Stop Centralizing Bitcoin
There’s a lot of screaming and hair-pulling going on about the Bitcoin exchange Mt. Gox right now. It’s really dumb. And I’ll tell you why.
All careful observers of Bitcoin have known for some time, probably more than a year now, that Mt. Gox was doing a death swirl down the toilet bowl. Problem after problem hit them, including having funds seized by the US government on more than one occasion. But their worst problem was the insane growth of Bitcoin.
Mt. Gox was killed by Bitcoin’s success. They got too big, too fast. They had to hire on new people at a record pace, add machines to handle the trading load and play the insane game of cooperating with government control (“regulation”) of a completely new phenomenon – crypto-currency. They were always playing catchup. That takes an enormous mental toll. Things fall through the cracks. Quality and security are not up to snuff.
Why did so many new Bitcoin adopters do business with Mt. Gox, even after it became apparent that they were death-swirling? Because of human sloth. Everybody referred everybody new to Mt. Gox because it was the big name. It was too big to fail.
Base human laziness leads to centralization. “Oh, Gox is already up and well-known, I’ll just give them my money and it should be fine.”
Centralization leads to single points of failure. A single point of failure is an identifiable part of your business process that, if it fails, the whole process, or system, ceases to function.
There are a lot of people out there who don’t know much about Bitcoin. They think Mt. Gox was an important part of the network. It’s not. The Bitcoin protocol, the daily sending and receiving of payments, continues on without Mt. Gox. If you didn’t voluntarily entrust any of your assets to Mt. Gox, then you haven’t lost any of them. But those of you who continued to patronize Mt. Gox and refer people to them, gave credence to this idea about its importance.
Here’s the bottom line. Mt. Gox is simply the most noticeable symptom of the ongoing centralization and statification of Bitcoin. Bitcoin entrepreneurs are trampling the purity of Bitcoin’s peer-to-peer model by registering companies with the government and actively seeking to help the government control (“regulate”) the Bitcoin economy. It is this trend which has led to the Mt. Gox debacle and it will lead to further problems, despite the good intentions or marketing whitewash of the remaining blue chip Bitcoin companies.
If you weren’t forming companies that funneled people into state-controlled processes for exchanging bitcoin, the marketplace would be dispersed. Private thieves would not be able to pull off multi-million dollar heists by exploiting just one vulnerability at one exchange. Public thieves would not be able to make seizures of the kind they made from Mt. Gox. These public thieves also would not be able to leverage corporate owners’ desire for wealth and comfort to satiate their lust for control and tribute.
Nobody can be trusted. That’s what Bitcoin entrepreneur Erik Vorhees said in response to the Mt. Gox debacle. Nobody should be trusted. That’s how I would say it. But all must be accountable for their actions. Centralization overloads the organic capacity to hold people accountable. When dealing with a large corporation, no one takes responsibility. There is no accountability. We need only look at the unaccountable banking excesses of the 2000’s to see that.
Control freaks and Bitcoin entrepreneurs who are only interested in making and keeping their wealth tell us that government control (“regulation”) must be implemented. They claim that Bitcoin is not currently regulated. But it is. We users of Bitcoin control the course of the protocol and the industry that is growing up around it. We need only exercise better our good sense and discretion by patronizing the good companies and ignoring the bad companies, so that the former may prosper and the latter may wither and rot away.
This is all human error. Mt. Gox couldn’t handle the growth. Its customers made the very poor decision to do business with them and to leave their funds with them, instead of transferring them to wallets or cold storage. But to demand greater governmental control of the Bitcoin protocol or its service providers is to only amplify the current sloth that has gotten us into this position.
Proponents of government control argue that consumers get screwed over by unregulated companies. This is a definite possibility. But look at how we get screwed by the government. Rising taxes, of all kinds, inflation, rising health insurance costs, brainless rules, institutionalized corruption, wholesale disarmament of the civilian population – and so much more.
There is no magic solution for dishonesty. We are all human, no matter if we are independent, CEOs or government bureaucrats. We can only be individually vigilant. Every single victim of Mt. Gox was not vigilant. You earned your losses. When we amplify our laziness by abdicating our individual power to regulate through our purchasing decisions and, instead, pass the buck along to the government, the damage to consumers is only writ hundreds of times larger.
Captains of Bitcoin industry, your greed and diligence will be rewarded by sizable fiat currency and Bitcoin riches. I have no doubt about that. You will join the geeks who got rich a decade ago from Silicon Valley as new members of the up-and-coming elite. You will be an important part of the coming technocracy.
But freedom is more important than riches. You are selling out Bitcoin and are traitors to the universal human cry for liberty.
Stop centralizing Bitcoin. Permit the networks which grow up naturally around Bitcoin to be the means for new people to exchange fiat currency for bitcoin. Keep it informal. Don’t change the protocol to help the government identify transactions they don’t like.
As for Mt. Gox, it does appear that they have lost everything. This is a tragedy. But, in the end, who cares? Let all the exchanges crash and burn. The protocol goes on as long as we have electricity, computers, a network and the will to trade. If you lost money at Mt. Gox, I’d like to know why. How did you let that happen?