P2P Exchange for bitcoin

[nwbitcoin]

There is a great collection of ideas here, and it looks like everyone has the same end of the stick.

The brokers become the gateway into the exchange.  They deal with the fiat. In theory, you end up with a localbitcoins mixed with mtgox, but all using the same exchange matching data.

The way I see it, is that the brokers sell a digital local currency token for a fraction more than face value.

The exchange shows the bitcoin and the LCT price, and buyers and sellers do their deals on these prices.

That LCT is the currency of brokers, and has a fixed value. When the customer buys or sells bitcoins and wants to go back to fiat, they sell their LCT back to the broker for a fraction less than face value.  The broker makes money on this difference.

It also means that the fiat doesn't need to leave the country, meaning that brokers don't get involved with expensive financial regulations because we are only taking tokens here!

It does sort of mean that bitcoins get bought and sold with altcoins, but at least it is scaleable, where the current system isn't!

Am I on to something here?

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[Mike Hearn]

Please see this page:

https://en.bitcoin.it/wiki/Ripple_currency_exchange

Note that this is NOT the same thing as what's happening at ripple.com - the page above describes the design of a theoretical system that hasn't been built yet. It uses the concept of settlements moving through a social network with an alternative chain that tracks credit relationships and the flow of fiat through the social graph.

This was also the last slide in my 2012 talk:

https://www.youtube.com/watch?feature=player_embedded&v=mD4L7xDNCmA

(scan to the last few minutes)

[nwbitcoin]

Please see this page:

https://en.bitcoin.it/wiki/Ripple_currency_exchange

Note that this is NOT the same thing as what's happening at ripple.com - the page above describes the design of a theoretical system that hasn't been built yet. It uses the concept of settlements moving through a social network with an alternative chain that tracks credit relationships and the flow of fiat through the social graph.

This was also the last slide in my 2012 talk:

https://www.youtube.com/watch?feature=player_embedded&v=mD4L7xDNCmA

(scan to the last few minutes)

Yes, Ripple has potential, but its also completely useless for this task, in its current form.

If I wanted to trade bitcoins with someone using ripple, I wouldn't be able to because I don't know anyone on my facebook who knows anyone who knows anyone who is wanting to sell bitcoins.

Eventually I will, but for now, I don't.

Maybe if the ideas in ripple were used in an altcoin niche social network it might work, but I doubt it can start up for this exact same reason.

If I have misunderstood the concept, please let me know, but for me, the whole 6 degrees of separation theory is a load of nonsense which only got off the ground because it sounds plausible to the innumerate!

[lakeluke]

Look into "open transactions" by fellow traveller;

https://github.com/FellowTraveler/Open-Transactions

https://en.bitcoin.it/wiki/Open_Transactions

http://vimeo.com/28141679

http://www.youtube.com/watch?v=HSgpStCTw2g

http://agoristradio.com/?tag=open-transactions

 I think it does what you are describing by matching orders, etc for any asset types.

[doobadoo]

May i suggest an order matching system similar to POSIT.  It worked by entering your order to buy or sell a stock, the price your were willing to pay/take and the an amount of shares.  Every 30 minutes, the system would match all the overlapping orders and execute everything at one price (probably the weighted average of everthing that overlapped).  If there was an imbalance between buys and sells at the given price the larger side would receive a pro rata amount of shares.

Now, no one could see the orders as they were being entered, but in our system that might not be necessary.  Each miner could be working to a hash solution and the first miner to achieve it could cross all the open orders using a methodology like the above and publish a block.  Orders could only be crossed amongst a group of brokers who have signed eachother's public keys.  Brokers would charge widthdrawal and deposit fees, and would settle account differences with competing brokers regularly.

[Mike Hearn]

Yes, Ripple has potential, but its also completely useless for this task, in its current form.

If I wanted to trade bitcoins with someone using ripple, I wouldn't be able to because I don't know anyone on my facebook who knows anyone who knows anyone who is wanting to sell bitcoins.

You don't have a trust relationship with anyone who uses Bitcoin? And you think that's still true once you expand out multiple levels? I think you'd be surprised at how the number of people you can reach scales up. Six degrees of separation isn't nonsense, it's the result of research into the average number of contacts a person has along with the power law:

http://en.wikipedia.org/wiki/Six_degrees_of_separation#Mathematics

http://www.telegraph.co.uk/technology/facebook/8906693/Facebook-cuts-six-degrees-of-separation-to-four.html

Yes, the social graph concept isn't workable today because we haven't been building out the infrastructure. But bear in mind a lot of people hear about Bitcoin from someone they know. Even if that isn't true this week, over the long term it will be. So if that person owns Bitcoins and tells you about Bitcoin, and you connect to them with an NFC phone tap or something like that, then you can be linked into the social network without even realizing it.

If you want a P2P exchange that isn't social graph based then you're out of luck. Nobody has ever proposed a workable alternative.

[vleroybrown]

Why should the infrastructure of Bitcoin be based differently than the dynamically fashioned cryptocurrency itself? The concept of Bitcoin should allow markets to stay ahead of rules or limitations. The trading platform itself should be p2p, open stack, scalable open source based, git script installed for anyone to develop and input ideas for maximine transparency of what any iteration is doing to tie in to friendly governed current currency exchange markets.

Open markets has to be the order from the top to the bottom or this concept is going to be limited in its potential. Anybody who can't just jump into Bitcoin in 5 minutes with 5 dollars to make commerce happen anywhere, anyplace will take the path of least resistance opting for cash or its equivalent. We have to think open, free, not evil, no greed; this and only this thinking, will give this concept the best chance to change a very fucked up financial system. It deserves everybody understanding what money is, and that is Abstract, a means to an end, make the system pay, society doesn't have too any more!

In its purest form money is the only reason we have to even have a social life once the basics of nessecities of life are met. Everything we acquire from it, is what makes us who we are as a member of the society. There should be a facebook of Bitcoin believers who can see where they are in relation to what they are doing with Bitcoin. Once liquid exchange markets are commonplace the concept becomes mainstream!

[doobadoo]

Okay so what would this look like technically:

Customer deposits $100 in mt gox.

Mt gox delivers token privkey to customer & account number (hash of pubkey).
Mt gox signs token pubkey with priv key and transmits to Market Makers.

Market Makers now have a UTXO table, which includes all the pubkeys corresponding to customer account balances, with custody (broker) determined by a sig script entry in the table made with the brokers private key.

They have another table (Balance of Payments, BoP) showing the sig scripts of competing brokers and their endorsements of eachother, a ledger of inter-broker debts, and credit limits brokers impose on eachother before demanding settlement.  (this table is hashed every block, and its hash is included in the following market maker block, see next steps:)

Customer places order by announcing to market makers he wishes to buy 1 bitcoin for $100 dollars.  He signs his bid transaction + fee with his token privkey (issued by gox).

A seller of 1 BTC with a bitinstant token private key signs a tx to sell it for $100

A Market maker discovers the correct proof of work and crosses the orders by making offsetting entries in the BoP table between gox and bitinstant (after checking to see that gox and bitinstant haven't exceeded their credit limits with eachother).   UTXO table is also adjusted to reflect the changes (expenditure of keys).  

Gox & Bitinstand, making note of the change in the UTXO table, issue new privkeys for $100 and 1btc, send those to the customers, and submit the public keys to miners maintaining utxo (signed by their private brokerage keys).

With all utxo accounts reassigned (balanced), miners hash UTXO  and BoP tables and include in PoW attempts to create next tx block.  If bitinstant or gox fail to deliver pubkeys after a period of time, the tx is reversed in utxo and adjustment made to BoP, new hashes would be inclued in next tx block.

When customer wants to w/d 1 btc, he presents new token private key to gox for revocation.  Gox uses customer privkey to txs a revocation of the 1 btc value assigned in UTXO.  Gox sends customer 1 btc to his client.  Bitinstand sends $100 to his customers fiat account.

[TierNolan]

Okay so what would this look like technically:

Customer deposits $100 in mt gox.

Mt gox delivers token privkey to customer & account number (hash of pubkey).
Mt gox signs token pubkey with priv key and transmits to Market Makers.

There could be a "mint" chain and an exchange chain.  The mint chain would be very similar to the standard bitcoin chain (and could be included).  A "mint" could create an address and say that any coins that can be traced back to that address will be converted into dollars on request at an exchange rate of $0.975 per satoshi.  Similarly, they will send you one satoshi from the address, if you deposit $1.025 into their bank account.  They could "unmint" coins by sending them back to a specific "unmint" address.

This would likely be interpreted as spam, in the same way as Satoshi dice is though.  However, you would still need to pay BTC fees for all transactions, so maybe not a big deal and they are "real" transactions.

Exchanges could then be handled separately, but I guess better to keep them together.  They inherently need an offer and accept process and a way to decide what the exchange rate is.

For example, the exchange rate could remain fixed unless no trades are possible at that price.  It isn't clear how best to handle ordering.  Someone more familiar with exchanges order books could comment.  Is it normally ordered by price with tied broken by processing the earliest submitted first?

Exchanges would have different exchange rates relative to the different mints, based on trustworthiness.

[greBit]

Im thinking on similar lines - just wrote a redundant topic over at https://bitcointalk.org/index.php?topic=173187.0

I feel that Ripple might be a bit heavyweight, and that a simpler solution ought to be possible. Having to establish social connections just in order to buy 10$ worth of Bitcoin seems to me like too much overhead for the average consumer, at least for now.

I like the idea of 'minting'. Where some provider can establish him/herself as a clearing house. The provider will give out tokens that are tied to a local currency amount, these tokens can be used for P2P trading and then later cashed-in.

Basically we can decouple the establishing of Bitcoin trade contracts ("I buy 10 btc for $2000" etc) from the handling of fiat. The former can be easily done in a P2P manner, the latter not so much.

I was also thinking about the 'coloring' of coins over the existing infrastructure:

Following on from the 'colored coins' idea, where we represent some subset of Bitcoin as having special value, what about ...

• MtBox maintains a special Bitcoin address, any coins that originate from this address are considered special.
• Anyone can see if a coin is of the MtBox colour and ascertain its true USD value.

1) Bob sends $10k to MtBox
2) Bob creates a Bitcoin wallet
3) When satisfied, MtBox sends a symbolic and tiny amount of Bitcoin to Bob's address. This symbolic quantity of Bitcoin will represent a specific USD amount.

Bob can then send a certain quantity of his colored Bitcoin to a seller for 'real' bitcoin.

4) The seller can send the received colored Bitcoin back to MtBox.
5) MtBox checks the transaction history of the coin, ensuring that it is indeed of the MtBox color
6) MtBox calculates the appropriate USD amount and credits it to the Seller's account.

Anyone could act as a colored coins provider (though legal issues may arise).  It would be up to the market to decide which providers to trust or not. We would see differing exchange rates between say MtBoxUSD/Bitcoin and say ZhouTongUSD/Bitcoin, according to the risk factor!

[alberthendriks]

Guys, the forum is overflowing with topics that initiate a p2p bitcoin exchange. I'm not kidding. Yesterday I investigated them all, and I chose help developing bitcoinx (2nd place was darkexchange, at a distance). You can do your research and you'd probably end up joining bitcoinx as well . See user killerstorm, project armoryx, project bitcoinx.

edit: I meant user "killerstorm" (on this forum).

[mobile4ever]

You don't have a trust relationship with anyone who uses Bitcoin? And you think that's still true once you expand out multiple levels?

You are right. Whole countries are run on trust. When people get burned in a transaction, they dont blame the money.

If you want a P2P exchange that isn't social graph based then you're out of luck. Nobody has ever proposed a workable alternative.

I have one. It needs a PHP programmer. Its P2P. It puts a seller in direct contact with a buyer.


https://bitcoinstarter.com/projects/54

http://www.reddit.com/r/Bitcoin/comments/18w6lu/a_new_idea_for_bitcoin_markets/

[greBit]

Guys, the forum is overflowing with topics that initiate a p2p bitcoin exchange. I'm not kidding. Yesterday I investigated them all, and I chose help developing bitcoinx (2nd place was darkexchange, at a distance). You can do your research and you'd probably end up joining bitcoinx as well . See user firestorm, project armoryx, project bitcoinx.

Have you got a link?  the firestorm user has made no posts and bitcoinx.org (if thats the same project) is dead

cheers!

[greBit]

I have one. It needs a PHP programmer. Its P2P. It puts a seller in direct contact with a buyer.

http://www.reddit.com/r/Bitcoin/comments/18w6lu/a_new_idea_for_bitcoin_markets/

Why don't you tell us clearly & concisely what it is that you propose, for the moment I can only see vague mentions of plugins, html and octopi

[gollum]

Guys, the forum is overflowing with topics that initiate a p2p bitcoin exchange. I'm not kidding. Yesterday I investigated them all, and I chose help developing bitcoinx (2nd place was darkexchange, at a distance). You can do your research and you'd probably end up joining bitcoinx as well . See user killerstorm, project armoryx, project bitcoinx.

edit: I meant user "killerstorm" (on this forum).

BitcoinX and other projects seems promising but I havent seen any detailed description of their system yet.

Before we jump into any project we should ask the community how the ideal exchange will look like and what we dont want from the current exchanges (MtGox, BTC-E, NYSE, Nasdaq OMX, CME ...)

Then we design the architecture of the system that the community demands - if such project already exists in open source we should of course use it, or make it fit the usage of crypto currencies.
If the current projects dont fit our needs we need to code it our selfs, but of course we can get inspiration from them to create our own exchange.
Let us remember that an exchange is not only for the transaction of digital currencies - but for the exchange of assets between physical humans.
Therefore we need a system that merges the best from digital P2P and the best from the physical exchange/broker model at Wall Street.

If Satoshi could create a decentralized currency - We as a community can create a decentralized exchange!

[mobile4ever]

I have one. It needs a PHP programmer. Its P2P. It puts a seller in direct contact with a buyer.

http://www.reddit.com/r/Bitcoin/comments/18w6lu/a_new_idea_for_bitcoin_markets/

Why don't you tell us clearly & concisely what it is that you propose, for the moment I can only see vague mentions of plugins, html and octopi

I am in the process, after putting out other fires, to put it up on: https://bitcoinstarter.com/


Do you want a link to the upcoming page?


All it is, its similar to a RSS feed, but in PHP and more secure and robust. Its a PHP plugin for Wordpress. They already use bitcoin.


Edit: Someone should contact me now about making this. The events with Gox are out of control.

[TierNolan]

What is needs as a "proof of concept" is working versions of the following

Website/gateway
- fiat -> colored coins -> fiat conversions
- The initial version could use "play" money, so no legal problems
- Actual "mints" just announce that they use dollars, let them worry about legalities

Basic exchange client
- works like Armoury, you have to connect it to a trusted node
- atomic coin exchange transactions (BTC and coloured coins)
- you specify the source of the coloured coins that you will accept
- some kind of simple matching of buyers and sellers

You don't need a full exchange with order books etc.  Even just allowing people swap colored coins for bitcoins in an atomic way would work as a rudimentary exchange.

All that is required for the above is a transaction generator and process system.  You don't need a full client for it to work.

The fiat "gateway" would likely be a website.  You login and can ask that colored coins be sent to a particular address.

Once there is a working version of all the parts of the system, then others have some kind of incentive to support it.

[Rassah]

It also means that the fiat doesn't need to leave the country, meaning that brokers don't get involved with expensive financial regulations because we are only taking tokens here!

Don't brokers still need to accept large quantities of cash that they sell those tokens, and send out large quantities of cash when those tokens are redeemed? (meaning we're back to problem #1)

[greBit]

It also means that the fiat doesn't need to leave the country, meaning that brokers don't get involved with expensive financial regulations because we are only taking tokens here!

Don't brokers still need to accept large quantities of cash that they sell those tokens, and send out large quantities of cash when those tokens are redeemed? (meaning we're back to problem #1)

I think the benefit lies in the decoupling of concerns. Brokers just sell tokens, they are not the marketplace hub for buying/selling Bitcoin. MtGox does both.

This means we can completely decentralise the Bitcoin/USDToken exchange, meaning we no longer suffer from DDOS/panic caused outages and 1-hour lag!

People will go fairly irregularly to cash in/out and have no expectation that their $100k transfer happen in real-time. People dont mind waiting a few days for their transfer to appear, but would be infuriated at having to wait even a few seconds before making their buy/sell orders.

Also the simplification means that we lower the barrier to entry, meaning we could see hundreds of brokers appear in a short time.

[gollum]

It also means that the fiat doesn't need to leave the country, meaning that brokers don't get involved with expensive financial regulations because we are only taking tokens here!

Don't brokers still need to accept large quantities of cash that they sell those tokens, and send out large quantities of cash when those tokens are redeemed? (meaning we're back to problem #1)

Yes,

Assume that we have a decentralized exchange consisting of MtGox, BTCE and BitStamp.
There will be a net flow of USD and BTC between this brokers according to the clients trades.
So at the end of the day all this firms needs to settle their net trading of USD with each other - instead of doing it for every single trade.
The trading volume might be 100 million dollars on a day on the exchange, but the net transafer of USD between the brokers will only be a fraction of that amount.