I don't understand why a Magic the Gathering site is the big exchange still...
I think you answer your own question:
...an exchange (which is inherently... a natural monopoly)
MtGox would have to stumble very, very hard to create an opening for another exchange, which would have high start-up costs (because of those interesting security and technical challenges). If you were sufficiently deep-pocketed and bullish on Bitcoin, sure, but most are chasing lower-hanging fruit without an incumbent leader in a natural monopoly role.
I'd agree that wallet provision is a weak opportunity, except perhaps as part one of some deeper strategy.
I think some are attempting to take on MtGox obliquely: Ripple/OpenCoin via its network's distributed books and TradeHill via its recently-restarted professional investor services.
The security and technical challenges aren't as high as most people seem to think and are pretty familiar to people who work on the technical side of trading in the financial world. I would imagine though that most of the people with the knowhow are already in jobs lucrative enough that theres little incentive to write a BTC exchange.
Or at least that's how my calculations go - while I've got the technical and financial background to make me tempted to write a derivatives platform for BTC, I already make a decent salary and my perceived risk vs profit calculation doesn't work out to a number that would make it worth my while. Unless I get bored enough to do it anyway!
Exactly! Your unwillingness to solve those challenges on the cheap, against an entrenched and well-funded leader, is what creates the "high start-up costs".
I don't think they'd be quite as hard to displace as people assume either. I've not spent very long looking at MtGox but I'm sure that all the usual tricks that real-world exchanges use to boost usage would work against MtGox as well - offering tighter spreads, lower transaction fees, encouraging market makers with incentives such as refunded fees as long as they're covering the market for a certain portion of the month, etc.
I'd fight for a position which has a natural monopoly even if there's an incumbent in the space if the incumbent isn't particularly strong. If BTC becomes 100x bigger, MtGox's current position doesn't matter much. If BTC (or other cryptocurrency in general) doesn't get 100x bigger, it doesn't matter and both MtGox and a new competitor will fail/be irrelevant.
I suppose it all hinges on how 'particularly strong' you think the incumbent is. I think MtGox is quite strong: they've survived a number of trials-by-fire, they've grown with Bitcoin, they're the most-linked place in 'how to buy' guides, they're the default source of 'the price'. People who view 'the oldest' as 'the safest' (a popular and not bad folk heuristic) will always lean toward MtGox.
The transition to CoinLab management is a risk factor, but is likely invisible to most people. If it goes off without a hitch, the new links with silicon valley capital will mean any well-funded assault would be answered with a well-funded defense.
> MtGox would have to stumble very, very hard to create an opening for another exchange
That's not true. Largest BTC2PLN exchange bitomat.pl lost it's wallet about two years ago. Mtgox bought them with their customers, covered for the mishap and started trading in PLN with very convenient PLN money transfers. In the meantime another exchange was created bitchange.pl but after bitcoin price crash it was closed. It was reborn with same software as pln.bitcurex.pl and now has larger volume of BTC2PLN trade than mtgox. It doesn't take fee on trades though.
Of course they're possible... but they'll be fighting for scraps compared to the market leader with the deepest book and longest history.
The existence of an exchange operating without fees, at a domain (pln.bitcurex.pl) I can't currently resolve, based on software that once lost the operators' wallet, doesn't seem like a MtGox-killer to me.
Bitomat lost its wallet and got bought by mtgox.Bitchange just closed an got reborn with same software as bicurex after a while. And it has more volume in PLN than mtgox. Probably due to the lack of trade fees (there are only small fees on withdrawals). It's also faster to get your money out of bitcurex than mtgox.
Comments
I don't understand why a Magic the Gathering site is the big exchange still...
I think you answer your own question:
...an exchange (which is inherently... a natural monopoly)
MtGox would have to stumble very, very hard to create an opening for another exchange, which would have high start-up costs (because of those interesting security and technical challenges). If you were sufficiently deep-pocketed and bullish on Bitcoin, sure, but most are chasing lower-hanging fruit without an incumbent leader in a natural monopoly role.
I'd agree that wallet provision is a weak opportunity, except perhaps as part one of some deeper strategy.
I think some are attempting to take on MtGox obliquely: Ripple/OpenCoin via its network's distributed books and TradeHill via its recently-restarted professional investor services.
The security and technical challenges aren't as high as most people seem to think and are pretty familiar to people who work on the technical side of trading in the financial world. I would imagine though that most of the people with the knowhow are already in jobs lucrative enough that theres little incentive to write a BTC exchange.
Or at least that's how my calculations go - while I've got the technical and financial background to make me tempted to write a derivatives platform for BTC, I already make a decent salary and my perceived risk vs profit calculation doesn't work out to a number that would make it worth my while. Unless I get bored enough to do it anyway!
Exactly! Your unwillingness to solve those challenges on the cheap, against an entrenched and well-funded leader, is what creates the "high start-up costs".
I don't think they'd be quite as hard to displace as people assume either. I've not spent very long looking at MtGox but I'm sure that all the usual tricks that real-world exchanges use to boost usage would work against MtGox as well - offering tighter spreads, lower transaction fees, encouraging market makers with incentives such as refunded fees as long as they're covering the market for a certain portion of the month, etc.
I'd fight for a position which has a natural monopoly even if there's an incumbent in the space if the incumbent isn't particularly strong. If BTC becomes 100x bigger, MtGox's current position doesn't matter much. If BTC (or other cryptocurrency in general) doesn't get 100x bigger, it doesn't matter and both MtGox and a new competitor will fail/be irrelevant.
I suppose it all hinges on how 'particularly strong' you think the incumbent is. I think MtGox is quite strong: they've survived a number of trials-by-fire, they've grown with Bitcoin, they're the most-linked place in 'how to buy' guides, they're the default source of 'the price'. People who view 'the oldest' as 'the safest' (a popular and not bad folk heuristic) will always lean toward MtGox.
The transition to CoinLab management is a risk factor, but is likely invisible to most people. If it goes off without a hitch, the new links with silicon valley capital will mean any well-funded assault would be answered with a well-funded defense.
> MtGox would have to stumble very, very hard to create an opening for another exchange
That's not true. Largest BTC2PLN exchange bitomat.pl lost it's wallet about two years ago. Mtgox bought them with their customers, covered for the mishap and started trading in PLN with very convenient PLN money transfers. In the meantime another exchange was created bitchange.pl but after bitcoin price crash it was closed. It was reborn with same software as pln.bitcurex.pl and now has larger volume of BTC2PLN trade than mtgox. It doesn't take fee on trades though.
So multiple exchanges are possible.
Of course they're possible... but they'll be fighting for scraps compared to the market leader with the deepest book and longest history.
The existence of an exchange operating without fees, at a domain (pln.bitcurex.pl) I can't currently resolve, based on software that once lost the operators' wallet, doesn't seem like a MtGox-killer to me.
Bitomat lost its wallet and got bought by mtgox.Bitchange just closed an got reborn with same software as bicurex after a while. And it has more volume in PLN than mtgox. Probably due to the lack of trade fees (there are only small fees on withdrawals). It's also faster to get your money out of bitcurex than mtgox.