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 (Mycelium Local Trader, LocalBitcoins.com, Bitcoin-OTC, Forum Reputations). 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”.
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”.
There is a new service geared towards bitcoin cash exchangers: http://localbitcoins.com/
Feedback and suggestions appreciated!
Bitcoin is a real saviour.
The service of exchanges is to facilitate the exchange of BTC with fiat money but a secondary service is to spread the information about the exchanges (the prices), so people know the prices asked and requested by others and is able to do their exchange. Without these exchanges the fluctuation of the value of one bitcoin would be much more sharp and high relative to other currencies.
You are correct. I would imagine that there would still be exchanges in some parts of the world where price discovery can be communicated publicly. Bitcoin-OTC, if it could become user-friendly, might also be able to fill that role so that individual traders could look to current exchange prices for guidance. Otherwise, prices would be communicated from person-to-person, much like drug prices are today, which is not very efficient.