Bitcoiners are planning to celebrate the tenth anniversary of the genesis block by withdrawing all their cryptos from exchanges.
“On the 3rd of January 2019, 10 years on, let us all [withdraw] our BTC to wallets we control. Let’s see if it is all there, let us see who fails, let us see the network work.”
So says one bitcoiner seemingly echoing week long whispers of plans to have a coordinated crypto withdrawals campaign on January the 3rd starting at around 4PM London time.
Who is coordinating this isn’t very clear, with some dubbing it Proof of Solvency or Proof of Trust. We’d call it a crypto bank run.
Not all think it’s a good idea. Unless you have a hardware wallet, it isn’t very easy to securely store crypto, especially if you are a casual cryptonian.
Exchanges, on the other hand, have gone down. MT Gox, for example, was operating on fractional reserves and couldn’t keep up. Unlike the banks, Gox got no bail-out, but a meeting with the Japanese bankruptcy court.
That was in 2014. Since then, some exchanges have closed, like BTC-e, but no major exchange has gone under as far as we’re aware.
How this would work exactly isn’t very clear because exchanges usually use a two-storage system. They have a hot wallet which holds say 5%-10% of all funds, with the hot wallet connected to the internet so at risk of being hacked. Then they have a cold storage where most of the funds are kept in difficult to hack systems.
One can imagine a crypto bank run might dry up the hot wallet, but that wouldn’t tell us much. They would then have to top it up from the cold wallet, but if they are bankrupt, they can use the hot wallet for plausible deniability to say something like they need some time to top it up from the cold wallet.
One very interesting cold wallet is that of Bitfinex. It usually goes up and down with some sign of life, but for more than a month now there has been a very straight line:
You can see all those 0.00 btc amounts. That’s just dust, not real money, people send them to track the address or sometime with a begging message to give them some btc or whatever.
The last time with some real activity was on the 2nd of November when a leet amount was sent to the cold wallet. Before then, funds were sent all the time, but since, nada.
As price has fallen considerably, you’d expect withdrawals from the cold wallet to top up the hot wallet, or maybe you’d expect more deposits as people sell, but nothing has happened.
Why, isn’t clear. It may be this is just one cold wallet. They have about five or so for eth, so you’d expect more than one for BTC. It may be they’ve stopped using this specific one and started using a new one. We don’t know.
What we do know is that there are no complaints of crypto withdrawal delays as far as we can see. There is a mountain of them for fiat withdrawals due to their banking blockade, but as far as we can see, crypto withdrawals appear to be fine.
Maybe that won’t still be the case on the 3rd of January. Who knows. They have provided no audited accounts, nor has any other exchange as far as we are aware.
Maybe they will go under or maybe no one will care about this crypto bank run or maybe bears will see it as a plot by bulls to get them off exchanges and thus get them to stop da selling.
Who knows, but it does sound like an interesting way of celebrating bitcoin’s tenth birthday. Be your own bank and all that. The message being of course that only bitcoins in your own pocket are “real” bitcoins. Those on exchanges are IoU bankcoins. They might not give them to you and you might have little recourse because you don’t control the private keys, the exchange does.
Practically of course bankcoins sort of work and they do usually turn into bitcoin, but to what extent might be revealed if cryptonians do go ahead with this bank run for fun and games.