FW: Open/distributed exchanges (posted on behalf of Leon Gommans)
Cees de Laat <delaat@xxxxxx>
Mon, 18 Apr 2011 14:55:03 -0400
(Due to change of mail system Leon Gommans is currently unable to post but he can receive on all@xxxxxxx)
Van: Gommans, Leon
Verzonden: ma 18-4-2011 16:57
Onderwerp: Open/distributes exchanges
Just to add a few more eurocents, here some more considerations regarding distributed exchanges and the perception of openness.
Distributed exchanges & Openness:
As Erik Jan noted, the distributed exchange model did not work well over large distances in the past. I am in support of this thought as it also hits a few fundamental concepts of an exchange.
An open exchange in my mind must be able to facilitate parties offering equal conditions. Openess implies the equality of rules and conditions for everybody. On the technical side this thought more or less demands a fully meshed topology between entry points of an exchange to guarantee this equality. When distances increase, the fully meshed topology becomes exponentially more expensive and can therefore not be maintained and as such undermines the guarantee for equality for everybody.
When not fully meshing across large distances, an exchange is forced to take a complex exchange fee cost model into account that may carry the danger to be perceived as unfair if the model is kept to simple, also endangering the perception of openenss. If the distances relatively are small, like in Amsterdam, the cost model can still be simple as well as managing the expectation that an exchange should be infinitively scalable by using well defined capacity management procedures.
Moreover, when increasing the distances between entry points, the exchange would become a competitor for its members.
An exchange facilitates in essence a trading process, but does not become a part of it (ie. a trade exchange does not sell or buy goods, the traders do.). When an exchanges takes on the role of a carrier, it should in my mind not be called an exchange, but a carrier.
Openness and rules, policies, etc.:
The role of an optical exchange is to facilitate connections according to a common set of rules. Rules should not only be aimed at member behavior (AUP) but also to the facilitation process of the exchange itself. Openness of the exchange itself should determine rules about the visibility of behavior of members. This to allow members to determine another members reputation (ie being open about the members adhering to the rules). This openness will enable members to trust each other. The ability of an exchange to facilitate trust between members is in my mind an important element of the openness of an exchange.
One could imagine the following: Once a common set of rules has been established by its members, the ability to notarize agreements between members that are based on these rules, which can also be enforced, creates a basis that allows judgement of a members reputation. In my mind agreement notarization and subsequent reputation management are elements in creating trust needed to create openness within the exchange. The notarization thought is spurred by history, where an exchange had a notary that wrote down transactions between traders.
Looking forward to tomorrows discussion.
Kind regards .. Leon Gommans