A BTC stock exchange for high-risk, unverified securities?

[BitSense Informatics]

On the suggestion of someone else, we would consider setting up a B market, with lower requirements, lower startup fees, and obviously more risk.

opinions?

+1 for this.  NASDAQ is a 3 tiered market.
http://www.nasdaq.net/PublicPages/ListingStandards.aspx

Then there's OTC BB, and Pink Sheets for companies not meeting certain listing standards.

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[Tritonio]

I think Nefario shouldn't drop those "scams/high risk" investments out. Maybe create two markets in GLBSE would be better and manually move the good ones from the high risk market to the low risk one. And make the high risk market pages stand out as high risk. Something that will always remind potential investors that this could easily be a scam.

Banning them outright has more less cons (pun intended) than pros. 1. Less profit for Nefario. 2. To much intervention in the market which goes against the "bitcoin spirit". Letting the people decide and giving them the proper tools to do so would be better.

Of course in any case it's up to market own to decide what will be trades in the market. After all someone else will cover the demand for a high risk market if GLBSE backs out.

[Ragnar17]

GLBSE is definitely getting cluttered and needs some organization and I think the best solution would be to separate shares by sectors (mining, funds, high risk and so on). A new website would be slightly more obnoxious but the splitting up/reorganizing of GLBSE would be really helpful.

[Nefario]

GLBSE is definitely getting cluttered and needs some organization and I think the best solution would be to separate shares by sectors (mining, funds, high risk and so on). A new website would be slightly more obnoxious but the splitting up/reorganizing of GLBSE would be really helpful.

We'll have this done in the next couple of days.

[sunnankar]

On the suggestion of someone else, we would consider setting up a B market, with lower requirements, lower startup fees, and obviously more risk.

opinions?

I think the laissez faire caveat emptor marketplace is the best way to go. But I also take the attitude that it is better to have more issues than less just like it is better to have more speech than less.

Perhaps you can segregate securities based on type, risk, profile, etc. I do find it annoying trying to sift through all the crap to find the diamonds. But this is a GUI issue and not a fundamental philosophy and business strategy issue.

Having a laissez faire caveat emptor marketplace opens up opportunities for creative entrepreneurs to solve problems, slice risk up and develop innovative financial products. A good example is Nyancat Financial's performance in the midst of this Pirate mess.

NYANCAT FINANCIAL: YOUR FRIEND FOR LIFE

Nyancat Financial Weekly Letter to Shareholders
Sunday August 26th, 2012

also available at: http://www.tsukino.ca/cpa/nyan/nyancat-statements/2012-34-nyan-statement/

The idea that Pirate, Ponzis, etc. issues crowds out investment from 'more legitimate' issues is a complete red herring. Individual investors determine their risk tolerance and attempting to interfere with this creates friction and inefficiency.

The problem with Ponzi scams is that they are fraudulent. A big problem with publicly traded companies is all the disclosures. This can reveal competitive advantages which results in pressure on margins and profits.

Sure, people can lie, etc. but so likewise investors can do significant due diligence, craft and execute binding contracts in addition to the GLBSE contract and maintain an aura of privacy around business operations when there is a legitimate trade secret. Often these trade secrets can be exploited for years by small private companies that keep their mouth shut and do not alert potential competitors to their money tree.

Therefore, as a shareholder and in order to maximize shareholder value I want issues I invest in to have the ability to maintain privacy, protect competitive advantage and secretly dominiate their niches. If that means we have to remove the issue from GLBSE to avoid disclosure of trade secrets and take it private then that would be the reasonable business decision.

Thus the conflict becomes whether investor's perform due diligence or whether GLBSE performs due diligence.

If GLBSE takes a regulator position attempting to ferret out the 'scams' then it costs time, resources and puts shareholders in a position to rely on GLBSE to their detriment thus opening up potential legal liability for negligence, etc. in not ferreting out the scams, etc. because some will inevitably get through or get through legitimately and then turn into scams.

Thus, a laissez faire caveat emptor position would allow for more innovative financial instruments that can creatively and more efficiently allocate risk, maintain the privacy, secrecy, trade secrets and competitive advantages of businesses which would create shareholder value and remove any reasonable reliance investors may have on GLBSE.

On the other hand, I do not see the advantages of babysitting fools who are easily separated from their money.

[Coincomm]

Why would the C market have a cap on funding?

A cap on the amount any one person or group could raise, why shouldn't it? C market is for smaller unproven projects from people with little or no track record.

They shouldn't be able to raise millions of USD worth of bitcoin for a massive project that they have almost no experience for, that is a recipe for disaster, for larger projects or funds you need to have a track record and your level of responsibility grows. If the C market isn't enough for someone to raise the capital they need then they need to qualify for the B market. It's not unreasonable and not a huge step up.

What if the investors and the issuer have a price of privacy and low visibility? What if no party sees any benefit in reaching B status?

[Coincomm]

Additionally, in some countries entrepreneurship is pretty much illegal through burdensome regulations.

Requiring some people to expose themselves is a recipe for disaster for their businesses. Capping funding will only put salt in the wound for them, especially if its a completely virtual business.

[markm]

Promoting high risk, unverified securities is probably a high risk activity (though I am not sure how verified/verifiable that assertion itself actually is).

However, situating such an exchange behind Tor and/or i2p creates sufficient barrier to casual entry that it might also permit dispensing with the security worries associated with using webservers and webbrowsers; people who are willing to get Tor or i2p running can maybe also handle using an Open Transactions client instead of a web browser.

What exactly is the job of the exchange? Are they supposed to promote/market for you or is it fine that they remain as unknown as possible to everyone other than to your shareholders and your potential shareholders: the people to whom you the issuer of a security choose to reveal the means of contacting the exchange your issue trades on?

I have been thinking it might be better to simply have experienced traders equipped with Open Transactions clients bundle managed portfolios of things as GLBSE assets to cater to the browser-addicted crowd, or maybe even set up websites of their own for interacting with their customers.

Admittedly I might be overly influenced by an old, obsolete model: floor trading / seats at the exchange; does the New York Stock Exchange run a website now so anyone can trade directly on it, or are there still remenants of the old days when only brokers / brokerages actually dealt directly on the exchange, the public dealt with brokers?

-MarkM-

[Nefario]

I think the laissez faire caveat emptor marketplace is the best way to go. But I also take the attitude that it is better to have more issues than less just like it is better to have more speech than less.

We did this with GLBSE 1.0, you talk a lot of theory but what it boiled down to is it didn't work, GLBSE got a reputation for being full of scams, which hurt GLBSE overall.

Having a laissez faire caveat emptor marketplace opens up opportunities for creative entrepreneurs to solve problems, slice risk up and develop innovative financial products.

The result of this was that users did not do their due diligence, then cried fowl and labelled GLBSE a scamshop. And even those who did still got burned by what most even considered to be decent securities.

No one came along to slice and dice risk or even to rate shares properly, our experience was that if we didn't do it no one would. Adding verification has made a huge change, what once was anonymous people issuing shares and almost always running off with the funds whether right away or later. Because no one (trusted 3rd party) had their real life identity, there were no consequences to skipping off, so it happened again and again and again.

Therefore, as a shareholder and in order to maximize shareholder value I want issues I invest in to have the ability to maintain privacy, protect competitive advantage and secretly dominiate their niches.

Thats all well and fine, but is a strawman of an argument, when did I say we were looking to out trade secrets or peoples identities? Never.

What has been proposed is market segregation where with each tier comes with additional requirements.

These requirements being proper accounting, outside auditing, deeper verification of the issuers(which is kept private) and publishing of quarterly accounts. All these allow said businesses to keep their privacy and trade secrets while getting good standard information to the market.

I'm thinking of tier names right now. Tier 1 would be GLBSEBlue for "bluechip" shares, Tier 3 being GLBSEPink for pink sheets (and all the risk, none of the requirements).

Anyone have a good name for Tier 2 middle tier?

What if the investors and the issuer have a price of privacy and low visibility? What if no party sees any benefit in reaching B status?

When did I say A B or C issuers would ever lose their privacy? GLBSE has never released the identity of any issuers.

Additionally, in some countries entrepreneurship is pretty much illegal through burdensome regulations.

Requiring some people to expose themselves is a recipe for disaster for their businesses. Capping funding will only put salt in the wound for them, especially if its a completely virtual business.

Strawman again, have never said issuers need to "expose" themselves. Getting verified means GLBSE knows who you are, no one else, NOT getting verified has a proven track record of disaster for shareholders (with very few exceptions).

I don't think that the identity of an issuer need be known all around the world for them to list on B or A markets, but GLBSE needs to know who they are. Failing to do this doesn't just result in scams, it ruins the market as a whole and it's reputation (as was our experience with GLBSE 1.0).

[Coincomm]

GLBSE will release information given enough legal force. You want us to trust the GLBSE and that is reasonable depending on the clientèle you want.

[markm]

People who don't want to go through verification can simply run their own issues on their own server, even from home behind i2p or Tor if they want to. The main thing preventing that so far has been lack of free open source software to do it. That is being remedied rapidly.

-MarkM-

EDIT: In fact, the default setting for Open Transactions servers is that anyone can issue an asset. So basically even if you don't want to run one yourself to issue your assets on, chances are you will be able to find one with that setting and issue as many assets as you wish as often as you wish...

-MarkM-

[Nefario]

GLBSE will release information given enough legal force. You want us to trust the GLBSE and that is reasonable depending on the clientèle you want.

We ran an anonymous market exchange for nearly a year, it was a total failure in the practical, ideological and economic sense. It made almost no money, no one "investing" made any profit or return because the vast majority of assets were scams, most of the rest were failures, with a few late arrivals being successful (when we added verification).

Also you're argument about being forced to release information is moot. We're implementing a separation of powers for verification data we hold. Similar to our disaster plan if I get killed.

One party holds the data encrypted while the other has the key, with only one party being publicly known (me) and the other in a very different jurisdiction.

[bitcoinbear]

I'm thinking of tier names right now. Tier 1 would be GLBSEBlue for "bluechip" shares, Tier 3 being GLBSEPink for pink sheets (and all the risk, none of the requirements).

Anyone have a good name for Tier 2 middle tier?

How about GLBSEWhite?

Since you have to get some verificaton to get out of the bottom tier, it would be like whitelisting the assets?

[Coincomm]

I'll cut out my idealism then. I am now even more sold on the GLBSE.

[Nefario]

I'll cut out my idealism then. I am now even more sold on the GLBSE.

Governments have a lot of power and our only real protection is cryptography, so governments have created laws to try to remove this protection, threat of imprisonment if we don't give them the password or key.

I don't know the US legislation but in the UK it's RIPPA(or RIPA not sure).

So the only alternative is to split the data from the key, and keep them in different locations/jurisdictions. Sure you could get the other person but it's a lot more work.

[Bitcoin Oz]

People who don't want to go through verification can simply run their own issues on their own server, even from home behind i2p or Tor if they want to. The main thing preventing that so far has been lack of free open source software to do it. That is being remedied rapidly.

-MarkM-

EDIT: In fact, the default setting for Open Transactions servers is that anyone can issue an asset. So basically even if you don't want to run one yourself to issue your assets on, chances are you will be able to find one with that setting and issue as many assets as you wish as often as you wish...

-MarkM-

And I as a customer am free to totally avoid anything like that 

[Bitcoin Oz]

Why would the C market have a cap on funding?

A cap on the amount any one person or group could raise, why shouldn't it? C market is for smaller unproven projects from people with little or no track record.

They shouldn't be able to raise millions of USD worth of bitcoin for a massive project that they have almost no experience for, that is a recipe for disaster, for larger projects or funds you need to have a track record and your level of responsibility grows. If the C market isn't enough for someone to raise the capital they need then they need to qualify for the B market. It's not unreasonable and not a huge step up.

What if the investors and the issuer have a price of privacy and low visibility? What if no party sees any benefit in reaching B status?

People will provide transparency because the market demands it not because there are regulations forcing them to do it.

[puffn]

I think the laissez faire caveat emptor marketplace is the best way to go. But I also take the attitude that it is better to have more issues than less just like it is better to have more speech than less.

We did this with GLBSE 1.0, you talk a lot of theory but what it boiled down to is it didn't work, GLBSE got a reputation for being full of scams, which hurt GLBSE overall.

Having a laissez faire caveat emptor marketplace opens up opportunities for creative entrepreneurs to solve problems, slice risk up and develop innovative financial products.

The result of this was that users did not do their due diligence, then cried fowl and labelled GLBSE a scamshop. And even those who did still got burned by what most even considered to be decent securities.

No one came along to slice and dice risk or even to rate shares properly, our experience was that if we didn't do it no one would. Adding verification has made a huge change, what once was anonymous people issuing shares and almost always running off with the funds whether right away or later. Because no one (trusted 3rd party) had their real life identity, there were no consequences to skipping off, so it happened again and again and again.

Therefore, as a shareholder and in order to maximize shareholder value I want issues I invest in to have the ability to maintain privacy, protect competitive advantage and secretly dominiate their niches.

Thats all well and fine, but is a strawman of an argument, when did I say we were looking to out trade secrets or peoples identities? Never.

What has been proposed is market segregation where with each tier comes with additional requirements.

These requirements being proper accounting, outside auditing, deeper verification of the issuers(which is kept private) and publishing of quarterly accounts. All these allow said businesses to keep their privacy and trade secrets while getting good standard information to the market.

I'm thinking of tier names right now. Tier 1 would be GLBSEBlue for "bluechip" shares, Tier 3 being GLBSEPink for pink sheets (and all the risk, none of the requirements).

Anyone have a good name for Tier 2 middle tier?

What if the investors and the issuer have a price of privacy and low visibility? What if no party sees any benefit in reaching B status?

When did I say A B or C issuers would ever lose their privacy? GLBSE has never released the identity of any issuers.

Additionally, in some countries entrepreneurship is pretty much illegal through burdensome regulations.

Requiring some people to expose themselves is a recipe for disaster for their businesses. Capping funding will only put salt in the wound for them, especially if its a completely virtual business.

Strawman again, have never said issuers need to "expose" themselves. Getting verified means GLBSE knows who you are, no one else, NOT getting verified has a proven track record of disaster for shareholders (with very few exceptions).

I don't think that the identity of an issuer need be known all around the world for them to list on B or A markets, but GLBSE needs to know who they are. Failing to do this doesn't just result in scams, it ruins the market as a whole and it's reputation (as was our experience with GLBSE 1.0).

A market regulating itself. Sounds pretty much like a libertarian wet dream. I think raising the barriers of entry by increased requirements in tiers is a great way to do this. A free market solution to a free market problem. Milton Freedman's corpse smiles on you.

[markm]

People who don't want to go through verification can simply run their own issues on their own server, even from home behind i2p or Tor if they want to. The main thing preventing that so far has been lack of free open source software to do it. That is being remedied rapidly.

-MarkM-

EDIT: In fact, the default setting for Open Transactions servers is that anyone can issue an asset. So basically even if you don't want to run one yourself to issue your assets on, chances are you will be able to find one with that setting and issue as many assets as you wish as often as you wish...

-MarkM-

And I as a customer am free to totally avoid anything like that 

And I as a server operator am free to turn off the ability of users to issue assets, which is what I have done on my server.

-MarkM-

[Korbman]

I'll be adding tags in the next couple of days for things like bonds, mining etc. to shorten the assets page.

But what I actually had in mind was having 3 different markets (or 3 different market pages) with differing requirements to get into each of them.

The (C) market could be unverified, no accounting records etc. and considered very risky, it would also have the lowest starting fees and maybe a limit on the amount that can be raised.

(B) market would be where most of the good assets currently stand, verified to the current level, but I think providing monthly accounting statements, they'd need to have a running business as well (compared to funds to get a project started). So it would only be a little more effort (I think mostly for the accounting side) for some existing assets to get into this category.

(A) market would have even higher levels of verification than now(background and credit checks), would also require a treasurer to approve the use of funds, provide GAAP accounts and be audited by an external source.

This way an asset could start off in the C market and as they grow (if they're successful) they will be moved to B market and then eventually A market, each step up raising the levels of capital they have access to.

We still wouldn't allow assets that would make GLBSE a target for government regulators/police (i.e. drugs, prostitution).

I actually like this idea a lot, as it has a lot of roots in the actual stock exchanges. As it is right now, wading through the various sketchy securities on GLBSE is tiresome as I look toward actual investments and ideas.

Not to mention bad timing for me as I try to get my IPO off the ground!