I recently watched a TikTok in which an interviewer asks a person if they believe Bitcoin is a scam. The answer is a well articulated reply in which the interviewee mentions that the idea behind Bitcoin is great, it started out as a decentralized network that is/was a pioneer in proving an asset can be decentralized and by using the cryptographic hashing to prevent easy takeovers of the network. As anyone who has tried to gather a group of to do literally anything, it’s pretty impressive that Bitcoin and other early cryptos have been able to attract millions of people (but I guess it’s easier when there’s a promise of gold at the end of the rainbow 🤣).
That interview ends with the interviewee mentioning that the crypto market has become yet another example of where the Matthew Effect is present, the whales control the market pretty well and exchanges like Crypto.com and Coinbase are just custodial accounts disguised as crypto wallets for the average person.
For the past few months, that last bit has really been on my mind. Coinbase does give you many crypto addresses and they all seemingly look like real wallet addresses. They might even be but one clue that sort of proved the opposite for me was the fact that XLM transfer require memos and if a memo is missing, the money will never make it to your account. Guess what the memo means to Coinbase? It’s your user account identifier. Real crypto wallets, the non-custodial versions, usually don’t require you to have memos set when sending to your address. Because the memo is just that, a memo on a transaction (just like a note on a paper check, meaningless to the machines, meaningful to the few exchanging money).
Today, I saw Fortune article mentioning that Coinbase admits all crypto held within their exchange could be subject to bankruptcy proceedings, meaning it would be an asset of Coinbase, not individual users. I went and looked at the PDF of their earnings report mentioning this. And yeah, it really does say that with a bit more legalese.
Moreover, because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.Page 83 under “Our failure to safeguard and manage our customers’ fiat currencies and crypto assets could adversely impact our business, operating results, and financial condition.”
I’m attaching the PDF in case the link becomes stale or lost.
So it does seem sort of stupid to hold my money within Coinbsae in any case, so I’ve moved most of my money out of it this morning to a software wallet, you can find a list of crypto wallets here → (make sure to not use Coinbase’s 🤣.