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Author Topic: We can never survive through mass adoption without decentralized exchanges  (Read 2818 times)
virtualmaster
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April 12, 2013, 07:21:08 AM
 #21

Humans are how they are.
Some are idealists, some are materialists, some are altruistic, some are greedy, some are honest, some are corrupt, some are smart, some are stupid, some beleave in God and some beleave in nothing.
Nobody will change his nature just because he/she is interested in bitcoin.
You can exchange 1-2 bitcoins decentralized but you cannot exchange tausends of bitcoins against fiat money in a secure way without a centralized exchange. At least not now.

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April 12, 2013, 07:24:36 AM
 #22

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It is also backed by *nothing* other than the USD,
No, it's backed by the faith of the people who use Bitcoin. Just because you can exchange it into US dollars or exchange it for a shoe (this might be a new concept, but all money is fundamentally a commodity), does not mean it's backed by either dollars or shoes.

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Matthew N. Wright
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April 12, 2013, 08:34:06 AM
 #23

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It is also backed by *nothing* other than the USD,
No, it's backed by the faith of the people who use Bitcoin. Just because you can exchange it into US dollars or exchange it for a shoe (this might be a new concept, but all money is fundamentally a commodity), does not mean it's backed by either dollars or shoes.

My mistake, the word I was looking for was "pegged". The purchasing power of your BTC varies not by people's faith, but what MtGox reports the last buy/sell at in USD. So you're right, it's not backed by USD, it's just pegged to USD. It's backed by MtGox. Lol

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April 12, 2013, 02:31:56 PM
 #24

My mistake, the word I was looking for was "pegged". The purchasing power of your BTC varies not by people's faith, but what MtGox reports the last buy/sell at in USD. So you're right, it's not backed by USD, it's just pegged to USD. It's backed by MtGox. Lol

Bitcoin is not pegged to USD.  "pegged to" means the relationship is fixed or at least fixed within some range.

Bitcoin is not backed by MtGox.  "backed by" means there is a guarantee or promise that bitcoin will meet the expectations spelled out in the guarantee/promise or you get compensated.  "backed by" is even stronger than "pegged to."

E.g. when the dollar was backed by gold, you could exchange your dollars for gold at a fixed price previously established.  The dollar was pegged to gold, or gold was pegged to the dollar and the dollar was backed by gold.

Currently the Chinese yuan is pegged to the U.S. dollar as are several other currencies.  The swiss franc is pegged to the Euro for the past few weeks/months.  However those are not "backed by" their peg.
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April 12, 2013, 05:07:42 PM
 #25

Thanks for the clarification! How do you describe the relationship with USD (not using Bitcoins in our community, but always trading for USD instead) and MtGox (Needing MtGox to be online in order to "know" the "price")?

My mistake, the word I was looking for was "pegged". The purchasing power of your BTC varies not by people's faith, but what MtGox reports the last buy/sell at in USD. So you're right, it's not backed by USD, it's just pegged to USD. It's backed by MtGox. Lol

Bitcoin is not pegged to USD.  "pegged to" means the relationship is fixed or at least fixed within some range.

Bitcoin is not backed by MtGox.  "backed by" means there is a guarantee or promise that bitcoin will meet the expectations spelled out in the guarantee/promise or you get compensated.  "backed by" is even stronger than "pegged to."

E.g. when the dollar was backed by gold, you could exchange your dollars for gold at a fixed price previously established.  The dollar was pegged to gold, or gold was pegged to the dollar and the dollar was backed by gold.

Currently the Chinese yuan is pegged to the U.S. dollar as are several other currencies.  The swiss franc is pegged to the Euro for the past few weeks/months.  However those are not "backed by" their peg.

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April 12, 2013, 05:25:29 PM
 #26

Perhaps the solution is not to have a purely decentralized exchange, but instead have an exchange network like NASDAQ.

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April 12, 2013, 05:58:51 PM
 #27

We already have a decentralized exchange: SilkRoad.

What we need is one not on the deepweb that lets users exchanges normal goods/currency/services for cryptocurrency that is decentralized and has a rating system which is not easily hijackable.  Ripple is not the answer; ripple is modestly decentralized system (see Ripple node list) that is dependent on a centralized means of transfer via US banking intermediaries.  There's no reason why we just can't overnight gold or cash to one another.

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April 13, 2013, 04:17:05 AM
 #28

Thanks for the clarification! How do you describe the relationship with USD (not using Bitcoins in our community, but always trading for USD instead) and MtGox (Needing MtGox to be online in order to "know" the "price")?

It is a floating relationship.

In other words, the relationship between bitcoin and USD is not fixed, it changes or floats at the whim of those who wish to exchange between the two.

This is the same relationship status as between the USD and most currencies in the world (e.g. the yen, pound, euro, franc, AUD, CAD, ...).
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April 13, 2013, 04:54:49 AM
 #29

The exchange problem is the real issue, and really the only reason Bitcoin has been hurt so far. Decentralized currency doesn't mean much if it is all routed through a lone, very attack-able exchange that alters the price instantly because 80% of the traffic runs through it.

It seems this may be the one part of Bitcoin that should have been built into it somehow, though it seems there will always be a need for singular exchanges.

It seems a better solution is provide an open source exchange platform. I know if Intersango, though it seems like there is ample room for another one that isn't such a pain in the ass to set up. Just like mining is diversified, exchanges must also be this way.

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April 13, 2013, 05:18:54 AM
 #30

Very good post.

So many talking heads around these parts, each with their own motives.
I won't name names, because they're pretty prolific around here, but yeah, I've noticed that adopters of Bitcoin are starting to deviate from the things that make Bitcoin so valuable to begin with!  Let's get back to the basics!
Matthew N. Wright
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April 13, 2013, 06:32:07 AM
 #31

I'm pretty green on economics, can someone explain to me why having the price of Bitcoin built into it would be a bad idea? I mean, couldn't it be something that miners "vote" on (just as they vote on everything else)? That for some reasons seems the most democratic decentralized option.

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April 13, 2013, 06:46:31 AM
 #32

I'm pretty green on economics, can someone explain to me why having the price of Bitcoin built into it would be a bad idea? I mean, couldn't it be something that miners "vote" on (just as they vote on everything else)? That for some reasons seems the most democratic decentralized option.

It cuts out the free market, now your giving power to the miners, and that would be like having a fed. The beauty is a floating currency like bitcoins, the market makes the price, not the selected few.

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CasinoBit
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April 13, 2013, 09:22:55 AM
 #33

As long as there is free market the void will be filled by exchanges ran by people eager to contribute to the bitcoin economy.

I do not understand the whole decentralized obsession.
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April 13, 2013, 09:49:02 AM
 #34

As long as there is free market the void will be filled by exchanges ran by people eager to contribute to the bitcoin economy.

I do not understand the whole decentralized obsession.

"United we stand, divided we fall"
Yes but I also believe we need a unified & decentralized exchange system for bitcoin that all independent exchanges can run on, if they wish.

Please read through
https://github.com/p2p/bitcoin-exchange
and come with any suggestions you may have for this system.

You can also participate in the discussion at
https://bitcointalk.org/index.php?topic=172705.0;topicseen


The proposal in the github readme is not only my ideas, but a summary of the ideas i have read through at bitcoin talk - and my own experience from trading stocks and futures at the "real" exchanges / brokerage firms.
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April 13, 2013, 10:15:43 AM
 #35

As long as there is free market the void will be filled by exchanges ran by people eager to contribute to the bitcoin economy.

I do not understand the whole decentralized obsession.

"United we stand, divided we fal"
Yes but I also believe we need a unified & decentralized exchange system for bitcoin that all independent exchanges can run on, if they wish.

Please read through
https://github.com/p2p/bitcoin-exchange
and come with any suggestions you may have for this system.

You can also participate in the discussion at
https://bitcointalk.org/index.php?topic=172705.0;topicseen


The proposal in the github readme is not only my ideas, but a summary of the ideas i have read through at bitcoin talk - and my own experience from trading stocks and futures at the "real" exchanges / brokerage firms.

Sounds weirdly similar to what I had in my mind.

My idea basically was that you cannot decentralize fiat currency, but you can decentralize debt, however writing protocols that would do so in a secure manner is mind boggling. If you could establish whether a certain debt has been paid out by the company holding the debt (e.g. Paypal, Banking account, Dwolla etc) you can then establish through which exchange was the debt paid out, throw in a reputation system for the exchanges and you can create individual "workers" that would process the debts in exchange for a fraction of the debts.

Of course the obvious cons are that such a system would ironically lead to the death of bitcoins as they will no longer be needed, or maybe if the centralized banks would continue to fight this would become a system that would solely be used in order to exchange bitcoins for fiat. Exchanges could be automatically shut down from the system if a sufficient amount of debt has not been paid out in a timely manner (e.g. if they are hogging all the debt) so exchanges would be constantly shut down by the goverment. All of this would be based on the same concepts as the bitcoin protocol.
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April 13, 2013, 10:29:33 AM
 #36

As long as there is free market the void will be filled by exchanges ran by people eager to contribute to the bitcoin economy.

I do not understand the whole decentralized obsession.

"United we stand, divided we fal"
Yes but I also believe we need a unified & decentralized exchange system for bitcoin that all independent exchanges can run on, if they wish.

Please read through
https://github.com/p2p/bitcoin-exchange
and come with any suggestions you may have for this system.

You can also participate in the discussion at
https://bitcointalk.org/index.php?topic=172705.0;topicseen


The proposal in the github readme is not only my ideas, but a summary of the ideas i have read through at bitcoin talk - and my own experience from trading stocks and futures at the "real" exchanges / brokerage firms.

Sounds weirdly similar to what I had in my mind.

My idea basically was that you cannot decentralize fiat currency, but you can decentralize debt, however writing protocols that would do so in a secure manner is mind boggling. If you could establish whether a certain debt has been paid out by the company holding the debt (e.g. Paypal, Banking account, Dwolla etc) you can then establish through which exchange was the debt paid out, throw in a reputation system for the exchanges and you can create individual "workers" that would process the debts in exchange for a fraction of the debts.

Of course the obvious cons are that such a system would ironically lead to the death of bitcoins as they will no longer be needed, or maybe if the centralized banks would continue to fight this would become a system that would solely be used in order to exchange bitcoins for fiat. Exchanges could be automatically shut down from the system if a sufficient amount of debt has not been paid out in a timely manner (e.g. if they are hogging all the debt) so exchanges would be constantly shut down by the goverment. All of this would be based on the same concepts as the bitcoin protocol.

Bitcoin will become to the p2p exchange what NameCoin is to the Domain-system of .bit.

Even if bitcoin would ONLY be used to pay exchange fees and used nowhere else,
that would create a huge demand and value for bitcoin.
Think about all trading that is taking place around the world in the markets of FX, Futures, Options and Stocks.

Even if our p2p exchange would only capture 1% of the global markets that would mean a lot for the bitcoin as a currency!
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April 13, 2013, 11:33:08 AM
 #37

This is exactly what bitcoin needs to make it stronger. I think what we need to start thinking about is escrow systems/business to replace banks/exchanges. I am looking into something that could possibly make these systems trustless. ill update with my findings   
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April 14, 2013, 05:01:22 PM
 #38

Nice thread Matthew.


But I doubt many here did understand a word you were telling them.

First they ignore you, then they laugh at you, then they keep laughing, then they start choking on their laughter, and then they go and catch their breath. Then they start laughing even more.
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