Not another one!

Here is the story describing that Flexcoin is now closed, after a theft of almost 900 Bitcoins (wiping out their customer’s holdings in the process). How can exchanges be in existence for so long and not have a check/balance to track the Asset Holdings and Liabilities?  How is this not a 1-1 relationship?

I assume no one is “loaning” Bitcoins – even the BTC.sx exchange that advertises itself as using “leverage” keeps a margin in excess of the actual position “loaned”. Which is the equivalent of, if you give me $1000 then I will loan you $10. Not the same at all.

On Massive Rainfall I’ve had to wrestle with this as well. Not for the initial trade (which costs little to nothing) but for the continued Mark-to-Market that occurs at 1pm each day (which I cannot confirm actually works). At some point, some trader who goes beyond his “margin” or “deposit” is going to require a “margin call” – similar to a bank calling you saying “Hey! You have no money to pay us, and we’re not allowed to lose money, so pay up or we’ll take your house.” In this case, a “house” is really assets or profitable positions but still.

No, what I have concerns about is that these magic coins aren’t being managed. It wasn’t until the value shot up to hundreds of dollars that anyone started to look. Not cool.

Be a bank first, a technology second.