The future of crypto.com and several other custodial exchanges is in question. In these dark ages of the worst crypto crisis in the history of blockchain, we returned to the original Bitcoin whitepaper, by Satoshi Nakamoto, for answers.
The Decentralization Movement
Blockchain technology and bitcoin originally represented more than just mad gains and arbitrage. It was a movement. Decentralization was meant to cut out the ‘trusted’ third party, yet human nature has slipped back into the ecosystem. There is a natural need to have someone in charge, someone to reverse the wrongs. Yet, throughout history, the same type of people we need protection from are often the ones that seek positions of power.
In the introduction of the Bitcoin whitepaper it says that in the trusted third party system, “completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes.” There is an inherent weakness in the trust based system that Bitcoin set out to resolve.
Some Dirty Bubbles Need Popping
Following the fall of FTX, several other exchanges have been closely examined by skeptical eyes. On October 21, 2022, crypto.com sent 320k in ETH to Gate.io. Then Gate.io essentially sent it back, about a week later.
– cryptodotcom sent 320k ETH to Gate
– Gate sends 285k back
Now: CEO RESPONDS SAYING THEY ACCIDENTALLY SENT IT THERE AND ASKED FOR IT BACK????
— DIRTY BUBBLE MEDIA: GOOD LUCK (@MikeBurgersburg) November 13, 2022
Aside from the implications here for both platforms, what does this say about our ‘trusted parties?’ In this case, investors have trusted crypto.com to protect their funds, but the very institution ‘accidentally’ sent it somewhere else. The Bitcoin whitepaper advocates for a removal of third parties. Many people still inherently want a backup plan or an option to avoid paying consequences for mistakes, but that thinking process goes against the freedom of tyranny that a trustless system offers.
The Double-Spend Dilemma
The third party is needed in central banking, according to the Bitcoin whitepaper, to avoid the double-spend dilemma. The central banking solution is to have a third party check every transaction for double spending. According to Satoshi, “the problem with this solution is that the fate of the entire money system depends on the company running the mint.”
A Distributed Ledger is Born
Satoshi Nakamoto wrote that the only way to confirm that a coin hasn’t been double spent is to be aware of all transactions. Hence the distributed ledger that Bitcoin introduced. The ‘Timestamp Server,’ proposed in the whitepaper, “works by taking a hash of a block of items to be timestamped and widely publishing the hash.” The goal of the timestamp is to prove that the data, or transaction, must have existed at the time.
The paper outlines many safeguards that lead to honest actors controlling the ability to broadcast a transaction and more can be read on the Bitcoin whitepaper directly.
SBF and Political Ties
Now that the links between Sam Bankman-Fried and various elected government officials have come out, the flaw of the ‘trusted third party’ has again seen light. In our quest for gold, we have forgotten the power structure that Bitcoin originally set out to eliminate, and instead, handed them more power than they ever dreamed possible. The powers that be, hoped we wouldn’t notice as they stuffed their bags in the Bahamas. While there may be public justice, and some bad actors may see consequences, many behind the scenes will not. People seek justice from bad actors, and those in power will often provide the illusion of it to quiet the people.
But what if those that provide the justice are also the ones that had their hands in on the deal. Since FTX delivered millions to house and senate officials, are the very people that benefited from this crypto crash, now going to be in charge of regulating it?
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