I have a concern with any exchange that also supports alt-coins, and shared that concern here:
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http://bitcoinmoney.com/post/53207712103There are four specific scenarios I would like to know what Kraken's policy is should they occur:
A.) My Kraken exchange account holds only fiat and bitcoins, and I've never traded for Litecoins. Would I be exposed to any risk of loss to those funds should there be a successful 51% attack against Litecoin?
B.) I have a balance of Litecoins and fiat, but had no litecoins deposited to Kraken in any block that was ultimately orphaned as the result of the 51% attack. Would I be exposed to any risk of loss to those funds should there be a successful 51% attack against Litecoin?
C.) I had bitcoins and I traded them for Litecoins. Following this trade the attacker released blocks that resulted in a double spend such that the Litecoins I received were from the attacker's account (i.e., Litecoins deposited with a transaction that no longer confirms or was double spent). Following the successful 51% attack against Litecoin, do I still have Litecoins that I can withdraw (or trade back into Bitcoins)?
D.) I deposited litecoins from a block that utimately was orphaned as the result of a successful 51% attack against Litecoin. Before the attack I was able to trade those litecoins for bitcoins which remain in my account. After the successful 51% attack against Litecoin, do I stil have the ability to withdraw those bitcoins?
Hey Stephen,
Thanks for the questions. We accept national currency wire transfers as settled once they hit our bank account, bitcoin transfers as settled on 6 confirmations, and litecoin transfers as settled on 12 confirmations. No matter how astronomical the chance, the possibility exists that any of these funding methods could be reversed. This is a risk that Payward takes and that risk is not passed on to our users.
A.) No. You would not be exposed to any risk.
B.) No. You would not be exposed to any risk.
C.) It'd be the same for national currency, bitcoin and litecoin. Once Payward accepts the transaction as settled, we'd assume the risk. There may be some totally insane scenario in which a rollback makes the most sense but my preference would be to have Payward take the damage and be responsible for recovering its losses from the attacker. One more reason to have account limits, delays, link analysis, fraud controls, KYC, etc.
D.) So, 12 confirmations go by your ltc deposit settles, you use it to buy some btc, the longer chain appears and your deposit is rolled back to 0 confirms. Your account would reflect a litecoin debt to us and other assets would be held as collateral. You could withdraw those bitcoin if you had enough EUR on deposit to cover the missing LTC. If you didn't have any other assets but the bitcoin you'd just purchased, it's likely that all of the bitcoin would be held until the litecoin transaction reconfirmed.
Payward keeps its operating funds, both national and digital currencies, separate from our customer funds. The bank account you deposit funds to is an account for the benefit of our users--we're holding it on behalf of another person. Those funds are not available to general creditors. Unfortunately, there's nobody we can trust with the digital currencies but it's the same thing there.. we keep customer funds and our own funds separate and accounted for separately. Contrary to what that article suggests, this exchange does have a lot of its own money on the line. The founders, having largely funded the development out of their own pockets, are in for over 7 figures--we've got a lot to lose.
