Tweetstorm: We’ve Built Intermediaries
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Tweetstorm: We’ve Built Intermediaries
By Meltem Demirors
Posted Septemeber 27, 2019
1/ in the crypto community, we love to talk about things like
- choice and access
- self-sovereignty
- privacy and consent
- removing rent-seeking
but when we take a hard look at what we’ve built… the majority of value in our industry is being captured by intermediaries
2/ there are new business models emerging on both the “cypherpunk” end of the spectrum and the “my dad” end of the spectrum… but at the end of the day, it’s all about who controls the coins
coin = power
not your keys, not your coins
3/ so where are the coins?
if 100% is all bitcoin mined to date, roughly 17% is in third party custody (although the number is likely higher)
that’s pretty significant
4/ why does this matter? well, history usually helps us understand what the future might look like.
in response to the financial crisis, the US government created a new designation for financial institutions - one called a SIFI or systemically important financial institution
5/ when you have a small number of firms holding a large number of assets, you centralize risk
with legacy finance, this is dangerous but not deadly.
with bitcoin, this is both dangerous and potentially deadly. what happens when a large intermediary gets hacked?
6/ well fortunately, we have history as a guide.
bank bailouts are common. crypto bailouts have also happened (see DAO below)
in May, when Binance’s hot wallet holding 0.03% of all bitcoin in circulation was hacked, a chain roll-back was suggested and discussed and rejected.
7/ what happens when an intermediary holding 5% of all bitcoin gets hacked? what about 10%?
what happens when institutions put bitcoin in cold storage and start trading paper bitcoin depository receipts (BDRs) instead of actual coin?
… is that still bitcoin?
8/ i’m not so sure.
bitcoin is a cultural movement. bitcoin is for people. bitcoin is about principles.
how do we allow for more participation via intermediaries without losing the message? curious to hear what you think.
9/ lastly, these snippets are part of a longer talk on architecture and intentions. will share video link when ready.
you may think you took the red pill, but actually, you’re colorblind and it’s blue…
enjoy that mental wormhole!