Convince me not to Invest $20,000 in P2P Bank/Exchange Idea

[bytemaster]

In this thread https://bitcointalk.org/index.php?topic=215488.0  I am discussing a plan for a distributed peer-to-peer bank / exchange that actually pays interest on all deposits (gold, silver, USD, etc) and IS NOT based upon any IOU or counter-party risks.  It allows you to withdraw funds and all of this occurs at prices cheaper than depositing / withdrawing funds from Mt. Gox or even your local ATM.  

The idea behind it is difficult to grasp at first and is easily dismissed but once understood is amazingly simple and elegant.  Because I want feedback and want to know what I am missing and what I haven't explained well enough to generate the interest and enthusiasm I feel it deserves, I am offering a 10BTC bounty to motivate people to tear my idea to shreds and save me $20,000.

So here is the deal, I am putting my money where my mouth is and making a wager that I can convince you to be as excited about my solution as I am.  If I am right then the time spent attempting to understand my idea would allow you to be an early adopter to a system that could replace bitcoin, if I am wrong and you are right then you will earn 10BTC for your time and we will have had a good debate regarding economics and technical details.

Overall I am seeking to bring out bright and intelligent debate around my idea.  I need to learn how to explain it in terms that is far easier for everyone to understand.    I am willing to Skype or talk on the phone if it would aid communication.  

[1713492528]

1713492528

[wildbud]

How would you ever make your money back?

[bytemaster]

I would make my money back the same way early investors in Bitcoin made their money.  Not by pre-mining or pumping and dumping, but by recognizing before others that BitShares are undervalued relative to all other crypto-currencies.  

Thus, by investing money to create the solution I am creating the opportunity to invest as an early adopter.   If I can convince others to help build it out based on the same recognition of the value in the idea then so much the better.  

I am not trying to pull of a pre-mining type system like Ripple but would be thrilled simply to see a solution on the market place that addresses all of the weaknesses in bitcoin (centralized exchanges).   Ultimately my system would enable a gold and silver based crypto-currency without the need for any IOU based issuance.  Not only that but the gold and silver deposits would pay INTEREST and thus absolutely destroy all criticism of crypto-currencies being backed by nothing.

[bytemaster]

10 BTC = $1,320 at the moment.. so I am confident enough that I am willing to risk 5-8% to a stranger to save 90% of my capital.   Besides, even if you convince me to drop my current idea, chances are the discussion would lead to an even better idea and thus allow me to deploy the other 95% of my investment more effectively.

[BitKoot]

First of all, I think it's a very interesting idea.

I would like to zoom in on point 5 of you post in the other thread: Update the hashing algorithm in a way to prevent centralized control or instant monopoly of all shares by asic mining companies.

If your idea will be a succes, then it will become interesting for people and/or companies to develop ASIC's which are compatible with the new hashing algorithm. When the incentive is high enough, someone somewhere will put in the effort to develop such an ASIC.

This in itself might not undermine your idea, but it is something you should keep in mind.

[prophetx]

interesting idea.

i'm not technical enough to implement this but i see a few issues, some of them appear in your original thread on this.

1) how do you solve the issue of broadcasting bids in an efficient and timely manner? even though some of us may not like high frequency trading with bots they do serve a purpose for price discovery and liquidity

2) how do you solve the issue confirmation of trades in a timely manner

I like this part of your idea, except I don't understand how you incorporate fiat unless you make a fiat backed crypto which 1 company controls, and destroys if a trade occurs and the accepting user transfers back into a bank account:

5. Have three-user (trustless) trading
  - how about 2-user trust-less trading between crypto-Fiat and 'BTC' and using escrow for remote exchanges of crypto-Fiat for bank-Fiat?

[bytemaster]

First of all, I think it's a very interesting idea.

I would like to zoom in on point 5 of you post in the other thread: Update the hashing algorithm in a way to prevent centralized control or instant monopoly of all shares by asic mining companies.

If your idea will be a succes, then it will become interesting for people and/or companies to develop ASIC's which are compatible with the new hashing algorithm. When the incentive is high enough, someone somewhere will put in the effort to develop such an ASIC.

This in itself might not undermine your idea, but it is something you should keep in mind.

That is exactly what I had in mind.  I know that the single biggest cost in RAM is transistor count and that RAM / cache is also the single most expensive part of GPU/CPU.   RAM is already as efficient an ASIC as the marktet can produce and because it is dual use it is EVERYWHERE.

So anyone who was creating a specialized ASIC would end up sinking the vast majority of their transistor count into RAM.  The end result being that while they may be able to do some of the calculations 1000x faster than a CPU the cost of the ASIC would be such that a 1000x speed up in calculation time only gives you a 1% gain in $ return.   So sure, they could create specialized hardware to accelerate it but the ROI would not have the same leverage as bitcoin ASIC.

[bytemaster]

interesting idea.

i'm not technical enough to implement this but i see a few issues, some of them appear in your original thread on this.

1) how do you solve the issue of broadcasting bids in an efficient and timely manner? even though some of us may not like high frequency trading with bots they do serve a purpose for price discovery and liquidity

The in-chain exchange would allow you to broadcast bids that are 'cached', when a bid is accepted it is included in a transaction which is broadcast to the network.  The transaction with the highest fee will be included in the block first.   Thus high-frequency trading could occur by receiving a bid and broadcasting a high-fee transaction as soon as possible to 'lock it in'.  It would be a race and the network would prevent propagation of 'double claims' that have lower fees, and the high-frequency trader would have to wait for 1 or 2 confirmations to see if they won the bid, but they could respond very quickly to the initial publishing of the bid. 

If you need fast back/forth trading then that could still happen off-chain on a TOR hidden service with a counter-party that is trusted.  But for most people that isn't worth while.  High-frequency trading (beyond a 10 minute window) is really all about arbitrage between exchanges and if they exchange is built in it would be very hard to arbitrage / compete with.

2) how do you solve the issue confirmation of trades in a timely manner

For most people one trade every 10 minutes is good enough.  The crypto-USD could be used outside the shared exchange as easily as bitcoin-to-litecoin exchanges operate today.  Do your High Frequency trading there.

I like this part of your idea, except I don't understand how you incorporate fiat unless you make a fiat backed crypto which 1 company controls, and destroys if a trade occurs and the accepting user transfers back into a bank account:

Please read my other posts where I explain how crypto-fiat has market-value of its own at or near parity based upon changes in the relative DIVIDENDS paid to crypto-USD in BitShares.  There is no need to have a company or individual provide backing just like there is no need to have that with Bitcoin.

[allten]

In this thread https://bitcointalk.org/index.php?topic=215488.0  I am discussing a plan for a distributed peer-to-peer bank / exchange that actually pays interest on all deposits (gold, silver, USD, etc) and IS NOT based upon any IOU or counter-party risks.  It allows you to withdraw funds and all of this occurs at prices cheaper than depositing / withdrawing funds from Mt. Gox or even your local ATM.   

The idea behind it is difficult to grasp at first and is easily dismissed but once understood is amazingly simple and elegant.  Because I want feedback and want to know what I am missing and what I haven't explained well enough to generate the interest and enthusiasm I feel it deserves, I am offering a 10BTC bounty to motivate people to tear my idea to shreds and save me $20,000.

So here is the deal, I am putting my money where my mouth is and making a wager that I can convince you to be as excited about my solution as I am.  If I am right then the time spent attempting to understand my idea would allow you to be an early adopter to a system that could replace bitcoin, if I am wrong and you are right then you will earn 10BTC for your time and we will have had a good debate regarding economics and technical details.

Overall I am seeking to bring out bright and intelligent debate around my idea.  I need to learn how to explain it in terms that is far easier for everyone to understand.    I am willing to Skype or talk on the phone if it would aid communication. 

Sorry, Can't convince you not to. I've been so excited about this prospect for some time. If anything, i would like to be a part of it.
The only reason not to is because the timing is not right. There's still a lot of infrastructure building going on, but that's your call.

[joulesbeef]

cool idea.. but so was Bitcoinica.. and what was that wallet... mybitcoin..that was a good idea too.. ok it wasnt.. it was a crap idea because no one knew who the fucker was in control of all that but it still did insanely well.. until it didnt.

[bytemaster]

In this thread https://bitcointalk.org/index.php?topic=215488.0  I am discussing a plan for a distributed peer-to-peer bank / exchange that actually pays interest on all deposits (gold, silver, USD, etc) and IS NOT based upon any IOU or counter-party risks.  It allows you to withdraw funds and all of this occurs at prices cheaper than depositing / withdrawing funds from Mt. Gox or even your local ATM.   

The idea behind it is difficult to grasp at first and is easily dismissed but once understood is amazingly simple and elegant.  Because I want feedback and want to know what I am missing and what I haven't explained well enough to generate the interest and enthusiasm I feel it deserves, I am offering a 10BTC bounty to motivate people to tear my idea to shreds and save me $20,000.

So here is the deal, I am putting my money where my mouth is and making a wager that I can convince you to be as excited about my solution as I am.  If I am right then the time spent attempting to understand my idea would allow you to be an early adopter to a system that could replace bitcoin, if I am wrong and you are right then you will earn 10BTC for your time and we will have had a good debate regarding economics and technical details.

Overall I am seeking to bring out bright and intelligent debate around my idea.  I need to learn how to explain it in terms that is far easier for everyone to understand.    I am willing to Skype or talk on the phone if it would aid communication. 

Sorry, Can't convince you not to. I've been so excited about this prospect for some time. If anything, i would like to be a part of it.
The only reason not to is because the timing is not right. There's still a lot of infrastructure building going on, but that's your call.

Thanks for the feedback.  I hope the meaning behind your response is that you have studied my proposal and believe it will work vs just hoping it will work because you want a solution to the problem it can solve.  You would be able to be a part of this project simply by helping answer questions and explaining why it will work and how to make it better.  No need to do anything other than help convince others of its viability.

[Zaih]

Peer to peer is the future in every single sector.

Go for it, if not, you'll regret it when an idea similar to yours is worth billions.

[bytemaster]

Peer to peer is the future in every single sector.

Go for it, if not, you'll regret it when an idea similar to yours is worth billions.

The beauty of the idea is that it doesn't matter who develops it, there is no one to control it.  Thus anyone who recognizes the value can jump in and start mining on day one or start buying BitShares.  If someone else created this idea 'first' then I would just jump on and save the initial investment! 

That said, having some influence over fine tuning parameters would have some value as I am sure any alternative wouldn't be exactly what I would want to see.

So, the question is do you think it will work!   That is the $1300 dollar question at the moment.

[btceic]

In this thread https://bitcointalk.org/index.php?topic=215488.0  I am discussing a plan for a distributed peer-to-peer bank / exchange that actually pays interest on all deposits (gold, silver, USD, etc) and IS NOT based upon any IOU or counter-party risks.  It allows you to withdraw funds and all of this occurs at prices cheaper than depositing / withdrawing funds from Mt. Gox or even your local ATM.  

The idea behind it is difficult to grasp at first and is easily dismissed but once understood is amazingly simple and elegant.  Because I want feedback and want to know what I am missing and what I haven't explained well enough to generate the interest and enthusiasm I feel it deserves, I am offering a 10BTC bounty to motivate people to tear my idea to shreds and save me $20,000.

So here is the deal, I am putting my money where my mouth is and making a wager that I can convince you to be as excited about my solution as I am.  If I am right then the time spent attempting to understand my idea would allow you to be an early adopter to a system that could replace bitcoin, if I am wrong and you are right then you will earn 10BTC for your time and we will have had a good debate regarding economics and technical details.

Overall I am seeking to bring out bright and intelligent debate around my idea.  I need to learn how to explain it in terms that is far easier for everyone to understand.    I am willing to Skype or talk on the phone if it would aid communication.  

Have you ever brought an idea from paper to the real world? i.e. have you ever been a start-up founder or worked at a start-up before?

Do you have the sales chops, connections, gravitas, family/friend support to bring this idea into reality?

It all sounds rosy on paper but when you have a family to support + a new business to run and get off the ground, taxes, employees, healthcare, PTO, sick pay, unemployment insurance, why people are late, water, electricity, government licenses to get and maintain etc, etc, etc, etc, it can be very tough.

What skills are you bringing to the company?

If technical only, Who will be your CTO, CFO, CSO(security) CEO.

How well do you know your founders? Do you have any? If not when will you get them, from where will you choose them from?

What security mechanisms are you going to embrace and why? After all you are considering creating the first Crypto Bank, this better be secure or you are going to get sued to the end of days.

Have you thought about what it will take to get your MSB license?

What is your exit strategy, what is your fund raising capabilities and connections?

Do you live near Silicon Valley or New York or any other established start-up area?

Edit: grammer

[bytemaster]

Have you ever brought an idea from paper to the real world? i.e. have you ever been a start-up founder or worked at a start-up before?

I was CEO of a software company specializing in Virtual Reality and general consulting.  I ran the company for 5 years employing 5-10 people before shutting it down in 2008 due to the market for VR being almost entirely government funded and government funds drying up.

Do you have the sales chops, connections, gravitas, family/friend support to bring this idea into reality?

I have family and friends who are supporting the idea through time and money.  I have connections with some heavy hitters who back many startup ventures of which I have also participated.   Unfortunately these contacts have ties/history with the banking sector and don't believe in digital money... yet.

It all sounds rosy on paper but when you have a family to support + a new business to run and get off the ground, taxes, employees, healthcare, PTO, sick pay, unemployment insurance, why people are late, water, electricity, government licenses to get and maintain etc, etc, etc, etc, it can be very tough.

First of all, I am very libertarian and would not structure my business in such a 'traditional' way.  Second of all, my investment plan does not involve running a company or requiring any business presence.   I could have taken to Satoshi approach of creating a valuable tool and releasing it.  So my only plan is to actively promote it, explain it, and help others understand the value of the tool.  Then by virtue of being an early adopter (along with everyone else who helps create it) we all benefit.

What skills are you bringing to the company?

If technical only, Who will be your CTO, CFO, CSO(security) CEO.

I am an expert C++ developer and austrian economist.  There is no company, no need for security or CEO.

What security mechanisms are you going to embrace and why? After all you are considering creating the first Crypto Bank, this better be secure or you are going to get sued to the end of days.

My security is taking the bitcoin code base and make a few very small changes and paying the community to find holes in the code or business logic.   I am not holding any assets on behalf of other people.   Depositor's security comes from the pure mathematics and economic principles that drive supply and demand to cause crypto-USD and crypto-GOLD to maintain parity with paper-USD and physical gold  regardless off the volatility of what is actually backing everything: a bitcoin-like crypto-currency.

Have you thought about what it will take to get your MSB license?

I will not be opening an store front, accepting any deposits, nor transferring money on behalf of anyone.   The software will do this in a p2p manner and I can neither confirm nor deny whether I am running a mining rig to earn BitShares.

What is your exit strategy, what is your fund raising capabilities and connections?

My exit strategy is to own an appreciating crypto-currency (like bitcoin) and sell it in the future via peer-to-peer connections entirely outside the banking system.

Do you live near Silicon Valley or New York or any other established start-up area?

I live in Virginia and work in a research park full of startup companies.  


Note:  I never intend to fully exit and it will not be possible because I suspect this system will enable digital gold and silver to become the universal money again.  Therefore, I hope to 'bank' on this system the rest of my life.

[Ardivaba]

Definitely going to keep my eye on this venture.
In the end we will need this perfect crypto-currency without flaws that could be universally used.

And while Bitcoin has it's value because of its such a revolutionary idea, it indeed has the flaws you have mentioned.

But technology evolves in unpredictable ways.
It would only take one genius to would figure out how to build ASIC miner of unimaginable speeds to crash the whole currency for good.
(Transistor centralized technology becoming obsolete like vacuum tubes did once)

Sure that given person would almost certainly not keep his research to himself to abuse the crypto-currencies as the implications of given technology would be far greater.

Not directly related to this project but just something that came to mind.
Obviously this is already common sense to almost everyone here.

[krudkeeper]

You are already having second thoughts. Go with your gut. Invest half on Mt. Gox and keep the other half for old age. Please.

[bytemaster]

You are already having second thoughts. Go with your gut. Invest half on Mt. Gox and keep the other half for old age. Please.

No second thoughts.  Just attempting to motivate people to challenge the idea and find any weak spots.  Without the bounty some might dismiss it without investing any time looking for 'bugs' in my idea.   

At this point I am considering doubling the bounty as my confidence is growing and no-one has been able to provide any argument why it will not work that I do not have a clear and (in my opinion) well reasoned answer for.

[krudkeeper]

You are already having second thoughts. Go with your gut. Invest half on Mt. Gox and keep the other half for old age. Please.

No second thoughts.  Just attempting to motivate people to challenge the idea and find any weak spots.  Without the bounty some might dismiss it without investing any time looking for 'bugs' in my idea.   

At this point I am considering doubling the bounty as my confidence is growing and no-one has been able to provide any argument why it will not work that I do not have a clear and (in my opinion) well reasoned answer for.

Good luck in your endeavors!

[calian]

Have you seen this yet? http://nashx.com/

Looks like he'd sell the whole thing if you're interested.