Bitcoin Forum
December 16, 2017, 03:51:22 AM *
News: Latest stable version of Bitcoin Core: 0.15.1  [Torrent].
 
   Home   Help Search Donate Login Register  
Pages: « 1 2 3 4 5 6 7 8 9 10 11 12 13 14 [15] 16 17 18 19 20 »  All
  Print  
Author Topic: [ANN] Bitcoinica Consultancy abandons customers. Bitcoinica to enter Liquidation  (Read 54561 times)
Bitcoin Oz
Hero Member
*****
Offline Offline

Activity: 700


Wat


View Profile WWW
August 24, 2012, 04:16:12 AM
 #281

Whoa, you cannot sell off items held in trust on behalf of one client in order to settle a debt you owe to another client, surely???

Nothing was held "in trust" in any meaningful sense of the word.  A ledger of balances was maintained and when the available funds are not enough to cover those balances you can't say that 100% of one person's balance is still available but only 50% of another's if both people are unsecured creditors and neither has a preferential claim.  It wouldn't matter whether the item was gold ingots, diamonds or BTC, if it's not secured then it's likely going to be sold and consolidated for the benefit of all creditors.  In fact, as the majority of Bitcoinica losses have been in BTC, it may be the people whose deposits were in USD who are ultimately worse off as the available USD won't be quarantined (and even more USD are available now because Chen paid back primarily in USD).

People really, really need to understand that they're not dealing with regulated deposit-taking institutions or actual trust accounts.   Your Bitcoinica account isn't like a safe deposit box which was robbed individually.  The thefts are more like money being taken from the vault - it didn't belong to anyone in particular but creates a universal short-fall.

The art gallery example isn't comparable because the paintings would be on loan to the gallery and not regarded as an asset or a liability of the gallery.

This would not be an issue if Bitcoinica wasn't insolvent and if the majority of creditors agreed to alternative payments arrangements - they could agree to repayment in kiwifruit if they wanted.  The problem arises because of the legal requirement to treat all creditors of the same class - in this case, all unsecured creditors - equally.  Everyone could be paid back in Bitcoins as long as the proportion of their total claim which each person received was the same (it's not going to happen because it's not practical), but the value of the claim would still need to be determined in dollars even if the refunds were made in Bitcoins.



Thanks for explaining it  Smiley

1513396282
Hero Member
*
Offline Offline

Posts: 1513396282

View Profile Personal Message (Offline)

Ignore
1513396282
Reply with quote  #2

1513396282
Report to moderator
1513396282
Hero Member
*
Offline Offline

Posts: 1513396282

View Profile Personal Message (Offline)

Ignore
1513396282
Reply with quote  #2

1513396282
Report to moderator
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
DeathAndTaxes
Donator
Legendary
*
Offline Offline

Activity: 1218


Gerald Davis


View Profile
August 24, 2012, 04:16:59 AM
 #282

Of course you would need to label each wallet.dat differently and im not sure if thats supported by bitcoin  ?

Then you could tell the difference between ROGERWALLET.DAT and ZHOUWALLET.DAT

You don't understand what I mean by satoshi client style accounts within wallets, it seems.

Read up on the accounts commands provided by the satoshi bitcoind.

The GUI might even also mention them.

In brief, accounts are distinct collections of addresses within a wallet, their balances being thus the sum of the balances of the addresses associated with that specific account.

So you could label each account with a username for example... within a single wallet.

BUT, AGAIN: fiat is totally separate. Even if all customer-owned fiat is in one fiat trust account and all customer-owned bitcoins in one bitcoin trust account, those are two totally distinct trust accounts.

-MarkM-


Accounts in the Satoshi wallet don't work that way.  They are meaning an accounting mechanism.  When you deposit $100 at your local bank and the teller increases the balance on your account they don't hand carry your $100 bill and place it in your personal vault so when you withdraw $100 the next day you get the same bill back.  They just give you any depositors bill and deduct $100 from your account balance.  The satoshi wallet account system works exactly the same way.  If a wallet had 500K BTC and 250K BTC were stolen there would be no way to determine "who's" 250K was stolen. 

Ironically I have never ever seen someone use an example involving accounts which wasn't completely inaccurate.
markm
Legendary
*
Offline Offline

Activity: 2002



View Profile WWW
August 24, 2012, 04:20:03 AM
 #283

Accounts in the Satoshi wallet don't work that way.

Ironically I have never ever seen someone use an example involving accounts which wasn't completely inaccurate.

Oh wonderful. So basically they don't actually work the way the rpc commands make them seem to work / imply they work?

-MarkM-

Browser-launched Crossfire client now online (select CrossCiv server for Galactic  Milieu)
Free website hosting with PHP, MySQL etc: http://hosting.knotwork.com/
DeathAndTaxes
Donator
Legendary
*
Offline Offline

Activity: 1218


Gerald Davis


View Profile
August 24, 2012, 04:21:09 AM
 #284

Accounts in the Satoshi wallet don't work that way.

Ironically I have never ever seen someone use an example involving accounts which wasn't completely inaccurate.
Oh wonderful. So basically they don't actually work the way the rpc commands make them seem to work / imply they work?
-MarkM-

Nope.  It comes up at least 2-3 times per month.  Sometimes involves heated debates but they work exactly the same as any "mixed funds" banking system works.  Honestly I don't know of any enterprise which uses them.  Most people who think it would be useful for their needs end up thinking that based on a mistaken understanding of how they work.
markm
Legendary
*
Offline Offline

Activity: 2002



View Profile WWW
August 24, 2012, 04:24:37 AM
 #285

Hmm, I did know that fees get suspiciously "stolen", not necessarily coming from the "account" whose transaction the fee is "for", but all the stuff about associating addresses with "accounts" is bogus too???

Re "secured" assets:

I am a bit fuzzy on what "secured" might be intended to mean, too. For example my Open Transactions server provides tokens "secured" by coins in wallets, but it is far from clear that this means they are "secured" assets or even that the actual coins in the wallets are "secured"...

-MarkM-

Browser-launched Crossfire client now online (select CrossCiv server for Galactic  Milieu)
Free website hosting with PHP, MySQL etc: http://hosting.knotwork.com/
DeathAndTaxes
Donator
Legendary
*
Offline Offline

Activity: 1218


Gerald Davis


View Profile
August 24, 2012, 04:30:45 AM
 #286

Hmm, I did know that fees get suspiciously "stolen", not necessarily coming from the "account" whose transaction the fee is "for", but all the stuff about associating addresses with "accounts" is bogus too???

It works exactly like a bank ledger does.

If you have address 1234 which is account A and address 198765 which is account B then

if you receive 10 BTC @ address 1234 the BALANCE (nothing more just the balance in the ledger) for account A is increased.
if you receive 5 BTC @ address 198765 the BALANCE (nothing more just the balance in the ledger) for account B is increased.

If you then spend 5 BTC from account A the BALANCE is reduced from 10 BTC to 5 BTC but the actual coins can come from any valid output in the wallet (i.e. the 10 BTC to 1234 may not be used).  If you then spend 10 BTC from account A again the balance will reduced from 5 BTC to -5 BTC and the actual coins can come from any valid output in the wallet.

Once again exactly how a bank ledger works.
markm
Legendary
*
Offline Offline

Activity: 2002



View Profile WWW
August 24, 2012, 04:35:47 AM
 #287

Ahhh, I see. I did not know that. I guess I was imagining a certain amount of "coin control" was implied that isn't actually in there. Thanks.

-MarkM-

Browser-launched Crossfire client now online (select CrossCiv server for Galactic  Milieu)
Free website hosting with PHP, MySQL etc: http://hosting.knotwork.com/
Bitcoin Oz
Hero Member
*****
Offline Offline

Activity: 700


Wat


View Profile WWW
August 24, 2012, 04:36:37 AM
 #288

Hmm, I did know that fees get suspiciously "stolen", not necessarily coming from the "account" whose transaction the fee is "for", but all the stuff about associating addresses with "accounts" is bogus too???

It works exactly like a bank ledger does.

If you have address 1234 which is account A and address 198765 which is account B then

if you receive 10 BTC @ address 1234 the BALANCE (nothing more just the balance in the ledger) for account A is increased.
if you receive 5 BTC @ address 198765 the BALANCE (nothing more just the balance in the ledger) for account B is increased.

If you then spend 5 BTC from account A the BALANCE is reduced from 10 BTC to 5 BTC but the actual coins can come from any valid output in the wallet (i.e. the 10 BTC to 1234 may not be used).  If you then spend 10 BTC from account A again the balance will reduced from 5 BTC to -5 BTC and the actual coins can come from any valid output in the wallet.

Once again exactly how a bank ledger works.

The only way to keep separate "accounts" is to segregate each wallet.dat

markm
Legendary
*
Offline Offline

Activity: 2002



View Profile WWW
August 24, 2012, 04:38:55 AM
 #289

But, fiat banks nonetheless do have things referred to as "trust accounts", and so do lawyers etc who actually put the fiat of those accounts into banks.

So if banks actually mixing up which coin or bill belongs to who does not render their so called "trust accounts" a null concept / invalid concept why should the details of how wallets work in bitcoin invalidate the same concept when it it merely exhibits the same gaping holes/loopholes?

-MarkM-

Browser-launched Crossfire client now online (select CrossCiv server for Galactic  Milieu)
Free website hosting with PHP, MySQL etc: http://hosting.knotwork.com/
Bitcoin Oz
Hero Member
*****
Offline Offline

Activity: 700


Wat


View Profile WWW
August 24, 2012, 04:40:50 AM
 #290

But, fiat banks nonetheless do have things referred to as "trust accounts", and so do lawyers etc who actually put the fiat of those accounts into banks.

So if banks actually mixing up which coin or bill belongs to who does not render their so called "trust accounts" a null concept / invalid concept why should the details of how wallets work in bitcoin invalidate the same concept when it it merely exhibits the same gaping holes/loopholes?

-MarkM-


Theres a lot about the banking system that doesnt make sense  Smiley

Bitcoin Oz
Hero Member
*****
Offline Offline

Activity: 700


Wat


View Profile WWW
August 24, 2012, 04:43:29 AM
 #291

But, fiat banks nonetheless do have things referred to as "trust accounts", and so do lawyers etc who actually put the fiat of those accounts into banks.

So if banks actually mixing up which coin or bill belongs to who does not render their so called "trust accounts" a null concept / invalid concept why should the details of how wallets work in bitcoin invalidate the same concept when it it merely exhibits the same gaping holes/loopholes?

-MarkM-


Theres a thing  called the FDIC which insures all deposits.

DeathAndTaxes
Donator
Legendary
*
Offline Offline

Activity: 1218


Gerald Davis


View Profile
August 24, 2012, 04:46:31 AM
 #292

But, fiat banks nonetheless do have things referred to as "trust accounts", and so do lawyers etc who actually put the fiat of those accounts into banks.

So if banks actually mixing up which coin or bill belongs to who does not render their so called "trust accounts" a null concept / invalid concept why should the details of how wallets work in bitcoin invalidate the same concept when it it merely exhibits the same gaping holes/loopholes?

-MarkM-


Even there funds aren't kept physically separate.  When a trust account gets a deposit it gets recorded on the ledger and the cash put in the banks vault with all other deposits.  There is no account in any bank where your funds are held seperate.  Banks work on the principal of fractional reserves.  Funds which can't be borrowed against to create new money out of thin air aren't very useful to banks.


A trust/escrow account simply means there are certain increased accounting and reporting requirements (as well as legal penalties) at the physical level they work exactly the same as any other account.

The only concept in a bank which would be completely separated funds would be a safety deposit box.  However that really isn't banking honestly you are just renting some private space in a vault.  It doesn't even require a bank there are private safety deposit box companies too.
repentance
Hero Member
*****
Offline Offline

Activity: 840


View Profile
August 24, 2012, 04:46:52 AM
 #293

Thank you, repentence.

Part of my interest in this is forward-looking.

It already occurred to me that if I would like accounts to be considered as being held in trust I should make sure my heirs and assigns, or whoever steps in to run things if I get run over by a bus, knows exactly which accounts are considered held in trust and which are considered to be part of the operation's own operating capital/assets...

-MarkM-


All services should segregate their own money from user's money.  They don't need trust accounts to do this, but they do need sufficient reserves of their own to cover expected daily/weekly transactions and other operating costs.  And yes, it would be helpful if users knew what the policies regarding deceased accounts are for each service they deal with.  For those services which require a significant amount of verification, it should be easy for the executor of a deceased estate to establish the legitimacy of a claim to the account (or for users to make specific bequests of accounts in their will).  It's likely going to be a much more problematic issue with services which don't require any significant user verification, though.

Failure to segregate user funds when you accept money on deposit from people is a big deal.  It brought down one of the online poker providers that the US DoJ went after - it's not an issue which is only relevant to Bitcoin services.

A "secured" creditor is someone who has a secured claim - usually against a specific asset.  A personal loan from your bank is generally unsecured but a motor vehicle or home loan is generally secured - the lender can take control of the asset and sell it if you default and if you owe 7,000 other people money as well, that asset is not available to satisfy their claims until the secured creditor's claim has been satisfied first.  Sometimes security takes the form of a lien over something other than physical property.

Receivers deal only with the interests of secured creditors so the fact that Bitcoinica is going through as receiver before it goes into liquidation means there's at least one secured creditor.  We're presuming it's Wendon because Tihan said that funds they obtain via receivership will be made available to the liquidator for distribution to unsecured creditors.  We don't know what the secured asset is (the domain and IP are the first things which spring to mind), but there'd be little point in pursuing receivership if it had no value.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
markm
Legendary
*
Offline Offline

Activity: 2002



View Profile WWW
August 24, 2012, 04:47:24 AM
 #294

Bottom line is, if I have a shitload of client fiat funds in the Royal Bank of Canada that I am holding in trust for those clients, and a shitload of bitcoins in bitcoin wallets I am holding in trust for possibly completely distinct separate clients, and a bunch of devcoins similarly, and a bunch of namecoins similarly, etcetera etcetera etcetera, how should I set things up if I want to ensure that if/when the FDIC and Royal Bank and government of Canada screw us out of the (value of the?) fiat it is only those clients who were foolish enough to have fiat in trust instead of cryptocoins in trust that suffer the loss?

-MarkM-

Browser-launched Crossfire client now online (select CrossCiv server for Galactic  Milieu)
Free website hosting with PHP, MySQL etc: http://hosting.knotwork.com/
DeathAndTaxes
Donator
Legendary
*
Offline Offline

Activity: 1218


Gerald Davis


View Profile
August 24, 2012, 04:51:48 AM
 #295

Bottom line is, if I have a shitload of client fiat funds in the Royal Bank of Canada that I am holding in trust for those clients, and a shitload of bitcoins in bitcoin wallets I am holding in trust for possibly completely distinct separate clients, and a bunch of devcoins similarly, and a bunch of namecoins similarly, etcetera etcetera etcetera, how should I set things up if I want to ensure that the FDIC and Royal Bank and government of Canada screw us out of the fiat it is only those clients who were foolish enough to have fiat in trust instead of cryptocoins in trust that suffer the loss?

-MarkM-


Get a lawyer.  It is possible you could word the contract in such a way that you aren't accepting coin deposits merely offering secure storage of the user's coins.  That combined with using physically isolated wallets should be sufficient however if you likely would want a lawyer to be sure.  The fun thing is this is all new area for the law.   Likely a lawyer who is familiar with bullion storage may have some insight into how to word the contracts. 
Bitcoin Oz
Hero Member
*****
Offline Offline

Activity: 700


Wat


View Profile WWW
August 24, 2012, 04:53:32 AM
 #296

Bottom line is, if I have a shitload of client fiat funds in the Royal Bank of Canada that I am holding in trust for those clients, and a shitload of bitcoins in bitcoin wallets I am holding in trust for possibly completely distinct separate clients, and a bunch of devcoins similarly, and a bunch of namecoins similarly, etcetera etcetera etcetera, how should I set things up if I want to ensure that if/when the FDIC and Royal Bank and government of Canada screw us out of the (value of the?) fiat it is only those clients who were foolish enough to have fiat in trust instead of cryptocoins in trust that suffer the loss?

-MarkM-


If a bank closes down I dont know how they treat safety deposit boxes.

markm
Legendary
*
Offline Offline

Activity: 2002



View Profile WWW
August 24, 2012, 04:57:15 AM
 #297

Wow. I am leaning back toward thinking the safest way to handle cryptocoins might be to have a deadman switch that sends them all out to their actual owners automatically if only I can merely delay the vultures from decrypting the key-storage long enough for that deadman switch to kick in...

-MarkM-

Browser-launched Crossfire client now online (select CrossCiv server for Galactic  Milieu)
Free website hosting with PHP, MySQL etc: http://hosting.knotwork.com/
Bitcoin Oz
Hero Member
*****
Offline Offline

Activity: 700


Wat


View Profile WWW
August 24, 2012, 04:58:43 AM
 #298

Wow. I am leaning back toward thinking the safest way to handle cryptocoins might be to have a deadman switch that sends them all out to their actual owners automatically if only I can merely delay the vultures from decrypting the key-storage long enough for that deadman switch to kick in...

-MarkM-


Thats where multi sig comes in I guess  Smiley

repentance
Hero Member
*****
Offline Offline

Activity: 840


View Profile
August 24, 2012, 05:01:00 AM
 #299

But, fiat banks nonetheless do have things referred to as "trust accounts", and so do lawyers etc who actually put the fiat of those accounts into banks.

So if banks actually mixing up which coin or bill belongs to who does not render their so called "trust accounts" a null concept / invalid concept why should the details of how wallets work in bitcoin invalidate the same concept when it it merely exhibits the same gaping holes/loopholes?

-MarkM-


A trust account is a specific type of account where someone has at least temporary control of funds on behalf of another.  By definition, someone must act as trustee of the account which renders them legally liable for the way the funds are used while under their control (which is why lawyers, accountants, real estate agents etc have fidelity funds/insurance in respect of funds held in trust).  Trust accounts generally accept funds on behalf of someone else.  You might pay your rent to your real estate agent, who deposits that money into their trust account and then forwards the rent to the owner after deducting management fees.  If you win a lawsuit, the settlement will be paid into your lawyer's trust account and you'll be paid from that account after any relevant disbursements have been made.  Accounts opened for deceased estates are essentially trust accounts.  

A normal transaction account at your bank or an account on a Bitcoin exchange is not a trust account.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
markm
Legendary
*
Offline Offline

Activity: 2002



View Profile WWW
August 24, 2012, 05:05:36 AM
 #300

It occurs to me that with the way Open Transactions works, what is happening when actual fiat or coins used to "back" a token ("asset") in the server vanish is simply that that specific asset type has become a "fractional reserve" asset. So if bitcoins get stolen, oh dear the bitcoin tokens are now fractional reserve bitcoin tokens no longer fully backed bitcoin tokens. If the devcoins, however, are still secure, then the devcoin tokens are still fully backed...

-MarkM-

Browser-launched Crossfire client now online (select CrossCiv server for Galactic  Milieu)
Free website hosting with PHP, MySQL etc: http://hosting.knotwork.com/
Pages: « 1 2 3 4 5 6 7 8 9 10 11 12 13 14 [15] 16 17 18 19 20 »  All
  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!