It's not that simple.
Trust doesn't exist in anonymous exchanges. There is no way to audit a corporation or issuer. If someone claims a currency is backed how are you going to check their vaults to see that they have platinum or gold in them?

Could DNS be implemented as smart property on top of something like Mastercoin?

If a hacker really took over your account you/they would just remove that edit. Duh.

You've found the main problems but you're not offering the solution.
A decentralized exchange is neutral and will not solve the main problems.

The problem is a problem of trust. Investors cannot trust issuers and issuers have to be audited which means there will be centralization in the form of a concentration of trusted nodes or entities. Trusted entities in the community will have to audit issuers to make sure they aren't a scam like Labcoin.

Mastercoin is a great technology but it lacks the ability to create an environment where investors can trust anything on the decentralized exchange. It's decentralized but untrusted which means technologically it might work but practically it will fail until there is enough trust between investors and issuers that scams and fraud is brought under control.

The SEC cannot solve the problem. Laws cannot solve this problem. It has to be solved technologically, and it means some layer of centralization will be required to have trust.

Even if a virtual auditing service or a distributed auditing corporation has to form there has to be something to certify the issuer as trusted enough that people can buy and sell shares and know it's not a complete scam.

For instance say a company forms on Mastercoin offering a currency backed by Gold called Goldcoin. People have to know without a doubt that this company really has Gold in a vault somewhere otherwise their Goldcoins are a scam and people will lose their real coins for their speculation on the scam. So for this reason there has to be centralization even atop the Mastercoin protocol.

Then after all of that you're going to have to deal with accusations of stolen coins, disputes, and accusations of money laundering. How do we deal with these problems? Ignoring the technical problem doesn't work if we want a legitimate investment platform just like following the law doesn't work if we want a legitimate technological platform.

The law doesn't regulate this space, but the technology doesn't either and that is the problem. We need technological regulation for a global currency because there is no nation in charge of Bitcoin and no uniform set of laws. The people who write the code are going to have to do a better job dealing with scams and fraud.

Proof of Storage right? I think this idea can work.

Upon further thought,

It's not possible to have a completely decentralized exchange. At some point there will always be central hubs and these will be necessary.

There will be central hubs just for sake of convenience, or to protect investors from fraud/scams, but the technology for a decentralized exchange will be developed even if the implementation makes it somewhat futile due to limited features and liquidity over the next 6-12 months.

I was wrong about a thing or two, and you were right about a thing or two. Regardless there are certain decisions and forces set in motion due to the decisions of Btct and Bitfunder which will ultimately lead to a decentralized exchange attempt. At some point some decentralized exchange attempt will be moderately successful but it will not happen for a while and there are problems which have to be solved before it can be done successfully.

This sucks for investors, but now I actually think its a good move to region block on the centralized exchanges at least until a more decentralized exchange can be created.

Centralized exchanges will have to region block but this will encourage development of better and more decentralized exchanges. It will encourage development of technologies for better centralized exchanges which can have security and be fraud/scam resistant without having to region block.

It will also eventually lead to some better laws and technologies so that region blocks and central exchanges in the current form wont be necessary. If the community could identify what the real problem is (it's not going to be solved just by making a decentralized exchange), and solve those problems then there will be progress.



The reason for that is it launched just prior to the exchange nonsense. It also launched as many people were getting burned by Labcoin which seems to have been a scam.

The reason we cannot easily have a decentralized exchange is because even the central exchanges are populated with fake stocks and scams. Those fake stocks cost people real money, and there is no easy way to investigate each corporation without having some central hub to do it. For this reason TAT is correct and centralized hubs will always be necessary even if we have decentralized exchanges. It's impossible to build a completely decentralized exchange unless we could find a way to deal with the real problems.

Here is the list of the real problems:

1. Scams/Fraud (this is the biggest problem of all, issuers have to be selected carefully and audited, held accountable).
2. Points of failure (In a decentralized exchange while there is not a single point which can go down, you instead rely on a chain and of the members of the chain are compromised or go down it's a failure.)
3. Money laundering (This is debateable whether or not it's a problem but the government will think it is.)

These three main problems have to be worked on before a decentralized exchange can work as intended. Scam and fraud detection requires a centralized hub unless there is a way to have security of that sort in a decentralized manner. Decentralization could probably solve many of the point of failure issues but then you'd need a web of trust in addition to decentralization which ultimately results in a concentration of trusted nodes creating a decentralized hub. Money laundering is up for debate whether or not you think it is a problem, but if it is a problem then it has to be solved too.

The SEC cannot solve these problems, they may be solved technically but the current developers building the next generation technology are not focused on it.  Basically it's going to be difficult for a decentralized exchange to become "trusted". It's going to be difficult to have "trust" with an anonymous issuer, so whoever issues a stock will have to be thoroughly investigated to prevent another Labcoin type scandal or worse.

The government has a legitimate concern. Terrorist finance is real.
But I'm not in a position to know how much of a problem it is for Bitcoin.

I'm skeptical about it being a problem for Bitcoin but there aren't enough statistics to really know yet.

Anyway, instead of thinking of terrorist finance as something involving the Taliban think of it as more state sponsored violence, using Bitcoin. If you're concerned about states abusing Bitcoin and you understand many terrorist groups are state sponsored then you can understand it will be a legitimate threat at some point.

I agree with you. And you were right about Labcoin being a total scam. I do want regulation of issuers and I do think issuers should be checked and held accountable by the SEC if necessary. But what does regulating corporations have to do with preventing investors from investing?

I'm all for making corporations become transparent and regulated so that people aren't scammed and don't lose their money. The current set of SEC rules don't make any sense at all and don't apply very well for the particular situations you see in the Bitcoin community. Bitcoin investors do not want the SEC interfering with their ability to invest, region blocking, or invading their privacy. I also don't think Bitcoin investors want to mistakenly fund terrorism, or be involved in money laundering.

The problem is fraud, scams, money laundering and terrorist finance. The regulations of the SEC don't really apply to Bitcoin with it's decentralized concepts and P2P digital money. For example with Bitcoin everyone is pseudo-anonymous, does knowing an investor prevent money laundering? No not necessarily. But it does make sense if someone were trying to move large amounts of Bitcoins or to have suspicious activity which looks like money laundering to have an ability to look more closely at that. The fork in the road is between those developers who push for anonymity and those who don't. Anonymity means every individual will have to report directly to the government similar to how you have to report your earnings to the IRS while transparency on the blockchain would allow the blockchain to report it all. Either way we will have to interface with the government at some point.

The benefit of digital is that you can be selective. Small investors should not be scrutinized or forced to give up their privacy. That means if someone is not investing large amounts of Bitcoins at the time there shouldn't be a need for verification anyway. Money laundering is usually something which takes place with large amounts of Bitcoins. If all the Bitcoins are anonymous this presents a problem though, because if a terrorist or money laundering situation does happen it puts a bad light on the entire Bitcoin economy if every transaction is hidden from authorities and this forces authorities to detain, question, and eventually make everyone report their activities.

At this time while it is true that there are a lot of illicit Bitcoins floating around out there, and a lot of scams, a lot of fraud and theft, the SEC has no solutions and until the Bitcoin community takes it seriously it's not even the SEC's fault entirely.

What do you propose should be done to prevent scams? fraud and money laundering?  Should we have anonymity? if we do then how do we report a scam, a crime, or prove our innocence?

Drugs I can understand but who is against gambling? I don't know anyone who is totally against gambling.

So what if they do? We'll get rich because they'll be buying from us.
And not just Bitcoins, but all of these altcoins can be sold to rich people.

I don't mind. I welcome that. If any rich person would like to buy a million Bitcoins for a trillion dollars that would be the best form of stimulus package.

Bitcoin isn't democratic but it's supposed to be. Why would anyone support it if it doesn't try to be?

Democracy doesn't require you lose anonymity or decentralization. Anonymity doesn't even exist and is an illusion. Bitcoin is pseudo-anonymous and was not designed to be anonymous. And not everyone thinks it should be anonymous.

Decentralization? If you're going with Proof of Stake voting you're centralizing the power but saying that is decentralization? I'm saying decentralized power through democracy which means you cannot have Proof of Stake based voting because that will produce a central authority of massive stakeholders who rule over everyone else.

If you're honest I don't mean to insult the project. These are good ideas and the virtual jury idea is an idea I've been thinking about myself as the solution to coin taint and a lot of other problems.

Please correct the math or show your work. Then I'll contribute.

I was going to donate but then I looked at your numbers and your math is way way off.
Mastercoins are not 1:1 with Bitcoins. Mastercoins are 0.02-0.038 Bitcoins. I agree with you that it will eventually likely be 1:1 with Bitcoins but it isn't right now.

Also the idea that a single Mastercoin could be worth 100,000 Bitcoins? That is complete nonsense. I can believe it will be worth 1-2 Bitcoins at best but with competition from colored coins and the like it will never get much higher than that. 100,000 Bitcoins per Mastercoin is just bogus math and you can quote me on this a year from now.

1:1 on the other hand works out about right. I actually think a Mastercoin is probably worth a few Bitcoins. Just try to be realistic with the math because if you were I'd have dropped some Bitcoin into your project but because you weren't now I'm thinking it's a scam like Labcoin.

You can do that but that is not democracy. Mastercoin would be a corporation at best and inherent all of the mistakes, flaws, and issues that many people have with the current ways of doing things. I think Proof of Stake does not work very well if it's supposed to be a democracy or for community decision making. It does work fine if the goal is to maximize profit because if the goal is only to make Mastercoin as valuable as possible and nothing else what you have then is a Mastercoin syndicate and not a foundation. That syndicate should be taxed.
Then Mastercoin is a corporation, the voting group is a syndicate, and it should be taxed.
You can't adopt tax free status without having an actual democracy. An actual democracy means 1 vote per head.

Dacoinminster has too many Mastercoins to convince anyone that it is decentralized. It's more decentralized than Ripple but cannot compete with Colored Coin. Mastercoin is as much a corporation as Ripple and the foundation cannot remain tax free unless it acts like a foundation and not a corporation. A foundation has members and members are all equals.

Any anonymous system can be corrupted by coercion. Any anonymous system of voting doesn't allow anyone to know who voted or if the votes are even legitimate. If you want to just let whoever has the coins at that time to vote on the direction of Mastercoin then go ahead, but don't make it part of the Mastercoin foundation and don't be surprised if a bunch of corporations end up owning Mastercoin as a protocol because they buy all the Mastercoins and tame it.

Verification is important if you want an actual democracy. If you're trying to be fair with your votes then each member should get a vote. If you're not trying to be fair then just let dacoinminster have complete control and not bother with voting. Voting gives only the illusion that he is relinquishing control when his votes are worth more than the average vote.

And that is the problem and why Proof of Stake voting is stupid. Each member of the foundation should get approximately 1 vote. 1 head 1 vote.

Hashrate wont continue to rise exponentially forever. At some point it will taper off and the share prices will go up again.

Do not use Proof of Stake. Use code based voting http://people.eng.unimelb.edu.au/vjteague/PGD.pdf

Each member of the foundation should be verified. Their votes should be tied to their real world identity. Each member should receive a code sheet to their smartphone or mailing address. That sheet should allow them to vote pseudo-anonymously in elections so that no one will know who they voted for or what but every member would be equal and capable of voting. Proof of Stake would create a situation where dacoinminster would own most of the coins and the system would be gamed by him or whomever else owns most of the coins.

An additional solution, create a vote coin for each specific vote. Require any verified member of the Mastercoin foundation to purchase each coin for each vote. This would ensure that each member receives only one vote and then set up an address where they all send the coins to. If they vote one way it should say yes and another way it should say no. This could be stored as a transaction and decoded to determine which way they voted. The addition of the code sheet would make it so no one could figure out who votes for what, just the amount of verified members who voted and for what.

The tokens would be limited to the exact number of members in the Mastercoin foundation. It could not be gamed because each member would only be able to vote once per election. Each member would have to purchase a vote coin so the voting would not be free, but it should be cheap. Tokens would either be heads or tails to represent the way they voted. In the future it could include heads, tails, or unsure. This could all be done by fuzzy logic. Each token would be unique and counting the votes would happen in real time.

Proof of Stake is not the way. The creator of Mastercoins has too many Mastercoins to allow Proof of Stake to work.
Instead it should be code based voting and based around actual digital signatures tied to real people. That would mean you'd have to use some verified account to vote. You could be pseudo-anonymous but if the account is verified then its one vote per verified user of Mastercoin.

If its completely anonymous it will be gamed. If it's Proof of Stake and anonymous then for all we know dacoinminster could game it himself.
Voting has to be both coercion resistant, pseudo-anonymous, verified, and it should be impossible for anyone to figure out who you voted for.

Code based coercion resistant voting makes this possible. Each verified user would receive a code sheet to their smart phone or mailing address which they can use to vote. This would require that every legitimate member of the foundation and democracy reveal their identity at some point, but those identities would not have to be tied to any specific addresses so they would still be pseudo-anonymous. The system would not keep track of who votes for what, it would just tally the votes everyone made. A user defined coin called a vote coin could be created to initiate a vote or poll and individuals who are verified members of the Mastercoin foundation could purchase those coins which would be limited in generation to the exact amount of verified members in an organization. These coins would actually just be tokens to promote the pseudo-anonymity of the process.

For more information http://people.eng.unimelb.edu.au/vjteague/PGD.pdf

What about investors in Europe? Canceling the IPO will hurt everyone.

You can't kill code that is open source. The GPL or MIT license would guarantee it survives forever. You cannot go to prison for writing code.
The only reason his exchange is shut down is because it's hosted in the USA. Why doesn't he just refuse to sell to any company in the USA? It's an unlicensed exchange which means it's just as illegal to run as before so nothing changes at all really. I don't see how a region block provides any protection. Of course whoever runs the exchange shouldn't solicit US customers but if they adopt KYC but are still unlicensed then what is the point?

Bitfunder shares still aren't considered real but they are trying to do this KYC type stuff?
Ultimately only a decentralized exchange will be immune to being shut down. Any governments police can raid any of these exchanges if they even have the hint that people used it for money laundering. Silk Road arrests could trigger a global crack down on all of these exchanges in an attempt to track tainted coins and it wouldn't have to be done under the regulatory laws but could be done under the criminal laws or even under the three letter agency anti-terror finance laws. In any case if they want to shut down unlicensed exchanges they will and no amount of blocking US customers will prevent it.

My guess? Because Silk Road was run by an American and Dread Pirate Roberts was an American the following investigations will probably be run by the FBI and DEA. But this doesn't mean that there aren't mutual legal assistance treaties and other mechanisms to allow local three letter agencies in every country to get involved. In that case the governments would be able to send national security letters, conduct anti-terrorist investigations, and then it does make sense to block US customers in order to avoid impeding on an ongoing investigation.

The problem is if that is all the result of the Silk Road investigation then something must be done technologically to allow law enforcement to do their investigations without disrupting the entire Bitcoin economy and having multiple sites shut down. There might be a very important investigation going on or several and the feds might not even care about btct or Bitfunder. It could have been that some bad guys happened to set up scams or use those exchanges to invest their drug money. That is a legitimate and real possibility which would explain all of this and fit in with the timing. If that is the case then moving to Havelock probably will not be a long term solution for US investors which is why I never recommended moving to Havelock for any other reason than to buy time until Havelock shuts down as well.

The conclusion to all this is we will need to make a choice as a community about what we want. Do we want anonymity in which case Bitcoin will probably never be able to have much growth, and in which case the price of coins will never be $20,000 a coin, but people will be able to use Bitcoins to buy drugs. Or do we want to have a Bitcoin which actually goes legitimate and which can be used as a currency, which can someday be $20,000 a coin or more, and which we can all build legitimate businesses around?

Due to money laundering laws and the real threat of terrorist financing we will not be able to have both. Developers are ultimately going to be made to pick one side or the other and there will either be a fork at some point or Bitcoin developers will choose one path or the other. At this point it seems gmaxwell and some other Bitcoin developers are choosing the path of anonymity. For that reason and as a result of that choice, the economic effects will be felt as the feds do everything in their power to discourage that.

I had a discussion with gmaxwell on the coinjoin thread. I made the case that the community is going to have to become more responsible and technologically regulate itself to avoid mass arrests. I'd rather deal with technological features like tainted coins with blacklists or KYC than mass arrests, shut downs, etc. Don't get me wrong there probably will be a coin which has anonymity, I just don't think that cryptocurrency will be the one to become the mainstream cryptocurrency. I don't think anonymity is necessary for privacy. I do think records should be kept either by the users themselves or on the blockchain. But I also don't think that corporations should know what books we buy or what we do with our money.

The issue of stolen coins, money laundering, coin taint, record keeping, these are all technological issues which can be solved in a way which could provide more privacy than Paypal and credit cards but not be completely anonymous. I have no clue how to strike the balance, and I know that currently the blockchain isn't anywhere near private enough, but I also know that it shouldn't be a complete black box of a blockchain where no one can determine what goes on because if some really bad event happens or if governments were to exploit this technology against us then we would want some way to be able to follow the money even if its not easy or cheap to do. Ultimately we are either all going to end up keeping records on our transactions in exchange for having true privacy and anonymity, or we will let the blockchain keep a public record of every transaction. If you see any other way let me know but I think we are at a fork in the road.