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Author Topic: Opening a BitCoin exchange is futile - ready why  (Read 4429 times)
JackH
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June 22, 2011, 06:39:38 PM
 #1

Lets just for a moment pretend that someone succeeds making an exchange with the following attributes

- Safe
- Stable
- Secure
- Has no thoughts of stealing money or scamming its user

Lets pretend that the exchange runs just fine for months after months. It even exceeds the turnover and stability that MtGox ever had, and it does that successfully for a long time.

The portal allows for Dwolla, Liberty Reserve and Wire (Iban/SWIFT/BIC) transfers.

Under the rules of the current world that we live in, administrating any form of financial business requires approval and requires the so-called institution to register with the respective financial authority of the country it is residing in. In well known cases this can be FSA (UK), SEC (USA) or any equivalent financial authority.

Operating an exchange platform would mean that money has to move through it (third party funds) and stored on a medium of exchange (a bank) which would be operating in a country (thus being regulated by a financial authority).

Therefore I dont see how anyone successfully, long term, and stable (from a regulatory point of view) would be able to operate without downtime.

While it is true that funds are secured once they reach the BitCoin network, it is also true that the greatest challenge we face is the exchange medium which has to be both stable and reliable in many aspects. The technology part is only one of them. At the end of the day receiving third party funds is where the heavy battle lies.

And unless someone with a license steps into the BitCoin exchange game, and more or less jeopardize their license (due to the fact nobody knows how a government would intervene against a regulated exchange).

So what is our solution? Some rich individual humouring the BitCoin society by testing the waters, or a governmental body in a country stamping BitCoin as an allowed crypto currency and exchange medium (the latter being unreasonable to think would happen).

I dont see any of the two happening, and thus I see a bit problem with BitCoin. Without a stabile price, or price fluctuation it will just be a shadow currency, where exchanging money in and out from will be harder than just purchasing the equivalent in diamonds and getting on a plane or whatever is required to move money anonymously.

<helo> funny that this proposal grows the maximum block size to 8GB, and is seen as a compromise
<helo> oh, you don't like a 20x increase? well how about 8192x increase?
<JackH> lmao
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GeniuSxBoY
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June 22, 2011, 06:45:26 PM
 #2

Man you are too lost to respond.


Read all the literature again.
Jaime Frontero
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June 22, 2011, 06:48:11 PM
 #3

i don't think that's accurate.

Quote
...where exchanging money in and out from will be harder than just purchasing the equivalent in diamonds and getting on a plane or whatever is required to move money anonymously.

i have some experience moving assets across borders, and completely eliminating the risk of interdiction has tremendous value - certainly more value than a bit of hassle exchanging BTC for local currency.

cops are dishonest (they don't stay bribed), customs agents are very good at their job (your diamonds have a fair chance of being found), baggage handlers consider the primary focus of their job to be finding a retirement plan, and the information that you are carrying an asset (like diamonds) has value to many unpleasant people.

you might want to re-think this.
qikaifu
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June 22, 2011, 06:48:38 PM
 #4

we will find a way to the licence.

We could just define bitcoin as virtual commodity in the law. We trade in exchanges silver, gold and other weird metal we never used in daily life, so we trade BTC.

If you see any of my suggestions useful, please donate me. http://btc.to/ec
dan_a
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June 22, 2011, 06:59:32 PM
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Under the rules of the current world that we live in, administrating any form of financial business requires approval and requires the so-called institution to register with the respective financial authority of the country it is residing in. In well known cases this can be FSA (UK), SEC (USA) or any equivalent financial authority.

Operating an exchange platform would mean that money has to move through it (third party funds) and stored on a medium of exchange (a bank) which would be operating in a country (thus being regulated by a financial authority).

Therefore I dont see how anyone successfully, long term, and stable (from a regulatory point of view) would be able to operate without downtime.

I don't understand the jump you make to say that a regulated exchange would not be able to operate without downtime.

Personally I think that well regulated institutions will be necessary for the Bitcoin economy to grow to anything substantial as they will bring the levels of trust that the general public require
JackH
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June 22, 2011, 07:03:01 PM
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Under the rules of the current world that we live in, administrating any form of financial business requires approval and requires the so-called institution to register with the respective financial authority of the country it is residing in. In well known cases this can be FSA (UK), SEC (USA) or any equivalent financial authority.

Operating an exchange platform would mean that money has to move through it (third party funds) and stored on a medium of exchange (a bank) which would be operating in a country (thus being regulated by a financial authority).

Therefore I dont see how anyone successfully, long term, and stable (from a regulatory point of view) would be able to operate without downtime.

I don't understand the jump you make to say that a regulated exchange would not be able to operate without downtime.

Personally I think that well regulated institutions will be necessary for the Bitcoin economy to grow to anything substantial as they will bring the levels of trust that the general public require

My bad. I ment to say that it would be impossible to operate an exchange service without downtime, unless that respective exchange service was regulated, thus it would be left to do business as usual. If an exchange service pops up and is not regulated, we can only assume its going to crash. Either technically or regulatory.

<helo> funny that this proposal grows the maximum block size to 8GB, and is seen as a compromise
<helo> oh, you don't like a 20x increase? well how about 8192x increase?
<JackH> lmao
enmaku
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June 22, 2011, 07:05:08 PM
 #7

For the moment, at least, bitcoin is recognized (legally) as more of a product or commodity. This means that the legalities of running an exchange at present are a bit less like the stock exchange or a banking institution and much more like a specialized version of eBay. eBay matches sellers of various products with people willing to give them money for said products, which is exactly what a bitcoin exchange does also - match sellers of bitcoins (legally a product, not a currency or stock) with people willing to pay (in USD/EUR/etc.) for that product.

Now given enough time the legalities might catch up and decide once and for all what bitcoin truly is (currency? commodity? product?) and legalities may change, but it'll likely be at least a few years before that happens. Legal wheels turn slowly.

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June 22, 2011, 07:08:35 PM
 #8

The law is irrelevant. The banks will use the governments to their ends and that will eventually include making it difficult for people to purchase Bitcoins.
InstaGx
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June 22, 2011, 07:08:50 PM
 #9

tl;dr

It's not too long. Go get a book and train your reading skills.

As for the thread: I don't see a problem with Bitcoin being a "shadow currency". That's the whole purpose. Why would I want to buy or sell BTC for USD/EUR if I happen to mine an accepted currency without any money trails?

Buy High - Sell Low
davout
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June 22, 2011, 07:13:20 PM
 #10

The law is irrelevant.
I can tell you're not running an exchange...

JackH
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June 22, 2011, 07:17:33 PM
 #11

tl;dr

It's not too long. Go get a book and train your reading skills.

As for the thread: I don't see a problem with Bitcoin being a "shadow currency". That's the whole purpose. Why would I want to buy or sell BTC for USD/EUR if I happen to mine an accepted currency without any money trails?


That is where you are wrong. Since the currency is decentralized, a stable price comparison to the USD/EUR is necessary (whether you like that or not, these two currencies are paid as wages and puts food on people's tables).

Without a price comparison you can mine all you want, but why would anyone sell you a laptop, computer hardware, clothes or anything else, if they dont know themselves how much food they can buy for BitCoin or how much wages they can pay their staff.

We NEED an exchange. We NEED a value, and such thing is what we dont have after the Mtgox incident. Without a price, there is no trade. Without any trade BTC has no value.

<helo> funny that this proposal grows the maximum block size to 8GB, and is seen as a compromise
<helo> oh, you don't like a 20x increase? well how about 8192x increase?
<JackH> lmao
enmaku
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June 22, 2011, 07:20:53 PM
 #12

As for the thread: I don't see a problem with Bitcoin being a "shadow currency". That's the whole purpose. Why would I want to buy or sell BTC for USD/EUR if I happen to mine an accepted currency without any money trails?

My handle is too easy to tie to my real identity (seriously, google me, dig through the Japanese rap shyte [I had the name first, I should sue!] and you should know who I am in ~30 seconds)

If I weren't so easily identifiable I might have something to say about this... I mean I *am* a miner, and I *do* keep some of my earnings in BTC but I'm also not buying anything on silk road or otherwise subverting any governments or breaking any laws.

That's my story, I'm sticking to it and you can't prove otherwise  Grin

elvis
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June 22, 2011, 07:25:45 PM
 #13

To paraphrase you: Because it may be difficult, we should just give up.
I am not sure if I agree with this attitude. There's money to be made, so Bitcoin will prevail. Half of the stuff traded in exchanges is funny money, BTC seems darn tangible compared to that!
Trader Steve
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June 22, 2011, 07:31:22 PM
 #14

I've thought about this a little and here's what I've come up with so far:

Marijuana is a banned substance (much like bitcoin may be some day) but it still has a market (dollar) value. It is its own commodity. Its value is determined in a decentralized fashion - through the millions of individual exchanges everyday. This creates price discovery and the price is communicated through the users - decentralized of course. It is not traded on any exchange.

As a banned substance, marijuana has a higher exchange value than if it were allowed to be freely traded. If bitcoin is banned I see it as also having a higher exchange value than it has right now.

Comments?
qikaifu
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June 22, 2011, 07:32:26 PM
 #15

The law is irrelevant. The banks will use the governments to their ends and that will eventually include making it difficult for people to purchase Bitcoins.

Then banks should do this before too many people start to have bitcoin, where U.S.A is under democratic ideology.

If you see any of my suggestions useful, please donate me. http://btc.to/ec
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June 22, 2011, 07:32:43 PM
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I've thought about this a little and here's what I've come up with so far:

Marijuana is a banned substance (much like bitcoin may be some day) but it still has a market (dollar) value. It is its own commodity. Its value is determined in a decentralized fashion - through the millions of individual exchanges everyday. This creates price discovery and the price is communicated through the users - decentralized of course.

As a banned substance, marijuana has a higher exchange value than if it were allowed to be freely traded. If bitcoin is banned I see it as also having a higher exchange value than it has right now.

Comments?

Have you tried smoking a Bitcoin yet?

Buy High - Sell Low
enmaku
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June 22, 2011, 07:35:10 PM
 #17

I've thought about this a little and here's what I've come up with so far:

Marijuana is a banned substance (much like bitcoin may be some day) but it still has a market (dollar) value. It is its own commodity. Its value is determined in a decentralized fashion - through the millions of individual exchanges everyday. This creates price discovery and the price is communicated through the users - decentralized of course.

As a banned substance, marijuana has a higher exchange value than if it were allowed to be freely traded. If bitcoin is banned I see it as also having a higher exchange value than it has right now.

Comments?

Have you tried smoking a Bitcoin yet?

If smoke comes out of one of my mining rigs' GPUs does that count?

Of course... I didn't inhale...

JackH
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June 22, 2011, 07:43:14 PM
 #18

Our problem is as much as BitCoin is not defined yet. Its not banned, nor is it accepted by the broader financial sector. All we have is a VERY convenient and transferable mean here.

We NEED a court case in a country that has something to say in the international market. That is one of the 5 UN permanent members. If anyone cares to open an exchange in France, UK, USA, Russia or China and register as exchange platform and take on the authorities once it grows to big, we have a definition. Until then we have Mtgox alike exchanges that will either fail due to insecure systems or pure scam.

<helo> funny that this proposal grows the maximum block size to 8GB, and is seen as a compromise
<helo> oh, you don't like a 20x increase? well how about 8192x increase?
<JackH> lmao
Batouzo
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June 22, 2011, 07:50:38 PM
 #19

[...]
Marijuana is a banned substance (much like bitcoin may be some day)
[...]
Comments?



God Bless USA, home of the free Wink

Sorry for OT.
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June 22, 2011, 07:51:36 PM
 #20

Our problem is as much as BitCoin is not defined yet. Its not banned, nor is it accepted by the broader financial sector. All we have is a VERY convenient and transferable mean here.

We NEED a court case in a country that has something to say in the international market. That is one of the 5 UN permanent members. If anyone cares to open an exchange in France, UK, USA, Russia or China and register as exchange platform and take on the authorities once it grows to big, we have a definition. Until then we have Mtgox alike exchanges that will either fail due to insecure systems or pure scam.

+1
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