Bitcoin Exchanges - The Future

[alphacenturion]

I'm curious, following the debacle at Gox I wondered what people's thoughts were on the future of bitcoin exchanges?

It seems to me that we need to move away from the centralized model ala Gox, CoinBase, Stamp and into a more decentralized space not only from a regulatory stand-point but also due to the trust issue of having funds held by a corporation which operates much like a bank but without the stringent anti-fraud measures.

Would a decentralized exchange still need to comply with government financial regulation if they weren't touching fiat directly? Why is it we are seeing so many more centralized exchanges being setup over their decentralized siblings - is it purely profitablity?

Any musings would be greatly appreciated.

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[fdmxv]

I send for rent for $ 10 on their site but I never received the exchange in bitcoin and this since yesterday

look at this :  26.02.14 17:00     Transfer Sent Payment: 10.00 USD to account U7777777 from U4982769. Batch: 49859210. Memo: Shopping Cart Payment. BTC-E CODE

but i have not receive anything

[Armis]

I'm curious, following the debacle at Gox I wondered what people's thoughts were on the future of bitcoin exchanges?

It seems to me that we need to move away from the centralized model ala Gox, CoinBase, Stamp and into a more decentralized space not only from a regulatory stand-point but also due to the trust issue of having funds held by a corporation which operates much like a bank but without the stringent anti-fraud measures.

Would a decentralized exchange still need to comply with government financial regulation if they weren't touching fiat directly? Why is it we are seeing so many more centralized exchanges being setup over their decentralized siblings - is it purely profitablity?

Any musings would be greatly appreciated.

An hour ago I was of the understanding that all cryptocurrency exchanges were agent facilitators (brokers/agents) but after reading the CoinBase agreement I learned that they are are NOT agents or brokers, that they do not act as third parties FOR the buyer and seller but rather they are both buyer and seller TO their customer(s). 

I know stamp is a P2P facilitator, and Cryptsy is a brokerage exchange, I don't know what Mt Gox was


Nevertheless we need more of all types of trustworthy exchanges who operate with integrity.


Kindly tell me what a "decentralized exchange" is? 

[benjyz]

Well, there are also 3-5 projects attempting to do P2P exchanges: Mastercoin, Opentransactions, ethereum, Ripple (kind of), ... There is probably a longer list somewhere of those types of projects. to me its unlikely they will succeed. I would argue they are impossible, at least in the current form.

From the perspective of a central exchange you maximize your profits - not very surprising. What surprises me a bit is that the lack of innovation at the central exchanges, or total incompetence in case of Mtgox. if you have command over say 20 million dollars you would expect it would be possible to hire some highly competent developers. I don't see too much of that at any major exchange (IMO, but I'm biased).

In the long term there will be much more coming, that I'm pretty sure of. The possibilities are endless. In fact I think these corporations/networks will at some point become as big as traditional stock exchanges. Its going to take 5-10 years. These structures will become as ubiquitous as the internet is today. A farmer in Africa with a 10$ phone in his pocket will be able to hedge his wheat harvest for almost free. a stock market IPO's will cost 10k$ instead of 10M$. this will blend in with advanced accounting techniques. the financial sector will be forced to innovate, instead of earning fees as middle men. the system will be global and much more fair.

I hope to contribute in that direction. If you can earn money offering a service you are not likely to give it away for free, although there is a continuum of ethical decisions one can make. As the competitions grows fees will come down, and security will improve. Users will be able to ask for more security (proof of balance, audits, performance checks). so users should organize and voice their demands (self-regulation if you will). proof of balance should be mandatory for all the big exchanges.

My approach falls in between P2P and central. Its not so easy to explain - I will post more shortly.

[apple_tree]

Guys,

Dont u think we're just wasting our time to mining bitcoins? I read latest new the Mt Gox will declare bankruptcy 

[miragecash]

We don't need exchanges to get into bitcoins by swapping out dollars. We have reached a tipping point where it is now possible for the miners who own the original bitcoins to spend their bitcoins. This will put them into general circulation. The whole purpose of bitcoin is not to rely on a centalized financial corporation such as a bank or exchange. Just a year ago, there was no place to spend your bitcoins. Now, you can rent a yacht in Miami, buy a car or Harley in Dallas, buy a mansion in Las Vegas, stay in a hotel in Las Vegas, and fill your house with stuff you buy off of Overstock.com. Then, buy some jewelry on Overstock.com and give the gems away as party favors for attractive women who'll show up at your bikini party and voila! Bitcoins are now in circulation with no need for exchanges.

Those miners just need to loosen their wallets in exchange for booze, boats, and fun loving women.

[Armis]

Guys,

Dont u think we're just wasting our time to mining bitcoins? I read latest new the Mt Gox will declare bankruptcy 

think of it this way, if Bank of America (one of the largest US banks) went out of business tomorrow cause much turmoil for its investors and account holders, what would happen to the USD?  The answer is next to nothing.    The reasons for that is BoA doesn't control all of the US currency, likewise Mt Gox didn't control Bitcoin when it left the scene.

do you mine bitcoin?

[Armis]

We don't need exchanges to get into bitcoins by swapping out dollars. We have reached a tipping point where it is now possible for the miners who own the original bitcoins to spend their bitcoins. This will put them into general circulation. The whole purpose of bitcoin is not to rely on a centalized financial corporation such as a bank or exchange. Just a year ago, there was no place to spend your bitcoins. Now, you can rent a yacht in Miami, buy a car or Harley in Dallas, buy a mansion in Las Vegas, stay in a hotel in Las Vegas, and fill your house with stuff you buy off of Overstock.com. Then, buy some jewelry on Overstock.com and give the gems away as party favors for attractive women who'll show up at your bikini party and voila! Bitcoins are now in circulation with no need for exchanges.

Those miners just need to loosen their wallets in exchange for booze, boats, and fun loving women.

you speak in a vacuum

I don't know about all of the rest of the btc accepters but I do know for a fact that Overstock uses Coinbase to process their transactions, they accept btc on the site and coinbase processes the transaction such that overstock receives fiat in their bank the next day.  They are considering holding some btc but as a business model it is most difficult to do because the currency is so volatile.


here's another vacuum for you

let's say there is a national blackout, you have all of your money in btc, how do you buy anything?  btc is dependent on the internet which in turn is dependent on electricity
even if you have batteries and you have a phone running on solar power and you can access your computer, there's no internet, other people in your country can't do transactions with you, and even if they could rest assured NO ONE is accepting anything other than cash or gold during an emergency.



btc has a loooooooong way to go in a real world, for now it's rapid growth is tied to it's convertibility from or into fiat (refer to overstock example). Without the fiat component it would be a very slow climb.

 

[miragecash]

I don't see how a p2p exchange could operate with cash and btc, but I could see a crypto to crypto p2p exchange.

[alphacenturion]

Well, there are also 3-5 projects attempting to do P2P exchanges: Mastercoin, Opentransactions, ethereum, Ripple (kind of), ... There is probably a longer list somewhere of those types of projects. to me its unlikely they will succeed. I would argue they are impossible, at least in the current form.

From the perspective of a central exchange you maximize your profits - not very surprising. What surprises me a bit is that the lack of innovation at the central exchanges, or total incompetence in case of Mtgox. if you have command over say 20 million dollars you would expect it would be possible to hire some highly competent developers. I don't see too much of that at any major exchange (IMO, but I'm biased).

In the long term there will be much more coming, that I'm pretty sure of. The possibilities are endless. In fact I think these corporations/networks will at some point become as big as traditional stock exchanges. Its going to take 5-10 years. These structures will become as ubiquitous as the internet is today. A farmer in Africa with a 10$ phone in his pocket will be able to hedge his wheat harvest for almost free. a stock market IPO's will cost 10k$ instead of 10M$. this will blend in with advanced accounting techniques. the financial sector will be forced to innovate, instead of earning fees as middle men. the system will be global and much more fair.

I hope to contribute in that direction. If you can earn money offering a service you are not likely to give it away for free, although there is a continuum of ethical decisions one can make. As the competitions grows fees will come down, and security will improve. Users will be able to ask for more security (proof of balance, audits, performance checks). so users should organize and voice their demands (self-regulation if you will). proof of balance should be mandatory for all the big exchanges.

My approach falls in between P2P and central. Its not so easy to explain - I will post more shortly.

Are you able to shed anymore light on this - it is a space I think we certainly need to address moving forwards.

[Coins4life]

I have an excellent idea for this that I am going to start working on.

[A Penny At A Time]

Hello...I am new to this forum and I am hoping to get some feedback. Recently, I starting seeing some silent buying of a stock TCHH which is the symbol for Trustcash/ T Cash ADS Inc, they were greatly involved with bitcoin payments in the past, the company went grey/quiet since there were legal issues with bitcoin transactions. Do you think they are still active...? Or do you thing they will return to the industry?

[bomb7]

Decentralized exchanges are a great idea if the base currency is BTC. But you how do you buy BTC with fiat through a decentralized exchange? You can`t. For fiat-BTC exchanges I think there needs to be some system of interaction between individual wallets not kept on the exchange, and the exchange interface. So you wire your fiat, buy BTC which is automatically sent to your private wallet and not stored on the exchange.

We can already do this by sending to an external BTC address, but mtgox showed that lots of people will leave their money on the exchange by default  Some of them might not have even known what a wallet is. Plus withdrawals were halted later on. So an automated system that requires an external wallet and by default never leaves BTC on the exchange after you buy, might be something. If you want to do trading, maybe there should be some special trading wallet that you have to select and agree to keep your BTC on the exchange.

Just ideas.

[DeathAndTaxes]

Decentralized exchanges are a great idea if the base currency is BTC. But you how do you buy BTC with fiat through a decentralized exchange? You can`t. For fiat-BTC exchanges I think there needs to be some system of interaction between individual wallets not kept on the exchange, and the exchange interface. So you wire your fiat, buy BTC which is automatically sent to your private wallet and not stored on the exchange.

We can already do this by sending to an external BTC address, but mtgox showed that lots of people will leave their money on the exchange by default  Some of them might not have even known what a wallet is. Plus withdrawals were halted later on. So an automated system that requires an external wallet and by default never leaves BTC on the exchange after you buy, might be something.

BitSimple does that.  There is on customer wallet managed by BitSimple.  To sell you send coins to BitSimple and the trade executes immediately (zero confirmations to lock in a price), to buy you designate a receiving address when you wire the funds.  Then again Tangible Cryptography has never lost a single satoshi of user funds so we might be on to something.

You keep your coins in your wallet all the time and you can still have instant liquidity.

[franky1]

the problem with attempting decentralisation is not to do with bitcoin capability. but bank wire transfer red flags check points and delays in transfering the FIAT.

exchanges are rapid. trading every second. day traders do hundreds of trades a day. so wiring in funds to buy, and wiring out to sell would be slow and also start flagging up strange bank activity.

especially if peter sends wire transfer to Sam to buy, then receives a wire transfer from Dave when selling. to a bank this would look like laundering funds. BAM! bank account frozen.

for those that only do one trade a day, local bitcoins* would do it.

as for exchanges so far a once in a while wire transfer to an exchange and they hold funds while you trade rapidly using the binary database that resembles your balances (the way things are done now) remove many bank account red flags because the funds remain in the exchange account untill you truly finished trading and want to cash out.

untill a regulated, licenced, insured and honourable financial service can protect your funds. while you do rapid trades. then the only option would be to use a local bitcoins* model system for rare exchanges. or the current exchange centralised model for rapid trading and jst ensure you move the funds out of the centralised exchanges when not trading (at night when you go to bed or while you go to work and unable to trade)

trying to force a bank to change their AML checklist or allow 100 wire transfers per minute. you will never get something that functions with the speed of an exchange, where bots could be used.

*i know people talk about decentralised model being a program that list orders and communicates p2p and does not have a centralised website. so lets not knit pick. i simply meant instead of orderlines in a database. that there is a list of PEOPLE that have individual prices which people can choose from and swap funds direct

[E.exchanger]

gox mess has definitely harm people and their trust but not bitcoin.