Seemingly this is the strategy of many Bitcoin exchanges as well, as every time Bitcoin price is going down, mysteriously Coinbase is having issues with their systems.
I just happened to have watched The Big Short [0] yesterday.
In the movie (based on real events) the same thing happened: during the housing crash suddenly every bank had 'technical issues' when people tried to sell their stocks.
Indeed ! If I remember correctly though, they had difficulties only until they sold all their crap (hence lying to their clients by selling them crap as gold). Once they were freed from their toxic assets, they "allowed" everyone to sell. What a world we live in.
Disclaimer: I'm not in finance, don't know much about it, but it's what I understood while watching the movie ;)
That's somewhat correct. But it wasn't that they didn't allow those people to sell. In the film they were dealing with specialty derivative products that weren't traded by your average person. The derivative products in the film were sort of like bond pricing where price discovery isn't obvious and determining a fair price is a bit subjective since the volume was very low. So when people like Michael Burry (Bale's character) called to see what kind of price they could get, the banks would give him a bullshit, obnoxiously low offer price they'd be willing to give him because correctly valuing these derivatives would bankrupt the banks. So they held them on the books with fake valuations to stay afloat while they reduced their risk. Then, after doing all that they could fairly price them, which is when Burry makes a metric shit ton of money basically overnight - because he is finally able to get a fair price.
For example, if we took a simpler example of something more people are familiar with like options...let's say you buy a put at a strike of 100. The stock is trading right around 100. The market tanks like it has been doing and the stock goes down to 80. That's great for you since you had the put. You technically have the right to buy the shares at the market and shove them onto someone and force them to pay you 100. Most of the time, since we're dealing with derivatives, they just trade the value of the option itself and skip dealing with the underlying security because it takes a lot of capital (100 shares * 80 bucks each in this case). So the value of the option (the derivative) should be around $20 as you approach expiration and the premium fades off. If the market maker for the options has way too much exposure and wrote naked puts (meaning they didn't have the underlying security) they took on a ton of risk and basically got fucked. In this scenario it's like Burry calling and finding out his options are worth like $1.50 instead of $20 simply because they are thinly traded and therefore can't get a good price by anyone. This actually happens on some options - you'll see a huge spread between the bid and ask on some options so it's not like it doesn't happen even for this type of retail-friendly derivative.
That's the point of cryptocurrency though: a financial world unencumbered by those annoying regulations that protect the buyer. No takebacks.
Reality is the regulations on the financial system are a feature. Being able to have charges reversed if I get my card skimmed and someone makes a bunch of charges is a feature. Being able to get my money back if the seller ships me broken goods (or nothing at all) is a feature.
Having regulations on banks front-running their customer's transactions is a feature (one that Robinhood unfortunately gets around somehow). Having regulation on securities not being scams is a feature.
> Reality is the regulations on the financial system are a feature.
As with anything, the answer is sometimes.
You want those rules for your retirement account, because if someone can steal a six figure sum from you instantly with no takebacks, that is bad.
But the overhead of that system is not always required, and it's the major reason that we don't have e.g. micropayments. The overhead of allowing transactions to be reversed eats the entire transaction amount for very small transactions.
So it would be good to have a system where you could, for example, transfer $50 into it from your bank account, wait the month or so until the transaction can no longer be reversed, and then transfer it from there a few pennies at a time with insignificant transaction costs because the small transactions are instantaneous, anonymous and can't be reversed. Which isn't nearly as problematic because even if you get scammed, your loss is limited to the $50 you put in. Instead of getting wiped out, you pay a reasonable cost for a personal lesson on security and trust.
And there is no reason we couldn't have both. Then you keep the bulk of your wealth in the inefficient safe system and some petty cash in the one with lower transaction costs and get the best of both worlds. But the existing rules don't allow that, which is bad.
This is a lot different though. Banks were the actual dealers of the securities in the big short- you were actually buying and selling to the bank itself. Robinhood and stock brokers, you aren't buying and selling to them- their primary function is to just give you access to the markets where market makers are participating on the other side of the deal. Robinhood does not participate in market making, they purely give you access to them.
In the Big Short case, the banks were acting as market makers, or more technically in this case dealers- this was more akin to going to a used car lot. You read a lot of reports saying that the new Fords were flying off the lots for outrageous prices, and to people with dubious ability to pay for the sticker prices they did because they got loans they shouldn't have. You go to the dealer and say I want to sell these cars short and buy them back later. The dealer presumably thinks you are an idiot, or wants to hedge some risk (the analogy is breaking down here), but says ok sure, thinking he is going to sell them for even more in 6 months. 6 months later comes- you were right- there is a flood of Fords on the market at half the price because so many people had them repossessed or are desperately trying to get out of these loans that are killing them. You go to the dealer and say "Ok bud, I'd like to buy these cars back at half price..." and they say "Nah, these are still worth 98% of what you sold for... how about that price?" and you are kind of stuck. You bought specific used cars that are kind of but not really entirely fungible. You can't just go down the street and buy those cars and replace them. You have to hope that they feel the pressure to lower those prices because they start feeling the squeeze for cash, or a regulatory agency comes in and puts the pressure on. They can kind of live in la-la land and avoid the reality of the situation as long as they have no requirement to sell.
Eventually though, they blinked and once one bank started taking write downs, all banks did, and once that became acceptable, they all followed suit- and they also needed the cash at that point.
Anyway- now back to stocks/options- these have well known discoverable prices and you can sell them on open markets where the brokers you connect to might be on the other end of the deal but its really unlikely. A broker/dealer like Robinhood or Schwab or Interactive Brokers should theoretically have an entirely flat position at the end of the day.
TL,DR: Robinhood didn't go down because it doesn't want you to sell your stocks.
Same here. I don't remember the details, but I had BTC (transferred from local wallet) stuck in some unexplained "pending" state for more than a week and Coinbase support was nowhere to be found. Thankfully, it was eventually resolved and that was the end of my BTC adventure.
One of the problems with Bitcoin is that there is a finite and fairly low limit of transactions that can take place per block. You have to get the bitcoin onto an exchange before you can trade them (and it is not recommended that you leave them there due to risk of scams/hacking) and during a time of crisis everybody else is trying to move their coins to the exchange too.
This means that transaction fees spike to 10-100x their normal rate during those crises, or else your transaction just sits and takes a week to get confirmed (if it ever does at all - eventually it will just time out after a few weeks).
There's logic to this... Most exchanges have most of their funds offline, and only a small portion on their servers (to reduce losses in case of a hack).
When volumes go up, the servers run out of money, and everything grinds to a halt till humans intervene.
The humans typically want to do a lot of checks they aren't being tricked into refilling the online wallet too. Those checks are usually manual and take time.
The reason is quite simple: they are using Ruby on Rails internally for many parts of the system.
As much as I love Rails, it's extremely hard to scale an application written in it to handle millions of users. All the Active Record transactions have to be rewritten as database transactions if you want to make sure that the databas doesn't lock the tables for a long time.
> The reason is quite simple: they are using Ruby on Rails internally for many parts of the system.
The choice of a language or framework is only one factor on the success of failure of a system.
You can write a broker in brainfuck if you are so inclined. You can make it rock solid. Your pick may require more or less engineering resources, but that's all it does.
You mention ActiveRecord. That too is premature optimization. Crafting optimized SQL queries will not save a badly architected app. They might even be worse if whoever is optimizing them doesn't fully understand what they are doing.
> if you want to make sure that the databas doesn't lock the tables for a long time.
You didn't mention which database you are using. You didn't say anything about its schema. This is yet another generalization. Not all databases will "lock the tables", no matter how badly queries are written. And, if they do, optimize that.
Usually, only a handful of services are critical. Microservices are all the rage, optimize those to death.
Both Twitter and Groupon scaled to many millions of users using RoR. I don't remember it being especially more difficult than scaling any other kind of system to millions of users.
