02 Feb Bitcoin by contrast illuminates the impossible accountability of a corrupt financial system.
I’m so happy I learned about money and finance through bitcoin instead of the traditional system.
I’ve been super curious to see how these hedge funds would weasel their way out of the GME predicament they created for themselves and in the process I learned a lot more about how bad the system really is.
They control the aggregation point from which the majority of all other brokers have to buy and sell through, this is called ‘market making’. They can create fake shares and even when they ‘fail to deliver’ the real shares they are given 30 days to produce the shares… but within 30 days they can replace those fake shares with new fake shares and it buys them another 30 days. The can do this perpetually even though it is highly illegal.
This is where the NSCC comes in, this is a private corporation under their control that acts almost like a regulatory body. It’s supposed to be regulated by the SEC but I imagine the SEC just believes whatever the NSCC tells them. The NSCC can arbitrarily choose the escrow requirements of brokers because money and shares don’t actually get transferred that much between brokers (that would be inefficient)… instead, they just keep a private ledger of who owes who what but then require escrow when the differential gets too high.
However in the GME case the NSCC was able to shake down Robinhood by telling them they need to come up with $3B to keep playing. Once Robinhood removes the buy button from their app that number was suddenly $700M, quite the discount!.
In bitcoin because we have the ability to be our own banks, the market makers are kind of like our exchanges (even though they exist within the exchange). There is a ‘withdraw’ button which is the ultimate accountability. If your exchange has removed the withdraw button or can not deliver your bitcoin to your wallet, you know you are already screwed.
The dark curtain of the NSCC is like a private blockchain that is only viewable by them. They read/write all the TXs to that private ledger and tell the brokers what they have. The brokers have their own ledger but only to and from the NSCC private blockchain.
Bitcoin has been plagued by many scams within our exchanges but one thing has remained true; the bitcoin in your wallet is the real bitcoin, the most provably scarce and secure financial instrument the world has ever seen.