Some of our users are asking the very legitimate question as to why an admin approves sending coins from Coinbook. This causes a slight delay most often, but in the middle of the night it can create a several hour delay! Why would an exchange choose to operate like this? Well, the question itself reveals to us that the person asking is a very honest person which is very refreshing.
Crypto exchanges are not created equal
First of all, not every exchange is as honest as Coinbook. Some exchanges are complete scams and it doesn't take more than a single Google search to find examples. Some other exchanges are completely honest, but have chosen to do business in a way that exposes them to complete ruin by not appreciating the risk that hot wallets pose. If you ask any person involved in bitcoin since 2012, they will universally tell you not to leave coins on an exchange. This is because they have been burned by irresponsible, or naive exchanges. Our founders have lived through MTGOX, Cryptsy, Mintpal, Bitgrail, Cryptopia, etc. and coin security is something they will not negotiate on.
What makes Coinbook safer than other exchanges
Being an exchange comes with quite a few challenges, the foremost being the safety and security of every coin that we custody for others as well as the large inventories that we manage. Ever since going live as an exchange, the attempts to scam our employees, manipulate our system, and attack our infrastructure to steal coins has been impressive ... but not successful. Why?? Because we don't leave any coins online in a hot wallet for scammers and hackers to steal.
So how does Coinbook operate coin flow? First we generate coin addresses with a hot wallet, but coins sent to these wallets are immediately swept off into an offline wallet on a regular interval. This is the only window where coins have any exposure online. If there was a problem here, this would be something we would discover very quickly since everyone who doesn't see their coins pending within a few minutes would send us a support ticket. The coins are safely offline, but the ledger of their existence remains in our database so your ability to trade is seamless.
When coins are requested, trusted admins with limited amounts of coins fulfill the requests. Each admin is given a specific amount of coins in cold storage to use so employee risk is limited as well. Since the coins they control are public on the blockchain, any misuse of these coins (meaning if an audit shows that they didn't actually send coins to the place they were supposed to) are public and easily prosecutable. This keeps everyone honest and accountable.
At a certain point in the future we will keep a limited hot wallet online for small transfers, but that risk will be measured in terms of what the company can afford to lose since that is the nature of exchange hot wallets. In the mean time, we remain a Fort Knox for your funds.
One more reason to start with Coinbook
Coinbook exists to help people that are new to have a safe place to learn about bitcoin and get involved. We also exist to save people from themselves when they choose to keep all of their coins on an exchange - which we don't recommend. Seriously, don't do this since it is completely against the point of bitcoin's invention in the first place. Our traders can rest easy at night knowing that Coinbook is a company that is doing it right.