The cryptocurrency market has seen quite a few scandals and Mt. Gox was among the most infamous of them all. Charlie Shrem, a Bitcoin entrepreneur discussed the story of Mt. Gox with J Maurice, a Bitcoin Miner, on his podcast ‘Untold Stories’.
According to Maurice and Shrem, Mt. GoX acquired almost “70-80% market share of all Bitcoin trading globally” which was quite a large share for one decentralized exchange to have. However, according to Shrem’s lens Mt. Gox was the “largest and most central company to the Bitcoin eco-system”. He also explained how in 2013-14, the largest Bitcoin exchange was an important factor for anyone trading Bitcoin.
However, Mt. Gox faced an unforeseen hindrance when 850k BTC went missing [or stolen] from Bitcoin circulation. According to the Wiz, the days before Mt. Gox shut were “really painful” as people couldn’t trust them anymore.
Shrem highlighted that there were two Bitcoin options available on the exchange at that point; one was the original Bitcoin [BTC] and other was Mt.Gox’s Bitcoin, which “were these fake Bitcoins that you could trade in Mt.Gox’s system”. This led to the formation of a secondary market buying Gox BTC, which was “essentially Bitcoin which couldn’t be removed from Mt.Gox before it imploded”.
However, Shrem claimed that even though Mt.Gox imploded, the market created its own token as debt, even as Bitfinex claimed to have created the first token as debt. Wiz noted that Josh Jones, a creditor at Mt.Gox, created a system to exchange this Mt.Gox BTC for real BTC. Wiz noted:
“Mt.Gox had this feature where you could internally transfer Bitcoins between Mt.Gox accounts and Josh Jones had created this system on top of that so that you can send your balance to his accounts and then that would be your os that will be your Bitcoin builder exchange balance, you would have Gox BTC at that time which you could trade for real BTC.”
The crypto users at the time could trade this Gox BTC for real BTC at a discounted rate and get out of the mess which was left behind following the hack.
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ErisX goes all hands on deck to launch a Bitcoin Futures market
ErisX’s CSO, Matt Trudeau, detailed the company’s four important plans for the future, which includes launching a spot market, to secure a Bit License, DCO, and to launch a futures market.
ErisX currently has a DCM contract, which is a Derivative Contract Market that allows ErisX to run a CFTC-regulated futures exchange. However, ErisX aims to get a DCO [Derivatives Organization], which will effectively allow it to run a CFTC-regulated clearinghouse. A clearinghouse would mean that ErisX can take control of the custody of the assets and clear and settled trades.
The CSO explained the benefit of this, stating,
“There is some efficiency for firms like producers [like mining companies]; if they need to hedge their inventory or need liquidity on a spot market, they could do that conveniently on a single platform. “
Trudeau added that from the “post-trade standpoint” and “the collateral management standpoint,” ErisX would have cash, crypto, and the futures, all stored in their clearinghouse. This would boost efficiency since it would be available for all customers under a single platform. The CSO added,
“… so there is some efficiency in terms of managing collateral, if you don’t have assets on multiple platforms, it can all be in our clearinghouse.”
Apart from the aforementioned plans, Trudeau added that the crypto-industry needs to mature more and that ErisX plans to make a significant contribution to that. He added,
“The market is professionalizing and we think that in terms of what institutions are expecting from a trading/custody experience, we will bring some of the solutions to the market and that’s really the foundational pieces that they are looking in order to build their businesses on top of us.”
Apart from ErisX, LedgerX has also received a go-sign from the CFTC to settle Bitcoin Futures in Bitcoins. Other exchanges include Intercontinental Exchange’s Bakkt and Seed CX.
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