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Mt. Gox versus Lehman

February 26, 2014

Here’s something interesting.  Lehman goes under and the world explodes.  Mt.Gox goes under and bitcoin chugs along.  Why?

The basic reason was that in the fiat world, all of the banks owed each other money, and people owed money through Lehman.  So when Lehman went down, it caused a domino effect.  With the exchanges, you didn’t have exchanges connected with each other so that when one node goes down, there is no domino effect.

It’s thinking like things like that make me excited about bitcoin.  In 2008, we had a financial disaster, and people moved heaven and earth to keep things from turning into a full blown depression.  However, I think since 2008, we’ve taken a wrong turn.  It’s back to “business as usual.”  The trouble with “business as usual” is that no one is really satisfied with the financial system.  This includes people within the the system.

But you can reconcile this by saying that “this is the best that there is, so just deal with it.”  But what if that isn’t true.  Why do we think that the way things work is the best that there is?  For a while, that’s the way that I thought.  Why rock the boat, when you can’t really change or improve things.  But then a series of events made that belief untenable.  I just can’t believe that any more.

So I ask questions.  Like how come the bitcoin world can withstand the collapse of the biggest exchange without missing a beat, whereas the fiat world can’t. 

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