Bitcoin Forum
September 19, 2019, 11:48:46 AM *
News: If you like a topic and you see an orange "bump" link, click it. More info.
 
   Home   Help Search Login Register More  
Pages: [1]
  Print  
Author Topic: How can a centralised exchange prove they won't run away with your money?  (Read 1260 times)
wangxinxi
Hero Member
*****
Offline Offline

Activity: 826
Merit: 1000


Founder & CEO of Coinut.com, Litecoin Core Dev


View Profile WWW
October 23, 2014, 03:58:30 PM
Last edit: October 23, 2014, 04:10:53 PM by wangxinxi
 #1

How can they prove that? I know they can somehow prove that they have money at some point. But that's still not very convincing.
1568893726
Hero Member
*
Offline Offline

Posts: 1568893726

View Profile Personal Message (Offline)

Ignore
1568893726
Reply with quote  #2

1568893726
Report to moderator
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
1568893726
Hero Member
*
Offline Offline

Posts: 1568893726

View Profile Personal Message (Offline)

Ignore
1568893726
Reply with quote  #2

1568893726
Report to moderator
tripppn
Hero Member
*****
Offline Offline

Activity: 756
Merit: 500


View Profile WWW
October 23, 2014, 04:35:07 PM
 #2

They can't.  There has to be a level of trust.  I don't care how good of a rep an exchange has they can always up and run and be very hard to find.  NEVER LEAVE TOO MUCH COIN ON AN EXCHANGE!!!

“You can't be a real country unless you have a beer and an airline - it helps if you have some kind of football team, or some nuclear weapons, but in the very least you need a beer.”
― Frank Zappa
PolarPoint
Hero Member
*****
Offline Offline

Activity: 672
Merit: 500


View Profile
October 23, 2014, 04:40:51 PM
 #3

They can setup a trust with a reputable lawyer or accounting firm and have no access to the keys of their cold wallet. That would warrant some trust. The exchange can still run away, just with less money.
findftp
Legendary
*
Offline Offline

Activity: 1008
Merit: 1000


Delusional crypto obsessionist


View Profile
October 23, 2014, 07:19:20 PM
 #4

How can they prove that? I know they can somehow prove that they have money at some point. But that's still not very convincing.
I think multisig could solve that problem.
Both you and the exchange need the keys to move the coins.
You could also use three or more keys.

1FdwDuV2qgsw2w1Lza8nsea7L6mQxsc7g3
wangxinxi
Hero Member
*****
Offline Offline

Activity: 826
Merit: 1000


Founder & CEO of Coinut.com, Litecoin Core Dev


View Profile WWW
October 24, 2014, 02:18:34 AM
 #5

How can they prove that? I know they can somehow prove that they have money at some point. But that's still not very convincing.
I think multisig could solve that problem.
Both you and the exchange need the keys to move the coins.
You could also use three or more keys.


Multisig needs real bitcoin transactions when you try to move funds. So whenever you open an order, you need to wait for several minutes until the transaction is confirmed, during which, the market may have changed significantly. How to address this problem?
opossum
Hero Member
*****
Offline Offline

Activity: 925
Merit: 1000


View Profile
October 24, 2014, 03:27:58 AM
 #6

How can they prove that? I know they can somehow prove that they have money at some point. But that's still not very convincing.
I think multisig could solve that problem.
Both you and the exchange need the keys to move the coins.
You could also use three or more keys.

This would not work as all of the coins are comingled together with the coins of other customers' money. Plus many people use exchanges in order to purchase bitcoin from their marketplace so the customer would not have any kind of associated private key. If you had "three ore more keys" of a multisig address then you would essentially control the bitcoin which would defeat the point of having the bitcoin at an exchange in the first place.


 
         ▄▄█████████▄▄
      ▄█████████████████▄
   ▄████▀            ▀████▄
  █████                █████▄
 ███████████████████████████▄
████▀▀▀▀▀▀▀████████▀▀▀▀▀▀▀███▄
████        ██████        ████
████        ██████        ████
████        ██████        ████
████        ██████        ████
 ████▄      ██████      ▄████
  ▀████     ██████    ▄████▀
    ▀████▄▄▄██████▄▄▄████▀
      ▀▀██████████████▀▀
TIDEX



wangxinxi
Hero Member
*****
Offline Offline

Activity: 826
Merit: 1000


Founder & CEO of Coinut.com, Litecoin Core Dev


View Profile WWW
October 24, 2014, 03:30:49 AM
 #7

How can they prove that? I know they can somehow prove that they have money at some point. But that's still not very convincing.
I think multisig could solve that problem.
Both you and the exchange need the keys to move the coins.
You could also use three or more keys.

This would not work as all of the coins are comingled together with the coins of other customers' money. Plus many people use exchanges in order to purchase bitcoin from their marketplace so the customer would not have any kind of associated private key. If you had "three ore more keys" of a multisig address then you would essentially control the bitcoin which would defeat the point of having the bitcoin at an exchange in the first place.

Good points.
sandykho47
Sr. Member
****
Offline Offline

Activity: 252
Merit: 250

Knowledge its everything


View Profile
October 24, 2014, 12:15:35 PM
 #8

It's very hard to trust centralised exchanger, but i think this can give a bit trust :
1. They must tell where are their office (not just fake picture)
2. They must show they are registered company
3. They must reveal their identity in real life
4. They must swear they won't run away with your money
5. They might need give you insurance
6. They must trusted by other people

It's not prove they won't run away with your money, but the chance is reduced

Kemampuanku Tidak semua orang memiliki dan dapat melakukannya . Tidak memakan kaum sendiri . dan mempunyai kode etik yang tidak masuk akal.
xmasdobo
Full Member
***
Offline Offline

Activity: 168
Merit: 100


View Profile
October 24, 2014, 12:38:17 PM
 #9

No doubt once exchange owners start seeing loses monthly they are going to pull a Gox/Mint and get the money and run.
wangxinxi
Hero Member
*****
Offline Offline

Activity: 826
Merit: 1000


Founder & CEO of Coinut.com, Litecoin Core Dev


View Profile WWW
October 24, 2014, 12:55:59 PM
 #10

No doubt once exchange owners start seeing loses monthly they are going to pull a Gox/Mint and get the money and run.

Why do they run instead of applying for bankruptcy?
bitsmichel
Sr. Member
****
Offline Offline

Activity: 518
Merit: 250



View Profile
October 24, 2014, 03:21:21 PM
 #11

How can they prove that? I know they can somehow prove that they have money at some point. But that's still not very convincing.
They cannot prove that they will not do that, which is why something like the Mt Gox theft was possible. At best an exchange could give you control over your bitcoins by handing you your private keys. Private keys are used to initiate bitcoin transactions and could be imported into your wallet.  Exchanges are no exception to this: any centralized system can run away with your money (including banking systems). If you do not have the private keys you do not control the money.

wangxinxi
Hero Member
*****
Offline Offline

Activity: 826
Merit: 1000


Founder & CEO of Coinut.com, Litecoin Core Dev


View Profile WWW
October 24, 2014, 03:30:52 PM
 #12

How can they prove that? I know they can somehow prove that they have money at some point. But that's still not very convincing.
They cannot prove that they will not do that, which is why something like the Mt Gox theft was possible. At best an exchange could give you control over your bitcoins by handing you your private keys. Private keys are used to initiate bitcoin transactions and could be imported into your wallet.  Exchanges are no exception to this: any centralized system can run away with your money (including banking systems). If you do not have the private keys you do not control the money.

yeah, but if you are the only person who has the private key, it's going to be much more cumbersome to trade, and every trade could take much longer as bitcoin transactions need time to confirm. If you have the time to wait for the confirmations, you can also choose another more intuitive way, i.e. store as little in the exchange as possible and transfer into the exchange only when funds are needed.
Lethn
Legendary
*
Offline Offline

Activity: 1540
Merit: 1000



View Profile WWW
October 24, 2014, 03:57:28 PM
 #13

In the absolute end they can't and even if it could be proven, they'd still be vulnerable to hacks, people need to learn to stop storing their money online and use a cold wallet.
wangxinxi
Hero Member
*****
Offline Offline

Activity: 826
Merit: 1000


Founder & CEO of Coinut.com, Litecoin Core Dev


View Profile WWW
October 24, 2014, 04:14:40 PM
Last edit: October 25, 2014, 03:36:04 AM by wangxinxi
 #14

In the absolute end they can't and even if it could be proven, they'd still be vulnerable to hacks, people need to learn to stop storing their money online and use a cold wallet.

In the traditional finance world, withdrawals are all processed manually. Although it takes a lot of effort and time, it's secure. Traditional exchanges are also being hacked everyday, but they seldom go bankrupted because of the hacks.

I don't know how many bitcoin exchanges failed because their creators ran away, but I guess most exchanges' failure was due to automatic withdrawals. People say MtGox's failure was due to some technical issues of Bitcoin. But surely there are still other issues within either Bitcoin or the exchanges' trading systems. If MtGox manually checked their withdrawals, they wouldn't fail. And to me, if existing exchanges do not check withdrawals, many of them will also fail sooner or later due to some other technical issues.

So, maybe bitcoin exchanges should follow the same approach adopted by the traditional finance world and check user withdrawals manually?
btcmulisha
Newbie
*
Offline Offline

Activity: 28
Merit: 0


View Profile
October 25, 2014, 11:19:19 AM
 #15

In the absolute end they can't and even if it could be proven, they'd still be vulnerable to hacks, people need to learn to stop storing their money online and use a cold wallet.

Correct.. It is better when we back everything that we have.
CryptoCarmen
Member
**
Offline Offline

Activity: 84
Merit: 10

★Bitin.io★ - Instant Exchange


View Profile
October 25, 2014, 12:59:45 PM
 #16


4. They must swear they won't run away with your money


Swear to whom? Maybe all mighty ghost of Rockefeller.
Q7
Sr. Member
****
Offline Offline

Activity: 448
Merit: 250


View Profile WWW
October 25, 2014, 01:08:25 PM
 #17

One way to overcome this is never to trust anyone. I only keep small amount in exchangers and that applies even to big reputable exchangers. No exception. If i need to trade, well just have to go through the waiting process. Opportunity might passed but at least money is safe.

Pages: [1]
  Print  
 
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!