With GLBSE gone, can somebody PLEASE write something like this or better?

[Rassah]

You probably heard that GLBSE went down recently. I am hoping someone out there can code software that uses BTC address signed contracts and allows companies to issue and track their own stock shares instead of relying on a single third party. In short:

1) Company announces a number of shares for sale.
2) Users bid on shares
3) Once bidders win, they pay for shares, and their BTC addresses become the owners/signature for their shares. I.e. shares are tied to a BTC address, not to users.
4) Company issuing the shares stores the ledger that states "Bitcoin address X owns so many shares," and any dividends get paid directly to those addresses
5) If a user wants to sell/transfer their stock, he sends a transaction message signed by the BTC address that owns those shares, telling the company ledger that the sold shares now belong to a different address
6) Company updates their ledger, and pays dividends to the new address.

This way
- you only have to trust the company issuing shares (and if you can't, you wouldn't buy those shares anyway)
- there are no costs associated with registering or trading stocks unless the issuing company takes a fee themselves
- stocks traded on the open market can be traded through third party auction houses similar to and as simple as eBay style bidding, and can be traded privately among users using OTC.
- shares can be sold by any company in any country, without concern about what regulatory jurisdiction a specific exchange falls under.

I wouldn't think something like this would be TOO difficult, since it doesn't even rely on Bitcoin transactions and blockchain, just signed messages and any means to see what address payments came from. Comments/suggestions/improvements?

[markm]

Bitcoin addresses can sign stuff but they cannot encrypt stuff, which is a pity since otherwise you could maybe just replace the crypto layer of Open Transactions with a version based on elliptic curves.

The nyms used in Open Transactions are portable though; you can use the same nym on any server, so it still serves as your identity on any server. So if an issuer of assets switches to a different server to issue on, people's nyms will work just as well there to prove who they are.

Most cryptocoins use slightly different addresses than bitcoin does, they are actually able to be translated from one to another but that maybe adds a layer of confusion, and it seems pretty likely that bitcoins will not be the only coins wanting to use the system.

It would probably be helpful for you to get an Open Transactions client installed and get familiar with how Open Transactions works, so that you can make useful suggestions on what additional features it might need as it probably handles most of what you need already.

Starting from scratch to write a new thing to do what Open Transactions already does seems a poor use of effort/resources compared to simply improving what is already done as it is a heck of a lot of code already written and a heck of a lot of testing and debugging already done and it seems to be pretty bulletproof on the most important thing which is keeping everyone's balances correct.

For example one thing you did not even mention is not being able to change someone's balance without them agreeing to the change...

-MarkM-

[Deafboy]

I don't understand. Is Nefario behind GLBSE the same Nefario who was speaking at the conference? The same smart and confident guy who said if there are any legal issues, he will simply move to another country? Theymos, can you please continue to operate GLBSE until P2P solution is available? If not, are you able to lower the price of the shares you are selling? Or at least open the source code?

[Rassah]

I think Open Transactions may be a hell of an overkill for this. Since a single entity is being invested in, that single entity can be the centralized source that keeps all the ledgers and keeps track of all transactions. It doesn't really matter if they decide to change their system or use a different database, either, since all that they have to store is "Address so-and-so owns so many shares, until we get a BTC signed message to tell us otherwise." And if the company goes down, it won't matter which exchange manages the stocks, since they would be worthless. Admittedly, I am only barely familiar with Open Transactions. I just could never figure out the point of using a second layer to send Bitcoin to someone when you can just send Bitcoin directly. Maybe there is a module in OT that already does most of what I described?

Regarding not being able to change someone's balance, I'm not sure why that is required. A centralized exchange can also arbitrarily change people's balances, though that would not be very, um, nice. And not having restrictions on changing balances means a company that controls the stock can do stock splits etc. without needing permission from everyone.

The point is, yes, there would be a single point of failure, and a single entity to trust, but that point of failure and trust is also the company being invested in, meaning the trust is redundant. If you can't trust the company to do basic accounting, you likely shouldn't trust them with your investment. And to get something like this off the ground, I imagine all that's needed is a simple database, and a not-so-simple front-end.

[Bitcoin Oz]

I don't understand. Is Nefario behind GLBSE the same Nefario who was speaking at the conference? The same smart and confident guy who said if there are any legal issues, he will simply move to another country? Theymos, can you please continue to operate GLBSE until P2P solution is available? If not, are you able to lower the price of the shares you are selling? Or at least open the source code?

He lied.

[Bitcoin Oz]

I think Open Transactions may be a hell of an overkill for this. Since a single entity is being invested in, that single entity can be the centralized source that keeps all the ledgers and keeps track of all transactions. It doesn't really matter if they decide to change their system or use a different database, either, since all that they have to store is "Address so-and-so owns so many shares, until we get a BTC signed message to tell us otherwise." And if the company goes down, it won't matter which exchange manages the stocks, since they would be worthless. Admittedly, I am only barely familiar with Open Transactions. I just could never figure out the point of using a second layer to send Bitcoin to someone when you can just send Bitcoin directly. Maybe there is a module in OT that already does most of what I described?

Regarding not being able to change someone's balance, I'm not sure why that is required. A centralized exchange can also arbitrarily change people's balances, though that would not be very, um, nice. And not having restrictions on changing balances means a company that controls the stock can do stock splits etc. without needing permission from everyone.

The point is, yes, there would be a single point of failure, and a single entity to trust, but that point of failure and trust is also the company being invested in, meaning the trust is redundant. If you can't trust the company to do basic accounting, you likely shouldn't trust them with your investment. And to get something like this off the ground, I imagine all that's needed is a simple database, and a not-so-simple front-end.

https://bitcointalk.org/index.php?topic=105437.0  heres one.

[Deafboy]

He lied.

I don't think so. He had clear vision about the future of GLBSE. Problems must came after the conference.

[Bitcoin Oz]

He lied.

I don't think so. He had clear vision about the future of GLBSE. Problems must came after the conference.

No he didn't. It needs 4 glbse shareholders to decrypt the database backups in the event of nefarios death. There is nothing in place prior to this in case nefario was lent on by the government and the 4 shareholders disagree on whether hes been compromised or not.

[Deafboy]

There is nothing in place prior to this in case nefario was lent on by the government

He specifically said he will move GLBSE to another country in case of regulation issues.

But another idea came through my mind. What if he's trying to build legitimate stock exchange following all the laws and regulations from scratch? I mean... Even if he started to following the laws suddenly, the GLBSE operation was still probably illegal in the past. If he start another company with possibility to for share issuers to move the stocks there, everything would be clean, and authorities could not complain about the past. However he completely destroyed his confidence here, so there is no point to do that anyway. Maybe his target customers are outside of this community...

[markm]

all that they have to store is "Address so-and-so owns so many shares, until we get a BTC signed message to tell us otherwise.

All that requires is a text editor that has a search function (so you can zoom quickly to the lines about a particular user or bitcoin address) and an email address where people can send you their instructions.

If you start adding in automated checking of the emails for certain syntax of commands congratulations you are on your way toward emulating MPEX.

-MarkM-

[CIYAM]

I'm not quite sure of the current progress but I think the best solution will probably the "colored coin" concept as it doesn't require any central authority to hold any information.

[Bitcoin Oz]

If its illegal to issue securities and you create a way to issue securities in bitcoin what is going to happen ? It pretty much means their silly laws are unenforceable. At least with glbse they may have some chance of working with us before we nuke them from orbit with the distributed stock market.

[markm]

Coloured bitcoins will demolish the 21 million bitcoins limit too, as anyone can issue ten-bitcoin coins and hundred-bitcoin coins and so on as different colours much like poker chips of different colours are declared to have different denominations. Will be kind of amusing to see bitcoin directly enabling all the many altcoins that miners have refused to merged-mine, too.

-MarkM-

[Lethos]

As a programmer (and many others here), it can be done, but I personally won't be jumping at it any time soon.
The problem isn't the exchange per say, it's those who abuse it with scams. That connection can still be there, regardless of the method, it still taints your image regardless of how little you were involved, it happened within your system.

There is probably a very good reason outside of even the ones I know why GLBSE was closed.
Personally I saw a lot of scams and ponzi schemes run through these, trying to avoid these was a minefield and he barely made any significant money off the venture personally and probably never would for all the hassle it involved others abusing his site.

There are other sites out there, for those who continue to want to do have involvement with stock exchange still have options.
However it's all moot if it's more of a legal issue, then any exchange will have to either comply before creation or resort to hiding behind TOR only access.

[killerstorm]

I confirm that:

• stock exchange based on colored coins is possible, it is 100% safe if used correctly (just as Bitcoin), and it's quite close to what OP suggests;
• there are people who work on it right now, so there is hope that it will be available soon.

Source: I'm the guy who implemented colored coins basic prototype and is now working on a more elaborate version.

(By "soon" I mean that a proof-of-concept might be available next week or so, if I'm in mood for it.)

[killerstorm]

However it's all moot if it's more of a legal issue, then any exchange will have to either comply before creation or resort to hiding behind TOR only access.

Exchange based on colored coins can be pretty much completely decentralized. It would be essentially a trading platform.

I imagine that if this thing will work, there will be a market for verification/rating/audit services.

If marketplace is completely open, ponzi funds and other bullshit investments will be numerous. But legit businesses would pay some "rating agency" to verify their existence, do audit etc.

Such rating agencies can build their track record and gain trust. Through competition most effective rating agency will win.

So, ironically, 100% open marketplace is a solution for ponzi and spam, IMHO.

[justusranvier]

Future Bitcoin services need to be run as if they are illegal enterprises, like Silk Road, even if what they are doing is apparently legal.

Why:

• Laws change.
• Regulations are vague and open-ended, and it's probably impossible to operate a business without accidentally violating one.
• Even if you do manage to operate without violating any rule law enforcement agencies do not always limit themselves to the letter of the law when deciding to begin an enforcement action.
• Governments are not the only threats to a successful business. Non-governmental organized crime is almost equally capable of extortion.

The solution is to run all services in the darknet, not tied to any physical location or legal jurisdiction, and without any explicit connection to a real-life identity.

In order to reduce the risk of the operator running away with all the coins customers should start using Bitcoin like it was intended and only get involved with zero-trust business models instead of giving their money to companies that blindly emulate old paradigms.

[smickles]

However it's all moot if it's more of a legal issue, then any exchange will have to either comply before creation or resort to hiding behind TOR only access.

Exchange based on colored coins can be pretty much completely decentralized. It would be essentially a trading platform.

I imagine that if this thing will work, there will be a market for verification/rating/audit services.

If marketplace is completely open, ponzi funds and other bullshit investments will be numerous. But legit businesses would pay some "rating agency" to verify their existence, do audit etc.

Such rating agencies can build their track record and gain trust. Through competition most effective rating agency will win.

So, ironically, 100% open marketplace is a solution for ponzi and spam, IMHO.

IANAL, but in 'merica the problem seems to be that it's illegal to issue securities to the public (only licensed brokers can trade securities between each other) and it seems to be illegal for people to audit public companies unless they are a CPA. I'm sure there is some regulation against an unlicensed individual or group being a rating agency too.

So, the system may need to eliminate reliance on trust altogether until people start legitimate (which means lawfully compliant) companies in all these sectors.

[Rassah]

all that they have to store is "Address so-and-so owns so many shares, until we get a BTC signed message to tell us otherwise.

All that requires is a text editor that has a search function (so you can zoom quickly to the lines about a particular user or bitcoin address) and an email address where people can send you their instructions.

If you start adding in automated checking of the emails for certain syntax of commands congratulations you are on your way toward emulating MPEX.

It could be done with text, yes, thus my suspicion that this would be a very simple thing to do. But I'm hoping for something like a web app that anyone can install on their web server, that allows issuers to easily set up stock IPOs, the investors can do initial purchases at automatically (purchase with BTC, that addy gets registered automatically), and users can send change announcements to. For example, "log in" by entering your BTC address and signing a provided message, to see that address's holdings and other information; and use some sort of standardized POST commands to request changes, like [BTC address; CHANGEOWNER "new BTC address"; signature], which if standardized can be sent from anywhere, thus allowing third party exchanges go send requests to various distributed company ledgers. So, ideally this would be a plug-and-play package, maybe open source, with some agreed upon standards, and will, in a sense, distribute all stock issuing authority to the final points of failure, those being the actual companies themselves.

The colored Bitcoin idea sounds interesting, as long as it exists alongside Bitcoin, not as a part of it, but, again, it may be overkill for a whole new block chain just for this. It would work well for other types of contracts, but if the stocks are distributed, but the company is not, that distributed colored Bitcoin stock won't help any if the company is shut down.

As for scams, at least until some third party central exchange gets started, if you wish to invest in a company IPO, you would actually have to go to the company page directly. Hopefully that means that you will have to do some actual research and see what they offer, in head of just get a brief description of financials and expected returns. Hopefully this also means that companies will have to do some heavy promotion and advertising to get their awareness out, since they would have to get people to come to their site, as opposed to some fly-by-night scams simply registering on an exchange with minimum of info, and running off as soon as they get enough gullible investors.

Regarding #assets-otc, that's close, but, again, it's another centralized point of failure. Also, why stick with PGP keys? We can sign with BTC addresses, and BTC addresses are all that is needed to receive IPO purchases and distribute dividends. PGP keys seem like a redundant extra layer, since you would still need to register a BTC address alongside it to receive dividend payments, and since to use PGP you need to install separate PGP software and learn how to create, use, and backup PGP keys, while BTC address signing is already available in many BTC wallets.

The train of thought I'm operating on nowadays is decentralize EVERYTHING.

[CIYAM]

The colored Bitcoin idea sounds interesting, as long as it exists alongside Bitcoin, not as a part of it, but, again, it may be overkill for a whole new block chain just for this.

The beauty of "colored bitcoins" is that it can exist within bitcoin without any change to the protocol (it only requires a client that can recognize the "colors" by searching the block chain) so there is absolutely no need for another block chain.