BitMex joins the list of exchanges and wallets that failed to supply customers with their BCH

Bitcoin Mercantile Exchange, or BitMex, is indeed one of the largest Bitcoin exchange websites handling over $1 billion dollars in trades every day. But on December 28, 2017, BitMex posted the following notice:

BitMEX completed the sale of all Bitcoin Cash (BCH) held on behalf of our users. Bitcoin Cash sale details:

  • The amount of Bitcoin Cash a user is entitled to is determined by their Margin Balance at 1 August 2017 13:17 UTC, a few seconds after block 478,588.
  • Bitcoin Cash to Bitcoin (XBT) Ratio: 1 BCH to 0.1707 XBT
  • Users’ BitMEX Bitcoin wallets will be credited with the amount of Bitcoin they are entitled to.

The Insurance Fund was credited with 120.5321631 XBT due to its holdings of Bitcoin Cash. source

The move was not exactly unexpected. On November 15, 2017, they had stated:

Users will not receive Bitcoin Cash, rather BitMEX will sell all users’ Bitcoin Cash, and credit their wallet with the Bitcoin proceeds. source

BitMex is not the only company that has taken this stance with Bitcoin Cash. Bitfinex for example, another major exchange, only credited their users with half of their due BCH balance. BitMex however, is one of the more extreme cases.

The unregulated nature of online exchanges, enables such entities to get away with practically almost anything.

The nature of BTC forks entitles every holder, of an equal amount in a forked coin. But exclusive ownership of coin, comes from ownership of the private key. Such exchanges do not provide users with their own wallet and key. Very few exchanges do… But in doing so, it gives control of funds, and any future forks to the customer directly.

After all, this was the whole point of Bitcoin – financial sovereignty.

Allowing a third party to have exclusive access to private keys (which should be yours), defeats the very purpose on which Bitcoin was founded upon.

It also opens up opportunities such as this- where a third party takes executive decisions on the movement and use of their customer’s funds.

As noted above, BitMex credited the BTC balance of their users by selling BCH at ratio of 0.1707. The obvious question here is, what if Bitcoin Cash ends up performing much higher? It has certainly gone well above 0.17 in fleeting moments. Alas, customers can withdraw their BTC, and buy BCH should they wish to… But users will lose a lot of traction in friction fees, moving and converting BTC.

Xapo wallet had also done something similar, forcing users to sell their entitled BCH for BTC…

A simple withdraw button could have been more than sufficient, so why the additional effort of going through pushing all that BCH to exchanges, converting, crediting users with BTC, and all the other hassles that goes with it? Questions remain.

In all, it leaves an unwanted after-taste. In this unregulated scene, users are given no option but to ‘trust’ that such a third party, acts in honesty of their announcements. Users have to ‘trust’ that their BCH was sold at a 0.17xx ratio. Users have to trust, that all BCH was sold.

Bitcoin isn’t about ‘trust’. This is why it is often referred to as ‘trustless’. An underlying tenet of the technology relies on never having to ‘trust’ a single entity.

There is very little most users can do about the ethical inner workings of a company within the crypto-sphere. But users should be far more cautious. And the onus is on the users to keep 3rd parties honest. Firstly, never leave your money on an exchange long term. Not only can such an entity get hacked, resulting in having your funds stolen (as evidenced already many times), but also, users are at the mercy of such entities when it comes to receiving the due coin from resulting forks. Secondly, users should own and hold their private key, in safe secure, and if necessary, encrypted space.

But I want to end on one glaring point that has come out on all this. If BitMex truly did sell all their customers BCH, and given that Xapo and others have done something similar, then the price of BCH today is very telling.

Today Bitcoin Cash has sustained incredible downward sell pressure, and has dealt with a barrage of negativity from Core aligned trolls, and outlets, only to surface unharmed, and positioned stronger than ever for what looks to be an exciting year ahead. The attacks have been met with unrelenting efforts from development teams, and an exploding eco-system seeking world-wide adoption.

Eli Afram

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