This post originally appeared on ZeMing M. Gao’s website, and we have republished it with the permission of the author. Read the full piece here.
Today’s headline: Coinbase cuts off 25,000 Russian wallets!
It is unclear what the reporter is concerned about. I don’t mean that there should be no concern. It is unclear what the reporter is really worried about. This is typical of cryptocurrency reports, because writers only look at superficial things and don’t understand what’s really in the business.
From a political point of view, it is foolish to demand exchanges to cut off Russians just because they are Russians. Even selectively isolating some Russians is questionable, because how could he decide to trade?
The only correct way to do this is for the exchanges to operate on specific orders or court orders. Exchanges need to comply with the law and regulations.
But beyond the political discussions, multiple layers of the matter are completely missing in the report.
The first thing one should understand is that there are two different types of wallet: custodial wallets and non-custodial wallets. The wallets on the central exchanges are all custodians. They are in complete control by the exchange. In fact, stock exchange-owned wallets are worse than just wallets. There are good reasons to own custodial portfolios because not everyone can and should not manage their own assets, and competent custodial services can be valuable. But giving assets to a cryptocurrency exchange results in the worst kind of custodian wallet. Clients on these exchanges may not really have any independent and enforceable ownership of the verifiable digital currency asset on the underlying blockchain, but instead have only a contractual right to what the exchange owns. What clients own instead is just a numerical appearance of ownership created by the exchange. The customer’s digital assets are placed in pooled and mixed-asset accounts on the blockchain. The true owner of these pooled accounts is the exchange, which has direct control over these accounts and presumably grants a contractual right to customers. In most cases, when it comes to exchanges outside of a jurisdiction that has a reliable legal system, the contractual right is even weak.
In this regard, Coinbase (NASDAQ:COIN) gives at least a somewhat reliable contractual right due to it being a publicly listed US company. But even Coinbase customers don’t understand that it’s not real ownership, at least not as powerful as stock ownership on a regulated exchange. Being a public company listed on a registered stock exchange has nothing to do with whether Coinbase’s own cryptocurrency exchange itself is regulated to protect crypto investors. These are two completely different things that confuse people. The Securities and Exchange Commission (SEC) and regulations only protect Coinbase shareholders and not cryptocurrency buyers who are customers, not shareholders.
In contrast, completely non-protective wallets cannot be accessed by any exchanges. However, there is a slight difference in this. see below.
Second, even non-governmental wallets are not entirely out of the reach of the law. A court in the United States, if determined to do so, can always access even non-custodial wallets indirectly through access to the underlying developers or nodes, even if they are outside the United States. To do that. But something like that will definitely happen, maybe even in 2022.
The aforementioned aspect of the truth has been dismissed by digital currency tycoons who have been lying to people, some on purpose but many out of their ignorance and bias. They did this by selling the illusion of anarchism, and playing into people’s disappointment with governments. The entire digital gold narrative of BTC is based on this illusion and associated manipulation.
If all the governments of the world are so corrupt that they are utter enemies of the people, then we are all doomed, at least socially, and I see no solution to this situation. Everything the cryptocurrency world has to offer including BTC and Ethereum will end up being useless illusions in this scenario anyway despite what they claim.
But the real Bitcoin (BSV) has a range Socially unassuming but technologically ambitious The goal, which is to provide a more efficient tool, a technology and an economic system, for a world in which there is a basic social system based on effective government, even if it is not fully operating under the rule of law.
This is one reason why BSV has come under attack by digital currency theorists, who show that any assumption of the government system is crap and a throwback to digital currency debt.
Unfortunately, at the moment, 99% of people interested in digital currency have absorbed the misinformation created by digital currency tycoons and thus believers in this false religion in one form or another. They are tempted by their own desire to escape the control of an evil government, but they don’t realize that they are being led into the control of special groups of people and organizations who have far less motivation to protect others than the government does. These private groups control the narratives and will not say or even allow any evidence to reveal that they are in fact controlling the masses. By comparison, he is at least more clear about what governments want to do.
Our only hope in society is to work together to create a more transparent and just government(s). There are good technologies and good economic systems that can help us achieve this goal. Find and support such technologies and economic systems to prevent society from descending into a technical dystopia.
This article has been slightly edited for clarity.
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