No matter how bad the gox thing is.....
I don't want no goddamned BigBanking And Government licensing and bullshit
like the banking bailouts. Banks aren't supposed to lose the money. Yet they
have fucked it up a couple times now...back in 1929... and more recently with
the banking bailouts that happened. Fuck banks. Fuck the banking industry.
Look at the bitcoin money supply. Almost five percent of it was just revealed to have been stolen.
That's unacceptable. I mean, just completely, mindbogglingly, unacceptable.
Put that in perspective. Imagine someone stealing five percent of the world's total money supply, and the destruction of lives and livelihoods that follow. We're seeing a limited version of that destruction right now, but as BTC gets bigger, this becomes more and more serious. This is the kind of thing that can utterly destroy national and world economies if we don't get it under control, and I'm starting to think that the time to do it is getting here now, or already past.
We need accountability. But I do think that accountability can be done without legislation - besides legislation would be limited to a single country, or patchwork different around different jurisdictions. If there is an absolute demand for accountability, the blockchain makes it possible for the exchange and the people it serves to cooperate to verify that the amount currently held by an exchange and the amount entrusted to it by the customers are in fact equal.
It's pretty simple in overview; customers keep track of transactions which are entrusting others with their money rather than direct spends. IE, I spend my money for alpaca socks, that's a direct spend. But if I send money to an exchange, or a bank, or anybody else whom I'm trusting to keep my money and give it back on demand, that's an entrusting transaction instead.
An auto-audit capability could be built into the blockchain. Imagine a protocol where at any time more than a week since last time an exchange got audited, anybody could broadcast a message initiating another audit. This message would be received by all clients (it would be in the blockchain), prompting clients interested in the audit (ie, those which have made new entrusting transactions to that entity) to sign using the keys for the entrusting transactions. The customers can remain anonymous; all the protocol needs is for there to be a response using the key. The amount entrusted by all entrusting transactions is then visible, and then the exchange responds by countersigning its new spends and its unspent txouts. Result: everybody can see whether the total held by the exchange has changed in a way that exactly matches the amount that customers have entrusted to it.
No need for KYC laws, no need for expensive human auditors, no need for licensing and barriers to entry, no need to pay for regulators and et cetera; instead, make it automatic. Build it in distributed trustless style the way we've built everything else. Let the audit get checked in a distributed trustless way exactly the same way all the other tx in the blockchain get checked.
If you think about it ... That really has been the issue all along. Satoshi built a trustless distributed infrastructure, and then we let these idiots butt in with financial service businesses which they constructed in centralized ways that required trust. That was a mistake. If you're going for a trustless distributed model, go for the trustless distributed model all the way from bottom to top.
In fact, it shouldn't matter if someone is a fast-food worker who majored in Philosophy, living in her mom's basement on a minimum-wage income; if she's smart enough to run an exchange and savvy to handle the software and professional enough to keep accounts secure and keep her own fingers out of the till, she'll pass the damn audits and she'll deserve to. There's no reason (at least none yet) to throw FINRA and the SEC at her.
