P2P Exchange for bitcoin

[99bitcoins]

I know this is against the free market but this thread should be PINNED! A P2P Exchange is a MUST and gollum has started us in the right direction. This need the full focus of the entire community right now. Maybe we should even start a fund for the developers.

[1714186348]

1714186348

[arklan]

anyone here at all familiar with hawala? money transfer system from the arabic world going back a long ways. i don't understand it fully, but it seems like it's applicable here.

http://en.wikipedia.org/wiki/File:Hawala.png
ie: (1) A customer (A, left-hand side) approaches a hawala broker (X) in one city and gives a sum of money (red arrow) that is to be transferred to a recipient (B, right-hand side) in another, usually foreign, city. Along with the money, he usually specifies something like a password that will lead to the money being paid out (blue arrows). (2b) The hawala broker X calls another hawala broker M in the recipient's city, and informs M about the agreed password, or gives other disposition instructions of the funds. Then, the intended recipient (B), who also has been informed by A about the password (2a), now approaches M and tells him the agreed password (3a). If the password is correct, then M releases the transferred sum to B (3b), usually minus a small commission. X now basically owes M the money that M had paid out to B; thus M has to trust X's promise to settle the debt at a later date.

wiki: http://en.wikipedia.org/wiki/Hawala

thoughts?

[99bitcoins]

^^^
That's basically how Western Union works too, nothing novel there

[arklan]

well, color me stupid.

[nwbitcoin]

Some really great interactions going on, but can we agree on a few things?

It seems that the exchange p2p coding area is already gaining some speed, but what about the other side, the brokers?

I am trying to imagine alternative markets to use for inspiration, and the best I can come up with is the way that torrents are found using websites like Pirate bay.  I can see how our exchange will basically be torrents, and the brokers will be sites who do their own marketing to get customers.

Will the focus for this project be on one or both aspects of this project?

While I can code a little, my skills are really about people and business!

It would seem to me we need to start to think about how to create 1000s of local exchange gateway websites to ensure that we don't move the ddos target from the exchange to the most popular exchange access websites!

[gollum]

Some really great interactions going on, but can we agree on a few things?

It seems that the exchange p2p coding area is already gaining some speed, but what about the other side, the brokers?

I am trying to imagine alternative markets to use for inspiration, and the best I can come up with is the way that torrents are found using websites like Pirate bay.  I can see how our exchange will basically be torrents, and the brokers will be sites who do their own marketing to get customers.

Will the focus for this project be on one or both aspects of this project?

While I can code a little, my skills are really about people and business!

It would seem to me we need to start to think about how to create 1000s of local exchange gateway websites to ensure that we don't move the ddos target from the exchange to the most popular exchange access websites!

Yes we need to market our p2p exchange to many many potential brokers in every country in the world.
The beauty of the this exchange is that bitcoin can be used as the maincurrency to pay the exchange fees regardless of what assets are traded.
My vision is that small cap companies will rather trade their stocks in the p2p exchante than ordinary stock exchanges.

But first of all we must agree on a system architecture and then build the platform, it will take months or maybe over a year even if we got several guru programmers in the project

[xylop]

We need coin that can't be manipulated. Bitcoin is useless now when investors/wall-street players have hoarded large portions of all existing coins.

No need to do money on the currency itself. That stinks from the beginning, and isn't better than fiat in that way.

[jgarzik]

A design contest is absolutely the most useless route to choose.

It is endless wanking, without any real engineering proof that the design is practical in the real world.

[Sage]

A design contest is absolutely the most useless route to choose.

It is endless wanking, without any real engineering proof that the design is practical in the real world.

How would you suggest orchestrating a system that would allow the best minds to self organize and collaboratively create some kind of solution?

The x-prize worked way better then expected.

Why could it not work here?  I believe all here would say we are open to any of ideas.

[BTCLuke]

Wow, there are a lot of threads popping up today on new ideas for Decentralized Exchanges. (I can't imagine why...) I started one myself 5 hours ago.

Allow me to throw some ideas on the fire, as this thread seems to have gotten further than the others.

1. Your concerns about how to port in real-world cash are unfounded. There already exists an industry of businesses that will take cash in many forms and give virtual credits, including bitcoins, for them... BitInstant, Dwolla, OKPay, coinbase, ArumXchange, and many others can upload cash into this exchange in one or more forms. Let them deal with this headache; there are many of them so there is no central point of failure there.


2. To really replace MtGox and have real-time graphs and trades like we all want to see, the core of this beast must always determine the other clients running within a short enough pingtime's distance. (So trades can happen in milliseconds, not multiple seconds.)

If a client logs on, looks around for other clients, & notes all of their pingtimes, the client can be a real-time, graph-displaying trading platform for everyone within a decent pingtime of you!

True, this means that someone in Kansas isn't likely to see the trades of someone in Perth... But that's the nature of decentralization. The going price of a bitcoin would therefore not be global, but regional... Although the regions are likely to be continents, not cities. You'd trade quickly with those closer to you (pingtime-wise) and if you can't find your trade there, I guess it would be a good idea to include an OTC board in the package too, or port in #bitcoin-otc somehow.

(Note: VPNs could be used for people that live far away from population centers to reduce pingtimes, too!)


3. No marketing will be needed. (!) If each client for this exchange gives the fees to the person running the client where the trade happened, then it is self-incentivized to spread much like how bitcoin miners get paid to mine. I've got some very specific ideas about how to make this part work, but for now all you need to know is that everyone with an internet connection would want to run this client because it would literally pay them to just run on their PCs. (And they wouldn't need expensive GPUs.) More details on this step later.


4. No miners needed. A lot of the data that runs across these clients need not be encrypted... You want the world to know what the current price for each currency is, for instance... It's just the ownership of things on it you must secure, so no processing of SHAs here, just good, secure ledger keeping.

Every client should be both a place for you to log in and make trades, and a place for other people to trade on. If run this way, it will use a bit of bandwidth (think: bittorrent) but not any advanced hashing that requires special equipment like GPUs.


Enjoy the ideas; I'll add some more later.

[gollum]

Wow, there are a lot of threads popping up today on new ideas for Decentralized Exchanges. (I can't imagine why...) I started one myself 5 hours ago.

Allow me to throw some ideas on the fire, as this thread seems to have gotten further than the others.

How can we prevent order manipulation if the processing of the order book is not encrypted?

If orders are processed in a true bittorrent manner that would mean that traders living close to big cities would get lower spread and better execution while people living far away from the centers would get bigger spread and longer execution times?

Why should we have millisecond execution? That would give a big advantage to HFT trading and make market manipulation easier.

[Sage]

Wow, there are a lot of threads popping up today on new ideas for Decentralized Exchanges. (I can't imagine why...) I started one myself 5 hours ago.

Allow me to throw some ideas on the fire, as this thread seems to have gotten further than the others.

How can we prevent order manipulation if the processing of the order book is not encrypted?

If orders are processed in a true bittorrent manner that would mean that traders living close to big cities would get lower spread and better execution while people living far away from the centers would get bigger spread and longer execution times?

Why should we have millisecond execution? That would give a big advantage to HFT trading and make market manipulation easier.

What about a darknet powered by the current miners?  Does that offer enough speed to solve this geographic problem?

[BTCLuke]

How can we prevent order manipulation if the processing of the order book is not encrypted?

When the whole board only exists temporarily and regionally, what exactly is it you are trying to stop from being manipulated? One board seems like too small of a fish...

Perhaps I didn't explain this part well enough: When your client logs on, it notes all other clients within X milliseconds from it, and creates a session of a trading board (like BTC-E's main trade engine) for that region. Every client within X ms instantly got access to that board, and can trade on it... But when your client logs out, the whole board ceases to exist.

That may be 50-500 ppl on that board in total, even in big cities... But it doesn't feel that small to the trader because he's seeing that many board's worth of trades side-by-side!

If orders are processed in a true bittorrent manner that would mean that traders living close to big cities would get lower spread and better execution while people living far away from the centers would get bigger spread and longer execution times?

I think the regionalality would cut down on that effect, if not eliminate it... I may be wrong though, never programmed anything like this before.

[behindtext]

anyone here at all familiar with hawala? money transfer system from the arabic world going back a long ways. i don't understand it fully, but it seems like it's applicable here.

http://en.wikipedia.org/wiki/File:Hawala.png
ie: (1) A customer (A, left-hand side) approaches a hawala broker (X) in one city and gives a sum of money (red arrow) that is to be transferred to a recipient (B, right-hand side) in another, usually foreign, city. Along with the money, he usually specifies something like a password that will lead to the money being paid out (blue arrows). (2b) The hawala broker X calls another hawala broker M in the recipient's city, and informs M about the agreed password, or gives other disposition instructions of the funds. Then, the intended recipient (B), who also has been informed by A about the password (2a), now approaches M and tells him the agreed password (3a). If the password is correct, then M releases the transferred sum to B (3b), usually minus a small commission. X now basically owes M the money that M had paid out to B; thus M has to trust X's promise to settle the debt at a later date.

wiki: http://en.wikipedia.org/wiki/Hawala

thoughts?

the problem with hawala is that it runs afoul of all sorts of AML laws in most 1st world countries. it is indeed a good system for informal transfers but does not scale over a few mln USD.

if you look around online, you can find many examples of "hawalas" that have been shut down inside the US. in many cases they were laundering money for drug cartels in south america.

[behindtext]

@ gollum - a decentralized exchange is a great idea in theory but i see several serious problems. i'll list a few of them below

- escrow - in order to put in a proper BTC sell order, you must actually possess the BTC you wish to sell. similarly, if you put in a BTC buy order, there needs to be some assurance that you have enough other currency, e.g. USD, virtual bucks, whatever. this means that both BTC and other currencies being exchanged for BTC need to be kept in escrow somewhere. i don't believe there is a good solution for this when there is no single point of exchange. the result would be submission of orders that are not actually backed by assets and a disorderly market.

- AML issues with high-volume orders/accounts - if we drop the idea of a central exchange, the direct value transfers between participants in the network would be the means for exchange, e.g. BTC for blowjobs or USD. for someone who either makes large purchases or many smaller purchases, the point being that the total value transferred is high, this creates a potentially serious issue with banks: banks _must_ keep track of accounts with lots of activity like that described. this could lead to that individual being investigated by various law enforcement agencies.

i like your idea of "trusted brokers" but the escrow problem is serious. stuff like ripple is great for ppl who want to buy/sell smaller amounts of BTC but does not scale well if you want to purchase USD 50K of BTC.

there is a reason that humans have historically gathered in single places to trade: it is efficient. the fundamental problem is that mtgox is an amateur-hour operation and not efficient.

[nightminer]

Hi Guys

Just saw this thread. Please see my post here:

https://bitcointalk.org/index.php?topic=174464.msg1817649#msg1817649

Basically Exchangers become what Verisign is to a browser. My post explains it better

[juice]

namecoin?

[nwbitcoin]

@ gollum - a decentralized exchange is a great idea in theory but i see several serious problems. i'll list a few of them below

- escrow - in order to put in a proper BTC sell order, you must actually possess the BTC you wish to sell. similarly, if you put in a BTC buy order, there needs to be some assurance that you have enough other currency, e.g. USD, virtual bucks, whatever. this means that both BTC and other currencies being exchanged for BTC need to be kept in escrow somewhere. i don't believe there is a good solution for this when there is no single point of exchange. the result would be submission of orders that are not actually backed by assets and a disorderly market.

- AML issues with high-volume orders/accounts - if we drop the idea of a central exchange, the direct value transfers between participants in the network would be the means for exchange, e.g. BTC for blowjobs or USD. for someone who either makes large purchases or many smaller purchases, the point being that the total value transferred is high, this creates a potentially serious issue with banks: banks _must_ keep track of accounts with lots of activity like that described. this could lead to that individual being investigated by various law enforcement agencies.

i like your idea of "trusted brokers" but the escrow problem is serious. stuff like ripple is great for ppl who want to buy/sell smaller amounts of BTC but does not scale well if you want to purchase USD 50K of BTC.

there is a reason that humans have historically gathered in single places to trade: it is efficient. the fundamental problem is that mtgox is an amateur-hour operation and not efficient.

These points are important, but you are missing one big issue.

A decentralized exchange with regional brokers will mean that we get best of both worlds

The decentralized aspect is for the actual price discovery, where the regional brokers will do the admin of matching bitcoins and currencies to the right places.

For instance

Bob visits USAEx.com and buys some currency tokens with real dollars
He then places an order which is sent to the p2p exchange
That order is matched with an order placed by Han on the YellowRiverEx.cn
The deal is done electronically, and at the end of the day, the task is added to the brokers list of things to do.
YellowRiverEX.cn sends all the BTC to USAEx.com - minus a commission
USAEx.com send all the dollars for orders to YellowRiverEX.com by bank transfer - minus a commission
Bob gets his BTC sent to his wallet and Han gets his currency tokens which he can convert to CNY through the YellowRiverEx.com



The end result is that individuals get to only deal with their local brokers, but their deals are world wide, using a mechanism which isn't going to be killed by a DDoS, or regulations or popularity!

Does this make sense - and what have I missed out?

[nightminer]

Basically my post above says exactly what nwbitcoin's post says. The whole thing should not be decentralized, just the "orderbook".

[lunarboy]

Would it be possible to build a P2P exchange based on Namecoin?

sort of like a unified Bitcoin payment ledger, (Fiat currency IOU's for BTC amount), written in the namecoin blockchain, possibly built around an open source cloud based escrow.  Its merged mined so limit the risk of attack.  The obvious flaw in this here would be the bottleneck of still requiring a physical bank account address to get fiat in and out of the system. Thats where I ran out of ideas??? could bitinstant or similar provide a clearing pool?

I'm probably way off the mark here and can't code so don't ridicule me too much, it was just an idea afterall