Quote:
Originally Posted by ShopCat
I dont think this is true. Do you have anything to back up your internal reconcile claim?
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I'm not sure if you asked specifically about PayPal or Coinbase? For PayPal, this is how foreign exchange transfer houses actually work. They have accounts with dollars in them, and they have accounts with Euros in them, and if someone needs to trade into something else, they swap and reconcile internally. Then they charge a fat exchange rate for this privilege. If someone actually needs to "withdraw" from them, then they either pull from their actual reserves, or buy on the open market. If one Buyer has dollars and wants to sell to another Buyer who wants Euros, the system reconciles it automatically internally. This is why PayPal is a somewhat risky place to put large account balances - they are not considered to be a bank and are not regulated. Also interesting to note, this is how large brokerage houses work too - they reconcile most trades internally (when one customer of theirs wants to sell Amazon, and another customer of theirs wants to buy Amazon, they hook those two up internally if they can. You have to be quite large to make that work somewhat smoothly though. This is how some companies perform trades when the market is closed.
It's similar with Coinbase or the other "wallets" for crypto. That is one of the reasons why when Mt. Gox got hacked, the hackers ran away with the reserve accounts that were "allocated" to the account holders. Mt. Gox simply wiped out those balances and "readjusted" everyone's account internally. What a screw! That's called bank fraud here in the US, but apparently not everywhere else...
https://www.reuters.com/investigates/special-report/bitcoin-gox/
Coinbase has a relatively vague press release about how they "perform transactions" and then reconcile the blockchain in a batched process after the fact:
https://blog.coinbase.com/coinbase-rolls-out-bitcoin-transaction-batching-5f6d09b8b045
-Wayne