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please delete

project abandoned long time ago

Couple issues:
You haven't explained how the trade happens without 3rd party.  This is a non-trivial problem.
Buyer has USD.  Seller has BTC.  They agree on an exchange.  How EXACTLY do you intend to faciltate the transfer so that Seller's BTC go  to Buyer's wallet and Buyer's USD get transfered to seller's Dwolla account without one party just taking both and leaving.

You haven't explained how you will enforce bids without a 3rd party.  This is a non-trivial problem.
I offer for sale 1,000,000 BTC @ $1 ea.  How do you ensure that I have 1,000,000 BTC and that I can't remove the order once matched and executed. 

There likely are solutions but you seem to have glossed away the entire problem which isn't reassuring.

I haven't glossed away anything. I said that I want people to give their ideas. I'm aware (and even said so) that the trade system is not full-proof. However, the bids are simple as far as I can see. Before placing a bid the software will check to see if the amount you are trading exists in your wallet before allowing it to go through.

All Best,

Michael

These are difficult to solve problem which will likely require some kind of distributed escrow, multi-signature solution, or fiat based crypto-currency.  To say it is "easy" would indicate you haven't thought this out.

So the checking is done in the client?  
The client which will be open source?  
The source code anyone can modify to include the "checking portion"?

So my modified version will let me spam the network with bogus bids and asks?

A 3rd party exchange serves two major functions:
a) to ensure the trader has the asset being traded.
b) to ensure the trader can't avoid trading when his trade is matched.

The entire decentralized p2p exchange boils down to solving those two problems.

So you've found holes! Now tell me how to fix them! My goal in this posting is to have people find the holes and give their ideas on how to make it work. When a full-proof workable system is developed then the coding will begin. I like your idea of the distributed escrow. Tell me more!

All Best,

Michael

<quote>Unlike other attempts at creating a peer-to-peer exchange, P2P Exchange does not rely on a web-of-trust system. How is this possible? The answer is quite simple. I like to call the mechanism that executes the trade a "Trader Bot"</quote>
Your proposed trader bot does nothing except error checking before offering a trade.  As an open source client, a malicious party could bypass these checks if desired.

I think you're headed down the wrong path, and should integrate in support for a web of trust.  I know of no other possible solution to the problem of a distributed exchange.

Say something that hasn't already been said please! If you have a solution share it! :)


I'm open to whatever works. I'd like to make it work without a web-of-trust but if it comes down to it then that's what we'll do.

yes why can't it be similar to what #bitcoin-otc does in irc.  effectively bringing the irc channel to an easy to use automated program.  a user could specify the lowest rating they allow to complete a trade

A web of trust mechanism might be a solution.

I buy/sell/trade on this Forum because I have been vetted by the Bitcoin community.

Seems to be a fairly decent self-regulating system, could we not do that w/ this P2P exchange?


I would like to forward a quote by 1QaZxSw2 on why this is so important for the crypto-coin community:

"P2PX (p2p exchange, yes I just invented an acronym) is an essential step to securing the future of bitcoin commerce.
Right now the exchanges are the possible targets of government shutdown."


We have a decentralized currency;  now we need to do the same for our exchanges.

Micheal, keep up the good work!

Exchanges perform several functions, of which the following are relevant to the bitcoin community:

• They are a central place where traders can place their trades
• Provides fiscal safety in dealings
• Provides clearing house functions

All other functions such as capital formation, speculation etc are facilitated by the above basic functions

Of the above, fiscal safety is the paramount function. Every trade that occurs on the exchange should somehow be enforceable. In the fiat world, you would need to deposit cash or securities with your broker (actually held by your broker's clearinghouse) and they will ensure that you cannot place a trade unless you can fulfill its obligation. If a trader cannot fulfill his obligations, the clearinghouse is liable and the exchange will ensure the other party in the trade is not impacted negatively. Clearinghouses periodically "clear" their balances by transferring cash or securities from each other.

This model is successful because of clear separation of responsibilities and risks. There are several layers of risk management that allows the exchanges to transact large volumes of cash with confidence. For example, the exchange itself requires clearinghouses to be insured against default and so on.

To adapt this to a P2P model, we would still need to figure out how to have a p2p exchange and a p2p clearinghouse.

Clearinghouse:

In a pure P2p model, every person is his own clearinghouse. When the amount of money is so huge, it would be extremely hard to trust the system would work on blind trust or even historical trust. If a 80+ year old institution like Bear Sterns could not keep its financial commitments, how can you trust random bitcoiners to remain solvent?

To keep everyone honest, we absolutely need a clearinghouse.  One simple option is to have the bitcoin network itself as the clearinghouse. Once someone puts in a trade, that money/currency has to go somewhere out of the persons control. Perhaps it could linger in the bitcoin network or some alt-blockchain. If the order is filled, the money/asset can go to the other party. If the order is cancelled, it should go back to the trader. This allows the bitcoin network itself as the clearing house. This may require some protocol changes and dudes smarter than me need to step up here.

Fiscal Safety:

The above approach also raises some interesting questions. Can the money lingering around in the bitcoin network be stolen? It should not be possible. It should not be double spendable either. It still belongs to the person who put in the order, they are just unable to do anything with it.

I realize that a lot of these are hard to implement unless everything is denominated in BTC, which is why my current project denominates everything in BTC and would love to use this p2p exchange instead of creating my own exchange which would be a possible target of government shutdown: https://bitcointalk.org/index.php?topic=62907.0 (please vote on this poll)

For example, transactions in blockchains currently only talk about BTC. Can alternative products be added in there? What are the procedures for creating a new instrument? Assign a code? Is this done by committee? Won't this all lead to some centralization anyway? How do we ensure blockchains remain in sync? A BTC to LTC trade should be reflected in both chains. Perhaps a brand new p2px chain just for this?

perhaps Open Transaction Server (https://bitcointalk.org/index.php?topic=53329.0) and this p2p project could somehow be the answer to the problems.

I've never used Paxum, but dwolla charges $0.25 for each transfer. Though still cheaper than Mt Gox in many cases, for someone selling .1BTC, it would be a large fee. If they (or any other funding option) have an issue regarding the frequency of transactions, this may not be a viable option for a day-trader, esp. a HFT bot.

This  does give an easy straight forward means of getting money in to BTC for the average Joe just trying to make a quick purchase though.

Good Luck with your project.

Dwolla was only for an example. My goal is to have EVERY payment gateway available eventually.

Transfers less than $10 are free.

This is an interesting project.  However p2p trade systems have cost; that is the cost of protecting from double spending.  Either you have a distributed verification network (like bitcoin with the block generation), or you have some sort of trusted centralized user that 'clears' the trades...  (this is normally called a 'clearing house').

If by some miracle you have come up with an algorithm to solve this problem in a distributed p2p manner; it would be wonderful if you could produce a white paper that explains how you propose to solve this doubble spending problem.


I'm working on the Open Transactions project;  this project is building secure (and centralized, but to a server of your choice, in the future we can have a group of federated trusted servers);  the market software executes in a similar mechanism to the Bitcoin scripting.  (through the use of cryptographic market contracts).

I really hope the best for your project, except I'm really scared if it doesn't have the well-thought-out cryptographic foundations (that we are still working on for the Open Transactions project); you will be opening your users up to easy scamming.

Thank you for your response! At first I didn't want to create a new blockchain because I felt there are already so many and it would only complicate things. But now I'm thinking it may be the only possible way to do this securely without a web-of-trust. We are currently designing an algorithm for this. At the moment we're calling it P2Coin. Both me and the one coder for this project that I have so far are working on it. We both enjoy and are good at designing these types of systems. This will be a fun experiment!

I will also advise that no one trade any amount that would really hurt them if they lost it until it is announced as a stable system. Due to the nature of what's at stake here (people's money) there will be extensive testing involved.

All Best,

Michael

The "miracle" already exists but people don't see the big picture yet. The solution is a combination of federated, p2p, and f2f architectures.

Earlier in this thread it was said that the exchanges are the natural "bottleneck" in the system that are likely to be targeted by "the authorities" (which is patently true.) But the purpose of these institutions is not trading, per se, but exchanging between fiat and crypto currencies--and this function will someday soon be subsumed by implementations of the Ripple protocol. (You will not need exchanges anymore, because people will be able to exchange in-and-out of various fiat currencies via friend-to-friend technology instead.)

We are standing at an epoch in history.

Normal market interactions will be processed by transaction servers (such as OT) and the security of the Bitcoins traded on those sites will be protected by multi-sign voting pools (on the blockchain) composed of federations of those servers (and someday in combination with auditing and insurance entities as well.) Systems such as OT will perform most of the actual transactions. Bitcoin/Namecoin will be the universal medium that glues it all together, and Ripple will be the gateway in-and-out of the system, which will forever eliminate any need for banks, money transmitters, monetary policy, or tax authorities. At the end of it, I expect to see precious metals re-monetized. (For the masses, I mean. Obviously it's already money for the elite.)

I have to put much more work into this, but I've a proposal that would allow this (and more):

https://bitcointalk.org/index.php?topic=60591

It is based on fiat based crypto-currencies or Ripple.
Fiat based cryptocurrencies could be issued within a chain or just with signatures (needing Timestampers and accounters in that case).
Cash-like IOUs could be traded atomically for bitcoins without the need of accounts in any server (like is the case for OT). It can be argued that my cash-like IOUs are not as untraceable as OT's, I would like Fellow Traveler to clarify this for me.

https://bitcointalk.org/index.php?topic=53329.msg710842#msg710842

Very excited about this! Keep up the good work!

If this solution can be FULLY integrated with Bitcoin-OTC, using some IRC Library... It will be a killer app! ;)
BTW, it is open source, right?!
Ah! And it works under Linux... RIGHT?!?!  :P

Seller: Puts up Bitcoin for sale. Bitcoin is transfered to a multisig address. Seller has one priv key, P2Coin stores the other in a way that the seller has no access to (ex. encrypted, with a timer set to expire and release the key and the funds back to the seller after a day or two).

Buyer: Puts up USD for sale, selecting Dwolla. TraderBot verifies balance exists.

Sale is matched

Buyer TraderBot scans P2Coin for other Dwolla users and selects one at random. USD is transfered to the random Dwolla account, with owner info of the this account stored in the chain.

Seller TraderBot verifies that random Dwolla holder received the funds. If funds are received, it send its own private key to the buyer, and requests random user's TraderBot to send money from their Dwolla to the Seller's account.
Third party TraderBot sends USD to the Seller, notifying P2Coin.
P2Coin releases the second priv key to the buyer.
Seller receives USD from random third party, Buyer receives BTC priv keys from seller and from P2Coin to get access to the BTC.

Sale is not matched, or seller cancels sale

USD still sits in Dwolla
BTC is not accessible until P2Coin signs the BTC for sale with the second priv key either when it's asked, or when the sale expires.


Security considerations

From BTC side:
Seller has no access to BTC due to not having the second priv key, so can not choose to keep BTC without letting P2Coin know. If he cancels the sale, P2Coin will know the BTC is no longer available.

From USD side:
There is risk that the randomly picked Dwolla account will have a malicious TraderBot that accepts random cash inputs, but does not send the money out when asked. Risk is reduced by making the third party picked at random, and having their account stored in the P2Coin chain. Reported scam accounts can beblocked from the pool, and reported to Dwolla.

Hope this idea helps keep things moving.

Also, if P2Coin is its own block chain, I suggest it only go back a few days, like the P2Pool chain, deleting blocks older than a few weeks. This will keep the block chain size small, will help with privacy, and will still give a few days to track down thieves. Though I guess someone can just continuously monitor the chain and record all transactions into their own database :(

So, in real simple terms, what is the motive to create a P2P exchange?
The biggest bottlenecks right now are banks and payment processor. Recent events are good evidence of that (paxum, tradehill getting ripped off, banks freezing accounts without notice). If we rely on Dwolla, then there is still a central point of failure and it may reverse transactions (See there TOS).

I appreciate your work and your thoughts, but in my opinion, it appears to me you are trying to cut out the wrong man first (the exchange).
Figure out a way to do away with the banks and then you are talking seriously cool disruptive technology.

I think the point is that Paxum and other banks won't deal with centralized exchanges, but their business is to move money between individuals, and if you use this system, they won't know if you're trading Bitcoin or just sending someone money. There won't be a single point of failure, that being the exchange's bank account, since many accounts will be involved individually.
Chargebacks will still be a problem with some systems, and I'm not sure how to get around that (force PayPal to send as gift? Use services that don't do chargebacks?)

As for using something like ripple, how do you get your money into ripple? And if it's a hassle, why bother instead of getting it into Bitcoin more directly?

Picture of the GUI got me hooked.

I've seen another thread about Dark Exchange (https://bitcointalk.org/index.php?topic=27055.0), but it would be good to get ideas going in both places.

First off, my original post detailing the p2p exchange was more speculative than a definitive method. I was asking people to put forth their constructive criticisms and helpful ideas. "Um, no." is neither a constructive criticism nor a helpful idea. Things have changed considerably since my original posting thanks to people who gave their helpful ideas. I will either substantially edit or remove completely, the original thread in the days to come and post the new details.


Regarding the motive to create a P2P Exchange; Bitcoin is a decentralized system. Bitcoin itself can never be destroyed. It would only die if everyone in the world decided to abandon it and stop mining. Other than that, it will last forever. But there are actually things that can weaken the strength of a decentralized system. I call them "external centralizations". Bitcoin is decentralized and you can't change that but you could create centralized aspects outside of Bitcoin such as exchanges or mining pools. At first they seem like good things but having too much power in one area is dangerous. If Bitcoin became outlawed one day and all the exchanges were forced to close down, it would take a serious chunk out of the Bitcoin economy. It probably wouldn't completely destroy Bitcoin but would probably just force it into the underground. It would then be much harder to buy Bitcoins. Mining Pools are probably the most potentially dangerous "external centralization" because it has to do with the actual infrastructure of Bitcoin. If one mining pool gathers too much power there is the possibility a 51% attack can be done. The owners of the pool might be honest but what if a hacker was able to gain unauthorized control of that pool? He can then attack the network. That's why we need decentralized mining as well and I'm happy to see that there are people working on that. I wish them the best!

Dwolla is only one payment gateway that can be used. There will be many others (Liberty Reserve, Paxum, PayPal, etc.). I only used Dwolla as an example in my description. Since this is an Open Source project, theoretically ANY payment gateway can be used if someone makes a module for it.

Since fiat currency is centralized, I doubt there would be any way to possibly cut out the banks, etc. It's just not possible in the electronic world. Cash on the other hand does allow for this but is restricted to local business dealings. I understand your concern about accounts being frozen etc. In the current system we have for P2P Exchange, there will be no way your account can be frozen as a result of Bitcoin trading. This is simply because you will merely be sending money to another person. There is no way for them to know why you are sending money to that person. Your guess is as good as mine as to why person A sent money to person B. There is no way they can associate the transaction with Bitcoin.


Thank you very much for your comment. I wonder if using PayPal's "send as gift" function would prevent chargebacks. I really don't know anything about this but will look into it. If anyone has anything to say about this I'd like to know. As for the ripple method, a bunch of people have told me about that and I will look into it. But if we are successful in our current design there will be no need for ripple or any other "trust" method. You will be able to get your money directly into Bitcoin.

There are some that doubt we can successfully create a scam-proof peer-to-peer trading system without any sort of "trust" method. I have reason to believe that it IS possible and I am very optimistic. I do realize that solving the "trust" problem in a peer-to-peer trading system is probably akin to Satoshi Nakamoto solving the double spending problem. That might sound daunting to some but I don't let it deter me in the least. I accept the challenge! I've been told that I should receive the Nobel Prize if I succeed in solving this. My response to them is "Thank you for your flattering remark but they can keep their stupid Nobel Prize!" lol

Rassah, thank you very much for the time you've put aside to write those suggestions you posted a few posts back. And thank you to everyone else that posted interesting suggestions. I will put some time aside to review them all.


Haha! Yea! I'm getting that from everyone. I'm glad you liked my design. I've recently just changed it a bit and added in a section for Trade History. I think it's looking even better now. I might post more pics down the line.

I admire the efforts of Dark Exchange. It's always good to see other ideas working. Then, at least if I don't succeed there is still hope in his idea.  :)

I am still looking for coders for this project so if you are a coder and interested in helping out please send me a Private Message. We currently have only one coder so any help to push this project along quicker would be much appreciated.

All Best,

Michael

Just a short message from me that I'm highly interested and would love to use this myself. You seem like to right person to do this!

Well, is there any solution to how to guarantee that both parties send what they need to send?  Because a bot logging into people's accounts and screenscraping is out of the question.

The answer is yes and you will be hearing about it in the near future after it's been tested.

I've said this many times but worth repeating: A p2p exchange (p2px) is the single most important thing needed for bitcoin to succeed. I'm glad you guys are pumped up about this, but do not create a solution just because its the first thing that comes to your mind.

Any exchange needs the following or its guaranteed to fail:

Quick transactions: If the end-to-end transaction takes more than 30s, I will probably continue to use centralized exchanges.

Simple: I should click buy and its bought. If I have to continue with 4 extra steps including contacting the other party, manually sending cash (using paypal or whatever) the burden of a transaction is too excessive. I'm personally not going to use a glamorized craigslist.

Secure: I agree with other posters here who indicated that inputing my dwolla info into the p2px is out of the question. A bot is going to do what? Someone else's random transaction takes place thru my main account?

I know this is hard, but lets plan this for success like our guru Satoshi did.

My opinion is that we need to anonymize the fiat and decouple the buyer and seller. That's what exchanges do. On placing an order, the fiat and BTC (or other cryptocurrency) goes into the network and is unavailable to the trader. Once a match is found, they are atomically exchanged. Cancelling a pending order will bring it back into the trader's account.

So far, we can already do this within cryptos. Basically, we need a way to mine fiat. A crypto pegged to a fiat currency (such as the originally proposed RealCoin) may be the solution here. RLC needs to be analyzed by independent minds before this it can be adopted for p2px. Unfortunately, we would end up depending on Realcoin to continue to exist, not be target of government shutdown, 51% attack and various other risks.

Another alternative is to create temporary financial packets where currency is anonymized and stored is a sort of decentralized escrow while an order is unfilled. This will allow miners to allow small amounts into and out of accounts specifically designed to take p2px cash and keep a small fee for the service (analogous to transaction fee). This account is strictly a business account that would not hold any real cash.

So a transaction may work like this:
1) 1QaZ wants to buy $1,000 worth of BTC at $4
2) Money is extracted from 1QaZ's account (dwolla/paypal/whatever) and is sent to say, 100 escrows at $10+fee each.
3) Once money transfer is confirmed, BTC is transferred to 1QaZ's bitcoin address using the escrow method.
4) once BTC transfer is confirmed, the 100 escrows each send $10 to seller.

Of course, 100 escrows twice cost $50 on dwolla, making it infeasible. Dwolla also needs a bank account.

Perhaps paypal with a gift or other mode to avoid payment fees. Also setting up paypal account (without a linked bank account) is fairly easy.

Frankly, I prefer smart folks here figure out a way to mine fiat.

No. Other people's transactions will not be taking place through your account. Trader A is selling 1 Bitcoin at $4. Trader B want to buy them. Trader A accepts Dwolla. Trader B sends money from his Dwolla account to Trader A's Dwolla account. It's that simple. Your password will be encrypted and stored on your PC so that the bot can have access to your account so that the trading process can be automated. It will also show your Dwolla balance inside the program. The only thing that will be asked of you is to verify that you really want to buy those Bitcoins so you don't buy them by accident. Same goes for the person that puts the Bitcoins up for sale. They will be asked if they are sure they want to sell the amount of Bitcoins at the price they specified. Then the bots, working together with the Bitcoin blockchain (which is what we're currently working with for recording orders, etc.) handle the rest so that the trading process will be completely automated and indeed be completed in less than 30 seconds.

You propose some interesting ideas which will require some time to think about.

All Best,

Michael

A truly descentralized exchange cannot rely upon any existing company or centralized point, as Dwolla, Mtgox and the likes. So, how will you move fiat currency across different jurisdictions and players ?

Maybe implementing the electronic version of the well known Hawala system ?
Though it was made illegal in some juristictions after 9/11.

More thoughts on this implementation (in spanish) :
http://bitacora.lasindias.com/hawala-descripcion-y-funcionalidades/

Unfortunately, we have a trust problem. In the fiat world, exchanges require brokers to disallow trading unless traders are verified to posses the items they can place orders on. It also removes control of said funds until the order is filled or killed.

What if trader A does not actually have any bitcoins. What happens once the cash comes to his account? What if he has some bitcoins but puts in an order on two such p2p exchanges? How do you propose to remove them out of his control? This would need the multi-signature escrow and could introduce delays. Also, how do we know trader B has funds in dwolla and will not immediately remove them after order is entered into the system?

Ideally, we shouldnt be using dwolla, which is tied to a bank account that can be monitored or frozen or anything else.

Any p2px needs to mathematically proven to be fool-proof. If there is a lot of money at stake, somebody will exploit it and confidence in the solution will collapse. One way around this is to ensure a lot of money is never at stake. Every transaction is packetized into small, random sized transaction of $5 or less (or around the value of 1BTC). That way the incentive to exploit a flaw is reduced since the network can quickly flag a rogue account at minimal damage.

We need something like paypal where we can fund using a visa gift card and is not tied to any bank account. Paypal may work for now but ideally, we need the community to run about hundreds of these paypal type services and have thousands of miners offer a micro escrow of each transaction. Hey, I pay 0.01BTC per transaction in a centralized exchange, so I'd gladly pay miners. Miners should be happy to offer micro-escrows since 0.01BTC accumulates pretty fast.

If we could do that, we wouldn't need Bitcoin :P
As for mining fiat, the problem of getting USD into mined fiat is exactly the same as getting USD into Bitcin, and at that point you might as well just transfer it into Bitcoin from the start.

As for many small escrows, I'm not sure how that is different from the single randomly chosen Dwolla escrow I proposed.

While replying to 1QaZxSw2, I thought that maybe the Bitcoin escrow is the only thing needed:

Trader A selling BTC
Trader B selling USD

Trader A puts BTC up for sale. The BTC is signed with two keys, one stored in Trader A's account, the other stored in he P2Coin chain where Trader A has no access to it (unless the trade expires, or the trade is canceled)

Trader B puts up USD for sale. It doesn't matter if the money is actually available or not.

Order is matched ->

Both traders have sufficient funds:

Trader B, either manually, or with the use of a more convenient TraderBot, transfers USD into Trader A's account.
This step automatically notifies P2Coin  (<----- This is the bottle-neck/security issue. Can someone come up with a slution?)
P2Coin releases the second private key to Trader B
Trader A releases the first private key to Trader B, giving them access to BTC.

Trader B does not have sufficient funds:

Trader B fails to send USD.
Trader A does not notify P2Coin of cash receipt
Transaction is canceled. After some time the second private key is released back to Trader A


Trader B does not transfer BTC:

Trader B transfers USD into Trader A's account
This step automatically notifies P2Coin
P2Coin releases the second private key to Trader B
Trader A fails to release the first private key to Trader B. Trader A received USD, but has lost BTC. Trader B lost USD and doesn't have BTC. Since Trader A already got paid, and lost his BTC, there is no reason for him to release the first private key, unless he wants to be a big jerk.


I can already see some major trust or technological implementation issues with this :( Maybe someone with more knowledge can expand on this? Without some sort of third party escrow for USD, this system won't be very secure, and, sadly, if yo start getting lots of money in and out of your account all of a sudden, you'll either end up having to pay high fees, or the bank will start having lots of questions (or both)

None of those work.

You are relying on the client to ensure trust.  Assume the client will be utterly hacked wide open and will do whatever the attacker wants.

Way back in first couple posts I mentioned this and it was glossed off as a minor issue.

Decentralized trust, verification, and enforcement are non-trivial solutions.   GUI and names of tabs are so minor to not even bother discussing at this point.

Sadly, I think you're right :/

What exactly does "other stored in P2Coin chain" mean? Who has access to it? Can it be read by any person or any program? Who has access to source code of such programs? Can they modify it to steal it?

As you noted, what if Trader A figures out how to send a fake notification?
And what ensures Trader A will ever release his private key to Trader B? Just look around this board, the world is full of jerks.

How long before non-receipt is the transaction cancelled? What about a network delay? Can I exploit this arbitrary condition to get the cash but not send the cash receipt to keep my bitcoins and the cash?

Ideally, we should eliminate the risk but we may be able to get away with fragmenting it to tiny pieces and distributing it.

Sorry I couldn't help but at least I can point out the client is always insecure and should be assume hacked wide open to do all kinds of nefarious things.

This is easily solved in a centralized system.

Online game.  The client is "dumb".  It can't do anything.  It sends REQUESTS (not commands) to the server who ensures the user can do that at this time, and sends the response back to the user.  Hacking the client is of limited value because you can't for example hack the client in WOW and make your character do 1 bazillion damage.  The server will simply ignore it.

So always, always, always assume the client is already hacked before you even release it.  The same logic applies to brokerage software, forex software, ATM machines, alarm systems, credit card vending machines, etc.

The user interface is "dumb".  There is little to hack there.

Now like I said with centralized networks it is easy.   Maybe that line of thinking will help you find a solution in a decentralized network.

I see one but it requires a "fiat coin" (crypto manifestation of $1 USD for example) and that will always be centralized.

I don't know if encrypting it in the chain somehow is a possibility. I'm not familiar enough with technology to know :( Now that I think about it, tough, I can't think of any way to lock a private key within a chain and only have it be decrypted by miners after a certain time has passed.


You're right. This is why my previous idea was to have the money sent to a random third party escrow, and have that third party verify receipt. Though now that I think about it, the client can be hacked to send the transaction to a non-random third party that is your other account, and have it fake receipt... Yeah, just leaving it all to clients without a trusted centralized party doesn't seem possible.


I think my just mentioned concern kills this idea, too. What's to stop you from creating 100 of your own escrows, distributing it to yourself, and announcing you got it without releasing any of it? Would we need to have trusted, centralized, and publicly known third party escrows that build up trust? And if they are publicly known, won't their accounts be shut down the same as now?

Also consider a descentralized implementation of Ripplepay.
http://ripplepay.com/faq/

What's the difference between getting money into Bitcoin and getting money into Ripple?

The main difference (as I understand) is that with ripple you do NOT need any exchange entity to manage the fiat money.
All the fiat in and out transactions are made between ripple participants, and settled by trust relationships.
So, all needed is a descentralized btc-fiat ripplepay, and we have the beloved P2P exchange.   

Could you walk me through the steps of how I would get $100 cash I'm holding in my hands, into BTC, using that system?

Each participant of the ripple network "trusts" one or more participants with a certain amount.
System will find one or more participants nearby who will give you USD 100.
In the future, you will settle your debt with one or more different trustees, using either USD or BTC.

Please see video for an example :
http://www.youtube.com/watch?feature=player_embedded&v=f9KqSgRZYgg

Why not simply focus on the Cryptocurrencies and avoid Fiat trades? Traders can use their own Fiat exit of choice once the cryptocurrency is in their own wallet. (this could possibly avoid govt regulations since its simply Virtual Goods trades)

It would be nice to have the network act as escrow (8+ nodes as so) confirming the terms of the trade.
Orderbook, trade history and escrow is the bare minimum, in my opinion.
So a trader submits a Limit order wanting to buy Bitcoins with Namecoins, the network takes the bitcoins and places it into an escrow account, then waits for a matching order. Partial fills okay, Fill-or-Kills, and time limits enforced.

Oh, and the network collects the fees for acting as escrow.

Just thinking out loud.

Good. I am very curious as to what the solution is.

Watching.

Mike, any updates on the tests or solutions?

The trust problem does not have a mathematical solution at p2p level.

A realistic solution for the present could be a federated set of exchanges.

While the fears of a government take down of a handful of exchanges is credible, they will never be able to take down say, 10000 exchanges, especially if new ones keep popping every now and then. This would require the client to be able to gather the best bid/ask from a large set of exchanges but this is not that hard to have a few aggregating services that do it for us.

So you could place a bid at any exchange, but when you accept a bid, it goes directly to the exchange that has the best bid with the size that you want.

Use case 1:

A places a bid to buy 1 BTC at $5 at a random exchange X1.
  Fiat Money is transferred from A's bank/dwolla account to his exchange account at X1
  A bitcoin wallet is created for A in X1 if needed.

After some time, A's bid becomes the best bid.

B accepts the Bid.
  Client software sends BTC to X1 and Fiat account info.
  X1 removes the bid and moves $5 into B's fiat account
  X1 moves 1BTC to A's account.

This could be made a bit faster I suppose but the trust problem would be moved from user level to exchange level. A user always has the option of choosing a small set of trustworthy exchange or splitting his transactions among several exchanges to reduce risk of any one bad exchange.

There's still a problem of someone setting up an exchange just to steal money (how will the federation work?), and an even worse problem of Dwolla (example) downloading the client, monitoring all available exchanges, and shutting down accounts of anyone who shows up on that public exchange list.
Don't mean to shut you down, but this problem is tough to crack.

Federation in this case only means that they are all sharing parts of the same workload and they all export their order books in the same format and have the same trading API. In a sense peers is probably a more accurate term. They wouldnt even need to exchange any information with each other since the actual trade takes place completely in one exchange.

Probably the mistake we are making is considering merchants like Dwolla. USD also needs to be stored in anonymous devices such as visa giftcards or single use credit cards. This would imply that exchanges need a merchant account and this would probably bring down the number of exchanges to say, 1000. Not very high, but not low enough to crush simultaneously.

Can someone set up an exchange to steal money? sure. But they wouldnt get very far since they would be labelled scamsters. If they wait until they have enough customers before stealing money it wouldnt make sense anymore since  its far more profitable to take transaction fees on millions of transactions than to steal a few thousand dollars.

The exchanges wouldnt actually hold the user's money but only charge the visa when filling a transaction. This means they dont need to register as a financial service.

Take a look at this post https://bitcointalk.org/index.php?topic=66274.msg769090#msg769090

That's already a fairly easy thing to do with multi signature transactions. And cryptocurrencies aren't a problem that we're trying to solve. A cryptocurrency exchange is not subject to banking regulations, does not require bank accounts, and in worst case scenario can be run from a completely secret Tor .onion site. Being able to make fiat currencies like USD or Euro work in a distributed fashion is the difficult problem that needs to be solved.

Great concept. It would be very useful/awesom.

Cryptocoin to Cryptocoin trades are not too difficult. Fiat is the hard part obviously. I have what might actually be a workable method for fiat but am doing a lot of careful consideration and fine tuning of the idea. Where there are potentially large sums of money at stake one can't be careless. I will post it if I feel that it is worthy. Keep sharing your ideas. I have been following and analyzing all of them.

All Best,

Michael

marked. Looking forward to seeing where this goes.

I think the Trust problem/part can be solved by a variation of the ripple network : http://ripplepay.com/faq/

But you will need to create a more anonymised version of Ripple so that relationships are not known to all parties; maybe announce 2nd or third degree relations. The full chain of relations is on an encrypted system-specific-blockchain.

After a trade/exchange is confirmed, the system will send out alerts to participants asking for fiat to be passed along the network to eventually reach the trade partners. The system will calculate the most optimised route with least steps. Failure by Ripple participants to carry out an exchange to a trusted node, will result in a penalty to them.

A series of IOU's can also be established to minimise the amount of actual physical transfers needed to carry out the transaction.

An IOU can be purchased by members wanting to join the network-they "announce" to the system that they are willing to contribute $50 FIAT; the next time a transaction can be completed by passing through this "new member" the system will ask this new participant to pass the $50 to the next link (who would be a friend of theirs) and hence gaining the person a $50 credit in the system. {this section about IOU's needs more thinking and eloboration- their are probably gaps)

But basically I think that the Ripple system has a lot to offer.

 

The central sticking point with all of this is establishing a cryptocurrency which has a fixed exchange rate vis-a-vis the USD. This can be done with
a) some centralization, but b) without any direct interaction with the fiat system whatsoever

It seems for now there is a necessity to change from a local currency to bitcoin because we don't have enough things to purchase with bitcoins.  Once enough products and services are willing to be exchanged for bitcoins and/or people are paid with bitcoins the use of exchanges won't be a central issue.

Why not just have the P2P exchange allow for trading on the central exchanges (Mtgox, Intersango, ect) using their API?

The issue is that getting money into Ripple with some level of trust is that it's as difficult as getting the money into Bitcoin with some level of trust. This suggestion seems like it's trying to mask the Bitcoin issue by covering it up with something else with exact same issue. There's also the problem if having to build out both, Bitcoin and Ripple networks to get this to work, as opposed to just a bitcin network by itself (network among people I mean)


What's the point of having a currency that has a fixed exchange rate with USD and centralization, if you can just use USD with centralization?



Completely agree with the first point. I think the fear regarding the second is that those exchanges may not last, and they make HUGE targets for government takedowns. People may not want to keep their money with the exchange if they fear it may be shut down and they can lose everything at any time. The man question for this whole problem is how or where to store the fiat money...

The pegged currency could be used to create a P2P exchange between USD and bitcoin and allow for irreversible and psuedonymous payments of units of USD value.

This is not doable when units of USD value can only be exchanged electronically through existing payment networks (which aren't irreversible or pseudonymous).

But, in the end, all you'll have is irreversible USD on top of reversible USD, with the same incompatibility-based fraud problems, where people will buy irreversible with reversible, and reverse their transaction. There won't be any benefit in that system besides off loading fraud into exchanges.

It also maybe doesn't make a whole lot of sense to try to peg the value of a real actual transfer of value to a pretend, play-acting, maybe it might turn out to be real but we won't know for six months unit of purported value.

I once thought maybe the simplest approach would be to make a PPUSD-fund of which the actual number of USDs that actually lasted the full six months without getting reversed would be kept track of, so that one could figure out the average actual value of each PPUSD currently in the fund and either value them at that average each or only value those that are over six months old.

I thought maybe it could work with things like game subscriptions. Have games people subscribe to at, say 10 PPUSD per month, and in the seventh month and thereafter they start to receive some blockchain based currency coins in addition to whatever the usual perks people who have not been in a full six months might get. (An allowance of game-gold for their character? An edifying newsletter all about the wonderful world that will open up to them in six months time... five months time, wait for it... three months... etc...)

-MarkM-

Why? The exchanges could operate primarily with irreversible coins. You are not too smart.

Exchanges. What will they be exchanging? Irreversible BitUSD to irreversible BitUSD? I'm wondering the same about you.

They will exchange 'irreversible BitUSD' with 'irreversible Bitcoin', obviating the need for bitcoin speculators/exchanges to interact with the banking system. Of course, BitUSD would likely develop other uses as well, but this thread is focused on development of a P2P exchange. Development of irreversible BitUSD is a necessary precondition.

And how will irreversible BitUSD exchange from reversible USD? At some step there will still be reversible fiat needing to convert into irreversible currency. Again, all you're doing is creating more steps further down the road, but ignoring the problem with the very first initial one. I mean, hell, why not have irreversible BitUSD, that exchanges into irreversible BitEuro, that exchanges into irreversible BitUNcash, that exchanges into irreversible BitWorldCoin, that exchanges into irreversible BitCoin? Make the chain long enough, and maybe people will forget about the initial reversibility problem.

This is the value that Bitcoin provides to all the other non-reversible currencies: it is the curtain behind which the whole can of worms that is the fiat system is hidden behind.

Only the people who are stuck with fiat, and the people who are willing to take the risk of accepting fiat, need worry about it. It is the users of fiat who don't seem to realise how untrustworthy their currency is, the irreversible currency users are well aware that fiat should be avoided unless some huge markup, presumably about what money-laundering usually goes for probably, is offered by those who wish to divest/launder themselves of fiat.

Really the overheads associated with accepting fiat currency are so ridiculously high that it should not surprise anyone that money-launderers thieves crooks etc are the folk most likely to be able to afford such overhead.

Put simply, fiat currency is so fraught with problems that it is worth far less than irreversible currency.

A DollarCoin thus needs to cost far far more than a dollar IF it is paid for using reversible fiat currency.

Maybe a Reversible Assets asset could be set up in which all reversible assets get put, then people who have irreversible assets can place offers so the market can discover how much people really think such reversible assets are worth. Bear in mind that the largest inputs of reversible assets to such a pool/fund will probably have the highest likelihood of being scams. So presumably it should come back again to the number of units in it that are more than six months old divided by the total number of units as the average value per unit. Interestingly that should result in an asset/fund that goes DOWN in value when units are put into it!

-MarkM-

EDIT: Hey that actually makes sense, as putting more paper printed by the fed into it is simply inflation just like it already is in the outside world when such paper is printed in the first place.

That doesn't ever need to happen for the system to work. Bitcoin can be exchanged for reversible USD at MtGox or other exchanges as necessary. This is all the integration necessary and it is already in place.

Yes, why not? Please provide a logical argument.

How?

I propose a mechanism in this thread. I fail to explain myself clearly, but DeathAndTaxes is able to understand me and writes a more comprehensible summary in this particular post:

https://bitcointalk.org/index.php?topic=66327.msg772010#msg772010

I remember that thread. Basically you suggest multiple, as opposed to fractional, reserve.

That might well require vast assets in order to accomplish it with a very wide aperture of how much value can pass through it per transaction, but it seems to me that the total amount of reserves on hand really only limit the aperture: the transaction size.

I wanted to go through an example of someone wanting to exchange, for example consider someone wishing to sell some NMC for some USD.

They buy some USDcoins from someone using a secure two-blockchain transaction in which both parties get the coins they bargained for or the transaction is invalid. (I think methods of doing that have already been worked out in some thread somewhere?)

However maybe NMC is a poor choice for an example if MtGox does go ahead and add NMC to its choices, since one could then go directly to MtGox instead of getting involved in this whole intermediary USDcoin stuff.

So lets pick some coin that currently has no established exchange that trades it directly for fiat, lets say bitNicKeLs for example

The person wants to exchange NKL for USD. So they buy some USDcoin with their NKL.

Now how do they turn their USDcoin into actual fiat USD? Presumably since this is decentralised there is no fixed publicly known exchange that will do that for them?

So as a potential issuer of some kind of "USDcoin", in order to avoid having a public exchange that is easily targetted, I will want to have market-makers or something? A bunch of partners who will appear on the p2p exchange-network as just another user, but who will happen to be willing to give someone some MtGox USD in return for USDcoins?

The more limited the actual USD reserves of the issuer(s)/backer(s) of the USDcoins the less tolerant the system will be of hoarding, due to the necessity of keeping multiple-reserve reserves instead of merely full or fractional reserves. For example if I commit to having two actual USD banked in an insured-deposit bank somewhere per each USDcoin I issue, there will be no more USDcoins available than half my USD reserves. This system has to make me at least 2 USD before I can legitimately issue another USDcoin.

So if anyone hoards any of the coins instead of hurrying them along their path back to me, the supply will dry up. All it takes is a number of hoarders equal to half the reciprocal of (the amount they each hoard divided by my USD reserves).

So even if I start the system up with a trillion dollars somehow divvied up among enough deposits at banks to somehow keep it all insured, I can only issue five hundred billion USDcoins which means only one billion "hoarders" hoarding on average five hundred coins each would freeze the whole supply. A mere hundred million hoarders hoarding only five thousand coins each same thing. One million hoarders hoarding only fifty thousand each, same thing.

Now obviously if the entire 500 billion does get issued, I could increase my reserves by half that, so I could issue another 250 billion. But basically no matter how large my reserves there is some point at which any agglomeration of people out there controlling only three quarters as much as my reserves or thereabouts can dry up the whole system if hoarding is tolerated.

So maybe the coins would have to come with an expiration date, to make them "hot potatoes" (like the dollars they represent maybe only maybe more so), to force them to have to come back to me in a reasonable timeframe so the timespan over which I am liable for a coin once having issued it is limited?

If it all came back to me in a matter of minutes or hours, or even seconds, then the amount of reserves needed could be limited to that aperture, and it would be only a means of exchange not a store of value.

-MarkM-

You went through a lot there, markm. I am suffering from tl;dr. I apologize. Could you edit it to make it more concise? In brief, yes, the system requires a lot of bitcoin. Yes, excess hording of USD does increase the capital requirements. Excess hording is not too likely because there are better investments than USD. However, it is still a problem. The horders would require a large store of value to be set aside, but wouldn't generate revenue. Are you suggesting that the system should incorporate a modest demurrage fee to encourage use as a medium of exchange rather then as a long-term store of value. If yes, then I agree with you. Maybe an imposed demurrage of 2% per year is reasonable.

Actually I still do not think it is best to use bitcoin to back some token that is intended to actually represent, or be pegged to, fiat.

For one thing, doing it that way is most of the reason why you need multiple reserve instead of full reserve.

If you kept most of your reserves in the form of the actual fiat the token is intended to represent or be pegged to then your reserves enjoy the same increases or decreases in value as the tokens they are backing. That seems to me to eliminate most of the volatility problem as regards your reserves getting out of sync with the liabilities your coins/tokens represent.

Basically I would only issue USDcoins equal to the number of actual USD that I have hidden securely somewhere, possibly in the form of actual physical specie rather than as electronic deposits at banks susceptible to gosh knows what freezing of accounts, confiscation of funds and so on and so on.

I would probably need to have a friend to friend network of friends who are willing to buy the coins from people using various things along the lines of MtGox USD credits, PayPal, Pecunix, Liberty Reserve, Dwolla or whatever. They would do so because they trust me to actually go dig up the actual physical specie if necessary in the case of a run on the reserves. They could be connected to me via i2p or Tor or via Sone messages on Freenet or using RetroShare or maybe even by none of those specific programs since I am known to run all of those so maybe they might prefer to use some "none of the above" methods.

Trust would be just a matter of time, eventually people will notice that provided you allow for a modicum of profit on the behalf of the buyer you can always find someone who will buy as many USDcoins as you have at close to a dollar each. Since no more exist than I have issued, you cannot have more than can be bought back from you.

Really all that is necessary for any cryptocoin to maintain a stable value is to keep it from being issued by miners who have no interest in actually buying it back at close to the price they sold it for.

-MarkM-

I guess you missed the whole purpose of the OP and this thread, which is that with centralized exchanges, this currency becomes an easy target for government laws and scammers. Look at Tradehill and all the issues MtGox has with keeping a bank account open.
Unless your proposed solution is to have BitUSD created and controlled by the government, thus being fully endorsed and legal... but in that case, why even bother, instead of just making ACH transfers irreversible? It's kinda funny how you keep making it sound as if you think everyone else is an idiot.  ::)

Because 0 x 1 x 2 x 3 x 4 x 5 is STILL 0

In order to actually do this, we first need to test whether we can even actually get enough hashing power merged-mining a new chain to actually secure the chain.

There isn't much point starting to issue coins until the chain they are to be issued on has attained a secure level of hashing.

Miners could in fact "vote" for the idea of a pegged-to-fiat chain by merged-mining it in advance of the issuance of any actual coins on it.

-MarkM-

Well, of course there needs to be some exchange between actual USD and bitcoin somewhere. The point is that it doesn't need to bear the kind of volume MtGox bears. It could just be a trickle and the vast majority of exchanges could be carried out with bitUSD. In the worst case scenario, it could be isolated  exchanges of BTC for cash. This could co-exist with a deep, liquid market for bitUSD - bitcoin which is unconnected to the banking system.

And yes, you are an idiot.

Step 1 - Get fiat USD
Step 2 - ???
Step 3 - Have irreversible BitUSD you can trade for Bitcoin.

Do yo propose to just give out BitUSD to EVERYONE who wants to some day buy Bitcoin? Please explain what Step 2 is, because if that step is solved, I don't see why you can't just have

Step 1 - Get fiat USD
Step 2 - ???
Step 3 - Have irreversible Bitcoin

Please let me know if you are misunderstanding something, because I have been asking for you to explain this Step 2, this exchange from reversible to irreversible ANYTHING, this step 0 in the chain of 1, 2, 3, 4, 5, this entire time and all you've been giving me is Steps 3 and up, and calling me an idiot because you forgot about Step 2.

Almost all exchange volume is related to speculative or hedging purchases by people who regularly move between USD and bitcoin.  My idea addresses this use (but not for HFTs).  I don't have a solution for using VISA cards or bank accounts to buy bitcoin with out facing a reversibility problems. However, not much stuff is sold only for bitcoin, so there isn't much need for this. People can just use USD to purchase things.

Project page is updated:
https://litebit.co/project-item/p2px/

Hedging is doubtless a market, and it really need not have anything to do with actual fiat<->cryptocoin exchanges.

Just like one of the bitcoin<->USD conversion rate options sites resolves all balances only in bitcoins, hedging can also balance / strike only in bitcoins. All the people hedging need is a way to denominate their holdings in terms of a fiat unit of count during periods then they think the fiat unit of account will lose less actual buying power / value than the cryptocoin unit of account will.

It is merely about relative "value" of unit of account. Actually acquiring fiat upon eventually cashing out is totally independent of that.

So far the primary barrier really to doing this as blockchains has been the evident unwillingness of people doing merged mining to merged mine more chains, resulting in merged-mined chains having insufficient security so far to be suitable for this use.

Maybe we should right off the bat distinguish between fiat currency exchanges, cryptocoin exchanges and fiat<->cryptocoin exchanges, as they are maybe three different problems, albeit the first (fiat<->fiat) and third (fiat<->cryptocoins) might be somewhat similar in terms of the regulatory problems they might encounter (though still the third might have more or different regulatory problems in some details from the first).

Since the USD is not the only fiat in the world, and in fact some nations might even prefer that it not even be used as global reserve currency at some point going forward, the whole concept of allowing each Freeciv nation to issue their own blockchain-based currency was intended partly to actually get in place blockchains that could, once sufficiently secured, be used for this hedging type of use even if not directly convertible to fiat. I figured the whole problem of conversion of fiat can be left to bitcoin itself, allowing all other cryptocoins to get on with their own problems internalt to the cryptocoin world. If exchange to and from fiat does turn out to be a massive market, then bitcoin's position as the primary conduit for such exchanges should help keep bitcoin its current place as the pre-eminent cryptocoin. If however such exchange turns out to be a dwindling market as more and more business takes place purely within the cryptocoin world then who knows, maybe bitcoin will find being the main gateway will slowly lose its importance in the cryptocoin economy.

-MarkM-

@Rassah

1) Having "fiatcoins" is a great advantage over centralized markets the way they're now:
The server can know all your trades and balances, get hacked exposing that data, etc...
There's many advantages that bitcoin has over bank balances apart from having a fixed monetary supply.
You still have to trust mtgox  (or whatever) as the issuer. As the ones that hold your fiat. You still have to pay them the fiat through regular banks unless they accept cash, ripple credits or something else, but the irreversible fiat would still be very useful.

2) With Ripple you can pay for bitcoins if there's a trust path between you and the seller.
In the same way, you can sell fiat for ripple credits and viceversa.
Making atomic trades between bitcoin and ripple would be great.
Feel free to ask anything about ripple.

Where is the "trader bot" running?

Some clients have been leaning toward Torchat as a transport mechanism, or as sample code for how to set up connections. Apparently Tor itself normally only takes about three hops to connect to stuff, whereas with Torchat both parties reach out three ore more hops to set up rendez-vous. If that actually does provide better security maybe it is worth looking into.

There are gosh knows how many chatbots floating around so maybe one could be adapted to do a ripple type credit system on a friend to friend basis. I do not know whether ripple's basic concept - that friends can be trusted to settle up in a reasonable timeframe - actually works, but if it does it seems better to set it up on an actual friend-to-friend basis than to have "servers" per se.

I actually already suggested earlier that maybe if you aren't in a hurry you might be able to "exchange" simply by offering a higher exchange rate for the currency you want and a lower rate for the one you are trying to "sell", and basically all be running friend to friend trading-bots. Your friends' bots will notice you have raised your offers for the currency you want, and presumably "arbitrage" it with their friends and so on. Of course if each hop involved fees that might stifle exchange a lot over multiple hops...

-MarkM-

Then you should give a look at Jtorchat (http://code.google.com/p/jtorchat/)
It's the Java client with the same protocol :)

The difference between the two is obvious.  In the former the value of your digital holdings is tied to value of USD.  The value of your holdings in the later is independent of USD.

I was questioning the difference in the act of exchange. Regardless of the value, I can buy BitUSD at 1:1 ratio, transfer BitUSD to my wallet, then do a charge back to get my original USD back. The only difference between this and Bitcoin is I have stolen $1 worth of BitUSD instead of $5 worth of Bitcoin. I.e. reversible to irreversible exchange can not be solved by calling Bitcoin by another name, or by pegging its value. So I was wondering why cunicula kept pushing it.

Okay, here is a scenario for you.

You ask around your dorm to see if anyone has any cryptocoins for sale so you can try them out.

One guy says "sure, I can sell you bitcoins, only $30 each, grab them while they're cheap, they'll be $100 each by Christmas".

Another guy says "sure, I can sell you DigiBucks, only a buck each, they're just a digital token representing bucks".

You buy $30 worth of each, try them out. You decide the stupid clients are too complicated, the offline wallet abilities are too complicated, the whole darn thing is too complicated. You really try mind you, heck you try all summer and fall.

Finally it is time to go home for Christmas. You tell both buddies you tried your best but cryptocoins are not for you, so you want your money back.

One of them says "are you crazy, have you looked at the price lately? That bitcoin is worth no-where near what you paid for it, no way I am giving you your money back, I got Christmas presents to buy."

The other says "no problem, how many you wanna sell me? Oh 30 was it? No prob, send them to this address. Thanks. Here's thirty bucks. Have a merry Christmas and a happy new year."

-MarkM-

I think you are still missing it.

It is IRREVERSIBLE DOLLARS.  The same irreversibly, decentralized, and peer to peer aspects of Bitcoin but for a "semi-stable" dollar equivalent crypto-coin.

He is pointing out the irreversibility not because it is somehow superior to Bitcoin or that you would need it to get Bitcoins but it is superior than Paypal, credit cards, ACH, checks, etc.

I am apparently still missing it, because the thread topic is on a P2P exchange, with the premise that Fiat <-> Cryptocoin centralized exchanges are vulnerable and bad, and he brought up the idea to bypass those exchanges using cryptoUSD. If his whole point was "this currency backed by... something... and maintaining dollar parity is more stable and useful," then he's post is totally off-topic. If his point was that a stable BitUSD will make exchanging into Bitcoin easier, then I just don't get it.
Regarding borrowing $30 for Christmas example, frankly, based on how pegged currencies have performed historically, I'd take my chances with floating feat :P But that's a totally different topic.

I guess friend to friend is different from peer to peer, since peer to peer seems to mean neither person trusts the other.

It still seems most likely that the problem of converting reversible to non-reversible will be best handled on a friend to friend level.

Once you have irreversible currency of any denomination, converting to bitcoins is suddenly a whole lot easier.

I doubt if you can avoid some degree of centralisation, for example if you use some kind of web of trust it is likely that some people will emerge as more trusted than others. That is a degree of centralisation as they become more and more central the more their trust score outweighs others'.

How do you propose to secure an exchange with no trust without having both currencies being exchanged be blockchain based? Even if some kind of "smart property" is one side of an exchange can you really be sure the "smart property" has not been tampered with or will not be tampered with by the time you take delivery of it? Most likely the proof of ownership used for its smartness will be a blockchain?

-MarkM-

Isn't the obvious solution to have both currencies blockchain based?

This comes right back to my original point that our main, used by most, currency is NOT blockchain based. Exchanging blockchain to blockchain is very trivial. Exchanging what most people use into blockchain is the holy grail of exchanges.

And not letting it happen without surveillance is a holy grail of despots, fascists, etc... oppressive/repressive governments/thugs in general.

Every over the radar / over the counter purportedly irreversible fiat-outlet other than person to person physical cash ends up reneging, basically.

DId Liberty Reserve renege yet? How about Pecunix? Egold tried not to and look where that got them.

So unless you want to mail paper money in unmarked envelopes or meet strangers in bars/cafes/alleys for hand to hand transfers friend to friend looks a pretty likely method of initially getting irreversible currency.

Maybe one could also consider saying outright heck I don't want your stupid fiat, how about accepting some of my cryptocoins instead of currency for whatever it is you do that people give you the fiat for in the first place...

...Which, if it turns out not worth buying, maybe just says even more about the fiat world: it pays people to do crap that shouldn't be done in the first place...

Okay that was uncalled for. What I mean is, don't come to me looking for bitcoins, ask your frickin' employer to pay you them.

-MarkM-

I think the only possibility for what you want is to have ripple in the middle.

Anyway, I still think that a decentralized exchange btc/usdCoin has many advantages. Even if you still have to convert usd into usdCoins.
For example, some people keep dollars in an exchange and only buy bitcoin when they're going to spend them to avoid price fluctuation risks.
But they have other risks by doing that. For example, the exchange gets hacked, the attacker sells all your usd for btc and they're gone. Fishing attacks, the exchange can easily manipulate the market by showing false data...
They could store the usdCoins on their computer and avoid all those risks and disadvantages. They can backup those dollars, etc.

So, yes, the idea of usdCoins and decentralized exchanges has value even if it's not the holy grail you're looking for.

Although I defended chain based usdCoins earlier, now I think that having a centralized there's not much added value in having decentralized accounting. An OT-like minter can do the accounting himself. If instead of the OT scheme, the coins were sent to public keys, you could have decentralized trades with bitcoin. Those coins would be as traceable as bitcoin (for the minter, much less for others) instead of "OT untraceable". I really think there's no difference, but fellowtraveler hasn't clarify that to me (or he didn't undesrtand me).
I have to rewrite it, but it could be something along these lines (https://bitcointalk.org/index.php?topic=60591).
The idea is mostly inspired in the decentralized ripple protocol and open transactions, but with offers of trade of IOUs instead of credit lines (ripple) and without the so called "untraceable cash" (ot).

Fiat is just another commodity. So you might as well be thinking about how to exchange irreversible, blockchain-based currencies into in any commodity in general instead of worrying about fiat as if it is so special.

Besides, if you can convert it into alpaca socks you can in turn convert those into fiat. So solving the problem for "goods and services in general" is maybe where we should be looking when thinking about fiat. Instead of thinking lets convert into fiat so that we can buy "things in general", leave fiat out of it and just convert directly to "things in general". Then if you really, absolutely cannot live without fiat, convert some "things in general" into fiat.

-MarkM-

Physical commodities are irreversible as well, just like Bitcoin. I guess if we use cash in envelope delivery for exchanges...

People exchange actual commodities for fiat regularly/constantly, it happens all the time.

So obviously the problem of how to deal with the reversibility of fiat has already been solved.

But, the solutions might not be very scale-able down to individuals who only occassionally sell something in return for fiat.

The suggestion users of Kijiji are given is only accept cash in person.

Basically being a seller in today's world is not very scale-able. If you aren't going to do enough trades to package your statistical losses from chargebacks into your price without thereby driving your price up above what people are willing to pay, you are likely to lose customers to a larger / higher volume merchant. So maybe commerce itself is not really very susceptible to decentralisation nowadays? Maybe if it ever was it was only because the technology had not arrived to allow really large operations?

On the other hand, there have been worldwide networks of money-changers and money-transmitters operating without regulation (other then by themselves / their network and their customers and how many troops / thugs their customers can raise up against them) for centuries. How did they do it? Maybe friend to friend, basically? Trust networks?

-MarkM-

Yes. Centralized trusted exchanges, similar to MtGox, Tradehill, or Bitcoin7, all susceptible to laws, regulations, errors, seizures, shutdowns, and being central targets for attack. The unsolved problem is p2p exchange. I fear that problem may not be solvable.


Friend to friend and trust (with a sword as an incentive). I do believe that system (like Ripple) will work, but my problem (and I'm sure it's one I share with others) is that I don't have any friends who use Ripple, and maybe one who uses Bitcoin. There's no Ripple network for me to hook into :P
Maybe eventually the network will be that of stores you can walk into who can exchange your fiat for BTC for you in person, with a proof of I'd and other things.

You do know about the #bitcoin-otc channel on Freenode IRC network, don't you?

Right now people even mention exchange of bitcoins for fiat out in public there.

Maybe someday we'll need to know some secure, encrypted way to contact the people we learn to trust there, and knowing their GPG codes from back in these good old days we'll be able to know it is really them when we contact them through some crypted channel.

Thanks to #bitcoin-otc I do know a few people who use bitcoin and are willing to trade them.

I don't know anyone locally in meatspace but so far #bitcoin-otc has sufficed for my needs.

-MarkM-

You can pay for the bitcoins with ripple and then settle the debt with your friend using cash.

Except that ripple doesn't seem to be working or something, at least not working well enough to bother actually implementing some kind of p2p protocol for it. Maybe a lot more people have to actually use it before anyone will consider it worthwhile to do some work on a p2p implementation?

-MarkM-

I've used  #bitcoin-otc to get a few grand last summer, with escrow service run by Gavin. Good point about that being a p2p exchange.

Maybe it doesn't work for you because you don't have connections. It's like saying that facebook doesn't work while you don't have any friends. I can buy bitcoins for villages.cc hours.
I think Ryan is doing some work with the p2p protocol, a design is done at least. I'm impatient for helping him out, but I cannot right now. Hopefully on summer. It's probably too much work for just one person.

Just giving a little update here. For the moment I'm only working on crypto-crypto trades because it is not possible to get fiat into a p2p environment at the moment. I've made some updates to the GUI. You can see picture of it here: http://litebit.co/project-item/p2px/ I'll upload some pics here later.

Also, in order to encourage developers to volunteer their time, I am releasing the source to my GUI. It can be downloaded here: http://pro2host.com/cryptocoin/p2px/

DISCLAIMER: This is a non-functional GUI! Only design and layout!

I've also been brainstorming a lot of ideas on this project. I'm a bit strapped for time now but I'll be writing about them later. I really want to get this project off the ground. It's been sitting for too long. I have zero developers!

I've been thinking about this and trying to conceptualize how this could be done, and there are a lot of ideas on this thread to go through.

First of all, if you want to actively trade with this client, and not just make single exchanges, there HAS to be some kind of substitute fiat anchored cryptocurrency, and barring some genius solution, there has to be a web of trust system to make it work.

The fiat-anchored cryptocurrency would be for the p2p client wallet, so that you could make fast trades without waiting on government institutions. Each 'crypto-dollar' would be backed by a user on the network and the blockchain would keep track of reputation/feedback for each user. The network would also track each cryptodollar as it was traded around so that anyone can see who is backing each trade in the order book and what their rating is.

Transactions in fiat world would only happen when a user wanted to withdraw from his wallet. The network would know who was backing the crypto-dollars and initiate the exchange and record feedback. I'm sure people would get scammed at first, but as time goes on people will build reputations for having sound currency, just like certain banks in the old west.

I think it should work in physical exchange too while you're at it. Give users the option of setting a physical exchange point like bitcoinmap and what they exchange for. It'd be cool if you can just click and see where you can pick up physical silver coins for bitcoin and vice versa.

Thank you once again to everyone that has posted their interesting ideas. However, I've canceled all work on this project a while ago. That's why I posted my GUI source. So if anyone wants to work on it then go right ahead! I'm only one man who has absolutely no programming experience and can barely manage to create the non-functional GUI. There was one coder involved at one time but he bailed out before he had even done any substantial work. Realistically, due to the scope of this project, a fairly large team would be needed to develop the many features and above all, ensure that everything is secure. I haven't even been able to develop a secure method in theory. It may not even be possible. Then again, nothing is impossible really. But this is just something that is beyond my own capabilities of bringing to life.

Please continue brainstorming! Maybe one idea that somebody puts forth here will actually be workable. Brainstorming never does any harm. Good luck to whoever decides to give a go at this project!

All Best,

Michael

https://i.imgur.com/5vsPY.png

Order opening,closing and modification
A block-chain is maintained which keeps all valid open orders.A node requesting to open an order sends order quote to the network.The network verifies the order by periodically querying the corresponding blockchain and check that order is sent by the node is less than its
balance or not.In this way fake orders could be weeded out.A node can modify or cancel the order by querying the network with message signed with its private keys.

Orders open could be accessed by all nodes.Any node interested could send request for accepting an order.After similar verification about buyer's balance the order status is changed to accepted.

Money Allocation to intermediate nodes
Once order is accepted,the network divides the money to the other nodes such that,the money send to any node is less than the trade amount,that node wants to execute.This trade assignment is sent to both trading parties.They are required to send money to assigned intermediate nodes.These transactions are verified by the network.

Intermediate transaction
After all intermediate transactions are over,the network sends the address of buyer and seller to the nodes which received money from seller and buyer receptively. Until they successfully execute their routing assignment,their trade money is not released from their intermediates.

Assumptions
1. To start the trading, first two nodes should be assumed that they conducted their routing operation.
 
Advantages
1.Buyer and seller don't know each other until trade is successfully conducted.
2.Using a block-chain,all trading activities can be recorded securely so that trade is not tampered until its over. 

I think the solution to trade across chain should part from the contract defined in the wiki (https://en.bitcoin.it/wiki/Contracts#Example_5:_Trading_across_chains) which enables an atomic trade.

OT is not a p2p exchange, but I believe that it solves this problem (or that it will, once all the pieces are in place.)

The first piece is a transaction server which cannot forge transactions and which cannot escape an audit.
OT fits this in theory, but the auditing protocol has not yet been coded.

The second piece is the ability to store Bitcoins safely on an OT server, in such a way that the OT server itself cannot steal them.
The solution here is to use multisig to store BTC in voting pools on the blockchain. See my other posts on this forum where I discuss this.
Now that multisig is actually available, this functionality could be added to OT.

The third piece is separation of powers. Meaning, while issuers who hold and wire dollars are susceptible to laws, seizures, shutdowns, etc, they are separate entities from the OT server(s) themselves, which could operate anonymously on Tor, at a profit. (This is made possible by Bitcoin. We see Silk Road doing this already -- operating anonymously yet at a profit -- again made possible by Bitcoin.)

You were right to fear this problem may not be solvable -- I have put a lot of thought into it myself. However, I believe the above pieces do solve this problem effectively. (Though p2p technologies are necessary in several ways for the above scenario to work, it's still not a "p2p exchange" but you still get all the benefits of one, i.e. it still solves the problem.)

Everytime i read such statements i am in awe at the possibilities and thankful to the devs making this possible!

The p2p exchange between chains will be possible when the contract I just mentioned is possible in bitcoin (enable lock time and tx substitution).

The p2p exchange with chaincurrencies/nacional currencies is also possible. But the minter (the entity that stores the actual national currency) will sell the cryptotokens (say mtgoxUSD) in exchange for deposits and will always need to be trusted. This is true for OT as well.
In some other thread I can't find I said that you can achieve that with the ripple protocol (atomic trades of bitcoins for crypto-IOUs).
Ripplecoin (https://bitcointalk.org/index.php?topic=3557.0) could also do that.
The mtgoxUSD could be issued as colored satoshis too.
There's some people trying to implement an atomic trade of "smart bonds" for bitcoins right now.
Here are some related threads:

https://bitcointalk.org/index.php?topic=92421.0
https://bitcointalk.org/index.php?topic=106449.0
https://bitcointalk.org/index.php?topic=112007.0

If you have a p2p bond market, you have a p2p exchange. What you will never have is p2p USD or EUR.
Ripple of course helps with that.
If you don't trust mtgoxUSD you can sell btc for mtgoxUSD and them for intersangoUSD (or whatever). And you can make both trades atomically!! So you're holding mtgoxUSD for 0 seconds.
And this can be extended to n trades.

So I disagree, the p2p exchange is completely possible and may be a reality soon.

You could have a p2p USD or EUR derivatives. Suppose someone colors a satoshi and assigns a one dollar face value to it, promising to exchange this Satoshi for one USD of bitcoins in the future at the current bitcoin/USD market price. Suppose colored bitcoins and regular bitcoins can be traded via a p2p exchange.

Why would a company do this? Well, they can invest a percentage of the bitcoin they borrow by coloring satoshis (fractional reserve).

Why would anyone buy the colored Satoshi (i.e. lend to the company)? Well it might be convenient to acquire USD units of value. In addition to this, the company might pay some interest on these colored satoshis in exchange for the ability to raise debt.

If you have multiple companies doing this, then they could discount each others' colored satoshis which would increase liquidity. It would be like free banking and thus unstable. It would be nice to have a more stable solution as well (for example an overfunded reserve with company profit coming from txn fees rather than interest), but this seems more complicated to implement at this point.

I think of these as possible long-term goals for this project. A BTC/LTC exchange would be a good starting point.

For a while the Brits and Canucks tried to peg their United Kingdom Britcoins (UKB) and Canadian Digital Notes (CDN) respectively to GBP and CAD, respectively. It maybe would have worked if they had not copied the bitcoin model for their blockchains, specifically the limiting of the number of coins to only 21 million coins. With the total number of coins limited it turned out that trying to prevent the value rising well above that of GBP and CAD was not feasible; in the end they gave up trying to push them down in value and just learned to live with the constant increase in value of their coins.

-MarkM-

Yes, but you still need trust. Existing exchange could issue USD deposits certificates by coloring satoshis and users will be happy to hold the proof themselves while still having to trust the company, not for the exchange anymore, which is conducted in the blockchain with colored coins, but for the deposits. Users should still be able to withdraw the paper by sending their usdCoins back to the issuer.


Bonds, IOUs, future contracts, currencies, vouchers, tickets, ETFs, discounts, smart property, votes, certificate of deposit, academic certificates, property registry, beer tokens and poker tabs with friends.
The question is, why would a company want to use another technology for anti-counterfeiting?

You may need more privacy than what can the chain can offer, which I think will be enough for most if not for all with hardcore obfuscation. Maybe it's about the confirmation time.
The ripple protocol solves this same problem in a different way that is stronger in these two points, but there's many cases in which the public accounting is actually a feature. You don't need the issuer online to move the asset, the chain signs the movement for him. For the smart car property example, you want to be able to sell it even if the company that sold it to you goes broke.
I hope that there can be more coin colors than people (everybody issues, but only your neighbors accept yours, so you ripple your satoshi to pay). I don't think all of us will have our own server always online. So we will need to trust a ripple server for the assets we issue or just use the chain.


A BTC/LTC is feasible but requires changes in the current protocol (enable nLockTime and transaction replacement), but colored coins don't.
Maybe we have the p2p fiat/coin exchange than the p2p coin/coin after all.
I remember when I writed about exchangeCoin, which was a protocol which listened to other protocols to enable atomic exchanges with it. Other chains could do the same to be tradeable for others apart than from exchangeCoins. Now that I think about it...what a stupid idea I had then.

There are several possible answers:

1) Anti counterfeiting is expensive. Colored Bitcoins can be a very cheap and reliable solution. Consider liberty reserve. Presumably they have overhead expenditures.
Turn liberty reserve dollars to colored bitcoin and you would greatly reduce overhead. Only redemptions with the company directly have to be handled by the company. The company would not even have to agree to process redemptions below a certain minimum value. There is very little that the company would actually have to do on a day to day basis. Transfers between users would have very small txn fees, i.e. whatever you need to pay to transfer some satoshi.

2) Colored bitcoins would be like bearer bonds, except that they can be exchanged digitially. Nothing like this really exists right now. Bearer bonds aren't even really legal anymore. The company could access demand for its notes by tapping this niche market.

3) A colored satoshi could be more easily traded than something on GBLSE. With GBLSE there are two counterparties. With colored bitcoins and P2P exchanges, you have the same functionality as GBLSE, but only one counterparty. No need to worry about attacks (hackers, gov't, etc.) on GBLSE anymore.

You also mention that more privacy would be good. That's true. Making bitcoin anonymous would help here. However, I doubt we could get to a state where a public investment in something like Silk Road would be a safe endeavor.

Not sure if serious. The company could very easily and happily release more satoshis if its debt appreciated.  Keeping the window open to redeem debt at face value would prevent any depreciation, except in the event of bankruptcy (closing the window). Again, not sure if serious. Yes, you need to trust the company.

These points are valid arguments in favor of using colored coins. My question was actually...when do you want something else?


You don't want to be anonymous for everyone (like silk road) when issuing credit but that doesn't mean that you want the whole world to monitor the loans you make to your friends neither. Two companies may know each other but not want to publish their mutual balance.
Obfuscating btc movements is easier because it's cash, but this is harder for credit. For example, with ripple, a network of trust is advertised and that could reveal the meaning of the balances in the chain. User's may be ok with revealing who they trust but not necessarily their current balances.

There is no way around the "scamming" issue and needing to trust humans to pay back debt will lead to more of it.

I guess you never have make a deposit in a bitcoin exchange if you're that afraid of credit. Because your balance in one of them is just that, credit. the same applies for banks and for the cash in your hands, which is credit from central banks. The same applies for a voucher "this is valid as payment for 1 beer at my pub" or a prepaid phone card.
Credit is not bad per se: look at mutual credit based currencies, for example.

The best way around the scamming issue is the emergence of long-term players that earn a significant and publically verifiable income stream via bitcoin business activity and thus have something too lose from destroying their reputation in the bitcoin world.

Mt. Gox, Silk Road, and Satoshi's Dice, I think, are the only examples of such players in the bitcoin economy currently.

I can go and visit the bank in person. Theres a difference between that and being able to verify some anonymous internet identity.

I very rarely deposit to exchanges and only use people who are subject to fair trading legislation in my own country. People with something to lose by being dishonest such as spendbitcoins.

Sure. I agree with that.

It also explains why glbse is moving away from anonymous security issuers - those days are over.

Your balance at the bank is still credit from the bank to you.
If it is about laws, you can link a legal contract to a cryptographic keypair. Thus colored coins could have legal value on courts.

No just have the two traders create a new wallet where each has one half of the key and put the BTC in there, not in the p2coin system!

The solution to Trader A being a big jerk? Trader B *also* creates a multi-key address (in such a way that each trader only knows one of the two keys) and puts a small "guarantee fee" in it. Then after Trader A has received the funds, he will not be a jerk and fail to give Trader B the second key to the large wallet, because he'd lose out on the extra few BTC in the small guarantee wallet.

Trader B could of course be a jerk and not send Trader A the other key to the guarantee wallet, but that would be a much smaller issue that could be handled through reputation, etc. since there would be no systematic benefit to doing so. Furthermore, Trader A would not even be afraid of this very much since is still making some money on the spread.

This seems to make a p2p exchange work, as well as eliminating the need for escrow (and if escrow was ever needed, the level of trust needed for the third party could be minimized through this same "dual locked boxes" method).

Please correct if this is in error, but it seems foolproof.

EDIT: Here's a chart illustrating the incentives of each trader: https://bitcointalk.org/index.php?topic=118418.0 (https://bitcointalk.org/index.php?topic=118418.0)

Thank you for running the exchange but your bid/ask columns (Sell Orders and Buy Orders) are switched :) bid is usually on the left and Ask is on the right.
Really confusing.

Do you actually think Silk Road will not simply vanish with all the loot it can some day?

There was a gold based currency on anonymous net too years ago, great reputation, worked well etc.

But when time comes to retire or whatever, why not take the loot?

-MarkM-

Sure, businesses may not want transparency because they benefit from keeping secrets. However, this doesn't mean that the world wouldn't be better off if their secrets were revealed to the public.
This is particularly true in credit markets. More transparency -> More stability.

Because you can sell the marketplace to someone else and the untarnished reputation will be worth more than all the loot. If the FEDS come, however, then take the loot and run.

If there are two otherwise equal alternatives they'll chose to keep their secrets. I think we will use both pseudonymous-public and private transactions. But that's for credit. Bitcoin needs to be "transparent" to be cash which at the same time makes it easier to obfuscate.
I think privacy is a desirable feature for both cash and credit protocols but there's more smart property use cases that require the tokens to be publicly traceable like the smart and securely transferable bolt key (for cars and doors).
We'll definitely use both schemes.

The creditor generally wants transparency. The borrower wants secrecy. However, accepting the transparent market as a borrower should allow you to borrow at lower interest rates. Obviously people can go out and get 'secret' loans in the real world, but just closing off secret markets in BTC loans should help to lower interest rates.

Good point. I'm probably one of the few persons here who likes low interest rates as you may have noticed from my signature. Just in case, I don't like manipulated (usually by central banks) rates: that's only moving rents around instead of suppressing them.

But, for example, I get and give ripple loans to/from people I trust at zero interest using villages.cc.
Having that service decentralized would be great, but I will still want to maintain some privacy.

I would like to share some raw thoughts and get feedback.

Having read http://stackoverflow.com/questions/3469628/banking-api-protocol (http://stackoverflow.com/questions/3469628/banking-api-protocol) and cursorily examined the OFX protocol, it seems that it is possible for the seller to get confirmation from the buyer's bank that funds have been sent to the seller's account.

This way it is pure p2p transaction. Of course the buyer will not remain anonymous, since the bank transfer will be made into his account.

But then I read in the very first post

Maybe we should first think how it would be possible to secure the private key to that wallet? And where will the Trading Bot run? It can't run "on the internet", it's got to be somebody's physical machine.

Hi all,

I have done some research on p2p bitcoin exchanges. As far as I understand, the project of this topic does not have any code yet. There's another p2p exchange project which does have code: DarkExchange (https://bitcointalk.org/index.php?topic=27055.140). However it's running into troubles and they haven't figured out yet that coloring is the solution. Actually the bitcoinx project did find that out, AND it has code AND it has a website. I've discussed matters with user "ConceptPending" and it looks like we're joining the bitcoinx project. I'm sorry if I'm stealing away people now, but at least you should be aware of similar projects.

I'm excited for you,
I'm doing my p2px research as well, trying to join forces on a viable project.
Kindly provide relevant info regarding bitcoinx internals etc.

I don't get it. Is this alive? Any code available?

I think this is the best idea I've heard in a while. I hope this comes together. Could do wonders for the bitcoin world. Will be following...

Cunicula, replied to you on that thread.

Could you somehow use the miners as the trust third party? They are mining and supporting the system anyway.

I believe bitcoinx is part of the solution but not the entire solution. Some people are critisizing the coloring of bitcoins in large scale.
My idea: we need to create a IOUcoin in the end where bitcoinx colors the IOUcoin, the IOUcoin will always be worth zero, but the IOU contained may be worth 1 cent or 1 billion dollars depending on what the IOU states. IOUcoin will therefore be inflationary so its value always will be zero, or at least close to zero (like paper you buy to sign contracts, the paper and the ink to sign the paper might cost you a couple of cent but not more)

Anonymity refers to interaction with internet using ways that protects a persons’ identity from being shared with a third party. Various forms of anonymity exist in the current technological field and use of internet at large. Some types of anonymity that have been in existence since time immemorial. In the past, the phenomenon of anonymity was used to hide one's real identity when transacting online and indulgence in activities that require individual to hide personal identity for security purposes entirely and to keep sensitive information out of public reach.
Initially, before Facebook and Google became significant platforms on the internet, the old web supported identity that remained separated from real life. This phenomenon is gradually disappearing from the internet computing scene. The pursuit of authenticity is crouching into the heart of social platforms and current online landscape largely shapes how people engage with others and online content plus related activities.
Facebook and Google offer platforms that offer confidence that individual is really who they say they are. This authentic identity is not anonymous since facebook profiles, and Google IDs are linked to individuals’ real names and connections. Signing up and logging onto other web platforms using this identity is aggregated version of one’s offline past, online present, and future.
When an individual purchases items or hire for services using PayPal or on eBay’s commercial website, a person is not required to disclose full information to the distributors hence this aspect hides and protects individual’s identity. There are quizzes websites such as Formspring that support asking for anonymous questions to online visitors that are known to obtain responses regarding specific issues. These sites promote asking anonymous questions and get answers to enable provision of better services and technological improvising.
Presently, there are anonymous flirting and networking online resources that enable people to tease with others without revealing their real identities. Such anonymous forcing and networking platforms include LikeALittle, Chatroulette, and Omegle. They support the connection between individuals with the disclosure of whom they are, and eliminate personal prejudices in people and encourage free interaction between people.
There is also anonymous blogging and posting in the present internet interaction. Users can interact with others on the network, blog and post ideas and sentiments anonymously. Twitter supports anonymous accounts. Other websites like BlogSpot and tumbler support anonymous blogging and posting.
It is therefore essential for people to use combination Tor browser and 4Chan since Tor offers back-end anonymity that complements 4Chan front end anonymity. Considering online transactions, it is crucial for a person to maintain a high level of anonymity so malicious users cannot obtain your real identity and relates information that can be used to fraud money and other monetary resources. Before the use of credit cards and other wire transfers dramatically exposes one integrity and do not protect a person’s sensitive information. The introduction of cryptocurrency such as Bytecoin provides an option where one can pay for goods and services using the digital currency which is untraceable and does not expose private information. This element of anonymous transaction protects individual’s identity and hinders sellers from gaining knowledge that can be used to solicit them in future.