A Call for a Better Bitcoin Exchange

Yet another theft rocks the Bitcoin community. My condolences if you lost money on Bitfinex. This writing is to attempt to frame the theft in way that might inspire helpful resolutions.

Bitcoin exchanges are attacked because bitcoin ownership is inherently more secure than any other thing that can be stolen. The NYSE is not unhackable, it is just very difficult for a hacker to do much with what could be stolen. Bitcoin is fungible while a bank account balance can be locked and stolen. Bitcoin fungability is what puts it equal to gold for use as money, do not attempt to "improve" Bitcoin by breaking what gives it value. Do not encourage that Bitcoin become regulated through white-listing of transactions because it is people who then become entirely controlled through their money.

The lesson is to not trust exchanges, or more correct is to say that is the lesson that should be reinforced through this experience. Exchanges are a counterparty relationship, and no counterparty (regardless of regulatory compliance) should be trusted with much.

The patterns used to secure fiat money are the opposite of those used to secure real forms of money. Fiat money is relatively secure from theft because it can be stolen back. Real money has value as money because it can't be easily stolen back. Gold, silver, and bitcoin qualify as real money. Wars are fought over real forms of money. Kingdoms are razed for their gold, but no army would invade Japan to take their Yen. Countries and banks still do international trade with real money and the real money is under such high security that even official deposits are misdirections.

It seems a natural law that wealth grows by many hands and eventually into fewer hands than can secure the wealth from theft. It would not be correct to conclude that fiat money avoids wars; in fact, fiat money derives value from measured and gradual violence. We now live in a time when global wealth is in very few hands who would be wise to seek security. An interesting twist this time is that masses care more to discharge themselves from the monetary violence that enslaves them and yet they barely understand what real money is. Another twist is that the wealthy few desire control over creation and circulation of fiat money more than real money ownership. Both the wealthy few and masses will discover that money has value through the security that others perceive.

The topic of the day though is how to implement a bitcoin exchange (with price discovery) with minimal counterparty risks. The old solutions involving large regulated exchanges simply won't work, it is a false promise of security that only ends in larger disasters. A better approach is to be able to distribute risk over a multitude of peer-reviewed counterparties. Ripple might have evolved that way if it were not for regulatory compliance made possible through having identifiable creators. People know how to implement a better bitcoin exchange. The problem is that people that can envision and implement the technology usually want recognition and reward that is later undermined through state violence to control their actions. Satoshi clearly understood the importance of security and privacy with regards to money, too bad "he" didn't finish work on a decentralized exchange.