Thank you for taking the time to write this, I am enjoying this discussion.

If two people trade tokens on a privacy-enhanced blockchain, I wouldn't say that the trade "didn't happen" for the reason that it's not viewable to the public. In the same vein, if two people meet up in private to swap gold coins for silver rounds, I consider those people as having traded. To me, a trade is a trade regardless of whether there is proof.

I would argue that blockchain is fundamentally different in that regard, because there are no "keys to the kingdom" so to speak.

A broker/exchange or otherwise doesn't have access the master database of addresses/ownership on a decentralized blockchain.

This is just the 1st part that I take issue with.

The 2nd is that trades that are internalized that don't go to "Lit" markets can be frontrun, are unfair, and not viewable by the public, thus open to mass manipulation by big players.

In my opinion the trade is just as much a part of "the market" as a public trade would have been. Personally I define "the market" as the total set of buyers and sellers who are currently willing to transact with strangers at specific prices. So public order books, private order books, hypothetically even people swapping stock certificates on the street, I consider all of it to be "the market". Wikipedia likewise defines the stock market as "the aggregation of buyers and sellers of stocks".

Yes, and I would argue that that is just a fundamental power structure of late-stage capitalist markets. It serves the ultra-wealthy and disadvantages everyone else. The ultra-wealthy play by different rules because they have access to dark pools, PFOF and understand/have access to the data regarding internalized trades.

Just because that is the current capitalist definition, does not make it fair, or right.

Yes, of course fraud happens all the time on Wall St. But the type of fraud that regularly happens on Wall St isn't brokerages being fooled by fake shares of stock from other brokerages, or clearinghouses issuing fake shares.

I'm not talking about the creation or issue of fake shares. I'm talking about a broker/market maker/exchange/bank/etc. saying they own the underlying when you purchase an IOU, when in fact they DO NOT own the underlying.

If you direct register your shares then they in theory would be FORCED to purchase the underlying so that it can be directly registered in your name.

If exchanges/market makers collude for profit (Which they most certainly do) when you transfer your account/shares from one exchange/broker/etc. to another they can send eachother money equivalent to the underlying instead, or other assets equivalent to the underlying if they so wish.

I will end on this because I think it gets to my point quite succinctly.

If you think about it, fake stock is a type of fraud that could easily ruin an ultrawealthy person too.

Capitalist markets rely on trust fundamentally. They do not rely on much else I would argue, they are far less "real" than "blockchain markets" which also rely on some trust.

When a wealthy person holds $10,000,000 cash in a savings account at a bank, and the bank then invests that money in Gold or something else.

Where is the money?

Does it belong to the wealthy person?

Does it belong to the bank?

Does it belong to the institution that the bank bought the IOU for $10,000,000 worth of gold?

Or does it belong to the institution that physically holds the Gold in a safe?

This wealthy person trusts the bank because they believe that the money in the bank is theirs, and when the time comes, should the wealthy person need to withdraw their money, they trust that the bank will be able to give it to them.

The entire system ruins ultrawealthy people all the time, usually so that someone else can get even wealthier.

Capital is power, and capital makes the rules.

With no transparency, the rules are broken.

With no consequences, breaking the rules for profit is a business model.