Bitcoin Forum

Decries banks being able to loan out your deposits, yet doesn't want to pay banks fees. Then loses their entire deposit, still pays transaction fees.

Bitcoin.txt

It's hard to say that people were gullible, when most were able to transact on Gox without problems back then.  When you have used a service for a decent amount of time without issues, your default assumption isn't that you are being scammed. That would be a really cynical was to look at everything.

Incorrect.

If the service is not independently audited, is not regulated, and is not insured by a reliable and trustworthy underwriter, then assuming that you are always being scammed is the ONLY way to protect yourself from loss.  Without proof that a services claims are legitimate, you should always assume that all services are lying.

I hear what you are saying, but correct me if I am wrong, there have only been publicly disclosed audits after the whole Gox fallout...  Prior to that, exchanges were not freely disclosing their balance sheets? 

Which is why I never held any balance on any exchange for any longer than absolutely necessary to complete the task at hand.  That's also why I always assumed that the balance that I transferred to an exchange would disappear before I could regain control of it, and therefore never held more at a time on an exchange than I could bear to lose without feeling devastated.

This. Would you take $50,000 of fiat money and deposit it into some brand new bank, some business you don't know on the OTHER SIDE OF THE PLANET? With no way to contact the owner(s) in person?

No, you fucking wouldn't. Because that'd be absolutely 100% moronic. And that's exactly what thousands of folks did with Mt. Gox.

Hopefully these fools learned their lesson.

Not fools, and not moronic.

As a society, we've all been trained to trust in Brands.

MtGox as a brand existed for several years.  Many people were aware of it, and it was talked about in the news.  This brand awareness led to a false sense of trust and security in the same way that we trust the Coca Cola company to actually put Coca Cola in the can that we drink, and we trust McDonald's not to make their burgers out of dead rats.

On top of that many people seem to have developed a habit of trusting those who haven't scammed yet.  If entity XYZ has been around for a while, and there aren't significant reports of loss yet, then people seem to feel that this is evidence that loss is unlikely.  I sometimes wonder if this is an evolved trait that must be overcome with constant focus on the reality of the situation.

As an example, if you wonder into a desert and it hasn't rained in a week, you might naturally trust that rain isn't likely.  As a survival trait, this would lead you to avoid the desert as uninhabitable. This natural tendency to trust that what you (and others around you) have experienced in the past is likely to continue in the future is exactly the type of tendency that scammers are aware of and take advantage of.

Interestingly, "More people drown in deserts than die of thirst." (source: http://pubs.usgs.gov/gip/deserts/features/ - don't know how accurate the statistics are.)
So just as you should be careful in selecting a camp site when you happen to be in a desert because there might be a rain flood, you should be careful in dealing with external entities managing your money because they might go under even though your experience would lead you to trust them.

Onkel Paul

This is the way I think... and I have not been scammed yet.

And that is why you are smarter than most

A rare opportunity to disagree with DannyHamilton.

To combat potential losses, one should accept the omnipresent possibility of loss and work to balance perceived risks against rewards.  It is not correct to assume that an exchange will necessarily return your money, but it is equally wrong to assume that an exchange is certainly scamming you.

Also, there's nothing magic about independent auditors, regulators, and insurers.  Certainly, having checks by independent parties can help to reduce risk, but the extent to which risk is reduced will depend on the reputations of these independent parties as compared with the reputation of the service in question.

There is risk in everything.

While you might be disagreeing with the specifics of what I said, I agree with you that risk mitigation is a nuanced endeavor that must be balanced against expected rewards (which is why I was willing to transfer "some" value to an exchange for the purpose of exchanging it into some other form of value).

The points I was trying to make are:

1. It is not valid to default to the assumption that a particular service is entirely trustworthy just because they haven't been caught doing anything dishonest yet.

2. It isn't fair to call those that lose out to such a dishonest service "fools", "moronic", or any other derogatory term that one might use to make themselves feel that they are in some way a better person than the one who was taken advantage of, exclusively based on the fact that they were a victim of the dishonesty and you weren't.

I suspect you'll agree with me on those two points.

it's really easy to look back AFTER the effect, finding some flaws in people, and then point the finger at them.. isn't it? but then again, the people who put up with mtgox's shit WERE pretty gullible.. maybe they were just too lazy to find a different platform to trade on.

I expected that I'd misunderstood you.  You have a reputation for quality, well-reasoned posts.

To be clear: I do agree with you on these two points.

Why is everyone so gullible? Because everyone has been to school, that's why.

Mostly because schooling is antithetical to critical thinking (http://www.wesjones.com/gatto1.htm), especially when it comes to questioning authority.

School stunts maturity and creates adults with the minds of obedient children / obedient workers (https://www.youtube.com/watch?v=acLW1vFO-2Q).

In addition to a lack of critical thinking, most/many honest people want to believe that at least some of the major players are also honest.
Thinking/knowing there are at least a couple of decent exchanges helps us believe the future is bright for BTC.*
*Of course, some 'radicals' want to totally ignore fiat, but the world isn't ready for that yet.

After having spent half my life working with some of the most dreadful people US society can produce, I want to believe in the honesty of most people.  In Bitcoin I am taking a risk.  A risk that I'm prepared to absorb in the event of catastrophic failure.  However, I seriously doubt there will be a "failure".  The concept is simply too pristine and beneficial.  So, this is my therapy.  I trust the logic, mathematics, and purpose of Bitcoin. 

P.S. Beliathon, where do you find your energy, fella?

i don't really trust that bitcoin will make any positive changes to society. there's just too much money and "opportunity" for the bad people to use it the wrong way. look at the bitcoin foundation, for example.

I hardly can say that a lot of people are gullible. Some people are just silly

Well gox didn't fool me, I stopped using gox from June 2011, when they lost their entire customer DB with passwords. The best decision I've ever made.

Congrats on your good, clear thinking about Gox. Back then we had no other choice with decent volume.
I was glad when Gox came back, and my confidence in "them" was probably the worst advice I ever offered in public....sorry.

Yes it was a difficult time, but since Bitcoin price went down hard at that time, I had no desire to buy or sell, so I just kept my stash, and stopped trading all together. Until Coinbase came along, and made it easy for people in the US.

So how long before they begin engaging in fractional reserve?

If they are hacked and lose a significant portion of the bitcoins that they hold, will they make the information public?

How can you be certain that nobody in the entire company will ever disappear taking a substantial percentage of the funds along with them.

I understand that many people trust them, the question I have is: "What makes them more trustworthy than MtGox?"

They literally can't engage in fractional reserve, unless people use Coinbase as a wallet. If people use it like how I use it, they can't do fractional reserve.

When I sell Bitcoin on coinbase, the money directly goes to my bank account in a few days. Coinbase has no withdrawal fees on Bitcoin withdrawal, also Coinbase does not offer limit orders, so there's zero reason to keep your coins there. For fiat, you literally can't keep fiat in coinbase, it always has to be in your bank account.

As for trustworthiness, being a US company founded by financial industry veterans, and multiple high profile VC backing, seems pretty trustworthy to me, to handle my money for a few days per transaction. Also their cold storage has been audited by trusted 3rd party.

You mean like the way people used MtGox as a wallet?

Doesn't Coinbase encourage people to use them as a wallet? I recently made a purchase from a merchant that uses Coinbase to process transactions.  The merchant was unable to deliver and processed the refund through Coinbase.  Coinbase required me to set up a wallet with them to claim my refund.

How long until they start offering off-blockchain transactions between Coinbase wallet users for micro-transactions and instant transfer?


People choose to keep their bitcoins there for convenience if they trust them.  Perhaps you'll start to see that "directly to my bank account in a few days" grow to "several days", and then "a week", and then "a few weeks".  Didn't MtGox eventually encounter delays with withdrawals?


Right.  Just like Enron, the entire banking industry leading up to 2007, and Arthur Andersen.


Interesting.  I guess I hadn't kept up on the news about this.  Can you provide a link?  I'd like to read about it and understand what steps they've taken.

Audit is here: http://antonopoulos.com/2014/02/25/coinbase-review/

You don't seem to understand Coinbase's paradigm, it's fundamentally different from mtgox. Mtgox has never offered direct buy/sell from bank account with PRICE LOCKING, you are lucky to fund/withdraw your money in a week, at best, with fees, and the price is probably changed significantly when you actually get your money into your account. So usually you just keep your fiat in mtgox if you don't want to pay lots of fees and experience lots of delays and price swings.

Coinbase does not even allow you to keep fiat in your coinbase account, all buy/sell must be done from your bank account. You can only keep Bitcoin in coinbase, you could use coinbase as a wallet for storage, that's up to you, I don't. Coinbase works just the same without using them as a wallet.

People are not gullible simply because they are willing to accept higher levels of risk than you are. The tone of this overall conversation seems to suggest that there is some objective rationally-derived level of risk acceptance that acts as a cutoff for being a moron, and somehow whoever the poster is gets to be the arbiter of that cutoff.

This is very reminiscent of some very basic interpersonal cognitive bias, whereby in hindsight we tend to interpret bad outcomes for somebody else strictly to stupidity rather than bad luck.

well, i'd have to say that the title of this thread is kind of cringey, but with mtgox.. the writing was on the wall, and yet people still continued to trade on there. it might be that people just weren't keeping themselves updated on mtgox's reputation.. and that kinda is on them.

Oh yes, everyone should feel much better after Andreas looked at it. Its not like there has been a string of disasters where he "consults".

As with all progress, the world will be dragged along kicking and screaming. There ain't no stoppin' this train we're on.

I murder and devour the heart of one politician or corporate lawyer each week. In all seriousness, the truth is it's own reward.

Ditto!