DeFi Reinvents the Bucket Shop for the Better

Modern futures markets originated in the U.S. Midwest during the mid-1800s and were originally democratic institutions that accepted all comers. The legal foundations for enforcing futures contracts were shaky, and the regulatory foundations non-existent. But as futures exchanges matured over succeeding decades and became more important economically, they began to exclude the hoi polloi with larger lot sizes, margin requirements and membership fees.

By the 1870s, traders excluded by these financial restrictions (or by social, religious, ethnic or gender classifications) organized into decentralized networks that came to be called “bucket shops” because they bucketed orders among customers rather than offering or promising delivery of the underlying commodities. Even people who could have traded on official exchanges often preferred the bucket shops for their longer hours of operation, customer-friendly conditions, lower overhead and more convenient locations.