Quote from: JorgeStolfi on August 23, 2014, 07:42:43 PM

Quote from: madken7777 on August 23, 2014, 06:49:02 PM

Quote from: igi00 on August 23, 2014, 03:12:05 PM

http://www.forbes.com/sites/kashmirhill/2014/06/26/bitcoin-bitstamp/

Quote

Charging trading fees ranging from .5% to .2%, Bitstamps founders make clear in their steady, confident way that they are making bank. Their monthly revenue at current trading volume which is lower than usual is between $700,000 and $900,000 USD. Were not the richest people in Slovenia, but we may be the richest 20-year-olds, says Merlak.

Kind of make me wonder why there are so few exchanges spring up to compete with them if the profit is so high.

If some 20-year-olds kids can do it, surely some experience people will be able to do it too.

Good question.

Actually there are many small exchanges that are not listed on the popular charts (and many more that have folded).

One barrier is that it takes a lot of investment, programming, and paperwork to set up an exchange with the quality and features that clients now expect. This initial expense doe snot depend on how much volume the exchange has. So a new exchange starts out in the red and remains so for months.

Exchanges serving the same market compete on the basis of features, quality, fees, client service, etc. Larger exchanges can afford more staff so they can improve faster.

Finally, given a choice between a small and a large exchange, clients will prefer the larger one, since it has more liquidity. That is, a largish buy or sell will get a better price on the larger exchange, even if the market price starts out the same on on both. Thus the larger exchange will tend to grow, while the smaller one will shrink.

I think the lack of these reasons in bitcoin's early days is the reason why MtGox was able to survive and thrive for as long as it did. For many years it did not have any real competition, however lacked most features that are assumed to be at today's exchanges.