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Comment by nullc | Hacker News Reader

Why do you think a single thing they told the public was ever truthful?

It seems naive to me.

I’m not sure what you mean by this exactly. Many of the things they said to the public are not true, but these currencies use permanent, public ledgers, so you can see where the money goes if you look carefully.

How is that particularly relevant? Data isn't knowledge. Just because some assets have public records doesn't really tell you anything about liabilities or underlying ownership.

Exchanges could practice provable solvency ( https://eprint.iacr.org/2015/1008.pdf ), but they aggressively do not-- in part because they don't want to bring customers attention to the potential issue (and they rightfully reason that once customers are concerned no amount of technical solution will likely satisfy them).

But FTX wasn't really an exchange-- it was a scamcoin casino primarily trading in highly leveraged proxy assets ("perpetuals") as a bucketshop.

How can the provable solvency scheme possible prove solvency for fiat holdings? For example, I deposit $100 into the exchange. How can the exchange prove to me that it hasn't gone and gambled that $100? I think this could only be handled with human auditors going in and checking the actual amounts held in the exchange's bank accounts.

Can't, except as you note. Best trade your fiat for something actually auditable through cryptographic means ASAP. :)

(for a less quippy answer: they could show their fiat liabilities through these means and have a third party bank attest to their fiat account assets (or an encryption of their fiat assets). At least then you'd be trusting some established bank and not just some sketchy cryptocurrency industry company)

Does the ledger capture loans of user funds held by FTX?

Yes

Not if the asset being loaned is cash

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