What sort of measures against these problems are available for me to take? 

Nothing of the same generation can surpass Mt.Gox. We need the Dealer Network, developed here.

I think it takes about 3 weeks from this day to the inauguration of the daily fixing. I mean that you can skip gox from that day on doing OTC. 3 months for this to take out the volume from Gox also.

A supernode has to have a certain organization, and organizing things costs money. One of the things how to spot the top end of the supernodes is to follow the money trail:

Duke must spend minimum 200,000mBTC per month
Prince likewise must spend 60,000mBTC
Marquis likewise must spend 20,000mBTC
Earl likewise must spend 6,000mBTC
Viscount likewise must spend 2,000mBTC.

What sort of spending qualifies? Personal and your family jetset lifestyle, organisation and bitcoin marketing, everything that the royal houses do all around the world. If you make profit doing these things (like I could have sold bitcoins in the public mental institution but declined the bid because of the rules), the better. I personally think and aim to close the year richer in bitcoins, after speding all that much into what many would call senseless expenses.

I tried out all systems (military, business) that came to my mind, and Nobility seemed to be a good system with established rules, and underused, and mathematically suitable to the task (armed forces could have been another one, with 1.0 Supernode as a 4 star General). 


I think we first to develop and set in stone some rules, and then just put a open invitation in Bitcointalk. If we give out something for free, people join. We could for example give out 200 noble titles out for free (to people who qualify) just to have presence. Then there would be mechanism how they can increase the network.



I think this will not be an incorporation under any existing law, rather we are creating something new.

I do think that there will be a code of conduct for all the members to follow, and that will encompass the creating of new titles, behavior in the meetings, etc.

I want lower-ranking nodes be created by higher-ranking, but also want higher-ranking nodes to have some kind of system to become higher-ranking. I am a cool guy and would rank between Prince and Duke, but I would like even cooler guys to join me now, so that there would not be a gap in the system (it is difficult to raise above the founder).

A join fee of 0.5% of your bitcoin wealth would take care of the needs of the organisation for ever. It is also a good deterrent to have nonrich supernodes. (I mean "Duke" should have 10 million minicoins, and his entry fee is thus 50k minicoins; if all you have is 100,000 minicoins, you don't play Duke).

If there is a travelling supernode going to HK, for example, it is the locals' honorary job to provide an audience/dinner, best quality hotel and environment etc. All depends on the size of the organization though. If the locals are double the visitors, then the locals are hosts and act like ones (In Haikko my delegation exceeded the total number of guests, not only the number of the second biggest delegation). If the travelling delegation is larger than the host, then they do what they want and invite the locals to their party.


Roni is working for my supernode, but my superdone is down and will likely only be re-established in July 7. I hope to have him back, as well as Annina and other key resources that are now smoking their own cigars when I am in the hospital.

The diary resumes

Funny. I am in a mental ward, and now I can post freely. But there is not so much to post. My family came to see me. Astrid/they have come every single day during the communication lockup, as she knows how important it is to maintain contact. During the lockup I really did not have much to do. It is the whole idea of this treatment. The patient must be detached from everything he has done to effect a sufficient cooloff. It hurts. But it is required (the same can be accomplished with stronger medication, but Finland is not a place for that).

After I was sufficiently normal, about 2 days ago, they gave me the iphone and macbook back, and now I can go outside 2 times per day (which is pretty much enough, since I cannot go outside the compound anyway. There are 5 light meals per day, and during meals you cannot go out anyway. Also you must sleep in your room. There are as many people as stories. Some are quite horrendous, some are just sad and concern divorce court cases where there are unborn children involved. Most patients are here willingly, I was asked, whether it is OK that I am unwilling. (Read the sentence again and be surprised.)

I ate all the meals, saw my wife, and Hilla played on the bedrock that is visible in the middle of the compound. Was so hungry that ate 2 raw chocolate snack bars. Tried to smoke a cigar, but it kept on dying. I have smoked more cigars here than days, I think the maximum was 5 per day. And we are talking good 10+ euro stuff. Still don't know whether I will quit or continue the habit after they let me out.


 

We plan to have members in all sensible locations. By sensible, hopefully that means "including the U.S."

(I currently run a company, Silvervault, which excludes people from the U.S., Canada and Japan for becoming customers.)

The minimum bail amount is currently what I'm pondering about. Is 500,000mBTC too much? Considering that there are only about 20,000 such entities in the world!!

I am planning that the minimum direct participation (I envision that the direct participators all have respective small networks in their areas/cities) would be as follows:

5 shares for 50,000mBTC
Bail for 5 shares for 500,000BTC.

All trades are between members only. So if prince William comes and wants you to pay first, you just decline and say that you are the member of the dealer network and it is impossible for you to default anyway. THIS is the most potent reason why you want to be a member.

So you can never default a stranger because all trades are members only. It is hard to even imagine how you could default in these conditions, anyway the underwriting order would by your bail first, then any bail you have bought for insurance, only last would be the aggregate bail.

It may sound like much that the minimum you need to surrender is 550,000mBTC. But once you do it, then you never need to pay first, so in essence you don't need BTC anymore for selling it, since you can sell it for "instant cash, future delivery" and then buy it from the network using just the terms that you like.

Please now the tough guys, I need you comments!!

I believe this is the way to centralize the trust (in a way of a bail fund) of all OTC-transactions, and do it in a way that at any given time all outstanding transactions are fully escrowed. Note: by all I mean the residual part, which the local merchants cannot match daily due to the fluctuation of their clients' time-based needs.

I think we need only about 50,000,000 mBTC to do this (and this will be heavily decentralized with multisig authorisation), which is <0.5% of all bitcoins existing. This is by far a better mechanism than the exchange-based one. No new exchanges have an opportunity to gain ground any more. MP, do you have something else in mind?

Even 2weiX can return the comment that was quick-deleted, since I quick-made at least 3 different benefits for him to participate the network, instead of working alone. He is ever should know the importance of dealer network since he is part of one both as metal and as bitcoin already. I don't understand what was the criticism..

reserved

BITCOIN DEALER NETWORK ASSOCIATION (BDNA) WORKING PAPER under construction

Moved from "rpietila public diary", please move your comments also here. I cannot easily move comments. Note that the paper is not even fully written due to my condition (I need rest, and even if I didn't, there is only 24/7):

How will the world be different? When someone wants to buy bitcoins, currently he uses Localbitcoins.com for trade. That has limits to trade size, few offer more than $ 3,000 deals. Also not all may be trustable. 99.9% sounds good unless you happen to be the 0.1%. The other option is to try to buy in exchanges, where volume is there, but trustability as a whole is not.

From BDNA on, the dealers will be empowered to be able to offer "unlimited" (10-100 times higher than before) size of deals, and have no more risk of anyone being defaulted upon. Read the spesifics how.


TL; DR

In every city there is now a local dealer to whom you can go to buy and sell bitcoins. Better than localbitcoins because margin is less (2-3% compared to their 5-10%), bigger deals possible (a million dollars OK in every city), also trustable guy who has been doing business for years. This can take care of all bitcoin trade in the world 100% escrowed because the escrow amount is currently tied up in one deal only, and there is no more than 100,000,000mBTC deals outstanding in any given moment anyway. This forms a backbone of the system to serve all of the Bitcoin community.


PURPOSE
The BDNA has a three-fold purpose:

A. for its members it provides a thrice-a-day (8-hourly) opportunity to trade in bitcoin in the most liquid way, possible on their own account, but mainly on the account of their clients. The system empowers the even dealers with rather small capital (<1,000,000mBTC) to safely and securely conduct large business (sell bitcoins to their new clients) without the liquidity risk / slippage risk that is so provident in all current ways of easily obtaining bitcoins (exchanges, current OTC networks).
  
B. Its members can safely trade with each other, because there is an automatic escrow/bail system in place to prevent problems. This half-automized system allows for all trades to be registered upon lock-in, and will then follow their completion and dispute management if necessary. This includes all currencies and altcoins.

C. The world (people outside the BDNA) will see the USD/BTC fixing price immediately after the fixing at 00:00, 08:00 and 16:00 UTC, and this will be act as a reliable gauge for bitcoin price worldwide. The system is build in a way that the current methods of price manipulation (that I all too well know, and have used to my advantage) are rendered unprofitable. Walls, flashcrashes and tapepainting in other venues become unprofitable after the legit hoarding and dishoarding of bitcoins. Price will fluctuate rapidly, but not more rapidly that that of silver or some stock. For p2p OTC trades, this solves the price-setting part, as price can be quoted at fixing+/-margin, where only fixing (usually the following fixing from the lock-in) and margin need to be agreed upon.

MEMBERSHIP

To become a member, you will need to buy stock in BDNA. The price of a stock initially will be 10,000mBTC. The price will be kept at the minimum level of the book value of the BDNA. No more than 500 stock will ever be issued. There will be standard KYC (ID + proof of address) for all members. The BDNA itself will be probably incorporated in Estonia.

1 stock = Member, you are liable to pay fees on the trades.
10 stock = Partner. Partners are void of most of the fees.
30 stocks = Senior Partner. They have more power and honor in BDNA

For every stock, the purchaser must post a bail of 100,000mBTC to BDNA

BOARD AND OFFICIALS

AGM selects the President and 4 other Board Members. One of them has to be Treasurer. One has to be marketing contact. Then at least 1 broker/techguy is needed. We have 24/7 presence in the market, that is why 2 brokers is needed in addition to Treasurer, who knows these things. Brokers need not be board members though, and it is just good if they reside in multiple continents.

Reason why there are 5 board members, is that they keep the bail plus BDNA funds well kept. Most of it will be in multiple authentication cold wallets.

BAIL

Since there is 100,000mBTC bail associated with the cost of a 10,000mBTC share, the total amount of bail gathered will reach 50,000,000mBTC. Even though the sum does not seem large, it is large enough to 100% cover indefinitely the remnant of all legitimate trade of bitcoins in the world ever.


OPEN FIXING

Open fixing is contracted in the fixing engine that clears the market of all orderbooks of the market participants. Member orderbooks must be posted to the engine 30 seconds before the fixing. Engine checks if there are market orders, or if somebody want to sell for lower than another one wants to buy. It finds one market clearing price, publishes it, and generates a List of Outstanding Payments (LOP).

The bail is maximum 168 hours anyway, for both participants of the trade. If the Bitcoin-sending party wants to relieve his bail, it can easily be done in 2 hours. Also the fiat may take as little as 24h or as much as 168 hours, with average perhaps 96 hours. This will lead to maximum of trading volume of about 100-150M mBTC per week, fully insured. This operation can for instance buy up all the new mining, and distribute it to the new holders.

The deals made, go to the List of Outstanding Payments (LOP), a list that very simply tells, who must pay what, to whom, and when. One Open Fixing deal that goes through generates two entries:

rpietila   150,000 MBC   rontus   1306190800
rontus   17,200 USD   rpietila   1306190800.

The LOP is visible only to the counterparties of the deal and the brokers.


CLOSED TRADES

Members tell to the broker, which kind of deal they have agreed upon. Broker enters it in the LOP in a similar way as with the automatic fixings. Broker assigns a 100% bail for both. These trades can be just about everything - any currency or altcoin.

rpietila   150,000 MBC   rontus   1306190800
rontus   17,200 USD   rpietila   1306190800.


LIMITS (LOP)

All trades are 100% escrowed with bitcoins. This is achieved by the bail structure that every currency pair traded is fully escrowed twice.

List of Outstanding Payments (LOP)


MEMBER STANDING AND ITS BENEFITS

Members are internally classified to 5 classed according to their perceived risk level. This information is not meant to be public
5 buttons = "Hero Member", may get 300% leverage
4 buttons = "Senior Member", may get 200% leverage
3 buttons ="Member", may get 100% leverage
2 buttons = "Junior Member", may get 50% leverage
1 button = "Newbie", no leverage.

Leverage here is automatic leverage that will be assigned to this member's trades if he has not previously contracted more bail but has assigned trades. This leverage is taken from BDNA and will cost 0.20% per day.

This is not correlated to Member Standing based on the number of stock.


DISPUTE/DEFAULT RESOLUTION

A dispute arises when a member says that he has sent the payment, and that it should have been cleared from the LOP as settled. The counterarty says no money is received. In this case both present their proof and the one-man broker court deliberates the judgement. Likely it was just the bank taking too long. In scam cases the board is the highest court, and they may issue Warnings and execute them.


FEES

membership fee (APR)	1000mBTC	.
life membership	5,000mBTC	.
entry to the fixing orderbook	no fee	1096 fixings per year
matched order (->LOP) fee	no fee	.
fulfilled order fee	200mBTC/no fee(partners)	.
"NOTE"	2,000mBTC	for late payment etc.
"1. WARNING"	20,000mBTC	.
"2. WARNING"	50,000mBTC	.
"3. WARNING & EXPEL"	100,000mBTC	.

1. All values are in minicoins (mBTC = 100,000 satoshi)

2. Stocks are freely tradable but the board may allow/disallow new entrants based on 3/2 vote. This may be done because e.g. the new applicant's history with disputes or other unethical behavior. The board may use maximum 168 hours for deliberation before granting the permission to sell. Nobody has the right or obligation to purchase the stock then, but the seller may auction them out to current members.

I will answer piecewise, otherwise it becomes tl;dr.


When I started, I was not clear myself, what I would be going to create. I wanted to see the relation of the "eventual distribution" of bitcoins to the people of the world (which closely follows a certain mathematical relation regardless of how the distribution is achieved - assumed it is achieved in any way imaginable now, and/or the result is lead to "play out"), and the purchasing power of people in the categories.

This resulted to the quick awakening that:

A) it is not so much how much we invest into bitcoins, but how many bitcoins we have as a result. I started investing in late 2011 and now (March-April 2013) have invested 100,000s of dollars more into it. Not that it changed my relative position much, but it just still happens to be insanely undervalued and I still invest all proceeds of my businesses into bitcoins.

B) Very many people will soon be in positions of high wealth and importance, and the only way for them not to, is to sell all or the most part of their bitcoins.

C) Even now, anyone in the first world can still be ultra-HNWI by buying 100 bitcoins. This is the original Supernode-limit. The world has now about 30,000 people of $30M or more, and Bitcoin is going to shuffle that deck a lot by bringing perhaps 10,000 new entrants and removing almost as many.

The ones who are now afraid of bitcoin's low exchange rate - don't be. The current HNWI's may want to buy some, and they will be the ones taking the price from $10 to $100. They don't invest $100k now even though it would be sensible. They want $1M later, when it buys less coins. Just like I never bought sub-$0.001 no matter how many times I was asked. (Honestly I lived in the middle of a community where perhaps 1/3 actively bought bitcoins in 2010-6/2011).

in the history of mankind.

But then again is Bitcoin a first-time 6 sigma metallic black swan.

It was during the seige (and the resulting famine) of Jerusalem about 2500 years ago. (2. Kings 6:25)

I just want to +1 bump this thread.

Also, during a famine dung was almost its weight in silver, but not the other way around.

In my supernodespeak, that would be:

"By the power vested in me, Gman, Earl of YourCityHere, hereby proclaim Este Nuno free man, and promise to not touch his life, liberty or property, in peace or in war, unless and until, he willingly comes to my aid in the time of great peril. Long live Este Nuno!

All of it. Upside is 1,000,000% and downside 100% (and even that is theoretical), and you are frugal and can easily make back the money.

Do every day the following: invest 20% of the remaining to bitcoin. When you start to feel queasy, don't invest (but continue asking yourself every day After 7 days of not investing, don't invest the rest.

Keep the car, if you need it. Your ret. account and life savings will be not worth much, perhaps buy some silver with it. I don't have cash, or house but do have 2 cars, 10,000+ oz silver, some kilo gold and quite many bitcoins. Want to buy some silver??

Perhaps it is good to just postpone it: Yes, we will reach $300 by 2016, for sure it will happen. If it happens in early/mid 2014 (which I personally believe), it will easily go to $1000 as a bubble.

Don't you know how many Localbitcoins.com merchants there is? How long does it take to get the Bitcoin Dealer Network Association formed, if it is even necessary. The tear days in March saw 1 million USD invested into bitcoin effect a $10 million rise in market cap. (And the contrary, my sales of $230,000 took 200 million away of the marketcap in May 5-7).

I am currently minding my own business and analysing the great bitcoin bubbles of 2010, because the end game will be like that: UP 10x, down 25%, UP 8x, down 20%, UP 6x, down 15%, UP 12x, down 60%, down 80%. No way the stability returns once we get out of the .1-.12 area...

I and my friend both called the 10->300->120->"1-6mo consolidation" already last year. The fact that it's played out exactly as scripted does not make me any less eager to see some action.

Are we all part of the same bank or different? 

(U'now I did have the time to go through all human hierarchical systems in the mental ward, and to me, the royalty/nobility seemed to stand out of all the rest, followed by the diplomacy hierarchy.) Teach me if you can, or be quiet.