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    BTC-e is skimming and holding on to huge amounts of FTC...

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    • M
      mnstrcck last edited by

      Sorry for the long read. But I think we should discuss this.

      I posted a question thread [url=https://forum.feathercoin.com/index.php?topic=3442.0]here[/url] a few days ago. I was mining FTC on D2 and deposited directly into the BTC-e wallet for later use on trade. Since I’m a slow miner, it’s been sitting there doing nothing while I waited to get to 1000. Nonetheless, I decided to check my BTC-e wallet address on the explorer.

      [url=http://explorer.feathercoin.com/address/6myZbAqTbjH3foCuBqTophsBPCSG9t9sPF]Here’s a link[/url], and as you can see, on 8-22 a withdrawal of 91.5807188 was made. Thing is, it wasn’t me. My overall balance on BTC-e was also unaffected. Which means that BTC-e sent money out of my wallet, but kept the proper balance on its database.

      That withdrawal led me to [url=http://explorer.feathercoin.com/tx/f9bdd88e9beca2861801213ef6946bf796ccdc93c17bd13c63325374f3c90803#i196]this[/url] transaction - of 50,000.275 FTC - which went to [url=http://explorer.feathercoin.com/address/6pUkUJT4vMjnmaBE7zf7gu7QNrPGihbpLd]this[/url] address.

      That’s 921,572.1 just sitting there.

      I backtracked and clicked on a few addresses from the first big transaction, and I found a few other large size wallets:

      [url=http://explorer.feathercoin.com/a/71Bnbs1W7w]THIS ONE[/url] - 348,530.62 FTC
      [url=http://explorer.feathercoin.com/a/6mricKGjfk]THIS ONE[/url] - 399,999.2 FTC
      [url=http://explorer.feathercoin.com/a/6igyEBfrdx]THIS ONE[/url] - 97,529.53 FTC

      All of them show the same pattern, huge amounts of FTC a day being deposited from what appears to be BTC-e user wallets. And it’s not going anywhere.

      Together with the first address I found, that comes up to 1,767,631.45 FTC [11% of all the coins mined until right now].

      First question is, how many other wallets like this exist? It would take a bit of time to sift through the transactions and find withdrawals that lead to similar nest eggs.
      How much of the coin does BTC-e skim and place into inactive wallets?
      Why?

      Once I realized this, I immediately withdrew all of the FTC into a private wallet [as I probably should have right from the start]. I believe this is very similar to what fractional reserve banking does - in some ways. Allow me to extrapolate further:

      BTC-e trades are not added to the block-chain, there is no public record of them. It is in-house. Shuttered.
      If I had an exchange with the volume of BTC-e, it would be VERY easy for me to use the skimmed money within the non-recorded trades of my exchange to pump and dump. Why would I pump and dump? Not only would I made money on the dumps, but I would also profit from the transactions of other users who participate. I could only do this with a large sum of each currency.
      BTC-e has enough reserves of FTC to sell for BTC [and probably also BTC alone], and back to FTC over and over again, pumping and dumping - making a hearty killing, without any record.

      Now, I’m not saying BTC-e is doing that. But it would be extremely easy for any exchange with enough reserves, using users’ deposits to work the market and make a killing. And since we are in unregulated wild west of crypto-currency here, any mistakes or major losses, any lack of liquidity [being able to pay out on skimmed amounts they don’t have], and they can shutter up and disappear into the night. They have no one to answer to.

      If something like this were to happen, it would put a huge dent into many people who have invested into FTC and trade on BTC-e.

      So yeah, thoughts? I don’t want to come across as a tin-hat wearing, table-hugger. But it’s definitely something worth talking about.

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      • S
        Smoothie Regular Member last edited by

        My view is the person who has the biggest buy wall on the buy order side has the largest holdings in FTC.

        They have the most to gain or lose. Simple as that.

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        • ghostlander
          ghostlander Regular Member last edited by

          They may be transferring coins between hot and cold wallets.

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          • E
            Entimp Regular Member last edited by

            I was watching the trade volumes yesterday for ftc. I might be reading the charts wrong, but would one expect to see 4000 btc of ftc trade in a 90 minute perioud? Seems high to me. Would this point to what the o.p. is saying?

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            • M
              meetrat1 last edited by

              Yes, you are probably seeing both their cold storage and hot wallets like it was said earlier. While they could try skimming, it might a bit risky on their part considering the people behind it have quite a reputation to uphold and a steady income with the amount they charge on fees.
              Sure, it is possible they could use their large holdings of coins to manipulate prices and it is always good to be skeptical and make sure you use a multitude of services instead of a single one to make sure you have a backup.

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              • N
                Nutnut Regular Member last edited by

                As has been said, exchanges generally keep most of their funds in “cold storage”. This is effectively a wallet on a server that is not accessible from the outside world (possibly even turned off).

                It works like a bank. If you pay £1000 cash in to your bank, they don’t put it in a box with your name on it. They simply update their database noting that they have £1000 of your money and then put all the notes into one big vault. You can then go to another bank and withdraw £1000 cash but it wont be the same physical notes. They’ll just give you someone else notes and update their database again to say they’ve given it all back.

                Same thing goes for pools. They don’t have a separate wallet address for each miner. Just one big wallet and a database that keeps track of how much it owes each miner. Any sensible pool op will, if the wallet grows too large, ship a bunch of the accumulated coins to “cold storage” and top up the hot wallet as needed.

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                • M
                  mnstrcck last edited by

                  D2, Nutnut, meetrat1, ghostlander - thanks for the clarification. I brain farted somewhere along the line and didn’t see the obvious. Alas, I’m new to this and learning as I go. Thanks for being patient and replying.

                  Looks like BTC-e has a 60 day automatic hot to cold wallet storage process going. It all makes perfect sense when looking at the scale of things, but I’m still wary since it appears that there’s a multitude of things that could go wrong. I wonder if there’s any point in having an “open” exchange, where each transaction actually goes on the blockchain, instead of being done in-house [where there’s a lot of room for manipulation]. I imagine it would probably do to FTC what SatoshiDice did to BTC. But isn’t that sort of the point of crypto-currency anyway? Being able to verify and trace transactions important to you does provide some security when dealing with an unregulated currency.

                  I think it’d also be nice if they’d include an explanation of how their exchange functions in the FAQ - would have saved me a ton of time!

                  Anyhow, thanks for the feedback!

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