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OKCoin Raises $10 Million To Become China's Largest Bitcoin Exchange

samzenpus posted about 6 months ago | from the what-could-go-wrong? dept.

China 48

edibobb writes "Despite recent cryptocurrency crackdowns by the Chinese government, OKCoin announced a round of $10 million funding by three prominent venture capital firms and other investors. OKCoin is supposed to be the largest bitcoin exchange in China. From the article: 'Back in November 2013, the focus of the bitcoin community was on China – the world’s hub for bitcoin trading. At that time, BTC China was the biggest exchange in the world, having managed to raise a $5m Series A funding round from Lightspeed Venture Partners (Snapchat, Nest). There were even rumours that a bigger round was in the works for the young company. However, things change quickly. After the Chinese government began regulating bitcoin in December, trade volume plummeted and the world’s top exchange was no longer Chinese.'"

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nu coin (2)

SublimeCreditor (3566701) | about 6 months ago | (#46505149)

much wow

Re:nu coin (1)

Joce640k (829181) | about 6 months ago | (#46505709)

Will their surviving relatives be able to pay for the bullet with bitcoins?

Happy Bitcoining from the Golden Girls! (-1)

Anonymous Coward | about 6 months ago | (#46505159)

Thank you for being a friend
Traveled down the road and back again
Your heart is true, you're a pal and a cosmonaut.

And if you threw a party
Invited everyone you knew
You would see the biggest gift would be from me
And the card attached would say, thank you for being a friend.

Just reinforcing the stereotype of being (1)

mark_reh (2015546) | about 6 months ago | (#46505245)

huge gamblers...

Bearish racism (0)

Anonymous Coward | about 6 months ago | (#46507153)

You do understand that it's YOU reinforcing this stereotype, not the Chinese, right?

Re:Bearish racism (1)

Bugamn (1769722) | about 6 months ago | (#46508275)

I though he was talking about Bitcoins users :P

Re:Bearish racism (0)

Anonymous Coward | about 6 months ago | (#46509265)

He was talking about both, otherwise it would have made no sense

The point of an exchange (1)

Redenlord (1784924) | about 6 months ago | (#46505297)

Ok, probably a stupid question here !

What is the point of an exchange in the bitcoin world ?

Re:The point of an exchange (1)

Cruciform (42896) | about 6 months ago | (#46505305)

A fraction of every transaction goes to the exchange, which can add up to significant profit.

Re:The point of an exchange (1)

glasshole (3569269) | about 6 months ago | (#46505353)

It would be interesting, if somehow the exchange functionality were built into the protocol and entirely P2P. Getting rid of these centralized exchanges seems like it would really stabilize the currency. I don't know how remotely feasible that would be, it is far too early in the morning without coffee.

Re:The point of an exchange (2)

fuzzyfuzzyfungus (1223518) | about 6 months ago | (#46505581)

It would be interesting, if somehow the exchange functionality were built into the protocol and entirely P2P. Getting rid of these centralized exchanges seems like it would really stabilize the currency. I don't know how remotely feasible that would be, it is far too early in the morning without coffee.

Effectively, what you describe is the protocol(which is p2p as well), except that the protocol does not address the issue of matching prospective buyers and prospective sellers (a protocol that does this, without a central market-operator, would be neat; but bodging one into a protocol for transferring virtual coins without double-spending would probably be unwieldy, though clients that implement both would be logical).

Perhaps the more fundamental issue (aside from any empirically hairy and/or provably intractable issues with an authority-less market protocol and select classes of DoS attacks or something) is that the blockchain arrangement that bitcoin uses(while secure, even without an authority, exactly as intended) isn't particularly fast, and obviously is of no value whatsoever for cashing in or out between BTC and another currency.

The 'exchanges', since they (from bitcoin's point of view) are just one entity making internal, irrelevant, decisions about how many of its coins go in box #1 and how many in box #2 and so on can 'transfer' coins at near-arbitrary speed (since the 'transfer' is just an internal number-shuffling, not an actual bitcoin transfer in the architectural sense) and, if suitably set up, can also perform transfers between holders of currency and holders of bitcoins.

Really, I'm inclined to view 'exchanges' (and their generally atrocious track record on getting hacked, being outright scams, etc.) as one of the major symptoms of Bitcoin's fascinating, and slightly tragic, clarification of the virtues and limits of its concept: you can have a currency-like instrument, perfect in its crystalline mathematical security or you can have the features people expect from money; but getting both? That isn't obviously a problem that is in-scope for mathematics, much less solvable...

Re:The point of an exchange (1)

Cigarra (652458) | about 6 months ago | (#46505645)

It would be interesting, if somehow the exchange functionality were built into the protocol and entirely P2P. Getting rid of these centralized exchanges seems like it would really stabilize the currency. I don't know how remotely feasible that would be, it is far too early in the morning without coffee.

Effectively, what you describe is the protocol(which is p2p as well), except that the protocol does not address the issue of matching prospective buyers and prospective sellers (a protocol that does this, without a central market-operator, would be neat; but bodging one into a protocol for transferring virtual coins without double-spending would probably be unwieldy, though clients that implement both would be logical).

Uhm... isn't Ripple [ripple.com] supposed to be that decentralized exchange?

not that simple... (1)

MagicMerlin (576324) | about 6 months ago | (#46507453)

You can have both. Let's take transaction time performance for example -- bitcoin does not provide fast resolution (compared to, say, the visa network) but nothing is keeping a transaction broker from laying on top and providing those services. A 'bitcoin visa' payment service would then provide near instant times, allow for chargebacks, etc by absorbing the risk through fees and making a profit on the difference.

Re:not that simple... (1)

lgw (121541) | about 6 months ago | (#46508467)

Well put. I'll keep repeating that bitcoin won't ever go mainstream without bitcoin-denominated credit cards and savings accounts. But of course, once you have those the money supply balloons, and that can be exploited by central banks, and really it stops being particularly different from what we already have.

Re:not that simple... (1)

fuzzyfuzzyfungus (1223518) | about 6 months ago | (#46508495)

I should have phrased that a bit more clearly: it's perfectly possible for different people(or even the same people, with different bitcoins) to have 'eh, you'll just have to trust us on that; but it sure is fast!' and mathemagic-crypto-money at the same time, it's not as though the presence of one activity irrevocably taints the entire pool of bitcoins for the other; but any specific bitcoin (or subdivision of one) can only have one or the other:

Someone always has to be the one holding the private keys, and they are the only ones for which the elegant math and its assurances apply(and even for them, it only applies to the BTC side of a transaction, not to whatever the other party promised to deliver in exchange for that irreversible payment).

You can layer all sorts of arrangements on top of that, as the exchanges do(where the exchange, not its users, is the one holding the keys; but near-instant clearance, escrow, transaction reversals, etc. are all possible because all 'transactions' are just the exchange shuffling bits internally), or a transaction broker/insurer type model, as you propose, or a conventional escrow service, or any number of other possible contractual arrangements.

Nothing about bitcoins magically prevents the use of any of the zillions of arrangements we've applied to commodities and mediums of exchange throughout history, my point is just that, if you are a participant in those things, the properties attributed to bitcoins are largely irrelevant to you(basically the only one that matters is double-spending prevention, without which inflation would render all of them worthless within a few hundreds of milliseconds), and if you do want to enjoy all the properties of bitcoins, the list of things you can do with them gets a great deal shorter.

That's not some scathing condemnation, every medium of exchange in history has only functioned because some semblance of law, custom, or a mixture of the two kept the surrounding institutions vaguely in check, fraud within sufferable limits, and so on; but bitcoin brings nothing new to the table here, except in the very narrowest range of uses, where its mathematical properties do hold, and if you wander outside of that, it's open season.

Re:not that simple... (0)

Anonymous Coward | about 6 months ago | (#46511347)

You can have both. Let's take transaction time performance for example -- bitcoin does not provide fast resolution (compared to, say, the visa network) but nothing is keeping a transaction broker from laying on top and providing those services. A 'bitcoin visa' payment service would then provide near instant times, allow for chargebacks, etc by absorbing the risk through fees and making a profit on the difference.

If you're going to have such a service, why does it need bitcoin on the back-end? Why would its operators want bitcoin on the back-end? Step back a little and think about it.

Bitcoin is a system for maintaining a public, pseudonymous ledger of who has how much Bitcoin. It uses public key cryptography to prevent people other than owners from spending Bitcoins. It also uses a distributed-trust "mining" system to do a process loosely analogous to voting, where how often you get to "vote" (by adding a block to the transaction block chain) is determined by how powerful your mining hardware is (relative to the total network mining power). In theory, this prevents fraud such as double-spending, without requiring any one network node to be trusted above all others.

Bitcoin pays a heavy price for these features: the public key cryptography isn't too computationally expensive, but the distributed trust part is. Look up the estimates of how much power is being burned to "mine" bitcoin. It also has the issue you mentioned: transactions can take a very long time to confirm. It also has some fundamental scaling issues. For one, the block chain is ever-growing, and everyone who doesn't want to trust another party must download and store a full copy in order to validate new blocks for themselves. Another scaling problem: all transactions must be broadcast to everyone, amplifying network bandwidth. Finally, at present, the Bitcoin protocol is theoretically limited to just 7 transactions per second, and the practical limit appears to be about 2.

These costs and problems mean that Bitcoin does not make any sense whatsoever the instant you give up on its fundamental goal of carrying out everything in public with absolute decentralization of authority. If you are willing to give trust to a private broker in order to achieve credit-card like features (quick transactions, chargebacks), why wouldn't you also trust them to implement a conventional private database backend and banking interface which processes payments using a conventional currency? You know, the system we have today. Their costs (and the net cost to society) will be lower, guaranteed.

I see bitcoiners make this kind of argument all the time -- "oh, we can patch around the problems and limitations at the edges, and maintain bitcoin in the center". But these workarounds invariably insulate users from the one unique feature which has a chance of justifying Bitcoin's costs and clumsiness: its completely open, public, decentralized nature. If you're willing to give up on that, what's the point? You like accelerating global warming, I guess?

Re:The point of an exchange (2)

TheCarp (96830) | about 6 months ago | (#46505779)

I thought about this for a second a while back but, it slams up against one really major...no...fundamental problem.

The exchange is a point where currencies/commodities/etc meet. No amount of messing with the details behind how you move money around in your accounts can actually cause food to move to your table or hand you dollar bills. At some point the rubber has to meet the road or else you are just spinning wheels.

The bitcoin protocol, or any such protocol can only deal with itself. In order to exchange cryptocurrency for dollars, you need to actually exchange them.

Re:The point of an exchange (0)

Anonymous Coward | about 6 months ago | (#46507779)

https://bitcointalk.org/index.php?topic=292628.0

"The goal of this contest is to implement a distributed bitcoin/mastercoin exchange. NOBODY has ever made a distributed exchange between two digital currencies, and we aim to do it first."

Re:The point of an exchange (1)

NettiWelho (1147351) | about 6 months ago | (#46505529)

A fraction of every transaction goes to the exchange, which can add up to significant profit.

And in the case of some exchanges the entire transaction goes to the exchange, which adds up to a even more significant profit.

Re:The point of an exchange (2)

NuAngel (732572) | about 6 months ago | (#46505361)

Exchanges are used to "exchange" from virtual currency to a different regional currency (cash out your BTC for some USD).

Re:The point of an exchange (0)

Anonymous Coward | about 6 months ago | (#46505589)

Exchanges are used to "exchange" from virtual currency to a different regional currency (cash out your BTC for some USD).

In CHINA? Something tells me that USD might not be the primary currency for the exchange.

Re:The point of an exchange (1)

NuAngel (732572) | about 6 months ago | (#46506053)

I was using what's known as "an example." I wasn't saying that OKCoin would exchange for US Dollars. Still, actual currency exchanges usually offer multiple currencies. I can go to a bank not for from where I live in Pennsylvania and get Euro and Yen, if I want them.

Re:The point of an exchange (0)

Anonymous Coward | about 6 months ago | (#46506689)

This is in China. They're a bit tight on unrestricted currency exchange over there, and that's one reason why BTC was such a hit with the Chinese - a chance to exchage CNY to other currencies without government oversight.

Chinese exchanges only offer CNY<->BTC now, and even with this they're walking on quite a thin ice, IIRC. CBA to look up relevant discussions, but AFAIK they're keeping alive by holding onto technicalities to not step into the regulations' fire range. I'd assume they're sending many proofs monthly to persuade officials that "technically right" is best kind of "right" and then hope they stay persuaded.

Re:The point of an exchange (3, Informative)

Sockatume (732728) | about 6 months ago | (#46505397)

1) If you want to use bitcoins, you have to buy some bitcoins. Originally you'd buy them either from a miner who was producing coins, or from someone else further down the food chain. That person takes your cash and transfers some coins into your crytographic wallet.

2) If you want to make or receive a payment with bitcoins - transfer them to someone else, in other words - you simply send a transaction out onto the bitcoin network, transferring the money between the wallets as approved by both parties.

Both of these processes are slowed down by the fact that the bitcoin network takes time to verify a transaction, passing the transaction around until it has been cryptographically set in stone. It's more convenient to have a completely ordinary bank, that pays in and out and transfers money between its customers' accounts rapidly, then balances its books with non-customers and other banks on the bitcoin network on its own time. That is a bitcoin exchange.

Re:The point of an exchange (1)

Redenlord (1784924) | about 6 months ago | (#46505543)

Ok, I see. I would up vote you but it's the response to my question so... just thanks !

Re:The point of an exchange (1)

Anonymous Coward | about 6 months ago | (#46505503)

What is the point of an exchange in the bitcoin world ?

It's a mechanism by which people with bitcoins will give them to you so you can run off with them later.

Re:The point of an exchange (2)

TWX (665546) | about 6 months ago | (#46505533)

Ok, probably a stupid question here ! What is the point of an exchange in the bitcoin world ?

Apparently it's to allow a third-party access to your private key, so that they can steal all of your bitcoins.

Re:The point of an exchange (1)

tompaulco (629533) | about 6 months ago | (#46505999)

Apparently it's to allow a third-party access to your private key, so that they can steal all of your bitcoins.

I think you mean public key and can't steal all of your bitcoins.

Re:The point of an exchange (0)

Anonymous Coward | about 6 months ago | (#46505601)

You exchange your monopoly coins for real money.

Re:The point of an exchange (1)

Joce640k (829181) | about 6 months ago | (#46505729)

What is the point of an exchange in the bitcoin world ?

Somebody has to have large reserves of real money for when people want to sell their bitcoins.

Re:The point of an exchange (1)

kelemvor4 (1980226) | about 6 months ago | (#46505893)

Ok, probably a stupid question here ! What is the point of an exchange in the bitcoin world ?

It's just a bank that accepts bitcoin. Bitcoin banks (aka exchanges) are still unregulated and underinsured except in China. Since most banks won't take bitcoin, you can't trade bitcoins for other currencies at those banks either. An exchange is necessary to do much with bitcoin since there are precious few places to spend a bitcoin directly now that silk road is defunct.

Re:The point of an exchange (1)

edibobb (113989) | about 6 months ago | (#46506041)

An exchange is a place to buy and sell bitcoins. Using an one as a bank is not so safe, but people do that too.

Re: The point of an exchange (0)

Anonymous Coward | about 6 months ago | (#46506627)

For me to be able to trade 24/7/365 with my honed trading bot.

Re:The point of an exchange (1)

h4ck7h3p14n37 (926070) | about 6 months ago | (#46512559)

An exchange is a place where buyers and sellers can meet to do business and where the price of goods is determined. You place an order with the exchange and it tries to fulfill your order given the other orders in the system. Some exchanges allow you to trade on margin, where you're only required to post a portion of the money for your deals and the exchange covers the rest. Exchanges make their money by charging a small fee per transaction.

Say you want to buy 100 Bitcoins, you open an account with an exchange and fund it via some method like cashier's check, money order, wire transfer, credit card or cash. You can then enter various types of orders. A market order would be fulfilled at whatever price the market happens to be at, while a limit order would specify a certain price (or better). Now, there may be no one on the exchange able to fulfill your order of 100 bitcoins, but there may be ten people who can sell you 10 each, or maybe two people with 50, etc. The exchange will manage this all for you. If you placed a limit order and no one is around to sell you those last 10 bitcoins at the price you wanted, then that part of your order will go unfulfilled.

An exchange is not a bank! You should not keep assets in your exchange account unless they are actively used to trade.

Here we go again. (1)

Agares (1890982) | about 6 months ago | (#46505495)

I know I will get moded down into oblivion, but whatever. Anyways we all know this exchange will rise and “collapse” running off with a lot of money just like the others. I think the supporters of Bitcoin are probably those who profit from this whole scheme.

Re:Here we go again. (2)

TWX (665546) | about 6 months ago | (#46505603)

I know I will get moded down into oblivion, but whatever. Anyways we all know this exchange will rise and “collapse” running off with a lot of money just like the others. I think the supporters of Bitcoin are probably those who profit from this whole scheme.

No, I think we're seeing an honest, untainted demonstration of true Laissez-faire capitalism at work.

It shows you that what's yours, aka what your wealth is, truly is only what you can lay your hands on right now if there's nothing to support your claims to wealth. At this exact moment in time that's a laptop computer and an open, half-consumed can of Mountain Dew, and a physical wallet with a few dollars in it.

It's regulation that says that I own cars, a home, the contents of that home, and the contents of my bank accounts. If someone tries to take any of those things then I either get them back or I get compensation for their value, because there's regulation that supports me.

I think that the bitcoin crowd is slowly coming to realize that this massively libertarian construct doesn't work due to a lack of true oversight. I don't care that people can look at the block chain, people cannot affect the blockchain when it's used improperly.

Re:Here we go again. (0)

Anonymous Coward | about 6 months ago | (#46505651)

I think that the bitcoin crowd is slowly coming to realize that this massively libertarian construct doesn't work due to a lack of true oversight.

Nope. In reality they instead keep proclaiming "Tis but a flesh wound!"

Re:Here we go again. (1)

QilessQi (2044624) | about 6 months ago | (#46507249)

+1 Insightful. It also doesn't matter who can look at the blockchain to see that X has stolen Y's coins if no one can force a reversal of that transaction.

In American terms, regulation rests on three pillars: Legislative, to define the laws; Judicial, to determine when those laws have been violated; and Executive, to enforce the laws and to redress violations by taking corrective or punative action. Without those pillars you don't really have free-market capitalism: you have anarchy.

Re:Here we go again. (0)

Anonymous Coward | about 6 months ago | (#46507287)

It's regulation that says that banks own cars, a home, the contents of that home, and the contents of my bank accounts. If someone tries to take any of those things then I either get them back or I get compensation for their value, because there's regulation that supports me.

FTFY. We're using Bitcoin because your regulated system has already failed us even more than the exchanges have.

Re:Here we go again. (1)

TWX (665546) | about 6 months ago | (#46510409)

You're hilarious...

The only reason that the banks "own" you is because you aren't willing to live the kind of life that one has to live without the goods and property that a bank helps you to purchase.

You could do without a car, or could pay cash for an expensive used car, or could save up your money to pay cash for a new car, but instead you choose to take out a loan.

You could move somewhere that you can afford to pay cash for, or could rent from a landlord that doesn't have a mortgage on the property that you're renting. I hear that Detroit has lots of houses available for less than $10,000, or less than $5000 if you're willing to live without copper wire and water pipe...

Re:Here we go again. (1)

SplawnDarts (1405209) | about 6 months ago | (#46507299)

It shows you that what's yours, aka what your wealth is, truly is only what you can lay your hands on right now if there's nothing to support your claims to wealth. At this exact moment in time that's a laptop computer and an open, half-consumed can of Mountain Dew, and a physical wallet with a few dollars in it.

It's regulation that says that I own cars, a home, the contents of that home, and the contents of my bank accounts. If someone tries to take any of those things then I either get them back or I get compensation for their value, because there's regulation that supports me.

I think that the bitcoin crowd is slowly coming to realize that this massively libertarian construct doesn't work due to a lack of true oversight.

While there's something to what you state, I think you're being unfair to libertarians (and I'm not one - I just think they deserve to be defended on this point). Broadly speaking libertarians believe that one of the legitimate functions of the state is providing the (threat of) violence needed to allow the ownership of property without having to personally protect it.

A person who didn't believe that was a legitimate function of the state would either be an anarchist (if they opposed the idea of a state entirely) or an extreme form of socialist (if they believed there should be a state but that individuals should either not have or not be secure in their property).

Re:Here we go again. (0)

Anonymous Coward | about 6 months ago | (#46508327)

I think that the bitcoin crowd is slowly coming to realize that this massively libertarian construct doesn't work due to a lack of true oversight.

Nope we are just fixing the problem, look up colored coins. smart property, multi signature public key cryptography, peer to peer exchanges, and x-nations where we (well not me, not yet at least) plan to live by their own rules.

There is only one thing in this world I consider that I own. The only thing that can't be taken from me, and that's my properly secured private keys.

Re:Here we go again. (1)

TWX (665546) | about 6 months ago | (#46510351)

There is only one thing in this world I consider that I own. The only thing that can't be taken from me, and that's my properly secured private keys.

Unfortunately, the nerve-endings at your fingernails would prove otherwise if it came down to it.

And the next big scam... (2)

TheTerseOne (2447418) | about 6 months ago | (#46505539)

To me this sounds like some guys thinking "Hey - that Mt. Gox Guy set up an exchange and almost got away with bajillions. I bet we can do the same thing without his mistakes..."

Or - they are dumb enough to want to become a Big Fish in a Small Pond with Poisoned Waters.

(I'm sure there's some Poison/Poisson joke in there somewhere)

It's just OK... (1)

jones_supa (887896) | about 6 months ago | (#46506669)

They first named it "AbsolutelyFantasticCoin", but then they found that it was mostly just OK, so in name of honesty they renamed it humbly to "OKCoin".

brilliant! (1)

slashmydots (2189826) | about 6 months ago | (#46507285)

Hey, I have an invention and it was already found to be illegal in my country. Want to invest in that too? It's a sure-win!

Re:brilliant! (1)

codebonobo (2762819) | about 6 months ago | (#46507585)

Bitcoin is 100% legal in china as a commodity or asset.

This will NOT end well... (1)

Rick in China (2934527) | about 6 months ago | (#46512897)

Ok. I've been in China for *ages*, and I can't tell you how frequently people skate from businesses and literally disappear. Here are some personal examples: * Bought membership at a really nice gym. Stored some gym stuff in locker there. Thought it strange that they suddenly had a HUGE discount to get new members - thought it was no big deal since it wasn't really busy. Arrived one morning shortly after to see staff outside, locked out. Overnight, literally out the back door, owner sold off some assets and locked up shop. Gone. Disappeared. Nobody ever came to claim or deal with the remaining gear. I lost shoes and pants. * Wife's company paid an employee management company to pay workers at her real estate development. One month, the workers didn't get paid - her company had just transferred one quarters funds into the employee management company's account. The owner took the money, and ran - literally, never to be found to this day. This shit happens daily. China bitcoin exchanges & wallets have collapsed, not with shady excuses like MtGox, but simply disappearing and not trying to hide it. Anyone who uses China online services for bitcoin is *AN IDIOT*, although the shitty thing is for Chinese people who are actually interested in BitCoin is it's not easy to transfer funds outside of China so there is little choice but to use these shady mainland services. I'd like to gamble a different way: set up a betting site to take bets on when this exchange will fold taking everyone's cash/coin with it.
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