Author: ZmnSCPxj 2021-07-10 01:26:14
Published on: 2021-07-10T01:26:14+00:00
The discussion between e and ZmnSCPxj is centered around the concept of proof-of-reserves and how it pertains to Bitcoin exchanges. E asserts that proof-of-reserves would work for a "pure" warehousing service where the user pays a fee, and the service keeps the money and provides proofs that the money is kept. However, this is not what a typical exchange does as it takes on risk due to dealing with non-Bitcoin monopoly money. With Bitcoin, users can be their own warehouse by using Green-like multisig schemes where they own their own keys that are part of the scheme. E also makes a point about Rothbard's criteria being vague in a couple of ways. He states that even a zero-interest account or negative up to the full cost of maintaining the account qualifies under this criterion. Further, one may "expect" no interest and even pay fees but it may nonetheless be a loan. Regarding exchanges, the expectation is that they earn money from the difference between buy-price and sell-price, and the money-warehousing service they provide is simply provided for free to facilitate their main business. Exchanges that deal in monopoly money must move this through traditional finance, which incurs all manner of risk. One of the essential benefits of Bitcoin is that users can be their own warehouse and be their own money transmitter. All investment is from someone's "reserve." Full reserve investment (including banking) is an oxymoron. Therefore, whether through exchanges or otherwise, there will be production, risk, loss, and earnings. Proof-of-reserves may not be necessary for exchanges since they take on risk by dealing with non-Bitcoin monopoly money. Money warehousing may very well be provided by means other than proof-of-reserves, such as by using multisig schemes like Green wallet does. Pure exchanges may be more amenable to such a scheme rather than proof-of-reserves.
Updated on: 2023-06-15T00:09:46.058172+00:00