The large exchanges that remain have responded to the crises by collecting personal details from their clients as a defense, a practice that many in the community say undermines the whole point of having an anonymous currency. Frank Braun, an IT security consultant and self-described privacy extremist, confronted the problem by urging people at the conference to open new over-the-counter exchanges.
But it may also be possible to build an exchange that is as anonymous and decentralized as the Bitcoin network itself. In his talk in London, Mike Hearn, another core Bitcoin developer, proposed a peer-to-peer currency exchange that would link trusted buyers and sellers online and then leave them to sort out payment details amongst themselves. The system would require no central repository of money, eliminating the target for hackers. Nor would the system collect private details about the users, working from the same string of letters and numbers as the Bitcoin protocol.
But perhaps most consequential for the future of Bitcoin—in order to shut down a peer-to-peer currency exchange, one would have to terminate every node on the network. The few lawyers who have studied Bitcoin all agree that the currency inhabits a legal gray area. No one really knows how governments would react if it gains traction, but many consider the exchanges to be the easiest target for people who want to regulate Bitcoin. Decentralizing the exchanges would make that job nearly impossible.
Bitcoin developers are quickly proving that they can design decentralized alternatives to even the most sophisticated financial institutions. But some are building applications that use money in ways that had never before been possible in the digital world.
Chris Raggio, a programmer in Mississippi, is working on a digital alternative for the common tip jar. The collection "vessel" would be a wall poster embedded with an NFC (near-field communication) chip, which could be programmed to accept Bitcoin donations. Unlike similar payments with PayPal or credit cards, one could make small donations without a fee, right on the spot, just like throwing a quarter in a jar. "'We hear all this talk that we're going to a cashless society," Raggio says. "Maybe we are and maybe we aren't. But if we are, we're going to need something like this to protect that money jar."'
Similar applications are being built to facilitate micro-payments on the Internet and, if successful, they could reduce the extent to which content providers now depend on advertising revenue. Such applications could aid in inviting new users to participate in the Bitcoin economy. None of them have arrived yet, but many people are writing them, often quitting steady jobs to do so.
At the end of his speech, Garzik rallied for the currency and asked for patience over the long haul. "'How long did it take to create the euro, implement the euro, widely distribute the currency, widely distribute the cash registers, point-of-sales systems—all of that stuff,"' he asked. "'It took years and years. And so one cannot reasonably expect Bitcoin to be an immediate success in two years."'