Bitcoin Forum

With the recent fall of so many cryptocurrency exchanges I was thinking about feasibility of making trades safe.

So I came up with the following idea. We create some metacoin with the single purpose of making its blockchain a decentralised exchange for trading other major coins. How this would work in practice. Say, you want to sell a few bitcoins and get some doges. You send your bitcoins to a randomly generated address whose private key is distributed across (encrypted in) this metacoin blockchain. The private key could only be made available to whoever sells you dogecoins at the price which will be set in the transaction you sign on this meta blockchain. For the buyer of your bitcoins the process should be pretty much the same.

Is it possible to make such a "coin", which client would serve as a trading platform?

I actually have coded an unlaunched alt with multivalent amounts - so I could easily launch a blockchain tomorrow that can keep track of thousands of different kinds of coins, and keep them all separate, and allow trading between them on the chain. 

But moving them back and forth to their native blockchains is something that the devs on those blockchains would have to provide a way to do.

Why not release the source code then? Someone could pick up where you left and go on. Also, altcoin exchange devs do have to deal with the issue of working with numerous blockchains somehow.

I may yet do it.  I did re-base it to Bitcoin 0.10.0 this week, following the latest Bitcoin release for all kinds of improvements in block chain handling.  I haven't implemented my side of the transfer-between-chains thing for anybody to be compatible with, and of course they'd need to add the code to their altcoins (and have a hard fork each for a couple of new transaction types) before it would work.

Mostly I've been not pursuing it because I don't want to explain to two or three hundred scammers why I'm not going to be making an effort to be compatible with their scamcoins.  Seriously, the altcoin world is filthy these days.  I would go so far as to say MOST alts actually have no interest in application as currency; their model of issuance (with most of the coins out in the first year, or coin production cut by more than half in the first year) makes no economic sense for that.  Nor does the ludicrous notion that it is reasonable for a significant fraction of the entire money supply to be reserved for one or a few people.  And one is left with the unfortunate implication that most of them have no reason to exist except as scams. 

And, do I really want to facilitate trading between scams?  Considered as an economic force, in the short term easy trustless trading would facilitate some scams and make others more difficult.  The question is, in the long run would it favor the less scammy operators?  With trustless trading, would market pressure mean the pump-n-dumps end with less money effectively stolen?  And hopefully faster, or with more accountability, or both? 

The Atomic Cross-Chain Transfer concept which has been implemented using Automated Transactions (AT) and is described in detail here: http://ciyam.org/at/at_atomic.html could end up providing the "lynch pin" for trading across different blockchains (and CIYAM is developing a Token package that could act as the decentralised "market" for this approach).

By using ACCT at least all trades would be "safe" (in terms of the trade being honoured according to the terms of the ACCT algorithm).

I do agree with @Cryddit that most alts are just pump and dump scams (but I doubt they would go to the effort of implementing AT so it might be a refuge from that at least in the short term).

You could take the most traded altcoin (say doge) and make a reference design (proof of concept). If this works out well in the end, other altcoin developers will be eager to add support for their stuff.

BitShares is a decentralied exchange.  The only difference between it and what you describe is it doesn't trade altcoins (yet), just BTC, fiat, gold and silver.

It doesn't trade *actual* fiat, gold or silver just IOUs - or am I incorrect?

(does it even actually trade real BTC - I think not)

Where are these funds actually (physically if applicable) stored?

Nowhere - as they are just IOUs (no different to Ripple really).

They have been trying to "con" people with the idea that an IOU is just a good as the real thing from day one.

Then why should we care?

I don't (as I know it is just crap) but unfortunately they are sucking more and more people into their "prediction market" crap (which is really "newspeak" for "let's steal your money by trying to make you think our snake oil is the real thing").

I suspect that they'll try and evade prosecution by eventually leaving the US and setting up overseas (as others are doing).

To use the terms "USD", "BTC", "gold" and "silver" when there is no such actual underlying asset is "deceitful to say the least".

Doge, for all that I don't care much for its prospects, at least doesn't appear to be a scam.  Or at least, not actively scamming at this time.  Litecoin likewise doesn't appear to have any active scams going. 

But, honestly?  The single most non-scammy alt I can think of is Namecoin.  Thousands of nodes on their network all the time, mostly just because people are running full nodes in order to keep their browsers updated on the .bit domains.  Namecoin actually provides a real service, so there's a constant non-pump demand for it.

Litecoin seems to me like a bastard child of Bitcoin. Neither here nor there. It tries to clothe itself with bitcoin's fame, but since there can only be one Bitcoin, it looks grotesque. Dogecoin, on the contrary, doesn't pretend to take after anything, and as a result we have fast (in terms of confirmation times) and cheap (in terms of transaction fees) coin, perfectly fit for trading.


Can't say anything about Namecoin. Though providing real service doesn't make it invulnerable to pumping (in fact, more prone).

Looking more closely at the atomic cross-chain trading protocol, I have a bit more coding to do for security.  

It works fine as long as both chains are proceeding, neither party can block the other from making a transaction in a given timeframe, and a reorg doesn't block out just part of the protocol on one or both chains.  But dealing with alts, often the block chain security is kinda thin, and I can't really trust that there'll not be long reorgs created by attackers -- either on my chain or one of the others.  

First thing, for secure cross-chain trades, because the protocol depends on transactions waiting until after other transactions have occurred,  I'll absolutely have to add minimum and maximum block heights to transactions. That is, a transaction would not be valid in any block prior to its minimum block height, nor in any block after its maximum block height.  

Second, I'll want to implement time-locked outputs;  That is, different outputs, even if created in the same transaction, will need to be able to specify different minimum block heights before which they cannot be validly spent and possibly even different maximum block heights after which they cannot be validly spent.

Finally related to secure trades, and also to eventually implementing proof-of-stake that doesn't give attackers infinite free shots at causing reorgs,  I'll need each tx to specify a very recent block (current block as of the time the tx is created) and not be valid in any block chain that does not have that block as its ancestor.  This will prevent a couple of possible scams involving chain reorgs either on the metacoin chain or the chain it's crossing with; if a given tx is invalidated by a reorg, then other tx in the same sequence must also be invalidated by the very same reorg.

I keep spending coding effort on this thing, like a hobby; maybe in the back of my mind I have already decided to do it.  With my conscious mind I still have huge doubts.

If you make it opensource (you will have to in the end, unless you decide to abandon it indeed), other people will give you motivation to continue your work. And this is the least you could expect after going public.

Well, there was already an nLockTime (minimum block/time for a tx to be valid).  I added an nLastTime (maximum block/time for a tx to be valid), plus an nStakeTime and an nStakeBlock;  nStakeTime is the height of a 'stake block' for the tx, and nStakeBlock is the last 32 bits of that block's ID.  And I implemented functions IsAliveTx and IsStakedTx to check for these conditions being wrong, and hacked IsStandardTx to keep such tx out of the blocks, and IsValid to keep blocks containing such tx from being accepted in a blockchain.

So, you can have a tx that is valid only between block A and block B; you know for sure that it won't be included in any block before A, and you also know for sure that it won't be included in any block after B. 

The idea with nStakeTime and nStakeBlock is that a tx is not valid in any chain other than one where the block at the named height has a hash whose last 32 bits matches the named nStakeBlock.  And this means that if a bunch of related tx all stake the same block, you can guarantee that if any of a them disappears in a reorg, then ALL of them disappear in the same reorg.  And that also puts in the infrastructure for proof-of-stake that doesn't suffer from the "nothing-at-stake" problem, although I have not implemented any PoS yet - and if/when I do it'll be a true hybrid where proof-of-work is still required to find blocks.

I have not implemented time-locked outputs yet; the more I think about it the more I'm certain that there is a better way to do it than by having another data field in the txout.  Time-locked outputs and much more become possible if the scripting language has an op that pushes the current block height.  Then the time-locked output becomes a P2SH output, where the script pushes the block height, compares it to a number that's already there, and returns true iff one is greater than the other. 

This makes several ways to 'backstop' the cross-chain trading risks involving playing silly-buggers with block timing and reorgs.

But now I need to think hard about whether that new scripting op introduces new vulnerabilities and scams.

Okay, I thought about it.  It is not just necessary for txOuts to have a spendable time, it is also necessary that people can see what the spendable time is without anyone having actually provided the script to spend it. 

So I'm hacking an nSpendableHeight into txOuts.  This will get serialized in the txOuts of each transaction and will permit transactions to have a minimum block height before which they cannot be spent. And importantly for auditable protocol,  people can look at the block chain and see what that height is.  I don't think a maximum spendable height is going to be necessary. 

Okay, did that.  Serialization and constructor calls were a heck of a thing to sort out, but now txOuts have a spendable time - a block height before which they cannot be spent.  At this time it's only supported in raw RPC transactions - the wallet doesn't know boo about it except to not display them for its current balance until they are valid and not use them to try to make payments until they are valid.  It always creates txouts that are not limited to a spendable time.

At this point I think I've provided ways to prevent most of the potential attacks on atomic cross-chain transfer, at least from my side.  

But since I now have StakeTime and StakeBlock, I can't resist going ahead to implement a non-stupid implementation of Proof-of-Stake.  

For the record, all implementations of Proof-of-Stake  that I've seen so far are in fact stupid.  

What I'm going to do is a PoW/TaPoS hybrid (that is, Proof-of-Work combined with Transactions as Proof of Stake).   Who forms the block is determined by PoW.  Each transaction 'stakes' a given block, and is not valid in any blockchain that forked before that block - making txOuts that exist before the fork into a finite resource that either supports one side of the fork, or cancels itself out by supporting both.  Resolving the conflict between two block chain branches will depend on both the relative proof-of-work between the branches and the total amount of txouts created before and staked after the split.  The stakers and the PoW miners will both get payments for securing the chain in the same proportion that their contributions to chain security are counted relative to each other.

I'm probably going to find dozens of bugs when I start testing this....  

Yes you are incorrect. BitShares is a decentralized exchange- it doesn't trade only IOUs as you are claiming, it trades assets that peg the value of their real world counterpart, also known as market pegged assets or bitassets. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.


This is just plain wrong. Market pegged assets like bitUSD, bitGOLD are a new type of asset... not user issued IOUs. Read more about them here: http://whatisbitusd.com/whitepaper/


We use these terms because the bitasset has the same buying power as the real world counterpart. AND it is not because someone is promising to redeem it as such (as with an IOU)! The value is frozen on the blockchain when a short order is matched to create the new bitasset. And technically the proper term is BitGOLD, BitUSD, etc.

BitShares is like a decentralized Ripple with a stable liquidity token (bitUSD vs. XRP) that can facilitate the same type of IOU payment network between gateways, only in a way requiring less trust of the user, a fair distribution, and Ripple doesn't have market pegged bitassets that eliminate the need for businesses to cash out of crypto into fiat... now they can hold bitUSD or whatever their favorite relatively stable asset is instead. Of course, this is pending more liquid markets... which has been improving as more bridges open up like metaexchange.info and shapeshift.io.

In fact there is a discussion over at the bitsharestalk forums about adding cryptocurrencies so other communities can trade on a decentralized exchange too. BitShares wants to bolster the overall crypto community with a platform for safer trades... not scam it as CIYAM suggests. I suggest you do your research before you make claims about projects you are unfamiliar with.

https://bitsharestalk.org/index.php?topic=14847.0

The point here is not how these assets are called. It is more interesting to see what this collateral is (in respect to it actually being collateral), and how it can be locked on the blockchain. Is it bitcoins that you send to some address and lose control over? If so, who has the keys, BitShares?

These market-pegged assets are pegged by whom exactly?  Who takes the loss if the relative value of assets changes and then someone wants their asset back? If they cannot be restored to the real world from the block chain, then they are not two-way pegged.  And a one-way pegged asset is indistinguishable from an IOU.  Someone took the real-world asset and manipulated the block chain to create the "pegged" asset - but if he did not keep the real-world asset at some actual place in the real world where you can trade in your "pegged" asset to get it back, then your pegged asset does not have its value.


DANGER WILL ROBINSON!!!  When someone tells you something is a new type of asset, there is a 99% chance they are trying to scam you!  This has been true for thousands of years! 


If the same set of merchants who accept the real-world counterparts are willing to accept the bitasset on the same terms, then it has the same value.  But they aren't.  And they won't, because, as you admit, there is no one who is willing to exchange the bitasset for the real-world asset they value.  Also, the "value" frozen on the block chain is measured in what units?  Hint:  There IS NO unit of value that does not constantly shift in its exchange rate relative to other units of value.  Even if there were, there is no way anyone can guarantee that unit of value is retained, unless there is a way to exchange the bitasset for that asset -- which would mean that the real-world assets are, in fact, stored someplace where you can get them back. 

We give the asset class a different name because they have different properties. They aren't IOUs- hence, they aren't user issued assets as claimed.

I mentioned in my previous post that the backing collateral is BTS. So, all bitasset markets start at supply 0. Bitshares uses DPOS to secure the ledger which involves BTS holders electing delegates to sign blocks via approval voting. The 101 delegates with the most stake voting for them are the active signers. Another task for the delegates to perform is publishing feed data for registered market assets. New bitassets can be shorted into existence after 51 delegates are publishing feeds, the median of which is used for the short price.

To create the asset and increase the supply, an order must be filled. That means there must be a buyer on the other end of the trade looking to hold said asset. The short must put up 2x the value of whatever asset they are shorting in terms of BTS. The long puts up 1x, for a combined total of 300% collateral. This collateral is held by the market in the bitshares protocol itself, as if it were taken out of supply. It becomes liquid again when the short order is covered. This can be triggered by a margin call if the price of BTS falls past a certain point, which means the short position is automatically covered. The short will also automatically cover after 30 days pass as an expiration date is built in to guarantee liquidity. Lastly, the short position could cover by buying bitUSD or whatever asset they are shorting off the free market, then using it to cover. The act of covering frees the collateral again and destroys the bitasset used to cover, shrinking the supply. So the market caps for bitassets are actually proportional to their demand in this respect.

Read this whitepaper for a better understanding: whatisbitusd.com/whitepaper

When I said new kind of asset, I meant in crypto-space. These assets are similar to contracts for difference outside of the crypto-space, yet they are fungible and divisible.

The short and long positions are at risk for the potential loss when they take their voluntary position.

The collateral is BTS (for the 3rd time).

Also there are people willing to exchange bitassets for their "real world" asset. You can convert between BTC:bitBTC on metaexchange.info, and another startup Cryptosmith is working on a bitSilver:physical silver offramp so you can receive physical silver in exchange for bitsilver.

Fiat gateways are more difficult, but the Chinese have a CNY:bitCNY bridge over at tradebts.com, and bitUSD:USD fiat gateways are in exploratory phase.

Just because the stream is calm now doesn't mean that the dam won't burst in the future. Bring on the liquidity, baby.

I didn't understand what you wrote after that part (in fact, I don't quite understand even this part), but how is the user protected from the exchange robbery or the exchange deciding to just run away with their clients funds? In short, who actually owns or, rather, controls the money?

The exchange is baked into the bitshares blockchain protocol... hence it is decentralized. There isn't counterparty risk as with the traditional exchange when trading on the Bitshares DEX; only systemic risk insofar as the integrity of the software from irrecoverable hacks or exploits. Each user with assets in a bitshares wallet control their own keys to their bitshares accounts and hence, to their money.

You can play around with the newly released web wallet here: wallet.bitshares.org.

The web wallet doesn't have trading enabled yet (hopefully soon) so you'll have to grab the desktop client if you want to see how it works: https://github.com/BitShares/bitshares/releases/tag/bts%2F0.6.2

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

I recall a coin that tried to do it, but was a false prophet and dumped their coins on us.

As far as I know, you can't really make a decentralized exchange with all these guys who have harden themselves from coin IPOs. If you want that to happen, you would have to try really hard to convince people that your coin will make it.

Bitshares has a lot of new and interesting stuff going on that makes it hard to follow at first until you've grokked it. I'd recommend reading some of bytemasters posts to understand some of the concepts better.

http://bytemaster.bitshares.org/article/2015/01/05/The-Future-of-Crypto-Currency-Exchanges/
http://bytemaster.bitshares.org/article/2015/01/07/The-Worlds-First-Decentalized-Exchange/

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

It's worth noting that you get paid a variable % yield for holding bitassets as well out of fees collected by the market.

http://bitsharesblocks.com/assets/market

BTC cannot be stored directly on the bitshares blockchain- it is its own native chain (BTS). There are some very interesting ideas from bitsapphire about how to use DPOS + OT to achieve what you are thinking though... I imagine we will see some ideas for that type of thing in the coming year.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them? And how is this bitBTC different from an IOU then?

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

"The Bitshares Foundation" claims all their "bitassets" are "backed" by their physical counterparts.  This is categorically false.  I don't know whether they claim this because they have absolutely no idea what they are doing or because they are intentionally trying to mislead investors.  "The Bitshares Foundation" claims that because you can sell your bitUSD for Bitshares and then sell your Bitshares for BTC and then sell your BTC for USD that bitUSD is backed by USD.  Obviously, that is the most ludicrous thing I have ever heard.  On that same logic I can claim bitGold is backed by tomatoes because I can sell my bitGold for Bitshares, then sell my Bitshares for BTC, then sell my BTC for USD and then take my USD and go to the grocery and buy tomatoes.  GENIUS!

Of course none of this stops Bitshares(TM) from claiming that Bitshares is "Safer than a Swiss Bank account!".  I'd still like to hear the explanation on how BTS derivatives are "safer" than physical assets in a vault.

No, I would most certainly not think so. As said before, these bit-assets are just IOUs for which you pay real money. And it doesn't actually matter whether their "bitassets" are backed by their physical counterparts. What matters here is who controls the real assets (if they exist at all, of course).

They aren't IOUs.  "Bitassets" are derivatives.  An example of an IOU is a Ripple token which is directly redeemable for the physical asset via its respective gateway.

This doesn't make them more reliable, right?

Derivative is a promise to give you some quantity of the underlying asset. IOU is a document that acknowledges debt, that is a promise to pay you some amount of money (and money is an asset too). Don't see much difference between them in respect to their reliability. Six of one, and half a dozen of the other.

If the IOU's respective gateway isn't fractionally reserved, then the IOU is actually redeemable for the physical asset.  The issue with "bitAssets" is that they are a derivative which can ONLY be settled in BTS.  There aren't any dollars, euros, bitcoins, bars of gold, barrels of oil, etc in the Bitshares ecosystem.  "bitAssets" are not redeemable for what they are supposed to represent.  Even if there are "bitAsset Offramps", companies that purchase bitassets and send out their physical counterparts, there will never be a 1-to-1 correlation between physical assets available and derivative contracts open on the market.  Bitshares' claims their "bitAssets" remove "counterparty risk" but what they really do is expose individuals to extreme systematic risk.

Imo, no convertibility, no parity.  IOUs are much safer and reliable than derivatives.  I'd much rather have a digital representation of a physical asset that is directly convertible requiring trust than a digital representation of a physical asset which requires no trust because it has no convertibility, therefore no value.

They don't exist.

This is exactly my issue with these "products" - if it is called xBTC then I expect to be able to exchange it for actual BTC.

So if you are able to actually exchange 1 bitCNY for 1 CNY somewhere then that is fine (and the name makes perfect sense) but if there is nowhere you can do that then the name is about as meaningful as bitXYZ.

Whilst I don't think that there is any intention to deceive it "seems" deceptive to name something xBTC if you can't exchange it with actual BTC (i.e. why are you using that name?).

I am quite familiar with options trading (used to do some of that years ago) and although options are often never exercised they always *can* be if the conditions are met (i.e. the underlying share ownership will be transferred).

Trading something that with a name that doesn't have an actual matching asset is just something I'd never do (but perhaps that's just me).

"So if you are able to actually exchange 1 bitCNY for 1 CNY somewhere and there is enough CNY held in reserve to cover all outstanding CNY debts then that is fine but if there is nowhere you can do that then the name is about as meaningful as bitXYZ."

I added the bold part because without 100% reserves you simply have a fractional debt scheme.

Yes - very good point.

This is why a Ripple BTC is not worth a real BTC (as you can't be sure that all the issued "tokens" can be redeemed).

Constantly posting links to large blog entries or papers (rather than giving a simple explanation) is another problem I have with these "products". Typically this is the "snake oil" sales approach in the financial world.

We all saw (and many have felt) the result of Credit Default Swaps (which were also very complicated "derivatives").

Please cite these references.  What is "The Bitshares Foundation"? I don't think that entity even exists.

I haven't seen anyone claiming that bitassets are backed by their physical counterparts... in fact that is the beauty of it. You can hold and trade a cryptographic token that closely approximates the value of its real world counterpart. You can send the purchasing power of gold, usd, etc. across the globe for fractions of a penny. This opens a new venue for use cases that hasn't been possible before & lowers counterparty risk. So you would prefer to hold an IOU... don't use bitassets. I however would like to minimize trust as much as possible with my money... hell I barely trust myself with it even. ;)


All bitassets are backed by BTS as collateral. Period. Nobody is trying to say that the physical counterpart is backing it as DecentralizeEconomics claims. This is why it is not an IOU and is in fact a type of derivative... but instead of trusting Wall Street bankers who are collateralizing the asset with junk mortgages (the bad derivatives), you are trusting a blockchain protocol to secure the underlying BTS and keep the asset collateralized. This is why the assets will automatically unwind if BTS is falling in price when the median feed price matches the call price for a short position an automatic cover is triggered.


Sorry, I will take bitUSD over MtGoxUSD anyday. Different strokes for different folks.

BitAssets are a new use case- want to have an asset with minimal trust that approximates the value of its counterpart and exposes you to yield? Hold a bitasset. Want to trust the assurance that a company will redeem your IOU, while being exposed to the risk of default, hacking or bankruptcy? Then go for the IOU.


BitAssets aren't collateralized by fractional reserves. In fact, they start at a 300% reserve, and margin call well before it gets anywhere near 100%. For uncollateralization of a bitasset to occur (a systemic risk), a black swan event would need to happen. Read about what those are here and ways they can be handled: http://bytemaster.bitshares.org/article/2015/01/27/BitAssets-and-Black-Swan-Events/

I've explained a lot of these things here before. There is a lot of content to digest- why wouldn't you want to read it from the horses mouth? I see no problem with linking people to useful resources. It isn't snake oil that instead of writing a blog posts worth of information I point you to a sufficient article. You can judge yourself whether or not it has merit; that is not for me to decide.


bitBTC approximates the value of BTC, but can be traded on the bitshares decentralized exchange. Simple as that. It pegs the value of BTC.

You can trade bitBTC/BTC on this market: https://metaexchange.info/markets/bitBTC/BTC

There are use cases that bitassets can fulfill that nothing else in the space is capable of atm. I wouldn't be so quick to dismiss it all as "snake oil" because you haven't taken the proper time to research it for yourself and are making assumptions instead.

Oh and for the record, DecentralizeEconomics has an excellent & entertaining thread filled with propaganda FUDing bitshares over here that had me laughing and has some great back and forth dialogue about contested bitshares topics... check it out!

https://bitcointalk.org/index.php?topic=916696.0

You are probably unaware that Dan Larimer used to chat with me on Skype before Bitshares even existed and that I knew about this whole concept before nearly anyone on this forum.

I am not making assumptions at all - calling something xBTC that has no BTC to back it up is not what I think of as being a valid product (but again that is just IMO).

And for the record I am not claiming that it *is* snake oil but the way it is being sold (by you in particular) looks just like that (so please stop telling me to "educate myself").

I'll try and clear up a few misconceptions.

BitAssets are shorted into existence.  The shorters are forced to buy back the BitAsset they shorted every 30 days.  So anytime someone buys $1 BitUSD, there is guaranteed to be a buyer within 30 days.  This keeps the peg in place, because people know that if you can snap up BitUSD down below the price feed, then later you will be able to sell it closer to the price feed (or slightly above).  You can view the accuracy of the peg here: https://bitsharesblocks.com/charts/feeds?asset=USD.  You can see it usually stays +/- 2% of the price feed, occasionally slipping to 3%.  So it's been working well for months and the more liquidity gained in the future will improve its function, making it get tighter and tighter.

So that's the peg, then there's the collateral.  The collateral percentage for each BitAsset is viewable here:
https://bitsharesblocks.com/assets/market.  You can see there is over 250% collateral for every BitAsset locked up by the BitShares blockchain.  This high collateral requirement is due to the unstable price of BTS, for more stable collateral types typically lower percentages are needed.

All collateral is in BTS, but does BTS have any value?

- Distribution.   BTS was initially distributed via proof of work, the same as bitcoin.
- Utility.  BTS is the fuel for a derivative instrument that create stable cryptocurrency - a decentralsed crypto-bank for all.
- Current distribution.  BTS is now created via real proof of work, DPOS (delegated proof of stake).  Developers do work for BitShares in exchange for BTS.

It's normal for derivatives to be backed by collateral different to that of the derivative.  A gold derivative doesn't have to be backed by gold, just an asset of equivalent value.  In this case, BitGOLD is backed by as much BTS as it takes to buy a physical ounce of gold. 

Very soon though you will be able to exchange BitGOLD and BitSiLVER 1:1 with the physical metal at http://cryptosmith.info/. Also, BTC38.com accepts BitCNY as if it were real CNY and actually pays a small bonus for depositing it.  This is just the beginning for BitShares.  Stocks are coming soon, backed by real stock bought on a stock exchange.

So BTS, which is used to back up bitassets as I got it, is just another shit coin out there, which we've seen more than enough already.

Sorry to make an assumption about you, there are a lot of misconceptions around the concept of bitassets so I was just trying to help the readers of this thread understand the difference. I am passionate about the project but I want nothing more than full disclosure of the associated truth, risks, rewards, and use cases. Not to sell someone on something they don't understand.

So as for you thinking I am selling snake oil, well like, that's just your opinion, man.  ;D

Personally, I think the ability to peg the price of BTC is rationale enough to include BTC in the name. I think BTSBTC would also be a good way to identify it.

Not quite, but I suppose that depends on how you define shitcoin. Bitshares is built from the ground up on a new codebase instead of being a simple fork of another like actual "shitcoins". The proof of work distribution (which accounts for ~50% of the BTS supply) was based off of a snapshot taken from protoshares (PTS), which is a bitcoin fork. The other 50% of the initial distribution was sharedropped to AGS holders, who contributed to a development fund by donating BTC or PTS to the AGS initial crowd offering.

 It is also the first cryptocurrency to use delegated proof of stake. To me, a shitcoin is something that has NO value proposition or unique use cases; instead it is just a simple fork of an old coin with a new brand.

Some examples of non-shitcoin projects (IMO) with their own native token: maidsafe, ethereum, ripple, nxt, bitshares

Why not use bitcoin as a back-up asset? Why create new coin when everything what is new in BTS can be done around an already existing infrastructure, that of bitcoin?

Proof of work in the current incarnation doesn't confirm transactions quickly enough to facilitate a decentralized exchange smoothly. The design of DPOS also has block confirmations set at every 10 seconds, to keep the flow of the market running smoothly. Each delegate can also be viewed as an oracle... they publish price feeds from scripts interacting with an RPC API on the server their delegate node is running, to provide the internal market with spot prices, the median of which is the price new short orders execute at for that given bitasset.

But if the primary purpose of the BTS blockchain is organizing decentralized trading, why make use of an intermediary when you can trade directly, say, buy doges and pay for them in bitcoins?

That would make trading even faster, right?

BitShares is a DAC- a distributed automated company.

It offers a service: value transfer
has expenses: delegate pay
has revenue: transaction fees
and its equity (BTS) rises in price as the adoption and utility of the network grows.

You can apply the same line of reasoning to Bitcoin and realize that mining is a really expensive way to secure the ledger. I'm not trying to get into a debate regarding whether or not mining is the way to go, just saying that it costs more to secure due to the energy expenditures. The idea is that there is a happy medium where you can achieve a sufficiently decentralized network where malicious actors cannot game or easily get control of the system, yet also minimize the cost of securing the blockchain ledger of said network.

BitShares attempts to redirect those miner fees in a more efficient way by allowing delegates to campaign for funding via delegate pay. Many delegates are being paid for their efforts in core development, building the BTS supporting infrastructure, and marketing initiatives, including many other things including education, exchanges, and blockchain statistic sites (such as bitsharesblocks.com). Their actual delegate node is validating and signing blocks to form the network consensus. In such a system, each delegate actor has their reputation at stake and their interactions with the blockchain are public and can be audited.

Also, Atomic cross chain trading is what you are talking about. Ideally, a decentralized exchange can accomplish such a thing... but in practice it is more difficult than it looks. Looking forward to seeing some creative solutions to that problem spring up in the coming year.

It's all very good indeed, but why use an intermediary? You said that bitcoin is not fast enough. I say in reply that without an intermediary the system should work even better. If I want to buy doges and am going to pay in bitcoins, why should I at first buy BTS to sell bitcoins and then sell BTS to buy doges? I don't get it.

I don't accept BTS as having value.  I don't accept doge coin either.  I regard these assets as having no collateral, because I have no guarantee that I can exchange BTS for anything of value.

I think we will see better usability as businesses see startup opportunity in the space and build those types of services.

http://mercuryex.com/ looks interesting too, I haven't tried it out. They are using the atomic cross chain swap to allow trading between the two. I think there is a centralized orderbook, tho so it isn't completely decentralized.

The market disagrees with you but of course you are free to believe what you wish. BTS are trading for around $0.01... seems like a steal to me.  8)

In my own experience, farmers sometimes trade options in their crops in order to reduce risk from, eg, a year with tough weather patterns.  When they do so, it's usually with the full intent of fulfilling that option, or demanding the actual physical asset it represents, should the market do what they hope it doesn't.

Thus a wheat farmer will place a  'buy' option on some quantity of wheat, and then if his own crops get hailed out (and likely everyone else's as well, driving prices sky-high) he will exercise that option and expect trucks to show up with product he can take to the grain elevator and sell.  

The Automated Transactions project (aka AT) has already created an atomic cross-chain transfer smart contract that could operate on any platform that implements AT (it is on Burst and soon to be on Qora).

If you guys are seriously interested in a completely decentralised solution then perhaps you should think about integrating AT with BitShares (I know at least two BitShares devs are interested in it).

For the type of options that are normally sold for stocks what I stated is 100% correct (perhaps you are referring to some type of option that only applies to the US?).

You sell options as an "insurance" against loss on the underlying stock. So the seller of the option is hedging and the buyer is speculating.

This is generally most useful for stocks that don't pay much in the way of dividends (as you are less likely to want to sell options on blue chip shares that pay good dividends).

The problem with this is counterparty risk.  The guy who "guarantees" to buy back the bitasset in 30 days may go broke first.  And somebody eats the loss. 

Counterparty risk is exactly what you get with IOU's and some types of derivatives, too.  So your "trustless" system involves "trusting" that someone will not have filed bankruptcy, will be able to buy back the asset, and will follow through on the promise rather than disappearing and retiring under a fake name in the tropics or something.   

How does Automated Transaction differ from Open Transactions? I'll have to read more about it.

I believe bitsapphire is working on something similar with Pactum- uses Hyperledger, Open Transactions, DPOS, and Codius apparently from this source:

http://www.slideshare.net/MrCollectrix/is-the-adoption-of-blockchains-and-consensus-ledgers-a-foregone-conclusion

There isn't much information on Pactum yet so it is mostly speculation.

Actually the beauty of it is the scenario you described won't happen because the shorter already put up enough collateral to perform the buy back, which is sent to an address controlled by the market on the blockchain. If the user shorting doesn't have the money to buy up bitUSD for example, and use it to cover the short manually, it will be bought out of the collateral they put up initially in the short (which is 2x the amount of the short).

You can find some information here: http://ciyam.org/at (am sorry it is mostly very technical).

To explain succinctly though AT is a "smart contract" implementation that can be added to *any* blockchain (so it does not have its own blockchain).

It already works and we have created Lottery and Crowdfund ATs that have been running "live" for weeks.

There is no law recognizing entities of this category in the United States.  Nor have I ever heard of any nation whose legal system encompasses such a thing.

As such, I have no guarantees of what the law requires of this entity, nor whom to serve papers on if they fumble and fail to deliver my asset as agreed.  The legal ambiguity of an unknown entity type will also make court proceedings drastically more expensive if it becomes necessary to sue them.

This part I *get* (and always did after Dan explained it to me more than a year ago) but I still have a problem with it being named bitUSD when you can't exchange it for actual USD.

It isn't a centralized entity, it is a metaphor you can apply to networks like Bitcoin and Bitshares to view them in a different perspective. Legal clarification on the laws delegates must abide by will be helpful though. There is a bitsharestalk forum member looking into a legal consultation to gain some clarification on the matter- if delegates are comparable to miners in bitcoin from a tax perspective or have extra hoops to jump through and other legal questions.


Thanks, I'm curious to see how it differs from OT which I believe is trying to accomplish something quite similar. I'll have to dig in and read more.


Not yet at least. I think it can become a reality, though. Looking forward to the first USD:bitUSD gateway.

When you have that I will be much less skeptical.

Again I don't believe you guys are scammers but when you are doing things to do with peoples money you really have to be very open, honest and careful.

You can deposit bitCNY to btc38 and they will give you CNY deposit credit for it.


The complaints about the lack of convertability merely show that the system is not yet fully developed.  Bitshares needs bridges into fiat which provide bitAsset to fiat convertability.


It is true that a bitAsset is not identical to actual fiat.  A bitAsset is a token with 'guaranteed' convertability into its value in BTS.  For example, a bitUSD is a token which is convertable into $1 worth of BTS.  A bitGold is a token which is convertable into $X worth of BTS, where X is the current price of 1 oz of .999 gold.  (By the way, someone is working on a precious metals dealer which accepts bitGold and bitSilver and ships you physical gold and silver for them).


A bitUSD stored on the Bitshares blockchain, and a fiat USD stored by some central 3rd party have different risks. 

If the Bitshares blockchain was to completely collapse for some reason, your bitUSD wouldnt be redeemable. 

If the 3rd party you were entrusting your fiat USD to gets hacked, goes under, or runs off with the money, your fiat USD will not be redeemable. 


Those are different risks.  The risk in Bitshares is systemic risk of a failure of the blockchain network.  The risk in having a centralized 3rd party such as a bank or exchange hold your fiat is that you have to trust that centralized entity. 


Saying that a bitAsset is a scam is untruthful.  A bitUSD is backed by $1 worth of BTS.  If the price of BTS goes down, then your bitUSD is worth more BTS than before.  Its still always worth $1.   The blockchain enforces margin calls and enforces a collateral requirment, which means that if at any time you are ever at risk of not being able to get your $1 value, the blockchain unwinds the trade and gives you your $1 of value.  Yes there are black swan risks, and bytemaster has blogged about them.




There is a strong tendancy in the crypto world to call everything else that one isnt invested in, and to call every other crypto project is a scam.  People calls Bitshares a scam, they call Ripple a scam, they call NXT a scam, they call Nubits a scam, they call Ethereum a scam, they call every altcoin a scam.  Come on people!  Stop being so tribalistic! 

These are not scams, they are experiments. 
Cryptodouble.com was a scam.  Some altcoins really have been scams, and the scammers ran off with the money and they died pretty fast.  But calling such major crypto projects as these 'scams' is simply not accurate. 


At first no one believed in Bitcoin.  Every single one of us had to make some mental leap to realize that a Bitcoin is REAL, that its not just some scam, that it has actual value.  It is no different with bitAssets in the Bitshares blockchain.  Yes, this is a complex thing to get your head around, just like Bitcoin was a complex thing to get your head around when you first encountered it. 

Success is not guaranteed, and these crypto projects are not fully finished products ready for mass consumption!  That is why we are investors, early adopters, who stand to lose or gain depending on whether they succeed!  If you wait until a project is fully developed and useable and has a large user base, what price do you expect to pay to invest in it?  Much more than you would when it is new and not fully built.  The fact that it isn't complete yet doesn't make it a scam, it makes it an opportunity.


Given the risks and the potential rewards, it makes a lot of sense to diversify into different crypto projects, and not bet all your eggs on one thing.  We dont know which will survive and win in the end, and which will fail.  So you should probably buy some Bitshares and some InstantDEX, because decentralized exchanges are a big deal.  You should own some Ether and some XRP and some NXT, because these are all promising but not fully developed projects in the crypto 2.0 space, and some will succeed and some will fail, and we don't yet know which, but the ones that succeed will reward you 100x, and all that matters is that you have some of the eventual winners.

The developers of Bitshares have been extremely honest and open, to a fault, to the extent that it has greatly hurt them because they discuss future developments openly on their forums and then people get upset. 


The way I look at it, in the future one of two things will have occurred:

USD:bitUSD gateways will exist, and all these people like you who are skeptical won't be skeptical anymore.  And the price of BTS will be 10x or more what it is now, because its clear at that point that the system works.

or

Bitshares will be dead and people will have lost money. 


You can wait until its a sure thing, but then you aren't an early adopter / an early investor, and you don't get to reap the enormous reward.  But you also didn't take the large risk if it failed, which is of course quite possible.

So the best course is to diversify into lots of these projects, not ignoring any particular one which has promise.  Some will succeed and some will fail, but the ones that succeed should reward you more than the ones that fail cost you, if you spread out your money.


Any time that someone dismisses some crypto project as a scam, they miss an opportunity to bet on one of the possible winners.  There are scams out there, of course, so we need to be smart, but generally those scams dont have a $10M+ market cap valuation over an extended period of time, like NXT, BTS, XRP, etc.   (Yes, PayCoin was an obvious scam and it was highly valued for a short time.  "Its worth $20 because I say it is" doesn't work in reality.  But scams die fast, and PayCoin crashed hard.  If something has been there near the top steadily for 6-12 months, you're no longer in scam territory.

Honestly, I don't quite get that part. If the price of BTS goes down (or the price of my bitUSD asset goes up, which is effectively the same) and, as you claim, it will still be worth 1 buck, whence will the necessary amount of BTS required to cover the lapse come from? Who pays for it?

The amount of BTS held by the market for each bitUSD starts at 300%, 2x from the short, 1x from the bitUSD buyer. Imagine the collateral as a slider split into 2 sections, 2/3 (short) and 1/3 (long).

As the price changes, that slider either goes to the left or right, i.e. the bitUSD will either cost more or less BTS to buy. One of these two voluntary positions will make a profit in this way... either BTS will go up and the short will be able to buy each unit of bitUSD for less BTS than it cost initially to short it, or BTS will fall relative to bitUSD, and the bitUSD buyer will be able to sell the bitUSD back for more BTS than it originally cost. If the price of BTS falls too quickly (past the call price for the margin position), a margin call will force the shorter to automatically cover. This is also known as a short squeeze.

Hope that helps you conceptualize it.

I got it, conceptually, but this still seems to me a bit unnatural in outlook and fragile in setup. On the one hand, you have to provide a collateral which is times as much as the initial amount, which is rather strange. On the other hand, it is not uncommon in the cryptocurrency world for a coin to drop (or increase) in price orders of magnitude (and fast at that), not just a few times, so it might not help (I mean what you call a short squeeze)...

The high collateral requirement makes it less likely to see under collateralization under high volatility. Even in highly volatile scenarios, the bitasset markets can adapt so long as the price doesn't flash crash. The bitUSD buyer doesn't need to pay more than the face value of the bitAsset, while the short is willing to lock up more BTS as collateral in order to get leverage. So we have a stability vs. leverage trade off here.

There is still the chance that a black swan event (http://bytemaster.bitshares.org/article/2015/01/27/BitAssets-and-Black-Swan-Events?r=robrigo) could happen.

This should be nailed on the top of the whole bitcointalk altcoin section!!!