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February 10, 2014, 05:22:09 PM
Last edit: February 10, 2014, 06:08:22 PM by Bitnicity |
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Firstly, this could happen to any exchange, this is just the nature of "fractional reserve".
and this is just a theory:
1. GoxAss as the Exchange creates a 10000 BTC fake sell order out of air at price of $950; assuming that order is executed, a total of USD9.5m deducted from Client's account and added into GoxAss's dollar balance; 10000 BTC created out of thin air also shows on the Client's BTC balance.
2. Panic and more sale orders created out of thin air by GoxAss finanly crash the price down to the tollet at $500;
3. GoxAss creates a 10000 BTC fake buy order also out of air at price of $500, assuming that order is executed, a total of USD5m deducted from GoxAss's dollar balance and add into Client's dollar account; and that 10000 BTC originally created out of thin air deducted from the Client's BTC balance;
GoxAss could make a total profit of $4.5m just by following the above steps or reverse steps WITHOUT having any fiat or BTC, no one will notice this so long as they could keep the buy/sell orders pool offsetting each other or paring in symmetry.
That's how the trick of "fractional reserve" works and any evil GoxAss could game the system by just doing that over and over again UNTILL the systematic imbalance(buy/sell, inflow/outflow) happens which lead to "bank run" and collapse of the scheme.
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