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Where do DXMerchants get funds to process OutX requests?
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Posted by: Doro Ajani
I'm going to resolve a glaring misconception that I've seen run rampant in various forums for at least the last two years.
A DXMerchant, acting as an exchange agent, has to have reserves of various digital currencies in their accounts, in order to process OutX requests within the DXSystem.
Some background reading material:
http://en.wikipedia.org/wiki/Digita...rency_exchanges
http://en.wikipedia.org/wiki/Digital_gold_currency
http://en.wikipedia.org/wiki/Currency_exchange
http://en.wikipedia.org/wiki/Exchange_rate
I find it very interesting that people fail to take into consideration where DXMerchants get the funds to process OutX's.
Too many people think the only source of digital currency that a DXMerchant gets comes from AutoInX's to their Merchant Console, whereby the DXSystem gives the DXUser making the InX the digital currency account # of the DXMerchant that they are to send their digital currency to, and that DXUser gets DXG off of that DXMerchant's Console in exchange.
What I described above is only ONE OF THREE ways that DXMerchant gets digital currency into their accounts to use as reserves to process OutX requests within the DXSystem.
Here are the other two ways:
1) A DXMerchant is running a business, online or off, selling products and services , and taking all or a portion of the funds generated to process OutX requests.
2) A DXMerchant borrows funds from third parties, for a fee, to use to process OutX requests, and makes arrangements to pay those funds back.
I wonder sometimes if anyone ever asks where the London Gold Exchange, the Bullion Exchange, AutoCambist, etc... gets their reserves of national and digital currencies in order to process exchange requests.
The bottom line is this: The most consistent source of funds for DXMerchants to process OutX requests with, would be from the proceeds of a business that they are running, selling products and services, which could be supplemented by funds that they may borrow from time to time.
AutoInX's to the Merchant Console, whereby a DXMerchant gets digital currency sent to their account, in exchange for the DXGold on their Float being sent to the Incoming Balance of the DXUser, only takes place when that DXUser makes an InX of funds into the DXSystem.
How often this takes place depends on a variety of differnet factors, but this should NEVER be depended upon as the SOLE SOURCE of digital currency for the DXMerchant to process OutX requests with on their Merchant Console.
Posted by: golddust
Doro, thanks for the clarification. Your points 1) and 2) also represent prevailing criticisms of the DX system; why would a merchant:
-use DX for a portion or all of their sales when other currencies which have not been so problematic are available (though not profitable in and of themselves like DX),
-make borrowing arrangements to process OutX, which could turn a 'loss' once the fees charged are multiplied over time until the processing is done and borrowed funds repaid?
Overcome these issues and DX will be a much more favorable payment method.
golddust
Posted by: Doro Ajani
golddust,
Given the indictment against E-Gold, I'm watching with great interest how exchange agents in general adapt to not being able to secure additional e-gold from OmniPay.
It relates to the questions I'd asked about how DXMerchants in general were supposed to be funded, in order to competently process exchange requests.
I predict that a number of exchange agents will limit or stop accepting exchange requests for e-gold into other digital currencies or national currencies.
They don't want to be in a situation where they have a large stockpile of e-gold and difficulty exchanging it into other digital currencies or national currencies themselves.
Where does this leave your average e-gold account holder?
Posted by: golddust
I agree Doro, it will be interesting to see many adaptations in the ecurrency 'industry'; I have seen posts reporting delays in receiving exchanges. For the average egold account holder, it seems to be mostly business as usual. I'd expect this to continue based on the provisions to egold in the indictment, however a very good time to be exploring exchange options.