Bitcoin Forum

A friend of mine is thinking about opening a Bitcoin exchange and I told him I'd see what the community is looking for. I know a lot of the exchanges have problems so I'm wondering what you would like to see in the 'perfect' exchange?

TMA

People using it?

I'm sorry if I sound pessimistic, but I don't know if we need yet another exchange that no one uses. Here's some info on previous attempts:

- ExchB offered same day bank deposits for free and they had to close.
- CampBX has shorting implemented and tested, but they need more volume to enable it. After 5 months they have ~1% of MtGox's volume.
- Ruxum had 'wall street security' and support for lots of currencies (the last trade at Ruxum was 2 days ago).
- CryptoExchange is the most recent one. Everyone was talking about it, but their current volume is also very low.

You need to offer something that will disrupt the market. Something like credit card deposits (note that other people are probably already working on this). But even if you had a cool idea, it will be hard for you to steal customers from well established exchanges. This is a small market and MtGox is where the action is at.

I disagree, we always need new exchanges. However I believe it will be shut down pretty quickly, if it is not profitable. Therefor you need some kind of new features which are gonna attract people.

My feature lists:

- Create at least some minimal bot, integrated with mtgox which keeps asks and bids close to the market price (arbitrage)
- physical location with cash exchange would be cool
- as many withdraw/deposit methods as possible with as little costs as can be

There could be lot of improvement on country-specific exchanges.

Therein lies the key: Disruptive Technology or Disruptive Innnovation

http://upload.wikimedia.org/wikipedia/commons/thumb/8/8e/Disruptivetechnology.gif/450px-Disruptivetechnology.gif

This, I believe, is the Holy Gail of Bitcoin.

Cheap withdraws.  Deposits can be more because there is more risk. Btc to $ to dwolla carries little risk for the exchange.  Both gox and tradehill do withdraws cheap and have higher volume because of it.

 - Dark-pool auction settlement every N seconds (eg. 30+), rather than continuous settlement, to reduce fees for people who don't want bitcoins immediately, just at some time.
 - Scheduled buy/sell orders, (eg. buy $10 of bitcoins every hour, +/- 10 minutes, or VWAP trades)
 - OpenTransactions support, so fiat money & bitcoins aren't stored on the exchange
 - BTC/Gold trading or quantos
 - Margin trading
 - Yubikeys
 - Pre-filled forms for US tax reporting

Also, the Bitcoin community needs to prefund organisations to support future legal issues with Bitcoin. There will be legal cases in future, and we will need at least one organisation to stand against the vested interests of fiat money. At the moment the best origin for this organisation is one of the exchanges, where the money is being made.

btc<-->xau (gold)  and btc<-->xag (silver)  markets.  maybe xau funds are held w/ pecunix.

liberty reserve withdrawal without having to go through aurumxchange.  two fee levels, ... 48 hours (low fee) and instant (whatever fee level is needed to ensure that you have funds)

You need a very robust trading engine and very friendly user interface.

Volume is not a problem if you can persuade Bitcoinica to use it. But unfortunately, Mt. Gox is the best exchange ever, without even considering the volume.

I have been thinking about building a killer exchange, but now I'm not that interested in grabbing the pie from Mt. Gox, so I'd share my ideas:

- Use things like Redis for order book to make trading super fast. (At least 10,000 orders per second.)
- Build very good APIs, like TCP APIs.
- You don't have to accept Mt. Gox codes, but you can be the first exchange to accept Mt. Gox green address for instant funding.
- Put your bank in Singapore or Hong Kong. Singapore banks can sometimes do amazing same-day wire transfers.
- Give incentive to developers who develop bots, and give them flexible authentication options.
- Very cheap fees, at most 0.1%. Remember, 0.6% for currency trading is ridiculous. ICBC Bank (China) charges individual customers 0.2% spread for USD/CNY exchange, and CNY is not even a free market currency like USD.

I'm giving almost all my ideas out and wish you all the best.

Isn't Ruxum running a "private beta"? So this should be a low user/volume site by definition.

Anyway to me the funding/withdrawing methods and the fees are essential. SEPA transfers are a must.
From a merchants point of view FX forwards (via API) and instant buy/sell (via API) would be great. Interests on the fiat currencies would be nice.

The main thing I've wanted to see is BTC<-->pecunix, at reasonable rates (<3%).

There is no green address stated on the MtGox website, so it cannot be used yet.

I was exploring this possibility almost since the beginning of this year. I also tried making polls like this before, and it's good to see much improved response over time.

Anyway, the exchange I decided to build (ICBIT) bases around totally new subject in Bitcoin economy.
The community should NOT focus just on currency exchange, because a currency exchange is just a service, not a way to earn money or produce something useful. Instead, Bitcoins should be used to buy/sell something else.
The most interesting way, in my opinion, is the derivatives market.

Imagine the possibilities:
- You want to speculate on the BTC/USD or BTC/EUR rate, for this you just sell/buy the corresponding futures contract (thus saving a lot on fees, when you don't need the exchange but just want to speculate). Also this is perfect for trading bots.
- You want to trade S&P 500 index futures contract using Bitcoins. Impossible? No, that's possible. More complex than trading via American broker using US dollars, but IT gives advanced opportunities to use your Bitcoins, to remain anonymous, etc. In real world a similar practice is used in Russia, where futures on RTS index trades on the united "MICEX RTS" exchange. The RTS index is denominated in US dollars, however the futures contract trades happen in Russian Rubles.
- You want to arbitrage between S&P, DAX, RTS, etc. Also possible, because those futures contracts could also be added on demand.

Also please note, this is not any kind of prediction market. The futures contract being traded will have real-world impact because the market makers and arbitragers would hedge their position by buying/selling the corresponding position on real-world exchanges. So you're not "betting" on the event, you're actually trading futures contracts.

As for the technical stuff, I will comment on what I came to think about:

I built ICBIT on my HFT experience, and it bases around in-memory and on-disk data structures. For on-disk a normal database is used, and in-memory is a highly-optimized storage (optimizations are implementation specific, Redis just can't have them). Snapshots are saved to the on-disk database periodically. In case of a failure, only small amount of last trades would just be rolled back, without losing any money/balances information.

Absolutely, one dev from my team is already developing an advanced high-performance desktop trading client, plus the useful API library for automated trading.

Yes, ICBIT will support green addresses transactions according to the standard proposed by DeepBit.

If you're interested, more information and discussion is here: https://bitcointalk.org/index.php?topic=50817.0

Built in Bitcoin laundry mixing services every money is put in or taken out.    The exchange that implements this and promotes it will set a new standard.

Exchange should be distributed as Bitcoin itself. Private transactions between pears will reduce risk of potential legal actions. And exchanger would act similar to torrent tracker.

Here's my wish list:
    An exchange with complete anonymity. That would make registration a pain as well as resetting passwords, but I would like to see it.
Everyone's Bitcoins get's mixed up making it very hard to trace.
Allow exchange for 100% backed precious metals.

Each one of those would come with a lot of challenges, but that is what I would like to see happen.

That would require distributed national currencies. Now how is this going to work?

If ICBIT uses DeepBit's merchant service, then all transferred money would be going mixed via a wallet having tens of thousands of BTCs transactions per day.

I am not familiar with your name or that site, will look into. 

Off first glance, it does not look as though you are putting the focus on the site to compete with Tradehill or Mt. Gox, but rather.. something else.  Bitcoinnica (sp?) maybe.

No offense, but if you're asking what is needed in a new exchange then you probably shouldn't be in this already saturated market. It should be blindingly obvious.

Yes, because market research is so last century...  ::)

It's one of those "private betas" where you get a discount for inviting people - basically anyone can get in. There was some action in the first weeks, but then it died: http://bitcoincharts.com/charts/ruxumUSD#rg180zm1g10zm2g25zvzcv

You can't do it right doesn't mean no one can't. In what way is a monopoly market saturated? The only possibility I can imagine is natural monopoly. Then you should shut down every exchange that is not Mt. Gox.

The problem right now is every new exchange is just another Intersango.

I hope the OP aims to be the next NASDAQ.

So what would it take to be the next NASDAQ? Let me take the list on your first post:


These are nice features, I agree. But do you think that an exchange with these features that launches right now can get more than 1% of total market volume?

EDIT: just for reference, here is the chart (http://bitcoincharts.com/charts/volumepie/)

If there are exchanges with these features right now I will divert all Bitcoinica volume into it. And it will have at least 25% of market volume.

Thanks


I think I can hear the developers typing to implement everything ASAP ;)

I have been doing automated trading on some of the bitcoin exchanges (I am doing a significant portion of Tradehill's volume). I think the exchanges we have are decent considering how fast they were thrown together, but there is much room for improvement. I like most of zhoutong's suggestions and I'll throw a couple cents in here:

 - try even lower fees -- yes, I'm surprised nobody has done this yet. Or you could do what some real-world exchange (I think it was BATS?) did, and actually give equity away to the highest volume traders in your first X (3?) months of operation, proportional to their volume. This gets people interested in putting volume on your platform and aligns your interest with the high-volume traders down the road.

 - make your exchange FAST. I have speed issues with all three of mtgox, tradehill, and campbx. And when trading heats up, the exchanges often get so slow that trading intelligently is nearly impossible.
Being fast means getting away from sql-based matching engines, and using an in-memory tree-based structure.

 - there are a number of things that each of the major exchanges could do to improve their REST apis. There are features missing and some design issues. And yes, eventually the awesomest exchange will have connection-based APIs.

 - Don't be broken. It's unnerving when deposits get held up for days because of a software glitch. Or when the book is regularly crossed due to a matching engine glitch. Have a really good test environment and top-notch software people deeply involved.

Tech and feature-wise, I like bitfloor.com best. It is a solid and lightning-fast platform. It's built by somebody who knows what he's doing. Obviously, it has very little liquidity though, which makes it pretty useless until it gets some.

I think there's room for a good gold and silver bitcoin trading platform, but I think mixing it with a usd/btc exchange is probably a mistake. I would focus on one or the other, lest you do neither well. (Shameless plug: if anyone wants to team up on the gold/silver thing, send me a PM; especially if you've experience in the bullion market -- I am looking to put together a team for this).
 
If I were to start a new exchange, I would team up with the bitfloor guy and basically find a way to bring that platform more volume. Or barring that, I would at least use his matching engine (it's been open sourced), or look to it for a design to base mine on.

Damn, that is quite the dangling carrot. Someone get on it!

- Alt-coins

- Fixed deposit addresses, so we can deposit directly in from a pool

- Slick interface but not sluggish

- PERHAPS a downloadable app that you can exchange on your desktop?  is this a good idea?

- PERHAPS a pool built into an exchange?

if I can think of other ideas i'll post them here.

Not really necessary. Private transactions over centralized systems, would be too difficult to control. I again refer to torrent model which is nicely works over centralized connection to internet providers.

http://icbit.se/pubimgs/scr5.jpg

Is that slick enough? :)

I did not look into that really, because I don't see any important alt-coins. But that's my IMHO.


Deposit problems are solved using green addresses standard proposed by DeepBit. Then you can deposit from trusted sources instantly.

Downloadable app - yes, it's a must really for fast trading, and we're doing that in ICBIT.

But how do you want to do a SWIFT/SEPA/VISA/PayPal/whatever transfer to a decentralized system? I don't see how a decentralized system will get hooked up to the Swift network and a clearinghouse. These providers make assumptions about the nature of the entities that connect and a P2P network does not qualify.

I doubt I could trust such a system, but it could run entirely on bitcoin deposits much like Bitcoinica denominates all positions in +/- USD. Consider one of numerous decentralized bots, each with an account at an exchange. Users pay into a bot pool with bitcoin and thereafter trade amongst the other users of the bot account while the bot balances all trades through its exchange account(s). Could a bot register and manage accounts without any single human knowing the details and would anyone trust such a bot? I don't know, but it's interesting, and theoretically possible.

I want an easy put and change orders interface. Of course this would not target those API users but rather the small people who want to toy around with BTC.

I don't trade much but as far as I know on Gox it works like this:
I have 100$.
I put in an order 50BTC@2$.
It doesn't get active cause I forgot about the fee.
I do a second order of 49BTC@2$.
Later I place a third order of 30BTC@3$.
It doesn't get active as I don't have money left so I have to cancel the other offer first.
Putting, cancelling, watching the market ... involves different tools. I use my calculator to somehow put in all my coins/$$ etc. (MtGox got better with that respect I guess).

I would rather want to have some drag and drop interface like this:
http://lw2.leowandersleb.de/dreamInterface.png
Red are my buy orders and blue my sell orders.
I can drag these in from outside and out to a recycle bin.
I am allowed to save invalid/inactive orders (C and D).
If I charge my account, these become active (and visible in the order book).
E and F are in contradiction as they sum up to more than the 20BTC that I have (blue BTC line) so the last of these would be inactive, too.
When I add/move a red/blue order, the lower red/blue line ($/BTC remaining) moves accordingly.

While dragging and at Mouse-Over I would see the exact price and amount.
Mouse-Wheel would allow me to zoom in and further adjust the Satoshis/ct.

I can switch my interface to BTC or $. The above image shows the $-view, so my 20BTC offer @ 4.2something is shown as a 84$ offer.

Finally I can set the interface to instant confirmation or to ask me for confirmation when saving my changes (default).

Finally I would love to see the market depth in real time, too like on mtgoxlive within the same graph.

Holy crap, that's complicated.  I'll stick to price, quantity, submit thank you.  BTW, on MtGox, your fist example would be activated just fine (buy 50BTC@$2).  The fee comes out after the trade, so you would end up with 0.994*50 BTC if your order was filled.  Even if you only had $98, the order would automatically split into an active order of 49BTC@$2 and an "insufficient funds" order of 1BTC@$2.

Not really. It could be additional to the pure text based interface just to let you easily see where you have your orders. A personal market depth should not be complicated for a trader that also somehow has to understand the global market depth. Allowing to manipulate the own market depth is only logical.

My main criticism was the case where I want to change an order, so you stick to delete one order, enter a quanity, enter a price and submit.

I'm pretty sure I ran exactly into this problem. They improved a lot since then.

Splitting is definitely new.

Simple 'bank -> excange', like Intersango, or better still would be to make it even easier.
Select a leverage degree per trade.
Input either in USD\local currency (GBP for me) or BTC and the other is calculated automatically.
Intelegent UI, for example if there is a "market" vs "custom" price option not then also giving "price (ignore if market)" after that while "market" is selected.

If you have a chart please make it the bitcoins charts chart as there are various different requirements here, for example I like high res but not candlesticks, and all the indicators and other things are helpfull.

The behavior I have described has been in place for at least 8 months (including on the previous trading engine).  I guess in the big scheme it may be "new".

This happens at TradeHill and is really annoying. CampBX has a great way to solve this: a "Spend X" trade. You just need to type in the amount you want to spend and the maximum price you are willing to pay and it calculates how many BTC you can buy (including the fee).

"Whatever" transfers go between two peers, private entities, members of the "whatever" system. From the point of view of the "whatever" system another decentralized system even doesn't exist.

I think you miss my point which is that a Bitcoin exchange must be a gateway between the proprietary, centralized world of financial institutions and the free, decentralized world of Bitcoin or other XCoin. As those institutions assume that the counter party is also a financial institution registered as a company, and possibly with a banking license, an exchange has to conform to those expectations.

An API call to withdraw BTC.

Currently only MtGox and CampBX have this.

Tradehill claims to have this but it doesn't actually work (or at least their tech support staff doesn't think it works).

+1

Thank you, anu, for striking yet another blow in the war to beat back this silliness that keeps popping up.

A big part of what exchanges (both currency and stock) do is interface with existing banks/courts/governments.  That role will never be "distributed".  But by playing this role, exchanges enable the distributification (?) of "everything else".

... although you have to provide a way to take delivery.

All fiat/BTC exchanges provide the ability to take delivery of the fiat via the banking system.  In order to have a credible (i.e. not-a-sham) metals/BTC exchange you need a way to deliver the metal.

I'm not aware of any exchange that will ever "expire" a BTC deposit address they've issued to you.  What would happen if you sent money to it after the hypothetical "expiration" date?  It just disappears?  Very bad business.

I think what you're looking for is already possible.

What about Bitfloor? I don't think they have all those features, but they do have a 0.1% liquidity rebate (which would make a high-volume market maker a good amount of profit).

And in your turn you miss my point which is exactly how to avoid those expectations. You can refer to www.centraw.com as an approximation to such model.

I'm doing http://www.centraw.com/ clone now... who is the guy behind http://www.centraw.com ?

Not decentralized at all. It's a centralized order book / escrow service like http://bitmarket.eu. But I agee that this could in principle be distributed (except for resolving disputes) if you find an incentive for a community to play that game.

But the really bad thing IMHO is that you have to manually deal with all transactions your offer is matched with. Which can be quite a bit of PITA if you do large amounts. On MtGox this is completely transparent. My BTC 10,000 ask can be matched with 10,000 BTC 1 bids on MtGox without me having to to 10,000 Bank transfers like I have to do on Centraw.

I believe that currency speculation and down-to-earth-need-it-right-now currency exchange are completely different operations. Even they referred by the same term "exchange". Volumes are different, purpose is different, choice of currencies/means is different, time frame demand different. So it is better not to mix them up the same way as forex is not mixed with currency exchange booth in airport.

Agree, but the problem is that only MtGox is anywhere close to a viable business. Just do the math:
BTC 50k /day *0.6% = BTC 300 / day ~ USD 1200 / day ~ USD 36,000 / month  (@ $4 / Bitcoin )

Any Xchange booth at the airport with that kind of revenue will have to close down.

MtGox is fine but leave it alone. It is just another niche which already accomplished and hardly need any improvement at the moment. While exchange system for lay people (not forex traders) is merely doesn't exist. That why we are talking here about exchange (network of booths or whatever else).

I use Tradehill's API withdraw call all the time.

With bitcoins? I also couldn't get it to work...

Yes, with bitcoins. Do you get an error?

Shorting. Options. Futures. Security. And auditing by a serious audit company.

Shorting. Options. Futures. Security. And auditing by a serious audit company.

Ok, now I just tried it out and instead of my available €€ I set an order that was rounded up. Result is that I have one order with state "Not enough funds".
I have no idea if you opted in for automated splitting or what but here it does not work that way out of the box.

:/ ok, now the order got clipped to the available amount somehow but it was first listed as "not enough funds".

What I want is not this:

Free Bitcoins.

I want explicit and official state sponsorship from a non-aligned nation of size, and one which would be exceedingly cumbersome to cut economic ties with at a state level.  e.g., Russia, China, Venezuela.

Isn't that a pleonasm?

Two things I would want to see in a new exchange:

1) Lots of volume!   

Not sure how an exchange could compete with Mt Gox on that, maybe with lower fees, awesome data/trading interface?

2) Stop Loss Orders! 

Mt Gox to their shame does not have this most basic trading function...arrrghhh!


Good Luck!!!