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Author Topic: How and Why You Should Set Up Your Own P2P Bitcoin Currency Exchange  (Read 5315 times)
Trader Steve
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May 25, 2012, 04:18:30 AM
 #1

From http://tinyurl.com/dyu4xcq :

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How and Why You Should Set Up Your Own P2P Bitcoin Currency Exchange

Problem: Centralized exchanges are vulnerable to attack and/or regulation by existing power structures.

Solution: Decentralize the exchange process.

Here’s how you do it:

Essentially you want to cultivate your own personal network of trusted trading partners. Make a market in bitcoin among your social network. Put the word out that you are the “go to guy” to buy or sell bitcoin. Build your “little black book” of trading partners that you can contact whenever you need to increase or decrease your bitcoin holdings.

Build your reputation as a trusted trader (Bitcoin-OTC, Forum Reputations, BTCnearme.com). Ask every trading partner to think of you first when they need to buy or sell. Point out the privacy and money-saving advantages of staying “off exchange”. Don’t charge an exchange fee.

The goals are to:

1. Help others in your personal community easily move in and out of bitcoin

2. Ensure yourself a reliable source of buyers and sellers

3. Facilitate the easy exchange between currencies which helps remove friction in the bitcoin economy

4. Avoid exchange fees

5. Preserve privacy

6. Reduce risk of attack by existing power structures

Ideally we may someday arrive at the point where everyone is an exchanger and the process of exchanging bitcoin will be as easy as asking someone to “break a twenty”.

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kangasbros
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May 25, 2012, 04:40:35 AM
 #2

I like this article, but bitcoin guys really lack marketing skills. Nobody gets what a "decentralized p2p currency exchange is".

A better article would be "How to make easy money by exchanging bitcoins" or even more provocative "How to get rich via running a bitcoin cash exchange". OK, probably it isn't that good way to get rich, but at least the title would catch people's attention Wink

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May 25, 2012, 04:43:37 AM
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And in addition, it should be practical guide, not list of philosophical reasons why decentralized exchanges are good...

Trader Steve
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May 25, 2012, 04:45:22 AM
 #4

Yes, the point I think is to simply build a large network of people you can trade with on a regular basis. I've been doing this myself and I make trades even when I don't have to because I want a ready market of buyers and sellers coming to me so that I always have a way to buy or sell without fees.
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May 25, 2012, 04:49:53 AM
 #5

I think the point of this article is to make a market for yourself, not to run a business.
kangasbros
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May 25, 2012, 05:03:17 AM
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I think the point of this article is to make a market for yourself, not to run a business.

Well yeah, maybe the goals are a little different. OK, it is great to have ideals (eg. nonexistant exchange fees), but who would do some real work, such as running an cash exchange without reward?

The thing is, to improve bitcoin cash liquidity, you need more than few hippies doing cash trading with bitcoins. You need people dedicated to running cash exchanges. And by marketing cash exchanges as a business, they could catch on. A cool way to create a little additional income or something.

BTCNearme.com seems great, but I would add couple of little features:

- send email directly from the site to sellers/buyers
- allow listing your offer/amount with bitcoin-otc style (or some easier way?), eg. "{{ mtgoxlast }} * 0.95"

The optimal process for buying would be:

- look up on the list, find someone pretty near and with decent price, contact using form included on the web page
- make your offer, and wait for contact. Email is not shown on the page, you are first contacted using the form, and then you can continue with email.

Trader Steve
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May 25, 2012, 05:11:55 AM
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I think the point of this article is to make a market for yourself, not to run a business.

Well yeah, maybe the goals are a little different. OK, it is great to have ideals (eg. nonexistant exchange fees), but who would do some real work, such as running an cash exchange without reward?

The thing is, to improve bitcoin cash liquidity, you need more than few hippies doing cash trading with bitcoins. You need people dedicated to running cash exchanges. And by marketing cash exchanges as a business, they could catch on. A cool way to create a little additional income or something.

BTCNearme.com seems great, but I would add couple of little features:

- send email directly from the site to sellers/buyers
- allow listing your offer/amount with bitcoin-otc style (or some easier way?), eg. "{{ mtgoxlast }} * 0.95"

The optimal process for buying would be:

- look up on the list, find someone pretty near and with decent price, contact using form included on the web page
- make your offer, and wait for contact. Email is not shown on the page, you are first contacted using the form, and then you can continue with email.

Yes, there is the business profit approach and then there is the personal profit approach. I profit by not having to pay exchange fees and by having a steady market of buyers and sellers. I like your ideas for BTCnearme.com. If I knew how to program I would try to implement some of these. The basic idea is sound. It connects you with local traders and then you can build a relationship and trade directly in the future without having to go through the site. The idea behind the article, I believe, is to build long term trusted networks.
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May 25, 2012, 05:22:46 AM
 #8

The problem with "decentralised" exchanges is that they are not that profitable. Adding a personal touch to service (which is basicaly what Trader Steve has advocated) takes time and PR skills. If you have cheep time+skill resources you may try to compete against centralised and automated exchanges.

I do not know economic realities in US (and they probably vary greatly depending on state and size of city). However, in Sydney it is hard to find a merchant who is making less than 2-3 AUD per customer at the checkout (not per item, people oftern buy more items). If you sell 4 BTC for around 21 AUD than fee would be ourageous 15%.

On top of that, to manage risk you need volume. Earlier or later someone will push you a counterfited bill or a shady persona will try to protect you for a fee.

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kangasbros
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May 25, 2012, 07:34:07 AM
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The problem with "decentralised" exchanges is that they are not that profitable. Adding a personal touch to service (which is basicaly what Trader Steve has advocated) takes time and PR skills. If you have cheep time+skill resources you may try to compete against centralised and automated exchanges.

If a person is already long on bitcoins, then it would be pretty risk-free to make a few bucks by exchanging bitcoins as well. For example, buy on mtgoxlast and sell on mtgoxlast * 1.05

I would code a better competitor to BTCNearme.com web site, but currently I have my hand full of work with all my old bitcoin projects Cheesy

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May 25, 2012, 07:54:47 AM
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Just going to the city center, probably spending ~1 hour there with someone who is afraid that 3 confirmations might not be enough and I run off to double-spend his 5 BTC and the trade fees on exchanges mean that I could only do this as a hobby, not valuating my time invested. Otherwise I might earn more by sewing Nike shoes in Thailand... Roll Eyes

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kangasbros
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May 25, 2012, 08:05:43 AM
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Just going to the city center, probably spending ~1 hour there with someone who is afraid that 3 confirmations might not be enough and I run off to double-spend his 5 BTC and the trade fees on exchanges mean that I could only do this as a hobby, not valuating my time invested. Otherwise I might earn more by sewing Nike shoes in Thailand... Roll Eyes

Or you give the buyer your address (house number), let him come to you, and when he calls you 2-5 minutes and the transaction is done. Use a 3rd party service like mtgox/exchange/instawallet/easywallet.org to have instant transactions.

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May 25, 2012, 08:06:07 AM
 #12

Just going to the city center, probably spending ~1 hour there with someone who is afraid that 3 confirmations might not be enough and I run off to double-spend his 5 BTC and the trade fees on exchanges mean that I could only do this as a hobby, not valuating my time invested. Otherwise I might earn more by sewing Nike shoes in Thailand... Roll Eyes

Lol, when someone wants multiple confirmations for less than 4 digits you should just make a face at them.

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Trader Steve
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May 25, 2012, 03:51:22 PM
 #13

In light of the suggestions in this thread I asked the author to re-write this post from the consumer standpoint and here is what he came up with:

Quote
How to set up your own bitcoin trading network, protect your privacy and save exchange fees
http://tinyurl.com/d2zzeh4

Problem: The large, centralized bitcoin exchange services are not private (most are now requesting detailed personal information to satisfy Anti-Money Laundering regulations). It also can take time to open and fund an account and the transaction fees can add up. Not to mention, these centralized exchanges are vulnerable to targeted attack by cyber-criminals and governments.

Solution: Set up your own bitcoin trading network

Here’s how you do it:

Essentially you want to cultivate your own personal network of trusted trading partners. Make a market in bitcoin among your social network. Put the word out that you are the “go to guy” to buy or sell bitcoin. Build your “little black book” of trading partners that you can contact whenever you need to increase or decrease your bitcoin holdings.

Build your reputation as a trusted trader (Bitcoin-OTC, Forum Reputations, BTCnearme.com). Ask every trading partner to think of you first when they need to buy or sell. Point out the privacy and money-saving advantages of staying “off exchange”. Don’t charge an exchange fee.

The goals are to:

1. Help others in your personal community easily move in and out of bitcoin

2. Ensure yourself a reliable source of buyers and sellers

3. Facilitate the easy exchange between currencies which helps remove friction in the bitcoin economy

4. Avoid exchange fees

5. Preserve privacy

6. Reduce risk of attack from predators

Ideally we may someday arrive at the point where everyone is an exchanger and the process of exchanging bitcoin will be as easy as asking someone to “break a twenty”.
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May 25, 2012, 04:04:05 PM
 #14

A better article would be "How to make easy money by exchanging bitcoins" or even more provocative "How to get rich via running a bitcoin cash exchange".

That goes against the view expressed in that article, "Don’t charge an exchange fee."

I agree with that view and not the view you express, which would tend to make the exchanger look like he is more interested in making a buck then in
helping the community he is a part of. 

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May 26, 2012, 11:45:59 AM
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I agree with that view and not the view you express, which would tend to make the exchanger look like he is more interested in making a buck then in
helping the community he is a part of. 

So basically you mean that it is better that there is no cash exchanges, than the alternative where there are cash exchangers who charge fee.

Communism was a nice ideology, but it doesn't work in practice Wink

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May 27, 2012, 01:27:03 AM
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I agree with that view and not the view you express, which would tend to make the exchanger look like he is more interested in making a buck then in
helping the community he is a part of.  

So basically you mean that it is better that there is no cash exchanges, than the alternative where there are cash exchangers who charge fee.

Communism was a nice ideology, but it doesn't work in practice Wink

I don't see how setting up a decentralized network like is presented in the OP is anything like a centralized - Statist - system like Communism.

I am not a communist. That doesn't mean that I look at every situation and relationship I encounter ( especially involving family, friends, neighbors etc. ) as a potential way to make money.  

I seem to recall etotheipi, the developer of Armory, speaking eloquently on why he wants to keep his client free...  Perhaps you could seek out his words if you are still unclear on the concept of being more interested in the good that systems like bitcoin can do for everybody - or at least those communities that one feels a part of - and not just for oneself on a financial level alone.  

I have nothing against making money, but I am sure I am not alone in feeling that it is not the most important thing in life.

Even if one is only interested in making money there are still positives, for oneself, that come from things like philanthropy, and charitable and generous ways of conducting oneself and doing business.  

Also it is best, I feel, not to think in either/or terms.  I am not suggesting that there be only exchangers that don't charge fees and operate in the way the OP gets into. There is room for a lot of alternatives, giving each individual as many choices as possible for a system they feel comfortable in using and supporting.  



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May 27, 2012, 04:48:11 PM
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I am not a communist. That doesn't mean that I look at every situation and relationship I encounter ( especially involving family, friends, neighbors etc. ) as a potential way to make money.  

I seem to recall etotheipi, the developer of Armory, speaking eloquently on why he wants to keep his client free...  Perhaps you could seek out his words if you are still unclear on the concept of being more interested in the good that systems like bitcoin can do for everybody - or at least those communities that one feels a part of - and not just for oneself on a financial level alone.  

I have nothing against making money, but I am sure I am not alone in feeling that it is not the most important thing in life.

Even if one is only interested in making money there are still positives, for oneself, that come from things like philanthropy, and charitable and generous ways of conducting oneself and doing business.  

Also it is best, I feel, not to think in either/or terms.  I am not suggesting that there be only exchangers that don't charge fees and operate in the way the OP gets into. There is room for a lot of alternatives, giving each individual as many choices as possible for a system they feel comfortable in using and supporting.  


Well, I don't want to imply that you are a communist or anything like that, you took it way too personally Cheesy

I mean that especially cash exchanges are not going to work without market makers. That means people, who are accessible, charge a little, and make the system work. I guess most people see the benefit of cash exchanges, but usually there are many kind of people with different goals - some just want the bitcoins fast and without hassles, others are willing to wait and save on exchange fees. The ones who can serve the impatient ones, can make a little money in the process.

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June 15, 2012, 01:27:57 PM
 #18

So, after getting inspired from the original article, I actually started competing service to BTC Near me: http://localbitcoins.com

Also I write similar guide, but with more practical and less philosophical focus: http://localbitcoins.com/cash_exchange_howto

Any feedback and suggestions welcome!

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June 15, 2012, 02:05:11 PM
 #19

I like this article, but bitcoin guys really lack marketing skills. Nobody gets what a "decentralized p2p currency exchange is".

A better article would be "How to make easy money by exchanging bitcoins" or even more provocative "How to get rich via running a bitcoin cash exchange". OK, probably it isn't that good way to get rich, but at least the title would catch people's attention Wink

That sums up the problem with BitCoins. Too many geeks and not enough business men. The world dont give a flying rats ass about how awesome crypto-currencies are, how secure they are or how decentralized they are. The world only care if they can make money from it. Just show the world that their is money to be made and watch the flood of people to it.

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June 15, 2012, 03:52:51 PM
 #20

Saving money is the same as making money. When you build a local network of exchange partners willing to trade the fees go down. I predict the exchange fees will practically evaporate, or become negligible, over time.

I don't see exchanging as a sustainable business model for the average person. As it says in the article, I believe making exchanges will eventually be as easy as changing a twenty dollar bill.

BTW, great job kangasbros!
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