Bitcoin Forum

So, every now and then I see a post about the beauty of a decentralized exchange. Well here's the thing. You can't get USD on a Decentralized Exchange, adding new coins to trade will always be a headache, and since there won't be any censorship, scamming with new, random, 2 day old altcoins will be abundant, among other things

Decentralized Exchanges sound good in theory, but in practice it just isn't plausible.

I have no experience in directly dealing with decentralized exchanges but I see several things that I would like to address (that in fact ties in with any place where you trade):

That's why you use common sense and avoid shady coins.

Aside from that, the idea of decentralized exchange is like the idea of cryptocurrencies: you have to keep trying to come up with that one mechanism that works and has the least issues possible.

Why do you need to get USD in for a decentralised exchange to work?

I've used and traded cryptos for years yet not once have I ever used USD (I've never even seen any US currency) nor have I traded cryptos for fiat.

The whole point of cryptos is to be an alternative to fiat (but thats lost on most the in cryptos for the fiat crowd).

New altcoins will be like a miracle for decentralized exchanges and all the people around the world. 

Your question is "How will people get any money in the first place that can be used on the exchanges?"

Solo mine any new altcoin, trade it for another relatively cheap coin, trade that for doge, trade that for ltc, trade that for btc.

Or just accept bitcoin for your own goods and services in the real world, and use that to enter the exchange.  Maybe you'll buy a cheap new altcoin from a homeless street child in India who has an hour a day at an internet cafe.

it could work if governments create cryptos like i think ecuador has done.

also it could still work with alts which is ok but not great. but yeah, it cant be tied to usd.

it could perhaps be tied to gold storage but that would be a logistically tough thing to do.

a decentralized exchange could by definition have no central bank account where one would be able to send fiat $ to and thus could not hold any balance of fiat currency as i understand it ... i would imagine it would somehow have to involve users attaching their individual bank accounts to the decentralized exchange ledger and sending money directly from one person's bank account to the other person's bank account in exchange for btc on the ledger of the exchange , while the btc sent to the decentralized exchange could be run off of a side chain connected to the btc blockchain ? ... at least as far as i understand the idea in any case it seems like it would be awfully clumsy and slower vs a centralized exchange ... more like a p2p marketplace capable of running a balance sheet with built in escrow-style delay assuring buyers can't buy 1000btc from a $0 bank account and sellers wouldn't be able to sell false btc because it could be based off of the btc blockchain ? ... in theory ...

It's probably easier to think of it as a "decentralized order book" rather than a "decentralized exchange".  The currencies would either be exchanged directly between the two parties without a third party being involved or the two parties would have to agree on a trusted third party (escrow) to be an intermediary.

There's BitUSD (market pegged asset) available in BitShares (first decentralized exchange).
Either you get BitUSD on a centralized exchange and move it into the BitShares blockchain, or you can trade BTS, BitBTC (the market pegged BTC), BitCNY, BitEUR, BitGOLD, BitSILVER for BitUSD.

Some markets are low liquidity though.

The gateways are being setup where you can get an IOU for your USD and trade with it in BitShares exchange (just like IOUs issued by a centralized exchange). However, if the gateway is busted, so are your IOUs.


In BitShares you can easily issue a UIA (user issued asset) and if you provide a gateway/bridge to another coin blockchain, I think, you can easily 'add' any coin.


It is the free market: do your own research.


I'm sure there are lots of other issues with decentralized approach (scalability etc).
it would be interesting to see how they develop.

If you want USD I'll send it to you via air mail dude.
When the usd arrives to you; you'll send my coins ;D

Here it is, we didn't need the bank to send money ;D

Why would 2 day altcoins be added to a DEX if they are "always a headache" ?

This is where you go to find your answer ^^ Trusted 3rd party though is 'smartcontracts' we would not have need to get usd on there if we have a coin that is hedged to the usd which can be spent of a decentralized market place. Bitbay is on its way to some good future business with decentralized ways leading the way the dev David has already created NightTrader which is a decentralized exchange already a few tweeks can be what we need.   

they say the same thing about a decentralised finance system, yet we see the beginning in bitcoin

The saying that goes back far in the past something along the lines of never say never  ;) I am not sure how close it is but take a look at Forex!?

Pretty sure that you can deposit btc onto there, i will take a look and get back to during the week

A decentralized exchange with a proper gateway can help with legal compliance around the world.

See: http://bytemaster.bitshares.org/update/2014/12/18/Benefits-of-Being-a-BitShares-Gateway/

Really? Do you guys really believe Bitshares? It acts likes a pyramid schemes in China, some people yalling that BTS will go to 500$ everyday.

I'm glad the OP gets it, central banks are a monopoly on currency, they will never allow a decentralised system to properly take place, if they do, I'd think something is up and chances are they'll use it as a way to keep track of lots of people trying to use any exchange they're allowing into their economy.

There are two main approaches: with fiat and without fiat. The first one is represented, e.g., by Bitsquare (they use escrows to secure coins while fiat is being transferred). The second approach is represented, e.g., by Coincer (my project). When you omit the fiat part, you can use pure crypto to trade coins between blockchains. Then you only need an underlying P2P layer to make it really decentralised. Obviously this is much easier and also safer than trading coins with fiat in a decentralised way.

That Gateway thing is a honeytrap. It kills the decentralization and requires trust.

I have bitcoins and I've never sent fiat to an exchange.  Bitcoin is peer-to-peer money.  I handed my fiat cash to a person and they gave me bitcoins.  Why do people always work under the backwards premise that exchanges are the be-all-and-end-all of crypto?  You don't need intermediaries to trade bitcoin.  Peer-to-peer and decentralised exchange is all we need to flourish.

U r correct indeed. None of BitSquare, OpenBazaar or BitShares have been able to overcome the problem of trust. Some tried escrow, some tried multiple centralized gateways. But at the end of the day, to get FIAT on board u need some centralization.

But that's like saying we don't need delivery companies because we can deliver the package ourselves. Not everyone wants to deal in face to face transactions or can find somebody to trade with. You can still get robbed of your coins in the real world too.

The person I got them from used LocalBitcoins.com and their transaction wasn't face to face.  What we need are more services like that to provide an easy "on ramp" to crypto.  There might be *some* occasions where people are solely reliant on an exchange, but people still generally have it backwards and go to exchanges as the first port of call.

I agree the USD part will be a hassle however I am certain some solution will be found to this.


I disagree with this as an argument, participating in a decentralized market you must look after yourself, since there is no central authority who will severely punish those who do bad, it is inevitable people will do bad, but as with BTC the good tends to outweigh the bad. If you can't handle due dilligence on your own, with common sense then trading in a centralized market is just better.

Having your money at a bank is better than having it in BTC if you can't look after yourself or take the occasional hit because of the higher risk it usually carries. That's putting it plain and simple. For most, having money at a bank is better. But if you can fully understand, encrypt and have a wallet on your computer, BTC is better. Decentralized means that you and you alone carry the responsibility, because you believe you can handle it better than said authority, so it is not logical to use this argument against the theory of a decentralized exchange..

I would probably agree. I don't exactly see how they are going to work. Exchanges are the on-ramps and I feel they will be going more and more towards the way of Coinbase and regulation. Perhaps it's not a bad thing if those are the points of regulation. Not everybody who uses Bitcoin needs to use an exchange. You still can be private.

what happened to bitcointalk?
the forum is full of pish!

i'll just briefly comment on this so far worthless thread.

who cares about usd? i can't exchange bitcoin for donkeys on bitstamp as well so piss off, for some BTC to [insert fav altcoin] is enough
those who own no crypto - too bad, buy at centralized exchange
trust can be build with reputation
exchange of larger balances can be divided into smaller ones
still better than one centralized ponzi scam exchange where you loose it all
http://www.etherex.org/faq
multisig

This. ::)
I was thinking the same  :)

People have already said it, BitShares is a decentralised exchange, or at least the closest it thing possible to it.  Try it for your self https://wallet.bitshares.org/.  BitUSD is basically a way for bitcoiners to lock their BTC to the value of the USD without touching a regulated centralised service.  The bank of the cryptosphere.

You can buy a CoinoUSD asset, which represents the actual USD price, 1 CoinoUSD = 1$ (or 74.2936 NXT - latest ask order), on NXT decentralized asset exchange (as I can see same is in BitShares). And if you want to cash out, you just exchange CoinoUSD using Coinomat service to USD (see here (https://coinomat.com/coinousd.php)).

There is definetely not enough volume right now, but that's just a matter of time. SuperNET is coming ;)

Check NXT wallets, the exchange is built into client: SuperNET 1.2b (http://www.supernet.org/en/home-of-the-supernet/supernet-downloads) (try Advanced mode, using SuperNET plugin you can withdraw cash to your bankcard directly from the wallet), NXTLite (http://nxter.org/nxtlite-client-get-started-with-nxt/) (no need to download blockchain) or try Secure Asset Exchange (https://trade.secureae.com/#17554243582654188572) (SAE)  8)

Decenteralized exchanges dont work?
Isnt localbitcoin.com a decentralized exchange

There are a few NXT based asset issuers that issue assets that are based on USD, although their value is only as good as the reputation of the people who issue them (there is nothing to stop their issuers from running away with the assets that back them). In theory it is possibly that someone could sign a NXT transaction that trades two different assets that are backed by two different altcoins, although I would not personally trust this because you would need to put a lot more trust into the asset issuers then you would need to put into exchanges.

I wonder how far multisig can take the concept of a decentralized exchange. 2-of-2 and use the bank as intermediary? That would bring some funny lawsuits to the System.

The OP is correct , it won't work .
It will just be a open platform for scammers .
What's wrong with paying a little fees ,it can be considered like Escrow if you look at it clearly

I have been using decentralized exchanges (localbitcoins) for years and it works fine

There is a high rate of fraud in decentralized exchange, a new trader will easily become the victim of scammers. Other than that, I don't see big problem with that. Maybe the platform is centralized, but since all the trades are done between users, platform only hold funds briefly during the trade, even the platform shutdown, the trader's loss will be minimal

Even on a decentralized exchange, you are still dealing with humans, so the credibility of each trader is still important, some kind of feedback and rating system for each individual is a must

Once above certain level, the credibility becomes irrelevant: A trader who has 300 positive trades should be as good as a trader who has 3000 positive trades. If many of these traders listed on the bid and ask side, then you have a order book similar to centralized exchanges

I think localbitcoins is on the right track to become the biggest decentralized exchange. In future they could implement multi-sig and setup their servers to be replicated between different sites, so that they become truly decentralized

Why will a new trader easily become a victim of scammers? If he is careful, and trades with reputable members, he should be ok? Besides, never put all eggs in one basket, so if he wants to exchange 1000 euros, perhaps do 100 at a time?

You got a point OP , but still I prefer Decentralized Exchangers then Centralized exchangers which are full of shit .
First of all , they are getting hacked one by one (Dosen't matter if it's an inside job or not ) and most of them are giving coins back. Secondly and the thing that defeats the whole purpose of Bitcoin which is "being annonymus" , I don't get how they ask for our ID's and resident and Passeport and other real informations ... then why we simply don't go and use Skrill , Paypal , Credit Cards etc ...? Bitcoin would be better without those exchangers .

~ Madness

Decentralized crypto only exchanges could work now though, agree it seems tricky with USD hopefully the ATM business will sort that so nobody has to deal with banks.

Decantralized asset exchanges are alive and well (at least one), and you can find WhateverCoin/USD assets what you can reclaim at some USD gateways. So some workarounds are already available. Ripple is the best example.

Decentralized Exchanges  can works, but never replace the Centralized Exchanges.

Of course they can replace , so you are telling me that Exchanges that defeats the purpose of Bitcoin (being annonymus) as I said above cannot replace Decentralized Exchange ? could disagree more to be honest .
Centralized Exchange is the worst thing that happened to Bitcoin if you ask me , BTER , MtGox , Bitsmap hacks are a proove for that .

~ Madness

I think that these are non-problems. A big market for decentralized exchanges are the altcoins. Also you forgot(?) electronic transfer for money (with all the problems today, I know).
Spam and scams are around here everyday too and still, it's a good forum and we got used to live with the goods and bads.

The actual problems may be the fees because every transaction means, as far as I understood, the coins to really move between wallets. In current exchanges you can make 1000 transactions or one big and the sum of the fees is the same. For decentralized... this may be a problem.

But still, I'd leave this idea get implemented for real. Then give it 2 years to get properly known and .. then we'll see how many are using it and if it was a good idea or bad.

If we take fiat out of the equation then the technology to create 100% trustless safe transfers exists.

The technique is known as "atomic cross-chain transfers" and the Automated Transactions system (AT) that is running live on the Burst platform *has this capability* (once we have deployed AT on the Qora platform we will demonstrate ACCTs between those two blockchains on their "mainnets" which will be a world's first).

No need for any website or centralised service at all (can all be done neatly and easily from the two blockchain wallets involved in the transfer).

It should be possible to get AT to work on a Bitcoin clone (and I've offered a 20 BTC bounty for just that) so if the community would like to be doing trustless trades across blockchains they should be requesting their favourite coin devs incorporate AT so they can get this feature.

If you take fiat out of the equation then I used Bitcoin to do 100% trustless trades using escrow four years ago. That's easy to do. The problem is we can't remove fiat from the equation. If you want to do something impressive then find a way to safely move Bitcoin into and out of the fiat world without requiring some licensed business that needs to gouge you with fees to pay for their initial investment.

That is not 100% trustless at all as you were trusting an escrow.

ACCT needs no escrow - it is *truly trustless* (read here http://ciyam.org/at/at_atomic.html).

There is *no third party* as the escrow is actually the ATs (which are smart contracts not people).

So no-one was doing this four years ago and in fact no-one is even doing it today - it will be done in about a month though between the two blockchains that support Automated Transactions.

Ok, not trustless but it works. We're still not solving the big problem that needs to be solved. I don't need a way to exchange Bitcoin for product or Bitcoin for services. I already have that. I need to exchange Bitcoin for dollars without getting screwed. LBC has become too hot for me lately.

Decentralized Exchanges can't be real time, like several seconds. and can't deal too much trade at the same time, as 10K per seconds.
Sure, if you use Centralized Exchange, you have to trust it.
But it's more convenient than Decentralized Exchanges.

lol the OP is smoking crack.  LocalBitcoins is a decentralized exchange, and it works fine. 

Have you guys already seen Mercury:

https://bitcointalk.org/index.php?topic=946174.0



I'm just checking it but seems interesting.

I definetly like the idea of decentralised exchanges, but the idea to use another coin as means of exchange i,e. bitcoin-altcoin exchange,
is an apsolute nonsence. You cant say you are making progress when you end up with the same problem; exchanging that altcoin for fiat..
Bitcoin was made to be used to replace the current fiat system, so let it do just that, and fight one on one with fiat, nothing else.

cheers

I think decentralized exchanges are the only solution to speculation and manipulation of bitcoin so we hope that they work

Well, yes - if your looking for a cryptsy type exchange. Most people here don't like alt's though, and when speaking of exchanges, they mean as a means of moving between fiat currency and BTC. Some people throw out the term "decentralized exchange" thinking that will do away with the risks, but as OP points out, that won't ever be a part of the future... Bitcoin can be held in some decentralized fashion, I"m sure, but dollars and euros, they need to be in bank accounts, and bank accounts need to be tied to individuals.

Nope.  Dollars and euros can be held in physical form as paper bills and metal coins.  No bank is required for that.

Fiat has always been a problem for decentralized exchanges. Another poster here said that in order for fiat to be deposited and withdrawn from an exchange, the exchange must have a bank account somewhere that holds this fiat. Once that happens, it can no longer be decentralized, and he is correct. People recognized this in 2011 when Mt. Gox was having problems and the situation isn't any different today.

As another poster here said, it is possible to create an exchange where funds are kept in your bank account and trades occur between other people's wallets and bank accounts. Bank accounts are not really an ideal solution though since they can be used for chargeback fraud. Cash eliminates this problem but also introduces new problems such as the risk of counterfeiting and the difficulty involved with transporting it in a safe manner. You would also need an escrow and a reputation system. I believe this is similar to what LocalBitcoins is doing right now.

On the other hand, I believe altcoin exchanges can be decentralized and still retain most of the usability that they have today. It won't be easy though and I highly doubt they will fully supplant traditional centralized exchanges such as Cryptsy. Traditional centralized exchanges are far more scalable, familiar, newbie-friendly, and require no downloads or technical know-how to use. And they work pretty well as long as you don't use them as a wallet. Just deposit your coins, make your trades, and then withdraw them immediately afterwards.


Coinomat has a fee when withdrawing USD and while coinoUSD might act as a good proxy to represent USD on the NXT AE, it isn't really a decentralized solution.


Yes, that would be a decentralized exchange, albeit a rather cumbersome one.

EDIT: There are also altcoins and assets that are pegged to the price of USD which could act as a proxy for USD when trading on exchanges. Examples include NuBits and bitUSD.

"Decentralized" doesn't mean "zero-risk".  Whether it's cumbersome or imperfect is immaterial.  Using paper bills and metal coins is the only way to implement a fiat-to-crypto/crypto-to-fiat decentralized exchange because it's the only fiat payment method that eliminates the need for an intermediary, avoids counter party risk, and is the one that is most difficult to reverse.  Any fiat payment method involving a financial institution is by definition centralized.

Makes sense. However, if using paper bills and metal coins is the only way to implement a decentralized fiat-crypto exchange then I would think that decentralized exchanges will remain a minority and never supplant centralized exchanges like Bitstamp. For example, I live in New Zealand and the nearest person willing to sell cash for BTC or BTC for cash is located 900 miles away. Therefore, a centralized exchange or an exchange with centralized elements would be necessary if I ever wanted to buy or sell BTC.

Now, if BTC adoption were widespread enough to the point where most people had some BTC then I could see how it could work. But that's really no different from the usual buying and selling of goods and services. After all, if I sold you 5 pencils for $10 in cash then that's decentralized too.

i'm still curious how they can address the "middle man" that's the only reason why this thing can't work properly, there is always a thing to trust

unless you do it automatic, i don't know how it can work( a bot that manage the money with a cold storage maybe?)

In the case of using Automated Transactions it is indeed effectively a "bot" that manages the funds in accordance with its code being executed (and thus verified) by every peer in the network.

Once the funds have been sent to the AT (it effectively has its own "account") then only the AT can decide what to do with them.

You could easily do a better decentralized exchange than Local Bitoins with today's release of the Abra p2p cash app (which happens to operate on invisible backend bitcoin rails).