So what's the plan with MPOE/MPEx ?
It's been in business for about a year now, it went from trading ~3 BTC worth of options in January 2012 to trading 90%+ of all Bitcoin denominated financialsi in January 2013. Perhaps by this point a discussion of the roadmap ahead isn't entirely unwarranted.
I. Operationally, MPOE will continue to market make options for the indefinite future. There are currently no plans to significantly alter its pricing model, although stiff competition may require narrowing of the spreads. Should this occur it will certainly be announced in advance, to allow bondholders to reallocate capital and adjust demand interest rates accordingly.
It is perhaps worth noting that various observers have been declaring the spreads "too wide" for about a year now, but have also failed so far to go in the mid market. This should indicate quite clearly that what people say, and to a large degree what people do has little to no bearing on actual underlying economic realityii, and therefore there's not much immediacy in reacting to perceived spread pressure. I believe this is one of those fields where being too quick is much worse than being a little slow.
MPEx will continue to IPO worthy companies. The standards of quality are a central part of MPEx's business model, and so will not be relaxed in the future. I believe in the skimming milk theory of running a financial market : it is better to have the creamy top of the stack, no matter how narrow, than it is to have the watery remainder, no matter how deep. I believe that on an ongoing basis being listed on MPEx will be the most valuable intangible asset available to any BTC company just for this reason alone, leaving aside the probably more significant advantage of access to literally hundreds of thousands of BTC looking for a home.
The MPEx registration fee has been in my estimation very successful at selecting high quality, competent and intelligent investors, the sort of which a company benefits fromiii. Consequently it will never be either reduced or waived. While currently it is at a level which I judge adequate, it may be the case in the future that further increases will be warranted. In general it is reasonable to expect that by the time MPEx exceeds in size NYSE, the cost of a seat at the table will also exceed the NYSE. MPEx registration of new accounts will however never be closed.
The current trade fees schedule seems adequate with regards to % excised. It may be revisited in the future to ensure more equitable allocation of costs among the counterparties, but this seems unlikely : in a working market that equitable allocation is ensured by the market itself. There may be fixed per-order fees added, if in the future order spam becomes a significant problem.
II. Technologically, MPEx will continue to build on the design principles already discussed, which means it will continue to be accessible through a PGP based messaging system for the indefinite future. The "website" may stay or go, as it's not actually critical to MPEx' continued operation. Still, for both historical reasons and simple convenience it will probably stay for at least a while.
In its current incarnation MPEx is a centralised system. This is not happenstance, all markets are by their very nature centralised affairsiv and financial markets especially, as trust is the only required ingredient to their continued operation. Decentralisation will occur, if and only if the environment makes it impossible for MPEx to be operated as is, but it will probably not exactly take the form of a blockchain-based system for reasons already discussed.
Running MPEx is in any event not much of a technological challenge, in the sense that significant revenue makes good solutions always affordable.
III. Legally MPEx will continue to promote the correct view of BTC, as a game currency not in any significant way different from any other game currency.
This stance can not be changed through Internet chatter, mass delusion no matter how widespread or court rulings, whatever jurisdiction they may be issued in. Specific legislation alone may change things, and we will certainly lobby against such nonsensical legislation should it come under consideration anywhere. I would imagine we'd not be in any way alone.
In the end, any country may issue laws isolating it from the wider Internet (and, if the example of North Korea &all is anything to go by, a country issuing such legislation is signalling significant problems in governmental legitimacy, public participation in administration and so forth). The matter is not of particular interest, seeing how we're neither journalists nor historians.
Those considerations aside, we do not expect much trouble at all. Disruptive technologies happen all the time, and always to someone's detriment. Amazon drove Borders out of business, email drove the post office out of business, there's always someone going out of business when new technologies are involved. The increased irrelevance of Wall Street and generally the financial sector on both sides of the Atlantic is neither a secret nor its causes a mystery. The fact that their continued survival was enacted through nationalisation everywhere clearly indicates that with or without Bitcoin that particular adventure is at an end. The notion that the collapsing Lehman tower will significantly hurt Bitcoin is not much unlike the idea that the Post Office's reorganisation will significantly hamper email. Sure, any government may in principle outlaw email to prop their postal monopoly. So ?
IV. As far as equity is concerned, I intend to slowly sell the remainder 40% of non-controlling S.MPOE interest that I currently own, during the course of the next 3 to 5 years. This intent is just that, intent. I will proceed according to what seems reasonable based on macroeconomic data, and if circumstances demand it that term may be exteded to fifty years as far as I'm concerned. It will not take less than three years in any case. We're so far at 10% over about a year, so roughly on schedule I would say.
I do not intend to hold on to my controlling interest indefinitely. Once the above is complete, and if I consider the general Bitcoin community is both strong enough and competent enough, I will sell S.MPOE controlling interest (50% + the voting share) to a group of credible investors, with a credible plan in place, through a proper auction much like what you'd see if the Russian government sold its Gazprom (minus, of course, all the graft). Should this ever occur (and to look at the forum digests I receive you'd think it absolutely never will) I will consider this little experiment a complete success, as far as I'm concerned (not that there's much to complain as it is). A closed deal, a second retirement for me personally.
I will obviously retain significant holdings both in BTC and BTC instruments much after that point, I'll probably start new businesses or consult for already established ones, take the girls up and down the river, basically the same thing I do today, only later. As far as MPOE/MPEx is concerned, however, it will finally be a thing of its own rather than a thing of me, and I guess that's something.
- There's 14`299.83610677 BTC on MPOEs bond book for January current, which certainly makes up for 90% of all publicly known Bitcoin lending - tho in fairness private arrangements probably bring the MPOE market share closer to the 50% level or even below that, depending how you qualify a loan. There's ~1.5mn BTC in equity market capitalisation and about 150k BTC traded monthly on the overall (equity+instruments), which comes out of a total market in the 155 to 160k BTC range, depending on whether you doublecount passthroughs or not. However you chose to define BTC finance, MPOE/MPEx is doing 90% of it or more. [↩]
- A point discussed for instance in the article about consensus, rehashed recently in the discussion of difficulty futures. [↩]
- To quote Warren Buffett,
Nor do we think many others can achieve long-term investment success by flitting from flower to flower. Indeed, we believe that according the name "investors" to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic.
In the end, Charlie and I do not care whether our shareholders own Berkshire in large or small amounts. What we wish for are shareholders of any size who are knowledgeable about our operations, share our objectives and long-term perspective, and are aware of our limitations, most particularly those imposed by our large capital base.
- The same is not true of currencies, which is why what's good for Bitcoin isn't good for MPEx necessarily. The distinction between a currency and a market should hopefully not escape the astute reader. [↩]
Sunday, 3 February 2013
Pure, unadulterated genius.
Sunday, 3 February 2013
That may be a little much, I'll take half.