You bet? All subjective feelings, not backed up by facts.... But if you watched the US senate hearings, it was clear that percentage wise Bitcoin wasn't that criminal at all (FINcen literary told that centralized systems like Liberty Reserve was much more of a problem). Further it is known that only 5% of Bitcoin's economy, used that black market you are pointing to... ??? that's nonsense. That fact that there only a few exchanges, is because of "regulations and/or the absence of clear rules". Currently there is no Exchange in the USA at all, due to the fact that the government makes it too expensive to open one (to comply to USA regulations it costs at least $50million). The moment that the USA issues special low-cost bit-licenses, unleashing innovation again, then many good Exchanges will popup in the USA very fast. Yes, I agree! We should re-code some of the protocol to solve monopolizing by a few extremely large Mining companies. This was not intended by Satoshi.
Think about this way - upside/downside digitals are nothing but coin flips, so their fair value is 0.5. These guys are offering them as "bet 1 to win 0.7", which means the % market is 35% @ 65% (since both downside and upside digitals are betting 1 to win 0.7). Even without a balanced book, there is very little chance they would lose money since they can delta hedge in the underlying.
Out of curiosity, is there anything preventing the Deutche Banks and UBSs of the world from getting involved, aside from reputational risk? They already have pretty good FX trading platforms and once hedgies/propsters will get involved in, they could integrate BTC x USD and other pairs in the linup. Probably going to be some sort of Coinbase style thing where you execute at the current level because both sides are known OTC entities.
It's impossible to see who is using bitcoins, or what the transactions are for, so you can't compile statistics on it. However you can use logic and common sense to reach conclusions. Put yourself in the mind of a criminal, would you rather use a currency that is regulated to the bone in order to prevent money laundering and where every transaction is monitored, or one that is essentially free of any regulation, that allows you to perform transactions to anywhere in the world, instantly, with absolutely no traceability? Why smuggle cash accross the border or jump through the thousands of hoops banks put in your way, when you can open a bitcoin acct. and have that money transferred to the mexican meth lord by the end of the day... There's plenty of exchanges, that's not the problem. The issue is market share related. The problem is for new exchanges to convince potential customers / traders, that they won't be part of the previous 50% of exchanges that suddenly dissppeared overnight, taking all their customers money with them. If you are well-established, you have a signal of legitimacy that provides you a serious competetive advantage over new establishments. That's what's meant by trust-related barriers to entry. In fact, just as recently as October 2013 a Hong Kong firm vanished overnight, taking $5m of customer money with them. If you were one of the customers who lost money on this, would you now be more or less skeptic towards newly establihed exchanges? Most likely you would stay as far away from them as you could. Centralization and monopolization is never "intended", however all markets tend towards it, both regulated and unregulated. In fact as difficulty rises, only the best of the best will be able to produce bitcoins. People can no longer play central bank from their moms basement, which was the beauty of bitcoins to begin with. Eventually it will land on very few hands, who act as the de-facto central bank. The point is that all the problems bitcoins are trying to solve, it's going to face eventually. It's a noble effort, but doomed to fail.