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Author Topic: Infrastructure vs price  (Read 462 times)
jinni
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April 12, 2013, 05:12:07 PM
 #1

In the last day or two, many services have been down or super slow at least once: like Gox, bitstamp, bitfloor, btc-e, bitcoin-24, bitcoincharts, clarkmoody, bitconity, bitcointalk etc etc.

It is the sounds of a creaking infrastructure. When these type of services start failing all of a sudden simply because too many people are checking in at the same time, then clearly it is impossible to justify a high valuation of BTC.

Until we have an order of magnitude better infrastructure, there is no room for BTC to rise in price to the astronomical levels we know it is worth. So this thing can head in two directions: (1) server capacity is rapidly scaled, lag becomes a thing of the past and we go for a new never ending parabolic bull run, or (2) the infrastructure keeps creaking along at a snail's pace for the foreseeable future and we see a prolonged depressed price with fluctuations cause of lag panic.

I'm not going to specify what price is a high price or what price is a depressed price, but I think you understand the logic behind my statement.

Personally, I'm hoping for scenario (2). The reason is that I will be able to buy more cheap coins Grin, we will be able to shake of more weak hands and that it will scare away institutional investors for long enough for smart but not very rich people that haven't gotten in yet to be able to get a small share of the pie and have a share of the pie in the future, maybe even be able to wield some influence in a new world order where the old establishment is marginalised.
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Photonfrog
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April 12, 2013, 06:33:15 PM
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We can surely expect several months of creaking infrastructure. The type of project that can provide a substantially better IS would typically be a multi-year development project. Given the hotness of bitcoin I would guess there is going to be fierce competition for being the first noticeably better exchange and with competition comes efficiency enough to possibly cut out the common delays.

The greatest barrier for success here is credibility and trust. Whoever aims to beat mtgox at their own game will need lots of transparency. Who is the owner? Who are on the board? How much funding do they have? How do you use their API's? How is your money insured once at their exchange? etc...

All these requirements pile up, you'll need a seriously big budget. Hundreds of millions of usd. If you try it with less you can at best take a small market share and then you will need to spend several years with small scale operations to slowly climb up towards meeting your goals of actually improving the bitcoin ecosystem.

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jinni
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April 12, 2013, 06:53:21 PM
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We can surely expect several months of creaking infrastructure. The type of project that can provide a substantially better IS would typically be a multi-year development project. Given the hotness of bitcoin I would guess there is going to be fierce competition for being the first noticeably better exchange and with competition comes efficiency enough to possibly cut out the common delays.

The greatest barrier for success here is credibility and trust. Whoever aims to beat mtgox at their own game will need lots of transparency. Who is the owner? Who are on the board? How much funding do they have? How do you use their API's? How is your money insured once at their exchange? etc...

All these requirements pile up, you'll need a seriously big budget. Hundreds of millions of usd. If you try it with less you can at best take a small market share and then you will need to spend several years with small scale operations to slowly climb up towards meeting your goals of actually improving the bitcoin ecosystem.

Great points.

A company that is run 100% openly, with open and auditable everything would gain a lot of credibility.

But exchanges are only one (albeit an important) part of the BTC ecosystem. Infrastructure needs to improve accross the board on every service.

But I don't see it as very realistic to have multiple hundred-million-dollar-investments. Maybe an organic socially grown decentralised system like Ripple could help? Though I have big problems trusting even close friends with money. Borrowing and lending, even between family and friends can easily lead to bad blood.
proudhon
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April 12, 2013, 06:59:21 PM
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The infrastructure will improve and the bitcoin price will limp along.  Just because the infrastructure suddenly improves, won't mean everything goes back to 3 days ago.  The improved infrastructure won't serve even a small fraction of users of the past few months because lots of them have been burned and realize that for now their state backed bank, that could possibly take 60% of their money, is a safer place to store their wealth than bitcoin.
Photonfrog
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April 12, 2013, 07:11:48 PM
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But I don't see it as very realistic to have multiple hundred-million-dollar-investments.

This is where the evaluation of each bitcoin has a very big impact on what to expect.

Before our little bubble popped we were heading into this territory with speed. If the coin would stabilize at 1k usd we got plenty of motive for huge infrastructure projects. But now as the price is down a chunk it does not really make sense unless you primarily make the investment as a charitable deed or with great faith that you will change the market fundamentals with your project (typically something big VC's never want to try).

A wonky side effect from this is that it becomes good business strategy for mtgox to destabilize the whole bitcoin system. Statistically it should be impossible for them to make the transition from small scale to big scale. They can maybe get to a point which is a factor 10 better than the current one but small chance they can do the factor 1000 needed for bitcoin to take market share from VISA, PayPal and the rest. As long as bitcoin is small potatoes mtgox is safe with a natural monopoly. They should be interested in protecting their market share, even at the cost of reducing the future potential of bitcoin on the whole. If they allow the price to climb above 1k usd they invite their own doom, why take that risk when you can keep on picking up safe profits from a small niche bussiness?

The technology outside the exchanges is also important, but in practice I can not imagine a path where the adoption of bitcoin increases without its price also increasing. From my noobish point of view on bitcoin I can only really detect the exchanges as the expensive development project. Eventually once adoption grows there will be further incentives for auxilary services but these should be much cheaper projects...

Test my Html5 Space Shooter! (works alright on Chrome and iPads)
http://www.photonfrog.com/
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