[Updated] FTX

[OmegaStarScream]

Now with multiple exchanges deciding to provide Proof-of-reserves as reassurance for their customers, it would be interesting to see what the other platforms are up to and whether we're going witness the collapse of some of them.

Crypto exchanges are now scrambling to publicly publish their fund reserves as insolvency fears grapple crypto investors following contagion risks from liquidity issues at FTX.
In the past 24 hours, seven exchanges – Binance, Gate.io, KuCoin, Poloniex, Bitget, Huobi and OKX – have separately issued statements that they would publish their Merkle tree reserve certificates to increase transparency.

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[o_e_l_e_o]

Now with multiple exchanges deciding to provide Proof-of-reserves as reassurance for their customers, it would be interesting to see what the other platforms are up to and whether we're going witness the collapse of some of them.

I think it's obvious - if the exchange refuses to provide proof of reserves, then they are running fractional reserve and are lending your coins out to unknown third parties. All such exchanges should be permanently abandoned by anyone with an ounce of sense.

However, exchanges providing proof of reserves does not mean they are safe to use. There are endless ways they can fudge the numbers and make it appear as it they are fully backed up when they aren't. A prime example would be USDT/Tether. They released several proof of reserves, and court documents later showed that Bitfinex transferred hundreds of millions of dollars to Tether on the morning of the days of their audits, and Tether transferred hundreds of millions back out again the next day. There is nothing stopping an exchange taking out a brief loan on the day of the audit to make it look like they aren't fractional reserve, or pulling back several outstanding loans or investments for a single day, or even printing a few million more of their own shitcoin, or a hundred other things to make their books seem balanced when they are no such thing. And at the end of the day, the only "proof" that any of us will see is that which the exchange in question want us to see. It will be entirely trust based.

There is no way for an average user to independently verify what the exchange is saying is true, just like all the exchanges over the last month who have said repeatedly that everything is fine and then collapsed the next day. Want to verify your coins are safe? Get them in your own wallet. Want to verify your exchange isn't insolvent? Use a decentralized one which does not have the power to give your coins out to third parties.

[Welsh]

I'm catching up on all of this, so forgive me if this has been determined before. What does proof of reserves actually mean, as in I know what it means per say, but what sort of proof is actually considered proof?

As suggested, couldn't the numbers just be fudged, and therefore you're none the wiser anyway. However, an exchange simply appears better since they're being transparent. Seems like the richer the exchanges, the more likely they'll be able to reassure customers they're safe to use, by giving the illusion they're backed by a ton of money.

[dkbit98]

Now with multiple exchanges deciding to provide Proof-of-reserves as reassurance for their customers, it would be interesting to see what the other platforms are up to and whether we're going witness the collapse of some of them.

They seriously think people are going to believe their words and statistics?  
I think most of us already knew that exchanges are reporting fake trading volume, and situation is surely no better with their reserves.
They can create fake reserve balance, unless there is some way to verify this with simple signing a message from their addresses and proving how many coins they have...
Let me predict what could happen next... new wave of ''evil hackers'' will show up and they will allegedly lose a lot of coins, so they can blame them for everything later.

I'm catching up on all of this, so forgive me if this has been determined before. What does proof of reserves actually mean, as in I know what it means per say, but what sort of proof is actually considered proof?

For coins this should be signed message from addresses to prove ownership and balance.
I am not sure how they can do this for fiat currencies, maybe bank statements, but this can be faked so easy.

[coolcoinz]

I'm catching up on all of this, so forgive me if this has been determined before. What does proof of reserves actually mean, as in I know what it means per say, but what sort of proof is actually considered proof?

As suggested, couldn't the numbers just be fudged, and therefore you're none the wiser anyway. However, an exchange simply appears better since they're being transparent. Seems like the richer the exchanges, the more likely they'll be able to reassure customers they're safe to use, by giving the illusion they're backed by a ton of money.

That's a good question because if an exchange is able to create and sell its own tokens or even like FTX send its token to another company, which they really own (Alameda), and make that company lend it out, this is at the very least a shady tactic. You make it look like another company holds assets, but in reality all their liquidity is fake because FTT has no intrinsic value. It has value as long as the issuer (FTX) shows profit and can act like its business has market value, and here we go into something much bigger like how do you value a company like FTX? You get their numbers which include number of clients, volume of trades, assets held, domain value, and so on, but it's all smoke and mirrors.
Their client number can go down by 90% in a week and Bitconnect, Luna, and a number of defunct exchanges like Quadriga are prime examples of this.
Their domain name is worth a lot only as long as the company is reputable. Mt.Gox domain used to be worth a lot when Mt.Gox was trading, but not when Mark went to jail.
Their volume can go to 0 when they shut down all trades, so it's worth looking into only when the company is in good shape.
Assets held usually includes assets that are borrowed, landed and levered. These can't be taken seriously. Also, they'll always add the value of their own token to that, but their token has value only as long as the exchange is in good shape. For instance if Sam would decide to drive under influence with drugs in the car and land in jail for it, the value of the token would go down.

All these companies, including Binance and Coinbase are building nice looking castles out of sand and hope that you'll give them money to buy a lifetime entry, or your own room inside.

Only decentralized coins held by you in your own wallet can be called solid. No stable coins and exchange tokens are.

[OmegaStarScream]

I'm catching up on all of this, so forgive me if this has been determined before. What does proof of reserves actually mean, as in I know what it means per say, but what sort of proof is actually considered proof?
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Kraken has been doing it for quite some time now, you can see the technical details here: https://www.kraken.com/proof-of-reserves

From my understanding, it's not something that can be tampered with.

[tabas]

2) Our teams are working on clearing out the withdrawal backlog as is. This will clear out liquidity crunches; all assets will be covered 1:1. This is one of the main reasons we’ve asked Binance to come in. It may take a bit to settle etc. -- we apologize for that.

To simplify: we are insolvent, we didn't have our customer's money and had to borrow from CZ, In exchange CZ will take over FTX but it will take some time to do the paperwork.
Please have patience, I fucked up.

Yeah, that's how it really is.
It will take time until this mess will be fixed but with some help of Binance, they're now clear and making it look like they've never made a mistake from what they did.
The time they're asking really clicks on the time that they should fix the papers together with Binance. We will see if there will be some next the same scenario that shall happen for other exchanges which might involve Binance again.

[o_e_l_e_o]

From my understanding, it's not something that can be tampered with.

You can't tamper with the Merkle tree once it has been created, but that doesn't stop them from using erroneous data to create the Merkle tree in the first place, or feed other erroneous data to the auditors. How do you know they have supplied the auditors with a complete list of all the balances on all their customer accounts, and not left some out? How do you know they haven't borrowed funds or pulled back in various loans or investments during the time of the audit, and they are running a fractional reserve the other 364 days of the year? Hell, how do you know they haven't just paid some whale to a sign a message saying that Kraken owns a few tens of thousands of bitcoin the whale owns? You don't.

There is exactly one way for you to be able to verify that your coins are 100% backed up without involving any trust in third parties: Keep them in your own wallet.

[royalfestus]

I personally don't like a single thing in all of this. The big impact of the biggest player or another fiasco with the exchange will certainly have serious consequences.

CZ is assuming an increasingly dangerous position in this market by controlling so much of it. It is possible that the FTT fracas is due to a fallout in a relationship (https://twitter.com/StackerSatoshi/status/1589971079703171072?s=20&t=Biw8cu_VWzt9WEcIT-UwqA). FTT is being forced to sell 580 million dollars of BNB to Binance, and the refusal is the penalty for the tweet and dump. FT has lost 70% of its market cap in 48 hours, along with a general market decline

[pixie85]

Plot twist: CZ is not buying FTX. I guess he likes it that the prices are falling. Makes it easy for him and his rich friends to scoop some cheap coins.

I think CZ knew FTX was insolvent and made this a bigger deal than it would be without his involvement. I also doubt he's alone in this.

[JeromeTash]

Now with multiple exchanges deciding to provide Proof-of-reserves as reassurance for their customers, it would be interesting to see what the other platforms are up to and whether we're going witness the collapse of some of them.

Crypto exchanges are now scrambling to publicly publish their fund reserves as insolvency fears grapple crypto investors following contagion risks from liquidity issues at FTX.
In the past 24 hours, seven exchanges – Binance, Gate.io, KuCoin, Poloniex, Bitget, Huobi and OKX – have separately issued statements that they would publish their Merkle tree reserve certificates to increase transparency.

According to a tweet by bitmex reseach. Bitmex claims to be the early pioneer and strong advocate of Proof Of Reserves and Proof Of Liabilities

Apparently, their fist snapshot was in the summer of 2021

I am not that technical, and I don't know much about the merkle tree, so definitely I have no idea how this proof of reserves is verified. Maybe it's time to hit YouTube 

[Darker45]

Plot twist: CZ is not buying FTX. I guess he likes it that the prices are falling. Makes it easy for him and his rich friends to scoop some cheap coins.

I think CZ knew FTX was insolvent and made this a bigger deal than it would be without his involvement. I also doubt he's alone in this.

This plot twist is not for movies, though. This wasn't unexpected. This was a possibility all the while. And while I only read a handful of enthusiasts who raised this possibility, in hindsight it makes perfect sense. CZ went for the kill, why should he then save SBF's ass?

CZ made ruthless moves which actually served as the final nail of FTX's coffin. It was CZ who opened FTX's Pandora's box in public. It was he who made moves loud and big enough to be easily noticed by the entire crypto community, sowing fear and panic. It was actually CZ who fired the fatal shot. And now he'll take the responsibility to revive it? That doesn't make sense.

If CZ's motive was to take FTX, he should have been milder and circumspect with his actions. He shouldn't have been too harsh against the very platform he wished to acquire and make money out of. And he should be the one to make the offer in private, but no, it was the other way around; it was SBF who reached out to him.


https://twitter.com/binance/status/1590449161069268992


https://twitter.com/binance/status/1590449164932243456


https://twitter.com/cz_binance/status/1590463239925944320?cxt=HHwWgMDSwfv4upIsAAAA

Mission accomplished! FTX is dead! SBF has fallen! It's now time to release some soft and dramatic statements if only to pacify some angry and hurt souls.

[pixie85]

Mission accomplished! FTX is dead! SBF has fallen! It's now time to release some soft and dramatic statements if only to pacify some angry and hurt souls.

Well said.

CZ is a drama queen. There's an interview with him on youtube where he's asked about the profits from being in the crypto business and he says something like I'm not in it for the money, I don't care about that, I'm here to build and i do it for the people. He doesn't look in the camera, avoids eye contact while saying this and looks a bit nervous like he's being pushed.

Remember guys, you are safu, it's all for your good! 

[Darker45]

Mission accomplished! FTX is dead! SBF has fallen! It's now time to release some soft and dramatic statements if only to pacify some angry and hurt souls.

Well said.

CZ is a drama queen. There's an interview with him on youtube where he's asked about the profits from being in the crypto business and he says something like I'm not in it for the money, I don't care about that, I'm here to build and i do it for the people. He doesn't look in the camera, avoids eye contact while saying this and looks a bit nervous like he's being pushed.

Remember guys, you are safu, it's all for your good! 

He is, he surely is a drama queen, but let's give credit to where it's due. And CZ deserves it. He knows business the smart way. Seemingly dramatic and humble in the outside, ruthless in the inside. And he also easily bends with regulatory winds. He does unregistered business silently, dodges regulatory requirements, but when noticed by the authorities, he'd try to amicably comply with their demands.

On the one hand, he pushes the idea of decentralization to appeal to the crypto masses, but creates centralized products to earn from. He talks of freedom and privacy and also force KYC to everybody.

He constantly talks of building or buidl but he's also slowly but surely making sure others would crumble down.

[Solosanz]

The funny thing here why anyone still believe in Binance until now? CZ is just full of drama, I never trust a person who can't back up his own words with a real action. The reason why I say many people still use Binance is this exchange still on top 1 the biggest volume and popularity.

I think the SAFU that CZ offer on Binance is actually they don't have SAFU, but it's just a reserve money from their profit which actually the main purpose isn't to cover customers losses due to hack.

[tabas]

Mission accomplished! FTX is dead! SBF has fallen! It's now time to release some soft and dramatic statements if only to pacify some angry and hurt souls.

Let's say he did really tried to help but he's a businessman and understands that removing a competitor would make his business flourish.

The funny thing here why anyone still believe in Binance until now? CZ is just full of drama, I never trust a person who can't back up his own words with a real action. The reason why I say many people still use Binance is this exchange still on top 1 the biggest volume and popularity.

I think the SAFU that CZ offer on Binance is actually they don't have SAFU, but it's just a reserve money from their profit which actually the main purpose isn't to cover customers losses due to hack.

Although many don't like the so called acting of CZ, we don't know what has happened behind. And for everyone that's using Binance, it's hard to jump off to another ship that we don't know if they'll stay for long just as what's happening for most things this year. That safu thing became popular every after hack that happens to them. It's for sure that they've got a reserve fund that will cover every loss that they'll make if they will be hacked again.

[Husires]

Was all this chaos caused by $2.1Bilion USD that Binance decided to liquidate, or was it the last nail, if such an amount caused all these problems, then most of the platforms are floating on an ice surface and it is easy to extort them by whales.

I will not believe any news at the moment, I will wait several weeks and then read the sequence of events, but we must learn that this market has become dependent on hot money, there are no real investments in all cryptocurrencies and exchanges.

[o_e_l_e_o]

Do not believe the CEO tweeting that everything is fine. Of course they will say that, since saying anything else will just accelerate the bank run they are already experiencing. Get your coins in to your own wallets now.

So as entirely expected by anyone paying even the slightest bit of attention over the last few months, everything was absolutely not fine and they were lying through his teeth. What's more, FTX have now deleted the tweets saying everything is fine: https://nitter.it/corndalorian/status/1590326571792859136#m

I assume with the Binance deal fallen through (or more likely never seriously on the cards to begin with), all FTX users will have lost everything and will be stuck in months of bankruptcy proceedings just like Celsius, Voyager, and all the other collapsed platforms' users are.

Seriously, when will people learn?

Custodial exchanges were a mistake.

[The Sceptical Chymist]

Either way, the CEOs are making huge profits at the expense of the average users. Stop letting them.

Word up, homey.  I'm not sure what other CEOs are profiting off the backs of plebs, but after learning a bit about this Binance/FTX situation I'm fairly confident CZ is a prime offender.  And I'm still figuring out what went down--if you'd asked me what FTX was yesterday, I would have drawn a blank, because I'm not sure I'd even heard of them until this debacle.  Is that weird or what?

Is it really possible to make leverage trading and shorting shitcoins like FTT?
I just can't believe that crap like FTT is still worth around $22 despite all the negative campaign surrounding it.

It might be unbelievable, but just look at all the shitcoins on the market and the valuations some of them have.  We were in a pretty raging bull market for a while there, and that's usually when even the shittiest of shitcoins get blown up like a ton of TNT.  I never thought BNB would ever reach $60, and yet here it is today trading for $275.  When you've got true believers buying coins they're in love with, rational investing goes flying out the window.

[DaveF]

Either way, the CEOs are making huge profits at the expense of the average users. Stop letting them.

Word up, homey.  I'm not sure what other CEOs are profiting off the backs of plebs, but after learning a bit about this Binance/FTX situation I'm fairly confident CZ is a prime offender.  And I'm still figuring out what went down--if you'd asked me what FTX was yesterday, I would have drawn a blank, because I'm not sure I'd even heard of them until this debacle.  Is that weird or what?

Is it really possible to make leverage trading and shorting shitcoins like FTT?
I just can't believe that crap like FTT is still worth around $22 despite all the negative campaign surrounding it.

It might be unbelievable, but just look at all the shitcoins on the market and the valuations some of them have.  We were in a pretty raging bull market for a while there, and that's usually when even the shittiest of shitcoins get blown up like a ton of TNT.  I never thought BNB would ever reach $60, and yet here it is today trading for $275.  When you've got true believers buying coins they're in love with, rational investing goes flying out the window.

100000% yes.

And that is always going to be part of the problem. I never thought USDT would work, yet people love it. I thought once the lack of valid audits happened with USDT it would implode, but no it kept going. I thought once USDC was released and showed how to have public information and real shown audits and everything else USDT would start to die, but no it kept going. With the TERRA / Luna disaster I thought finally this will cause people to shy away from USDT....but nope.

Looking away from stablecoins there are 1000s of other shitcoins and tokens that people rode to the bottom. There are stocks that people do the same with.

Such is life, at least now we can get some cheaper BTC.

-Dave