An idea for this has been proposed. See the "ripple currency exchange":

https://en.bitcoin.it/wiki/Ripple_currency_exchange

Yeah. Check out Ripple:

https://ripple.com/

How the heck did they get a 2-sylable 6-character dictionary word .com domain for this?!

They bought it from a Grateful Dead fan for something like $10k.

I imagine they bought it? With the intent of making their money back.

I work for Desk.com, owned by a company that also owns Work.com and a few other one-syllable domains.

That company is Salesforce.com. They paid quite a bit for those domains. :O

Not open source (at least, not yet, for the server-side).

The client side is on Github, but has absolutely no tests. Literally, the stub files for the tests are there, but that's it.

Node.JS dev community really needs to get religion with testing.

But lastly, it's also somewhat centralized. While you can run a Ripple daemon locally, the actual currency's distribution is centralized. Which I think is... not smart.

Thanks for the link. What I couldn't find out while reading the site: Since it is a decentralized network, who runs the nodes, what's the incentive for doing so? I suppose running a node will give you their ripple currency, but this information seems to be not visible on their site. Apart from that, it looks like a really interesting project.

That is an interesting project indeed but I think the actual solution will not require previous trust among exchangers, because it would render it useless for the majority of potential users in my opinion.

There has to be something like an escrow service connected to it though (centralized or distributed) in order to guarantee for the transaction to be completed, do you agree?

ps. ripple's website appears to be down..

There's already quite a few bitcoin exchanges and some people are working on a new open source exchange: http://www.reddit.com/r/buttercoin

Bitcoin exchanges are already distributed. Free markets are decentralized.

If MtGox can't function, there are plenty of competitors.

I don't see any way to do a decentralized exchange, at some point in needs to deal with local currencies.

I can see a federated exchange, lot's of exchanges using using each others liquidity to do trades.

Distributed how? I don't think such a thing is possible, someone will have to deal with the banks.

I edited the original post, what I was referring to was a P2P bitcoin exchange, impossible to DDoS, and possibly built upon the technology shown by the bitcoin project itself

A solution exactly like what you've just described is in the works. Zyocoin is a P2P Bitcoin exchange utilizing multi-signature issued "debt", where debt can be BTC, USD, EUR, or bananas.

Real contracts are created with verifiable blockchain-based timestamping.

Debt is issued with colored coins.

Ripple attempts to do something like this but I feel it must be done natively on the blockchain to see widespread acceptance.

Python programmers wanted. Send a BitMessage to BM-oq7iLGGH7e7JJaqiTcUj1qGQYxeZVo65b; IM [email protected] or join #zyocoin on Freenode.

Are you using Entangled? I've looked at doing the same thing, also using colored coins. But it's going to take a lot of work + luck to go up against someone as well-monetized as Ripple.

Plus, the technical issues are not even the biggest challenge, it's forming and managing a clearing house in a decentralized manner. I'm not sure it's possible. But someone has to physically conduct the exchange of dollars, euros, or bananas. Otherwise, you've just developed a p2p version of localcoins.