In a recent blog post titled Didn’t we learn anything?, the former CEO of the now-bankrupt Bitcoin exchange MtGox, Mark Karpeles has said that, “the current situation (of Bitcoin exchanges) is nothing but another disaster waiting to happen.”
Mark Karpeles, co-founder of The Bitcoin Foundation, also suggested different methods which could prevent another MtGox style collapse. Earlier in April, his fellow co-founder Gavin Andresen had called him and Charlie Shrem “a disgrace to the cryptocurrency industry.”
Mark’s Two Vital Suggestions
- Decentralized Bitcoin Exchanges – The former CEO has always maintained that someone from within the company was responsible for the downfall of the Tokyo-based exchange. Hence, to eliminate this type of risk, he says, more decentralized Bitcoin exchanges need to be created. “Creating a decentralized exchange is a good idea, except for the fact that you are not able anymore to perform checks to avoid stolen property [funds or coins] being used,” Karpeles said. “Based on my own experience, the best option for a decentralized exchange would be to allow exchange only between existing cryptocurrencies, which would create a lot of new possibilities in terms of value for said coins while potentially helping offload the Bitcoin blockchain.“
- Third Party Settlements – In the post, Mark insists that customer funds need not be held by the Bitcoin exchanges but rather be handled through third party settlements.
“One entity would be specialized in handling of coins,” Karpeles said. “It would focus mostly on security, and could also offer processing for other things than exchanges. I’m thinking about Lightning, for example. Existing wallet services are probably in a good position to start working on these kinds of solutions.”
Karpeles accepts that incorporating such features into the existing situation exchanges would prove to be a costly and a time-consuming affair but, if the Bitcoin exchanges fail to adapt and improve according to the changing environment, they are “nothing but another disaster waiting to happen“.
Image: Reuters