

Ask HN: Why haven't we built a decentralized exchange for bitcoins? - EGreg

It seems to me that a lot of the latest bitcoin crash is attributed to MtGox being a centralized place and unable to handle so much trading activity.<p>The question of centralization has come to bite us multiple times over the last 10 years, as the internet has centralized around AOL, then Facebook, Google etc. Every time there is a single point of failure and various problems can arise from the disconnect in policies of the provider and the customers.<p>I wrote about this issue 2 years ago, and I believe eventually we will find better decentralized solutions to a lot of the challenges today (social networking, trading, etc.)<p>http://myownstream.com/blog#2011-05-21<p>But if BitCoin was a tour de force for decentralization of currency, why haven't we had a prominent decentralized exchange to go along with it?
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saalweachter
Bitcoin itself is unable to handle the rate of transactions. Currently, the
Bitcoin network can verify about 0.75 transactions per second, because of the
block sizes.

This was what broke in the 0.7/0.8 fiasco. 0.8 would have increased the block
size and upped the transaction rate, but broke backwards compatibility and
blah blah blah.

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jyu
You may want to read further about the Buttercoin project. The promise is an
open source exchange software that runs on commodity servers. It's still in
the early days, but seems pretty possible. If this project were successful,
then multiple exchanges could sit on top of this software and in effect
decentralize the exchanges.

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EGreg
What are the main challenges that explain why it hasn't been completed yet?
Seems like a clear win over centralization, kind of like git/mercurial vs svn.

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dragonwriter
> What are the main challenges that explain why it hasn't been completed yet?

Because its pretty hard to define even what "decentralized currency exchange"
means, and, particularly, to identify a mechanism by which you could do order
matching in such a system so that wouldn't leave you with just a bunch of
disconnected exchanges that are far less efficient at market clearing than a
centralized exchange.

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jeeringmole
I don't know this space well, but if I understood the SVForum EMTech talk I
attended last week, that's what Ripple is doing.

<https://ripple.com/>

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EGreg
How does ripple work? Everyone is charging 2% fees...

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wmf
OK, how do you build a decentralized currency exchange? No one knows.

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EGreg
Well if you have a decentralized ledger of transactions, it can't be that hard
to also add another ledger where people transfer bitcoins one or more virtual
"channels" where others could buy them? These channels wouldn't actually
correspond to any servers but would just be virtual bitcoin users?

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dholowiski
Bitcoin is a decentralized exchange for bitcoins - it's built into the system.

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Throwadev
No.

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dholowiski
Um, yes.

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27182818284
When people say exchange, they don't just mean exchange, like change hands,
they mean something akin to the NYSE.

