Overstock.com Assembles Coders to Create a Bitcoin-Like Stock Market(wired.com)
wired.com
Overstock.com Assembles Coders to Create a Bitcoin-Like Stock Market
http://www.wired.com/2014/10/overstock-com-assembles-coders-build-bitcoin-like-stock-market/
15 comments
I am curious how someone can come away from the last decade of Wall Street behavior and conclude the answer to the problem is less regulation.
The obvious answer is that wall street has never been in a state of no regulation; at least, not for a very long time.
When you have a bunch of poorly thought out regulation, much of it designed to exclude competition, that's when things go bad.
The cool thing about the internet is that regardless of what you or the SEC or John Q. Public thinks is a bad idea or improper, people are free to experiment with it anyway. Technology has outpaced the ability of governments to proscribe voluntary interaction.
When you have a bunch of poorly thought out regulation, much of it designed to exclude competition, that's when things go bad.
The cool thing about the internet is that regardless of what you or the SEC or John Q. Public thinks is a bad idea or improper, people are free to experiment with it anyway. Technology has outpaced the ability of governments to proscribe voluntary interaction.
If there were a law that could prevent regulatory capture then I would say go for it, more regulation.
With or without regulatory capture, I can't see how the problem we face is too much oversight on Wall Street.
The counterargument is that regulation hurts small players more than large ones. Citibank can afford an army of compliance officers; most of us can't.
I'm generally pro-regulation, if the details are sensible, but regulatory capture is a real problem, and it is not an unreasonable stance that the cure is sometimes worse than the disease.
I'm generally pro-regulation, if the details are sensible, but regulatory capture is a real problem, and it is not an unreasonable stance that the cure is sometimes worse than the disease.
That isn't really a counterargument; it's just a factoid. A counterargument would be something along the lines of "Regulation hurts small players more than large ones, and the scarcity of small players has been the biggest problem with Wall Street over the past decade because _____, therefore the problem with Wall Street is too much oversight."
Regulatory capture's a real issue, but it's not a given. For those interested in the topic, I highly recommend Shelia Bair's "Bull By The Horns", which is her account of running the FDIC up to and during the financial crisis. It left me with quite a bit of respect for the FDIC's approach, and for what solid regulation takes.
Why should people on wall street be forbidden from doing whatever investments they want to, insofar as they are contractually allowed? If you don't like how someone is investing, don't invest with them. If you think certain banks are behaving riskilly, don't give them your money. What are some counter-arguments to this? I.e. why is it a) moral and b) desirable to regulate the activity of wall street traders in addition to the laws they are automatically subject to (like anti-fraud laws)?
The argument is actually fairly simple: behaviors that have been known to cause fraudulent or deceptive activity in the past are placed under more scrutiny or outright banned.
For example, it becomes quite easy to hide fraud when a single entity is both an investment bank and a mortgage lender.
In my layman's opinion, a lot of the problem comes from the fact that accounting is not an exact science. For a large company with many revenue, expenditure and investment streams spread over the course of a year, accountants have a lot of leeway to massage the numbers as they see fit. Until the house of cards comes crashing down ala 2008 it can be very hard to pick apart what is actually going on from the outside.
For example, it becomes quite easy to hide fraud when a single entity is both an investment bank and a mortgage lender.
In my layman's opinion, a lot of the problem comes from the fact that accounting is not an exact science. For a large company with many revenue, expenditure and investment streams spread over the course of a year, accountants have a lot of leeway to massage the numbers as they see fit. Until the house of cards comes crashing down ala 2008 it can be very hard to pick apart what is actually going on from the outside.
I would imagine most of the laws and regulations are anti-fraud in nature. Outside of that, limiting the risk exposure of banks that carry FDIC insurance, or some other government backing, is in the interest in of all taxpayers. From my laymen's understanding, if you want to start a hedge fund, take some rich people's money, and gamble it all away, nothing is really stopping you. In fact people do it all the time.
>take some rich people's money
And there lies the rub. So the wealthy man can take advantage of start-up investing, but the government in its infinite wisdom, forbids the middle-class man from doing the same under penalty of imprisonment for the person offering the security.
And there lies the rub. So the wealthy man can take advantage of start-up investing, but the government in its infinite wisdom, forbids the middle-class man from doing the same under penalty of imprisonment for the person offering the security.
Yes, it is truly a moral imperative that we allow people who can't afford to be ripped off access to the same "investment opportunities" as people who can.
Freeeeeeeedom!
Freeeeeeeedom!
I'd argue that those sort of investments would be better gated by knowledge than available finances. There's no reason a early employ that made <$1m in a buyout shouldn't be allowed to invest 10k in another startup. He absolutely knows what he's investing in, and it's his choice if he's willing to take that risk.
You know how people always complain about the rich getting richer? That frequently happens because they're given exclusive access to those "rip-offs" you're claiming average people should be excluded from.
We let them get payday loans and credit card debt, but when it comes to something that is generally in their best interest, we must step in and save them from themselves?
imo its the fact that we're so reliant on 3-4 big banks as opposed to 100 banks. if it were more decentralized, US could afford less regulation and just let companies succeed/fail on their own. can't do that in the current climate
I don't think it would look the way you imagine. There are lots of computer software vendors, but if you wiped out Apple, Microsoft and a few core Linux contributors, you'd pretty much wreck the computer world, even for people who directly use other vendors. The existence of smaller players does not negate the influence of the larger ones.
People come away concluding that, because the problem with Wall Street is not deregulation, despite all the propaganda to the contrary. The problem was selective regulation or deregulation, whatever benefited Wall Street, as well as selective enforcement and interpretation of law. In a nut shell, Wall Street is in control and reconfigures the legal apparatus to their advantage; they don't randomly dismantle it.
I think people like to simplify regulation as either good or bad and fail to consider how biased it can be. Unbiased software rules that can be openly analyzed and force everyone to play fair are good. Selective regulation written by those with money is terrible.
Because there is a tremendous amount of regulation surrounding finance - look at how it is impossible to make a backer liable Kickstarter. You cannot make your own stock market, and you cannot sell ownership in a company through anything but a public stock exchange.
I imagine there is also tremendous regulation surrounding venture capital, but I have never engaged in it much so I'm unaware of the complexities.
Too bad that, by nature of the fact the finance industry inherently has all the money, that money lets them buy the politicians to then use regulation to prevent competition and line their own pockets, while leaving them impervious to persecution when their greed fucks everything up.
I do not see how even the best intentioned regulation can work in finance. It is the proverbial tightening the fist while the actors slip through your fingers - if you try to restrict the flow of money, really big money, like drug money, then all you will find is you suffering for it.
I imagine there is also tremendous regulation surrounding venture capital, but I have never engaged in it much so I'm unaware of the complexities.
Too bad that, by nature of the fact the finance industry inherently has all the money, that money lets them buy the politicians to then use regulation to prevent competition and line their own pockets, while leaving them impervious to persecution when their greed fucks everything up.
I do not see how even the best intentioned regulation can work in finance. It is the proverbial tightening the fist while the actors slip through your fingers - if you try to restrict the flow of money, really big money, like drug money, then all you will find is you suffering for it.
Protip: If you start by saying "I do not see how", the problem may be that you are just not seeing it.
One of the reasons that foreign companies list on US markets is that we have some of the strongest financial regulations in the world.
A simple analogy: San Francisco has a vigorous health department, and food safety scores are posted visibly in every restaurant. Does this reduce the vibrancy of the restaurant scene? No, it enhances it. Because I know when a place is likely safe to eat at, I spend more money in restaurants and I'm more willing to try new places. That increases the effectiveness of the market because newer restaurants compete on a more even footing with established ones.
One of the reasons that foreign companies list on US markets is that we have some of the strongest financial regulations in the world.
A simple analogy: San Francisco has a vigorous health department, and food safety scores are posted visibly in every restaurant. Does this reduce the vibrancy of the restaurant scene? No, it enhances it. Because I know when a place is likely safe to eat at, I spend more money in restaurants and I'm more willing to try new places. That increases the effectiveness of the market because newer restaurants compete on a more even footing with established ones.
> Because I know when a place is likely safe to eat at, I spend more money in restaurants and I'm more willing to try new places.
And the inverse of this, is that if a restaurant listed food safety scores irrespective of state mandate, you would visit those restaurants more, and if most people agreed, those restaurants would prosper and those not adopting food safety scores would suffer.
Except in that situation there was no violence of the state to compel the individual restaurants to do something - the market naturally lead to that conclusion. It is not like there is any limit on your ability to learn information about a restaurant - I would say I am surprised that there is not some popular national database of website safety ratings made up of user reviews, but considering I have never searched for such a service - I just go by general user reviews, under the assumption that an unsafe food service locale would get trashed in criticism - I guess it makes sense not to exist.
> That increases the effectiveness of the market because newer restaurants compete on a more even footing with established ones.
Or it would be a competitive advantage if the markets truly benefited from food safety scores for newer restaurants to advertise them where their entrenched competition does no such thing.
And the inverse of this, is that if a restaurant listed food safety scores irrespective of state mandate, you would visit those restaurants more, and if most people agreed, those restaurants would prosper and those not adopting food safety scores would suffer.
Except in that situation there was no violence of the state to compel the individual restaurants to do something - the market naturally lead to that conclusion. It is not like there is any limit on your ability to learn information about a restaurant - I would say I am surprised that there is not some popular national database of website safety ratings made up of user reviews, but considering I have never searched for such a service - I just go by general user reviews, under the assumption that an unsafe food service locale would get trashed in criticism - I guess it makes sense not to exist.
> That increases the effectiveness of the market because newer restaurants compete on a more even footing with established ones.
Or it would be a competitive advantage if the markets truly benefited from food safety scores for newer restaurants to advertise them where their entrenched competition does no such thing.
That is such an incredibly naive view, it's hard to know what to begin with.
Voluntary food safety postings are useless, because they allow fraudulent posting. Sure, it'll come out pretty soon - but by that time people are ill or dead due to food poisoning, and the person in question is likely long gone.
"The market" doesn't give a shit if actors are fraudulent or working with good intentions, and it has no way to prevent turning an iterated situation into a one-off situation. "The market" has no idea which reviews are genuine. If you'd like to see unregulated reviews in action, look at the direction yelp is turning lately. "The market" does not guarantee that consumers are fully (or even somewhat) informed, a condition that is necessary to a market actually working properly.
> Or it would be a competitive advantage if the markets truly benefited from food safety scores for newer restaurants to advertise them where their entrenched competition does no such thing.
No, it wouldn't, because you'd have no idea if you could trust the reviews. So you'd wait a while. Sooner or later, you have a bunch of restaurants that post reviews. And then new restaurants pop up, also posting their reviews. Do you still know which ones are trustworthy and which ones aren't?
Sure, you could ask your friends. Until you travel. At which point you're at the mercy of complete strangers.
"The market" is not an almighty force for good. It allows efficient exchange of goods. If a cost is externalized - say, the hospital bill of people eating at restaurants - the market does exactly nothing about it. Because the cost is externalized.
That's the whole point of regulations. Not to be a pain in the neck, but to ensure costs are not externalized. The only way to achieve that without enforcement is a society of entirely benevolent actors. That does not exist.
Voluntary food safety postings are useless, because they allow fraudulent posting. Sure, it'll come out pretty soon - but by that time people are ill or dead due to food poisoning, and the person in question is likely long gone.
"The market" doesn't give a shit if actors are fraudulent or working with good intentions, and it has no way to prevent turning an iterated situation into a one-off situation. "The market" has no idea which reviews are genuine. If you'd like to see unregulated reviews in action, look at the direction yelp is turning lately. "The market" does not guarantee that consumers are fully (or even somewhat) informed, a condition that is necessary to a market actually working properly.
> Or it would be a competitive advantage if the markets truly benefited from food safety scores for newer restaurants to advertise them where their entrenched competition does no such thing.
No, it wouldn't, because you'd have no idea if you could trust the reviews. So you'd wait a while. Sooner or later, you have a bunch of restaurants that post reviews. And then new restaurants pop up, also posting their reviews. Do you still know which ones are trustworthy and which ones aren't?
Sure, you could ask your friends. Until you travel. At which point you're at the mercy of complete strangers.
"The market" is not an almighty force for good. It allows efficient exchange of goods. If a cost is externalized - say, the hospital bill of people eating at restaurants - the market does exactly nothing about it. Because the cost is externalized.
That's the whole point of regulations. Not to be a pain in the neck, but to ensure costs are not externalized. The only way to achieve that without enforcement is a society of entirely benevolent actors. That does not exist.
> That is such an incredibly naive view
I'm genuinely interested in what you define "the market" to be, and how you define government, and lastly regulation. Avoid circular references if you can help it.
How can you have such disdain for markets when governments are operated by a market of politicians? That sounds like the worst kind of market society has to offer.
I'm genuinely interested in what you define "the market" to be, and how you define government, and lastly regulation. Avoid circular references if you can help it.
How can you have such disdain for markets when governments are operated by a market of politicians? That sounds like the worst kind of market society has to offer.
That's a fine hypothetical, but a) I know of no city where restaurants voluntarily put together such a system, and b) if each restaurant gets to pick who evaluates it, there's no particular reason for customers to trust the scores.
I also don't buy your view that the magic sparkle ponies of the market will always take care of everything. I think your approach works in theory, with infinitely smart and well informed humans. But given that we're dealing with a bunch of hairless monkeys, I think cognitive limits make it relatively easy for bad actors to push market solutions away from optimum.
I also don't buy your view that the magic sparkle ponies of the market will always take care of everything. I think your approach works in theory, with infinitely smart and well informed humans. But given that we're dealing with a bunch of hairless monkeys, I think cognitive limits make it relatively easy for bad actors to push market solutions away from optimum.
It works in that given example. Of course if you invent an arbitrary number it holds no value. But the OP postulates that through force of state having safety criteria restaurants must advertise is a systemic benefit to the food service industry, and if it actually was, then restaurants everywhere would naturally adopt it if it increases consumer participation and revenues.
More than anything I'm trying to indicate that safety ratings are not actually benefiting the restaurants if they are not adopting similar systems elsewhere. And if they had a private rating system it would only mean anything if there was some consortium that posted standards. Consider the ESRB, which is not a state review board but exists to keep states from instituting review boards in the US on video games. They specify their rating criteria in available records and are utilized industry wide because the users of the rating board find it a net benefit.
I'm not going to argue that consumers do not benefit somewhat from food safety ratings, but it is also not purely black and white, because by compelling restaurants to produce them, if they are not a market positive effect (and like I said, the lack of a natural appearance of such a system outside mandate indicates it is most likely not) then the consumer pays for those reviews with a more significant expense on the part of restaurants than the restaurants make as a result of increased traffic, which means they must raise prices systemically to compensate, and you end up paying more.
Except in a sane market, you should be able to pay more if you want to only shop at restaurants that give safety ratings from some public consortium in the first place. But then you have the choice.
More than anything I'm trying to indicate that safety ratings are not actually benefiting the restaurants if they are not adopting similar systems elsewhere. And if they had a private rating system it would only mean anything if there was some consortium that posted standards. Consider the ESRB, which is not a state review board but exists to keep states from instituting review boards in the US on video games. They specify their rating criteria in available records and are utilized industry wide because the users of the rating board find it a net benefit.
I'm not going to argue that consumers do not benefit somewhat from food safety ratings, but it is also not purely black and white, because by compelling restaurants to produce them, if they are not a market positive effect (and like I said, the lack of a natural appearance of such a system outside mandate indicates it is most likely not) then the consumer pays for those reviews with a more significant expense on the part of restaurants than the restaurants make as a result of increased traffic, which means they must raise prices systemically to compensate, and you end up paying more.
Except in a sane market, you should be able to pay more if you want to only shop at restaurants that give safety ratings from some public consortium in the first place. But then you have the choice.
The scenario you paint isn't common for a number of reasons, but the primary issue is information asymmetry.
I don't know enough about food preparation and don't have access to the kitchen of a restaurant, so I have no idea how to properly assign it a health rating. The restaurant itself can obviously produce a health rating, but if they are the type of place to skimp on health issues, it isn't that much of a stretch to believe they may lie about health issues. The free market result will then be a mess. Customers who want a healthy restaurant won't know which ones are truly healthy. That makes it a hard to justify paying the premium for a health rating that could just be a lie. The restaurants then have little motivation to actually care about health since they can't prove it to their customers. In the end, you will have a market that is dominated by cheap and low quality goods (check out "the market for lemons" [1]).
The video game system is not an exact equal. The main difference is that there generally isn't information asymmetry in video games. The customer will be able to play the game and by the end of it have all the same information as the creators of the game. That provides accountability. A classic example of both that accountability and information asymmetry was GTA and the whole hot coffee scandal. The developers hid sexually explicit content in the game that was not factored into the rating. Once knowledge of that leaked out, there was a lot of backlash and the rating for the game was eventually changed.
Banking, finance, and Wall Street likely have even more information asymmetry than the food industry, hence the need for an external and trusted source of oversight.
[1] - http://en.wikipedia.org/wiki/The_Market_for_Lemons
I don't know enough about food preparation and don't have access to the kitchen of a restaurant, so I have no idea how to properly assign it a health rating. The restaurant itself can obviously produce a health rating, but if they are the type of place to skimp on health issues, it isn't that much of a stretch to believe they may lie about health issues. The free market result will then be a mess. Customers who want a healthy restaurant won't know which ones are truly healthy. That makes it a hard to justify paying the premium for a health rating that could just be a lie. The restaurants then have little motivation to actually care about health since they can't prove it to their customers. In the end, you will have a market that is dominated by cheap and low quality goods (check out "the market for lemons" [1]).
The video game system is not an exact equal. The main difference is that there generally isn't information asymmetry in video games. The customer will be able to play the game and by the end of it have all the same information as the creators of the game. That provides accountability. A classic example of both that accountability and information asymmetry was GTA and the whole hot coffee scandal. The developers hid sexually explicit content in the game that was not factored into the rating. Once knowledge of that leaked out, there was a lot of backlash and the rating for the game was eventually changed.
Banking, finance, and Wall Street likely have even more information asymmetry than the food industry, hence the need for an external and trusted source of oversight.
[1] - http://en.wikipedia.org/wiki/The_Market_for_Lemons
> but if they are the type of place to skimp on health issues, it isn't that much of a stretch to believe they may lie about health issues.
I'm not saying the restaurant itself would give itself a rating, I'm saying that if there was an economic advantage to information garnered from food safety, a private company could charge restaurants to get rated, and restaurants would seek ratings to garner customers. The fact such a service does not exist indicates that customers don't care about food safety enough to change their dining preferences to restaurants that provide such information, or else restaurants would do it, and I would be the first to line up to found that company because it would be an unexploited profit center.
> accountability and information asymmetry was GTA...
You can falsify the state of your kitchen just as much to a state inspection agent as a private one. And in both cases being caught doing it has repercussions, the former would be police at your door, the later a slander campaign by the ratings board.
I'm not saying the restaurant itself would give itself a rating, I'm saying that if there was an economic advantage to information garnered from food safety, a private company could charge restaurants to get rated, and restaurants would seek ratings to garner customers. The fact such a service does not exist indicates that customers don't care about food safety enough to change their dining preferences to restaurants that provide such information, or else restaurants would do it, and I would be the first to line up to found that company because it would be an unexploited profit center.
> accountability and information asymmetry was GTA...
You can falsify the state of your kitchen just as much to a state inspection agent as a private one. And in both cases being caught doing it has repercussions, the former would be police at your door, the later a slander campaign by the ratings board.
This statement troubles me:
> But the OP postulates that through force of state having safety criteria restaurants must advertise is a systemic benefit to the food service industry, and if it actually was, then restaurants everywhere would naturally adopt it if it increases consumer participation and revenues.
You seem to treat that as an article of faith. In particular, you come across to me as a free-market fundamentalist. The creed seems to be something like: If a market does it, it's good; if a market doesn't do it, then it's definitionally not good. I've learned never to argue with fundamentalists, as they're impossible to convince.
> But the OP postulates that through force of state having safety criteria restaurants must advertise is a systemic benefit to the food service industry, and if it actually was, then restaurants everywhere would naturally adopt it if it increases consumer participation and revenues.
You seem to treat that as an article of faith. In particular, you come across to me as a free-market fundamentalist. The creed seems to be something like: If a market does it, it's good; if a market doesn't do it, then it's definitionally not good. I've learned never to argue with fundamentalists, as they're impossible to convince.
Things that are counter to the market can absolutely be good for individuals. I'm just saying that you would not see the entire food service industry improve from the perspective of the retailers themselves through mandates and regulation if that mandated behavior were not inherently beneficial and as such would be practiced in the absence of such regulation.
Simplied question: if it is beneficial to restaurants to be forced to conform to food safety guidelines, inspections, and public ratings, it would stand to reason restaurants would naturally seek to self regulate and have their own common rating board if doing so attracted more business than it cost them to maintain said ratings.
Obviously it does not, since restaurants do not naturally do that. I'm not saying the idea of food safety mandates is good or not, I'm just saying the industry would implement it themselves if it was fiscally beneficial to the restaurants. And since it is not, that implies their rates are higher, they are less competitive as a result, and that consumers are paying for something they (in a natural market) were not willing to fork money over to see happen naturally (by way of not favoring publicly rated restaurants).
Simplied question: if it is beneficial to restaurants to be forced to conform to food safety guidelines, inspections, and public ratings, it would stand to reason restaurants would naturally seek to self regulate and have their own common rating board if doing so attracted more business than it cost them to maintain said ratings.
Obviously it does not, since restaurants do not naturally do that. I'm not saying the idea of food safety mandates is good or not, I'm just saying the industry would implement it themselves if it was fiscally beneficial to the restaurants. And since it is not, that implies their rates are higher, they are less competitive as a result, and that consumers are paying for something they (in a natural market) were not willing to fork money over to see happen naturally (by way of not favoring publicly rated restaurants).
Your simplified question isn't actually a question. But if it were, my answer would be "no". There are many ways in which that could not be true.
For example, as I already mentioned, public food safety ratings benefit new market entrants more than they do existing restaurants. Ergo, every existing restaurateur might oppose them (or at least decline to pay for them).
Another possible reason: dominant players benefit the least from public health ratings (because they already have a large established clientele and good word of mouth), but they are the ones with the largest surplus for things like this. So it might not happen because dominant players wouldn't work to make it happen. They might even oppose it.
Or another: humans have many known cognitive biases, including ones toward competition and zero-sum thinking. Perhaps prominent restaurateurs would oppose regulations that would benefit everybody because they would focus on benefit to competitors.
Or another: restaurateurs are very busy people, or perhaps very focused people, and so wouldn't have sufficient time or awareness to understand the benefits of a scheme like this.
Or another: even if they actually stand to benefit on average, individual restaurant owners might fear exposure of health issues, and would rather keep things quiet just in case (the loss aversion bias).
Or another: the costs of the program are short-term and obvious, but the benefits of the program appear speculative and/or long term, and nobody is willing to take the risk or take the short-term loss.
Or another: the program might not pay for itself purely in terms of increased restaurant business profits. However, it does pay for itself when health costs and human suffering are taken into account. In other worse, restaurants wouldn't do it because making people sick is a negative externality.
Or another: maybe nobody has gotten around to it yet. There are plenty of things that businesses do now that they didn't do at one point. Not because market conditions were different, but because things take time. Actual humans have to actually think of the idea and then get a lot of other actual humans to make it happen.
So off the top of my head, that's, what, eight holes in your argument from orthodox free-market dogma. Presumably an economist with relevant experience could find more, as could a public health expert or a restaurant owner.
Markets are a fine technology for accomplishing particular purposes. But like any real technology, they have practical limits and known failure modes. Which should be unsurprising given that they are implemented on people, who are rational to about the same extent that cows are spherical. [1]
[1] http://en.wikipedia.org/wiki/Spherical_cow
For example, as I already mentioned, public food safety ratings benefit new market entrants more than they do existing restaurants. Ergo, every existing restaurateur might oppose them (or at least decline to pay for them).
Another possible reason: dominant players benefit the least from public health ratings (because they already have a large established clientele and good word of mouth), but they are the ones with the largest surplus for things like this. So it might not happen because dominant players wouldn't work to make it happen. They might even oppose it.
Or another: humans have many known cognitive biases, including ones toward competition and zero-sum thinking. Perhaps prominent restaurateurs would oppose regulations that would benefit everybody because they would focus on benefit to competitors.
Or another: restaurateurs are very busy people, or perhaps very focused people, and so wouldn't have sufficient time or awareness to understand the benefits of a scheme like this.
Or another: even if they actually stand to benefit on average, individual restaurant owners might fear exposure of health issues, and would rather keep things quiet just in case (the loss aversion bias).
Or another: the costs of the program are short-term and obvious, but the benefits of the program appear speculative and/or long term, and nobody is willing to take the risk or take the short-term loss.
Or another: the program might not pay for itself purely in terms of increased restaurant business profits. However, it does pay for itself when health costs and human suffering are taken into account. In other worse, restaurants wouldn't do it because making people sick is a negative externality.
Or another: maybe nobody has gotten around to it yet. There are plenty of things that businesses do now that they didn't do at one point. Not because market conditions were different, but because things take time. Actual humans have to actually think of the idea and then get a lot of other actual humans to make it happen.
So off the top of my head, that's, what, eight holes in your argument from orthodox free-market dogma. Presumably an economist with relevant experience could find more, as could a public health expert or a restaurant owner.
Markets are a fine technology for accomplishing particular purposes. But like any real technology, they have practical limits and known failure modes. Which should be unsurprising given that they are implemented on people, who are rational to about the same extent that cows are spherical. [1]
[1] http://en.wikipedia.org/wiki/Spherical_cow
Regulation done by math is infinitely better than the regulation done by easily corruptible talking heads.
HSBC got caught laundering billions of drug cartel and Iranian money. Do you know how many of the bankers went to jail? Zero. They had to pay a tiny fine equal to less than a month of their revenue.
How many bankers or Wall st guys went to jail for the largest freaking financial crisis they had caused?
Regulation in finance just doesn't work. Look at who the regulators are and who is in charge of the regulators. Half of t these folks are from Goldman.
HSBC got caught laundering billions of drug cartel and Iranian money. Do you know how many of the bankers went to jail? Zero. They had to pay a tiny fine equal to less than a month of their revenue.
How many bankers or Wall st guys went to jail for the largest freaking financial crisis they had caused?
Regulation in finance just doesn't work. Look at who the regulators are and who is in charge of the regulators. Half of t these folks are from Goldman.
Why go to the SEC?
Overstock is already a publicly traded company - anything that remotely hints at trying to circumvent the regulations they're already subject to would be a very bad idea
Overstock is already a publicly traded company - anything that remotely hints at trying to circumvent the regulations they're already subject to would be a very bad idea
It's already been trading on CMFX (one of the most reputable Forex markets around, on par with BATS or CME) against the USD for a while now. This is nothing new.
This is the sort of thing that is exceedingly hard to have a measure for, but CMFX is in no way on the same level as BATS or CME.
Also, Bitcoin being traded on a forex exchange has nothing to do with the article.
Also, Bitcoin being traded on a forex exchange has nothing to do with the article.
If "CMFX is one of the most reputable Forex markets around," why can't I seem to find their official website? Do you have a link?
Given Patrick Byrne's history[1] with stocks, markets, regulators, etc. I am not surprised to see him involved in this kind of project.
[1] http://www.deepcapture.com/
[1] http://www.deepcapture.com/
This is great. Patrick Byrne is doing a great service here. Development of crypto-security tools being pushed by an already successful publicly traded company adds instant credibility to the project and will lead many more successful business leaders to give it closer inspection, sooner.
So what happens when somebody doesn't secure the private keys to their Overstock shares well enough? A hacker steals your Overstock shares, and now they own them? What happens if someone steals the shares from the CEO? Obviously the hacker could never make use of those shares or else they would get caught. In a system like this, it can't be truly decentralized, can it?
From a technical perspective, it can. See http://counterparty.io/ for a decentralized exchange in action.
Do you mean you don't think people can be trusted to keep their own shares safe? Securing a large value of cryptocurrency is challenging right now. But if you don't trust yourself to do it, you can hire a third party that you do trust to hold your shares for you.
Do you mean you don't think people can be trusted to keep their own shares safe? Securing a large value of cryptocurrency is challenging right now. But if you don't trust yourself to do it, you can hire a third party that you do trust to hold your shares for you.
"Do you mean you don't think people can be trusted to keep their own shares safe?" Well, to a degree, yeah. Most people don't know how to properly keep them safe.
The main thing I'm trying to say is that it's potentially easier to steal shares, and there is really no way of reversing it if it's decentralized. If you know some shares are stolen, can you invalidate them, or reissue shares? It's not really completely decentralized if you can. There is probably still a central authority for creating and issuing shares, but they will allow you to trade the shares in a peer-to-peer way.
The main thing I'm trying to say is that it's potentially easier to steal shares, and there is really no way of reversing it if it's decentralized. If you know some shares are stolen, can you invalidate them, or reissue shares? It's not really completely decentralized if you can. There is probably still a central authority for creating and issuing shares, but they will allow you to trade the shares in a peer-to-peer way.
Just thinking loosly here.
It my understanding that the decentralized part refers to the networked validation.
I.e couldn't you imagine a setup where the network collectively invalidates a set of shares and re-issue them back to the original owner. A kind of distributed jury system.
Now the problem of course is that the jury could be wrong and I have no idea about the actual implementation but it seems to me like a potential solution in the future.
It my understanding that the decentralized part refers to the networked validation.
I.e couldn't you imagine a setup where the network collectively invalidates a set of shares and re-issue them back to the original owner. A kind of distributed jury system.
Now the problem of course is that the jury could be wrong and I have no idea about the actual implementation but it seems to me like a potential solution in the future.
Even if that's the case, how do you convince the network that the shares need to be invalidated? How do you do that in a way that can't be faked?
That sounds a lot like another set of private keys to me. We already know those are vulnerable to being stolen.
That sounds a lot like another set of private keys to me. We already know those are vulnerable to being stolen.
Because the protocol is transparent so you can trace what happened?
Ebay and Paypal solve 60million disputes a year using software.
http://techcircle.vccircle.com/2011/02/08/ebay-paypal-solve-...
I am not saying I know how to do this just saying that I don't think it's going to be as hard as some might thing. But sure I could be wrong.
And keep in mind. No system is perfect. Neither is the crypto-protocol. But it doesn't need to be. It just have to be good enough.
Ebay and Paypal solve 60million disputes a year using software.
http://techcircle.vccircle.com/2011/02/08/ebay-paypal-solve-...
I am not saying I know how to do this just saying that I don't think it's going to be as hard as some might thing. But sure I could be wrong.
And keep in mind. No system is perfect. Neither is the crypto-protocol. But it doesn't need to be. It just have to be good enough.
Just because you can trace how shares/money moved doesn't mean you can convince the rest of the network that the movement was improper.
This doesn't meet any sane definition of "good enough". It gives up a bunch of protections for no real gains.
This doesn't meet any sane definition of "good enough". It gives up a bunch of protections for no real gains.
Perhaps perhaps not. It seems pretty early still to say anything with certainty.
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You could make the same argument with paper money and I think the result would be similar. Theft might be a big issue, but that doesn't mean the system won't work.
A veritable explosion of innovation is coming our way. This decentralized stock exchange is just a hint of what is to come. Technologies using bitcoin, and technologies built on bitcoin, are the next thing that will change the world. Don't get me wrong, I'm happy we're also democratizing taxi services, but democratizing finance makes me so much more excited.
It's an exciting prospect to trade financial assets on a decentralized, trustless network. Definitely the right direction.
But I'm not psyched about having to think about Counterparty's internal XCP currency, even if it isn't used for most purposes. It's an annoying barrier to have to transact in an altcoin to access certain functionality.
Other implementations use pure Bitcoin only, and are much less overwrought with complexity than Counterparty: https://coins.assembly.com
But I'm not psyched about having to think about Counterparty's internal XCP currency, even if it isn't used for most purposes. It's an annoying barrier to have to transact in an altcoin to access certain functionality.
Other implementations use pure Bitcoin only, and are much less overwrought with complexity than Counterparty: https://coins.assembly.com
Quite generally, Counterparty functionality that requires the use of XCP simply can't exist on platforms without their own currency. That's why it's there.
Why didn't you join Overstock, why only Robby?
Counterparty isn't an altcoin. All XCP transactions are BTC transactions.
The issue I see is there's no avoiding putting your trust in the centralized issuer. You can issue and trade inherently centralized assets on a global ledger, but why? What is the advantage for the common man?
I guess the benefit is that you only have to trust the issuer one time. Once the stock has been issued on the blockchain it cannot be manipulated. With a centralized system you'd have to trust the issuer/exchange on an ongoing basis. Whether this difference matters is kind of a philosophical litmus test that divides the blockchain and non-blockchain (i.e. Ripple/Stellar/OpenTransactions) camps.
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The exchange would be based on the counterparty protocol, which allows anyone with a BTC address to issue and back assets in a decentralized manner. We'll have to see how this decentralization leaks into what it means to be a stock exchange.
Can anyone knowledgeable (especially those that do not like bitcoin) weigh in as to why this would be a bad idea ?
I'm asking this sincerely, and not being sarcasm, as I don't know enough about either Bitcoin or stock market to make a judgement. And this seems ... different enough that I'm not sure my reaction should be "damn the future is here", or "what a bunch of craps".
I'm asking this sincerely, and not being sarcasm, as I don't know enough about either Bitcoin or stock market to make a judgement. And this seems ... different enough that I'm not sure my reaction should be "damn the future is here", or "what a bunch of craps".
As somebody who did tech work for traders who dealt with a number of exchanges, I am hugely skeptical that an exchange can be fully automated.
A real exchange has an enormous team of well-paid people whose job it is to make sure things run smoothly. They also have incredible power: they can freeze the exchange, limit price movements, undo transactions, kick people out of the market, and who knows what else. They use this power rarely, but when they do market participants are generally glad they did.
I'm sure somebody can automate 90% of the cases, or 99%, or even 99.9%. Most trading is routine. But will this work when there's a war? A financial panic? A major fraud or theft? An exploitation of a previously unsuspected bug?
The New York Stock Exchange has been working this stuff out since 1817 (or 1792 depending on how you count). And we still have things like Black Monday [1] and the 2010 Flash Crash [2].
This will be an interesting experiment, but I will not be surprised at all if it's something most investors avoid for decades because it's a) novel and therefore risky, and b) lacking a lot of the regulatory protections of a real exchange.
[1] http://en.wikipedia.org/wiki/Black_Monday_%281987%29
[2] http://en.wikipedia.org/wiki/2010_Flash_Crash
A real exchange has an enormous team of well-paid people whose job it is to make sure things run smoothly. They also have incredible power: they can freeze the exchange, limit price movements, undo transactions, kick people out of the market, and who knows what else. They use this power rarely, but when they do market participants are generally glad they did.
I'm sure somebody can automate 90% of the cases, or 99%, or even 99.9%. Most trading is routine. But will this work when there's a war? A financial panic? A major fraud or theft? An exploitation of a previously unsuspected bug?
The New York Stock Exchange has been working this stuff out since 1817 (or 1792 depending on how you count). And we still have things like Black Monday [1] and the 2010 Flash Crash [2].
This will be an interesting experiment, but I will not be surprised at all if it's something most investors avoid for decades because it's a) novel and therefore risky, and b) lacking a lot of the regulatory protections of a real exchange.
[1] http://en.wikipedia.org/wiki/Black_Monday_%281987%29
[2] http://en.wikipedia.org/wiki/2010_Flash_Crash
As the company issuing shares, unless you get the approval of the SEC (i.e. you're regulated to sell shares to the general public) you will be fined and prosecuted.
It you are a non U.S. based company you will be chased by the SEC for issuing shares to U.S. citizens, which brings you under their jurisdiction(so says them).
It you are a non U.S. based company you will be chased by the SEC for issuing shares to U.S. citizens, which brings you under their jurisdiction(so says them).
Unregulated financial marketplace, what could possibly go wrong?
I'm a big Bitcoin supporter mainly because of the interesting tech opportunities, but I don't like the extremist proponents to deregulation that come with Bitcoin in droves. Take a look at the posts from people who lost their families inheritance when the price drops.
Now I know it's not a level playing field, and I can spend my inheritance on forex in a few hours. I'm not saying that's a good thing, but the fact it's not a level playing field does not mean it's a green light to let these things run without any regulation at all.
People who advocate freedom from all regulation generally are in my experience wholly unsympathetic to those who suffer as a result of it, and are unable to recognise that the theory behind it all is flawed.
I'm a big Bitcoin supporter mainly because of the interesting tech opportunities, but I don't like the extremist proponents to deregulation that come with Bitcoin in droves. Take a look at the posts from people who lost their families inheritance when the price drops.
Now I know it's not a level playing field, and I can spend my inheritance on forex in a few hours. I'm not saying that's a good thing, but the fact it's not a level playing field does not mean it's a green light to let these things run without any regulation at all.
People who advocate freedom from all regulation generally are in my experience wholly unsympathetic to those who suffer as a result of it, and are unable to recognise that the theory behind it all is flawed.
There are a lot of ways to abuse information asymmetry in stock markets. Decentralizing and removing oversight makes things more readily abused by creating more forms of information asymmetry.
stealth takeovers, stealth monopolies, the fact that its unregulatable and illegal as fuck under US law
One easy solution is to force key holders to de-anonymize themselves if they want to take any shareholder actions, such as voting. This wouldn't be an issue for 99% of us - just because I own a few TSLA shares doesn't mean I'm ever going to pound my fist on Elon Musk' desk and demand something - But if someone does buy up a large portion of the corporation and tries to use it to vote - they would have to declare "Hi, I am Carl Icahn, I own the following private keys XYZ and I'm demanding that we liquidate our assets and build a giant statue to the sky" or whatever. This prevents the Taliban or Chinese hackers from seizing control of a US corporation.
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I'm nitpicking, but it's bizarre to see Karl Popper being described as an "economist".
With the current low price of bitcoins, wouldn't it be a good time to burn bitcoins into XCP ?
That opportunity was only available at the start of the Counterparty project. The burn-in period ended a good 6 months ago, I believe.
check the overstock's original website, after few seconds it was evident that I shouldn't be bothered reading the article.
The title is misleading: the exchange will actually be built on top of Bitcoin using Counterparty (counterparty.io).
Indeed, the article does mention this later on.
Why go to the SEC? I feel like the advantage of doing something like this would be the ability to build a trading exchange without any authority over looking it.. I'd say that's what's wrong with the current system (NYSE,NASDAQ,etc).