The Critical 1000X Question Nobody Asked...

[Sage]

Bitcoin was on the verge...

...the verge of breaking into the mainstream, and hitting the critical tipping point.  It was about to explode like never before.

Cyprus revealed the extreme risks of the current antiquated banking system.  The smart money was looking to get out.  Then along comes Bitcoin at just the right timing.

Thousands flood mtgox with new accounts openings each day.  Mtgox is backlogged over 20k or more.  Thousands of users who are desperately trying to get fiat out of the banking system and into Bitcoin.

The press is finally talking about Bitcoin.  Some even favorable.  Google trends shows new Bitcoin searches going parabolic.

Now was the time for Bitcoins big debut on the world stage.  

The curtains rise. Then what happens...

Complete and utter FAIL!

FAIL by the one central point of failure, Mtgox.

Over a billion and a half gone in one day, ironically at the same time more money then ever before was trying desperately to get INTO Bitcoin.

Now what's the perception of Bitcoin going to be? You think the media or any new users are going to make the distinction between the ineptitude of Mtgox and Bitcoin?

No... They are going to lump them into the same basket.  Both as unstable, and too volatile to be trusted... Run by a few inept geeks.

Who knows just how long this event set Bitcoin back.

And why did this happen?

Because enough in the community didn't ask the 1000x question.  And those that did, shouted and screamed, but nobody listened...

What is the 1000X question?

Simply this... "If the present inputs into the system are amplified 1000x current reality, where is the system going to break first?"

Then fix that weak link.  And ask the question again.

Currently it's painfully obvious that weak link is the centralized exchanges.

So long as we have centralized exchanges Bitcoin will never be able to hit critical mass...period...end of story.  Ya simply can't get there from here.

We need a decentralized exchange.  We need it now.

I propose we take the most promising existing darknet open source code...plug the Bitcoin minors into it to power it.... then on top of that darknet build an eBay style decentralized exchange. 

Rather then inepts like Mtgox getting trading fees, those fees would reward the critical backbone of Bitcoin...the Bitcoin miners.

This same Bitcoin darknet could power all Bitcoin transactions completely independent of the Internet.

.... And oh the possibilities that could be build on top of this Bitcoin darknet...

- Encrypted messaging systems...
- Truly decentralized, encrypted cloud storage no government could seize or shut down...
- Cloud web hosting...

And who knows what else.  All with the fees for these services rewarding the Bitcoin backbone...the minors.

2 years from now everyone will forget about this event.  Bitcoin will have even more traction, even more momentum.  It will reach another critical point where it could tip, and then truly explode.  When it does will it be another utter FAIL?

...Not if we have a Bitcoin darknet and decentralized exchange.

...and not if we keep asking the critical 1000x question.

But now is the time to build it.

Who is with me on this one?

Techies, who will step up now for the good of humanity for God's sake?

Sage

P.S. Remember just how liberating it felt when the realization hit you... "If Bitcoin hits mass adoption I will never again have to bow and scrape to any central banker and be enslaved by their fiat."  

Well, because we failed to anticipate we just robbed the world of that reality for a few more years.

Let's not f%^# up the next opportunity. Who is with me on this one?

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[Buffer Overflow]

You can't have a decentralised exchange. Where would you store the flat?

[michellj]

Great post.

A bunch of people need to work on this idea.

[Sage]

You can't have a decentralised exchange. Where would you store the flat?

The system doesn't store the fiat.  Brokers in the system handle that in the thousands of ways fiat is transferred and stored currently.

[bitbadger]

Bitcoin was on the verge...

...the verge of breaking into the mainstream, and hitting the critical tipping point.  It was about to explode like never before.

Cyprus revealed the extreme risks of the current antiquated banking system.  The smart money was looking to get out.  Then along comes Bitcoin at just the right timing.

I agree with your points about Mt Gox and the exchanges in general and the need for something better.

But I'm not sure the exchanges are actually the cause of Wednesday's crash.

I think the real cause was the parabolic rise in the value of Bitcoin throughout March. It went too fast and overstretched itself in too short a time period.

Even if the exchanges had still been open, I think it highly likely we would be seeing a crash either now or sometime very soon. The price just went too high too fast. When it does that there has to be a correction.

You don't need malfunctioning exchanges or even ddos attacks or overloaded exchange webservers to set off a sudden move down. If the price has risen too high, then almost anything can set it off.

A lot of selling is just fear and herd mentality. Once a sharp move downward occurs large numbers of people take heed and follow and sell. Especially if they've just come into the market to speculate and not to buy and hold or use Bitcoin in the long run. Those buyers will sell as soon as there's a clear downward sign.

Im convinced Bitcoin will rise above the price of gold and within a relatively short time period, but trying to make gains of the sort we had in March is just unrealistic. Growth in price has to be more steady to be sustainable.

[Buffer Overflow]

You can't have a decentralised exchange. Where would you store the flat?

The system doesn't store the fiat.  Brokers in the system handle that in the thousands of ways fiat is transferred and stored currently.

The banks might decided to refuse dealing with them. The brokers are then the single point of failure.

[bitbadger]

You can't have a decentralised exchange. Where would you store the flat?

The system doesn't store the fiat.  Brokers in the system handle that in the thousands of ways fiat is transferred and stored currently.

The banks might decided to refuse dealing with them. The brokers are then the single point of failure.

If the banking sector puts a prohibition on transfers in and out of Bitcoin and other digital currencies then it makes no difference whether we have a broker/ decentralised exchange system or the present set up.

But people would still find other ways to use Bitcoin, it would just be made harder getting in and out.

[Sage]

You can't have a decentralised exchange. Where would you store the flat?

The system doesn't store the fiat.  Brokers in the system handle that in the thousands of ways fiat is transferred and stored currently.

The banks might decided to refuse dealing with them. The brokers are then the single point of failure.

The system will have thousands and potentially millions of brokers.  No central point of failure!

[Luno]

Maybe it can also be considered lucky if Cypriots and Europeans paused for a second to reconsider putting money into Bitcoin?

As mentioned in other threads, Europe specific and the world in general,  reluctantly UK and also the US,  is cracking down on off shore accounts and other non reported fortunes. I'm imagining that not that many individuals holding millions of Euro's in tax heavens are seriously considering Bitcoin. Simply because it's hyped a lot at the moment with everyday press coverage. These people are carefull and seek covertness. Transfering from a covert bank account into an exchange with their millions being put up for the world to see on the blockchain for an eternity, while leaving a money trail directly back to your account in a bank or investment firm that might be busted, would certainly be something they would feel vary about.
I am not sure either, that a Bitcoin OTC or Bitcoin moneychanger would touch an unspecified suitcase of money from someone, as they in the end are accountable for the fiat money they receive. The blockchain will deliver indisputable proof that they received money from nowhere Bitcoin spinner or not their accounting would show that their processed sum of Bitcoins is larger than the fiat they handled!

The world tax authorities are not complete idiots and on this, they are working together, if there is a story in media one day that Bitcoin is the "untraceable" way to save your illicit funds, like there used to be press about Silk Road being the "untraceable" way to buy drugs leaving the authorities powerless, we smell the roses. Not because any Bitcoin devotee would soil the purity of Bitcoin to evade the law for personal gain, but because that would freeze all bank accounts connected to Bitcoin and your funds would be siezed for an eternity until things are sorted out.

So not having Cyprus using Bitcoin as a way out might be good ATM and if there is attempts for tax authorities to use Bitcoin as an intelligence tool, the community should step up and explain why Bitcoin is a very bad place to hide anything of value you want to hide.

[Gabi]

...the verge of breaking into the mainstream, and hitting the critical tipping point.  It was about to explode like never before.

No it wasn't.

For this to happens, infrastructures all around the world would have to be made, and that takes TIME. Merchants learning how it works and adapting their websites, new software, new services, this takes time. It is 4 years that bitcoin is growing, faster and faster, but it can't just explode and be used all over the world in a handful of days.
The price was increasing too fast, it was a bubble, no more supported by the real economy of bitcoin.
The bitcoin economy is growing, today like yesterday like tomorrow, what happened didn't slow it. It only corrected an absurd price. Today is not time for 260$, it will be in the future, very soon, but not today.

[crazy_rabbit]

Bitcoin will be fine. Even if you buy at $100 now you will do awesome long term. Even if it crashes to $1, think of how much money would tsunami in to grab cheap coins.

[MrCrabs]

Is it possible to build an exchange in a box that can be downloaded and set up an a server easily. With cogent advice on how to sort out the back end with banks and the like. Every city town and village should have an exchange where people can go to on a local level..
I would love to run an exchange in Wellington NZ. I don't have a clue how to do it. But i know if i did have an exchange. I would be allover every bushiness's  in the city offering exchange services.
 

[yocko06]

Is it possible to build an exchange in a box that can be downloaded and set up an a server easily. With cogent advice on how to sort out the back end with banks and the like. Every city town and village should have an exchange where people can go to on a local level..
I would love to run an exchange in Wellington NZ. I don't have a clue how to do it. But i know if i did have an exchange. I would be allover every bushiness's  in the city offering exchange services.
 

you can run your own exchange through localbitcoins to start with mate it would be fairly easy just have a look at their site.

[Sage]

...the verge of breaking into the mainstream, and hitting the critical tipping point.  It was about to explode like never before.

No it wasn't.

For this to happens, infrastructures all around the world would have to be made, and that takes TIME. Merchants learning how it works and adapting their websites, new software, new services, this takes time. It is 4 years that bitcoin is growing, faster and faster, but it can't just explode and be used all over the world in a handful of days.
The price was increasing too fast, it was a bubble, no more supported by the real economy of bitcoin.
The bitcoin economy is growing, today like yesterday like tomorrow, what happened didn't slow it. It only corrected an absurd price. Today is not time for 260$, it will be in the future, very soon, but not today.

This "bubble" still had plenty more upside.  Mtgox was backed up with 20K plus users trying to get money INTO Bitcoin.  Bubbles only pop when money runs out.  

The thousands of tiny sell transactions to freeze the system, the ddos attack... all very coordinated to prevent Bitcoin from hitting the tipping point.

When Bitcoin tips it will be grow compound exponentially.

This last round of attacks was orchestrated to prevent that.  It certainly was on the verge.  You cannot deny the flood of NEW users into Mtgox along with the tiny transaction flood attack, and to top it off DDOS is what brought the system to a screeching halt.

...And that is what caused the correction.  

Had the flood of new users been able to actually get their money into Bitcoin when they wanted, the price would have only gone higher.

The time to short bitcoin will come.  Now isn't that time.  We are just hitting the public interest phase of the "bubble".

This was a well-timed attack... plain and simple.

And they'll do it again at the next potential tipping point if we don't have a decentralized exchange going.

[yocko06]

My opinion on the crash is that people where buying bitcoins without any real knowledge of the technology that they are, these same people where only buying bitcoins because they where looking like making massive money from their investment.
This lack of understanding for bitcoin caused all the problems.

newbe buy a get rich quick investment without doing any real research

newbe gets a scare because of site failure

newbe panic sells their investment because they don't understand bitcoin will not just fall over without a real reason.

this all happened over a year ago when bitcoin first spiked up to $30. It was nothing new and anyone who really knows bitcoin would have seen it on the horizon. This does not stop bitcoin as it hasn't in the past it just gives people a scare. If you look at the drop we had as a percentage compared to the last big drop from $30 to $3 this was not even as big.
bitcoin does need p2p trustless trading facility's and this is where we need to go from hear.    

[InspiredEye]

You can't have a decentralised exchange. Where would you store the flat?

But you can create more powerful open source software which powers trading platforms. Here in the bay area people are working on Buttercoin http://www.reddit.com/r/Bitcoin/comments/1c7v6z/buttercoin_open_source_highperformance_bitcoin/

[silzero]

Much fun as it is to think otherwise, Mt. Gox is already an example of a decentralized exchange. What that means is its not the only exchange to trade BTC.

Just because it has become the largest exchange means BTC traders like something about it.
"decentralization" just means to 'unlike' Mt Gox and trade elsewhere.

What you are asking for is a distributed exchange. Now, If you have millions of brokers. You have millions of points of failure.

Who is going to enforce settlement of trades?

Still not sold on the distributed exchange idea.

[cdog]

There was going to be a correction, PERIOD. The Gox thing didnt help, but it wasnt going to go from $10 straight to $1000 in 4 months.

This is the normal course of events, a normal correction and ultimately BTC will be healthier because of it.

Stability will come but only when the market cap is much MUCH bigger.

[CasinoBit]

You can't have a decentralised exchange. Where would you store the flat?

You can't store fiat but you can store debt, you could theoretically create a decentrillized system where debt is being circulated like bitcoins in different currencies, exchanges can pay out the debt.

[silzero]

You can't have a decentralised exchange. Where would you store the flat?

You can't store fiat but you can store debt, you could theoretically create a decentrillized system where debt is being circulated like bitcoins in different currencies, exchanges can pay out the debt.

Almost. But again who is going to make sure the Fiat payment is actually completed?