Bitcoin Forum

 What were to happen if difficulty was determined by the current exchange price from MtGox?

That's just an example. What might be acceptable would be using a p2p distributed exchange and valuing BTC from a basket of currencies.

Would this mitigating speculation effects?

ack! Can't edit typos.

I should point out that this relies on p2p currency exchange and probably best employed by an alternative cryptocurrency blockchain... perhaps some way to seed the value from a fixed point in time of BTC

A P2P currency exchange for bitcoin is near useless because alt currencies generally rely on bitcoin for value. Constant difficulty adjustment has been proposed, which I believe will better mitigate speculation.

"alt currencies generally rely on bitcoin for value"
Hang on, does that mess it up because that would mean it's feeding into itself? 

I was proposing to value Bitcoin by taking an average from all the data we can from an exchange; LibertyReserve, any fiat currencies traded, even gold.

How can you prevent the exchanges from manipulating the data? Even if you take the median rather than the mean, this is very much centralizing the difficulty adjustment.

A P2P exchange can be set up using more than one cryptocurrency through a bitcoin-like system, which will allow taking bitcoin's price over a large amount of alt currencies. This is very unreliable because such volume would likely be so small any person with ten grand could manipulate difficulty greatly.

"exchanges from manipulating the data"
Well the idea is to have an exchange that is as hard to manipulate as Bitcoin is.

"such volume would likely be so small"
True. You'd have to adjust the effect of the difficulty change according to volume. As the exchange gets bigger or smaller it's influence on difficulty adjusts.

This isn't possible without using an alt-currency. A decentralized USD-BTC exchange is seen differently by different nodes (because of the WOT required).