Re:Stick a Fork in Ethereum
by wpietri on Wednesday July 20, 2016 @02:47AM
(#12127284)
An investment market is a game we agree to play with ourselves because it's useful.
Long ago I worked for financial traders on early electronic trading systems. One day in our Frankfurt office there was a big commotion. Our head trader thought he had made a boatload of money. But it turned out that the trader on the other end of the trade had fat-fingered an offer. The mistake-maker stood to lose hundreds of millions of dollars, destroying his company.
The exchange halted trading in that instrument, unwound all the trades, and started things back up again as if the mistake had never happened. I only heard of it happening that once; smaller mistakes were always the trader's problem. But for the exchange, the normal rules of the market did not override the purpose of the market, which was to facilitate certain kinds of commerce. There was just no point in destroying an entire company, and even our traders were fine with the outcome.
If Ethereum's goal is a market where "people can invest without fear", then it sounds like they did the right thing. Your "caveat emptor" approach has the advantage of being ideologically simple, but it results in an economically suboptimal amount of trading.
Real markets all have elaborate protections pushing them away from purity and toward economic utility. E.g., the US's stock market is a preferred place even for foreign companies to list because our strong disclosure requirements and legal protections make investors less afraid, increasing capital availability and decreasing cost. And it's not just financial markets; consider the Uniform Commercial Code: https://en.wikipedia.org/wiki/Uniform_Commercial_Code
Long ago I worked for financial traders on early electronic trading systems. One day in our Frankfurt office there was a big commotion. Our head trader thought he had made a boatload of money. But it turned out that the trader on the other end of the trade had fat-fingered an offer. The mistake-maker stood to lose hundreds of millions of dollars, destroying his company.
The exchange halted trading in that instrument, unwound all the trades, and started things back up again as if the mistake had never happened. I only heard of it happening that once; smaller mistakes were always the trader's problem. But for the exchange, the normal rules of the market did not override the purpose of the market, which was to facilitate certain kinds of commerce. There was just no point in destroying an entire company, and even our traders were fine with the outcome.
If Ethereum's goal is a market where "people can invest without fear", then it sounds like they did the right thing. Your "caveat emptor" approach has the advantage of being ideologically simple, but it results in an economically suboptimal amount of trading.
Real markets all have elaborate protections pushing them away from purity and toward economic utility. E.g., the US's stock market is a preferred place even for foreign companies to list because our strong disclosure requirements and legal protections make investors less afraid, increasing capital availability and decreasing cost. And it's not just financial markets; consider the Uniform Commercial Code: https://en.wikipedia.org/wiki/Uniform_Commercial_Code