In light of Mt. Gox... Time for a more professional trading platform?

[encoderer]

I've been watching the BitCoin community -- and this forum -- closely for several months.

I'm a software developer. Myself and 2 partners run a consultancy. We've done a lot of general work but our speciality -- and what we bill as much as $200/hr to do -- is building highly scalable tracking systems for the advertising and affiliate marketing industries. We build systems that can track 100 billion impressions a month with the reliability you need when people are spending 6 and 7 figures on advertising campaigns. (Though nobody we've ever worked for bills on impressions -- nearly everything is billed on Conversions or Sales or Clicks -- everybody wants accurate stats down to the impression).

We've also worked recently for a smaller High Frequency Trading firm. And we've done a fair bit of PCI Compliance (credit card acceptance compliance) in the last year because those changing rules made that a lucrative market.

In other words, we're not weekend hackers.

I personally have taken an interest in BitCoin because I see it as an interesting technology and perhaps the first bit of people-powered-economics since bartering gave way to gov't issued currency.

Here's why I'm posting today:

I've kicked around the idea of building another trading platform and website. We have a lot of custom code that we own the rights to that we reuse from project to project and we're all quite good at what we do. And we look at the general state of BitCoin trading platforms (like MtGox) and we see a very underdeveloped system. We see a community flying by the seat of their pants -- which is quite understandable. What we go back and forth on is if we see a real opportunity to provide a useful service and hit at least a break-even point on our investment.

The first thing we would build would be a very simple trading platform (similar the API's that the other sites are currently using). This would be its own system, a first-class project in its own right. It would perhaps have its own simple readonly website that publishes a "ticker" of activity on the platform.

Then we'd build a site with functionality similar to TradeHill, MtGox, etc, etc, that would merely be granted the first API key on the trading platform.

The fact is we've got a number of home-brewed tools that help us produce reliable, secure software. And that seems to be a novel idea in the world of slapped-together "weekend projects" the existing sites seem to be.

If you're interested in the technology, among other things, we've got a customized version of Tsung we use to stress test systems, and we'd be able to build a blazingly fast trading platform. We use Python for most our web development but we also commonly use Java for things like stats aggregation daemons. We use either Percona MySQL or PG SQL. We have a fantastic python static analysis tool that helps us find security flaws in our code, as well as a continuous integration and security-flaw framework we built on Selenium that hits with a test suite after every deploy. And of course we practice TDD on all core systems and use a CI server to run all our PyUnit (or PHPUnit or JUnit) tests on each SVN commit and we always know who broke the build.

SO my question is to anybody who is still reading: 

Is there a receptive market to this concept? Should we invest that much time in the bitcoin community? Are we going to get a frigid response from people who prefer their current favorite trading sites?

And FWIW, we wouldn't wish to put them out of business. Ideally, though, all those sites would be sharing a central trading platform so people can Sell on siteA to buyers on siteB and siteC. And the platform itself would earn a share of the commision that's large enough to support profitable operation but small enough to leave the trading site operators a comfortable profit margin.

However to let that happen we'd have to have a rigid process of granting API keys because we'd have business each day that would rely on the integrity of each trading site to settle.  That is, if you sell $100/worth of bitcoin on SiteA to somebody that buys on SiteB, siteA will "credit" your account $100 in their system and SiteB will deduct $100 from the buyer in THEIR system and at some point throughout the day or perhaps in batch at the end of the day, actual cash will need to move from SiteB to SiteA.  Of course, ideally, the actual sum changing hands will be a fraction of total trades that day -- that is, if there's a transaction later in the day where somebody on SiteB sells $90 to somebody on SiteA, then at he end of the day only $10 needs to be settled between the two sites. And that settlement, of course, would also use the trading platform in some way.

Consider this a first, open proposal.

Thoughts? Comments? Criticism?

[riX]

More exchanges can never be bad, and I like the approach.

If you open source it would be even more attractive.

[opticbit]

I'm looking for someone to setup an open algorithmic trading site, ca be its own exchange, or use one of the establised ones.  When its proven secure, and makes good trades, and cash out works (bitcoin out only is fine I can get usd some other way). I'll drop so coins in

[de_bert]

Please do create another exchange, because frankly, I don't trust the quality of Mt. Gox either - and it's the best exchange there is imho.

[noedaRDH]

More exchanges helps not only to strengthen any one point of attack for trading but also helps keep each exchange more competitive with better support, better security and more updates. This needs to be done. Period.

[SilentSeraph]

Please. By all means. And make it pretty!

My biggest gripe (I own a software consultancy as well, though we're not nearly as "stringent" on all our security measures, so I don't plan on following through with my own ideas on a public site like this) is that these websites have zero design talent behind them.

I realize that right now, there's a lot of developers and "geeks" in the community, who may not give a damn about pretty graphics (most of us sit in terminals most of the day), but, I can guarantee that if your product looks like crap, it doesn't matter how many features you have, or how great your algorithms are, laypeople will not use it.

We need something with an interface as simple and easy to use and understand as an iPhone interface (just as an example), where children could pick it up and understand what the heck is going on. Big calls to action, slick designs to attract attention, etc. Make Grandma be able to understand this.

Right now, the bitcoin community looks like it's just a big wiki and forum (pretty much every site has this "slap some text on a page" feel to it). If you don't have the design chops to do it right, go and buy a $40 html/css theme from themeforest.com or some other alternative.

Sorry. /rant

I'm in favor of a slicker look and feel, and definitely a single API that connects all the other exchanges. What I'm really wanting is something that lets us do pairs trading between exchanges Not only would it be profitable for people to take advantage of dips in one exchange and rises in another, it will also, I think, level out the market so that we all end up settling on at least some consensus of what the value of a BTC is.

[blueling]

Is there a receptive market to this concept? Should we invest that much time in the bitcoin community? Are we going to get a frigid response from people who prefer their current favorite trading sites?

And FWIW, we wouldn't wish to put them out of business. Ideally, though, all those sites would be sharing a central trading platform so people can Sell on siteA to buyers on siteB and siteC. And the platform itself would earn a share of the commision that's large enough to support profitable operation but small enough to leave the trading site operators a comfortable profit margin.

From a user's perspective this is quite easy:
I would consider using your exchange if it would be trusted by the Bitcoin community - so that I can be pretty sure that account withdrawal actions succeed without delay or trouble and depositing money at your site would be as safe/secure as at my bank. And also very important is stability and speed of the trading site itself. Your site will definitely become a frequent target of DDoS and other attacks. In general of course there is enormous potential in creating a better site than e.a. Mt Gox.

The idea of a cross exchange protocol is quite interesting. But I guess exchanges will not help you to become a dominating central market gateway. Maybe this could be realized with an open source standard protocol - preferrably distributed.

But a more general business question: Are there not a couple of tricky regulative issues when you want to open an exchange? Do you plan to found an offshore company or something like that? Effectively you want to create something like a bank... I do not know the legal situation where you live .. but were I live this would definitely not be easy.

[Hollie]

I would also like to try this new exchange out. Would be awesome if I use Dowalla as a cashout option.

[rizzn]

Setting yourself up as a central authority with closed source IP on a market might run you up into some trouble. The basic principals behind BitCoin are just going to be against the grain on something like that.

I think a better way to attack this problem would be to implement your code, as described, and create a standardized API - a sort of OpenSocial for market exchanges.

I've been investigating the APIs for a project I'm working on right now, and the lack of maturity and differences in the various platform APIs is staggering.

Having a more secure set of standards, as well as any standardization between the various APIs, to me is more important than a shared infrastructure between all the exchanges. BTC itself is the connecting thread (as are all the other currency entry/exit points, like Liberty Reserve or Dwolla), and a centralized market platform is frankly unnecessary if we can just get everyone to agree on a common API format.

[cecil w.]

What would be nice is to have an exchange that doesn't require coins to rest on its servers. Anyone know of any threads discussing such an exchange?

[BradZimdack]

A more professional trading platform is going to be essential for widespread use of bitcoin.  I'm working with a group of investors on a number of web projects.  I pitched the idea of integrating bitcoin or building some kind of bitcoin-only services.  They were interested, but that interest dissipated pretty fast when they saw no effective way to convert between USD and BTC.  Mt.Gox certainly deserves credit for paving the way in this emerging market, but their site does not instill confidence as a financial institution should.  Even just improving the visuals would have a tremendous impact.  Right now, it looks like something some guy is running out of his basement.  I've got a bunch of money sitting on the sidelines that I'd like to put into bitcoin, but I'm going to wait until something more professional comes along.

[malavita]

Yes, very much so - transaction security and usability being the two most important factors (IMO).  If done properly, this could warrant a monthly fee IN ADDITION to transaction costs, just to keep out the tire kickers and the malware artists (hackers will not open a gazillion accounts if they have to come up w/ a deposit for each one).  This is turn will give you more liquidity, better forecasting capabilities & more satisfied customers - I will not mind spending $10-15/month in fees knowing that if I use your service I will get secure VPN connections for example, or encrypted offsite backup services for wallets, better documentation, tutorials, etc.

As always, you get what you pay for and I think it's pretty silly to mine for weeks only to lose it all to some hackers.

Just my .02 cents.


On your way to becoming the Goldman Sachs of Bitcoin!!

[breminp]

A 1 time X bitcoin registration fee then provide a slightly less than .65% transaction fee and I bet you'll see a lot of action.

[EpiClock]

I think a more polished trading platform would be extremely welcome, if we assume the entire Bitcoin ecosystem doesn't come crashing down.

I'm certainly not married to Mt Gox or any other service.

[jack_jones]

Absolutely necessary. Mt Gox has done some incredible things for the BTC community but I think that we need a more reliable service. What about NYSE to BTC???

[bitcola]

It's not just Mt.Gox. Everything about this currency needs to be more professional.

What you see now just looks like a hobby currency. Adoption is slow but I think professionals are turned off by the early adopters fortunes. No matter how you try to explain it, a lot of people don't like the fact that a new currency can be invented and this can happen.

Sure, early discovers of precious metals, oil, rare earths etc. get the same thing. But this currency has been invented out of thin air. I think there is still a great lack of confidence in it. It could yet drop and be worthless.

Bit of a chicken and egg situation.

[jack_jones]

It's not just Mt.Gox. Everything about this currency needs to be more professional.

What you see now just looks like a hobby currency. Adoption is slow but I think professionals are turned off by the early adopters fortunes. No matter how you try to explain it, a lot of people don't like the fact that a new currency can be invented and this can happen.

Sure, early discovers of precious metals, oil, rare earths etc. get the same thing. But this currency has been invented out of thin air. I think there is still a great lack of confidence in it. It could yet drop and be worthless.

Bit of a chicken and egg situation.

Yeah I agree with your early adopter analysis. However, many of the first commercial websites grew into huge businesses (take books.com for example) and that didn't stop large scale adoption...

[SilentSeraph]

I think we need a couple of things, in the same vein of bitcola...

We need more professional exchanges, yes. Super heightened security and serious counter measures if/when something bad happens. Right now I trust my credit card because I know I can reverse an illegal charge if something bad happens. I also believe that, for the most part, banks are secure. Those two things are powerful attractions to traditional systems.

But I also understand that such a thing sucks, when shown what a de-centralized currency like this can be like. It's not just "geeky" cool, it's "economics" cool and take charge of your own currency kind of cool. I think this could be a lot more widespread if just a few things would happen after we nail down this trust issue we have with seemingly "hobby" exchanges.

Once we nail those things down and break trust barriers, you will immediately run into user experience issues. First, how do I explain to my grandmother what the hell a bitcoin is? Not only that, let's say I even get past that, and she gets on board with the idea. Now what? How does she use them? And I don't mean in a "what does she spend them on" use. I mean mechanically, how does she hand someone some bitcoins, possibly both physically and electronically?

I'll have to explain addresses and public/private key encryption and.. christ. Not only that, I've got to teach her how to run it in a way that she won't lose her life savings because of a hacker.

That is far, far too much for her to deal with. We need USB sticks, for distribution; those should open a simple interface, and securely transfer funds. We need a magnetic strip card or RFID or NFC card and hardware for merchants so they can take it (AND get the same money without processing fees), and it needs to be on the cheap; so cheap that Mom and Pops grocery store wouldn't blink twice about it.

That said, I'm sure with all of those "simpler" ways of using the BTC system, there may be insecurities which might be too much for the community to bear. But, I still remain confident that there are better, easier to allow ways of using this technology and this currency than the very confusing user experience it currently has.

If anyone has any advice on how we can all collaborate on something like the above, I'm all ears I'm not one to make suggestions without digging in with everyone.

[osborn_20]

Setting yourself up as a central authority with closed source IP on a market might run you up into some trouble. The basic principals behind BitCoin are just going to be against the grain on something like that.

I think a better way to attack this problem would be to implement your code, as described, and create a standardized API - a sort of OpenSocial for market exchanges.

I've been investigating the APIs for a project I'm working on right now, and the lack of maturity and differences in the various platform APIs is staggering.

Having a more secure set of standards, as well as any standardization between the various APIs, to me is more important than a shared infrastructure between all the exchanges. BTC itself is the connecting thread (as are all the other currency entry/exit points, like Liberty Reserve or Dwolla), and a centralized market platform is frankly unnecessary if we can just get everyone to agree on a common API format.

Am not sure how this would "centralize" the market.
Wouldn't they be just another service provider?. If they do good, it could attract other people to do business in the same way.

When you say "trouble" do you mean "governments issues"?. I guess that will always be the bogeyman until BTC are more mainstream.

[rizzn]

Am not sure how this would "centralize" the market.
Wouldn't they be just another service provider?. If they do good, it could attract other people to do business in the same way.

When you say "trouble" do you mean "governments issues"?. I guess that will always be the bogeyman until BTC are more mainstream.

He's talking about building a standardized system for inter-market trading where he's "granting API keys." That's pretty centralized and authoritarian.

I'm not inventing bogeymen, nor referring to the "government issues," as you put them. I'm talking about running counter to the culture of the Bitcoin community, which would mean trouble, specifically if you expect any sort of adoption.