I am happy to say that the 52-day saga of my Kraken withdrawal has finally been resolved.  The wire arrived today, at long last.

Word to the wise - Kraken is great for SEPA (EU) deposits and withdrawals.  But outside of the EU, you are going to be in for a very long wait to get your funds.  It is apparently their bank's fault.  I would not use them again until they get a better bank for doing international wires.

I've been waiting to get my money out of Kraken since January 24th.  After two failed USD Withdrawal attempts I was advised by the management to convert my balance to Euros because the Euro wires go out lickety split.  So I did that, and have now been waiting two weeks for a Euro bank wire that still hasn't been sent.  I opened a support ticket and was advised this is the fault of FIDOR Bank which is still processing the outbound bank wires for February, and if I'm lucky my wire will be sent by the end of March.

On the board here we've seen lots of examples of people in the SEPA area whose wires come in and out of Kraken in a reasonable time (less than three business days).

From this I conclude that Kraken has had serious problems with their US and European bank when it comes to processing bank wires outside of SEPA, but the SEPA interface must be automated.

Since my EURO withdrawal is to a bank outside the SEPA area, it is being processed by hand by the bank, and there is clearly a backlog of several weeks in processing those outbound wires.

Kraken advertises on their site "fast deposits and withdrawals".  I feel that given their abysmal record on that point, they should remove that claim because it is dishonest to claim "fast deposits and withdrawals" when withdrawals outside of SEPA will take weeks.

If Kraken can only deliver good service in the European Union then perhaps they should limit their customers to the European Union or else make it exceedingly clear on their site that deposits and withdrawals from outside the EU may take weeks to months to be processed.

The point is that HTTPS is flawed in a number of ways, though more political than technical. (He who controls the CA's controls the world.  The CA's charge a shitload of money for certs, but hardly do any verification and refuse to be held liable when they issue a cert to a known phishing site, etc.)

Bitcoin could write its own protocol, or else include the CA Cert root certificates in the clients by default.  Otherwise, as Grigg has pointed out, Bitcoin merchants will find themselves at the mercy of CA's in order to accept Bitcoin payments.  That hands control over a substantial part of the Bitcion network back to the Establishment.

If you don't want to do a better protocol than HTTPS, then at least include the CA Cert root certificates in every client so Bitcoin merchants can use a decentralized CA without paying exorbitant fees for SSL certs.

The dev team recently announced the decision to chose SSL's PKI for the new Bitcoin merchant API , called BIP 70.

Mike Hearn defended the choice in this article by claiming that nobody offered any workable alternatives.

However, CA Cert is an alternative that works and should be considered for three reasons:

1. CA Cert works with SSL.  It is a decentralized Certificate Authority that does not charge for SSL certs, with 20,000 members.

2. CA Cert has a working arbitration forum that has the potential to solve many of the problems that crop up with Bitcoin - the lack of trust and enforcability of contracts between users across national borders.

3. CA Cert has thus far successfully repelled attempts by intelligence agencies to insert their people into key positions in the organization.

In this article at financialcryptography.com, Ian Grigg argues that Bitcoin is throwing the baby out with the bathwater by adopting the mainstream SSL PKI.

Grigg says:


The Bitcoin community is exactly the kind of community that has the chops to provide a much needed alternative to the centralized corrupt corporate SSL PKI.   If they aren't willing to give it a go, at least use CA Cert which is far more in line with Bitcoin's ethos.

Thanks, Jesse.  Your apology is a step in the right direction.  I look forward to seeing the audit.

Best regards,
Ken

So, Itod, you completely reject the theory that Karpeles lost the keys to MtGox's cold wallets?

I agree with martinhyl.

Kraken has been having major problems with deposits and withdrawals, especially USD deposits and withdrawals.

The customer support was very slow to address this issue, until they finally said no more USD withdrawals.

Kraken CEO Jesse Powell recently posted a comment on CoinDesk denying that Kraken has suspended USD withdrawals, even though many of us had received an email from Kraken advising us of that situation.

My concern is that Kraken's CEO Jesse Powell is another Mark Karpeles.

Why do I say that?

Jesse is a kid who made a lot of money trading magic swords and things in computer games. 

He "came out of retirement" to start Payward/Kraken after he saw in 2011 that MtGox was messed up from the inside.

Yes, as Kraken has faced difficulties with their banks over the past two months, instead of just telling us the truth, Jesse has blustered and covered up just like Mark Karpeles did - until he couldn't cover it up anymore.  Then and only then did he come clean with us, the customers.

I have very little confidence that computer gamer Jesse Powell has the knowledge or integrity to run a financial institution, which is what Kraken is.

If he wants to change my mind, he needs to start taking RESPONSIBILITY for the performance of his company immediately, instead of blustering.  He needs to put in place 5 Parties Model of governance.  And he needs to start processing withdrawal wires in less than 3 business days.

It has been speculated by many that MtGox lost the private keys to their cold cold storage wallets because of a bug in their key generation software.

Before putting 10,000 BTC in an address, I would want to check to make sure the private key really works for that address.  Wouldn't you?

But what if there is a bug in my internal testing procedure?  Ultimately the only true test that is 100% reliable is to do a live spend.

Recent speculation about MtGox has raised the possibility that Karpeles may have spent BTC into wallets for which he had invalid private keys.  Ie, his key generation algorithm may have malfunctioned.

I don't care to speculate about that.  However, it does raise a valid technical question...

Is there a way to test the private key of a Bitcoin wallet without transferring real value?  Ie, can I make a spend of 0.00000000 BTC to another wallet?

Obviously no value would xfer, but the transaction would get recorded in the blockchain.

Tell me, is this possible or practical as a way of doing a simple live test on a new wallet before sending live value to it?

Kraken ended up cancelling the USD Withdrawal and put the money back into my account.  They said they can't do USD Withdrawals and I have to convert the money to Euros and take a Euro wire.  So I did that, and this time they say they sent the wire.  Hasn't hit my bank yet, but I'm optimistic it will be there on Monday.

All said, it's taken over 1 month to get my money out of Kraken.  Customer service was non-existent until the last two weeks when they seem to have put a higher priority on it.

I understand that US banks are incompetent.  But Kraken needs to be careful to be certain that their claims of bank-related services on their website (like fast deposit and fast withdrawal) are matched by reality.

It doesn't cut it to the blame the bank.  The bank is part of your system.  If your bank sucks, then your system has a weak link which results in poor customer experience.  A sucky bank is contagious. From the customer's perspective it means the Kraken experience sucks.

I recently posted this article at Bitcoin Magazine: Don't Get Goxed - Use The Five Parties Model

In Summary

45% of Bitcoin Exchanges have failed since 2010. 70% of those failures were due to security breaches, and the remainder due to inside theft or (if you believe Mark Karpeles) gross incompetence.

The Five Parties Model of Governance helps to avoid problems like MtGox by separating the powers of the parties involved in the transactions and having everyone watch each other.

The Five Parties are:

1. Issuer's Board of Directors (holder of value).

Their job is to write and uphold the contract for escrow of value, deliver the service, and make sure the other parties do their jobs.

2. The Trustee of the Digital Assets

The Trustee is the person who creates/destroys or transfers the internal digital assets of the Bitcoin Exchange.  He can only create or destroy value according to the rules set forth by the Issuer, and at the request of the Manager.

3. The Manager, or Trading Desk

This may be an employee of the Issuer (Bitcoin Exchange) or in some cases a separate business that provides the market for the Digital Issuance (such as is done on NASDAQ).  The manager runs the daily trading (in/out exchanges) using an internal float account (ie. MtGox internal BTC account) and an external float account in the reserve asset (ie Bitcoin Hot Wallet).

4. Operator

The operator runs the software that keeps track of the value.  Transactions can only be authorized with signing keys (like Bitcoin transactions).  The Operator should never have those keys.  The operator is the IT department that runs the exchange, or in the case of Bex.io, an external company that provides hosted exchange software.

5. The Public as Auditor

By making the internal net account balance public through an API, along with the reserve account addresses (cold wallets), the Public is able to verify the asset backing the internal accounts are 100% liquid at all times.

Here is a diagram of a simple Five Parties Model:

http://btcmag.9wizards.netdna-cdn.com/wp-content/uploads/2014/02/5PM1.png

Five Parties Model for a BTCitcoin Exchange

For a Bitcoin Exchange you need two Five Parties Model instances set up in mirror - one for the internal user accounts, and one for the Bitcoin cold wallets.  Here is a diagram that shows governance for a Bitcoin Exchange.

http://btcmag.9wizards.netdna-cdn.com/wp-content/uploads/2014/02/2-Sided-5PM-31.png

How It works in Practice

In practice you want to make sure that the Manager cannot piss away the Cold Wallet BTC reserve like MtGox claims they did.

Here is how you control the deposit or withdrawal of BTC from the reserve in a controlled firewalled manner:

http://btcmag.9wizards.netdna-cdn.com/wp-content/uploads/2014/02/Bailment-434x620.png

You can get more detail by reading the article at Bitcoin Magazine.

I would really appreciate community feedback.

For more detail and excellent diagrams, see the article:  Don't Get Goxed - Use The Five Parties Model

EAD, Raskul, the wire coordinates were correct and have worked many times before.

The Kraken Support guy said, "The problem is in a batch of USD withdrawals that were slightly malformed, and consequently delayed."

Somehow Kraken managed to screw up a whole batch of outbound wire transfers, not just mine....

I sold a few BTC on Kraken in January and placed a "USD withdraw" order on their site on January 24th.  I kept checking and it never changed from "pending", which made me suspect they had never processed the order.  After 10 business days, I posted support ticket #19434.

The Kraken support wrote back to me (only after I started posting on their Facebook page) to say that they had a batch of "malformed" USD withdrawals and it will take an investigation and 2-4 weeks to perform an investigation to find out what happened. 

I asked for a copy of the outbound wire receipt, but they never replied to that request.

How do you have a "malformed" USD withdrawal?  It sounds like he was just using words from the Bitcoin malleability bug and making up an excuse.  I am suspecting that Kraken has a serious problem in the wires department.  They may be illiquid, understaffed, incompetent, or else their bank just sucks.

I don't know if I will ever see my money again.  There is no way that any other exchange business could possibly rely upon Kraken for restocking their inventory.  They are too slow.

I would never recommend Kraken to anyone.