Bitcoin Forum

Decentralised trading, means no need for gateways.

With a true Decentralised trading platform A bank would not be able to tell you are sending funds, or that your funds came from the Decentralised trading platform. To the bank it would just look like another transaction, or international wire.

NXT will again rely on gateways to get Fiat in and out.

A true Decentralised trading  structure will consist of

[1] a decentralised core trading systems,

[2] Plugins that can interface with various banking systems, individuals in various countries will write these for local requirements, and t local banks it just looks like another bank account at another bank

it really gets me all the big schemes for decentralised trading when gox went down last April reams of typing and grand schemes but not one came to fruition and now there is talk of decentralised trading that is nothing of the sort, when it misses [2] completely.

What port do I connect to to supply my bank account and ID numbers?

What you are asking for is not (yet) realistic. The Canadian MintChip thing has been recently brought up here: https://bitcointalk.org/index.php?topic=424205.0. It is possible that this device would enable the exchange of fiat/digital currency without a gateway. But without something like that, I don't see how it can be possible.

Possible or not, until this happens there is no true decentralised exchange.

There maybe one way of doing it now

10000's of people open bankaccounts that include a special number in the reference to signify this money goes to the distributed exchange. When the bank finds out the account is terminated perhaps, but there are 9999's other such accounts and list of account number are on a pirate bay style listing.

So banks give up as there are too many people doing this all the time.

jubalix, you seem to have some good understanding of the issue, and raise some important points.

All people currently involved in these "exchanges" know next to nothing about how they work (sorry folks). Anyone who has worked in this area for long enough would be able to tell. The model of the future is going to be very different than most currently imagine. having said that those in traditional institutions have no idea what's coming and are generally completely ignorant of the potential.
 
There are several major reasons why the current P2P-EXC models are flawed:

* liquidity has to be "centralised". this is because orderflow is time-ordered. if you have order_1, ...,order_N, then each depends on the other. this is completely different than the blockchain for most (not all) goods. on the blockchain the tx (tx_1, ..., tx_n) are largely independent of each other (otherwise the block mechanism would not work!). arbitrage insures that liquidity flows to the most efficient pool, which is going to be "central" (although might be distributed in a different sense).

* clearing. seriously, authors of current schemes don't even know what that means. without clearing, you don't really have trading of assets. and for clearing you need a lot of infrastructure, which will take years to build, and nobody hasn't even started. there are so many complicated issues. for example if you know how complex the stock market in its relation to the legal system is, you'll know what I mean.

* laws. assets are rooted in a legal system, which grants rights to asset-holders. without those rights, most assets are really worthless. no investor would be so stupid to invest in virtual shares, without these rights, because loss is almost certain. the idea of launching a "stock market" on top of the blockchain is just ludicrous. nobody wants to lose money, when the counterparty just runs away with the money. those who believe an investor can live without rules, just hasn't invested any real money. how do you properly measure sales and income without fraud? what does rights does an equity holder have in case of bankruptcy vs a bond holder? how are dividends treated? etc.etc. not that the current system is that good, but we have exchange laws, GAAP, IFRS, and so on.  these matters are highly non-trivial. I'm not saying laws as they have existed should exist in the future. but again, if you have serious money on the line, you want protection of your rights.

The community will be better off in thinking more deeply about why institutions exist. it takes much more profound understanding of the mechanisms, which you basically only know if you've studied economics deeply. having said that, new models are possible, but it will require more serious work, instead of amateurs working on it. the problem is that it requires deep technical knowledge of several fields (technical and economical). you can't just ignore the economic side.

I've also been disappointed by the apparent lack of progress on this issue. As you say, there were lots of designs being floated around earlier in the year. However, my hope is that there are people working on such platforms, just not ready to go public with their offerings yet.

Someone still has to clear those transactions. It's going to be a bank/gateway. Unless you propose that every single online exchange will initiate an EFT/SWIFT/etc.. Even then, I cannot see how this is possible in a decentralized way. How can you prove an account owner approves of a transaction without some centralized authority that is authorized to do so for you? There isn't a decentralized block chain with a PKI that allows you to interface directly with clearing houses...

Ix, that's right. It depends what kind of assets we are talking about! That really makes all the difference. Now for example if you want to trade say USD against JPY in Bitcoin, you would need a central clearing account at the central banks. Which you will only get if you part of something like SWIFT. basically the people who run the show. IMF, Worldbank, Banking organizations, the nation state governments. If you're say Iran or north korea than you will be simply blocked from the network. And BTC will be blocked/never allowed into the network. Now however, you can imagine that localbitcoin involves much more, so that there are say "local" authorities for clearing say Gold trades. For commodities this would work well. For FX/stocks not so much. as I said its not enough setting up a swap market like bitshares/mastershares. of course this can't work if you understand what clearing means. it means somebody is escrowing asset transfer.

i've come up with a model which allows true clearing for certain asset classes. everything depends on the structure of assets. from there we can build other cool stuff, but its not the stock or bond market. the distribution/centralization model will be mix of blockchain and FX like gateways. you really need btc exchanges as gateways. but improving localbitcoins is going to good. not sure anyone is working on this. one reason is market makers want to make money, and nobody gives away free money. over time fees will come down to close to zero though. you can look at fee/spread progression of US stock market from 1990 to 2010. it went from 1% to 0.02%.

I also remember the "reams of typing", as you put it, post-April. I think a critical error in those discussions was conflating two entirely different goals: (1)peer to peer exchange of fiat currencies for crypto assets and (2) real time decentralised trading of crypto assets. The reason for the conflation was that people saw the failure of Mt Gox in both areas and wanted solutions to both.

(1) and (2) are both very hard goals, but (2) is by far the easier, as long as you're prepared to sacrifice some performance to achieve the decentralization. Many people made grand claims about having solved (1) and (2) when actually they only had partial solutions to (2); partial in the sense that they were either not real time, or not decentralized. Purported inclusion of (1) into these architectures were dubious at best, usually involving a peg between a crypto and a non-crypto asset, but without accounting for clearing and settlement properly. Such pegs are to my mind fatally flawed.

Personally I am not very interested in (2), although better and better models will come along.

I am much more interested in (1); while conceivably there is an optimistic scenario where regulations get more and more lax and it will be less and less important to worry about on-ramps from fiat to crypto, I find it much more likely that regulations will get stricter and the absence of a private, decentralised, online mechanism will end up being a major throttle on cryptocurrency development.

That's why I spent a lot of time (and still do) on the ideas that were discussed here (https://bitcointalk.org/index.php?topic=173220.msg4029782#msg4029782). Only cryptographic proof of bank balances and transfers allows semi-automated and distributed arbitration required to transfer value between fiat and crypto without bank involvement.

I'm not saying it's but it is the requirement for a truly decentralised crypto currency, exchange.

The banks backend clears thier transaction automatically, they just wont realise they are sending/clearing to the distributed exchange.

and visa versa.

Also please define what you mean by "clear"

This is how fiat money transfers work: Alice has a bank account at bank Goldbank and Bob has a bank account at bank Silverbank, say in the US. The way this works is that Goldbank and Silverbank have accounts at the federal reserve. So if Alice wants to send Bob some money, effectively Goldbank will send money to Silverbank and the central bank will do the clearing. Fiat transfers without involvement of banks is impossible, except for cash. However there is no system where you can connect and prove that you own cash. Well there is the global exchange currency system moving around trillions of dollars everyday, but it is hooked up to central banks, see http://en.wikipedia.org/wiki/Real-time_gross_settlement

Essentially if you're not a bank you will not got access to those systems (SWIFT, FX clearing system, ...). You have to start a bank to be eligible to trade.  There is no system by which one can move fiat money around, without oversight. Except for cash. The first group that moves  money around without oversight are outlaws, and they use cash. At the same time there are rich people who use off-shore locations. Most of the big corporations use criminal tactics to avoid tax. Most normal people can't afford paying the lawyers for access to that infrastructure, which is legal. Even if one follows the argument of those pushing blacklists, the problem is who controls that list, and who makes those judgements. But subverting the fiat money system would be clearly illegal in most jurisdictions.


No. Its certainly not the case that "nobody will notice". You have to understand how banks and centralbanks inter-operate. They have pretty large systems for it, tens of thousands of people working on this stuff on bank and central bank side. You can't just hook up to the systems without anyone noticing. Thats not how the financial system works. Anyway, that just underlines my point I made earlier. You need to understand how the system works if you want to make it better. I would note that many nations don't have these kinds of complex and efficient systems.

What I'm describing is a way of leveraging trust in banks without needing their permission. It is possible to prove the existence of a bank transfer to a *third* party without divulging credentials. The most primitive way to try to prove such a thing is to print out a bank statement. This is not, of course, proof. Another way is if banks allowed third parties to contact them and ask for verification of a transfer. Banks do not generally allow this (and note - this *is* proof to any reasonable extent, since banks have the final say on the entries in their own ledgers).
A third, far superior level, is for banks to cryptographically sign bank statements/transfer records. This is an elementary piece of technology which they have decided not to implement thus far. The reasons for this have been discussed in this forum before.
What we proposed in the thread I linked was a replacement for that cryptographic signature in the form of recording of ssl sessions.

Third party arbitration, you may say, means total loss of the decentralization principle. But not really; first, bitcoin multisig means that third parties never control funds, and second, if the arbitration process is sufficiently simple, it can be distributed across multiple parties, including at random, and it can either be fully or partly automated (there are a lot of practical considerations here). The key point is that trust needs to be replaced with verification.

The practical limitation of an ssl logging based system is just the practical limitation on the extent to which any fiat transfer can be truly irreversible. If SWIFT is truly irreversible, as claimed, then an ssl logged internet banking enabled SWIFT transfer can be traded against bitcoin peer to peer with basically no trust, only verification - because any third party can do the verification and award a multisig payment accordingly.

If SWIFT transfer is only irreversible if the two counterparty banks want it to be, then that scenario of course doesn't apply, at least not perfectly.


I worked for a few years in a financial clearing house, so don't worry about the education :)

Okay, so we're talking about fiat exchange. The other projects make claims about stock markets, which are very different. My comments were about clearing assets which are not fiat money.

In terms of the suggestion of the use of banking data (logs). I might be misunderstanding this, but the problem is I believe this is not legal.

Say Mr. Smith is a private person in the US or Europe. He has a bank account at a respectable international bank. Some person approaches him and says: I will wire you 1M$. Please wire that on to 10 people on this list. You will get 1% as a reward. Although Mr. Smith owns the bank account and can receive and spend money as he wants to, this kind of transaction is illegal in the jurisdictions that I know of. I'm not sure how this works with localbitcoin in practice. I assume anyone doing large volumes will sooner or letter have problems with his bank. Not everyone private individual can become a bank or exchange. Usually it takes quite a lot of money to set up an institution like that.

ok this is easier than I thought, for one the banks back end is going to go blockchain tech, eg peercoin for high value settlement or maybe BTC itself so there goes the RTGS

swift or similar or visa can be used, visa being a cooperative, or invent something. Where I live I am pretty sure the central bank does not clear things and the banks do it inter se

Ultimately a bank has to set up some computers some where to connect into this and give a balance. So it can be done.

Futher it only takes a few nations to allow banks to open in their jurisdiction to then be the receiving accounts for all of this, which prisoners delema and the money on the table wii ensure happens.

Probably you didn't understand the general idea. Think of it like this. Alice wants to send dollars to Bob in exchange for bitcoins. Bob places bitcoins in multisig escrow with Charlie. This means the bitcoins can only be sent with the permission (signature) of any two of Alice, Bob and Charlie. Then Alice makes a wire transfer to Bob. Once Bob has received the funds he can give his permission, and then either of the other two parties can also give the permission, and the bitcoins are transferred to Alice completing the transaction.
The problem with this scenario is what happens if there is a dispute between Alice and Bob. Say for example that Bob is a bad actor and lies, claiming he hasn't received the fiat funds when he has. What we could say is that Charlie can abritrate - ask Alice for a bank statement or similar proving that the funds were sent.
This is not good enough since a statement isn't proof. So we need either cryptographically signed statements or, equivalently, ssl records.

There should be no legality issue because Alice only exposes the information about her transfer in the same way she would if she gave someone a bank statement copy; but with cryptographic proof this bank statement cannot be forged.

I see. well there is a couple of issues here. in exchanges there are large liquidity providers who specialize in trading. so you're not just send a couple of BTC for $, but potentially dealing in large volumes of trade. you're just not allowed to do that without following AML/KYC. sure, if you doing small volumes likely nobody is going to notice, but for the system to work on large scale you need big processors (market makers).

also what is missing here is the element of price discovery. That is what exchanges are all about. The bitcoin exchanges gather order data, take the fiat money and settle the trades. so if you want to settle 1'000'000 tx/sec, you can't have a completely inefficient system. I very much doubt that one can work around the existing clearing banking system, to settle fiat transactions.

OK, so again it comes down to which problem you're trying to solve - (1) or (2) as I referred to in my first post. I think like many earlier discussions, you are mixing them. That's OK if you want to solve both of them simultaneously but I think it helps to separate them. As for scale and AML/KYC, for sure that's a problem; but one of the main points about decentralisation is that it reduces scale. No centralization means no large scale transactions (or at least, no transfers larger than is usual for that particular entity).

I think we can all agree that clearing is an issue in the fiat world, but not an issue in the crypto world - there, settlement occurs atomically with the transaction because of irreversibility, so there is no clearing.

Performing clearing and settlement for a decentralised fiat-crypto exchange is indeed going to be tricky. Centralised - no problem, it's just like any other currently existing trading system. You can imagine things like T+2, netting etc. existing in that framework if the system gets complicated enough (e.g. brokers) but it's all bound to be much cheaper than the existing system because it's so easy to get to a final settlement when you want.

For decentralised, I could imagine it having two tiers. For high transaction throughput crypto-crypto asset exchange, you'd need some kind of settlement into crypto (for the transition from sub-second trading up to minutes/hours bitcoin settlement), and then a second layer of settlement of bitcoin-fiat using traditional bank clearing, on the order of days. This is what we currently have really at the big bitcoin exchanges; they do it poorly I guess but they do it. Trying to make all that work in a decentralised manner is seriously difficult. What I was describing in my earlier posts was a system to help with the on-ramp part - how to do settlement of fiat/crypto without a central server.

However I have envisaged a system like this: a p2p network of users who hold fiat accounts and bitcoin accounts. Fiat deposits and balances are tracked using ssl logging (so verifiable by the whole network), and these provide the liquidity to allow real time trading peer to peer of fiat for bitcoin. Imagine the network as a whole as an entity having a USD balance. Peers add $1000 when they enter and are credited with that amount in the globally maintained ledger (blockchain comes in handy!) - the mechanism to "add $1000" to the ledger is to make a deposit to one of a class of users who act as depositories, and who have pledged an equivalent, or usually much larger, btc amount to multisig (so they can't run away with it and liquidity is maintained even with price fluctuations). So, these users hold dollars on the network's behalf. Then fiat-btc trading can occur within the network in real time and when time comes to settle out into fiat, any of the depositories can make the wire transfer.

Obviously that is an enormously complex structure to build, but with the ability to verify fiat balances cryptographically, it *is* possible.

As for high transaction throughput and price discovery, I don't have a strong opinion. For sure that is the natural preserve of a centralized system, but perhaps with imagination you can make price discovery work in a decentralised way. Not sure.

interesting. I don't see how you want to solve settlement risk. This is a feature of fiat money. bitcoin itself of course does not have settlement risk! following a quote from wikipedia about how FX settlement works. I believe part of the solution is that exchanges will evolve protocols, so that market maker profits go to outside stakeholders/exchange members. I don't see at all why alt-coins should be coupled to exchanges.

I'm working on parts of this. Some of it is redesigning FIX protocols, but also trading protocols, where sell-side and buy-side are essentially plugins. even most large billion dollar funds don't know how to trade (execute) efficiently. some of this can baked right into the exchange, instead of having market makers who profit from inefficiencies.


http://en.wikipedia.org/wiki/CLS_Group

http://de.wikipedia.org/wiki/Multi-purpose_Business_Security_over_IP
In Austria: Port 3048 (Bank servers: http://www.elba.at/hotline/mbsipzugangsdaten/)

Germany has HBCI for example...

How do you guys do internet banking in the US?! There are surely some standardized interfaces, right?

That's not on the transaction layer. You can't for example have two bank accounts and move from one to the other going over one API. so in the future I think we're going to have a layer over bitcoin which is like FIX. certainly traditional banking, in the sense of a storage of value is going to go away. then one can move seamlessly between services on top of protocols (like an investment scheme etc.).

The CLS quote you posted is really talking about counterparty risk (I think it's a more helpful name than settlement risk, although of course that's also accurate).
The best way to deal with counterparty risk within the trading system is to use multisignature transactions. This is a really revolutionary technology; it almost entirely removes counterparty risk as long as you have verifiable transactions on both sides. The only remaining risk is collusion. You still have to trust that the arbitrator is not colluding with your counterparty. The best way to do that is, I believe, have the arbitrator chosen in a provably (i.e. publically verifiably) random manner, or even more effective (but more difficult to implement) to have the arbitration done by a voting mechanism within a P2P network.

That's true, it is "revolutionary" in many different ways. So, how do I prove I own 10$ or have send 10$ in a fiat money system? Fiat money transactions are reversible, because they have a counterparty. any fiat within cryptocurrency leads to something like marking, i.e. colored coins. I haven't studied that approach to much, but I suppose the pool you suggested is like that. It seems to me there will now fiat colored coin any time soon.

I have a much easier solution which immediately makes p2p exchanges possible, however not for fiat money. and certainly not for stocks or bonds, which I believe is nonsense (given state of affairs as of 2014). stocks are tied to the legal system, and there is no way one can abstract that.

Using internet banking. The encrypted ssl record of the session can be recorded. Then the specific encryption key for the page which shows the balance or transfer can be passed to an arbitrator, allowing them to read that particular html page. The proof ultimately traces back to the bank's ssl certificate (exactly the same proof that allows one to be confident of doing internet banking in the first place).
Digital signatures from banks would provide the same thing in a much more elegant way.

Well obviously the existence of a counterparty does not imply reversibility, but that aside - not all fiat transactions are reversible. First, obviously there's cash. Second, SWIFT transfers are intended to be irreversible by design (after all settlement has to occur at some point).

I'm not talking about colored coin type systems.

Fair enough, I apologise if I dragged you off topic, I probably misinterpreted some parts of what you wrote. If you're only interested in (2) not (1) (from my first post) then most (but not all) of what I said isn't probably relevant.

forget about Fiat, what about a Decentralized NXT/BTC exchange or even a pure BTC futures exchange, where we are only dealing with Crypto currency.

I don't think anyone has even come up with a solution for a simple Decentralized limit order book. Seems to me that a Decentralized exchange can be gamed with common latency arbitrage / high frequency market making techniques..

Check out this sweet decentralized exchange protocol, Counterparty:

https://bitcointalk.org/index.php?topic=395761.0

You can trade Counterparty (XCP) for BTC or other assets completely decentralized and trust-free.

You can also issue dividends, and place bets on things like sporting events.

I've looked at this XCP thing. it doesn't have prices in the orders... why would I buy something at an unknown price? that's what an exchange does. its a price-machine so to speak. I mean this design is like a car that doesn't drive. its completely absurd.

at least they are not taking money for the dev upfront, so that's good.


yes. people designing an exchange should know what they are talking about. none of this stuff works, for quite obvious reasons. limit order book is a central datastructure like the blockchain. if you think about it bitcoin is de-central and central at the same time. blockchain is the ultimate central datastructure.

I haven't studied NXT at all, only looked the source code for 5 seconds. all current projects MSC, NXT, eth, have not considered much what an exchange is, in terms of price discovery and settlement.

What do you mean it doesn't have prices in the orders?

http://blockscan.com/order.aspx

ok, I stand corrected. then the readme doc is just badly written (an order without a price is called market-order). I'll look at it more closely then. with a block based exchange there are plenty of attacks one can do. timing attacks, flooding attacks, ... it certainly can't scale to any meaningful volume, because orderbooks are central datastructures. a possible way to solve this is much more involved.

I just announced a proposal for a P2P Fiat-Bitcoin Exchange.

BANK RUN! - P2P Fiat-Bitcoin Exchange
https://bitcointalk.org/index.php?topic=462236

waxwing points out very clear that we have 2 different parts when it comes to P2P exchanges:

My proposed solution is targeting part (1).

To solve both parts is probably not possible in our current legal framework: Regulation of entities dealing with the money of other parties. For good reason to protect from fraud or default.

Solutions for part 2 are already out there (Ripple, Open transaction or any of the new altcoins advertising crypto-crypto/IOU exchange).
But all those leave one part open: The gateway to the Fiat world.
These gateways are exchanges or Banks. So it is no decentralized solution and has only small benefits to use these exchanges in the first place. It is more like a interbanking network, they improve liquidity and could benefit from arbitrage.
As a normal user you cannot become a gateway as you would be confronted with the regulatory framework. To create a P2P network of gateways where everybody can act as a gateway and play "private bank" is an illegally proposal, as the gateways are dealing with money of other people. Fiat money, so you are in governments realm and control.

The only solution I could image (but which will be pretty complicate and I have not thought it trough completely) would be a kind of  gateway doing the fiat conversion in behalf of 2 other traders.

Something like that:
Gateway issue USD_IOU and need to put a BTC collateral of the same value into a lock as warranty that he will change the USD_IOU to USD any time, otherwise he will loose the locked BTC collateral.
Trader1 wants to buy BTC for USD from trader2. They do the deal with BTC and USD_IOU.
The change from USD to USD_IOU and USD_IOU to USD will be done via the gateway.
There are always only 1 to 1 relationships in the trade: Gateway-trader1, trader1-trader2, Gateway-trader2.

Not sure if that construction could be considered as (assistance for) money laundering, as the gateway doing a fiat conversion in behalf of others. I guess it would.

So at the end if you want to operate in the legal framework the only allowed interaction with Fiat money is to use it for you personally matters (buy, sell form another), but not to offer a service to trade on behalf of others (what a gateway is doing).
Providing liquidity is a service and I assume it could never be done in a pure P2P solution.

jed's new secret bitcoin project could be it.

Maybe? There would be much demand in China right now as well as in Russia I assume.
But I am not sure if a solution provided by a company (assuming jed's is that style) will be really the solution in a pure P2P sense? A free open source project would be more suitable (like Bitcoin, dark wallet, bitmessage ...).

i don't think there's a company behind his new secret project. maybe he's going back to his roots. that would be rad.

This "decentralized trading" idea can only work with digital assets (e.g. blinded Bitcoins...), not fiat money. There is no way to "digitalize" a dollar bill without introducing a third parts (called bank, escrower, gateway, exchange...).

Here is a solution using collateral to build a system for trust-less fiat-btc trading:
https://bitcointalk.org/index.php?topic=462236

The bank transfer(s) can be reversed after the BTC are released. Alice Will steal Eve's bank data, send 1k USD to Bob, pocket the BTC and then Eve gets Bob in trouble. This happens often enough on both localbitcoins and bitcoins.de already right now (since that's the exact same system these are operating under).

The bank transfer network is the third party in that scheme and it sucks compared to Ripple for example, since transactions between banks are reversible. It would only work with cash-in-mail and even then you need to trust the postal services.

Also if BTC prices fall more than 10% until the BTC are sold, Bob is better off never releasing the coins. Using this system is like shorting BTC on reversible bank transfers no less. Good luck with that.

I agree, but with the Nash equilibrium solution posted here, you don't need to trust the banking system. You can perfectly send cash money by snail-mail.

No you can't.

We both put up 50 BTC, I send you a couple dozen self-printed 500€ bills and claim the post man switched them. Heck, I can even take pictures and whatever you want of me putting in real money beforehand. If you want to, I'll even make a video, uncul, of me stuffing 100% real money in an envelope, sealing it, writing your name on it and handing it in at the post office, no problem. You'll still receive ony fake money and after some time our 50 BTC each will either have to be returned or destroyed. I still have proof and go to court, also your reputation on that exchange is destroyed.

Also I could send real money. With the GPS tracker from the last bank robbery still inside (or not, doesn't really matter if the serial numbers are tracked). ::)

You have to use bank transfer types which are irreversible SEPA in europe for example. See: https://en.bitcoin.it/wiki/Payment_methods

Price swings are handled in the paper. Volatility is direct proportional to the collateral high. So if you wnat to cover risk for 10% volatility 10% collateral is enough. for 30% volatility use 30% collateral.

I think you are still missing the most important point!
The collateral on both sides guarantees that both will loose money if they are behaving inhonest.
It is not a question of proving the other party anything. If Alice has done the bank tx and she knows that it was successful and Bob received it but tell her "no I didn't get the fiat money" Alice cannot do anything about it, but Bob will loose his collateral when not signing the payout tx and that would lead to a bad deal for him.
There are exact 2 situation where they could behave unfair. In both nobody could steal money from the other but both will losse money. Once Alice would loose 0.1 BTC and Bob 1.1 BTC, and then Alice would loose 1.1 BTC and Bob 0.1 BTC (if you convert the USD to BTC). See the paper all that is covered....

I am in Europe and I would not trust that SEPA transfers are irreversible at all. There are cases every few weeks in the German subforum that support this claim. Even if they are irreversible, your bank account still will get locked up sooner or later as soon as someone sends you money from a phished account.

You just describe NashX and as I already said, there are strategies where Bob can benefit from Alice loosing money, even if it costs him a bit as well.

Once the collateral gets higher by the way, there is an easy extortion attack: freeze both collaterals + Alice's coins she sells, don't send money but agree to release the collaterals at least if she claims to have received money. As soon as the collateral become worth more than what she would have gained from selling the coin back in the days, she is acting economically rational to agree to that deal.

Very good insight. I agree entirely.   A lot of coins keep focusing on the technology side but are unable to see the big economic picture.

Anyway,  if you want to explore this more,  I would like to discuss this in light of the direction of NEX.

Please note:

loose
[loos]
adjective, loos·er, loos·est.
1. free or released from fastening or attachment: a loose end.
2. free from anything that binds or restrains; unfettered: loose cats prowling around in alleyways at night.
3. uncombined, as a chemical element.
4. not bound together: to wear one's hair loose.
5. not put up in a package or other container: loose mushrooms.

lose
[looz]
verb (used with object), lost, los·ing.
1. to come to be without (something in one's possession or care), through accident, theft, etc., so that there is little or no prospect of recovery: I'm sure I've merely misplaced my hat, not lost it.
2. to fail inadvertently to retain (something) in such a way that it cannot be immediately recovered: I just lost a dime under this sofa.
3. to suffer the deprivation of: to lose one's job; to lose one's life.
4. to be bereaved of by death: to lose a sister.
5. to fail to keep, preserve, or maintain: to lose one's balance; to lose one's figure.

Nice idea. Not really an exchange in the true sense, though,  as it would be to slow.

Agreed. SEPA and ACH =/= SWIFT.  I've also been led to believe OKPay has a high "money hardness" (see the first page of my slides here: https://github.com/AdamISZ/multisig_lspnr/raw/master/Paysty.pdf). I'd love to hear more anecdotal evidence if anyone has it.

right on! ive been saying this for months. once its distributed, everyones order book looks different.

In the real exchanges, orders have a choice to be routed to an exchange.  Furthermore, if I recall, every exchange must post is best bid and lowest ask price to allow orders to be routed to the appropriate exchange. 

yes..Reg NMS . whats your point. http://en.wikipedia.org/wiki/Regulation_NMS

I know that this topic is a bit out of date, but just in case you are still interested in a P2P Fiat-BTC exchange, I wanted to post an update of our project and announcement for our crowd funding campaign which will end in a few days (on February 9th).

Bitsquare released an alpha version in December and it can be tested at our regular testing sessions with other traders (testnet).
Today 17:00 CET we have such a session. Feel free to join us on our IRC channel #bitsquare-trading on Freenode.
Further information can be found here:
https://github.com/bitsquare/bitsquare/wiki/Bitsquare-WAN-Parties

Regarding the crowd funding campaign:
We are using Lighthouse as decentralized crowd funding solution to iteratively fund the development of every milestone, leading to a fully functional version 1.0.
The funding goal is 120 BTC for the next milestone and the campaign ends in a few days on February 9th. 
Please visit our web page for more details:
https://bitsquare.io/crowdfunding

If you like to support that project please help us to spread the word.

Best regards,
Manfred