ChromaWallet (colored coins): issue and trade private currencies/stocks/bonds/..

[jl2012]

Every now and then appears someone with the "new" idea of tainting coins. It's a very bad idea for multiple reasons. God, use the search button and you'll find a lot of threads about tainting.

What we need is an add-on for the Satoshi client and for the usual mining software to allow people melt-mining coins. That way we prevent the next "visionary" to taint our coins.

Melt-mining: mine a block and add a selfmadetransaction with all the coins you want to "melt" as fees. You need a tweaked client that prevents the selmadetransaction to be broadcasted but in your brand new mined block.

BITCOINS MUST BE FUNGIBLE.

This is one of the worst ideas I have ever heard. It's so obvious that the miner and the owner of melt coin is the same person. Even worse, imagine that your block is orphaned. You "melting transaction" is now known to the whole world with 0-confirmation. I wish you could mine another block to include it before any other people did it.

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[jl2012]

Every now and then appears someone with the "new" idea of tainting coins. It's a very bad idea for multiple reasons. God, use the search button and you'll find a lot of threads about tainting.

What we need is an add-on for the Satoshi client and for the usual mining software to allow people melt-mining coins. That way we prevent the next "visionary" to taint our coins.

Melt-mining: mine a block and add a selfmadetransaction with all the coins you want to "melt" as fees. You need a tweaked client that prevents the selmadetransaction to be broadcasted but in your brand new mined block.

BITCOINS MUST BE FUNGIBLE.

Thank you. Taint was the word I was looking for.

Bank notes being traceable is one of the problems with them. When you use cash it is supposed to not be traceable. Using bitcoins should be just like using cash anonymously, at least as much as possible.

With the blockchain structure, bitcoins are actually LESS anonymous than cash. Even you may launder your coins, every single satoshi is still traceable to its generation block (or people can print bitcoin out of thin air). You can't just close your eyes and ignore the blockchain and say bitcoin is not (or should not be) traceable.

If you want increased anonymity, there are some proposal like automatic coin mixing. But that is your own choice.

[HostFat]

every single satoshi is still traceable to its generation block

is this true? are you sure?

[jl2012]

every single satoshi is still traceable to its generation block

is this true? are you sure?

It depends on how do you define it. For example, with my proposal https://bitcointalk.org/index.php?topic=117224.0 , it is possible to trace every satoshi. With other definition, you may conclude that a satoshi is associated with a finite number of blocks. No matter how defined, all satoshi must be linked to one or some block generation, or that means bitcoin could be generated without proof-of-work.

[Jutarul]

every single satoshi is still traceable to its generation block

is this true? are you sure?

It depends on how do you define it. For example, with my proposal https://bitcointalk.org/index.php?topic=117224.0 , it is possible to trace every satoshi. With other definition, you may conclude that a satoshi is associated with a finite number of blocks. No matter how defined, all satoshi must be linked to one or some block generation, or that means bitcoin could be generated without proof-of-work.

Similar problem is studying ancestral history by looking at genes (http://en.wikipedia.org/wiki/Genealogy). If the gene pool was not isolated, but well mixed, after a few generations you're related to everyone. The question is how many generations till the information is diluted enough to regain practical anonymity.

[guruvan]

However, given real world experience in this community, such exchanges also have a nearly 100% chance of (a) getting DDoS'd and (b) getting attacked by determined, knowledgeable thieves.

Well, it would be quite similar to how mining pools work in terms of centralization. Some pool might be attacked, but that's barely a problem.

Note that thieves wouldn't gain much from a hack, so there is almost no incentive to do that.

That is why decentralized, open-review systems are preferred.

I think it's unlikely that full p2p system can be as fast as semi-centralized (federated) one. I.e. daytraders won't like it.

But it would be cool to have it as an option.

There's no reason not to use a fully p2p system. As an investor, daytrader, and one looking for development opportunities in the broker/dealer/exchange space, this is what I'd like to see. Between all the coloured coin/atomic coin swap discussion, and the distributed bond discussion I see - this is the most exciting development in bitcoin.

I think you're correct that most individual traders wouldn't want to use the basic p2p network and reference client, but there's an opportunity for both open source and commercial software (clients, analysis tools, discovery tools) development for these users, as well as exchanges/brokers.

Most users trading bitcoin for fiat money today don't prefer peer to peer solutions, like bitcion-otc, they prefer to use more centralized services (mtgox, bitinstant, etc) The OTC market can flourish alongside semi-centralized markets. Having a purely peer to peer system as the underlying assures an equal barrier to entry for exchanges & individuals, as well as assuring the transferability of assets, and decreasing the overall counterparty trust requirements of transactions not supervised by a central authority.

[killerstorm]

There's no reason not to use a fully p2p system.

There is a plenty of reasons.

As an investor, daytrader, and one looking for development opportunities in the broker/dealer/exchange space, this is what I'd like to see.

I'd like to see it too, but that doesn't mean that there is no room for other solutions.

Particularly, I want to make one based on simple information exchange protocol on top of HTTP. (I.e. pieces of transactions and meta-information is serialized and stored/retrieved via HTTP.) It can easily scale from fully centralized to somewhat-decentralized to full p2p.

There is no reason to start with full p2p: it's far easier to start with something centralized and then scale it. (This isn't the only argument, though.)

(I should note that I'm not a stranger to p2p stuff: I once implemented an ed2k client, and I read articles on DHTs and whatnot... It's just that HTTP provides cleaner solution by decoupling of transport layer from layers which implement application semantics.)

Having a purely peer to peer system as the underlying assures an equal barrier to entry for exchanges & individuals, as well as assuring the transferability of assets, and decreasing the overall counterparty trust requirements of transactions not supervised by a central authority.

As I already noted, p2p or not p2p is just a transport layer. It, broadly speaking, does not affect transferability of assets, trust requirements etc.

[jgarzik]

pybond follows the distributed bond design laid out in that post -- including the P2P and DHT bits.

I am thinking there will be a third component as well:  P2P network will permit traders to advertise "coordination points", a single address where traders may connect for high-speed trading between themselves.  These coordination points may be created or destroyed at any time, and are self-organizing among participants.

[chrisrico]

pybond follows the distributed bond design laid out in that post -- including the P2P and DHT bits.

I am thinking there will be a third component as well:  P2P network will permit traders to advertise "coordination points", a single address where traders may connect for high-speed trading between themselves.  These coordination points may be created or destroyed at any time, and are self-organizing among participants.

That's really clever, Jeff. I might describe that as P2P with voluntary, spontaneous federalization.

[Mike Hearn]

I suspect HFT should be a non-goal for v1. It's hard enough to make things work just for regular trading by long-term investors.

If you want to also explore designs that could do HFT between a set of parties, Satoshi had the following to say on the topic:

One use of nLockTime is high frequency trades between a set of parties.  They can keep updating a tx by unanimous agreement.  The party giving money would be the first to sign the next version.  If one party stops agreeing to changes, then the last state will be recorded at nLockTime.  If desired, a default transaction can be prepared after each version so n-1 parties can push an unresponsive party out.  Intermediate transactions do not need to be broadcast.  Only the final outcome gets recorded by the network.  Just before nLockTime, the parties and a few witness nodes broadcast the highest sequence tx they saw.

I took this description and recast it into "micropayment channels" with WiFi hotspots as an exemplar, but it's actually a general technique.

[Polvos]

Every now and then appears someone with the "new" idea of tainting coins. It's a very bad idea for multiple reasons. God, use the search button and you'll find a lot of threads about tainting.

What we need is an add-on for the Satoshi client and for the usual mining software to allow people melt-mining coins. That way we prevent the next "visionary" to taint our coins.

Melt-mining: mine a block and add a selfmadetransaction with all the coins you want to "melt" as fees. You need a tweaked client that prevents the selmadetransaction to be broadcasted but in your brand new mined block.

BITCOINS MUST BE FUNGIBLE.

This is one of the worst ideas I have ever heard. It's so obvious that the miner and the owner of melt coin is the same person. Even worse, imagine that your block is orphaned. You "melting transaction" is now known to the whole world with 0-confirmation. I wish you could mine another block to include it before any other people did it.

In the last 2023 blocks, only 26 were orphaned. That's about 1,3% odds of loosing all the meltmined coins (to a lucky miner). I prefer a 1% chance of loosing the melted coins than your tainted coin system. Tainted coins will affect all the bitcoin economy badly but meltmining pools only have a 1% chance to loose the block. I insist, tainting coins is a very bad idea because it will hurt all the bitcoin economy and the solution is not so risky for a melting transaction.

[killerstorm]

In the last 2023 blocks, only 26 were orphaned. That's about 1,3% odds of loosing all the meltmined coins (to a lucky miner). I prefer a 1% chance of loosing the melted coins than your tainted coin system. Tainted coins will affect all the bitcoin economy badly but meltmining pools only have a 1% chance to loose the block. I insist, tainting coins is a very bad idea because it will hurt all the bitcoin economy and the solution is not so risky for a melting transaction.

Bro, again, this has absolutely NOTHING to do with tainting. You have no idea what you're talking about.

[jgarzik]

I suspect HFT should be a non-goal for v1. It's hard enough to make things work just for regular trading by long-term investors.

It seems likely that people will hook up bots to distributed bonds as soon as they pop into existence.  Some sort of mitigation strategy will be needed, at a minimum.  Otherwise the P2P network will be flooded with sales offers.

[yoniassia]

decreasing the overall counterparty trust requirements of transactions not supervised by a central authority.

I think this is the main point of colored bitcoins, enable creation of new assets, and using bitcoin infrastructure as a digital asset grid, to enable people (and organizations) to hold value digitally, in the cloud, without any need for regulation or counterparty trust.
Today the biggest problem in finance is counterparty risk, and the reputation of a financial institution represent its counterparty trust and is the most valuable asset a financial institution has, and the biggest barrier to entry for new companies therefore for new technology. By decreasing requirements for regulation and counterparty trust the progress of technology will accelerate dramatically.

[jl2012]

In the last 2023 blocks, only 26 were orphaned. That's about 1,3% odds of loosing all the meltmined coins (to a lucky miner). I prefer a 1% chance of loosing the melted coins than your tainted coin system. Tainted coins will affect all the bitcoin economy badly but meltmining pools only have a 1% chance to loose the block. I insist, tainting coins is a very bad idea because it will hurt all the bitcoin economy and the solution is not so risky for a melting transaction.

Bro, again, this has absolutely NOTHING to do with tainting. You have no idea what you're talking about.

He absolutely have no idea what he's talking about. He thinks coins are magically laundered by using as transaction fee. Transaction fee is nothing more than a special type of output. If someone tries to melt some dirty coins by sending unreasonably high fee, the block reward will simply become dirty. Not to mention that setting up a coin melting pool cannot stop people using colored coins, unless he is able to spend coins that are not belonging to him.

However, I still hope he will set up a pool like that, so I may be able to grab some of those easy coins.

[Jutarul]

In the last 2023 blocks, only 26 were orphaned. That's about 1,3% odds of loosing all the meltmined coins (to a lucky miner). I prefer a 1% chance of loosing the melted coins than your tainted coin system. Tainted coins will affect all the bitcoin economy badly but meltmining pools only have a 1% chance to loose the block. I insist, tainting coins is a very bad idea because it will hurt all the bitcoin economy and the solution is not so risky for a melting transaction.

Bro, again, this has absolutely NOTHING to do with tainting. You have no idea what you're talking about.

He absolutely have no idea what he's talking about. He thinks coins are magically laundered by using as transaction fee. Transaction fee is nothing more than a reduced value of the output. If someone tries to melt some dirty coins by sending unreasonably high fee, the block reward will simply become dirty. Not to mention that setting up a coin melting pool cannot stop people using colored coins, unless he is able to spend coins that are not belonging to him.

However, I still hope he will set up a pool like that, so I may be able to grab some of those easy coins.

FTFY

There are some tricks you can play though if you have the mining power to create a block in a reasonable time. Then you can deliberately include transactions which increase the noise level and make it hard for any tracing software to infer the origin of coins. If done right, the tracing of the coins you want to launder becomes unpractical.

[jl2012]

In the last 2023 blocks, only 26 were orphaned. That's about 1,3% odds of loosing all the meltmined coins (to a lucky miner). I prefer a 1% chance of loosing the melted coins than your tainted coin system. Tainted coins will affect all the bitcoin economy badly but meltmining pools only have a 1% chance to loose the block. I insist, tainting coins is a very bad idea because it will hurt all the bitcoin economy and the solution is not so risky for a melting transaction.

Bro, again, this has absolutely NOTHING to do with tainting. You have no idea what you're talking about.

He absolutely have no idea what he's talking about. He thinks coins are magically laundered by using as transaction fee. Transaction fee is nothing more than a reduced value of the output. If someone tries to melt some dirty coins by sending unreasonably high fee, the block reward will simply become dirty. Not to mention that setting up a coin melting pool cannot stop people using colored coins, unless he is able to spend coins that are not belonging to him.

However, I still hope he will set up a pool like that, so I may be able to grab some of those easy coins.

FTFY

There are some tricks you can play though if you have the mining power to create a block in a reasonable time. Then you can deliberately include transactions which increase the noise level and make it hard for any tracing software to infer the origin of coins. If done right, the tracing of the coins you want to launder becomes unpractical.

The standard fee at this moment is only 0.005BTC. To launder 1BTC without paying suspiciously high fee will take 200 transactions. You can't put these into the same block or it will become too obvious, and you need to generate more than 100 blocks for laundering only 1BTC. Even worse, the FBI may just monitor all unconfirmed transactions on the network. If they find many "hidden transactions" that were not broadcast to the network before they appeared in a block, they will further investigate that particular miner.

[Polvos]

You understand nothing.

A meltmining laundry can melt a small number of coins every block it finds.

¿You say you can adapt your taint software to find the unusual fee transactions?

Ok, I say that I will send 2 to 5 tainted BTC fees in the next block and wait to be mined by p2pool or Deepbit.

¿What do you think will the miners do when they start getting their accounts freezed in MtGox because your taint lists and software? They can't dodge the tainted melting coins fake transaction I made and they can't prove they aren't the melting launderers.

So the tainted coins list/software adoption is the beginning of the end of bitcoin.

[Polvos]

The standard fee at this moment is only 0.005BTC. To launder 1BTC without paying suspiciously high fee will take 200 transactions. You can't put these into the same block or it will become too obvious, and you need to generate more than 100 blocks for laundering only 1BTC. Even worse, the FBI may just monitor all unconfirmed transactions on the network. If they find many "hidden transactions" that were not broadcast to the network before they appeared in a block, they will further investigate that particular miner.

Lol. Have you ever heard about TOR?

You have no idea about the system I proposed. I said that you, as a meltmining pool, tweak the bitcoin software in order to prevent the meltmining transaction to be broadcasted until it gets added in the block you found.

[Mushroomized]

pybond follows the distributed bond design laid out in that post -- including the P2P and DHT bits.

I am thinking there will be a third component as well:  P2P network will permit traders to advertise "coordination points", a single address where traders may connect for high-speed trading between themselves.  These coordination points may be created or destroyed at any time, and are self-organizing among participants.

Interesting...