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Comment by laluser | Hacker News Reader

Regardless, what has been happening and pointed out is not even an inconsistency - it's a huge red flag. This week we'll see more players go bankrupt or run away with even more money as the fallout from FTX is yet to propagate everywhere. Truly fascinating to watch from the sidelines.

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What is FTX ? First time hear about it.

I only care if bittrex, bitmex or binance got any problem.

> bittrex, bitmex or binance

Yes, the money launderer [1], one whose founder is coming out of house arrest [2] (and is also a money launderer [3]), and one that can’t tell you where your money is [4]. What could go wrong.

[1] https://home.treasury.gov/news/press-releases/jy1006

[2] https://www.reuters.com/legal/government/crypto-exchange-bit...

[3] https://www.coindesk.com/markets/2021/08/10/bitmex-announces...

[4] https://www.coindesk.com/markets/2020/10/29/leaked-docs-reve...

In Binance's defense, they claimed (a) they don't follow their publicly known plans, and (b) they have other, secret plans.

Up to users if they want to trust that.

the solution isn't to use a different company exchange, its to go on-chain directly.....

any company exchange that is not lending customer assets will function completely fine during a bank run even if 100% of assets are withdrawn in quick succession, nobody should have anything to worry about ever, but so far these are mismanaged companies with poor collateral choices for their creditworthiness.

many crypto skeptics only see headlines when things go wrong, but many people that use crypto regularly know that there are plenty of exchanges and services that have had 100% withdrawals just fine, something that would be called a "stress test" on poorly run services or a "black swan" in the traditional banking world. these big ones from the last cycle got hooked on leverage, the ones that didn't will be fine as long as they stick to just running an exchange instead of additional overhead.

> the solution isn't to use a different company exchange, its to go on-chain directly.....

i'm a crypto noob - this is what i've been wondering - isn't the point of crypto that you can participate in these transactions directly without trusting an intermediary? why do people use exchanges?

Because exchanges are the easiest way (by far) to exchange money for crypto, and they also make it as easy to transact as an investment app.

The alternatives, as far as I know, are to find a friend willing to give you some crypto for money, or to buy mining equipment and get crypto from that, or to find some trusted physical exchange to pay cash to and trust they will pay the crypto you bought into your wallet.

Even after you get in, you'll have to create and manage your own wallet for every crypto you want to trade in (though an on-chain DEX could in principle handle that for you, I believe none of the popular ones do, based on previous discussions). There are probably apps that help, depending on how much you want to go trust-less.

All crypto on chain transactions are one leg of a transaction.

When you pay for something, you want the thing you buy to actually arrive, and if that's something off-chain (like real money), you need to trust your counterparty to actually deliver it.

Crypto exchanges also solve the reverse problem: how to trade real money for cryptocurrency. That can't be done on chain.

Exchanges can also cut out blockchain transaction fees and transaction rate limits, and offer all sorts of tempting (but probably fraudulent) financial products.

Because doing on-chain transactions with a known counterparty that gives you their wallet address is completely impractical for trading/speculation/gambling, because you'd lack a way to find the counterparty that's going to give you the best price, and you'd be paying on-chain transaction fees.

And trading/speculation/gambling is 99% of what people do with cryptocurrencies.

> , because you'd lack a way to find the counterparty that's going to give you the best price,

This part can still be done on chain, "automated market maker" is the term to search for for more information about how this part of the problem is usually solved.

*coins have an insane transaction cost and it takes a long time, they are not really suited for gambling in this way.

So you get exchanges that just lets you trade without actually sending things on the networks since they are so useless.

the main point is familiarity, when trading other kinds of assets, the exchange is the destination. you buy it, and keep your assets there. deeeeep down the exchanges keep a hotline for you to ask for your share certificates or physical commodities, but they make it very hard, and when you get them you can't do anything with them easily. with crypto, the exchanges are just part of the journey and your wallet is the destination, it is very easy to get your crypto and there is an ever expanding set of things you can do with your crypto easily. people chose not to get familiar with that because its simply not the same user experience ("hard" wouldn't be the word I would use, just unfamiliar) and because they weren't there to use crypto at all, only attempt to profit from a delta in price differences or managed staking where the company lies about how much they are earning from staked assets and gives a little less to the user.

people chose to learn or lose their funds. pretty simple.

when it comes to "hard" versus unfamiliar, it will just be different people that chose to be crypto natives and self-custody and use on-chain services. its the same with every other advancement, there are still people that don't use ATMs and don't trust them due to the new problems that arise from their existence. there are still people that don't use discount brokerage firms because they are more familiar with calling their broker, computers are hard and they don't trust their money on the internet or services on the internet. its the same with crypto: nobody can stop you from becoming your parents, can't blame the user experience on everything.

That's not right. Brokers and DRS hold shares, not exchanges. If Exchanges held shares, "settlement" delays would not exist.

accurate, making no difference in anything I wrote about the user experience. custody is simulated by the exchange, and demands for self-custody is initiated at the exchange.

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