I kept my funds on Binance for a while, for convenience's sake. However, the old rule applies: not your keys, not your crypto.
Keeping anything on an exchange, for the time being, is just too risky. This is another example of it. Governments are still trying to figure out how to regulate crypto, ever shifting the amount of hurdles between crypto and the world of fiat.
I'd advise to pull funds if possible. I've recently done so with mine.
Of course that means my keys / wallets are now my responsibility, along with ensuring that I have appropriate backups in place etc.
Doesn’t matter what you do with your cryptocurrency, the value can easily evaporate because of the actions of others, including binance and those who use it and other dodgy exchanges which make up the vast majority of crypto ‘transactions’. What happens when you want to sell it for fiat you can actually use and nobody wants to buy?
So many people pouring money into this space have never seen a bear market or a bank run.
Bitcoin isn't that new thing any more, to me it looks like fiat holders have seen too many bitcoin holders gain significant value. Yes, there are also those that lose their BTC for whatever reason but to me it seems to be quite a minority compared to those who actually have made good dough just holding BTC. To the tune of having retired on their stash.
Fiat holder is a ridiculous term in a false dichotomy. A holding of BTC is a security holding just as holding stocks (despite the fact that they are not legally referred to as such.) Nobody chooses between holding dollars or holding BTC. Nobody.
The fact that this parent has a number of children that don't seem to pick up on this is problematic to say the least.
You hold fiat money to exchange for goods and services. You buy securities (or sometimes physical assets) to eventually get more fiat money to then exchange for goods and services. Currently you buy BTC with fiat to later exchange BTC back into fiat and still use fiat to exchange for goods and services. This is why BTC is more like a security than a currency.
Holding stock in a company (for instance via en index fund) is not a fiat holding. The fact that it is commonly priced in terms of fiat currency is not any different that the fact that BTC is too.
Neither of them have to be. All exchanges take place in pairs; one holding is exchanged for another. Buying BTC with dollars is (USD, BTC); buying Microsoft is (MSFT, USD); buying EUR with dollars is (EUR, USD).
Nothing prevents you from pricing Microsoft stock in BTC or BTC in EUR or Etherium.
The holding as such, however, is only a fiat holding when it is in fact either a (wad of) cash equivalents and/ or a bank balance.
There isn't a person on earth for which there is only two types of relevant holdings, in either USD or BTC. A person that (seriously) considers acquiring a crypto holding, such as BTC, is most likely choosing between other crypto currencies, gold or silver, primarily. Even more likely, they're merely FOMO-speculating as a complement to plain stock holdings.
The fact that a number of you don't seem to understand this should call your competency into question.
I believe the perception of this dichotomy is something of your own imagination. Anecdotally the term fiat is used exclusively in the context of crypto, but to the best of my understanding its usage doesn't imply that the sole alternative to fiat is BTC, or crypto. Rather, I believe the term solely carries a prejudice against money that is declared valuable as such by political authority rather than by its market adoption and de-facto usage.
How could that be of my imagination when it's used and liked in the parent to my comment? Everyone is a fiat holder but holding (not crypto) does not constitute being a fiat holder.
But yes, I agree with you about where fiat is used. It's almost always used by people that don't quite undersand the concept of value or that of money for that matter.
Money is not declared valuable by political authority. That is just not how it works. Crypto is what's declared valuable by fiat, ironically. Its value is described as derived in terms of a limited supply (it's just like Gold!)
Fiat currency derives its value from network effects, debts and the feeling of safety (or the lack thereof.)
If you cashed out to fiat and retired on your stash in this last bubble you’re doing great, though that is at the expense of millions of retail bag holders who bought your cryptocurrency hoping they’d get rich too.
If you didn’t cash out already and are taking your coins offline etc, you’re the bag holder.
Binance has holdings in all sorts of cryptocurrencies that it has no involvement in the creation or minting of.
As a cryptocurrency exchange, Binance must hold Tether to operate.
As the most popular cryptocurrency exchange on the planet, they're likely to be on the larger end of Tether (and various other cryptocurrencies) holdings.
I'm not defending Binance here, I think there's fair potential that they're doing shady stuff, but they're not responsible, in any way, for the minting of billions of dollars of Tether, or involved in any of the dodgy accounting around Tether's backing.
Same goes for Huobi, who are second on that list. They're an exchange. Holding Tether is an essential part of being in that business.
Nobody is actually using Bitcoin to pay for things, because it is a terrible currency due to fundamental design flaws. At this point the narrative of Bitcoin the world currency is dead, it’s now a get rich quick scheme.
A bag thats value getting heavier every year while the bank balance is losing value every year. Are not fiat holders the true bag holders? When you accept that everything is relative value, the dollar is not absolute (far from it!), holding fiat for long times seems foolish.
Yeah, sure, but everyone except cranks who works in fiat openly acknowledges that. Fiat (well, major fiat currencies like the dollar) are good for low-volatility liquidity. For long-term accumulation of value, you invest in productive assets, which are both riskier over the long term and higher volatility over the short term, but have higher average long-term yields. And, ideally, you diversify investments in ways that maximize independence of at least long-term variation, to mitigate risk and get closer to consistent long-term average results.
Crypto“currency” that isn’t fiat-pegged tends to be worse than major fiat at the things people who prefer fiat think fiat is for, while (in the best cases) being a very high-volatility speculative asset with very good average performance over its history to date (which isn’t very long term). It’s thus not a great replacement for fiat, but potentially a bice addition to the stable of available investments.
Replacement, maybe, no, I don’t know. It radically changes things back about 200y to a pseudogold standard but universally harder (energy usage over physical gold supply). I know I spend fiat over harder money. (I don’t spend bitcoin, I save in it).
I think you should not ignore the forest for the trees here. A small purchase today held for another 5-10y could prove quite lucrative for you.
I dumped my BTC (2011ish early adopter) once my mom began to talk about a Bitcoin investor who played the crypto markets and made so much money at my age. My mom does not know how to format a Word file.
I just hope my parents and relatives aren't secretly stashing away their life long savings in crypto because of all the hullabaloo.
> once my mom began to talk about a Bitcoin investor
There’s an ad running on Indian TV literally of this script..Two moms are talking, while one brags about her son being in USA, buying cars etc the other’s son is seemingly trading crypto on a mobile app. The other mom then retorts “all that is fine, but have you invested in crypto?”.
This .... exactly this, You did a good thing by getting out of it.
When a normie on the street starts talking about crypto, it means crypto has jumped the shark and it is a pure bubble driven mainly by people's greed.
As long as the economy stays okish, crypto might fall 50% but it will get up a bit again as well. Wait for an economic crisis to see it tank to for real. When msft drops 80%, btc will be under 5k again. It will happen. People seem to have some weird faith this time is different because covid postponed things. For now you can make a lot of money with btc weekly: it drops hard 1 or 2 times a week and then goes back up 3-4k. But when 'the normal' economy bottoms out, it will drop and the 'hodlers' will be out of trillions. If you keep that in mind: happy trading but hodlers are crazy imho.
I know it is tempting to compare the current price when estimating losses. But really, you cannot do that. I had 2.5M dogecoin that was also stolen. But I don't use the peak valuation (~$1.25M) or the current price (~$0.63M) because that implies I would have singled out the peak or held until now. I really only lost my buy in ~$1,500. It makes for a good story to lose a house, but it is better for your sanity to base your losses in actual line items.
This. If in 2012 you bought a pizza with 1 BTC and now feel silly, don’t. You also bought pizzas for $20 which you could instead have converted to BTC and held until now had you only had a working crystal ball.
This is kind of the emotional mechanism behind a lot of crypto investment. It's not intentional, and it's kind of sneaky, but with the strong fluctuations and chance of "hitting it big" there's always the "what if..." feeling. As someone who doesn't care much for crypto (in its current form anyway) and was never involved in it at all, even I have this to some degree as I was aware of it very early on (when it was still interesting, instead of what it's become now).
This is probably a big reason why there are so many "amateur" investors compared to more traditional investments/trading.
This is probably a big reason for why many cryptocurrencies have a high value as well. Nobody actually uses these things to trade for goods and services (well, maybe for drugs), everyone just expects the USD price to maintain or go up and values it based off of what they think they can get in USD in 5, 10 or maybe even 100 years.
As the comment you're replying to points out, that same opportunity cost applies to literally any non-essential ~$20 purchase they made with any currency in that time period.
Similar to the Monty Hall problem [1], the mistake you're making is calculating the opportunity cost at the time of sale, rather than within the context of perspective. Opportunity cost is dynamic, not static.
If I approached you in 2012 with two envelopes, one with $20 worth of US bank notes, one with $20 worth of Bitcoin, you'd most likely take the cash. If I approach you again in 2021 with the same envelopes (unopened) from 2012, only a fool would take the cash.
Speculative assets would not exist if your theory held water.
The critical difference between spending BTC on a pizza and the Monty Hall problem is that you only receive additional information once you no longer have any option to change your mind.
If Monty Hall asked you if you wanted to change doors before opening one the problem would not be much of a problem.
Except the OP was (almost certainly) in possession of $20 USD in 2012. The opportunity cost of buying that Pizza with Bitcoin rather fiat totals ~$34k at the time of comment.
That is some dumb shit and not only should you feel silly you should feel stupid for saying it.
If you buy anything at $X with intention of "hodling" it to increase it's value, unless you have a plan (i.e. I will sell at $Y) then you are just holding on to nothing. You will either sell too early or too late (now talking about the absolute maximum gains) and then you will always "feel silly".
Unless OP actually put in, say $300k (a price of a small house) and that was stolen he didn't lose "a house worth of money" since he had no exit plan. I don't play crypto, but I could still say that I lost $600 when the market crashed couple weeks back conveniently forgetting that my initial investment was only $10 back in the day. I could even be more dramatic and say that I lost half of my bitcoins just in the crash and not mention that I only had $1.2k.
> If you buy anything at $X with intention of "hodling" it to increase it's value, unless you have a plan (i.e. I will sell at $Y) then you are just holding on to nothing.
I don't think that's holding on to nothing just because there's no exit plan in place.
If I invest 30k in index funds that are managed by my bank, with the expectation that the value will rise and thus beat inflation, i wouldn't say that I'm holding on to nothing.
Similarly, if the value would rise to 35k over time, but something (like an economical crash, or any reason) would have me withdraw my money before that, I think it would be fair to say that my actions made me miss out on the total value of 35k.
I don't see how the case of Bitcoin is that much different - most people won't have sold at its highest point, but the average value has indeed increased bunches compared to when it was not popular.
I don't think you always need an exit strategy for every investment you make - wanting to diversify and perhaps beat the inflation seem like valid goals, regardless of whether you're putting money in index funds, are buying BTC, or are burying pots of gold in your back yard.
Volatility and risks are probably another story, though.
Reasoning that way can only conclude that the opportunity cost is always the investments that an oracle would make.
I.e. you would have to not only account for losing $34k but also lose nearer a few hundred thousand because you could have sold at each peak and bought at each trough.
Mostly agree. The true lost value is the amount you would've sold the coins at, but that's impossible to know. For most people its safe to assume they would've sold the coins during the first price jump years ago so its still less than peak valuation but probably more than purchase value. For more savvy investors who would take profits and hold the rest, the story could be different. The worse case is people who forgot they had coins years after purchase and went to retrieve them only to find that they've been stolen or permanantly lost. In that case you would lose the current values worth. I was in a similar situation with ETH stores on a laptop I donated to my sister years ago but luckily it was still stored on a partitioned drive and I was able to retrieve it.
Easy answer: you get The value that you insured it for (either replacement cost or actual cash value with depreciation). You definitely wouldn’t insure it for 2M because those premiums would be stupid
If it isn't obvious, your simplified accounting excludes opportunity cost. Actualised losses are much higher (otherwise insurance companies would be marketing the same logic).
The fact you keep changing your answer should be evidence to yourself that you are on the wrong side of the argument. The entire point of my comment is that you are supposed to exclude opportunity cost. Did you lose $1M last year because you forgot to convert your cash to <insert any asset that increased wildly in the last year>?
There's also a podcast called A Death in Cryptoland about Quadriga, but I don't recommend it. A lot of the evidence they present is so thin it borders on conspiratorial. Maybe it was going somewhere but I gave up after 5 episodes when very little concrete information was presented.
I disagree. I learned a huge amount of information about Quadriga from that podcast (A Death in Cryptoland). It wasn't produced by some random Joe in his basement. It was produced by the CBC, Canada's public broadcaster and a Canadian federal Crown corporation.
When the producers of that podcast weren't sure about something, they said so. When they couldn't get an interview with a key player in the story (such as the wife), they said so.
That's probably related to the risk of accidentally facilitating money laundering? The exchanges are all forced to implement various "know your customer" processes
FWIW, I don't mind the KYC concern. I even provided my identification documents to facilitate the process. It's the we-only-do-business-with-exchanges angle that irks me.
Wait, the law firm has agreed to give you/pay you in BTC, but they won’t deposit it into a hardware wallet address you provide them? Why do they even care?
I don't know about that. For people like you and me that are likely to be familiar with good infosec practices, run open source OSes and only open source software, with no possibility of spyware or ransomware, have offline backups and offsite backups, sure, this advice is fine.
For most people though, I feel like exchanges are safer from the more common threats: viruses, ransomware, failed hard drives, fire, floods, "gimme-your-laptop" gunpoint, ... They ironically also make your crypto slightly more anomymized since you aren't always spending out of the same wallet address so when you transfer crypto to someone, they don't automatically know your crypto net worth.
I wouldn't trust Binance though. I moved all my funds off Binance for one reason -- their UI (especially authentication workflow) is super buggy, and that makes me extremely not confident that their backend isn't equally buggy. To top that, when I tried to report bugs to them they wanted my national ID to even engage in conversation, instead of fixing the bugs. Fuck that. Fix bugs first and only then will I trust you with my ID.
Kraken, Bittrex, Coinbase Pro have solid UIs and give me more confidence in the quality of their engineering.
How about simply losing your hardware wallet? That's what scares me. If I had enough crypto, I'd probably get a hardware wallet and store it in a safe deposit box, but then I'm going to lose that key.
I wonder if there is an opportunity for smart contracts around insurance for the exchanges...a bit meta...
Sounds hard, because it would be hard to prove that you lost a key. You could always pretend you lost it.
But if the blockchain supports actually invalidating those coins and transferring them to a new wallet via e.g. 3 trusted friends with pre-pregrammed wallets that sign and verify your new wallet, maybe it could work.
Is there an ELI5 guide to keeping coins secure when they're off-exchange? I heard terms like 'cold wallet', 'cold storage', but surely there's work that goes into creating a secure USB stick?
Use a hardware wallet to securely generate keys and sign transactions. Hardware wallet is meant for secure use of cryptocurrency, but it is not optimal for long term storage. It's important to buy devices only from trusted vendors, and to make sure they're not been tampered with (never buy them from a third party).
For long term storage, you need indestructible and physically secured backup of your keys. Basically, you just need to write down the 12 or 24 seed words generated by your hardware wallet and try to keep the words safe from destruction and theft. It's recommended to use a indestructible material such as steel for these, and then store or hide them safely. For more advanced security, seed words can be split in multiple parts using the SLIP39 seed format.
Looking at the cryptosteel - am I missing something or do you need to securely store or destroy all the engraved letters you don't use? Otherwise someone who obtains the remaining letters surely knows exactly which ones are in your secure word store...
> Basically, you just need to write down the 12 or 24 seed words generated by your hardware wallet
Why is that in any way more secure than writing down the private key itself? (inb4 "need to find both the hardware and the written seed words" that's equivalent to writing down the private key and then cutting the paper in half)
BIP39 seed words are used to deterministically generate all of your private keys in your wallet. You don't have to store the private keys themselves. Remember that each address has its own private/public key pair, and addresses shouldn't be reused. BIP39 has been the standard for many years.
Hardware wallet is assumed to generate BIP39 seed words securely. If you don't trust the RNG, some hardware wallets also support adding your own entropy with dice rolls. [0]
In some ways it's less secure, because seed phrases are usually master private keys, versus a single private key.
The point is that you can decide what to do with it... be your own bank. You can also add a password to a seed phrase backup if that makes more sense for your threat model.
how much BTC are you willing to bet that you'll remember 24 randomly generated seed words? probably not much.. that's why parent was advocating "you just need to *write down* the 12 or 24 seed words generated by your hardware wallet"
How much are you willing to bet that you transcribed a string of gibberish correctly (including case variations). Isn't a sequence of real words more fault tolerant?
I just used a tool called BIP39 generator on and offline machine which you can feed entropy and it will generate a bitcoin private key. then sent funds to that address.
you can use multi sig wallets. Which are synonymous to Shamir’s Secret Sharing Algo; tldr you can generate say 5 keys and you need 3 of the 5 to unlock.
As for if you die … you could use one of those services that will send an email out to your significant others if you don’t log in for X amount of time.
> As for if you die … you could use one of those services that will send an email out to your significant others if you don’t log in for X amount of time.
And put your bitcoin private key in there? Surely whoever runs those services would take all your money.
If you use multiple services each with a piece of Shamir’s secret you are more protected. You can get more sophisticated with this if you want e.g each piece can be xored or encrypted with a value only that person would know e.g their birthday or their fav food.
Being your own secure bank isn’t a trivial task. Hopefully this can get easier in the future
Consider a hardware wallet like Ledger or Trezor, both are pretty easy to use and have extensive documentation. I'm sure there are OSS/hardware solutions you can roll yourself, too.
You can buy something like Ledger Nano which is a hardware wallet. Essentially, the private keys never leave the device, you can instead just sign messages directly with it.
You can also have normal software wallets (don't recommend it for larger amounts) or paper wallets.
In the extreme case people will set up a paper wallet using a computer that’s disconnected from the internet. Once they have the keys, they can typically keep them non-digitally and transfer coins to that address as safe cold storage
Use a separate computer with a minimal Linux system (maybe even without GUI) and only open-source software to manage your crypto. Your key should be password-protected. Make multiple backups of the key and remember your password. You can also write your password down on paper and hide it somewhere.
Also a good idea to use ECC Memory with the ZFS filesystem. That combination can correct any single-bit error, and detect and warn about any double-bit error, significantly reducing the chance of losing data to bitrot.
And if you’re backing up your keys on USB drives, use high-endurance SLC NAND industrial drives. They provide the highest reliability and endurance available.
"There's nothing special about ZFS that requires/encourages the use of ECC RAM more so than any other filesystem. If you use UFS, EXT, NTFS, btrfs, etc without ECC RAM, you are just as much at risk as if you used ZFS without ECC RAM. Actually, ZFS can mitigate this risk to some degree if you enable the unsupported ZFS_DEBUG_MODIFY flag (zfs_flags=0x10). This will checksum the data while at rest in memory, and verify it before writing to disk, thus reducing the window of vulnerability from a memory error.
I would simply say: if you love your data, use ECC RAM. Additionally, use a filesystem that checksums your data, such as ZFS."
Note that you can secure the coins but not the purchasing power of the coins. 10k bitcoins may be worth a billion dollars or they may be worth a pizza in ten years time.
Is Coinbase also a case of not your keys, not your crypto? What would be the best way then to have your keys and your crypto? I never really understood the whole crypto storage stuff and how to approach it.
Yes absolutely. Coinbase has terrible customer service, often ignoring support requests completely until you go onto social media and try to get their attention publicly before they'll even give you a response. I don't think there is necessarily a "best" way to have your keys and crypto, but usually depending on the crypto you use they usually have an official wallet that you can use where you'd be responsible for the key(s). This means that you act like your own bank though, so if you lose your private key you also lose your crypto. Therefore it is important to use utmost security, privacy and safety when displaying and saving your key.
A lot of people swear by hardware wallets like Ledger, and I think those are probably the best options for people that don't know a lot about security and crypto or possible even those that do.
Coinbase, a nasdaq listed company, handles customer support through its subreddit. What's more, a few weeks back a customer got scammed through coinbase's subreddit when his support request was answered by another user impersonating coinbase customer support, instructing the customer to move their coins to a wallet number they gave them in order to solve the issue. The customer lost $75k and there was nothing coinbase could do other than "sorry for your loss".
The support is bad but this was phishing: how is it coinbase their fault?
Not to mention that most big companies have kafkesque awful support, but if they offer better for $0.01/year more, all their clients will go elsewhere. Bad support is only noticed when you got bitten and just not that a big % gets bitten, even if support is awful for almost all that needed such support (you need support, the bot chat does not work for you (apparently it works for people) and then you need to have a bad experience).
> The support is bad but this was phishing: how is it coinbase their fault?
Because they chose a support platform that makes it very easy for other people to impersonate them? We would laugh at a bank that was running their support out of /~foobank/ on a shared hosting provider, but reddit is pretty much the same thing.
Yes, but so does no support at all at Google. We can, by now, for go the nonsense that it is a free service: they make money selling our data so we pay. And yet, no support. And there are more examples of huge companies not giving any or adequate support. Here in the EU Revolut is known for support horror shows too.
But yes, support via reddit is weird, I agree to that.
Google provides support roughly proportionately to how much you pay Google. Free-as-in-beer internet services tend to be offered as-is, and this is nothing unusual.
A financial firm providing support through reddit, on the other hand, is a bad joke.
Yeah but the services from Google are not free. So it is just what you put up with. But even when I was funneling 100s of 1000s of $ through then both ways (adsense and adwords), the support was nonexistent. But I see your point.
If the support would be good, reddit would not be that much of an issue, but yes, you are right that it is at least weird. Probably they think it is all OK in the free-spirited crypto world.
I smell a fresh wave of lawsuits in the crypto space with companies like Coinbase. Honestly, they just remind me of Robinhood during the GME fiasco. They are also a Y Combinator company too.
Yea they are terrible. They told me based on my state ID that I scanned and uploaded that my name was "wrong" -- i.e. if I'm "John L Smith III" they basically said my name is really "Smith Iii L John" and refused to fix it, effectively nuking my account because it didn't match my real (wrong?) name. Oh and it took them over a month to respond.
What is a competent and trustworthy guide for choosing a cold wallet strategy? There are many products on the market and none seem trustworthy. Is a raspberry pi kept offline with an external storage drive a good strategy? When the pi needs kernel patches etc, I’d unplug the drive in this scenario?
What if those brands are compromised or back-doored by internal or external actors? Just look at the Western Digital fiasco recently. Do these wallets call home at all? Also: aren’t backups easier to make on a normal SSD?
(PS: these are my personal genuine concerns and I’m at least somewhat willing to have my mind changed: not trolling or being argumentative for entertainment)
Trezor is open source, and neither of them connects to the internet directly. They only connect to open source programs on your own computer, so the ways they talk to the outside world are known.
Keeping anything on an exchange, for the time being, is just too risky. This is another example of it. Governments are still trying to figure out how to regulate crypto, ever shifting the amount of hurdles between crypto and the world of fiat.
I'd advise to pull funds if possible. I've recently done so with mine.
Of course that means my keys / wallets are now my responsibility, along with ensuring that I have appropriate backups in place etc.