Who holds the coins in a decentralized exchange?

[Lorenzo]

While the idea of decentralizing websites in general seems rather easy to implement since a typical website is really just a collection of .html files, a decentralized altcoin exchange seems very difficult to implement and I just don't see how a decentralized fiat-cryto exchange could exist at all.

I've tried to think of various ways in which a decentralized altcoin exchange similar to Cryptsy or Poloniex could function but the main problem seems to be the issue of who actually holds the damn coins. Usually in centralized exchanges, it's the exchange itself that holds the coins. This works well for the most part - but we must trust the exchange owners to not run off with the coins.

A semi-decentralized exchange (in the sense of not relying on centralized servers) that is similar to eBay could probably work where person A sends their coins first, person B receives it, and then person B sends their coins to person A. Obviously for a crypto exchange this solution is not ideal because now person B could run off with the coins.

There would need to be some way of making sure that both people have sent their coins before receiving the other's coins - i.e. some type of escrow who holds the coins. But then the escrow could run off with the coins so again, the problem remains.

A typical escrow model is shown below. If A wants to trade his 2 bitcoins for B's 20 catcoins, A must send bitcoins to C and B must send catcoins to C. Only after both events are true will C send catcoins to A and bitcoins to B:



Anyone know of any good solutions? And how is NXT's asset exchange able to solve this problem by allowing people to trade without using an escrow?

[Rampton]

There will obviously have to be some sort of escrow implemented. What interests me though is how will you get fiat money into these decentralized exchanges? That baffles me. Does any one have any info or ways it can work? I'm very intrigued to how decentralized exchanges or markets will function so I can't wait for them to actually get released. They seem to have been in development for quite some time

[ijphlrnxewho]

100% decentralized exchange possible is if someone were to create a software that is running on many different nodes. In other words, each user's computer is hosting the exchange similar to the old days where each user's computer is hosting the bitcoin server.

All future coins created must be compatible with that exchange's software. This way the coins are not control by someone.

[Q7]

100% decentralized exchange possible is if someone were to create a software that is running on many different nodes. In other words, each user's computer is hosting the exchange similar to the old days where each user's computer is hosting the bitcoin server.

All future coins created must be compatible with that exchange's software. This way the coins are not control by someone.

I think that's a great idea because eventually it will become a win-win situation for all because you don't have to trust anybody that could potentially run off with the coins and at the same time, those running the nodes will be motivated to maintain the network by earning a portion of the exchange amount.

[Snail2]

100% decentralized exchange possible is if someone were to create a software that is running on many different nodes. In other words, each user's computer is hosting the exchange similar to the old days where each user's computer is hosting the bitcoin server.

All future coins created must be compatible with that exchange's software. This way the coins are not control by someone.

I think that's a great idea because eventually it will become a win-win situation for all because you don't have to trust anybody that could potentially run off with the coins and at the same time, those running the nodes will be motivated to maintain the network by earning a portion of the exchange amount.

Supernet doing this, but only for a limited number of cryptos at this moment.

[sAt0sHiFanClub]

I imagine that liquidity issues will make the 'escrow' model a non starter. How will an exchange know whether it can fulfill a specific request it has to go through a 3rd party? And doesn't that kinda defeat the whole 'decentralized' thing?

[Lorenzo]

There will obviously have to be some sort of escrow implemented. What interests me though is how will you get fiat money into these decentralized exchanges? That baffles me. Does any one have any info or ways it can work? I'm very intrigued to how decentralized exchanges or markets will function so I can't wait for them to actually get released. They seem to have been in development for quite some time

Examples like LocalBitcoins aside, I can't think of any way how an electronic fiat-crypto exchange could be implemented in a decentralized manner. Electronic fiat requires the existence of bank accounts since there would need to be a place to actually put the fiat in. And anything that requires bank accounts must, by definition, be centralized.

That's why I'm more interested in the prospect of decentralized crypto-to-crypto exchanges since that seems like a far more realistic goal. All coins are just code after all.

[hilariousandco]

There will obviously have to be some sort of escrow implemented. What interests me though is how will you get fiat money into these decentralized exchanges? That baffles me. Does any one have any info or ways it can work? I'm very intrigued to how decentralized exchanges or markets will function so I can't wait for them to actually get released. They seem to have been in development for quite some time

Examples like LocalBitcoins aside, I can't think of any way how an electronic fiat-crypto exchange could be implemented in a decentralized manner. Electronic fiat requires the existence of bank accounts since there would need to be a place to actually put the fiat in. And anything that requires bank accounts must, by definition, be centralized.

Maybe it could be something like bittylicious uses. They're more of a middle-man than a traditional exchange and the payments go directly from the buyers bank account into the sellers and the coins are then automatically released as soon as payment has been sent. It's quite a smooth and efficient system and a similar one will likely have to be built into these decentralised exchanges.

[Amph]

third party with escrow should be done by a computer, automatized, this way there will be no source to be trusted, because a computer will never steal your money if it is 100% automatized

[sAt0sHiFanClub]

third party with escrow should be done by a computer, automatized, this way there will be no source to be trusted, because a computer will never steal your money if it is 100% automatized

Automatization is fraught with technimalogical difficulties. The only way will be be to run them automagically. Automagicalization has proved to be a winner.

[countryfree]

third party with escrow should be done by a computer, automatized, this way there will be no source to be trusted, because a computer will never steal your money if it is 100% automatized

A computer is only a front. There are programmers behind. Remember the Evolution drug market which vanished last week. Everybody was saying it was the safest market not long ago.

[CIYAM]

A technology such as Automated Transactions (AT - http://ciyam.org/at) can act as a trustless 3rd party to perform Atomic Cross-Chain Transfers (ACCTs) between blockchains (provided both blockchains implement AT).

This technology has already been developed and an ACCT between two blockchains is expected to be demonstrated within a few weeks (the two blockchains concerned are Burst and Qora).

It should be noted that this type of exchanging doesn't require a website and it should also be noted that it will only apply to exchanging one crypto currency for another (not fiat).

[odolvlobo]

In a crypto-crypto exchange, the decentralized network runs the market and provides communication between buyers and sellers. Cryptography ensures that the coins in the trade can't be spent until the trade is done. No escrow is needed.

I don't think anyone has figured out how to create a decentralized crypto-fiat exchange without relying on a trusted party.

[CIYAM]

I don't think anyone has figured out how to create a decentralized crypto-fiat exchange without relying on a trusted party.

It may end up possible at least in places like China where you do have basically irreversible fiat txs online (with the likes of Alipay) although certainly not currently.

[Amph]

third party with escrow should be done by a computer, automatized, this way there will be no source to be trusted, because a computer will never steal your money if it is 100% automatized

A computer is only a front. There are programmers behind. Remember the Evolution drug market which vanished last week. Everybody was saying it was the safest market not long ago.

with 100% automatized, i mean a program that don't need any maintenance, and it's made one time only, to run forever without any help from human

something that can't be done now i think, maybe in the future

[vokain]

Who holds all the bitcoins in this blockchain?

[CIYAM]

with 100% automatized, i mean a program that don't need any maintenance, and it's made one time only, to run forever without any help from human

This is exactly how AT works (once an AT has been created it cannot be modified and it will run forever unless it has been terminated according to the rules of the blockchain it runs on).

[chmod755]

Examples like LocalBitcoins aside, I can't think of any way how an electronic fiat-crypto exchange could be implemented in a decentralized manner. Electronic fiat requires the existence of bank accounts since there would need to be a place to actually put the fiat in. And anything that requires bank accounts must, by definition, be centralized.

That's why I'm more interested in the prospect of decentralized crypto-to-crypto exchanges since that seems like a far more realistic goal. All coins are just code after all.

You could make a decentralized crypto-to-crypto exchange, but that's a tiny market and I think sidechains will make most altcoins obsolete.

[MicroGuy]

Who holds all the bitcoins in this blockchain?

Satoshi has around 10% and the rest are controlled by the core developers.

[fox19891989]

a decentralized exchange?

Do you mean Counterparty(XCP) exchange or NXT exchange?

I have translated Chinese wallet for Counterparty(XCP) team, so I am familiar with XCP, it's a great derivative trading platform, and indeed it's a decentralized exchange.