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Author Topic: Thought experement, USD withdrawless exchange?  (Read 1635 times)
alan2here
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August 21, 2013, 02:15:56 PM
 #1

If an exchange didn't alow the withdraw of USD directly, only storing it and converting USD/BTC at around the market price. Such that to withdraw USD entirely it must convert to BTC and sent to another exchange to convert back and withdraw, maybe even with a withdraw option that automates this process such that it looks like a direct withdraw.

Then you wouldn't expect the cost of BTC to increase endlessly on this exchange, at a faster rate than others, would you?

﹏﹏﹋﹌﹌ WPP ENERGY ﹌﹌﹋﹏﹏
≈ WORLD POWER PRODUCTION ≈

████████████
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notme
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August 21, 2013, 03:39:48 PM
 #2

If an exchange didn't alow the withdraw of USD directly, only storing it and converting USD/BTC at around the market price. Such that to withdraw USD entirely it must convert to BTC and sent to another exchange to convert back and withdraw, maybe even with a withdraw option that automates this process such that it looks like a direct withdraw.

Then you wouldn't expect the cost of BTC to increase endlessly on this exchange, at a faster rate than others, would you?

That's not an exchange.  That's a bucket shop.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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alan2here
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August 21, 2013, 07:01:17 PM
 #3

I've looked up 'bucket shop' and it dosn't seem like the same thing, Bets of Bitcoin seems like a better match for the turm.

Not that the label is of great importance, this I think is usefull to think about at the moment because of the situation at Gox. Are there non obvious consequences of a situation as I describe, removed from Gox, and also if Gox becomes this sort of service instead if eventually it gives up and has to, maybe rebrands.

I'd be happy with a service like this as long as their were also many other full exchanges available.

﹏﹏﹋﹌﹌ WPP ENERGY ﹌﹌﹋﹏﹏
≈ WORLD POWER PRODUCTION ≈

████████████
██████████████████████
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MAbtc
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August 21, 2013, 07:18:25 PM
 #4

I've looked up 'bucket shop' and it dosn't seem like the same thing, Bets of Bitcoin seems like a better match for the turm.

Not that the label is of great importance, this I think is usefull to think about at the moment because of the situation at Gox. Are there non obvious consequences of a situation as I describe, removed from Gox, and also if Gox becomes this sort of service instead if eventually it gives up and has to, maybe rebrands.

I'd be happy with a service like this as long as their were also many other full exchanges available.

It is the same thing. Customers are trusting an exchange to hold [the value of] USD when it holds no USD equivalents. Would you want your funds on deposit at an exchange that backs their USD with bitcoins? What happens when the price of bitcoin crashes, and the exchange holds none of the USD that their customers have on deposit?

Here is a scenario: Exchange holds 10,000 coins and $0 on deposit in customer funds. Price of bitcoins drops 50%. Customers sold into USD on the way down, and now want to cash back into bitcoins. However, now that the price has dropped 50%, the exchange can no longer cover 100% of the USD equivalent in bitcoins. Do you see why this is a problem? They are straight up gambling with customer funds. USD must = USD.
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August 21, 2013, 08:21:19 PM
 #5

I've looked up 'bucket shop' and it dosn't seem like the same thing, Bets of Bitcoin seems like a better match for the turm.

Not that the label is of great importance, this I think is usefull to think about at the moment because of the situation at Gox. Are there non obvious consequences of a situation as I describe, removed from Gox, and also if Gox becomes this sort of service instead if eventually it gives up and has to, maybe rebrands.

I'd be happy with a service like this as long as their were also many other full exchanges available.

It is the same thing. Customers are trusting an exchange to hold [the value of] USD when it holds no USD equivalents. Would you want your funds on deposit at an exchange that backs their USD with bitcoins? What happens when the price of bitcoin crashes, and the exchange holds none of the USD that their customers have on deposit?

Here is a scenario: Exchange holds 10,000 coins and $0 on deposit in customer funds. Price of bitcoins drops 50%. Customers sold into USD on the way down, and now want to cash back into bitcoins. However, now that the price has dropped 50%, the exchange can no longer cover 100% of the USD equivalent in bitcoins. Do you see why this is a problem? They are straight up gambling with customer funds. USD must = USD.

Right.  They either have to hold USD or hedge on an exchange that holds USD.  Otherwise, it simply won't work except maybe temporarily if they are very lucky.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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August 21, 2013, 10:51:42 PM
 #6

I've looked up 'bucket shop' and it dosn't seem like the same thing, Bets of Bitcoin seems like a better match for the turm.

Not that the label is of great importance, this I think is usefull to think about at the moment because of the situation at Gox. Are there non obvious consequences of a situation as I describe, removed from Gox, and also if Gox becomes this sort of service instead if eventually it gives up and has to, maybe rebrands.

I'd be happy with a service like this as long as their were also many other full exchanges available.

It is the same thing. Customers are trusting an exchange to hold [the value of] USD when it holds no USD equivalents. Would you want your funds on deposit at an exchange that backs their USD with bitcoins? What happens when the price of bitcoin crashes, and the exchange holds none of the USD that their customers have on deposit?

Here is a scenario: Exchange holds 10,000 coins and $0 on deposit in customer funds. Price of bitcoins drops 50%. Customers sold into USD on the way down, and now want to cash back into bitcoins. However, now that the price has dropped 50%, the exchange can no longer cover 100% of the USD equivalent in bitcoins. Do you see why this is a problem? They are straight up gambling with customer funds. USD must = USD.
If they would allow shorts, they could try to match the amount of long positions with the amount of short positions. This would make the exchange indifferent to changes in the exchange rate, although they would need collateral from those who want to short. There is still a risk of a big short squeeze where the short positions can't be covered fast enough though.
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August 22, 2013, 12:47:03 PM
 #7

Not alowing withdraw of USD, deposit would still work.

﹏﹏﹋﹌﹌ WPP ENERGY ﹌﹌﹋﹏﹏
≈ WORLD POWER PRODUCTION ≈

████████████
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notme
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August 23, 2013, 12:07:02 AM
 #8

Not alowing withdraw of USD, deposit would still work.

Why would sellers want to use this market?

https://www.bitcoin.org/bitcoin.pdf
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August 23, 2013, 12:34:01 AM
 #9

There is another possibility. Let's say that the exchange's bank account has been frozen by the bank. So essentially it does not have any USD available (those who have USD at exchange only have a checkbook number in their account). But the exchange do not tell their customer, only give it a very long delay for the withdraw (so they can actively open up new account in other banks and take new deposits to payback the old customer's withdraw). Since the withdraw is too slow, the only exit will be bitcoin, that will push the bitcoin price up

So those banks who tried to freeze the account of exchange (that is the only thing they can do to harm an exchange) will indirectly contributing to support the bitcoin price, thus creating a one way road for fiat money to flow into bitcoin, and a rising bitcoin price will reduce the withdraw pressure and attract more buyers

On the seller's side, they are not willing to sell coins on an exchange that can not withdraw, so less and less coin will be supplied on the exchange, that will also help to raise the exchange price of coins

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August 23, 2013, 12:39:48 AM
 #10

If an exchange didn't alow the withdraw of USD directly, only storing it and converting USD/BTC at around the market price. Such that to withdraw USD entirely it must convert to BTC and sent to another exchange to convert back and withdraw, maybe even with a withdraw option that automates this process such that it looks like a direct withdraw.

Then you wouldn't expect the cost of BTC to increase endlessly on this exchange, at a faster rate than others, would you?

short bitcoin with truly fake USD, lol nice.  Tongue

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August 26, 2013, 10:31:54 PM
 #11

Not alowing withdraw of USD, deposit would still work.

Why would sellers want to use this market?

For selling and waiting to buy more Bitcoin when the price drops.

Then withdraw the Bitcoin and store until you're ready to sell again.

I suspect a lot of people are never going to need to withdraw the USD they have on the exchanges. Like me they are trading some upswings then selling. Waiting for a reasonable down movement and then doing it again.

I have no plans on cashing out any time soon - it could be years before I make a USD withdrawal, if ever.
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August 27, 2013, 12:08:55 PM
 #12

Exactly! and at that time, if there ever is that time at all, you can do so on another exchange because BTC can still be withdrawn.

﹏﹏﹋﹌﹌ WPP ENERGY ﹌﹌﹋﹏﹏
≈ WORLD POWER PRODUCTION ≈

████████████
██████████████████████
██████████████████████████████
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August 30, 2013, 11:31:25 AM
 #13

If you cannot exchange, why would you call it an exchange?
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August 30, 2013, 12:59:27 PM
 #14

If you cannot exchange, why would you call it an exchange?

Obviously you can exchange as you can buy / sell fiat for Bitcoin in this scenario you just can't withdraw fiat.
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August 30, 2013, 11:46:39 PM
 #15

This is exactly what you have with gox at the moment, no?

Want to bet against bitcoin? Sell for USD @ gox, wait for the price to fall, then buy back in.

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