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Crypto and Caveat Emptor

With the high volume of shit coins being spun out all over the Intertubes, it might be a good idea to go back to Bitcoin's founding and push forward a key point that lies in the original white paper.

The main concept of Bitcoin is a peer-to-peer version of money that can be moved between two parties without any direct contact with a financial institution. But sitting in the Introduction, right up front, is recognition of what Bitcoin does, and why it does it. It allows two entities or people to send money to each other with finality. Once a transaction is committed and validated, it is final. Finis. No Mas. There are no take backs. You, as a buyer, are committing to a non-reversible transaction.

This is the caveat emptor in crypto. It seems like an oft forgotten concept. The key to lowering transaction costs, in the case laid out by Satoshi, is removing the need for third-party trust and replacing it with algorithmic validation. 

Our current financial system has been built and regulated to a degree whereby risk in a financial transaction is split between the sender, recipient and any third party financial institutions backed up by public policy that subtly shapes our behavior. People are often infantilized at the expense of protecting them from themselves. 

Having worked in the payment processing world, I see how this works. Let's say you want to buy something on eBay. You don't know the seller but you commit to a transaction. Your package arrives and you find it isn't as described. Now the recommended process is to contact the seller and try to reach an amicable solution.

But a lot of people don't start there. Instead, the first course of action is to contact eBay to resolve the dispute. Or maybe go to PayPal if they sent their funds that way. Or maybe they just go to the credit card company and file a chargeback. Maybe they do the prior three actions. Every step of this process, to "protect" the buyer, builds up an underlying cost that ends up baked into the transaction.

Sellers have to account for chargeback fees. eBay and PayPal have to account for covering transactions in some cases where they extended seller protection for the transaction. So you, as a buyer, want to make a purchase where you, for your own protection, pay more for. All of those little costs end up in the final selling price you commit to.

Bitcoin's initial concept is to side-step all of this and say - commit to finality and shed the implicit costs that are built into all of your traditional financial transactions. The principal here is caveat emptor. Buyer beware. You can have reality, in which you commit to the transaction knowing the risk involved. Or you can commit to the false notion of protection.

Regardless of whether Bitcoin's initial concept has or will every truly play out, there are a lot of people buying into crypto who want the safety net that isn't there. And when the shit coins sink to the bottom, reaching the end of the 0's on the coin's rope, they'll be begging and pleading with regulators and financial systems to bail them out. And bailing them out is the last thing anyone should do.

This article was updated on 29 Oct 2021