Clients are wary of centralised control over funds held in exchanges. Coinfloor provides a monthly Provable Solvency Report while Brawker has implemented Multi Sig Wallets.
Over the past 5 years Bitcoin has been subject to some astonishing thefts and seizures. Earlier this year the exchange Mt Gox had 850000 BTC walk straight out of the exchange. The closure of Silk Road in 2013 resulted in the seizure of 32716 BTC. These monumental losses have been addressed by the rapidly developing Bitcoin industry in some interesting ways.
Coinfloor is a UK based Exchange dealing with crypto currency and Fiat. The exchange provides a monthly Provable Solvency Report, showing clients their funds are still at the exchange.
“We are committed to continuing to prove our solvency and prove that we are in possession of 100% of our client funds.” – Coinfloor
Coinfloor combines clients balances, and transfers them from one wallet address to another, provably showing the total number of Bitcoins under its control. Looking at the latest Solvency Report #8, we can see there is one entry per customer. Client balances are quoted in Satoshis, displayed with a unique cryptographic hash. Each customer can look up their balance in the public report.
“We believe that this approach is the best way to achieve maximum accountability while retaining privacy for our clients. We welcome your feedback and hope that in time, other exchanges will also help safeguard client funds by providing proof of solvency reports to their users.” – Coinfloor
By no means is this a foolproof accounting process, Bitcoin transactions are open to human error and the process is only repeated once a month. This does show a willingness within the industry to use the transparency of the Blockchain, and will develop over time.
Brawker is a broking service which connects people who want to buy bitcoin with people who want to spend bitcoin. A Bitcoin Buyer, with a credit card or paypal account, purchases an item the Bitcoin Spender wants, off a site like Amazon or Apple. When the item arrives at the Bitcoin Spender’s house, the Bitcoin Buyer collects Bitcoins in return.
“This is exactly how the very first Bitcoin transaction happened: in 2010 someone gave 10000 bitcoins to someone else if they would order a Pizza for them. We took this concept and made it available to everyone with an online platform” – Cyril Houri, Brawker CEO
The Company is one of the first to include Multi Signature security in its Bitcoin Wallets, the wallet address is used as an escrow account for settling agreements.
“When you create an account at Brawker you are not required to deposit any bitcoins. Instead, your funds will go through a multisignature address” – Brawker
With 3 signatories per wallet, Multi Sig provides the Buyer, Seller and Intermediary with private keys. To release funds, two out of the three keys are used. Usually this is the buyer and seller. In cases requiring mediation, Brawker can use their intermediary key, in conjunction with either buyer or seller, to settle disputes.
“Brawker does not store or control the funds, which reside at an address on the blockchain. Any two keys control the funds. This is what decentralization means, and why multisignature transactions are a great improvement in security and ownership control.” – Brawker
The rapidly evolving Bitcoin Industry provides innovation at a blistering pace, companies come and go, ideas rise and fall. Day by day the products and services progress and improve, rest assured legacy banking solutions will soon seem insecure in comparison.
Ben Ferris has a keen interest in financial markets, new and old. Participates in FOREX and is invested in BTC. Constructive comments are always appreciated.