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Author Topic: A decentralized exchange!  (Read 4327 times)
Elwar
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April 11, 2013, 11:56:06 PM
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A decentralized exchange would require each person converting dollars to Bitcoins or the other way around to become a registered currency exchanger according to FinCEN. This comes will $millions in fees.

Gotta love government created monopolies.

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gollum
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April 12, 2013, 02:00:37 AM
 #2

A decentralized exchange would require each person converting dollars to Bitcoins or the other way around to become a registered currency exchanger according to FinCEN. This comes will $millions in fees.

Gotta love government created monopolies.

We are discussing a solution for a p2p based decentralized bitcoin exchange.
https://bitcointalk.org/index.php?topic=172705.0
https://github.com/p2p/bitcoin-exchange
wumpus
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April 12, 2013, 04:27:42 AM
 #3

Elwar: I suppose the idea around that is to trade small amount between people, so no one is really "the exchanger". A bit like bitcoin-otc but more automated and easier to use.

We are discussing a solution for a p2p based decentralized bitcoin exchange.
https://bitcointalk.org/index.php?topic=172705.0
https://github.com/p2p/bitcoin-exchange
Even with a github repository with only a README.md in it, you're already doing 1000% more than all people theorizing around here Smiley Good luck!

Bitcoin Core developer [PGP] Warning: For most, coin loss is a larger risk than coin theft. A disk can die any time. Regularly back up your wallet through FileBackup Wallet to an external storage or the (encrypted!) cloud. Use a separate offline wallet for storing larger amounts.
Mike Christ
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April 12, 2013, 04:31:45 AM
 #4

The answer:

Demand payment in Bitcoin!

And if that doesn't work, wait a while, get more people to say it with you, and the say it again.

Repeat as many times as it takes Grin

gollum
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April 12, 2013, 04:41:56 AM
 #5

Elwar: I suppose the idea around that is to trade small amount between people, so no one is really "the exchanger". A bit like bitcoin-otc but more automated and easier to use.

We are discussing a solution for a p2p based decentralized bitcoin exchange.
https://bitcointalk.org/index.php?topic=172705.0
https://github.com/p2p/bitcoin-exchange
Even with a github repository with only a README.md in it, you're already doing 1000% more than all people theorizing around here Smiley Good luck!


Every great project begins with a ReadMe File Smiley
Elwar
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April 12, 2013, 04:47:00 AM
 #6

A decentralized exchange would require each person converting dollars to Bitcoins or the other way around to become a registered currency exchanger according to FinCEN. This comes will $millions in fees.

Gotta love government created monopolies.

We are discussing a solution for a p2p based decentralized bitcoin exchange.
https://bitcointalk.org/index.php?topic=172705.0
https://github.com/p2p/bitcoin-exchange


Just be sure to address this:

Quote
a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.


When a follow up was asked of FinCEN, no minimum was included. Anybody who exchanges bitcoins for fiat is an exchanger.

Even at bitcoin-otc or localbitcoins they are exchanging money illegally if doing it in the US without a license.

If you plan on trying to do it but stay under the radar then you may want to make sure it will run in Tor and mimick the Silk Road approach.

http://www.bitpools.com
Pool your bitcoins with others. Vote on solutions using the Bitcoin blockchain. Keep your bitcoins in your cold storage until you find a solution you like.
Links and Reviews of useful every day places to spend bitcoins: https://bitcointalk.org/index.php?topic=943143.0
Sage
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April 12, 2013, 04:52:46 AM
 #7

A decentralized exchange would require each person converting dollars to Bitcoins or the other way around to become a registered currency exchanger according to FinCEN. This comes will $millions in fees.

Gotta love government created monopolies.

We are discussing a solution for a p2p based decentralized bitcoin exchange.
https://bitcointalk.org/index.php?topic=172705.0
https://github.com/p2p/bitcoin-exchange


Just be sure to address this:

Quote
a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.


When a follow up was asked of FinCEN, no minimum was included. Anybody who exchanges bitcoins for fiat is an exchanger.

Even at bitcoin-otc or localbitcoins they are exchanging money illegally if doing it in the US without a license.

If you plan on trying to do it but stay under the radar then you may want to make sure it will run in Tor and mimick the Silk Road approach.

Better yet... set it up to run on it's own network, using existing darknet open-source code.
Bitobsessed
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April 12, 2013, 05:38:05 AM
 #8

What about Ripple?
SGExodus
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April 12, 2013, 05:44:04 AM
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Decentralized exchange is not possible because fiat money are involved in the transaction.

Sell order may be easy to distribute.  New "sell" function can be added to the existing client.  The client can check the wallet to ensure that you really have that much to sell, and then the coin can be "wrapped" in a digital envelope and transfer into the existing P2P network (to prevent double spend/double sell) to wait for the transaction to happen. A built-in sale-order chart can be added into the client.  This can display stats, such as average transacted price, volume, all the current sales order etc.

However,  buy order is tricky.  You need to prevent fake buy order that has no fund to execute the order.   Fake buy order can easily manipulate prices in the exchange.    

In the end, you will still need some trust worthy external escrow services, the like of the current exchanges such as mtgox, btc-e, to hold the fiat fund to ensure the validity of the buy order, and to transfer the fiat fund to the seller.

gollum
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April 12, 2013, 05:45:34 AM
 #10

Decentralized exchange is not possible because fiat money are involved in the transaction.

Sell order may be easy to distribute.  New "sell" function can be added to the existing client.  The client can check the wallet to ensure that you really have much to sell, and then the coin can "wrapped" in a digital envelope and transfer into the existing P2P network (to prevent double spend/double sell) to wait for the transaction to happen. A built-in sale-order chart can be added into the client.  This can display stats, such as average transacted price, volume, all the current sales order etc.

However,  buy order is tricky.  You need to prevent fake buy order that has no fund to execute the order.   Fake buy order can easily manipulate prices in the exchange.    

In the end, you will still need some trust worthy external escrow services, the like of the current exchanges such as mtgox, btc-e, to hold the fiat fund to ensure the validity of the buy order, and to transfer the fiat fund to the seller.



Yes, we still need mtgox, btce and bitstamp to handle our fiat and bitcoins- but their role will be as brokers instead of exchanges.
wumpus
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April 12, 2013, 05:57:55 AM
 #11

I found out that people have been working on decentralized exchanges already for a long time.

Overview of current projects:

- bitcoinx: http://www.bitcoinx.org/  

Protocol description: https://bitcoil.co.il/BitcoinX.pdf
Other code, as well as links to the forum can be found here: http://www.bitcoinx.org/resources/  
Repositories here on github: https://github.com/bitcoinx
Wiki: http://wiki.bitcoinx.org/index.php/Main_Page

- darkxchange "Dark Exchange is a distributed p2p exchange for bitcoin.". Uses the I2P network.

Source available at https://github.com/macourtney/Dark-Exchange  
Described on bitcoin wiki: https://en.bitcoin.it/wiki/Dark_Exchange .
Also has a forum thread: https://bitcointalk.org/index.php?topic=26063.0;

- opentransactions

Description on bitcoin wiki: https://en.bitcoin.it/wiki/Open_Transactions
Wiki: https://github.com/FellowTraveler/Open-Transactions/wiki
Source: https://github.com/FellowTraveler/Open-Transactions

Though it's not completely decentralized, you don't need to trust any single server.

- bitcoin-otc  http://bitcoin-otc.com

Not really software, but a P2P exchange nevertheless, and frontend software could be built.
Uses PGP web of trust combined with a reputation system.

IRC: #bitcoin-otc on freenode

=====
Any others? I know about ripple (https://ripple.com/), but it isn't really a distributed exchange. From what I understood the plan is to have central servers, owned by one company, to get fiat money into the system.

Bitcoin Core developer [PGP] Warning: For most, coin loss is a larger risk than coin theft. A disk can die any time. Regularly back up your wallet through FileBackup Wallet to an external storage or the (encrypted!) cloud. Use a separate offline wallet for storing larger amounts.
moni3z
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April 12, 2013, 05:58:34 AM
 #12

A decentralized exchange would require each person converting dollars to Bitcoins or the other way around to become a registered currency exchanger according to FinCEN. This comes will $millions in fees.

Gotta love government created monopolies.

Yes

Also the person who invented such an exchange would be responsible for reporting everything that happens on the network and staffing compliance officers. Lol not joking

This is only going to work if done anonymously using Gnunet but sadly infrastructure not ready, Gnunet is too young to fend off the ddos internal flood knocking down the escrow peers
Severian
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April 12, 2013, 06:00:04 AM
 #13

Non-negotiable warehouse receipts aren't money by anyone's standards.

Create cooperatives of gold/silver dealers and exchanges. Exchange deposits $100,000 (for example) with PM dealer. PM dealers issue non-negotiable warehouse receipts to purchasers with a code instead of PMs, up to the amount that exchange has on deposit. The code is convertible only on the exchanges in the co-op. At the end of the day, the exchange turns in warehouse receipts to PM dealer and deposit is re-upped.

PM dealers make money on fees and their metal never leaves the shop. People get onto exchanges without directly using fiat. Exchanges and users don't have to mess with banks.

Best of all, banks are cut out completely.

Elwar
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April 12, 2013, 06:02:45 AM
 #14

Non-negotiable warehouse receipts aren't money by anyone's standards.

Create cooperatives of gold/silver dealers and exchanges. Exchange deposits $100,000 (for example) with PM dealer. PM dealers issue non-negotiable warehouse receipts to purchasers with a code instead of PMs, up to the amount that exchange has on deposit. The code is convertible only on the exchanges in the co-op. At the end of the day, the exchange turns in warehouse receipts to PM dealer and deposit is re-upped.

PM dealers make money on fees and their metal never leaves the shop. People get onto exchanges without directly using fiat. Exchanges and users don't have to mess with banks.

Best of all, banks are cut out completely.



Quote
or other value that substitutes for currency

http://www.bitpools.com
Pool your bitcoins with others. Vote on solutions using the Bitcoin blockchain. Keep your bitcoins in your cold storage until you find a solution you like.
Links and Reviews of useful every day places to spend bitcoins: https://bitcointalk.org/index.php?topic=943143.0
moni3z
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April 12, 2013, 06:03:07 AM
 #15

Open Transactions when it's ready will be good enough. If enough federated servers can just create our own currencies and act as exchanges for the fiat in and out of the system. These can be run over Gnunet and come with the bonus of crypto verification instead of relying on GnuNet DHT which is unreliable and possibility nodes can be faked (like faking an escrow node to scam..uhoh).
wumpus
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April 12, 2013, 06:08:44 AM
 #16

Open Transactions
I forgot that one, I'll add it to my list! Though it's not completely decentralized, you don't need to trust any single server or company, which is already better than Mtgox etc.

Bitcoin Core developer [PGP] Warning: For most, coin loss is a larger risk than coin theft. A disk can die any time. Regularly back up your wallet through FileBackup Wallet to an external storage or the (encrypted!) cloud. Use a separate offline wallet for storing larger amounts.
gollum
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April 12, 2013, 06:09:40 AM
 #17

Open Transactions
I forgot that one, I'll add it to my list! Though it's not completely decentralized, you don't need to trust any single server or company, which is already better than Mtgox etc.


Ive listed them all in github Smiley
Severian
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April 12, 2013, 06:13:30 AM
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Quote
or other value that substitutes for currency

I believe currency substitutes are foreign currency specifically. There are many domestic alternative currencies that aren't regulated.

A PM dealer issuing his own funny non-negotiable scrip to a consenting party is a-ok unless the sale of gold and silver for cash is being regulated again.
wumpus
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April 12, 2013, 06:13:39 AM
 #19

Ive listed them all in github Smiley
Great!

I think one of the issues that needs to be addressed with the current projects is that they're unapproachable by normal users (and even normal developers). Bitcoin would likely not have lifted off if Satoshi hadn't made a simple Windows GUI for bitcoin.

Also, for example the opentransactions description and features list is kind of difficult to parse if you're not already into financial cryptography.

Bitcoin Core developer [PGP] Warning: For most, coin loss is a larger risk than coin theft. A disk can die any time. Regularly back up your wallet through FileBackup Wallet to an external storage or the (encrypted!) cloud. Use a separate offline wallet for storing larger amounts.
elebit
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April 12, 2013, 06:16:14 AM
 #20

Sure, but what would you be exchanging _against_?

Perhaps USD, but paid how? Bank transfers between peers? Those take a day, during which the buyer can simply cancel if the bitcoins drop in value. So that's skewed to buyers. Credit cards? Good luck processing those. Paypal? Chargebacks.

There is already a decentralised exchange. It's called OTC. It has all these problems. If you want to reimplement it, at least look into solving them.
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