Please simplify the concept of P2P exchange

[usscfounder]

To answer the original question:

I have designed a system for a P2P decentralized orderbook:

I have created a system for a P2P orderbook here:

https://bitcointalk.org/index.php?topic=209269.0

I figured out how to make a P2P Orderbook for a decentralized exchange:

I am updating the post daily but will add more in a few minutes:

https://bitcointalk.org/index.php?topic=209269.0

Decentralized Orderbook - BTA System (Bus - Train - Plane)

BTA - Bus. Train. Plane. BTA is a concept I came up with the solve the problem of a decentralized orderbook for P2P systems.

BTA is a system to move orders from Tier I exchange nodes to Tier II exchange nodes to Tier III exchange nodes according to a predetermined cycle.

BTA is a system akin to a mass-transit public transportation system.

example:
In a mass transit system you could have a bus that would route and cycle through a city with 25 bus stops, stopping at every stop to pick up people. The bus would then drop all of the people off at the last stop which for the purposes of this demonstration is the city's train station. The bus would then repeat the cycle continuously bringing more and more people to the train station.

Eventually the train would arrive to that city and pick up the people who got off the bus and are waiting at the train station. The train would then continue on and cycle through all of the cities of that particular province/state picking up people (who were dropped off by the bus) at every city train station. At the end of the train route would be an airport with a planes ready to pick people up and take them to a specific destination. The train would cycle continuously through all of the cities picking up people and dropping them off at the airport.

The people who were first on the bus and then on the train and now at the airport would then board the plane (jumbo jet if you will) and travel on the plane from the province/state they were in to a final location all the while making stops in every major province/state of that country to pick up additional people. After the plane arrived at the final location it would take off again and cycle through all the provinces/states of the country continuously picking up and dropping off people.

Now, imagine if you will a dating and match making service on one of the sides of that county that has a big convention to help people find a spouse. That service decides to utilizes the same aforementioned mass transportation system to bring people together from all over the country.

People would leave their homes and go to the bus stop. Some people would find compatible matches for themselves at the bus stop or while riding on the bus. Those people would get off the bus pay the fee and then go home with no need to go to to the convention. Those people have what they want; a spouse.

The rest of the people would continue on to the train station and get on the train. But again some people would find matches on the train and at the station; so, they too would pay the fee and go home. They have what they want; a spouse.

What remains of the people would continue on to the airport then get on the plane to go to the convention hoping to find a good match for a spouse.

A P2P BTA (Bus-Train-Airplane) exchange would operate the same way only picking up orders instead of people.

(More in a few minutes)

 

More here in a few minutes:

https://bitcointalk.org/index.php?topic=209269.0

Here is how it works:

P2P BTA Application

How does it work?

In a P2P BTA system a "Bus" exchange node would cycle through and collect orders from P2P "home-server" nodes mentioned in the above posts.  "Home-server" nodes house user accounts and wallets in a P2P network.

1. The Bus exchange server node would collect orders from home-server nodes 1 through 25 (for example).

2. Matching orders (if any) are fulfilled in a mini exchange. Receipts are generated. All unfulfilled orders and receipts are then stored for pickup by an "Train" exchange node.

3. On a predetermined cycle the higher Train exchange node would pick up all of the unfulfilled orders and receipts from all four (for example) of the Bus exchange nodes in the P2P network. All matching orders are fulfilled in a medium sized exchange and more receipts are generated.  Again, All unfulfilled orders and collected receipts are then stored for pickup by an "Airplane" exchange node.

4. Finally, on a predetermined cycle the higher Airplane exchange node would pick up all of the unfulfilled orders and receipts from all four (for example) of the Train exchange nodes in the P2P network. The Airplane exchange is the highest exchange on our example P2P network. All orders would attempt to be fulfilled here. Collected receipts are used to generate reports and to display fulfilled orders.

In our example P2P network, if no orders were fulfilled by the Bus or Train exchange nodes then the Airplane exchange node would have picked up 400 orders.

(MORE TO COME LATER TODAY)

https://bitcointalk.org/index.php?topic=209269.0

[usscfounder]

Fiat conversions ARE a political problem. Maybe you will realize that when the Department of Homeland Security shows up at your door.

Hey buddy, if you think that the whole world is going to use BTC and no other cryptocurrency then you are in "LaLa" land. Please join the rest of us in reality.

[keelba]

The one and only problem that needs to be solved for distributed exchanges to work is how to move the fiat. If you're not focusing on the problem of moving fiat you are wasting your time, because that's literally the only thing that matters. When fiat is no longer used then we'll have no need for exchanges.

Amen to that!

[justusranvier]

Fiat conversion ARE a political problem. Maybe you will realize that when the Department of Homeland Security shows up at your door.

It's still the only problem that needs to be solved. If you're not going to tackle that problem then everything you do on the technical side accomplishes nothing.

The only reason exchanges exist, and the only reason they have customers at all, is to do fiat conversion. If you can't do that nothing else matters. If you don't first have a credible plan for moving fiat around your project will go nowhere.

What you're trying to do is build a car dealership without having any cars to sell or any plans for how you're going to obtain them.

[usscfounder]

That's why I said earlier "we need to just let the political Libertarian revolution continue".

Other than that there is really nothing else we can do.

In the meanwhile, we CAN focus on innovation; because innovation is what got us here in the first place.

What if Satoshi said "well I don't know how to convert fiat into bitcoin so I wont focus on developing or coding software for the bitcoin software".

Come-on, man. Get real dude!

[usscfounder]

We control Crypto. The government controls their money that they print. Its their money dude.

Is it not written "render unto Caesar what is Caesar's".

Its Caesar's money dude; but, its our crypto.

[QuantPlus]

best decentralised exchange= ................... dramatic drum roll........... localbitcoins.com

Oh please, enough of this juvenile nonsense.

Nobody can run a serious business by meeting strangers at Starbucks...
My time is worth $300-500/hour and that is typical of a small businessman.

[keelba]

best decentralised exchange= ................... dramatic drum roll........... localbitcoins.com

Oh please, enough of this juvenile nonsense.

Nobody can run a serious business by meeting strangers at Starbucks...
My time is worth $300-500/hour and that is typical of a small businessman.

I'm not disagreeing with you at all, but why do we only consider businesses? What about the billions of people out there that we want to be buying bitcoins that have no intention of running a business themselves? If you're running a business then you probably would just build in the cost analysis of money transfers and hassles into your overall business plan.

[justusranvier]

That's why I said earlier "we need to just let the political Libertarian revolution continue".

Other than that there is really nothing else we can do.

1 million people willing to handle $1000 USD per day could move $365 billion per year.

To do that we don't need technical innovations - we need a million people willing to register on Localbitcoins and start actively buying and selling. But as always there's a huge shortage of people willing to do that. It's a lot more fun to sit in a chair and write code than it is to go out in public and work with people.

If we could code our way to a solution I'd be ecstatic but unfortunately that's not where the market is right now.

[lexxus]

That's why I said earlier "we need to just let the political Libertarian revolution continue".

Other than that there is really nothing else we can do.

1 million people willing to handle $1000 USD per day could move $365 billion per year.

You forget that not everywhere it's easy to receive/send USD over the wire though the banks.

[CypressXM]

The one and only problem that needs to be solved for distributed exchanges to work is how to move the fiat. If you're not focusing on the problem of moving fiat you are wasting your time, because that's literally the only thing that matters. When fiat is no longer used then we'll have no need for exchanges.

Amen to that!

Thank you.

I'm glad to finally see some sanity in these threads. This a waste of time, it's currently not possible. People proposing a 'voucher' system are really proposing another digital currency which, if implemented, would be better than bitcoin.

Moving fiat is the ONLY problem that matters...and it's an impossible problem atm. So let these threads die with dignity.

[keelba]

Moving fiat is the ONLY problem that matters...and it's an impossible problem atm. So let these threads die with dignity.

I don't think it is productive to just let these threads die. I believe there may be a unique solution to this problem but we won't know unless we try. The important thing is that we focus on the right problem. Most of the talk has been around the technical issues but most people don't seem to care about the pragmatic issues. I guess they're just assuming that people will figure it out for themselves. It makes no sense to me.

[Zangelbert Bingledack]

Moving fiat is the ONLY problem that matters...and it's an impossible problem atm. So let these threads die with dignity.

I can see why moving fiat P2P is hard, but why impossible?

It seems you could at least have meeting-less localbitcoins.com as long as

• you can set up a fiat money transfer with unique ID that states where the money is to go
• you can publicly prove you initiated the ID'd transfer (fiat money on its way, shown on bank website, etc.)
• failure to initiate the transfer within a certain number of minutes/hours would also be public

If Alice wishes to purchase BTC from Bob, the process for a trustless, meeting-less trade would be:

1) Alice draws up a money transfer ID at bank, etc., and informs Bob of the details but does not actually send it yet
2) Bob puts the BTC into escrow with the P2P software, which uses an oracle to monitor the bank website for posting/cancellation of the transaction
3) If the transaction is posted (because Alice actually initiated the transfer), the oracle releases the BTC from escrow to Alice
4) If the transaction ID times out, the oracle releases the BTC back to Bob

Alice can't cheat, Bob can't cheat, Alice can't lose, Bob can't lose. The coins only move if the fiat moves. Note how the bank is unwittingly the trusted party, though it has no knowledge that it's being used as such. It depends on the bank generally disclosing the right information in a reliable manner.

If this can't work, how about cash via certified mail? Any financial service that offers public tracking records that can be checked by the recipient. If there is just one service that offers such a thing, this seems possible.

[bytemaster]

Moving fiat is the ONLY problem that matters...and it's an impossible problem atm. So let these threads die with dignity.

I can see why moving fiat P2P is hard, but why impossible?

It seems you could at least have meeting-less localbitcoins.com as long as

• you can set up a fiat money transfer with unique ID that states where the money is to go
• you can publicly prove you initiated the ID'd transfer (fiat money on its way, shown on bank website, etc.)
• failure to initiate the transfer within a certain number of minutes/hours would also be public

If Alice wishes to purchase BTC from Bob, the process for a trustless, meeting-less trade would be:

1) Alice draws up a money transfer ID at bank, etc., and informs Bob of the details but does not actually send it yet
2) Bob puts the BTC into escrow with the P2P software, which uses an oracle to monitor the bank website for posting/cancellation of the transaction
3) If the transaction is posted (because Alice actually initiated the transfer), the oracle releases the BTC from escrow to Alice
4) If the transaction ID times out, the oracle releases the BTC back to Bob

Alice can't cheat, Bob can't cheat, Alice can't lose, Bob can't lose. The coins only move if the fiat moves. Note how the bank is unwittingly the trusted party, though it has no knowledge that it's being used as such. It depends on the bank generally disclosing the right information in a reliable manner.

If this can't work, how about cash via certified mail? Any financial service that offers public tracking records that can be checked by the recipient. If there is just one service that offers such a thing, this seems possible.

Even assuming Alice and Bob were honest and could directly send funds via bank transfer, paypal, etc with no worries.... this version of p2p exchange is fatally flawed and not a suitable replacement for Mt. Gox.

1) The transaction fees would be high.
2) Alice or Bob would have to transact with many different people unless their order sizes were identical (unlikely)
3) It would be slow as every exchange would require a bank transfer (no day trading or even weakly trading).
4) Buy/Sell spreads would be high because the exchange was so slow.

I am a little disappointed that so few people have taken time to understand or consider my approach for creating an interest-bearing crypto-USD (EUR,Gold,Etc) that has no counter party risk and would allow near-instant exchanges as frequently as one desires as well as USD-denominated transfers between users.   I believe it solves all of the problems with moving fiat around in a decentralized manner.   Please consider my thread: https://bitcointalk.org/index.php?topic=213588.0  and help me find weaknesses and ways to improve it.

[Zangelbert Bingledack]

A replacement for MtGox would be the holy grail, but that doesn't mean alleviating some of the centralization for certain types of trades isn't a big deal.

[bytemaster]

I agree everything helps.   I also have a solution that is much better than the one presented.  I am practically begging people to consider and give me feedback.

[justusranvier]

why move fiat directly?

We could start an auto dealership where people buy and sell cars without ever having to actually move the cars directly. When someone wants to sell a car they can just transfer the title to the buyer while leaving the car in their driveway. Likewise a buyer can purchase the title for the car without actually needing to take physical delivery of it. It's a perfect plan except for that small little problem that people actually want to drive the cars.

Without moving fiat around what you're building is just a complicated online casino. The only people who will play in the casino are people with spare money to gamble with. If you're talking about a service that's supposed to open up Bitcoin for widespread adoption then the first and most important problem you have to solve is how to move the fiat around. People who aren't interested in online gambling need that fiat in order to pay real bills and purchase actual products and services. If they can't easily do that two things will happen:

1) They'll hold less of their liquid assets in Bitcoin, because they can't afford to tie up much of their income stream in a form they can't easily spend.
2) People who do hold bitcoins will be less willing to list them on the exchange so there will be less liquidity in the market.

[bytemaster]

why move fiat directly?

We could start an auto dealership where people buy and sell cars without ever having to actually move the cars directly. When someone wants to sell a car they can just transfer the title to the buyer while leaving the car in their driveway. Likewise a buyer can purchase the title for the car without actually needing to take physical delivery of it. It's a perfect plan except for that small little problem that people actually want to drive the cars.

Without moving fiat around what you're building is just a complicated online casino. The only people who will play in the casino are people with spare money to gamble with. If you're talking about a service that's supposed to open up Bitcoin for widespread adoption then the first and most important problem you have to solve is how to move the fiat around. People who aren't interested in online gambling need that fiat in order to pay real bills and purchase actual products and services. If they can't easily do that two things will happen:

1) They'll hold less of their liquid assets in Bitcoin, because they can't afford to tie up much of their income stream in a form they can't easily spend.
2) People who do hold bitcoins will be less willing to list them on the exchange so there will be less liquidity in the market.

Under my system actual USD can enter from anyone and leave from anyone.  Exchange rate risks mostly eliminated and there is financial incentive to keep money in crypto-USD form rather than always cashing it out.  Going in/out of fiat to crypto-fiat is always more expensive.

So anyone can deposit a crypto-car and then the title can be exchanged.  Eventually someone who wants to drive it somewhere finds someone who wants to deposit a crypto-car. They trade.  All crypto-car titles are fully backed by crypto-currency value and then some.   Car owners never really need to handle or consider the crypto-currency backing the system nor its volatility.  They just deal with cars and titles (something they understand) and the let the crypto-currency investors (distributed bankers) worry about the value of the crypto-currency. 

[johnyj]

At a higher level of abstraction, all the exchanges or platforms only carry one function: Provide price/deal information to guide people's transaction

Since bitcoin transactions will be done in bitcoin network, and fiat money transactions will be done in legacy banking system, there is no need for an exchange, just a platform that provide price/counter-party information and that's all

This is the reason I think localbitcoins.com is the right direction, it even eliminated the need for foreign currency exchange for non-USD/EUR countries

At a lower abstraction level, this is what an exchange provide

1. Provide the deal price
2. Matching buyers' order and sellers' order
3. eliminate the counter party risk

Localbitcoins can do Nr.1

Currently Nr.2 is manual, e.g. if you want to buy/sell a large amount of bitcoin you have to find enough counter-party orders, otherwise you will have to split your order into small batches, this is the part that can be improved by implementing an order book function in the website, or have some local market makers

Nr.3 is the most difficult part, you can guarantee a bitcoin transaction, but not a fiat money transaction. No one wants to send money first. If this can be solved, then a P2P based localbitcoins.com will be a huge success

So IMO the focus will be on Nr.3. Currently NashX.com provided some idea about having some risk fund before doing transaction, but maybe people are so get used to a secured exchange, it still feels not that convenient, especially for some new users who don't have risk fund in bitcoin

And a slow trading platform like localbitcoins.com will dramatically reduce the amount of speculation, so that most of the trades are driven by real demand, this is good for price stability