Best Practices to Avoid Mt Gox Repeats

[TheAccountant]

I can completely understand the nature of people to work with the biggest exchange, assuming it is good.  But a lot of innocent people lost coins they bought or mined.  Given what we know today, what would be your "best practices" to manage your bitcoin investment and protect it from the known issues with the exchanges and wallets?

[rat]

drop a coin on an exchange -

and get it out.

[jztxeno]

simply never store your coins on 3rd parties.

[Zeeks]

If you are not holding your coins in a wallet you have the private key for then you are not holding your coins at all. If you are giving some of your coins to a site for some reason such as trading you should remove them as soon as you are done trading. If you are not allowed to remove them quickly then you should stop using that site immediately.

[Armis]

I can completely understand the nature of people to work with the biggest exchange, assuming it is good.  But a lot of innocent people lost coins they bought or mined.  Given what we know today, what would be your "best practices" to manage your bitcoin investment and protect it from the known issues with the exchanges and wallets?

the best thing to do is to reinforce the cryptocurrency infrastructure, the block chain knows where the money is, now the cryptocurrency industry must create ways to scrub the block chain https://bitcointalk.org/index.php?topic=492776.0;topicseen  and identify where it is to then allow humans to turn the addresses into recognizable actions and recognizable people, at that point it's up to the humans to do with the info as they wish.

Nothing electronic is truly anonymous the FBI and many others have proven that, and they have far less resources than the cryptocurrency economy.  

The block chain serves many purposes one of which should be a policing tool to maintain multi-level security

[Trance]

Research, Research, Research! If an exchange scams 10% of all users 1% will probably spread the word what happened to them out of the 10% and the other %90-99 will think its competition just bashing the reviews of the exchange! It really sucks when anything can be a potential liability, especially third party wallets. Selective scamming is a BIG problem within the cryptocurrency realm!

[V8x8d]

I can only assume those people who lost money in MtGox were day traders. Otherwise why would you leave that quantity of Bitcoins on an unregulated exchange (especially one that has been struggling for so long)? Greed gets the better of most of us from time to time.

I only hope the lack of trust in exchanges limits the number of day traders.

[grifferz]

I can only assume those people who lost money in MtGox were day traders. Otherwise why would you leave that quantity of Bitcoins on an unregulated exchange (especially one that has been struggling for so long)? Greed gets the better of most of us from time to time.

Some of the numbers and stories that stand out don't appear to be day traders, but people who sent a significant sum of money into MtGox as a one time thing, bought bitcoin and then left it on there waiting for prices to go up.

It boggles the mind why they did not withdraw it given how quick and easy that would be, but I get the impression that a lot of these people never took the time to understand bitcoin in the slightest and were intimidated by the idea of running their own wallet.

It's as equally confusing as why they carried on using MtGox even after the serious problems it had from 2011 onwards.

[CoinRocka]

So let me ask this, how safe is a blockchain.info wallet??  I mean should you delete your wallet each time you make a transaction and hold your info in cold storage till the next import?

It seems a bit much but in these early stages it may be the safest?  Trying to wrap my brain around it.  Furthermore, isn't it very unsafe to export unencrypted to get my private key?   Thx.

[grifferz]

With blockchain.info wallets only you have the private key for your addresses, they do not have them. So that is safe, provided you don't lose the keys.

[Armis]

Research, Research, Research! If an exchange scams 10% of all users 1% will probably spread the word what happened to them out of the 10% and the other %90-99 will think its competition just bashing the reviews of the exchange! It really sucks when anything can be a potential liability, especially third party wallets. Selective scamming is a BIG problem within the cryptocurrency realm!

That is one of very many projects that I'm working on and and currently seeing a web developer partner to work on it with me.

 www.CRYPTOCURRENCYCOMPLAINTS.COM

it will allow people to complain, allow both sides to be heard, allow the community to judge,

as such regardless of spam, spiteful competition, or companies trying to game the system over time a pattern will develop about everyone involved.

[Armis]

I can only assume those people who lost money in MtGox were day traders. Otherwise why would you leave that quantity of Bitcoins on an unregulated exchange (especially one that has been struggling for so long)? Greed gets the better of most of us from time to time.

I only hope the lack of trust in exchanges limits the number of day traders.

There is one guy that posted in many of these MalMTGox threads about how he cashed out his btc and requested his funds at the end of 2013 but only received excuses as to why it was not done

Regardless of why the funds where there, they trusted Mt Gox to the full extend of the funds they allowed to be there until the point that they were frozen, then there were the ardent orthogoxiants who practiced mtgoxism to such a blinding degree that they bought frozen accounts with real money, and subsequent new converts who got sucked in by the $100 MTGOXbtc even though regular btc was $500 - $600 more.

[Armis]

With blockchain.info wallets only you have the private key for your addresses, they do not have them. So that is safe, provided you don't lose the keys.

See that's the extent of the security of the cryptocurrency economy at this point you not only can't trust individuals, but you also can't trust MAJOR players. 

This is why the btc community must scrub the blockchain and find every satashoi of the so called missing btcs

using lawyers, feds, and courts do nothing to improve the cryptocurrency system, it needs self regulation with teeth.


I'm working on that project too:   www.CRYPTOCURRENCYREGULATIONS.COM
it will focus on industry standards, ways to police the system, alarms, and ways to check and balance improper behavior by market leaders 




 

[lumierre]

the best thing to do is to reinforce the cryptocurrency infrastructure, the block chain knows where the money is, now the cryptocurrency industry must create ways to scrub the block chain https://bitcointalk.org/index.php?topic=492776.0;topicseen  and identify where it is to then allow humans to turn the addresses into recognizable actions and recognizable people, at that point it's up to the humans to do with the info as they wish.

Nothing electronic is truly anonymous the FBI and many others have proven that, and they have far less resources than the cryptocurrency economy.  

The block chain serves many purposes one of which should be a policing tool to maintain multi-level security

I agree. Exchanges should prove their solvency with the blockchain. I mean, the blockchain is the single most effective tool in our time to provide transparency. Why not use it? We as a community must support only honest exchanges - those who are willing to subject themselves to audits by the public!

[Armis]

the best thing to do is to reinforce the cryptocurrency infrastructure, the block chain knows where the money is, now the cryptocurrency industry must create ways to scrub the block chain https://bitcointalk.org/index.php?topic=492776.0;topicseen  and identify where it is to then allow humans to turn the addresses into recognizable actions and recognizable people, at that point it's up to the humans to do with the info as they wish.

Nothing electronic is truly anonymous the FBI and many others have proven that, and they have far less resources than the cryptocurrency economy.  

The block chain serves many purposes one of which should be a policing tool to maintain multi-level security

I agree. Exchanges should prove their solvency with the blockchain. I mean, the blockchain is the single most effective tool in our time to provide transparency. Why not use it? We as a community must support only honest exchanges - those who are willing to subject themselves to audits by the public!

bingo - 

I'll take that and raise it by identified exchange transactions, so that although the customers may not be identified, the exchange is actually identified on the exchange for every transaction they do -- their name will be right there.

[mccoyspace]

The exchanges are critical for price discovery. And to have open orders and a functioning order book means funds must be left there. So the 'get in and get out' strategy is rational individually, but very limiting to bitcoin overall.

[CurbsideProphet]

If you are not holding your coins in a wallet you have the private key for then you are not holding your coins at all. If you are giving some of your coins to a site for some reason such as trading you should remove them as soon as you are done trading. If you are not allowed to remove them quickly then you should stop using that site immediately.

Basically this. 

However to the OP, in the case of Gox you literally had YEARS to see this coming.  Yes, years.  They've been hacked, rolled back transactions, had their Dwolla account frozen, slowed the withdrawal process to a trickle, all of this well before the latest fiasco.  People who got burned simply had their head buried in the sand.  People, including myself, have been warning others on the forum to stay away from Gox for a long long time now, so another thread on what to do isn't going to do anything.  People are going to do what they're going to do.

[Armis]

The exchanges are critical for price discovery. And to have open orders and a functioning order book means funds must be left there. So the 'get in and get out' strategy is rational individually, but very limiting to bitcoin overall.

Nah, funds don't NEED to be left there, that's just 'inside the the old box' thinking,  in fact funds don't need to leave your wallet in order to pledge them for a current, or future transaction blockchain pros can explain the mechanics of it but it can be done

Even if you choose to do it the old fashioned way, in terms of having the funds in the exchange, any value that is not connected to an actual sale only has meaning if the position has no track record.  

The exchanges are have a role in the cryptocurrency economy they also have a responsibility as well.
  

[Entropy-uc]

Deposit coins when you are planning to trade.  Wait for 6 confirmations.

Withdraw EVERYTHING when you are done.

Repeat as needed.

I broke this rule once because a clear uptrend was developing so I decided to let things ride over the weekend.  Monday morning I discovered Roman Shtylman had ripped me off for 106 BTC.

NEVER, EVER AGAIN.  The temptation to operate as a fractional reserve occurs because people leave BTC on deposit for months at a time.  The operators see that their balances never go below XXXX, and decide there would be no harm if they use XXX as operating capital.  Don't tempt them by leaving your coins on deposit.

[crazynoggin]

Never leave money on an exchange unless you are trading. Also, never use more money than you can afford to lose. The best practice in my opinion is that once you start buying bitcoin or having usd on an exchange (which is likely for that purpose) is to think of that money as lost. You can't always predict what will happen next and that helps you understand how much you can really afford to invest in a risky market.