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Author Topic: The Final Solution to the Mtgox Problem...  (Read 6736 times)
Sage
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April 12, 2013, 08:19:59 AM
 #1

The centralized inferstructure surrounding Bitcoin is fundamentally broken.  And NOW is the time to fix it.  

Here's how...

Here's what needs to happen for Bitcoin to be massively adopted and not killed by its own exponential growth:

- decentralized, scalable exchanges.

- stupid simple, one-click LOCAL wallet solutions that a newbie could not mess up if they tried.

- decentralized encrypted cloud back of local wallets.

- decentralized Bitpay-like solutions.

No central anything.  No central wallets.  No central exchanges. No central payment intermediaries.  No central wallet backup locations.  Nothing central period.

Here's a solution to all these problems:

A decentralized Bitcoin user/minor driven network...

...A darknet that's fully powered by the Bitcoin users and miners.  Simply take existing darknet code and retrofit miners to it.

On top of this network we build a decentralized exchange that quickly matches buyers to sellers.

In addition to that we build a decentralized cloud storage solution.  Using this cloud storage, local wallets are backed up across the network automatically.  Along with every bitcoin client is an encrypted backup of the wallet in the network.  No more novices losing their coins.

All users get enough cloud storage to store their wallet.

Web services could also be purchased on the Bitcoin network too.  The fees would go to the Bitcoin miners powering the network.  The fees would be based on a market bid/ask.  Effectively allowing a fast, fully decentralized tor-like network with no central point of attack.

This could be dovetailed in nicely with the existing Namecoin DNA system.

Users could also purchase additional Bitcoin cloud storage based on the market driven by the miners/users.

An encrypted email-like system could also easily be built on top of the network that would allow fast communications that can't be shutdown by an Internet kill switch.

Who knows what else could be build on the platform and offered as services.

These additional services would encourage more mining and diversify the network.

Miners/users get the fees....  The free market governs the price.... No central authority possible.... Everyone wins.

That would be a very robust network that would solve most the Bitcoin centralized inferstructure problems in one fell swoop.... And create an entirely new Internet that can't be snooped or shut down.

...and would make Bitcoin completely independent of the Internet.  All transactions could be roughted through the Bitcoin network.

We already have more then enough hashing power.  There is already open source darknet code to build on .  The groundwork has been laid.  

...Now we just gotta create it!

Create it and finally we are free of central attacks, central control, and Bitcoin can scale.... And no longer beholden to any central authority.  

...and idea who's time has come.

Techies, tell me...

...the viability of the idea...
...any improvements to the idea...
...the obstacles that need to be anticipated and overcome...
...and the next step to make it happen.

No trolls reply.  No non-intelligent replies.  Only those who know what the hell they are talking about chime in here.
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División de Poderes s.XXI es Descentralización


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April 12, 2013, 08:39:09 AM
 #2

Yo will be taken to a centralized trial in...Nuremberg?
  Grin

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April 12, 2013, 09:07:48 AM
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A de-centralised exchange cannot work.

When you buy BTC from Fiat you need to send the money somewhere, claerly this cannot be a different person in a different country everytime you buy any BTC, this is not practical on far too many levels and is why BTC exists in the first place!

When you sell BTC you require to receive cash. Same as above applies only this time you are relying on an individual sending the money having received a coin that cannot be traced = 'Licence to Scam'

Exchanges exist to pool liquidity and also to ensure that settlement risks are borne by a central company, usually with some financial depth and credibility. This is the part that is lacking currently.
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April 12, 2013, 09:15:46 AM
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A de-centralised exchange cannot work.

When you buy BTC from Fiat you need to send the money somewhere, claerly this cannot be a different person in a different country everytime you buy any BTC, this is not practical on far too many levels and is why BTC exists in the first place!

When you sell BTC you require to receive cash. Same as above applies only this time you are relying on an individual sending the money having received a coin that cannot be traced = 'Licence to Scam'

Exchanges exist to pool liquidity and also to ensure that settlement risks are borne by a central company, usually with some financial depth and credibility. This is the part that is lacking currently.

Bull pucky.  There are plenty of solutions to the trust and fiat problem. We can talk those in length.  But first things first.  We need the platform.  We can talk the fiat and trust solutions after we get the platform discussion going.
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April 12, 2013, 09:22:26 AM
 #5

Ripple anyone?
Kluge
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April 12, 2013, 09:55:05 AM
 #6

This would be way easier if you just created "Darkcoin" and allow users to choose whether they want BTC or DKC. (Hmmm... Maybe that's a bad name)

Then you don't need to deal with problems like a seller being matched up with 30 partial orders and needing to figure out how to pay them all through fiat infrastructure.

Don't mix your coins someone said isn't legal
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April 12, 2013, 10:00:39 AM
 #7

This would be way easier if you just created "Darkcoin" and allow users to choose whether they want BTC or DKC. (Hmmm... Maybe that's a bad name)

Then you don't need to deal with problems like a seller being matched up with 30 partial orders and needing to figure out how to pay them all through fiat infrastructure.

I don't get your logic.  Another currency does not solve the centralized inferstructure problem.

The decentralized exchange will allow for p2p exchange of any currency for any other crypto or not... Gold, silver, and any other commodity of value too.

....Solves the exchange problem for all the existing crypto currencies as well. 
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jail all bankers!


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April 12, 2013, 10:05:26 AM
 #8

Yo will be taken to a centralized trial in...Nuremberg?
  Grin

do you want the total money?

END THE FED !
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April 12, 2013, 10:24:05 AM
 #9

Exchanges are necessary because they're compliant with AML regulations, and institutional investors will only use legally compliant means to buy and sell bitcoin. For bitcoin to scale, it needs institutional investors.
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April 12, 2013, 10:27:37 AM
 #10

Exchanges are necessary because they're compliant with AML regulations, and institutional investors will only use legally compliant means to buy and sell bitcoin. For bitcoin to scale, it needs institutional investors.

There is no reason mtgox and all the exchanges couldn't simply be brokers on the decentralized framework.

There is no reason for an centralized exchange.  And a billion and a half (and counting) reasons against it.
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April 12, 2013, 10:31:21 AM
 #11

This would be way easier if you just created "Darkcoin" and allow users to choose whether they want BTC or DKC. (Hmmm... Maybe that's a bad name)

Then you don't need to deal with problems like a seller being matched up with 30 partial orders and needing to figure out how to pay them all through fiat infrastructure.

I don't get your logic.  Another currency does not solve the centralized inferstructure problem.

The decentralized exchange will allow for p2p exchange of any currency for any other crypto or not... Gold, silver, and any other commodity of value too.

....Solves the exchange problem for all the existing crypto currencies as well. 

Well, you can escrow for trust issues, but that doesn't really make up for the fact that if you place a significant order on Gox, you're going to be matched with tens of small orders. So if you sold 10BTC for 1oz of gold, and that was matched with 12 partial orders, are they supposed to each send tiny bags of gold shavings, or are you talking about a posting board rather than an exchange?

DarkCoins would be easily divisible, and able to be transferred quickly/easily, much unlike 12 bags of gold flakes. Fiat transfers, even with a decentralized exchange, have banks as a point of failure. If you're trading with people directly, as I'm assuming would happen in an exchange, the "decentralization" is proven failed the instant BAC freezes your account over AML concerns with 20 out-of-country people deposited a combined $50k into your account over a couple days. Gox, OTOH, is a central figure with a relationship (one they've incidentally had to fight hard for) with their banks, which no longer freeze their accounts every other week.

Don't mix your coins someone said isn't legal
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April 12, 2013, 10:36:28 AM
 #12

This would be way easier if you just created "Darkcoin" and allow users to choose whether they want BTC or DKC. (Hmmm... Maybe that's a bad name)

Then you don't need to deal with problems like a seller being matched up with 30 partial orders and needing to figure out how to pay them all through fiat infrastructure.

I don't get your logic.  Another currency does not solve the centralized inferstructure problem.

The decentralized exchange will allow for p2p exchange of any currency for any other crypto or not... Gold, silver, and any other commodity of value too.

....Solves the exchange problem for all the existing crypto currencies as well.  

Well, you can escrow for trust issues, but that doesn't really make up for the fact that if you place a significant order on Gox, you're going to be matched with tens of small orders. So if you sold 10BTC for 1oz of gold, and that was matched with 12 partial orders, are they supposed to each send tiny bags of gold shavings, or are you talking about a posting board rather than an exchange?

DarkCoins would be easily divisible, and able to be transferred quickly/easily, much unlike 12 bags of gold flakes. Fiat transfers, even with a decentralized exchange, has banks as a point of failure. If you're trading with people directly, as I'm assuming would happen in an exchange, the "decentralization" is proven failed the instant BAC freezes your account over AML concerns with 20 out-of-country people deposited a combined $50k into your account over a couple days. Gox, OTOH, is a central figure with a relationship (one they've incidentally had to fight hard for) with their banks, which no longer freeze their accounts every other week.

There is no reason that a large order cannot be batches to hundreds of different offers in the system.  And there is no reason mtgox cannot exist on the system too, if you prefer to deal only with them.

The competition from the other brokers on the system will keep them honest and prevent another monopoly.

Having another crypto intermediary coin doesnt really solve anything.  Fiat still has to be used to buy that intermediary coin, and hence an exchange for it.  Nothing solved.

There will also evolve intermediaries in the system.  Those who batch arbitrage small orders at a discount into big orders for larger investors.

Create the decentralized platform and the market will fill in the gaps.
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April 12, 2013, 10:41:44 AM
 #13

Bitcoin is the virtual Lichtenstein: The primary contribution to the economy comes from the financial sector. We can not build a "country" financed on speculation alone. No more than 30% of trade value in an economy, should come from exchanges, ideally around 5%.

Bitcoin is not faulty neither are the exchanges, it's the mentality from debt based currencies being carried over to a pristine system.


 
 
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Kluge
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April 12, 2013, 10:46:15 AM
 #14

This would be way easier if you just created "Darkcoin" and allow users to choose whether they want BTC or DKC. (Hmmm... Maybe that's a bad name)

Then you don't need to deal with problems like a seller being matched up with 30 partial orders and needing to figure out how to pay them all through fiat infrastructure.

I don't get your logic.  Another currency does not solve the centralized inferstructure problem.

The decentralized exchange will allow for p2p exchange of any currency for any other crypto or not... Gold, silver, and any other commodity of value too.

....Solves the exchange problem for all the existing crypto currencies as well.  

Well, you can escrow for trust issues, but that doesn't really make up for the fact that if you place a significant order on Gox, you're going to be matched with tens of small orders. So if you sold 10BTC for 1oz of gold, and that was matched with 12 partial orders, are they supposed to each send tiny bags of gold shavings, or are you talking about a posting board rather than an exchange?

DarkCoins would be easily divisible, and able to be transferred quickly/easily, much unlike 12 bags of gold flakes. Fiat transfers, even with a decentralized exchange, has banks as a point of failure. If you're trading with people directly, as I'm assuming would happen in an exchange, the "decentralization" is proven failed the instant BAC freezes your account over AML concerns with 20 out-of-country people deposited a combined $50k into your account over a couple days. Gox, OTOH, is a central figure with a relationship (one they've incidentally had to fight hard for) with their banks, which no longer freeze their accounts every other week.

There is no reason that a large order cannot be batches to hundreds of different offers in the system.  And there is no reason mtgox cannot exist on the system too, if you prefer to deal only with them.

The competition from the other brokers on the system will keep them honest and prevent another monopoly.

Having another crypto intermediary coin doesnt really solve anything.  Fiat still has to be used to buy that intermediary coin, and hence an exchange for it.  Nothing solved.

There will also evolve intermediaries in the system.  Those who batch arbitrage small orders at a discount into big orders for larger investors.

Create the decentralized platform and the market will fill in the gaps.
Okay... I put up a buy order for 100BTC and offer 10oz of gold. The decentralized exchange matches me to 200 orders. Explain to me how this will work out quickly, without a great deal of trust in any single entity, and without insane fees (including shipping fees).

Don't mix your coins someone said isn't legal
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April 12, 2013, 10:55:38 AM
 #15

This would be way easier if you just created "Darkcoin" and allow users to choose whether they want BTC or DKC. (Hmmm... Maybe that's a bad name)

Then you don't need to deal with problems like a seller being matched up with 30 partial orders and needing to figure out how to pay them all through fiat infrastructure.

I don't get your logic.  Another currency does not solve the centralized inferstructure problem.

The decentralized exchange will allow for p2p exchange of any currency for any other crypto or not... Gold, silver, and any other commodity of value too.

....Solves the exchange problem for all the existing crypto currencies as well.  

Well, you can escrow for trust issues, but that doesn't really make up for the fact that if you place a significant order on Gox, you're going to be matched with tens of small orders. So if you sold 10BTC for 1oz of gold, and that was matched with 12 partial orders, are they supposed to each send tiny bags of gold shavings, or are you talking about a posting board rather than an exchange?

DarkCoins would be easily divisible, and able to be transferred quickly/easily, much unlike 12 bags of gold flakes. Fiat transfers, even with a decentralized exchange, has banks as a point of failure. If you're trading with people directly, as I'm assuming would happen in an exchange, the "decentralization" is proven failed the instant BAC freezes your account over AML concerns with 20 out-of-country people deposited a combined $50k into your account over a couple days. Gox, OTOH, is a central figure with a relationship (one they've incidentally had to fight hard for) with their banks, which no longer freeze their accounts every other week.

There is no reason that a large order cannot be batches to hundreds of different offers in the system.  And there is no reason mtgox cannot exist on the system too, if you prefer to deal only with them.

The competition from the other brokers on the system will keep them honest and prevent another monopoly.

Having another crypto intermediary coin doesnt really solve anything.  Fiat still has to be used to buy that intermediary coin, and hence an exchange for it.  Nothing solved.

There will also evolve intermediaries in the system.  Those who batch arbitrage small orders at a discount into big orders for larger investors.

Create the decentralized platform and the market will fill in the gaps.
Okay... I put up a buy order for 100BTC and offer 10oz of gold. The decentralized exchange matches me to 200 orders. Explain to me how this will work out quickly, without a great deal of trust in any single entity, and without insane fees (including shipping fees).

Unless you want to send gold to 200 different people, likely it would match you to a gold dealer who could handle your order size.

You would then enter a multi-sig bitcoin transaction with the dealer.  And/or use escrow.

You send him your gold.  Once the gold arrives escrow releases the coins to you.  If the gold gets lost in the mail, well, insurance would handle that (just like online old dealers do it now).

The small-time brokers would keep the market honest.  They would set the market price for the large gold dealers.  Large gold dealers would arbitrage the price difference users are will to pay to fulfill large orders.  Large capacity would carry a premium in the open market.  So would reputation.
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April 12, 2013, 10:55:44 AM
 #16

How can a decentralised exchange put US$ in my bank account?
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April 12, 2013, 10:58:41 AM
 #17

How can a decentralised exchange put US$ in my bank account?

The individual broker you're dealing with would transfer the cash in any of the thousands of ways fiat is transferred now.

There will also evolve intermediaries who's soul business would be to facilitate the fiat transfer in in the system through whatever network they have access to for whatever country they are in.
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April 12, 2013, 11:19:13 AM
 #18

How can a decentralised exchange put US$ in my bank account?

The individual broker you're dealing with would transfer the cash in any of the thousands of ways fiat is transferred now.

There will also evolve intermediaries who's soul business would be to facilitate the fiat transfer in in the system through whatever network they have access to for whatever country they are in.

So finance intermediary plugins could be installed in your P2P exchange app? Might work. 
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April 12, 2013, 12:34:35 PM
 #19

Guys before we shoot this down, let's continue with this train of thought.

So it has been established:

1. We will always need commercial companies to do the exchange between real world currency and BTC.

2. The "centralization" problem lies around the fact that one IP address of a big exchange (with of course load balanced server behind it) can be attacked. It is more of a web problem than what it is a "brick and morar" problem.

Here's my suggestion

1. We have a program exactly like bitcoin. It connects to 6 peers by default.

2. Instead of sending BTC, it sends out a BUY or SELL orders to the network. In other words, the program will maintain a global p2p orderbook. The price of BTC will always be exactly the same worldwide.

3. The problem also maintains a list of exchanges. Think of what Verisign  is to IE/Firefox/Chrome. Inside any browser they maintain a list of "trusted ssl providers". The same thing applies here. Since this is open source, the community can decide which exchanges are trusted and there can be a formal application process.

So your P2P Market App will show you a interface similar to this

Code:
Buy [ 1 ] [ BTC ] in [ USD ] from [ Drop down ]
                                                  [ Mt Gox ]
                                                  [ BTC-e ]
                                                  [ CanadaExachange ]
                                                  [ Ausie Exchange ]

So if you select CanadaExchange (just an example) that will be sent to the entire network. Canada Exchange will then pick that up and do their 6 confirmations (the exact same way we receive bitcoins) and will then check their bank account for your reference.

References:
=========

You could have a "preferences" menu item in the app. From there you configure your exchanges. For example

Configure Exchange:

Code:
[MtGox]:

Your payout Bank Details
     Account: [      ]
     Bank: [      ]
     etc etc

Your funding reference
    Ref:   [        ]   [ Button: Automatically get a reference number for this installation ]



Additional details will be sent with every outgoing buy order. MTGox will be able to pick up your reference number for you buy order from your transaction.

That's just a quick rough idea of implementation. Of course there are holes in the idea. The bottom line is, something like this is possible, we just have to figure out the details.

The most important aspect of this whole thing is - One Global Peer 2 Peer Order book that cannot be attacked - lets work out the details around that.



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April 12, 2013, 01:11:34 PM
 #20

Here's what needs to happen for Bitcoin to be massively adopted and not killed by its own exponential growth:

- decentralized, scalable exchanges.

...........................

a lot of good points made by the OP.  I just want to focus on the exchange decentralization issue.

I think a peer to peer based distributed exchange would solve a lot of the problems we've seen recently with Mt Gox and all the other exchanges.

The main problem I see with this idea is transferring fiat currency to/from the system to cover trades.

This is one of the services that the current exchanges provide at present. Without this you can't have a working exchange.

Given the present banking and payment transfer setup I can't see how a peer to peer exchange system can possibly interface with the banks.

So you'd need to set up some kind of transfer service for BTC/fiat which everyone would use.

This would either have to be run by a commercial provider or operated as a non-profit service funded via the bitcoin system eg from an automatic levy on each transfer.  

The system would also have to interface with the bitcoin peer to peer exchange.

I'd imagine that technically implementing the above would not be too difficult.  

But you need to have a reliable, safe and accountable operation for the bank/BTC transfers. Maybe a commercial service would be the best solution for this? In that case you would have competing providers offering this facility.
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