We now have the technology to completely remake the financial system -- not just make 'banking' or whatever easier online, but a thorough and innovative re-imagining of what the whole thing should even be about.
Information structure is the essence of all cooperative systems, and that means the economics of tomorrow is absolutely about software -- its architecture, its engineering.
The practicalities mean this cannot be tackled directly, but someone needs to think big and work on it (in various ways).
You're missing that all of these things have valid uses. Take CDS for example. They're a very efficient way for organizations to mutually insure each other's risks, cutting out the middleman. The trick is to cross them with two uncorrelated things (pork bellies and frozen OJ, for example) rather than using defaulted mortgages to insure umm defaulted mortgages. Or CDOs, done right they're how a bank protects itself against a run and is still able to do maturity transformations (e.g. turning monthly salaries into 25-year mortgages).
How can CDOs be both limited in abuse as well as a meaningful
The problem is that in any realm, commotidization acts as a one-way function, with enough complexity it becomes difficult or impossible to track, thus allowing effective money laundering (or outright theft).
The real problem is lack of oversight, or traceability inherent in these devices. This draws in shady money and, essentially, evil.
This is a wonderful piece of waffle, but I'm trying very hard to find any abstract or even remotely concrete idea that it would describe that doesn't in some way model our existing markets, which already exist in almost every conceivable formulation, with and without regulation, with and without every kind of fee/commission/rebate/order structure imaginable.
You get back to some very deep concepts in economics and finance.
Value is defined based on trust and faith. I accept dollars for goods I produce because I believe that I can then turn around and give the dollars to get other goods. It's a trust issue throughout the economy.
Many of the problems associated with the economy hinge on the very usage of the dollar or renminbi or whatever currency you use. You need to replace that currency. As we saw with BTC, it's not a simple task to replace a currency and maintain a trust structure throughout critical infrastructure. We are willing to lend trust to the sovereign but your task would be to establish faith in this other entity.
Unfortunately, you will need to establish a new currency to accomplish your goals. This is far beyond the scale of a YC startup.
Do note that given the depth, breadth and complexiy of wall street, this is like asking someone to come up with ways to kill the tech industry. And I suspect that the financial sector is the more complex of the two.
Not saying that it shouldn't be attempted - but that instead of targeting wall street, target a specific function they provide and disrupting that.
10. Kill Wall Street (etc.)
We now have the technology to completely remake the financial system -- not just make 'banking' or whatever easier online, but a thorough and innovative re-imagining of what the whole thing should even be about.
Information structure is the essence of all cooperative systems, and that means the economics of tomorrow is absolutely about software -- its architecture, its engineering.
The practicalities mean this cannot be tackled directly, but someone needs to think big and work on it (in various ways).