- Published: Tuesday, 11 February 2014 08:07
- Written by Editor
The ongoing fallout from the Mt. Gox debacle will not be the last such incident with Bitcoin exchanges, prompting many questions, not the least of which is how and why did it happen?
Well of course there may be many different reasons, both technical and administrative, but the fundamental reason above all others is very simple but crucial - Mt. Gox was a central point of failure in a decentralised system. However decentralised Bitcoin is, integrity of the system as a whole is only as strong as its weakest link.
The reasons Mt. Gox has apparently failed are trivial compared to the bigger picture and therefore largely moot.
Mt. Gox has proven one thing above all others - one central entity can cause considerable ongoing shock waves in the entire system, resonating for some weeks, months or even years.
This situation is clearly a considerable weak link in the Bitcoin chain in that while there central points of failure, Bitcoin itself is not and cannot be a fully decentralised monetary system, free of a single point of failure and free of external interference from governments, banks and other nefarious entities who would go to any lengths to take control, the global monetary system being the axis of control and loss of freedom and security for billions of people.
Simply put - Centralisation means control and loss of freedom, Decentralisation means freedom and liberty.
Governments, banks and other entities can very easily compromise Bitcoin by attacking centralised hubs such as exchanges and large shopping stores, with over-regulation, over-taxation and any number of phoney laws and legal trumped up actions, as well as the complete loss of anonymity and privacy by users of Bitcoin as they are required to present photo-ID etc. The usual bogus reason given is to "prevent money laundering", which is absolutely ridiculous of course because the focus should not be on Bitcoin, but those people actually involved in money laundering itself.
So the entire Bitcoin network, from end to end, needs to be decentralised and beyond the reach of external influences, exclusively managed by Bitcoin owners with complete freedom of choice.
How then may this be achieved?
Well clearly sooner or later Bitcoin Exchanges will be over-regulated to oblivion as governments seek to take control and make it impossible for people to exchange Bitcoin with fiat currencies with privacy and anonymity - a fundamental human right. Ultimately this will resolve itself as Bitcoin becomes a de-facto standard global monetary system in its own right, with people paid in Bitcoin, saving in Bitcoin and buying all goods and services with Bitcoin. Exchanges will no longer be necessary. Until then a decentralised method of peer to peer exchange is required where people exchange Bitcoin and currency directly, beyond the scope of any controlling influences. Local Bitcoins is a step in the right direction, but requires a higher level of automation and integration.
The other central point of failure and weak link in the Bitcoin chain is shopping for goods or services. It is only a matter of time before shops are regulated to require photo-ID and proofs of address before paying in Bitcoin. This is a more difficult scenario to overcome but overcome it must be in order to maintain the integrity of Bitcoin, the Bitcoin network and its users. Providing payments are kept peer to peer, anonymous and private, then distribution of goods can be kept separate with fulfilment orders coming from the main network according to who owns the goods. Again though, this requires more research.
Ultimately we are heading for a decentralised world, a world of freedom, liberty and privacy, where energy, food and everything else necessary for life is decentralised, out of the control of the would be controllers.
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