A Reminder – The Most Important Word in Bitcoin, Again because Gox

This is the most important thing to take out of the present HASHTAGGoxfail. Early in the history I made blogged about the most important word in Bitcoin, Counterparty. By Counterparty I mean not the shitty yet another Alt decentralized OMGWTFBBQ shitpile, but the actual term with a rich history in the the consideration and determination of contracts. Here's a link to the original article. Because some people may be lazy, or because they might actually either not click or click the wrong thing, the rest is quoted below with a bit of extra commentary following it.

The Most Important Word in Bitcoin

A number of people write guides helping to introduce people to Bitcoin where they introduce some of the vocabulary giving people the definitions of things like "mining" and "satoshis" in ways that either reflect their own, often limited understanding of the terms or they recycle someone else's copypasta as their own. The end result is many of these guides have a substantial value for people reading these guides that is under that of any given replacement guide. My dissatisfaction with these guides leads me to highlight what should be considered the most important word for anyone getting into Bitcoin.

Counterparty

Understanding what a counterparty is, and being able to apply that understanding while navigating the bitcoin space is the single most important survive. Thriving involves understanding much more learning and understanding, but surviving is the a reasonable goal for starting out with things.

The Concise Edition of the Oxford English Dictionary didn't deem Counterparty worthy of making the cut, so lets suppose here a sane dictionary style definition stripped from the legalisms.

Counterparty: 1. Someone who through your transacting with them exposes you to risk 2. Everybody you transact with.

Those two parts considered together are  important, and need to be internalized if you want to keep your bitcoins and receive some other sort of value for your coins when and if you consent to spend them. Every transaction you enter into involves accepting some amount of risk. It doesn't matter if the trade is a straightforward exchange of X for Y, a bet placed on the outcome of a sporting event, some arrangement where you deposit a sum of bitcoins with someone else, or something more exotic. Even (more often is seems Especially may be the right word) the proposition that you download and run some piece of software involves entering a relationship with a counterparty.

It is also critical to understand that in Bitcoin it is almost always proper to refer to this counterparty as a person or a group of people, at least in your mind. After having read and lurked more, probably no less than six months to a year you may begin to think of some entities in bitcoin as being in part well constructed contracts defining them. This is an excellent example of such a contract. If you are doing things right though, continuing to think of things in Bitcoin as persons is what you should be doing. Even if the only name you can ascribe to that person is the name of whatever venture they front as. Bitcoin largely lacking Statute as it does means thinking of entities in terms of being incorporated, as incorporation is understood in the fiat world is the wrong way just like how through lacking statute Bitcoin lacks "default" and "bankruptcy" and instead has scam as the appropriate label for failure to carry out one's obligations.

If you enter transactions, at some point you are going to be a counterparty for someone else. It is well worth doing the work to make yourself as an attractive of a counterparty as you can be, if for no other reason than it helps you to understand what you should be looking for when you search for counterparties yourself. Consider the ability to trade with civilized people a bonus.

Now stopping frying bacon naked. People were warned in large ways for nearly a year, and in smaller ways much earlier than that. Everyone who might actually have claim to the title of the "Bitcoin Public" has long since divested from and forgotten about MtGox. Any one who thought to have claim to such a title and yet ignored the warning signs as they have accreted since the first post on the Bitcointalk forum by the MtGox account needs to engage in serious reflection. Many people might know the trouble you see, but the odds are tremendously in favor of most of them having been able to avoid it.

4 thoughts on “A Reminder – The Most Important Word in Bitcoin, Again because Gox

  1. This Bitcoin is a crypto currency that does not have a "numeraire".
    It has NO base, eg, How tall are you? Can you answer this WITHOUT
    Comparing height to some constant, like inches or metres.
    Bitcoin is based,maybe on the US dollar-788 Bitcoins to one dollar but the dollar is based on what the Fed decides to print that day-say, to save JP Morgan- so the floating Bitcoin is based on the floating dollar, which has no basis. Whee!
    If this is too complex, buy some Bitcoin,

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