If a new crypto v crypto exchange were to be built and launched. What would tempt you to use it rather than what you currently use? Or what improvements would you like to see from the way things work now.
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5I was considering to close this as "primarily opinion based", but came to the conclusion that it can be a good question, in that it's questions like this one that will move Bitcoin ahead. Let's keep it constructive: In any answer, please explain why and how, and back your opinion up with facts and references.– Murch ♦Commented Mar 31, 2014 at 9:03
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1FDIC insurance for all customer coins/fiat they hold would be an advantage, though probably not that realistic to achieve.– PeterisCommented Apr 1, 2014 at 23:03
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6 Answers
A popular opinion in the Bitcoin space is that transparency is key for Bitcoin businesses. Bitcoin and it's pseudonymous nature make it very suitable for scams and corruption.
Competitive fees or additional payment options are no longer the key to the success of an exchange. There are so many exchanges that you can almost certainly find what you need feature-wise. However the important question that remains is whether the exchange you found can be trusted with your money.
Proof of Reserve
Fortunately, the nature if Bitcoin's technology also has a positive side with regard to transparency: the Bitcoin block chain is public and everyone can verify it.
This allows for the possibility of exchanges to verifiably proof that they hold all the money of their customers. CoinDesk explains this here. Some exchanges like Kraken have recently published such proof of reserve.
An ideal situation would be for an exchange to provide a method that allows users to constantly verify of their money is still there. F.e. by keeping every customer's coins at a fixed address (this could be quite costly) or publishing a proof of reserve on a weekly or daily basis (this could be done automatically).
answered Apr 1, 2014 at 21:34
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Proof of reserve is a good thing but solve the problem of trust at the time is produced and not for the future. Mark Kerpeles (mtgox) gave proof of reserve in the past, we all know what's happened next. Commented Apr 2, 2014 at 12:42
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@xenoky If I understand the Mtgox history correctly, they once gave proof that they had a significant amount of bitcoins, but they did not repeat it and they never proved that it covered all deposits. The ideas this answer links to have the potential to do both (although not in Kraken's weakened implementation) in a way not requiring to trust anyone, and allowing automated weekly or maybe even daily proofs. That would certainly avoid the doubts and rumors that developed (and persisted) around Mtgox' trustworthiness.– user6049Commented Apr 2, 2014 at 15:10
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1You are right, mtgox history with such proof of reserve could not happen. It's great. Maybe enough. But explicit volunteer fraudolent activity by the exchange owner that just after the last proof take it all and fly to "Puerto Escondido" it's not covered. Commented Apr 2, 2014 at 18:41
In my humble opinion the ideal exchange works without needing to be trusted.
I mean that this exchange must find a way to work without having direct control on customer funds, this controls (private key) remain in the hands of the customers. If this is not possible for the trade to occur, limiting as much as possible the funds controlled by the exchange is the most desiderable feature to me. This is needed to avoid what happens to mtgox
I think (not sure) "smart contracts" of new cryptos like Mastercoin, Counterparty, BitShares, Ethereum could technically address this solution
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there is such a thing as too much decentralization. By decentralizing exchange mechanisms, we could theoretically set off an irreversible change in the global economy. The most obvious effect of decentralization is conversion to and from fiat. The least obvious effect, is how that can relate to our global economy. I'm talking about taxes. Without taxes, we allow for a system that marginalizes the already marginilized 51%(ie, the poorest people around the globe) while enabling the rich to become richer. [continuing in next]– r3wtCommented Mar 31, 2014 at 14:27
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Without a feasible means for taxation, the governmental bodies around the globe collapse. at this time, we see total anarchy. Things like this start as a small action, like Bush repealing the Homestead act... Use your noodle. crypto is not ready for a decentralized exchange, because markets need a centralized control mechanism to prevent total anarchy. A decentralized exchange will be subject to the same attack mechanisms of the proof of work block chain. gain 51% of the network it is highly probable you could double spend such a system.– r3wtCommented Mar 31, 2014 at 14:27
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3I personally completely disagree. I don't think decentralization means taxes evasion, it's about "old fiat high commission and fee" evasion. This is where the richest get richer. Commented Apr 1, 2014 at 8:59
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Not having to trust the exchange with custody of my funds would be good, but instead having the block confirmation delay on a blockchain-based decentralized exchange is potentially even worse---imagine having to wait so long to see if a trade happened or if your attempt to cancel an order worked (rather than the order executing after all)! How about an exchange that automatically transfers my altcoin back to me after, say, a few days of not trading? Or maybe even better, one that proves it still has all my altcoin with Maxwell's method?– user6049Commented Apr 1, 2014 at 16:53
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@r3wt You never heard of en.wikipedia.org/wiki/Henry_George right? The single rate, single tax on pure land area (without regard to what you build over it) that George proposed is actually the most efficient tax model of all - according to the theoretical analysis Joseph Stiglitz did on it. Plus, it's the one that harms the poors the less whilst reducing the disparity between the rich and the poor in a society. Commented Apr 1, 2014 at 23:25
1) An ideal exchange, in my opinion, should implement a form of the Tobin tax.
Plenty of times I've been burned trying to take advantage of a large price gap in a coin that apparently does see movement. I may place a buy/sell offer just to see, some seconds later, my offer being surpassed by another by just some satoshis. Should I try to pass it again, the offer gets passed again, and again and again - until one of 2 things happens: someone fulfills my order once the price gap has all but disappeared or I cancel all my orders just to see, some seconds later, all the successive orders that continuously passed mine disappear as well, seemingly leaving the market at a wide price gap again.
Other times, I've seen some participants "compete" for the price of a coin until the price does move in a direction and, once a high enough number of other participants try to ride the wave, a dump - at that point it becomes obvious it was really 2 members of the same team attempting to manipulate the market.
2) Another improvement I wish existed in exchanges is to place a limit in the number of orders/cancels per time period per market, so that participants with very fast Internet connections and trading with bots don't have too big an advantage over humans with less than ideal bandwidths. Plenty of times I've seen traders putting an offer and cancelling it after just some seconds, again and again several times per minute. Obviously it's a trap for humans with slow connections who might be tempted to trade at the price they see unaware that such price is no longer the best.
A hard limit of orders/cancels per second and a system that executes trades every 10 seconds (so to say) would ensure most participants have the same view of the market.
Post Edit Addition:
3) Something else an ideal exchange should have: the ability for a trade to go thru different coins if doing so allows the customer to get more coins for what they already have.
At some exchanges there's a BTC/DOGE market, and there's also a LTC/DOGE market. But then there's a BTC/LTC market, so should there be a sudden increase in the value of LTC vs. BTC , for some time it'll become cheaper to buy dogecoins in BTC, and more profitable to sell them in LTC. Some coins can also be bought with Primecoins, adding the markets XPM/BTC, XPM/LTC and XPM/DOGE to the mix and lots of potential inefficiencies.
The markets eventually reach very similar levels of mutual coin worth after some minutes but never exactly the same, have seen it a number of times. If I were allowed to indicate in which coins I'd like to pay/be payed, I could get a better deal when I want to get, say, 42coins in exchange of my potcoins. Having the exchange look at the potential exchange paths available at a moment and choosing the one that benefits me the most.
At this point, I believe such an exchange would basically mimic the Ripple network.
answered Apr 2, 2014 at 0:07
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Of course, a useful comment or feedback criticism is much preferred to a negative vote just because Commented Apr 2, 2014 at 4:45
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The Tobin tax is an interesting idea---but to the user, isn't that already the current situation of exchanges usually charging trading fees of approximately the magnitude Tobin himself porposed as a tax. Or did you mean a fee/tax not just on completed trades, but also on on cancelling orders?– user6049Commented Apr 2, 2014 at 10:02
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+1 For the idea of trading periods (if I may call them that): Collect orders, then execute all of them, and maybe only then accept any cancellation requests for the submitted orders. Not perfect, but interesting. I'd have thought a period of 1 second or maybe even just 0.1 seconds a better compromise between responsiveness and dealing with the automated front-runner behavior you complained about. Then again, what's wrong with what established financial markets do about front-running, having a relatively high price granularity such that truly insignificant price increases are impossible?– user6049Commented Apr 2, 2014 at 10:14
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Yes, exactly: I meant not just on completed trades but also on cancelling orders; that way there's a penalty for placing orders as "bait" then cancelling after a few seconds. A bit more of sand into the financial markets' gears, to reduce the positive feedback gains in the system. Commented Apr 2, 2014 at 14:30
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1Established financial markets have the benefit of volume, likewise in the crypto world, there's so much volume in markets for LTC, DOGE and a few others that prices are usually a few satoshis off and manipulating them is nigh impossible. With less traded coins, automated front-runners impose a big penalty on humans and on people with high-latency connections (bandwidth's really irrelevant). Due to latency in propagation of TCPIP packages, a period of some seconds might be desirable so all traders are fully aware of prices in the last trading period. Commented Apr 2, 2014 at 14:40
I think with the latest set of IRS rules, the best exchange would allow for autotracking and calculation of transactions and capital gains. One can imagine at tax time have a push button system that autogenerates all the information needed by the IRS. I can image this could become a rather large document, but if a standard format and file could be generated, then it would be a selling point for the exchange.
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This and a few other nice features, an industry standard API e.g. FIXML like Atlas uses, and a proper trading client rather than just a webgui e.g. Meta trader which BTC-e offers a screen for.– hafneroCommented Apr 15, 2014 at 15:38
A new exchange needs to have:
Volume Top most point - Developing an exchange is not just enough, you need to think on to get volume, the more volume you've on exchange you've better chances to create a place among largest prevailing exchanges.
Functional capabilities The functional which can stand among the largest available exchange that the way to attract end user to trade on an exchange.
Platform Infrastructure Exchange infrastructure must be robust to handle high volatile market in peak trading session, it should not hang or stuck.
Order Matching Engine A proper unit test of order matching engine is important because its all about to fulfill the supply and demand the various users from different location dealing with different crypto coins. Order matching engine is the main part and you need to make sure that its algorithm should have enough capabilities to handle millions of transaction in fraction of time.
Coin Pairs A trader always looks for comfortability on an trading platform, they want to trade with easy. Most of traders want to trade using BTC but someone choose to trade in ethereum or usdt pair. So you need to make sure that you've atleast btc, eth and usdt pair on your exchange. you can also create your own coin pair to offer something good to end users.
Security The most important things is that your exchange is secured or not, you need to make sure that end users funds are secured in your exchange wallet. You need to make sure that your system should not have any low pools in deposits/withdraw of coins also the verification method are important to work properly.
Many more that needs attention to launch crypto exchange in competitive market
It's time to reach the mass with all media attention so Safe, Secured, and Easy to trade should do it. Now you're looking at the average Joe not innovators or early adopters!
