> That's 23% the customers are loosing out on instantly.

That's not even remotely true. Right now there are zero exchanges that support depositing BCH. The only BCH that are trading are the ones that were created by the exchanges.

So unless you're arguing that Coinbase should be liable for not creating an exchange for BCH then the argument that anyone has lost out on money has zero merit. Even if Coinbase had already given everyone BCH, no one would have been able to sell on any exchange.

Not to mention 80% of the hash power seems to be controlled by one entity. They could roll back tx arbitrarily.

As I said, that's measured using coinmarketcap and of course the exact value is only speculation. But it's currently far from negligible.

> So unless you're arguing that Coinbase should be liable for not creating an exchange for BCH then the argument that anyone has lost out on money has zero merit.

That's only with the assumption that no exchanges will ever allow BCH deposits, that you cannot sell them OTC nor buy things with it.

But there's other cryptocurrencies with a nontrivial market cap out there; Coinbase only supports three. Then there's fiat currency, of which Coinbase's support is also limited.

Again, where do they draw the line?

They should quit representing themselves as bank holding your coins/private keys, which is not what they are doing. They are issuing IOUs for a certain amount on a particular blockchain. It would be more honest to be explicit about this in their marketing and website copy, and would avoid this problem, but that's not sexy and doesn't get VC funding. I have no sympathy for their plight.

When you put your fiat currency into a traditional bank, the bank doesn't hold it for you either. They also issue IOUs.

Coinbase is more similar to a bank than it is to a wallet.

Well, if you want to extend the analogy...

Let's say that JimBob came along offering a lollipop to everyone for every $1000 they could prove they held in a US bank on a particular day. (The BCH network is offering credits to everyone on the BTC network in proportion to how much BTC they can prove they had on a particular day.)

You, as a customer, tell your bank, "yes, confirm to JimBob that I had $30,000 in my account on that day!" (You provide notarized authorization, etc.) The bank says no. Would that fly? Maybe.

Instead, they call up JimBob and say, "Look, we have $3 million in our bank vault. Give us our 3,000 lollipops."

Would that fly? I don't think so. (Though Coinbase hasn't done that last part ... yet.)

Well, really, the problem is that JimBob is in total control of the interaction here. Maybe your bank says, "Sure, here's an affidavit showing you had $30,000 on date X", but that's not good enough for JimBob; he needs to see the actual, physical bills and needs proof that _those specific bills_ were in your bank's vault at the time.

This process puts a fair amount of burden on the "bank", because they need to deal with JimBob's byzantine lollipop claims process _directly_ with their own cash, rather than issuing a standard affidavit that'll work equally well for MarySue's pop-tart claims process. Or, in more technical terms, _every time_ anyone comes up with a new coin, coinbase would have to dust off the cold vault, generate the proofs of ownership, reassign them to the new owners, then move the bitcoin over into newly generated cold addresses to restore the security posture of the cold vault coins.

Moreover, creating new types of altcoins is a process that can be easily automated, and at little cost to whoever is instigating this creation process. Of course, most of these coins won't ever gain any popularity or value - but then what's the threshold? At what level of popularity does a broker need to do anything? What happens if a coin is totally unpopular initially but gains popularity later - do brokers need to backfill? What if the key material has been rotated away and destroyed in the meantime?

For that matter, how do we measure popularity? Volume? It's easy to spam volume if you control the first exchange for your altcoin. Market cap? It's easy to fake market cap and unrealized gains when nobody can transfer coins yet. Hashrate? Who knows when that'll settle down. In any case, it's not the sort of thing that can really be objectively determined too quickly after a split.

These don't become an issue with normal securities because, in normal stock market securities there is only one authorized issuer who is able to issue splits, and this issuer incurs real, significant administrative costs for doing so. They also must involve credentialed third parties, and all participants face regulatory scrutiny, fines, or even jail time if they deliberately set out to abuse the system.

Compare to the creation of an altcoin, where the costs of creating a new altcoin are tiny, but the costs of dealing with the fallout by brokers can be quite large. And, of course, there is effectively zero regulation that would give penalties to deliberate abusers. There's therefore a large cost and risk imbalance between altcoin creators and brokers who have to deal with the new altcoins. This sort of cost/risk imbalance results in, effectively, a sort of denial of service threat against bitcoin brokers if it's allowed to stand.

For this reason, the precedent set by this split is going to be of great importance in the future of bitcoin and altcoin brokers - if brokers must deal with splits, it will mean that they will need to segregate coins and keep them online ("hot") at all times in order to be able to deal with any split immediately and/or retroactively. This in turn will hurt the security posture of these currencies substantially. The risk of screwing a split up will also hang over any service that holds *-coins on behalf of their customers or other third parties.

This will also impact the legal feasibility of off-chain transaction aggregation schemes (e.g. lightning) not feasible, as there's no guarantee that the next harebrained altcoin split will be able to deal with redeeming the complex transaction scripts involved with e.g. an unsettled lightning channel - and if it doesn't, who is liable?

So, in short, _requiring_ brokerages to deal with altcoin splits and redemptions opens up a huge legal can of worms that is probably best left closed, for the viability of the overall altcoin landscape. Yes, it sucks that coinbase didn't do something for this particularly public split, but if they did they'd have to be processing splits every other day, or perhaps even more frequently.

Disclaimer: I have no position, long or short, in bitcoin or any other similar "altcoin" assets, nor do I have any plans to open such a position in the forseeable future. However, I do find it fascinating to watch this legal/economic experiment evolve from a safe distance.

That's a lot of text that dances around the problem. Wouldn't the issue be solved if exchanges just offer IOUs for a particular chain instead of claiming to be a "wallet" or "bank" holding your asset? If they want to claim they are holding a user's "coins" (which is a misnomer to be honest and is an inaccurate representation of how blockchains work), then they better have a particular address and private key somewhere for ever user that holds assets on their exchange.

Well, the problem is that this means exchanges need to actually implement support for every chain. If I tomorrow go muck around with my bitcoin node and make it fork, why shouldn't they be required to issue you IOUs for that altcoin as well, after all? What if they didn't know that a fork happened, went and rotated all their cold storage keys, destroyed the old private keys, and later you ask for your coins on the secret chain?

You have to draw the line somewhere, and, as a practical concern, determining that a fork meets this line retroactively adds a great deal of complexity and risk to the process. Further, as we've seen here, even a short delay in executing the split raises a great deal of ire and threats of lawsuits.

So, as I see it, the only consistent positions to take would be to either:

1. Not require split tracking at all. People who want to enjoy the benefits of such a split can simply move their bitcoins to a wallet under their direct control, or to an exchange who has agreed to track the split. [what happened here - a market-driven solution, essentially]

2. To legally mandate split tracking if proponents of the split agree to make a market - that is, agree to buy at a particular price for a particular period of time - thus ensuring that the coins have value [unlikely to ever come into play due to the enormous cost of such a venture]

3. To legally mandate split tracking for absolutely every altcoin, no matter how awkward or technically difficult it may be to do so.

Keep in mind that implementing 3 means the exchange might need to run software created by the altcoin's promoters - because keeping up with your own software for every altcoin would take too much development resources - and would be exposed to the exchange's private keys in order to perform hot wallet transactions that the altcoin's network will accept. Thus, if exchanges are forced to run software from any random Joe's fork, this would present a real security risk that backdoored software might be slipped in - this means that they would be forced to switch to split wallets by customer so a single customer using JoeCoin won't compromise funds held by other customers, but having this split out makes maintaining cold wallets impractical.

> Well, the problem is that this means exchanges need to actually implement support for every chain

No, read my comment again, carefully. If they are providing IOUs for BTC, that means there is no private key associated with the debt. If say for instance they owe a user 10 BTC, they could give them any 10 BTC. if a new chain pops up, it doesn't matter, because the contract is explicitly an IOU for 10 BTC, not BCH or BCC.

the problem arises when the exchange implies they are holding "your coins" for you like a safe deposit box, which means there's a private key associated with the coins, and thus that key would work with any chain splits, including BCH/BCC.

just curious, do you understand how blockchains work? i.e. private keys and the transaction protocol? if you weren't familiar with it, then that would explain why you are having a hard time understanding my comment.

I think I misread your comment - I had interpreted it as suggesting that exchanges should be required to issue IOUs for new forked assets, which has serious practical issues.

Of course, saying that coinbase balances are IOUs for bitcoins is basically what happened here, and apparently people aren't happy about it. While you could change the marketing material, I don't think it would do much to change the outrage in this case; I very much doubt people will pay attention to such a nuance when they apparently couldn't be bothered to temporarily withdraw their coins.

> I very much doubt people will pay attention to such a nuance when they apparently couldn't be bothered to temporarily withdraw their coins.

That's a very good point. It would avoid any legal ambiguity and save face with the more technical minded though.

Then how about this: JimBob constructed a perfect copy of everyone's bank safety deposit box key and its contents, including the keyhole[1]. The contents of the copy are free for the taking if you can open it with the key.

Your bank happens to have an access control policy where they hold the safety deposit box key for you and you have to pick it up from them each time (after authenticating).

You ask the bank for your key so can go to the JimBob version and get your copied stuff. They refuse because of a security policy about taking keys offsite.

You offer to close the box account and take your (original) stuff out so that there will be no security compromise. They refuse because that would compromise the box and cost them a usable one.

You offer to pay for the cost of replacing the box with an uncompromised one. They still refuse.

That is the position that Coinbase is in. (Users haven't offered to pay for the replacement of the private keys that coinbase uses, but this is a trivial cost, and establishes the barrier that prevents coinbase from facing unbounded costs to deal with every fork.)

EDIT: And for an analogy that favors "Coinbase doesn't owe you anything": Assume we're under a gold standard. Assume that some goldsmiths just give you regular dollar bills as your warehouse receipt "since they're redeemable with the government banks anyway". Most people don't care much about the difference, but each goldsmith keeps a list of the serial numbers they gave out so they don't have to honor arbitrary demands.

Then (of course) the government goes off the gold standard. But some goldsmiths are like, "no, that's BS, we will still honor your claims, just bring us a dollar bill that's on our serial number list". So there's a mad dash to get dollar bills that were used as goldsmith receipts, and some people ask for their deposits back from their bank, but the bank (like Coinbase) insists that they only have to give you banknotes of their choice, not the original ones you deposited, which was all they ever promised.

(Modified scenario: you kept the dollar bills from the goldsmith in a safety deposit box, and the bank replaces them with new dollars and never redeems them for gold.)

[1] You can further assume that the copy is some debased, lower value version of arbitrary percentage and it doesn't affect the analogy.

You are latching onto the wrong aspect of my comment. Remove the word "bank" from my comment and it still makes sense.

It's irrelevant if Coinbase supports trading of the coin. What they should do is allow the customers to withdraw their Bitcoin Cash coins.

What other cryptocurrencies have been forked of another coin gaining such a large value, placing the exchanges in the same spot?

I can think of only one: Ethereum and Ethereum Classic. The same thing happened there. Coinbase was forced to allow the customers to withdraw their Ethereum Classic coins.

> Again, where do they draw the line?

If a forking chain survives and gains a significant share they should allow withdrawal of their coins. Not keep them, as they are doing now.

The fork has literally existed for 36 hours only.

It is easily too soon to say whether it will survive. You may have read or done technical analysis that came back supporting the conclusion that it will survive, but if Coinbase is taking the position that it won't survive, IMHO it is much too soon to say whether or not the same thing is happening here.

As a matter of fact, this can't be the same thing...

Ethereum Classic was the original chain. Ethereum(') is what the developers answered with, after the famed failure of the DAO, before 28 days had passed and the damage would become irreversible.

If anything, your comparison is reversed, but in my opinion it is nowhere near close to the same thing. Eth Classic tokens are called classic because it was the original chain (with the bug in it, "just like we agreed to," if I understood the story fully.)

> It is easily too soon to say whether it will survive.

I agree. That's why Coinbase should have said that they will wait and see if the fork will survive or not. If Bitcoin Cash continues to have a non trivial value and the fork survives Coinbase will either have to give in and give the customers their Bitcoin Cash or they will get sued and loose.

> Ethereum Classic was the original chain. Ethereum(') is what the developers answered with, after the famed failure of the DAO, before 28 days had passed and the damage would become irreversible.

It doesn't really matter which chain was the original. After the fork Ethereum(') became Ethereum and only after the fact did the Ethereum Classic movement begin (as you say).

> If anything, your comparison is reversed

Majority hash power and the market decides the "real" coin. Ethereum and Bitcoin are the real chains and Ethereum Classic and Bitcoin Cash are the spinoffs/altcoins.

The fact is Coinbase weren't going to credit the customers their Ethereum Classic, but had to give in. I see history repeating itself.

Well, BCC has about 13 blocks on their chain in 24 hours. I understand there's a technical reason for the delays, but if you thought Bitcoin Classic had a problem with transaction delays, BCC absolutely still has yet to prove it can even remotely help with that.

I welcome the diversity, and a chain that has lower difficulty will be most welcome for miners as well. Hearing about some of the issues with withdrawal limits, I will not be surprised if there is a lawsuit against CoinBase. I'm personally just glad to see that, on the Bitcoin price graph, this whole event has so far been a complete non-event. (Even though I sold mine before the Hard Fork. I'm betting on ETH.)

That's a good balanced view.

Note that the difficulty will be reduced, to about 20%, after the next 6 blocks. So the transaction delays should resolve themselves during the next 12-24 hours or so.

You have no idea what you're talking about, your argument is not even coherent, it's just a bunch of talking points stringed together.

As I explained, the reason Bitcoin Cash situation is different is because the blockchain / private keys are shared. It's not the case with the altcoins. That's why Coinbase is in the wrong.

Plus it would cost them very little to fix the situation, compared to how much of the users' money they are holding.