Bitstamp has reported that it has found a solution to delays being encountered by traders in cryptocurrencies who have been trying to withdraw Ethereum. On 7 December the Luxembourg-based brokerage in Bitcoin and Ethereum reported that attempts to withdraw Ethereum were being slowed down due to network congestion.
“Our system is based on smart contracts, which means that ETH [Ethereum] withdrawal transactions are processed individually and in succession,” Bitstamp commented last week. “If an unmined transaction is at the front of the queue, the transactions behind it remain stuck until each is confirmed and processed.”
Bitstamp says it has found a solution by replacing the old hashes with new ones. All of the backlogged ETH transactions were re-sent with higher fees. Bitstamp added that it had cleared most of the backlog within 24 hours.
The issue, a technical one, throws up one of the major concerns we at The Armchair Trader have with cybercurrencies. Most of the investing world seems to be divided between enthusiasts ready to grasp the opportunity of digital currencies with both hands, and sceptics who view them as a financial bubble, or at worst a vast Ponzi scheme.
Our concern is what will happen should enough investors decide to exit Bitcoin or Ethereum en masse. Will the market infrastructure be able to sustain the demands for withdrawals (effectively ‘sell’ orders) or will it simply cave in? The issues with Bitstamp are a good indication of what can happen if the trading infrastructure which supports a market is not up to the job.
Bittrex operation encounters transaction problems
Similar problems have occurred more recently at Bittrex, a Las Vegas-based cryptocurrency platform. In this case problems seem to have occurred when traders were asked to verify their identities when trying to withdraw Bitcoin. Bittrex says that it was struggling to meet enhanced identification procedures required by US banking regulators. It is hiring more staff to help it to cope with the issue.
However some traders in the US complain they are being given the run around by Bittrex and that there has been little or no communication from the broker. Several have complained that they have been waiting for over a month to withdraw assets.
In a statement that Bittrex sent to Business Insider, the firm claimed:
“Bittrex recently reached out to its affected customers to explain more fully the improvements we have been making to our identity verification procedures and the reasons some accounts have been affected. A small percentage of our overall user base has experienced delays in getting their account issues resolved, and we have recently added more staff to address those delays.”
Bittrex is one of the top three crypto exchanges in the United States. For investors to be experiencing issues with redemptions at a time when most investment cash is travelling the other way, into cryptocurrencies, it does give us pause to wonder what would happen if the bulk of traders are withdrawal orders. How exactly will the likes of Bittrex and Bitstamp cope then?