Which means that MP got some good profit out of this. And now he's complaining?


Yeah, I, too, hate it when I have profit.


Or so you say...


Ehm... Suppose there is a connection problem and you DIDN'T get a signed receipt.

Now what, can you prove that you HAVEN'T got it? You don't even know whether server registered your trade or not.

Do you know a story about Byzantine Generals? Look it up.

BTW trade via colored coins will be Byzantine fault tolerant in some way (due to use of Bitcoin protocol which is Byzantine fault tolerant), while simplistic HTTP-based trade won't be, ever. (Not that it matters that much, but it's nice.)

I know how it started, but not the rest of the story. And I don't have time to read all forum posts... So it would be great if somebody can provide a summary.

I'm willing to pay like 25 LTC for a summary (or equivalent about in BTC). Maybe more if it is necessary...

Particularly I want to know:

1. What happened to first version of SC, why did it die?

2. Why SC2 was necessary, what were the features (!), was there SC->SC2 upgrade process (I mean, keeping coins)?

3. What happened to SC2, why haven't it took off?

4. Why do they want to make MicroCash, what interesting features will it have?

I think I've found a potential use of LQC: it can serve as a tested for experiments with new transaction types and stuff like that.

It can work because you can run a patched version of LQC and generate block yourself, without waiting till "network" applies your patches.

Sure, you can also do experiments on testnet, but with LQC you can do them right on the real currency, which is way more cool and it's easier to find beta users, for example.

Also one can do "economics" experiments with LQC. E.g. give it for free to some group of people, include transactions without fees etc.

So... How much does it take to generate a block on average?

Devcoin generates 50,000 coins per block. So three billion devcoins already exist, and award per block won't be reduced.

That's probably enough satoshis for everything in solar system...

I think I've already addressed your concerns.

1. You shouldn't ever worry that Bitcoin is being misused or abused, because being a crypto-based protocol it is DESIGNED to withstand misuse and abuse. If it cannot withstand abuse then it is a problem which needs to be addressed on protocol level.

2. What people do with Bitcoins is none of your business. If somebody wants to destroy them by sending them to non-existent address, it's his right.

3. Each satoshi costs money, so there is an incentive to not use it for something small and insignificant. Each transaction carries transaction fee, so again there is an incentive to not use it for something insignificant.

4. Colored coin protocol can work on any Bitcoin-like blockchain, so it's likely that if it will be heavily used then there will be specialized a blockchain just for colored coins. (E.g. ripplecoin.) But at start we want to use Bitcoin as a host for a number of reasons (e.g. ease of payment). No heavy use is expected at start, so don't worry about blockchain bloat and satoshis being out of circulation.

5. Bitcoin protocol doesn't need to be modified to support colored coins. Only people interested in colored coins need to run color-aware client software, and it's their own decision.

6. If some kind of danger for network & security will be discovered (which is highly unlikely, but still...) you should be grateful that we've discovered it sooner rather than later.

7. If you have many shares you won't need stock split. But if it is necessary, it can be done approximately same was as it was done by Berkshire Hathaway: company can issue a different kind of shares. See here: http://en.wikipedia.org/wiki/Berkshire_Hathaway#Corporate_affairs


As with any experiment, you never know until you actually try it. But luckily in case with Bitcoin risk is minimal because Bitcoin is designed to be robust BOTH technically and economically.

There are problems which colored coin users will face, but they won't affect Bitcoin users.

FWIW it looks like extra liquidity have helped to break manipulator's plan.

Also note that if somebody tries to manipulate the market and fails, everybody gets some good extra profit. So it's not always bad.

It all depends on how much liquidity "the manipulator" had, obviously it could be way more than "daily liquidity", whatever it means.


In which case you get amount equivalent to initial margin, which isn't bad.

But, yes, due to a lack of transparency a web site can actually do whatever it wants to, in theory. (This is why I'm advocating trading via blockchain. Not just advocating, I'm actually working on this.)

But back to our topic, just because exchange could be dishonest, it doesn't mean that it was.

As I already mentioned, I talked to Fireball before he implemented ICBIT, and I know he had big plans. And I'm sure he is a very good programmer.

I'm sure he put at least $10,000 worth of his time into this project, likely more. This only makes sense if he wanted it to become THE Bitcoin derivatives exchange.

Does it make sense to spend that much effort to run a scammy low-volume bucket shop? Absolutely not.

(BTW making it a scammy bucket shop might be even harder than to make it a true futures exchange since it would require a lot of ad-hoc doohickeys, like a functionality to block a specific trader right before clearing time. It also requires much more daily attention.)

So, again, Fireball could do it, but I'm 99% sure he didn't.


MP's article was just a piece of evidence. OK, we can consider it. Perhaps ICBIT should be more transparent. I want to see full trade log, full information about what happens during clearing time and so on. I don't understand why this information isn't available.

But now you claim that you know that ICBIT is fraudulent with certainty. This is simply bullshit, it just screams cheap propaganda. Do you want to start MPex futures exchanges or something like that?

Only two things imply that exchange operator might be behind it: "changing logs" (which might be simple a mistake on trader's side) and "locking MP's broker's account".

But if you think about it, locking MP's broker's account doesn't make that much sense since MP's broker could as well put a bid wall beforehand. Posting bids in last seconds really gives you nothing. So it could be simply a technical glitch.

Of course, it is possible that exchange operator is doing this, but it might be just some trader trying to manipulate the market, thinking that he has more resources than others. As Stephen have noted, you don't really need that much money to manipulate such a thin market.

As for economic sense, see here, educate yourself: https://bitcointalk.org/index.php?topic=50817.msg1340759#msg1340759 (I've outlined this situation back in June 2011.)

I you wonder why manipulator perished not long after MP got involved, it might be simply because MP added more liquidity on long side, thus depleting manipulator's reserves. So it is not a coincidence, there is a rational explanation.

And, by the way, I think your forum signature is wrong: "THE Bitcoin Stock Exchange" will be based on Bitcoin protocol itself: colored coins to represent securities, multi-party transactions for trade, perhaps even orders will be advertised via blockchain if we figure out how to solve bloat issues. Web site you're pointing to is definitely not the definitive solution, it is just a web site ffs. Use of PGP to authorize orders is cute, but (if I'm not mistaken) people need to send their bitcoins to this web site in order to trade, and so they have to trust some random person's web site. That's not how Bitcoin works. You can as well add LR USD payment option, it can work exactly the same way. So there is definitely nothing Bitcoin-specific about MPex, aside from Bitcoin being the only payment system it accepts (which is more like a deficiency, it simply makes sense to accept as many currencies as possible if you aren't utilizing any Bitcoin-specific features anyway). This isn't related to ICBIT discussion, of course, just noticed your signature...

As I said exchange is allowed to close winning guy's position too (if there is not enough liquidity), and so winning and losing guys will simply cancel each other: var. margin amount will be moved from losing guy to winning guy.

So it IS closed circuit. And that means that there IS counter-party risk, i.e. you cannot depend on futures contract being honored.

Of course, exchange might simply choose to put its own money on the table instead of forced liquidation of winning side's position. But it is not required to do that according to contract.


Yep, people need to realize that currently it's possible to wreak havoc with relatively small sums of money.

Why do you think it is futile?

He does not need to keep price low, he only needs to force counter parties to close at unfavorable price and to close his position.

For example (note that I use terminology somewhat different from what ICBIT uses) suppose there are two parties: I sold 100k BTC @10.00 and other party bought it.

Now I see that spot price went above 10.00, so I'm losing money. But suppose that I have a lot of BTC in reserves.

So I make a massive sell-off, filling all bids from 10.00 to 5.00, and then put by own bid: 100k @5.00.

Counter-party needs 100,000 BTC to cover his position. Why? He is buying 100,000 BTC for 1,000,000 USD. If he sells those 100,000 BTC @5.00, he gets 500,000 USD. So he needs another 500,000 USD in var. margin, and it is 100,000 BTC at 5.00.

Even if counter-party has exactly 100,000 BTC in reserves he needs to close his position because he won't have enough reserves in case futures price will fall even lower.

So he sells 100,000 BTC @5.00, to me.

Now we both got to neutral positions, but I have 100,000 BTC profit and counter-party has 100,000 BTC loss. It won't be affected by settlement because position is already closed.

However, to drive price from 10.00 to 5.00 I had to sell some contracts. But how much I had to sell depends on depth of market at that time, not at size of my main bet, so it can be some small sum, e.g. 1000 BTC.

Moreover, I could close that position through same kind of manipulation.

So, basically,  a person who has more liquidity than the rest of the market combined can totally pwn that market.

https://bitcointalk.org/index.php?topic=15352.msg264503#msg264503

What I see here is that somebody sold a shitload of BTC, filling all available bids.

He then spammed order book with many small asks going down to 9.6. (People say that this is ICBIT's deficiency: number of rows it shows in order book is limited so such spam can hide true market depth.)

9.5 and 9.1 orders you see on this screenshot are mine, BTW.

Apparently "manipulator" tried to squeeze the market right before settling time, but it was delayed this time. And apparently he was out of reserves since market was able to recover up to ~10.80 before settling.

It then shot up to 11.21 in the new session because some of manipulator's positions had to be liquidated and he no longer was able to post ask walls.

So if anything this shows that manipulator and exchange is not the same person, as apparently manipulator didn't get the news that settlement is delayed.

In theory exchange could require participants to lock their funds in multisig escrow instead of sending those funds directly to exchange.

However this tech isn't commonplace yet. But we can hope that one day...

Wait, where does it come from? As I understand, clearing price is based on spot price only on settlement day, and before that it is based on futures price.

And to get futures price to move from $11 to $12 you need other market participants.


Have you read this? https://icbit.se/margincall


"Worst case scenario" is why I abandoned the idea of making a traditional futures exchange, it's kinda too messy for my taste.

FWIW I was discussing this kind of a problem (manipulation/margin calls) with Fireball back in summer 2011, before ICBIT was developed, when we considered making a futures exchange together.

Basically I've outlined a situation where a person with big enough pockets can effectively pwn the market getting profit out of nothing. Moreover this situation is very likely on bitcoin exchange: there are people with many bitcoins who do not mind risky endeavors. On the other hand, futures market is rather thin. Also, participants are pseudo-anonymous, so it's feasible to make an alt-account which would lose more money than it had.

So, well, I didn't want to deal with this mess (margin calls, forced liquidation, pissed off customers) and I designed a different kind of contracts ("capped forwards") which kinda serve the same purpose as futures, but do not suffer from same issues. I've also designed some non-traditional kind of futures.

But Fireball made it clear that he wants futures exchange similar to "traditional" ones, and apparently this margin call issue is a norm.

So problems were expected (it would in fact surprise me if nobody tried to squeeze the market), and there is no evidence that exchange operator is responsible for that. This simply make no sense in long term.

As for Mircea Popescu's accusations, they are largely baseless.

1. As I understand, volume displayed by ICBIT is a total for a security, and don't forget that it's leveraged.

2. Cash-settled futures are fine, it is a legitimate financial instrument. Yes, don't have direct effect on spot market, but that's OK.

3. There is no evidence that it was exchange operator who tried to squeeze investors.

4. I don't think that you should rely on being able to send order in last seconds, it could have been just a glitch. It is a web-based trading platform ffs.

So it's just FUD.

(While we are at it, colored coins would allow to organize delivery in USDcoins, for example.)

Yes. Orders with compatible margin requirements will be matched.

Although I guess it would be more convenient to have few standard contracts. E.g. daytraders can work with 5% margin requirements (equivalent to 20x leverage), while long-term investors might use 25% (4x leverage).

As for ease of use, I thought of having two front-ends:

1) a simple one which would simply offer users to make bets, e.g. "I bet that bitcoin will trade above 10.5 tomorrow"

2) and a more elaborate one which would expose details about forwards/options

"Simple-minded" users don't even need to see the order-book: they would either use suggested parameters thus buying/selling at market, or they'll place an order which might later be filled by a "sophisticated" user doing arbitrage.

There was a proposal to assign an unique id to each satoshi in such a way that it can be traced through blockchain according to a set of deterministic rules.

It is possible to link satoshis which "vanished" in a txn fee to satoshis which "appear" in coinbase.

While this is theoretically sound, I don't think it's a good idea because it is rather complicated, but it doesn't solve any real problem:

With a simple order-based coloring colored coins are effectively lost when they are mixed or sent as a fee.

But with satoshi-level coloring they might be sent to random people. I don't think it's better.

Market has "buy" (bid) and "sell" (ask) price. If you're buying at current "buy" price, you have to wait. Potentially, forever.

If you want to buy immediately, you need to buy at "sell" price, in that case your buy order will be matched to that sell order.

There is a "fill" button for that -- it would allow you to buy right now (but you might want to edit quantity).

I was developing my own derivative trading platform a while ago, and now as people are actively trading USD/BTC futures on ICBIT, I wonder if there is any interest for other kind of derivative contracts.

Let's call them "capped non-deliverable forwards":

• capped: there is a hard limit on maximum profit/loss
• non-deliverable: settled in bitcoins, exactly like ICBIT futures contracts
• forwards: there is no such thing as variation margin and there is no such thing as margin call. Initial margin is your maximum loss.

So unlike futures, forward is essentially a contract between two parties, exchange does not need to manage it. And since they are capped and initial margin is required, there is no counterparty risk.

However the downside is that initial margin might be considerably higher than you have with ICBIT futures. (But it's up to market players, it might be tiny if they are OK with small profit caps.)

Also since forward is settled between two parties it can be done via multisig escrow, so there is no need to trust exchange your money, at least in theory.

(I'm sorry if it looks like an advert for my non-existent service, but I was discussing this topic with Fireball before he made ICBIT and I wonder what people think about it now. That's all.)

OK, I meant transactions which involve more than 2 parties.


Uncolored coins are not particularly special, the only difference is that we can pay fees with them.

Yep, I'm working on multi-party transactions now. That was one of reasons for choosing Armory.

Auto-trade's role is to allow to trade with clients which do not implement p2p trading protocol: any client capable of sending/receiving coins can trade them this way.