Bitfinex “socialized loss” estimates
TLDR: Estimated $6 million worth of socialized loss taken from ETH and ETC balances. over $66 million in socialized losses for USD, BTC and LTC balances
Bitfinex in light of losing 119,756 bitcoins has decided to implement what they call a “socialized loss”. In terms of raw $ amount the figure I’m going with is $72,339,809.36 which according to Bitfinex “represents the midpoint of the bid and ask on August 2, 2016 at 18:00:00 UTC”.
Below is the table of values that Bitfinex announced:
BTCUSD: 604.06000000
ETHUSD: 10.19050000
ETHBTC: 0.01689900
ETCUSD: 2.83700000
ETCBTC: 0.00471495
LTCUSD: 3.75180000
LTCBTC: 0.00621295
All things considered the socialized losses at Bitfinex, are being primarily funded by USD balances, Bitcoins from non-hacked accounts and Litecoins (added June 2013). To a lesser extent, Ethereum (added in March) and Ethereum Classic (added recently).
Bitfinex further writes in their recent announcement “Upon logging into the platform, customers will see that they have experienced a generalized loss percentage of 36.067%.”
Personally I see this “socialized loss” as the worst possible solution and one which equates to stealing from people.
Essentially we have different reasons for holding a specific amount on an exchange and each token carries a different risk profile. For example it is most likely more convoluted to steal USD from Bitfinex compared to a digital token so you may actually feel safer in holding a larger quantity of USD on Bitfinex. The point is that each asset should be assessed and treated individually (there is the edge case of loans).
Quantifying this I see the following scenario as a percentage of overall “stolen” funds used to pay out as a “socialized loss”:
USD: LARGE amounts of USD were taken from people. USD was traded against Bitcoin so many accounts have large amounts of USD.
BTC: LARGE amounts of BTC were taken from people. Not all Bitcoin accounts were hacked.
LTC: SEMI LARGE amounts of Litecoins were taken from users. Litecoin has been traded on Bitfinex since June 2013. Many users also likely use Bitfinex as a bank for their Litecoins.
ETH: SMALLER amounts were taken. A tagged wallet for Bitfinex shows 999,909.61 ETH. This is likely the cold wallet and has not had transactions for the past 4+ days. Based on hack time value of $10.19, this is $10,189,578.88. Socialized loss value of 36.067% makes this $3,675,075.41.
ETC: SMALLER amounts were taken. Based on hack time value of $2.837 per ETC, and estimating a similar amount of ETC as there is ETH on Bitfinex, socialized loss would make this around $1 million.
In conclusion, we can estimate approximately $6 million worth of socialized loss taken from ETC and ETC balances combined. Subtracting this from the total $72,339,809.36 figure, we come up with over $66 million in socialized losses for USD, BTC and LTC balances.
