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Shanghai-based LakeBTC, a Big Four exchange in Coindesk’s Bitcoin Price Index (BPI), will soon offer EUR and GBP trading with bitcoins. Over the weekend, allcoinsnews.com conducted an interview with LakeBTC CEO Thomas Xie.


allcoinsnews: My first question is about the history of LakeBTC. Who are the founders? You are in the Coinbase Big 4 index. What sort of volume do you do now in bitcoin (BTC)? How did you grow from the start? Have you raised venture capital?

Thomas Xie: LakeBTC was started in March 2013 as an exchange initially for a small group of traders and other financial professionals from investment banking and commercial banking sectors. These early users and investors helped shaped LakeBTC with their years of experience trading bonds, currencies, commodities, and all types of derivatives and structured products in financial markets.They know capital markets inside out, and they trade Bitcoins as a hobby, just like playing Texas hold’em. Later that year, we decided to incorporate and run the exchange under the current domain name. Naturally, our investors and many of the people we recruit have extensive financial experience, and this is one of the important differences than other players in the field. We are one of the big four bitcoin exchanges that determine CoinDesk BPI and a Gateway member of IRBA. We are also included in TeraExchange’s bitcoin index, which is the base of their US CFTC approved bitcoin swap, and our data is included in a number of leading bitcoin websites.

We are dedicated to building a fair Bitcoin platform with top security, excellent liquidity, and extraordinary customer service. As crypto currencies gained more and more exposures to the general public, LakeBTC is becoming a leading Bitcoin platform around the globe. Our years of risk management and internal control experience in financial industries build the most solid foundation for ensuring customers’ fund and privacy being safe and secure.

Additionally, creating a fair and efficient marketplace is also important to protect investors’ interests. We do everything in our power to minimize market manipulations and unfairness. Market surveillance programs, carefully designed products, comprehensive risk management, and strict internal controls are all meant to ensure this young and energetic market be fair and safe to every participant. At LakeBTC, users are best protected from financial predators, bitcoin theft, online fraud, market manipulators, trader errors, bot bugs, and flash crashes. We provide the same level of service to all users at all times. All users are treated with the same policy published on our website.

Trading volume really depends on the market conditions. It varies from a couple of thousand to over 10 thousand.

We have initial investors, but we have not raised any external funds yet. Some potential investors got in touch with us, and it’s ongoing.


allcoinsnews: You exchange offers USD / BTC trading now. I know that you will offer EUR / BTC trading very soon. When will this happen? What other services or currencies will you support in the near future?
Thomas Xie: To better serve our customers’ needs, we are constantly looking for banking and payment processing partners around the world. We added Ripple network and EgoPay, and we became a Gateway Member of International Ripple Business Association.

To better serve our European customers, we are finalizing partnership details with our payment processing partner in Europe, and plan to launch the service later this year. EUR and GBP will be included in the first phase, and multiple payment methods including SEPA will be added. It’d be much easier for Europeans to make deposits and withdrawals to/from LakeBTC at a much lower cost. With LakeBTC’s outstanding security, great liquidity, and superb customer service, we expect to see a sizable BTC/EUR trading activities.

We are also working with partners in North America, Africa, Southeast Asia, and South America to introduce more local payment methods and streamline the deposit/withdrawal processes.


allcoinsnews: How has the volatility of BTC affected your business planning?
Thomas Xie: Volatility definitely has an effect on market sentiment. Bitcoin is just a few years old, and this volatility is not surprising. As a matter of fact, when you look at the historical prices, what we see today is much smaller. On the bright side though, the volatility and the speculation help bitcoin stay on headline news and get more coverage from the media.

To any exchange, an effective market surveillance program is a critical component that ensures the fairness and smoothness of the marketplace. Unusual activities, abnormal positions, sudden price changes, and suspicious trades should raise alarms to exchange operators and if necessary, preventative actions should be taken quickly to mitigate the risk of price manipulations and human errors.

LakeBTC have a real time market surveillance program to monitor unusual trading activities and suspicious positions. By comparing with bitcoin index prices from other sources, we try to reduce the risk of market manipulations by individual attackers. This is especially important for a volatile market such as bitcoin. We shifted an enormous amount of effort into this, including market surveillance, limited orderbook, dark pool, product design, staff training and so on.

Other than that, we do plan to launch bitcoin derivatives such as futures to help miners, exchangers, merchants, and institutional investors to better manage their risks and exposures.


allcoinsnews: Your exchange is in English, Swedish, and Chinese. What is your analysis of what countries your users are from?
Thomas Xie: We have users from all around the world, with a better concentration from Americas, Europe and southeast Asia.

As mentioned earlier, we are adding banking and payment processors all around the world. Besides, we are currently working on adding more languages as well to bring better experiences to non English speaking users.

We offer a comprehensive and secure REST and Websocket API, with sample codes in PHP, Ruby, Python, and a few other programming languages. Professional algorithm traders would find it extremely easy to integrate their trading bots to LakeBTC. Our website design is responsive, and works equally well on mobile devices so casual users may buy and sell bitcoins on their cell phones smoothly.

We just made a major change to our fee structures, with maker-taker introduced and a big promotion is going on right now. Users may enjoy a 0.05% or even free trading at LakeBTC. All of these strategies will further grow our user base globally.


allcoinsnews: There have been some significant exchanges that have collapsed with hacking being an important factor (e.g. Mt Gox, Bitcoin Trader recently). How are you protecting your customers funds from this type of risk? In terms of wallets, what do you think is best solution for your customers?
Thomas Xie: The founder of Mt.Gox came from a technical background, but running a financial firm requires many years of risk management and internal control experience. That’s not something you can acquire overnight.

The safety of the wallet is indeed a huge challenge. Average users may choose and trust a professional bitcoin company such as LakeBTC, especially if it’s a lot of money. They should pick one who’s secure, legitimate, compliant, and well managed. Professional users who know what they are doing can manage their own wallets.

Security, liquidity and service are three strengths we have and security is number one. SSL encryption, cold storage, Google Authenticator, SMS confirmations, etc. are several technical measures we currently employ. But people have to realize that a Bitcoin exchange is not only a technology company, but more importantly, also a financial one.

If Facebook went under, it’s bad but people can live with it. Same thing for Amazon, Youtube, Uber and so on. But if your bank failed and all your savings vaporized? That’s horrifying.. A financial firm faces many security challenges that are unheard of typical technology companies. The technological security mechanisms mentioned above are certainly important, but what really matters to financial institutions are risk management and internal controls. Our team with years of experience in financial industries is working hard to ensure customers’ fund and privacy being safe and secure. For example, all withdrawals need to pass an automatic system checks for book balances, login history, trading patterns and so on, then passed to a two level manual approval process. If everything is good, the fund is transferred to the customer. We do everything in our power to minimize the risks of human errors, system bugs, and hacking activities. Incidents such as transaction malleability would not happen at LakeBTC.


allcoinsnews: Many governments have concerns (e.g. China, USA, etc..) about crypto currencies. How will the Chinese cryptocurrency develop going forward?
Thomas Xie: First of all, we are a BVI company, with customer service and technical support in Shanghai. LakeBTC is a bitcoin exchange for the world. We pay attention to the government policies around the world and do our best to stay compliant. We believe this is to the best interest of all our users.

Chinese government clearly stated that bitcoin is not a currency and would not regulate it as a currency. Secondly, the policy is in fact quite easy on bitcoin participants. The latest official policy declared that people have the right to own, buy, and sell bitcoin. The major goal of the existing policies is to manage risk and stop market manipulation. Margin and shorting trading, futures, and many other high-leverage products (20 times or even higher) and price manipulation caused flash crashes early this year and that’s the target of the so-called ban. If the situation does not improve, we are not surprised to see the policy tightens further and the entire bitcoin ecosystem is jeopardized.

US is more complicated. Both federal and state regulators are involved. The most recent NY DFS proposal is not considered a positive sign. We are living in the new millennium now and they government agencies need to adapt to the digital age too. It’s impractical and cumbersome for every state plus Fed to come up with a regulation each separately. Bitcoin is an internet thing and there’s no state borderline on the internet after all.

http://allcoinsnews.com/2014/10/27/big-4-exchange-lakebtc-plans-eur-gbp-trading-ceo-thomas-xie-interview/

Thank you for your interest. However, we have repeated the points over and over again, but you are not listening. One more time:

1. Company policy prohibits customer support to discuss ANY financial info such as BTC address, banking info, Ripple gateway address etc in forums, emails, social media, or chats. Only source of such info is our secure website, LakeBTC.com

2. This policy is meant to protect users from fraud and theft. It happened before. Somebody pretended to be a representative and post a different banking info, and the victim sent the money to the wrong place. LakeBTC takes security very seriously and does everything possible to protect users' assets. Our team came from a strong banking background, and we are the professionals. This is just one of the many preventative measures we take. For details, please refer to https://www.lakebtc.com/s/help?locale=en#diff

3. That info is no secret. Simply click "Deposit" in the menu, then "USD" tab, then "WIRE". This is for users passed KYC only.

4. If you want to stay anonymous, that's fine. Just trade digital currencies only, i.e., BTC, Ripple network, EgoPay.

5. Our company name, office location, CEO interviews are available on our website and some other leading bitcoin media. We are one of the "big four" exchanges that determine CoinDesk BPI. We are a Gateway Member of IRBA. We are part of the Tera Exchange's bitcoin index, which is the underlying of their US CFTC approved bitcoin swap, and on and on. See here for more https://www.lakebtc.com/s/about?locale=en

6. Which banks we use do not really concern users. It's unlikely that you get a intra-bank transfer rate. International wire usually costs $25 - $65. Again, all banks we work with are well capitalized, part of SWIFT network, regulated by local government, and BASEL compliant. That means, they are legit, well-established, ready to receive payments world wide, and will not disappear over night.

7. Do your homework first. If you don't feel comfortable, don't trade.

We hope we have made the points clear enough. If you have any other questions, please don't hesitate to ask.

I see what you're saying and that's a fair theory. We are working with a couple of potential partners in North America but we do not own any accounts there yet. Our existing customers from that region usually pay $45 + $15 for outbound wires. Just for your reference.

As a matter of fact, wire is never cheap and that's why bitcoin/ripple gets a chance to grow. For smaller amounts, Ripple/EgoPay might be cheaper. For thousands or more, wire is more cost effective and reliable.

For BofA specifically, we happen to have a business partner who banks with BofA in US. It turned out to be more troublesome to transfer money within BofA system internally, especially both personal and business accounts are involved. At the end they gave up and used "domestic wire" instead, which still costs like $25.

No you do not use our bank. Users transfer money to one of our banks, which are part of SWIFT network, regulated by government, and basel-compliant.

It does not really concern users if the target bank is Bank of America, or Bank of Africa, Bank of China, Bank of Denmark, or Bank of England. You do not open an account with it. You don't deal with it directly.

And, this info is no secret. Most of our users have access to it. If you don't want to go thru the KYC process, that's perfectly fine. Just stay in the digital world (BTC, Ripple network, and EgoPay), and do not touch FIAT. You an stay anonymous and trade at LakeBTC.

interviews and articles can be found at coindesk, cointelegraph etc.

for example http://cointelegraph.com/news/112112/a-ban-should-target-risky-products-and-foul-players-not-bitcoin-itself-lakebtc-ceo-thomas-xie

NodeJS sample code for LakeBTC API is available now!

https://github.com/LakeBTC/lakebtc_nodejs



We'll integrate with more popular trading bots soon!

We are not aware of other firms' policies.

What we can assure our users is, LakeBTC enforces TOP risk management and internal controls in the industry. Our team has decades of experience in commercial banking and investment banking sectors.

Thank you for your inquiry.

Again, LakeBTC takes security very seriously and company policy prohibits customer support to post ANY financial account info on forums, emails, chats, and social medias, including banking info, Ripple gateway address, third-party account name, and BTC addresses. Our website, LakeBTC.com, is the only source of such information.

It's not a secret. All registered users with KYC can simply click "Deposit" - "USD" - "WIRE" to get the most up-to-date info on LakeBTC.com website.

Thank you for the inquiry. Company policy prohibits customer support to post any banking info on forums, chats, emails etc. And, again, all users should ONLY use banking info displayed on LakeBTC.com. The reasons include:

1. the banking info from other sources could be out of date. we are actively adding banking and payment processing partners to better serve all users around the world.
2. somebody could pretend to be a LakeBTC representative, post different banking info, and make people wire money to them instead.

So again, simply click "Deposit", then "USD", and "WIRE". We take security seriously, and this is one of the many measures LakeBTC take to protect users' assets. We do everything in our power to safeguard your money and your personal information.

Thank you for your suggestion. I'll forward it to the management for consideration.

Current company policy is: no personal info is required for BTC/Ripple network/EgoPay transactions. To make deposits/withdrawals via bank wire, we need to upload ID documents.

Flash Crashes

Bitcoin Markets

On August 14, 2014, bitcoin price dropped sharply on a bitcoin exchange. Four days later, another flash crash happened again on another bitcoin exchange. Bitcoin price fell under $309 and bounced back to $440 in minutes like a roller-coaster. There are quite a few articles and discussions about these two incidences and obviously a lot of people lost a non-trivial amount of money, while a few "lucky" guys brought home piles of cheap coins.

Flash crashes are not something new, even in the cryptocurrency world. For instance, on March 21, litecoin price dived to 1 CNY from 103 CNY in minutes on a Chinese exchange. What it means is virtually ALL users using margin, be it 10% or 2% leverage rate, got busted. Lots of people were forced to liquidate their positions, and many accounts even ended up with negative assets. The exchange in question was also at the brink of insolvency.

Traditional Markets

Similar things happened to the traditional, mature capital markets, too. For example, on August 16, 2013, Shanghai Stock Exchange Composite Index soared 5% in just 2 minutes. Regulators' investigation of the incidence accused Everbright Securities of market manipulation and possible insider trading.

On May 6, 2010, the Dow Jones Industrial Average fell almost one thousand points. More than 90% of the U.S. stocks plummeted.

On Dec 8, 2005, a customer asked a Mizuho Securities broker to sell 1 share of J-Com company at JPY 610,000, but stockbroker mistakenly entered a trade to sell 610,000 shares at a price of JPY 1 per share. This typo triggered a free fall of the J-Com company stock price.

The list can go on and on, including Morgan Stanley in 2004, Lehman Brothers in 2001. The question is, why flash crashes happen and how to avoid them?

Causes of Flash Crashes

There are a number of reasons but the most popular ones are leverage, price manipulation, and trader mistakes. Often these factors stack on each other to further worsen the situation, very quickly.

Leverage

Bitcoin flash crashes we mentioned at the beginning were good (or bad) examples of leverage's role played. Any initial price decline, triggered intentionally by a financial predator or unintentionally by a butterfly flapping its wings, quickly entered into a positive feedback loop and crashed the entire market in minutes or seconds. It's like an avalanche or nuclear chain reaction. Once triggered, it grows extremely fast and almost impossible to stop.

Attacker

For attackers, there are two things that are indispensible: sufficient market information and enough money. With the knowledge of the full market depth (and user margin/short positions). an attacker can easily find out exactly how much money is needed to drag the price to a specific level. Within a millisecond, he can spit out all orders necessary and before anybody else gets a chance to react, the price is already changed wildly. This type of attacks are very lucrative along with margin calls, forced liquidation, and futures positions somewhere else. It's profitable, easy to execute, and hard to resist.

Trader Mistakes

A few incidents in the stock market history turned out to be human or algorithm mistakes. Nevertheless, enormous amount of investors' money vaporized because of these silly errors. It is obviously not acceptable and the exchanges and security firms involved also had to suffer monetary penalties and endless litigations. With modern computers, advanced algorithms, and fiber networks, crashes like these are repeating themselves again and again. There gotta be a better way to monitor and prevent market disasters like this.

Crash Risk Mitigations

Leverage

Many sharp declines in financial markets were largely attributed to the leverage involved, especially for cryptocurrencies.

The entire bitcoin capitalization is still very tiny, the number of bitcoin in circulation is even smaller, and the market is quite illiquid compared to most of other traditional financial assets.

Besides, there are dozens of bitcoin exchanges scattered around the world, and the already limited market depth is further diluted.

Born merely 5 years ago, bitcoin has yet to develop a robust ecosystem and attract enough sophisticated market players. Most of the bitcoin exchanges do not have enough financial background to run a safe and bullet-proof platform to take good care of customers fund. People have to realize that bitcoin businesses are not just another tech startup. Coding talents and marketing skills are important, but risk management and internal controls are crucial. Any negligence or mistake on the financial side will sink the entire ship with all passengers, either by a storm or an attacker. Mt.Gox was, sadly, a good example.

Therefore, it might not be the right time to introduce leverage trading, be it margin/short trading or P2P lending, to the bitcoin world. Don't get me wrong - leverages, futures, options, plain vanilla or exotic, and all varieties of other derivatives and structured products are useful financial instruments, and LakeBTC will introduce them sooner or later. The thing is, market needs to be ready, and more importantly, the exchange itself needs to be ready. Leverage is a weapon of massive destruction, just like CDO (collateralized debt obligation) and CDS (credit default swap) in the '08 financial tsunami. If not used properly, it's a disaster to everybody onboard.

There are enough bad examples in the traditional capital markets that are supposed to be mature, liquid, and robust. Even the fixed-income and foreign exchange markets, which are well known for their unlimited liquidity and endless depth, are not immune to crashes. Arming bitcoin exchanges run by a bunch of geeks and technologists with financial WMDs? Not a good idea. It is always easy to copy something from the traditional markets. Running it right with appropriate risk management is what really matters here.

It's like a giving a student pilot a high-performance (i.e., over 200 horsepower) or twin-engine airplane to fly, with hundreds of passengers sitting in the back. More horsepower and more engines are always good, as long as you know what you are doing. You have higher rate of climb and can fly thru weather more quickly. There's a reason why high performance endorsement and multi-engine rating exist in aviation. A guy who's good at fixing cars doesn't necessarily mean he's a good pilot automatically. It takes lots of training, experience, and a major change in mindset. When you are ready to handle the machine and weather, a better airplane with more engine power will definitely take you, and your passenger, to a higher altitude safely.

Market Surveillance

To any exchange, an effective market surveillance program is a critical component that ensures the fairness and smoothness of the marketplace. Unusual activities, abnormal positions, sudden price changes, and suspicious trades should raise alarms to exchange operators and if necessary, preventative actions should be taken quickly to mitigate the risk of price manipulations and human errors.

Should a comprehensive market surveillance program be implemented, the flash crashes in Tokyo Stock Exchange and Shanghai Stock Exchange mentioned above could have been avoided.

LakeBTC does have a real time market surveillance program to monitor unusual trading activities and suspicious positions. By comparing with bitcoin index prices from other sources, we try to reduce the risk of market manipulations by individual attackers.

Order Book

Let's say bitcoin is trading at $500 right now, and our orderbook is showing bid/ask orders from $490 - $510. That would be enough for most users, and advanced traders may want to see more market depth, say between $450 and $550. But, who would want to view bid orders at $400 (20% off the current price) or even all the way down to $0.01? Or ask orders at $700 or as high as $1 million per coin? That information is ridiculous and irrelevant to most, if not all, trading strategies. It is not even noise. It is simply something traders ignore.

However, the same information could be useful to marker manipulators. They can easily calculate the ammunition required to ambush innocent investors. If the current price is $500, and an attacker needs to bring the price down to a target price, say $309, to trigger a chain reaction of forced liquidation, it'd be a straightforward math to figure out the money needed. As we mentioned earlier, bitcoin market cap is tiny, and the depth is further diluted. It wouldn't take an enormous amount of money to swing the market. Then he can fire out all the orders in the blink of an eye and the price drops instantly to where it's planned to be.

To reduce the chance of orderbook attacks, LakeBTC decides to make only the most relevant part of our orderbook open to public. Financial predators wouldn't be able to determine the amount of fund needed for a specific attack, and for most "good" traders, their strategies are not affected at all.

Dark Pool

To further mitigate the orderbook attack risk, LakeBTC provides dark pool (or invisible) orders to our users. Basically any user can place dark pool orders for free, as long as the order size is 50 BTC or more. All dark pool orders are not shown in public orderbook, and invisible to everybody, including financial predators. Without accurate and complete market depth information, it'll further reduce the willingness of aforementioned market manipulation activities. As a matter of fact, such dark pool order type is quite mature and popular in traditional equity exchanges worldwide.

LakeBTC's version of dark pool is designed to protect the interests of all investors, not the other way around. Unlike some other exchanges, we do not sell this information to anybody so it's fair to all traders. Contrary to many people's intuition, full transparency sometimes implies unfairness and hurt average users in one way or another. Nowadays in Wall Street (plus New Jersey and Chicago), predators, with the assistance of exchanges, can take advantages of other investors by co-lo (co-location) and so-called latency arbitrage. They consume and react to the same public information a few milliseconds earlier than the rest of the world, and by doing that everybody else is robbed without even knowing it. These professional attackers are always equipped with better network, better computers and better algorithms. The public information, such as full orderbook, is not the same to everybody as before.

Security, liquidity, and service are three strengths that make LakeBTC stand out of the crowd. We take the safety of users assets and personal information very seriously. Additionally, creating a fair and efficient marketplace is also important to protect investors' interests. We do everything in our power to minimize market manipulations and unfairness. Market surveillance program, carefully designed products, comprehensive risk management, and strict internal controls are all meant to make sure this young and energetic market is fair and safe to every participant.

A bitcoin exchange is not just another technology company, but more importantly, also a financial one. There's no denying that SSL encryptions, cold storage, 2-factor authentication, and SMS confirmations are important, but risk management and internal controls are really what matters to financial institutions in the long run. When the black swan comes, people may appreciate all these experience and measures better.


https://www.lakebtc.com/p/7064?locale=en

click "Deposit", then "USD", then "WIRE", and you will get the most up-to-date bank info.

Do NOT trust any banking info on web forums, in emails, chats, or social media etc.

ONLY use bank info shown on our secure website, LakeBTC.com. This is the ONLY source of such info.

We are here: https://www.lakebtc.com/s/about?locale=en

And here's an interview with our CEO: http://cointelegraph.com/news/112112/a-ban-should-target-risky-products-and-foul-players-not-bitcoin-itself-lakebtc-ceo-thomas-xie

A quick update: our prod support blocked this site from referring to LakeBTC.com.

However, it's still possible to clone our page on a different but similar domain name. All users should pay close attention to the URL in the address bar.

Thanks for bringing this up. We are a business with all required documents, and we enforce the necessary AML/KYC rules to stay compliant.

Your fund and personal data are safe with us.

Thanks for your attention. Rest assured, LakeBTC has a comprehensive set of risk management and internal control measures to safeguard users' fund and personal information.

Dear Users,

A LakeBTC user, HR, recently notified us that there is a phishing website www.lalkebtc.com (with one extra letter "L" between a and k) that attempts to steal users' login credentials.

LakeBTC takes security very seriously. Rest assured, with LakeBTC's risk management and internal controls, the damage caused by a hacker with your login credential is limited. All withdrawals need to go thru automatic system checks including login history and book balances, email/SMS confirmations, and a two-level manual approval. The chance of bitcoin loss is low.

Nevertheless, we strongly recommend all users to

1. Make sure our only domain name LakeBTC.com is in your address bar, with the green https header
2. After each login, check your login history for any suspicious activities.
3. Enable Google Auth (click My Wallet in the menu, then "Settings" tab)
4. Have your cellphone number verified

We'd like to thank HR for the heads up, and would appreciate it if you could report any potential security issues to us.

Thank you for choosing LakeBTC.com!

https://www.lakebtc.com/p/7063?locale=en

Dear Users,

A LakeBTC user, HR, recently notified us that there is a phishing website (with one extra letter "L" between a and k) that attempts to steal users' login credentials.

LakeBTC takes security very seriously. Rest assured, with LakeBTC's risk management and internal controls, the damage caused by a hacker with your login credential is limited. All withdrawals need to go thru automatic system checks including login history and book balances, email/SMS confirmations, and a two-level manual approval. The chance of bitcoin loss is low.

Nevertheless, we strongly recommend all users to

1. Make sure our only domain name LakeBTC.com is in your address bar, with the green https header
2. After each login, check your login history for any suspicious activities.
3. Enable Google Auth (click My Wallet in the menu, then "Settings" tab)
4. Have your cellphone number verified

We'd like to thank HR for the heads up, and would appreciate it if you could report any potential security issues to us.

Thank you for choosing LakeBTC.com!

https://www.lakebtc.com/p/7063?locale=en

usually under 30 minutes during business hours.