Topic: Robinhood to enable the lightning network (Read 308 times)

Well, you can't really argue that all consumers will act rationally, and then also admit that many consumers do no due diligence and freely use a scam exchange because they haven't read a single one of the plethora of valid and proven scam accusations against YoBit. Sending your money to anonymous strangers online without doing a single check on whether or not they are scammers is not rational behavior. The same is true for most shitcoins. The same is true for a project which prints infinite tokens to keep it solvent, and yet how many people just lost how much money when Luna collapsed because they didn't spend 10 minutes learning about it before throwing their money away on promises of 20% APY and other such obvious lies?

Consumers are not rational. Consumers are greedy.

The issue comes back to the pinto example. Ford KNEW they were dangerous and people would get hurt & killed but the CONSUMERS did not.
Sticking with the car examples GM knew about the Corvair safety issues. Firestone knew about the tire exploding issues and so on.

The company will do what is best for the company, and people have no way of knowing till it's too late.

That is always the issue, as consumers we have to work with what we can find out, the seller almost always has the advantage.

Oh look a Takata airbag grenade, even big companies can get fooled or do you think all the auto makers knew they were putting defective airbags in their cars....

-Dave

People use YoBit largely for one of two reasons. One, because they are not aware they are a likely scam exchange. Two, because YoBit does not scam all their customers, and their scam is one such that it is possible that some of their customers will make money while participating in their scams -- in other words, customers are gambling.

You mention that some customers do not care that companies are doing what you believe are negative actions. None of what you describe removes all value from the products the various companies offer. The free market will handle these negative behaviors.

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I think your bolded statement agrees with my statement. If a consumer is not going to buy what does not get them the best value for their money, the company is going to be unable to realize sales from a product with a bad value.

I think I pulled a muscle laughing.
Yeah the Pinto was a great deal for consumers, or the Firestone tires failing or killing people.
The manufacturers knew the product was not in the 'best interest of customers' but selling them made a higher profit.
Cigarettes, foods with know carcinogens and so on.

Companies will offer what makes them the biggest profit.
Consumers will usually buy what appears to get them the best deal for the money.

The same applies to financial products too. Be it stocks & bonds or crypto or whatever.

-Dave

Rational consumers will act rationally, but the fact that we have literally tens of thousands of complete scam tokens and coins that people continue to lose their money on, and we have 100% proven scam exchanges like YoBit still operating, proves that this space is filled with irrational users. If any service thinks they can largely get away with doing something which will harm their user base in order to make themselves more money, then they will absolutely do that. Robinhood is a great example. Other examples which spring immediately to mind are Coinbase selling customer data without users' knowledge or consent, Binance tricking newbies in to buying some fake bitcoin token on their centralized scamchains rather than actual bitcoin, and Wasabi implementing censorship in their wallet. Plenty of people don't even know these things are happening, let alone actually care about them.

Exactly. Any coins stored on a centralized exchange are not yours and you do not control them, which becomes obvious when exchanges like Robinhood stop you from selling them or sell them against your will.

A truly rational user would get their coins off of centralized exchanges and in to their own wallets as soon as is practical.

to my knowledge, they did have a record to block trades they deem to be "risky" and even sold clients' shares without prior warning, for example, GameStop. that precedent alone proves they can control what clients can do, let alone if you can transfer out your shares (or cryptos) at all.

Often, what is best for the consumer alligns with what will make a company the most money. The reason for this is because consumers will ultimatly act rationally and in their own best interest, and if a company is offering a product that is not in line with what is best for their customers, their customers will not buy said product.

There are real drawbacks to things like DEX's such as lower liquidity and higher spreads. There are also real costs associated with forcing customers to withdrawing their coin immidiatley, such as it being more difficult for the customer to later sell their coin if the price moves a certain way.

The core of the problem is that people put their money above their principles, which makes them lose both.

The ideal benefit of bitcoin is that you're free of monetary oppression. That, besides self-custody, you're using something whose supply is programmed, which means safe from any arbitrary monetary policy, and that it's completely transparent and therefore honest towards you. However, it's not easy to get the picture if you've done the opposite your entire life.

The current capitalism relies on greed and the ignorance of the mob; that's why most don't understand the way money works and even worse: Don't care to find out. Which brings us to the second, non-ideal benefit of bitcoin, profit. Lots of people want to abuse the existence of the ideal benefit, to make money. They will portray themselves as cognizant of something innovative they, yet, haven't fully understood themselves, to serve their broken system's ideals.

And that's also the reason we have thousands of altcoins which are gradually forgotten. We've solved the double-spending problem and got rid of trust. Yet, some constantly try to create different mechanisms, which supposedly "work better", to favor mostly themselves financially.

If people had acknowledged the importance of self-custody, transparency and privacy, we'd have hardly any alt, the impact from centralized exchanges would be minimal and the title of this thread would be a joke.

Absolutely agree. The very first line of the whitepaper talks about avoiding financial institutions, which is exactly what exchanges are. The whole point of bitcoin is lost when you let an exchange dictate what you can and cannot do with your bitcoin.

Because they know they don't need to. Binance are hacked for user data and coins - continues to be massively popular. Coinbase sold user data, insider traded, scammed their users - continues to be massively popular. Huobi admitted to being fractional reserve and using customers' money to hand out risky loans and investments for their own profit at their users' risk - continues to be massively popular. Robinhooh froze buying and selling for regular users, causing them to lose huge amounts of money, to protect the interest of their hedge fund buddies and CEO - continues to be massively popular. Not only do we see people continuing to use these exchanges, but they even defend them with nonsense statements which can be summarized as "Well, it's never happen to me, so therefore it's fine."

When exchanges can get away with constantly abusing their subservient users with literally no repercussions, then they have no incentive to change.

I do agree, from a business perspective i.e only thinking about profits rather than customers security, it makes sense to have a web wallet on your platform. Although, I do believe this is where Bitcoin should be the outlier, we've gone through all this work to assure that people are free to hold their own money, and be responsible for it, why would we then want to encourage the same capitalistic ideals, that corrupts traditional fiat companies?

I hate the fact that a lot of companies pretend that they're looking after your best interest, and the annoying part this does actually convince a lot of their users. However, while they might appear to trying to improve their services for the user it's all about how much profit they earn. Having a web wallet, is probably fundamental to their success as a platform unfortunately.
 
Good point. See, to me an exchange which did that would have much more credibility than any other service out there that didn't, and to be honest credibility, and therefore trust should be at the top of their agenda. Although, obviously profits cloud their judgement, but I'll be quite honest I care far less about how well an exchange is doing, than user security. Something which exchanges should be caring about, but the truth of the matter is they don't, they only care whether they're storing that Bitcoin on their platform. They likely do measure the amount of Bitcoin stored on their platform, and they likely have internal meetings about how they can improve/increase the amount stored on their platform, as it probably directly correlates with profit.

I think it is most likely that exchanges stand to lose more in trading fees than they do in additional transaction fee revenue if they required their customers to withdraw their coin immediately after trading. I don't think transaction fee revenue is as much as a revenue center as it is a way to discourage smaller accounts.

If someone with $20,000 worth of coin is forced to immediately withdraw, if this results in this customer from making a single trade, this type of policy would be a net negative from a profit perspective.

Another negative is that this policy would effectively make it impossible for an exchange to store customer money in cold storage. Currently, if a malicious actor were to compromise the trading engine, and say for example crash the price down to $0.01, the exchange could simply reverse the trades, and take the hit for whatever was in their hot wallet. If customers had to withdraw, anyone holding USD would likely be left holding the bag.

Using LN can be considered an incentive already, lesser fee is a huge difference. Binance might not adopt LN as long as they are on the top, they may not need it until another exchange surpassed them which they would need to compete against. Having their own node means they could still collect from  users, it will still be an advantage for the centralize exchanges.

Afaik Yobit is already using LN, ofc not in a million that we'd use the exchange. I was just mentioning it because I monitor channels every day and read some announcement  from time to time.

Even better, use a DEX like Bisq which means your coins are never stored on their platform at all, and go from your wallet, to multi-sig escrow between you and your trading partner, to their wallet, or vice versa.

Exchanges already make huge profits on withdrawal fees. Binance charges 50,000 sats per withdrawal when 500 sats would more than cover it, and then pockets the difference. More withdrawals would result in more profits from fees for Binance, not less. But as you say, forcing customers to keep coins on the exchange leads to more profits from trading fees.

Let's not also forget that plenty of exchanges use their customers' deposits to fund loans, investments and other shady activity without their customers' knowledge or consent and would become illiquid if everyone tried to withdraw their coins at once.

I don't see any centralized exchange ever doing this. Requiring customers to withdraw their coin will lead to higher costs in the form of transaction fees, and will likely result in transaction fees increasing if the exchange is large enough.

Allowing customers to keep their coin on an exchange will also make their account more "sticky" as their customers will have to do more to move their money elsewhere. Further, allowing customers to keep their money on an exchange makes it easier for their customers to trade, which leads to both more liquidity, and to higher trading fees.

There are just too many incentives for Robinhood, or any other exchange to implement something similar to what you propose.

I mean its hard to measure that accurately, without just being stereotypical. Honestly, I believe any self respecting exchange should require you to transfer the funds to another address that the user owns, I don't like the idea of having a wallet on an exchange, you're just asking for trouble. I'd have an insane amount of respect for any exchange that would build that into the process. Since, that tells me they actually care about the safety of their customers, and not encouraging bad habits. Of course, they won't since the more people they get on their website, the more money they earn since even being on the website probably gives users the temptation to trade.

Same goes for Robinhood, I'd like to see them dropping support for keeping funds on their website, rather than implementing features to better it.

Most of Robinhood's customers have their money in cash, stocks, and options. These securities are insured by the SPIC (and FDIC for cash) up to certain limits. I don't think this is the case for any crypto holdings, and it is difficult for most companies to properly insure crypto they hold on behalf of their customers.

Robinhood offering customers the ability to withdraw their crypto is likely part of a strategy for them to increase their userbase.

I don't even think if there are average crypto users who have an account and actively trading there while they can do a lot on top crypto exchanges such as binance, kucoin etc.

So adding lightning may be a buzz only coz who will use it if their crypto traders/users use coinbase as wallets or any other custodial wallets or just use fiat to deposit there and trade crpyto, well, who knows, but yeah, it is still a good news. Cheers.

Good move, but I don't think I will ever like Robinhood or even sign up to use it, especially when they decided to do the unthinkable after the Gamestop incident where they decided to block retail traders from trading certain assets while it was business usual for hedge funds and institutional investors.
They are capable of doing the same thing again.

Sounds great. Isn't Robinhood traders the kind of people who just leave funds on the platform though? Not necessarily the people who buy bitcoin and withdraw them to a non-custodial wallet?

Regardless, even if I don't think it would be used on Robinhood that much, I hope this move pressures exchanges to follow suit.

The only thing should be good for is for anyone who is dumb enough to still be holding coins on Robinhood to get them off of Robinhood as soon as is physically possible. Robinhood have a long and very widely known history of screwing over their users in every possibly way in order to make more profits for themselves and their hedge fund buddies.

Yea, positive moves for Robinhood. I can't recall but heard more exchanges adopting Lightning Network. It would better option for users with fast transactions and lower fees. On the other hand, users should also be familiar with Lightning Network, otherwise, it will be hard to adapt it. Let's see, day by day more platforms accepting Lightning Network which is positive news for us.

Just when I thought that BitPay accepting LN payments was surprising...Robinhood announces[1] that its users can now withdraw their funds to their personal wallets and will soon be able to use the lightning network to send and receive bitcoin.

[1] https://decrypt.co/97202/robinhood-use-lightning-network-bitcoin-transactions