Bitcoin exchanges are more centralised than traditional exchanges. We can do so much better than this.

6 Mar

Richard Gendal Brown

What The Traditional Financial System Can Teach Us about The MtGox Disaster

Imagine you were an equity trader and used a Stock Exchange to trade between equities and cash and back.  What would happen if they unexpectedly filed for bankruptcy? How much money would you stand to lose? The answer is zero.    You would lose nothing.  Your equities would be safe at your custodian bank and your cash would be wherever you left it.

However, if you were a Bitcoin trader and your Bitcoin exchange went bankrupt, you could have lost everything – as users of Mt.Gox discovered to their cost last week.

How can this be?  Isn’t Bitcoin supposed to be the ultimate decentralized financial system?  Well, yes… the Bitcoin network is decentralized but many of the major players are not.  And, worse, exchanges like Mt.Gox acted as more than just exchanges: they are also the Bitcoin…

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