Quote from: Armis on March 11, 2014, 07:01:57 PM

Let's say everyone removes their coins from exchanges, in fact let's remove exchanges from the example altogether, what is the up and down side?

1) all new crypto becomes forever unheard of.

Why? What prevents people from buying and selling without exchanges? localbitcoin.com is a wonderful example of a channel for exchange which is not an exchange, but a non-dealing broker.
Do people stop communicating when facebook goes down? No, they use email or phones or sms or face to face or skype or whatever. Speculators depend on exchanges. Users don't need them.
Speculators don't matter. Users matter.

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2) all cryptocurrencies including btc no longer have 'common' market values, presently there is the bitstamp value, the coinbase value, the btc-e value, and you have various values on localbitcoin. without the exchanges then there are literally thousands of values (none right and none wrong)

That's no worse than today. If you can't arb without excessive friction and risk, there will always be variance in the local bbo. It's a business opportunity for those who do the arb, and thus make the market more efficient. Business opportunities are good for Bitcoin.

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3) so now with all of the different values who will get into the business of dealing with btc? if it has no stability or reliability or standard how do you set your prices

There will never be "stability" in bitcoin until it stops growing. So give up on that right now. You set your prices in accordance with your interests under present market conditions. Typically prices will be set in local fiat, and a service provider will lock-in exchange rates for the buyer and seller. Pricing in BTC is relatively rare and usually very dynamic. That wouldn't change in any way.

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4) why would you buy any more than you actually need for immediate use?

Because it's a good investment. You don't need an exchange to sell it.

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5) if you only buy what you immediately need, and the quantity of new btc is always increasing, it will result in oversupply of btc

No, because the volume of transactions in BTC is growing faster.

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The answer isn't "NO EXCHANGES", instead it's "MORE GOOD EXCHANGES".

Here we can agree. I am not claiming that exchanges are not useful. I don't think the lack of exchanges would much impact the value, the utility, and hence the price of bitcoin.