The Buttonwood Agreement was established in 1792 in response to the public’s desire for a more transparent transfer of wealth into securities representing steel companies, railroads, coal plants and many other growing industries. There is no denial that these industries had merit and ultimately the Buttonwood Agreement was the foundation to offer the investing public a safe and dependable ability to participate in the growth of these markets. Prior to this agreement, many people were scammed out of their savings by criminals promising to deliver stock in return for money. Most people are honorable, but some will use the vulnerabilities in the system for their own needs.
Imagine it’s 1780 and B&O Railroad is building tracks just outside of your town. The new technology offers a huge opportunity for you, as a farmer in the town, to sell your goods to a whole new world of potential customers. Now imagine the opportunity to buy stock in the railroad itself. As you can see many people could easily see the merits of such a new technology and would like the opportunity to own a part of it. How do I buy stock? Well, you could travel to Philadelphia or New York and buy and sell for yourself, or you could trust a broker to handle the transaction for you. Using a broker, you can assume that they will have connections to obtain the stock of your choice at the best prices possible.
Once you trust the broker, you essentially have created counter-party risk. What if the broker does not deliver me the stock? Obviously, there is precedent that this brokerage system does work. Look at the world today. We have brokerages all over the world competing for to offer these exact services. And a public that is invested in the companies that have driven the world. We did not start at this point, but the Buttonwood Agreement was a major step in building public trust.
|“||We the Subscribers, Brokers for the Purchase and Sale of the Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at a less rate than one quarter percent Commission on the Specie value and that we will give preference to each other in our Negotiations. In Testimony whereof we have set our hands this 17th day of May at New York, 1792|
Richard J. Teweles, Edward S. Bradley, and Ted M. Teweles (1992). The Stock Market (6th Edition). p. 97.
Bitcoins are direct products of a system to validate transactions between two parties. The investing public has taken notice of the merits of the system. Many people want to be a part of this new technology. As a payment processing system, Bitcoin is the financial equivalent to email versus The Postal Service. But trading of the coins themselves is wrapped in a cloak of a darkness. How can the value widgets of such a life changing dispute solving mechanism be transferred in such a “wild west” fashion?
For the world to trust the brokerage of bitcoins, a Digital Buttonwood Agreement needs to be established. The largest brokers in the market have organically gained the trust of their clients. Bitcoin’s value varies at each broker because of the simple fact that the public is comfortable with some and not others. The voting shows itself with the premium valuation at Mt.Gox versus others. And the market capitalization of Bitcoin reflects the overall sentiment of the investing public in this new technology. This agreement will essentially be a tangible asset for the market. Take the asset and sell it to the influencers of the world. As of now, the strong (Suning Appliance) can lobby for using bitcoins on a grander scale. Baidu does not have the clout to take such a risk in Bitcoin’s present state. The governments of the world simply want this technology to be used for good. The anonymous nature is scary and without a unified, tangible asset, Bitcoin opens itself to massive regulation.
I implore the largest brokers to establish an agreement of their own to take the Bitcoin market out of the back alley and into the portfolios of every person that wants to participate in this world changing technology. We, together, built the internet. An unimpeded method to transfer information. We, together, will build Bitcoin. An unimpeded method to transfer wealth.
-The Crypto Analyst
Last modified (UTC): December 19, 2013 19:26