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Ethereum Exchange Reimburses Customer Losses After 'Flash Crash' (gdax.com)
An anonymous reader writes:
"The price of ethereum crashed as low as 10 cents from around $319 in about a second on the GDAX cryptocurrency exchange on Wednesday," reports CNBC, calling it "a move that is being blamed on a 'multimillion dollar market sell' order... As the price continued to fall, another 800 stop loss orders and margin funding liquidations caused ethereum to trade as low as 10 cents." An executive for the exchange said "Our matching engine operated as intended throughout this event and trading with advanced features like margin always carries inherent risk."
Though some users complained they lost money, the price rebounded to $325 -- and according to a report on one trading site, "one person had an order in for just over 3,800 ethereum if the price fell to 10 cents on the GDAX exchange," reports CNBC. "Theoretically this person would have spent $380 to buy these coins, and when the price shot up above $300 again, the trader would be sitting on over $1 million." Yet the currency exchange announced Friday that they're honoring everyone's gains, while also reimbursing customers who suffered losses. "We view this as an opportunity to demonstrate our long-term commitment to our customers and belief in the future of this industry."
Though some users complained they lost money, the price rebounded to $325 -- and according to a report on one trading site, "one person had an order in for just over 3,800 ethereum if the price fell to 10 cents on the GDAX exchange," reports CNBC. "Theoretically this person would have spent $380 to buy these coins, and when the price shot up above $300 again, the trader would be sitting on over $1 million." Yet the currency exchange announced Friday that they're honoring everyone's gains, while also reimbursing customers who suffered losses. "We view this as an opportunity to demonstrate our long-term commitment to our customers and belief in the future of this industry."
Why don't you take your own advice? From the second link:
"We will establish a process to credit customer accounts which experienced a margin call or stop loss order executed on the GDAX ETH-USD order book as a direct result of the rapid price movement at 12.30pm PT on June 21, 2017. This process will allow affected customers to restore the value of their ETH-USD account to the equivalent value of their ETH-USD account at the moment prior to the rapid price movement. To clarify:
* For customers who had buy orders filledâSâ"âSwe are honoring all executed orders and no trades will be reversed.
* For affected customers who had margin calls or stop loss orders executedâS -- âSwe are crediting you using company funds."
These are rollbacks on exchange accounts. Those transactions never entered the blockchain. An exchange account is like an IOU while the exchange backs those IOUs with real coin in an internal wallet until such time as you send a coin transfer from your account to an external address. Only then do the transaction get recorded in the blockchain.
What GDAX is doing is simply restoring those IOUs for people whose IOUs got wiped out. At the same time, they allow the people who scooped up those IOUs for cheap to keep them, whether they are still there or not. Since part of their own assets are company owned coin (which is probably separate from the exchange hot wallet) all this means is that they suck up the financial hit for the sake of PR.
The blockchain was not altered in any way. There are no holes, and it is only possible for GDAX to reimburse the GDAX customers that were affected by the flash crash.