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Author Topic: Centralization in a decentralized Bitcoin world makes it unstaneble - idea  (Read 2662 times)
fastandfurious
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September 23, 2011, 06:31:08 PM
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Because Bitcoin in its nature is decentralized, you would think that people investing time, effort and financial means around Bitcoin would try to make for example the exchanges as decentralized as possible. But the world doesn't look like that, it is much easier to for example centralize a exchange and have as we have it today with Mt.Gox one exchanges that everyone finds liquidity at. Because we could suppose that Mt.Gox doesn't want to create a "exchange pool" with other exchanges and by that lose potential fees through their own platform. We as a community needs to put effort on the exchanges that get in the position that Mt.Gox is in right now, being number one.

My suggestions are these, feel free to make comment on them and add suggestions as well.

1. Insider trading from all exchanges should be strictly illegal (including own bots that does the trading on algorithms), specially on their on exchange but maybe even on other exchanges (when it comes to active trading). This could be looked at from a committee  (that we as a community in a democratic way will vote for) that will get the right to act accordingly, if there are suspicion to look in to the matter in different ways.

Reason: Easy to understand, you can see all other peoples orders, amount of BTC/fiat money, trading habits of each account, money flows, BTC flows etc.

2. Some kind of audit on the financial health of the company, like do they have the Bitcoins they should have that their customers have deposited, same thing with fiat currency's, at which accounts are they, how much etc.

Reason: If Mt.Gox loses all their financial assets, then I would say Bitcoin will have it very hard to rise after that (for ever). Also it is a trust issue, it is much easier to get into Bitcoin as a merchant etc. if you know that your money is audited.





Many things has evolved over thousands of years, thinking that markets will take care of that, market will take care of this is a naive standing point. I am the first to acknowledge that Bitcoin is a very interesting and necessitous financial tool (because of the way our world looks like today) that have the potential to, to some part revolutionize the world. But having said that some part of the world today looks as it does because it works.

I hate it when people look at everything in black and white. Like if we have two pools, (Love) Bitcoin and (Hate) the financial industry, the world doesn't look like that, the financial industry of today believe it or not have some part of their business that are working pretty good. Let us adapt the good parts of the present world order we now live in and in-weave it with Bitcoin (for the new world order). It will make Bitcoin much more prosperous and will attract people with different backgrounds and not as it is today a very specific individual (background).

 
 
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fastandfurious
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September 23, 2011, 06:42:31 PM
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3. If we look at the problem decentralization/centralization issue. We should as much as it is feasible choose to go for more decentralization. Don't put all your money at one exchange etc.

Reason: Bitcoin is in its nature decentralized, we want the power over Bitcoin to be spread to as many as possible, this will also lower the risk of big failure, big scams etc.
fastandfurious
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September 23, 2011, 07:18:03 PM
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I'm all for you trying to convince people to be smart with which exchange they use and why. I'm also all for people sharing as much information as they want to share.

What I'm not all for is rules or bans forcing people into a certain type of action. (As if you could easily enforce this in Bitcoin). The thing about rules is once they are in place, people will find ways around them. Like water, money will flow through the path of least resistance. Those with the most money will be able to avoid the rules easier than those with the least money.

Another thing I'm all for is privacy. It's no one's business what someone else does with their money. If you somehow managed to get exchanges to share things like "all other peoples orders, amount of BTC/fiat money, trading habits of each account, money flows, BTC flows etc." what makes you think anyone would continue to use that exchange with such a violation of privacy?

Choose which exchange you want to use, and do all you want to convince others, but let's not start telling other people what they can and can't do with their money. We have enough of that already, don't we?

TL;DR Voluntary regulation = good; enforced regulation = bad. Yes, black and white.

The big mining pool, the big exchange, herd mentality... let it bite the people in the ass until they learn on their own.

My number 1 and 2 will to some degree vanish if we have a much more decentralized exchange situation, but as it looks like today, my options are the ones I have stated. At the same time, I understand your standpoint, but you have to also understand that regulations, call it voluntarily regulations is in some cases (as Mt.Gox situation is today) a healthy option compared to no regulation at all.
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September 23, 2011, 07:18:33 PM
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Illegal?

Even if that was a good idea (which I don't think it is) how exactly does a goup of bitcoin users make something illegal?  Going to arrest them w/ bitcoin police?  Try them in bitcoin court?  Put them in bitcoin jail?

If distributed exchanges provide a superior product then they will gain marketshare, otherwise they wont't.
fastandfurious
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September 23, 2011, 07:28:34 PM
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Illegal?

Even if that was a good idea (which I don't think it is) how exactly does a goup of bitcoin users make something illegal?  Going to arrest them w/ bitcoin police?  Try them in bitcoin court?  Put them in bitcoin jail?

If distributed exchanges provide a superior product then they will gain marketshare, otherwise they wont't.

I choose the wrong word, but I think you understand my point of view. Change it to wrong/unethical/improper. Everyone of us can vote with our BTC and fiat currency's, if a exchange do have a "unethical" way of doing business, then they shouldn't be in the Bitcoin Economy, it's all about common sense.
DeathAndTaxes
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Gerald Davis


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September 23, 2011, 07:50:05 PM
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Illegal?

I choose the wrong word, but I think you understand my point of view. Change it to wrong/unethical/improper. Everyone of us can vote with our BTC and fiat currency's, if a exchange do have a "unethical" way of doing business, then they shouldn't be in the Bitcoin Economy, it's all about common sense.

Well that makes a little more sense.  Still people HAVE voted w/ their BTC.  They have voted for Mt. Gox.  Like any democratic function if you want it to be open you also have to respect the choice made.

The thing to do now is to educate others.  Still that will be a tough task.  Mt Gox provides liquidity.  Centralized or not that is a tangible benefit.  It will be tough to convince people the intangible risk of centralized exchange is more important than the very tangible benefit of higher liquidity and smaller spreads.
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