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March 19, 2012, 03:47:52 PM |
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Having been asked about a P2P Exchange System and after some thought on the matter, I am looking for some feed back before I write an Abstract for an entity.
Some might know that these systems are already in place between companies to bypass the exchanges (NYSE, NASDAQ, etc...) Although, I am not familiar with a system that allows individuals to participate. BitCoin has an opportunity to allow this and possibly can be expanded into traditional currency exchange. If the latter comes to fruition, a p2p exchange would become huge as anyone with a computing system could become an exchange.
What is the biggest reason exchanges are used?
I believe it comes down to "Trust." One must trust the exchange and that the numbers are correct. Traditionally this method of acceptance is done by reputation over time. The inherit flaw in this is that past reputation is no guarantee of future reputation. Madoff had a high degree of trust, until.
How can reputation and past performance be taken out of the equation for a future performance guarantee?
Lets put the trust in mathematical calculations. As this is election season in the U.S., many are familiar with Scientific Polls that report to within a certain percentage the reflection of individual sentiment to with in a ± percentage, usually less than 5% some as low as 1.5%.
Ironically for this system to work effectively there needs to be a starting point, i.e. exchanges need to already exist.
The premise here is to create a P2P System that every Bitcoin user has and uses for every trade. Scientific Polling algorithms could be used to prevent intentional skewing of the current price. As a bonus, this type of system would go a long way to prevent intentional market manipulation.
Past trades need not be saved all the way back to the beginning as this is not a analysis system. The last, say 30 days, and a moving average would suffice. At sometime in the future, it might even be beneficial to include it into the BitCoin App itself.
Initially users would rely on the price of the traditional exchanges for their rates of exchange. But as more and more people use the system, the advantages would become apparent to them and could transform the traditional currency exchange system in use. As the P2P exchange rate approaches the current traditional exchange price using the Scientific Polling Algorithms and maintains a price that is close to the current market rate, users will realize that one can conduct exchanges without paying an exchange, giving up personal information, keeping the exchange private between the two parties conducting business.
In effect, this system would turn every user with Bitcoin into an exchange and open up more opportunity to expand BitCoin usage. Also it could provide a secondary exchange system between currencies. e.g. USD-YEN-GPB-EUR-BTC etc...
Obviously the more people that use it the more accurate the price will be. This is where the current system of exchange is applied. The price will be closely matched to MTGOX or other exchange prices and as usage grows a divergence would occur.
The above is just a premise pointing out some benefits. I am looking for feedback and some negatives before I construct an Abstract of the system.
I am not familiar with all the algorithms that are used to reduce polls to an ± percentage of error or even if they could be applied to the system for the intended purpose. I have been pointed in a few directions but am looking for some feedback.
Thoughts and Ideas Please.
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