, exchanges are just centralized places who apparently don't even put your money on the real blockchain and possible solutions are 'hopefully' in the future.

Well nobody can control what others say. I'd say that those actually involved in cryptocurrencies (other than those who bought) knew this all along. It's why there's been so many different attempts at fixing it!

But like I said above, a car taking magnitudes longer to cross the country compared to a plane doesn't make the car useless for all purposes. Having the option of being able to use a blockchain to transact without trust is a huge benefit to many. It might not be what everyone wants for all transactions, and it having downsides doesn't mean it's useless, but it still has immense value to some, for some of their transactions. Bitcoin was not designed to be faster than Visa, so saying it's useless because it can't keep up is kind of silly.

Blockchains and Bitcoin might be useless for you in their current forms, and that's more than fine! But they are still improving and changing, and they will almost definitely never truly be "finished". It's all about fixing the problems that people have.

When Bitcoin was first introduced, it was one of the first to allow trust less transactions without a central authority (again, a gross oversimplification). People found value in it, and as it gained some popularity problems were found, and people began working on solving them.

Those solutions are now beginning to have more widespread usage. Things like Lightning Network aren't "hopefully" in the future, they are now. The usage is still small, partly because the developers are intentionally taking things slow (becaus bugs can be very expensive here!), but the theory seems pretty sound. And many exchanges are already part of it and are planning to move to using it for everything (and IMO any good exchange should love the idea of LN! It takes all the risk out of holding people's money, it allows you to prove your trading volume is real, and it is as fast as you can move the bytes).

I have no doubts that more limitations will be found, and LN itself already makes some tradeoffs, so there will be more work after it's "done". And you can continue to not use it, and you can continue to criticize the ecosystem based on what charlatans and assholes said, but I believe in this tech and there are many people who will continue working on it and improving it for those who want it, for the use cases they want it for.

How can you call it unusable when it is clearly being used by thousands (millions?) of people? I would consider anyone who keeps track of some crypto in a wallet (on an exchange or not) to be part of the system, do you disagree?

Payment channels solve this. It’s basically on-chain trading without custodial account, the exchange simply does order matching.

Lightning Network in general is still pretty young, it's no surprise that the big exchanges haven't begun working with it yet. Especially since most implementations still have maximum limits in place to prevent bugs from costing too much money while the software is still being developed, tested, and proven.

>This kind of net trading is fairly common. Just because it didn’t go through the network doesn’t mean it didn’t happen.

I would expect that to be the ONLY kind of trading, with the single exception being decentralized exchanges that need to use the network to facilitate trades.

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