[DATA]Exchanges: their way of using a fractional-reserve and generate inflation

[gbianchi]

Next month, a lightweight web client will allow on-blockchain bitcoin trading:

blockchain is Bitcoin blockchain or your own blockchain ?

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[Mashuri]

I would be more concerned about the fiat side of exchanges.  It's hard to run fractional reserve on BTC because it is so easy to transfer in and out of exchanges.  Fiat, on the other hand, is slow and cumbersome by comparison.  Because of this, a larger percent of fiat is likely to stay in an exchange than BTC.  For example, Gox was basically running a fiat fractional reserve and artificially distorted BTC prices higher than they should have been.  The first key is to make BTC the reserve currency: all contracts get settled in BTC.  http://796.com does this already and has more transparency than any other centralized exchange as a result.  They have no fiat to audit -- just the BTC addresses they post.  The next step is to decentralize the transactions themselves on the blockchain via multisig.  796 could do this now for non-day traders if they wanted to.  Day traders will need to stick to off-chain exchanges for speed purposes though.

[dKingston]

people should use localbitcoins or other anonymous exchanges NOT the big coinbase, bitstamp, etc

[galbros]

Thanks for your post and this thread.  I agree that exchanges acting opportunistically is a real threat to bitcoin, Mt. Gox was only one example of the things that can be pulled.

I think the issue is what happens the first time one of the exchanges faces a "bank run" and has to shut down when it becomes clear it does not have all the coins it says it does.  Will the price rise as the exchange attempts to buy coins to cover, perhaps using "sticky" fiat balances (as pointed out by Mashuri) or will price drop as people lose more confidence in the coin?

[Bitcoinexp]

I don't entirely agree with your post but it was a lengthy and interesting post. Think of it as a glorified loan to a bank/exchange. That's what depositing money into a bank/exchange is to me. But being able to put a large sum in and only able to withdraw tiny amounts at a time does cause a sort of illusion/paradox that you describe.

[acquafredda]

But being able to put a large sum in and only able to withdraw tiny amounts at a time does cause a sort of illusion/paradox that you describe.

That's the thing: why in the world you can deposit as many BTC as possible but, when's a matter of withdrawal, they say no wait!no more than x at the time.

We know that moving 50BTC or 50000BTC or 1230000BTC has the same transaction price.
So?
Why a legitimate BTC exchange should behave like a bank?

From there comes a nasty smell if you know what I mean.
 

[gbianchi]

Thanks for your post and this thread.  I agree that exchanges acting opportunistically is a real threat to bitcoin, Mt. Gox was only one example of the things that can be pulled.

I think the issue is what happens the first time one of the exchanges faces a "bank run" and has to shut down when it becomes clear it does not have all the coins it says it does.

some people around try to organize a "targeted bank run", this can be a good stress test for an exchange .... bitcoin people hawe the power to do it !

 Will the price rise as the exchange attempts to buy coins to cover, perhaps using "sticky" fiat balances (as pointed out by Mashuri) or will price drop as people lose more confidence in the coin?

I think they are already doing fracional-reserve, so they are doing inflation.
If I am right, when they are forced  to restore the reserves, inflation falls, and price go up.

[gbianchi]

people should use localbitcoins or other anonymous exchanges NOT the big coinbase, bitstamp, etc

When i need to buy-sell BTC, I use localbitcoins,
(and never hold my BTC on their wallets )

[D05GTO]

I believe all Exchanges should have a real time liquidity page.   Only one I know of is the Atomic-Trade exchange and it has very very low volume but I'm not scared to leave some BTC there.  The USD/BTC is offline now and is scheduled to return.   KYC verification is such a painful process on all the legit ones.   I know I waited over a month on the Coinbase one.

https://www.atomic-trade.com/liquidity

[gbianchi]

I believe all Exchanges should have a real time liquidity page.   Only one I know of is the Atomic-Trade exchange and it has very very low volume but I'm not scared to leave some BTC there.  The USD/BTC is offline now and is scheduled to return.   KYC verification is such a painful process on all the legit ones.   I know I waited over a month on the Coinbase one.

https://www.atomic-trade.com/liquidity

How you are sure they report real data ?

[gbianchi]

Looking for a list of transparent exchanges, live updated proof of reserve, user controlled wallets etc. If an exchange is holding users bitcoins non-transparently it's possible they're a scam.

Decentralised:
https://bitsquare.io/ (in development)

Live proof of reserve:
https://www.usecryptos.com/transparency
https://exchange.coinport.com/coin/BTC
https://exco.in/reserves
https://yunbi.com/exchange_assets ( https://github.com/peatio/liability-proof )

No users funds held/OTC with escrow:
https://www.247exchange.com/
http://www.100bit.co.in/

Multisig user controlled wallet:
https://www.therocktrading.com/ (optional, preferred)
https://www.bitalo.com/

Audited recently:
https://coinfloor.co.uk/


Some info on the merkle tree method of proof of reserves, original site down but still available on web.archive.org:
https://web.archive.org/web/20140821194253/https://iwilcox.me.uk/2014/proving-bitcoin-reserves

[picolo]

I believe all Exchanges should have a real time liquidity page.   Only one I know of is the Atomic-Trade exchange and it has very very low volume but I'm not scared to leave some BTC there.  The USD/BTC is offline now and is scheduled to return.   KYC verification is such a painful process on all the legit ones.   I know I waited over a month on the Coinbase one.

https://www.atomic-trade.com/liquidity

How you are sure they report real data ?

We have to avoid thinking 'it's ok as long as everyone doesn't withdraw'. We need proper auditing!

[gbianchi]

I believe all Exchanges should have a real time liquidity page.   Only one I know of is the Atomic-Trade exchange and it has very very low volume but I'm not scared to leave some BTC there.  The USD/BTC is offline now and is scheduled to return.   KYC verification is such a painful process on all the legit ones.   I know I waited over a month on the Coinbase one.

https://www.atomic-trade.com/liquidity

How you are sure they report real data ?

Coinport's a good example of a simple method, a list of the exchanges addresses with a signed message for each, very easy to verify. The merkle tree explanation is worth a look, confusing though.

Not added BitShare to that list, not had time to go over it yet, please post any additions or any don't belong on it. Therocktrading uses greenaddress for multisig and its a bit of a compromise solution that's received a lot of criticism but practically all of it appears to be astroturfing, very few posts with legitimate concerns.

Good method, easy to verify.
The proof that if an exchange wants to be transparent, can do it easily.

[bitllionaire]

What do you think about decentralized exchanges?

I think they may beat the manipulation and traditional exchanges problems

[gbianchi]

What do you think about decentralized exchanges?

I think they may beat the manipulation and traditional exchanges problems

I think they are the real solution.
I am looking at bitsquare.io progress ...

[gbianchi]

people need more awareness about exchanges problem
from https://bitsquare.io/crowdfunding/ :

The crowd funding campaign has ended and has not reached its goal
Results (Feb. 9th 24:00 CET):
55 Pledgers
54.03480061 BTC
45 % of the goal reached

We want to thank all our supporters who wanted to help us to make it a success!
You can revoke your pledge now in the Lighthouse application.
Here is a blog post with an analysis and more information about how the project will continue.
Here is the last snapshot of the list of pledgers and the messages they left.

[picolo]

people need more awareness about exchanges problem
from https://bitsquare.io/crowdfunding/ :

The crowd funding campaign has ended and has not reached its goal
Results (Feb. 9th 24:00 CET):
55 Pledgers
54.03480061 BTC
45 % of the goal reached

We want to thank all our supporters who wanted to help us to make it a success!
You can revoke your pledge now in the Lighthouse application.
Here is a blog post with an analysis and more information about how the project will continue.
Here is the last snapshot of the list of pledgers and the messages they left.

Will you still do the project?

[gbianchi]

people need more awareness about exchanges problem
from https://bitsquare.io/crowdfunding/ :

The crowd funding campaign has ended and has not reached its goal
Results (Feb. 9th 24:00 CET):
55 Pledgers
54.03480061 BTC
45 % of the goal reached

We want to thank all our supporters who wanted to help us to make it a success!
You can revoke your pledge now in the Lighthouse application.
Here is a blog post with an analysis and more information about how the project will continue.
Here is the last snapshot of the list of pledgers and the messages they left.

Will you still do the project?

yes, they continue (slowly) the project:
https://bitsquare.io/blog/crowdfunding-campaign-conclusion/

The Bitsquare crowdfunding campaign has ended without reaching our funding goal.  We are disappointed, but also proud and encouraged by the amount of the support we did receive.   The enthusiasm we have seen from the community confirms we are on the right track and fuels our own passion to make Bitsquare a reality.

Although the project will lose the full time efforts of Manfred and Chris, we will continue to move forward with a renewed focus on development with out the distraction of raising money.  We may not be able to deliver milestones on our original schedule now, but we will continue to make progress with the part time volunteer efforts of Manfred and the rest of the team.

[acquafredda]

That list of transparent exchanges is great.
Many thanks!

[gbianchi]

That list of transparent exchanges is great.
Many thanks!

done by stan.distortion