Silk Road forums
Discussion => Security => Topic started by: p3nd8s on July 05, 2013, 12:19 am
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The only thing holding back Bitcoin is not buying BTC or cashing out as that can be done with localbitcoins.com, bitcoin-otc, blueskytraders, a plethora of exchanges, etc. It's the lack of a decentralized pricing system. Currently everyone relies on the MtGox price as the standard. As more people stop using MtGox, the price at that exchange will be very volatile and will not represent the true price of BTC. However, people still use MtGox to look for the price. Even other exchanges use MtGox as a price gauge/standard.
One solution is to make a system similar to localbitcoins.com. At the latter site, you can do a transaction in escrow and BTC is released by entering a special code to the seller. The cash is given to the seller f2f or by other electronic means (paypal, other e-money, etc). The new system can log the latest prices negotiated with these actual escrow transactions, and upon release of the escrow and completion of the transaction, update the last price depending on the size of the transaction (just as a normal exchange would do it). This last price would become the standard price everyone looks to instead of the now inaccurate MtGox last price.
Any comments or other ideas on how to decentralize the BTC pricing discovery?
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Other exchanges don't use Gox. They rely on their own order books. A trading engine uses the set of buy and sell orders in its database to execute trades. What happens on btc-e is independent of what happens on MtGox... except for arbitrage. The prices on the exchanges tend to agree over time because if there is a large discrepancy, people will buy a lot on the low exchange and sell (the same coins) on the high exchange, bringing the prices closer together.
That being said, non-exchange traders do tend to rely on Gox a lot, but arbitrage guarantees the prices are never too different among the exchanges, so in my opinion in doesn't matter that much.