Modern finance is based around the concept of a trusted third-party middleman, who brokers deals on behalf of two or more parties. This worked well in days past, where such arrangements were simpler and financial technology less developed. However, in today’s age of financialization, globalization, and excess centralization of power, these frameworks are beginning to break down.
The crisis of 2008 was a warning call to the world about the dangers surrounding the excess concentration of power, privilege and money to too few. Still, very little has been done as a response: Complex financial derivatives continue to be created and rehypotheticated, further entangling the system in a web of excess leverage and trust requirements. Egregious practices such as market scalping, naked short selling, and blatant manipulation of market rates such as Libor and the Gold fix continue to take place in one form or another. And, countries the world over engage in extensive quantitative easing (“money printing”) policies meant largely to plug the gap created from years of debt-based phantom growth and the destruction wrought by harmful financial products and practices.
This would be one thing if it only affected those who chose to take the risks and commit these actions. However this is not the case. We are all pulled into these games, as witnessed via the shrinking size and health of the middle class in many countries, the growing sting of inflation surrounding numerous consumer prices, and the stark rise in enrollment for government assistance programs as the gap between rich and poor continues to rise. This crisis demands action, yet our politicians and mainstream finance industry seem either incapable or unwilling to to anything, and more often than not are just making what is quickly becoming an intractable situation even worse.
As the world evolves and becomes more interconnected, the structures and systems we use at the heart of finance and governance must also evolve. Technology itself has arguably enabled many of these issues, through magnifying the impact of human shortsightedness and greed. However, properly conceived and deployed, technology can also provide the solution. Built on the revolutionary peer-to-peer blockchain technology that powers Bitcoin, Counterparty provides decentralized financial markets and instruments, intended to help solve these issues at hand.
Through the use of the Counterparty platform, the immense computer network powering the Bitcoin blockchain itself takes the role as the trusted third party in trades. Excess leverage and trust requirements are then eliminated as math and cryptography replace failable human logic and greed. Finance can continue to evolve to suit the demands of a global economy, but this time with built-in protections that prevent the system itself from being gamed by those in positions of power or influence.
This is the purpose behind Counterparty, and we offer the vision of a better tomorrow, founded on the basis of truly free and fair markets.
