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RE: BitMEX dumped their BCH and credited all users!

in #bitcoin • 7 years ago (edited)

@kingscrown - while given that BCH had considerably corrected in recent days, it was rather unethical of BitMex to sell off what their users held without their consent. I certainly would never trust an exchange like that which would take decisions without my consent.

7 years ago in #bitcoin by
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     7 years ago  

    I disagree. If the customer has the theoretical possibility to withdraw the BTC compensated and buy BCH for it, then the customer bears no harm for it. Except that the BCH/BTC-ratio may grow significantly during the time from the exchange starts dumping until the customer can withdraw BTC, and except that the costs and fees on moving the bitcoin funds and trading it on another exchange can be significant.

    Anyway, the exchanges basically has five options on how to deal with forks:

    • Ignore it. I'd say that's the most reasonable action for insignificant forks. It takes zero effort, except for that the support staff may get some heat answering angry support requests. However, if there is significant values in them there coins, this would be the most unreasonable option.
    • Dump the new coin and credit the users. It may sound simple, but still it may require quite some effort from the exchange; funds are probably locked up in some tight-security cold wallets. There is always the risk that the forked-coin-software contains backdoors (like we've seen with Bitcoin Gold) or bugs, hence one may want to move all the BTC-funds over to a new cold strage (new private keys) before yielding the old private keys to the new software. Those costs (which may be difficult to measure since it's about risk-taking and spending employee resources) should of course be deducted from the sales income before the users are credited. Since the whole process is likely to take time, one will also have to bear the full cost of angry support requests in the meanwhile.
    • Allow users to withdraw the new coin. It also requires quite some extra resources in development, testing, etc, in addition to all costs above.
    • Develop full support for the new coin. I'd say that's the most reasonable action in the case of BCH, but then again it does require quite some resources in development, testing, configuration, marketing etc. It takes time (unless planned long in advance), in addition to the costs above
    • Dump the coins and count it as profit. This can arguably be called "theft".

    The latter is the only truly unethical option, as I see it.

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     7 years ago  

    Certainly they didn't have the BCH to begin with because they didn't have all the BTC that they SOLD. (Fractional Reserve Crypto and part of their business plan - CoinBase too) They are exposed by their actions. It happens. When we are caught cheating our friends and clients we have egg on our face and it is embarrassing for everyone. The only thing to do at that point is admit it and try determinedly to earn their trust back.

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     7 years ago  

    Remember Hanlon's razor and all that ... but it's not even needed to include "stupidity" in the equation, it's perfectly reasonable that it takes time and resources to move tons of liquidity from cold storage to the exchanges.

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     7 years ago  

    Excellent point, and thanks for Hanlon's razor.

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       7 years ago  

      In this case, the most sensible thing for them would be to include BCH in their trading platform and yield the BCH to the customers there. Most likely many customers wouldn't withdraw it.

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       7 years ago  

      Seems equally valid.

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         7 years ago  

        The actual truth of the matter is beyond my pay grade. The only thing I might add is the observation that when, due to circumstances, we find we have neglected, shortchanged or actually cheated our friends and clients in the marketplace we have to earn their trust back one step at a time. But when we govern we are not usually held accountable for our actions and the neglect, injustice and hypocrisy can reach astronomical proportions. When corrected early by the Invisible Hand, a tiny spark cannot become a devastating blaze.

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           7 years ago (edited) 

          Coinbase did the same thing with BCH holding it for 6 months.

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