Wow, bitcoins are worth 1000 minimum wage or better hours of work, awesome! Now lets convert that into USD, it seems offhand like bitcoins have gone up finally to a more reasonable value than had been the case recently...

-MarkM-

There is another problem when using an Open Transactions server, and that is the number of tokens actually available on that server.

For example right now there are no litecoins issued onto my server as DigiLitecoins (dLTC), only 10,000 ixcoins issued as dIXC, only 20,000 i0coins issued as dI0C, only 200 bitcoins issued as dBTC, and only 1150 namecoins issed as dNMC.

Thus the problem of not having enough available to buy to pay back what you borrowed can be very real. For example if you borrow 10,000 dIXC and short them (sell them), who-ever bought them then has the only dIXC on the server. How are you going to pay back the loan? Buy them back from the guy who bought them from you? Convince them to loan them to you to "short" again, thus making the problem worse but pushing it into the future? Or send in some actual real on the blockchain ixcoins for the server to stash away in their cold storage vault so that more dIXC can be issued onto the server?

-MarkM-

Actually shorting something you do not own, that is, selling something you do not own, has to involve leverage to do it right now, even if the leverage is only a fraction not a multiple. Basically you have to borrow the thing you want to sell.

If you are not selling it now but in the future, I can see that maybe being able to avoid leverage (borrowing), maybe, if there is to be no guarantee that you will ever actually be able to get hold of the thing you claim you will at some future time sell.

To actually guarantee that what you will have to buy in the future will actually be available for you to buy in the future, some has to be put aside, reserved, to ensure it will be avilable for you to buy come the time you want to buy it.

However if you set up your contracts in such a way that they leave you an emergency penalty clause allowing you to pay some penalty in some other currency or asset if you fail to deliver the asset the contract is really about, then presumably this problem of whether what you will be owing will be available to you come the day your debt comes due can be sidestepped. I think in normal trading fiat comes into it for that, since all debts have to be willing to accept settlement in fiat.

I think if a system of leverage (borrowing) is set up, shorting can take care of itself. If no one is willing to loan you the thing you want to short, tough, you maybe aren't offering them enough interest on the loan, try making a better offer.

So maybe the thing we need to solve is how to secure loans of arbitrary assets by arbitrary users to arbitrary users. That sounds like something that should be possible using smart contracts. It is probably just a matter of designing a contract that both parties find agreeable.

-MarkM-

Trust-free betting in the sense of not having to trust your counterparty should be very possible using "oracles", but you have to trust the "oracle", which is basically a "smart contract". You'd bet on what a script in the contract is going to say, with the script doing something like scrape the sports page of a certain online newspaper, or scrape the top five such newspapers to see if any three of them agree or something like that.

Open Transactions does have "smart contracts" so if those can be authorised to use a website scraper (libcurl type thing) betting on things one can predict the newspaper's format for reporting should be feasible.

If there is no delivery of the stuff you shorted you maybe aren't really shorting it; if it doesn't hit the market you are maybe really just doing some kind of option or non-delivery-future rather than a genuine "short"?

-MarkM-

Actually it is even more than that, but people are stupidly throwing them away for under ten bucks. There's just no accounting for people I guess.

-MarkM-

Sorry, no solidcoins on my server. I don't want to get stuck holding the stupid coins to "back" the tokens traded on the server. (I don't want their code running on any of my machines.)

Where I am at so far is I have a working Open Transactions server with asset contracts set up for a bunch of coin types, and have issued some coins into it though I do not have many of most types of coins. Now that the passphrase handling system is done I am able to run market-maker scripts again so am in the process of figuring out what exactly to have those scripts buy and sell and at what prices. I have some other scripts that examine fundamentals such as the reserves each asset actually has to figure out reasonable offers; these scripts of course loop to converge on values since obviously if Martian Botcoin goes down in value and the Brits, Canadians, and United Nations each hold Martian Botcoin in their reserves the value of their reserves changes, which changes the value these scripts will ascribe to their own coins, which the Martians likely have in their reserves so those changes further change the value of the Botcoins and so on. The scripts do converge though so that is looking good so far.

I also have scripts to do basic handling of hourly compounding interest, so I can make a simple file that sets original unix-date and original debt then any time run a script to tell me current value of the debt, and the scripts for evaluating reserves can take those values into account.

I do not have yet though a simple quick easy method, suitable for applying to umpteen people without human intervention, for doing margin accounts.  My current approaches to things actually leads me to think about doing shorting not as an individual player activity at all but, rather, by creating a corp dedicated to shorting some specific thing, and let people trade shares of that corp.

There is a big lending boom ever since the General Financial Corp was formed, due to a large amount of debt that had been paying 1% per day to General Mining Corp and General Retirement Corp being made aware by General Financial Corp of the possiblity of refinancing at lower interest rates. This has resulted in a bunch of entities looking to take over such secured loans and, as an aside, start thinking about how much money they might be able to make if they can design some more forms of secured loans.

So the basic financing picture is where I am at so far, maybe looking toward large players like with the underwriter idea.

I am still actually somewhat dubious of the whole concept of shorting, since it seems to me the loaner is only going to loan you something at a profit, thus will either charge interest more than (s)he thinks you can drive the value down or will screw you nicely by buying on the market everything you borrow as soon as you put it on the market, and could even try to buy up so much that you cannot even find anywhere enough of what you borrowed to pay them back. Remember I am operating in a paradigm of no preferential asset; there is no magic asset that "by fiat" can pay all debts public and private. If you owe someone a rarecoin and they have bought up every single rarecoin, you are screwed.

That led me to thinking maybe the mechanism for implementing shorting should include putting on the market as much as you borrow of what you borrow, to absolutely guarantee there will for sure be enough of it there for you to buy to pay back the debt.

That in turn leads to thinking you might want your contract to include a specifying of exactly what price those emergency backup assets are to sit at in the orderbook, so you know what the worst case cost is going to be.

So basically it is all very much up in the air and even looking like a possibly entirely silly concept. Maybe simply going to bets of bitcoin and betting that the price of this that or the other thing will or will not hit a certain price on a certain market by a certain date might be a much more sensible enterprise. Except that such betting maybe cannot actually move a market...

-MarkM-

You could wait for all the auditing stuff to be completed and then find a server that is willing to let you issue assets.

I had not wanted to allow third parties to issue assets on my server as I felt I could not be sure my users could be compensated if the issuer ran away with their backing assets or simply lied about their existence. However some users came up with a suggestion which no on in the securities section of the forum seems to have found fault with: https://bitcointalk.org/index.php?topic=92725

So maybe with such an "underwriting" system third party assets might be feasible.

-MarkM-

Instead of focussing on the minting of coins, try focussing on just processing transactions. The main reason so many merged-mined chains, and even chains that are not merged-mined, are so low in value is that it is hard to "back" millions of coins minted by third parties.

Miners are so "spoiled" by all the "free money" that it is hard for a "backed" chain to get enough transaction volume to attract miners. Thus most of them have moved to Open Transactions for now, hoping to eventually move back to a blockchain format once they have enough transactions going on that transaction fees will suffice to pay the relatively low cost of adding yet another chain to a merged mining operation.

-MarkM-

Huh? I have seen you come and go, so to me it looks like its you that is hardly ever on...

-MarkM-

Okay, now there is  http://open-transactions-tv.github.com/

Many more movies coming there soon too.

If by a VPS you mean a machine you do not physically control, then whoever physically controls that machine has access to the server's private key and thus is in effect the operator of the server. You should regard it as their server not yours since they have the key, and then it is immediately obvious it is not secure if they allow you access to the key.

However once all the auditing is in place you could audit it to detect whether they try to issue more of any asset than that asset's issuer authorises for example. Basically though just think of it as their server since whoever has the private keys can "prove" they own that seerver by signing messages using that server's private key.

So first thing for any kind of security is to have physical custody of the machine. If that means having to use i2p or Tor or whatever to create the ability to have incoming connections then fine, do that. Never put private keys on a machine you do not physically control.

-MarkM-

It can connect using outgoing connections still can't it?

-MarkM-

It would be handy to isolate various coin-specific constants used in the code, such as the symbol displayed, the icon(s) displayed, the word used as label to label that coin distinct from other coins, all the stuff users see, as well as the simple things that change from coin to coin such as genesis block, genesis block hash, all the things multicoin isolated into a config file.

It would be much easier to contribute patches back then because the code being patched would be much more up to date.

-MarkM-

Hey if people are willing to pay the service charges then of course full-service bank and full-service brokerage type establishments might well thrive. We are already starting to see the emergence of insurance corps, so full reversibility of transactions might also be possible if the service fees are high enough to provide that degree of insurance.

It is not as if you can go to a website and trade directly on a real stock exchange, right? You go to the website of some broker? Heck do most of those brokers even trade directly from that website to the actual stock exchange?

When we take into account the heists, I wonder how much the service fees, taken in big lumps like that instead of openly up front, add up to?

Frankly I am not hoping to attract multitudes of penny-ante traders. Better that their volume be aggregated at satellite nodes of some kind, relieving the actual market server(s) of huge volumes of trivially small trades. They can all phone their brokers directly even if even running a web browser is too "technical" for them.

The fee system in Open Transactions favours fewer, larger trades, since you pay per API call regardless of the monetary value of the trade.

I actually expect that we will see third party services that run clients for people, insulating them from the whole technical side of things by holding private keys for them and maybe not even brining up the fact since telling people all about such internal workings of the service could just confuse people. After all if the keys are private and are held by the service, they are a private matter between the service and whatever it uees those keys to communicate with, there is no need for some web-user to even have to wade through mentions of such things except maybe in some legal smallprint where they sign of, likely without reading, on agreeing that the service holds the keys and is not responsible for any employee or hacker abusing such keys.

In other words I agree that people prefer to be ripped off regularly than to be inconvenienced. I am not particularly eager to do the ripping off, and outsourcing it to third parties has other side-advantages too, such as only needing to have KYC info on those third party "brokers" since only they need know on whose behalf they trade.

Maybe at some point it will come down to traffic versus content as in other web applications. Which is king, being the "owner" of eyeballs you can control the gaze of or being the "owner" of something those eyeballs might like to see. Will the "big money" play on websites catering to the masses, or on secure backbone systems the masses maybe do not even qualify for access to (minimum balance requirements, ability to run a secure client, whatever)?

Also bear in mind that people can run plugins or java or javascript in their browsers so if they want to trust their browsers to sandbox financial plugins from cracker plugins phisher plugins and so on they should be able to keep their private keys at their end even while using a browser.

I expect you are right, most people will prefer not to have anything to do with private keys, leaving private keys to be a private matter between websites, hackers, and whatever behind the scenes facilities the websites use the private keys for. Like fellowtraveler said, we can have a big button saying press here to download secure client. The smallprint can mention the contractual effects of not pressing it, such as accepting responsibility for any employee or cracker misuse of the keys that you thereby voluntarily surrender control of.

Its amazing what people will sign. Its a free market though right?

-MarkM-

t (time; the number of compounding periods) is still in the exponent. The problem with the "bc" calculator seems to be that it actually iterates to raise to a power. That keeps it accurate but it limits it to integer powers and makes it take longer the higher the power you want to raise a number to. There are 86400 seconds in a day and it takes quite a while to loop through that many multiplications just to work out one day's interest.

Thanks though.

I am only using "bc" right now in shell scripts, presumably Open Transactions would use some C++ library if/when it implements interest.

-MarkM-

Yes, of course, but the borrower believes the asset will have a lower market price at that time, thus that they will be buying it back at a lower price than they sold it for.

-MarkM-

There are quite a few I think, though I am not sure where exactly. A few more got made just recently in fact.

EDIT:

Here are a couple

http://vimeo.com/28141679

http://vimeo.com/28142096

-MarkM-

All the coins were minted at the start, so yes, they are totally "pre-mined" chains.

There is no way anyone can afford to "back" millions of coins mined by third parties, and the plan was to actually "back" one's currency instead of just dumping it in the hope that someone else would "back" it.

-MarkM-

Ones I actually had blockchains up and running for include britcoin, botcoin, CDN, GMC, GRF, NKL, UNS and CZB.

They were run quietly using addnode and no IRC but still it became obvious that as soon as a connection port got leaked any large mining farm could attack them too easily.

-MarkM-

Due to lack of miners, even with merged mining, it was necessary for a number of blockchain-based currencies to retreat from the blockchain type format for now until their transaction volume is large enough for transaction fees to attract enough miners.

-MarkM-

Apparently GFC was able to get in on the same refinancing opportunity as DeVCorp last april, loaning 1,000,000 DeVCoins at just under half a percent per day, compounded hourly.

-MarkM-