Since Mt. Gox has so many problems, why hasn't a better exchange taken over yet?

[BitChick]

I am fairly new to BTC, only been involved since March, but I was wondering with the huge potential to make billions in BTC, why hasn't any large company stepped up to create the best/easiest and compliant with the law exchange?  I guess there was talk of Coinbase becoming that but we know how that has been working out.  I was using Bitfloor, which was actually pretty good in spite of it being small.  It was a great trading platform and I was actually paid a small amount for buys and sells which made it great to trade on.  I wonder why doesn't someone just buy Bitfloor's platform and build on it?

I guess I am just confused.    

Yes, I know many of you have your other favorite exchanges but I have read up on them and all of them seem to have their problems too!

All I want is a trusted, stable, easy to use, legally compliant, low fee exchange.  Is that so difficult?

[eklass]

Network effect

[bitcoincraps]

1. Buyers need sellers.
2. Sellers need buyers.
3. Bringing 2-3k sellers and buyers online in the same time on your NEW exchange is impossible. Simply impossible.

We talk about a new exchange being trusted by thousands of traders. It looks easy but the truth is :

- NOBODY trusts a new exchange.
- NOBODY use a new exchange.

Those are the reasons we only have 3 big exchanges :

1. TRUST
2. "The chicken or the egg" causality dilemma.

We (www.bitcoin-exchange.info) have solved number 2 but number 1 can be solved only in time (at least 1 year). Period.

[davout]

Network effect

+1

1. Buyers need sellers.
2. Sellers need buyers.
3. Bringing 2-3k sellers and buyers online in the same time on your NEW exchange is impossible. Simply impossible.

We talk about a new exchange being trusted by thousands of traders. It looks easy but the truth is :

- NOBODY trusts a new exchange.
- NOBODY use a new exchange.

This is the reason we only have 3 big exchanges :

1. TRUST
2. "The chicken or the egg" causality dilemma.

We (bitcoin-exchange.info) have solved number 2 but number 1 can be solved only in time (at least 1 year). Period.

Not at all.
People usually start with small deposits and move on from there, if you can deliver trust is usually not an issue.
The problem is the network effect, liquidity is attracted by liquidity. This can be mitigated by a couple of things : affiliate programs that get you lots of subscriptions, and cutting deals with market makers, or market making yourself.

[fredtrader]

The only way an exchange would replace mtgox is if it were to go down for weeks or if it got taken down by authorities.

[bitcoincraps]

Network effect

+1

1. Buyers need sellers.
2. Sellers need buyers.
3. Bringing 2-3k sellers and buyers online in the same time on your NEW exchange is impossible. Simply impossible.

We talk about a new exchange being trusted by thousands of traders. It looks easy but the truth is :

- NOBODY trusts a new exchange.
- NOBODY use a new exchange.

This is the reason we only have 3 big exchanges :

1. TRUST
2. "The chicken or the egg" causality dilemma.

We (bitcoin-exchange.info) have solved number 2 but number 1 can be solved only in time (at least 1 year). Period.

Not at all.
People usually start with small deposits and move on from there, if you can deliver trust is usually not an issue.
The problem is the network effect, liquidity is attracted by liquidity. This can be mitigated by a couple of things : affiliate programs that get you lots of subscriptions, and cutting deals with market makers, or market making yourself.

1. We have solved the network effect.
2. TRUST = TIME (1 year is just not enough)

[bitcoincraps]

The only way an exchange would replace mtgox is if it were to go down for weeks or if it got taken down by authorities.

I agree. The oldest exchange after mtgox will take 60%, no. 2 around 30% and  no. 3 around 10%

New exchanges will receive 0 new customers in case Mtgox is falling. Its all about trust.

[davout]

1. We have solved the network effect.

Lol wtf. You don't magically "solve" the network effect.

2. TRUST = TIME (1 year is just not enough)

Especially if your forum nick was registered three months ago.

So much stupidity in here it hurts.

[bitcoincraps]

1. We have solved the network effect.

Lol wtf. You don't magically "solve" the network effect.

Is it ?

[BitChick]

I would think a large established company could get involved and help with the trust issue.  For instance, Money Gram could decide it wants to be a part of this and make it's own exchange?  It may even help them survive if Bitcoin becomes the new way to transfer money internationally.  Of course, there are other companies that are established that could do this too.  It seems like a no-brainier to me.  Are companies just not risk takers?  I would think that they should always be looking for the next think and moving forward if they were smart.

[repentance]

I would think a large established company could get involved and help with the trust issue.  For instance, Money Gram could decide it wants to be a part of this and make it's own exchange?  It may even help them survive if Bitcoin becomes the new way to transfer money internationally.  Of course, there are other companies that are established that could do this too.  It seems like a no-brainier to me.  Are companies just not risk takers?  I would think that they should always be looking for the next think and moving forward if they were smart.

Moneygram has already been busted in the past (they paid an 18 million dollar penalty following FTC investigations) for allowing its network to be used for fraudulent transactions and is still under investigation by FinCEN.  Apart from the enormous costs of setting up properly licensed financial services, there's also a substantial administrative burden imposed by regulatory compliance issues.  You have to recover those costs somehow and it's going to be in the form of fees.

It's less a matter of companies not being risk takers than it is a matter of them deciding that the possible rewards aren't substantial enough to justify the risk.  Their shareholders aren't going to happy about business decisions which would expose them to the possibility of even more regulatory action against them.

[BitChick]

I would think a large established company could get involved and help with the trust issue.  For instance, Money Gram could decide it wants to be a part of this and make it's own exchange?  It may even help them survive if Bitcoin becomes the new way to transfer money internationally.  Of course, there are other companies that are established that could do this too.  It seems like a no-brainier to me.  Are companies just not risk takers?  I would think that they should always be looking for the next think and moving forward if they were smart.

Moneygram has already been busted in the past (they paid an 18 million dollar penalty following FTC investigations) for allowing its network to be used for fraudulent transactions and is still under investigation by FinCEN.  Apart from the enormous costs of setting up properly licensed financial services, there's also a substantial administrative burden imposed by regulatory compliance issues.  You have to recover those costs somehow and it's going to be in the form of fees.

It's less a matter of companies not being risk takers than it is a matter of them deciding that the possible rewards aren't substantial enough to justify the risk.  Their shareholders aren't going to happy about business decisions which would expose them to the possibility of even more regulatory action against them.

Thanks.  That explains a lot.  Perhaps the high cost of compliance is why the exchanges are having trouble.  Hopefully there will come a day when it will be worth it to pay the high costs to make something great because BTC is so valuable and stable.  Time will tell I guess.

[stslimited]

what bitcoin needs is a consolidated order book. it just shows the best bids and asks from all the exchanges, in one order book.

This is what Nasdaq and NYSE do. when you buy and sell shares, they systematically route pieces of the order through multiple exchanges on the order book.


it would allow a new exchange to pop up with lower fees and better bids, asks, and it would quickly get more popular where people will see they can get better fills.

in direct market access platforms, you can choose which "route" you want to let your order sit on if you feel like it. so you can sit your limit order on the mt. gox order book, or sit it on a different one. obviously you will place it on the exchange with the lowest fees.

[davout]

what bitcoin needs is a consolidated order book. it just shows the best bids and asks from all the exchanges, in one order book.

This is what Nasdaq and NYSE do. when you buy and sell shares, they systematically route pieces of the order through multiple exchanges on the order book.


it would allow a new exchange to pop up with lower fees and better bids, asks, and it would quickly get more popular where people will see they can get better fills.

in direct market access platforms, you can choose which "route" you want to let your order sit on if you feel like it. so you can sit your limit order on the mt. gox order book, or sit it on a different one. obviously you will place it on the exchange with the lowest fees.

That's what brokers do, not exchanges.
Bitcoin brokers exist, look them up.

[MPOE-PR]

1. Buyers need sellers.
2. Sellers need buyers.
3. Bringing 2-3k sellers and buyers online in the same time on your NEW exchange is impossible. Simply impossible.

We talk about a new exchange being trusted by thousands of traders. It looks easy but the truth is :

- NOBODY trusts a new exchange.
- NOBODY use a new exchange.

Those are the reasons we only have 3 big exchanges :

1. TRUST
2. "The chicken or the egg" causality dilemma.

We (www.bitcoin-exchange.info) have solved number 2 but number 1 can be solved only in time (at least 1 year). Period.

Thank you for your expert judgement calls based on nothing whatsoever.

OTC trade is up a good 50% in the past three months. The thing with Bitcoin is that idiots/noobs believe in the website model, and so agglomerate themselves in the killing fields (aka websites). People who know what's what use the WoT and trade OTC.

This trend will continue, the combined "exchange" market will likely continue dropping in relative value and eventually mature into the < 1% it's supposed to be (to which add, of course, all their own wash trading, fake walls and whatnot).