Refocused Invictus P2P Exchange Discussion

[bytemaster]

Charles and I have been making great strides in defining requirements, understanding designs, and lining up the developers and financial backing necessary to turn project Invictus into a success.   We have gathered and reviewed white papers from a dozen different approaches and spent many hours discussing designs and approaches with their authors and others in the community.

The best ideas from all of these papers are being worked into the BitShares white paper and I would like to invite the community to review, edit, and comment on the google docs paper.   The goal is to clarify the ideas and come to a consensus.

https://docs.google.com/document/d/1RLcjSXWuU9vBJzzqLEXVACSCdn8zXKTTJRN_LfoCjNY

You can post general comments in this thread, but it would be very helpful to focus your comments in the google docs document so that they are in context and can be addressed. 

[Sage]

+1

Big kudos for taking this on! 

The success of Bitcoin is riding on whether we get a viable decentralized exchange.

[lixiaolai]

congratulation!

[Stephen Gornick]

You can post general comments in this thread, but it would be very helpful to focus your comments in the google docs document so that they are in context and can be addressed. 

I would think Google Docs comments isn't that good for Q&A activity.

The escrow agent is also bonded by other agents.

How does this happen?  Who would bond me if I was anonymous.  (or am I not anonymous with other agents?)

[bytemaster]

You can post general comments in this thread, but it would be very helpful to focus your comments in the google docs document so that they are in context and can be addressed. 

I would think Google Docs comments isn't that good for Q&A activity.

The escrow agent is also bonded by other agents.

How does this happen?  Who would bond me if I was anonymous.  (or am I not anonymous with other agents?)

I would suspect that there would be a couple 'trusted' but 'anonymous' members on this forum and other places that could serve as the root of the trust chain.   They would be referenced by other anonymous agents as someone they would let judge disputes.  From this trust a web of inter-connected bonded agents would develop.  Agents make money on transaction fees that reference them so they would have incentive to post bonds with as many other agents as possible.  Eventually the agents earn a reputation for their speed and quality of service and therefore people can select agents.  People can also observe the transaction history to see which agents are the post popular and have the best fees.    I will be going into much greater depth on the escrow system in a follow-on paper.   

[bytemaster]

Because of all of the discussion on Master Coin, I thought I would bump this thread to stir up discussion on BitShares as the real, funded, alternative backed by a team of 5 FTE individuals. 

We plan to make some major announcements at Crypto Currency Conference in Atlanta in October.   

A note on Master Coin:   It is an alt coin that is using Bitcoin addresses with bogus data as a means of broadcasting MasterCoin transactions.    It is based upon a TRUSTED party, price fixing, public oracles, and supply-side economics.   

[ripper234]

I haven't had a chance yet to read about BitShares yet, I'll do that when I get a chance.

For those wishing to learn more about MasterCoin, check out mastercoin.org (currently just redirects to the relevant bitcointalk thread)

[Loozik]

A few remarks / questions. Forgive my bad English.

BitShares requires a global ledger that establishes the order of transfers, bids, asks, and market trades.  Every 5 minutes the set of all bids and asks included in the previous block are deterministically matched.

Do I wait 5 minutes to get my buy or sell order visible in the ladder (not ledger)?


Canceling an open order is also subject to the 24 hour rule because a chain reorganization after you placed your order but before you canceled it could result in another miner executing your order.

So, no ''good till cancelled'' orders?


Local ‘Deposit’
Grandma wants to earn a 10% return on her dollars, but is unable to use a computer.   Her grandson decides to help her out, so he receives the dollars from his grandmother and then uses them to buy BitUSD.

Why not treat grandson's account as a ''master account''* (probably all forex brokers offer trading through master account - trades are allocated to sub-accounts) through which the grandson can perform specific (and limited) operations on the grandma's ''sub-account''. This will effectively render scams like Pirate40 impossible.


Speculator with Leverage
It would be interesting to see what leverage ratios will evolve


* master and sub-account idea explained in a picture: https://www.interactivebrokers.com/en/index.php?f=friendsFamilyAccounts&p=more

[bytemaster]

A few remarks / questions. Forgive my bad English.

BitShares requires a global ledger that establishes the order of transfers, bids, asks, and market trades.  Every 5 minutes the set of all bids and asks included in the previous block are deterministically matched.

Do I wait 5 minutes to get my buy or sell order visible in the ladder (not ledger)?

It would work like a bitcoin transaction.   You can either negotiate the trade entirely 'off chain' and then just publish the atomic transaction, or you can place an open order into the block chain.  Your open order will show up as an 'unconfirmed transaction' as fast as it can be broadcast and could be matched by the miner the very next block.

Canceling an open order is also subject to the 24 hour rule because a chain reorganization after you placed your order but before you canceled it could result in another miner executing your order.

So, no ''good till cancelled'' orders?

All orders are good until you cancel them.    The sentence you quoted relates to the fact that decisions made by miners are tied to the block and thus cannot be ported over to new chains.

Local ‘Deposit’
Grandma wants to earn a 10% return on her dollars, but is unable to use a computer.   Her grandson decides to help her out, so he receives the dollars from his grandmother and then uses them to buy BitUSD.

Why not treat grandson's account as a ''master account'' (probably all forex brokers offer trading through master account - trades are allocated to sub-accounts) through which the grandson can perform specific (and limited) operations on the grandma's ''sub-account''. This will effectively render scams like Pirate40 impossible.

The key with this example was to show that Grandma doesn't even need a computer and can benefit from the system using a trusted (but decentralized) 3rd party.  

Speculator with Leverage
It would be interesting to see what leverage ratios will evolve

Everything is at least 100% collateralized, so there are no leverage ratios in the traditional 'fractional reserve' manner.   In this case he was going short to yield a higher return (with higher risk) to leverage his bet that BitShares will go up relative to BitUSD.  So there will be return rations, but the minimal backing for a short position is 150%  and due to market forces, the maximum backing will probably be no more than 250%.

[Loozik]

Thanks.

[jimbobway]

How does one invest in Invictus?  Allowing people to invest will increase the network.

[bytemaster]

How does one invest in Invictus?  Allowing people to invest will increase the network.

SEC prevents us from selling stock to all but the 'sophisticated' investors (those with net worth over $1M), and we are committed to no pre-mining which leaves me at a loss on how to do this directly.

[ripper234]

I started reading the whitepaper, but I find it rather hard to read and don't have the time to read it more thoroughly at the moment.

1. Is there a short summary available that explains how BitShares implements an IFMFS?
2. Is there an incentive for people to "invest" in BitShares? Is it more like Bitcoin, Mastercoin and Ripple, in rewarding early adopters (assuming the technology captures significant market share), or is it more like Colored Coins, which is technologically sound, but offers no such incentives to early adopters?
3. Can you compare and contrast it with Mastercoin?
4. Is there a development roadmap? What's the current stage of development?

I made a few minor comments on the doc.

[bytemaster]

I started reading the whitepaper, but I find it rather hard to read and don't have the time to read it more thoroughly at the moment.

1. Is there a short summary available that explains how BitShares implements an IFMFS?
2. Is there an incentive for people to "invest" in BitShares? Is it more like Bitcoin, Mastercoin and Ripple, in rewarding early adopters (assuming the technology captures significant market share), or is it more like Colored Coins, which is technologically sound, but offers no such incentives to early adopters?
3. Can you compare and contrast it with Mastercoin?
4. Is there a development roadmap? What's the current stage of development?

I made a few minor comments on the doc.

BitShares is a effectively a set of continuous prediction markets on the value of BitShares relative to USD, BTC, EUR, etc.   Prediction markets are very hard to manipulate and are very good at integrating information quickly as a result the prediction market will track the value of USD, BTC, etc in a decentralized block-chain based manner. 

BitShares is not pre-mined, so you can invest early by adopting it on launch and mining on day one.  Also, promoting the idea and helping us develop it will insure you the best return on investment.  Thus, early adopters will benefit like Bitcoin early adopters. 

We have plans to reward early adopters that provide funds prior to release, but we are not yet prepared to announce our plans.

Mastercoin is horribly flawed and carrying around the ball and chain of Bitcoin's block chain bloat and all of the risks / problems associated with bitcoin.   It has scalability issues and its Escrow system for creating the equivalent of BitUSD is broken (I won a 3BTC bounty for showing how and why, he has not yet published a solution that I am aware of).   

Development roadmap is to release a BitMessage / BitID system in October, a beta of BitShares by Thanskgiving, and launch the genesis block in early 2014. 

[ripper234]

BitShares is a effectively a set of continuous prediction markets on the value of BitShares relative to USD, BTC, EUR, etc.   Prediction markets are very hard to manipulate and are very good at integrating information quickly as a result the prediction market will track the value of USD, BTC, etc in a decentralized block-chain based manner. 

BitShares is not pre-mined, so you can invest early by adopting it on launch and mining on day one.  Also, promoting the idea and helping us develop it will insure you the best return on investment.  Thus, early adopters will benefit like Bitcoin early adopters. 

We have plans to reward early adopters that provide funds prior to release, but we are not yet prepared to announce our plans.

Mastercoin is horribly flawed and carrying around the ball and chain of Bitcoin's block chain bloat and all of the risks / problems associated with bitcoin.   It has scalability issues and its Escrow system for creating the equivalent of BitUSD is broken (I won a 3BTC bounty for showing how and why, he has not yet published a solution that I am aware of).   

Development roadmap is to release a BitMessage / BitID system in October, a beta of BitShares by Thanskgiving, and launch the genesis block in early 2014. 

So, BitShares is a sort of alt-currency / alt-chain? Is it mined like Bitcoin, or differently?

Can you explain how a BitUDS is represented on the BitShares protocol, and how is its value determined? In what way does Bitshares act as a prediction market?

Also, I don't understand the roadmap. If the genesis blocks launches in 2014, what are the components that are launched before that? What does it mean to launch them without a genesis block?

[bytemaster]

BitShares is a effectively a set of continuous prediction markets on the value of BitShares relative to USD, BTC, EUR, etc.   Prediction markets are very hard to manipulate and are very good at integrating information quickly as a result the prediction market will track the value of USD, BTC, etc in a decentralized block-chain based manner. 

BitShares is not pre-mined, so you can invest early by adopting it on launch and mining on day one.  Also, promoting the idea and helping us develop it will insure you the best return on investment.  Thus, early adopters will benefit like Bitcoin early adopters. 

We have plans to reward early adopters that provide funds prior to release, but we are not yet prepared to announce our plans.

Mastercoin is horribly flawed and carrying around the ball and chain of Bitcoin's block chain bloat and all of the risks / problems associated with bitcoin.   It has scalability issues and its Escrow system for creating the equivalent of BitUSD is broken (I won a 3BTC bounty for showing how and why, he has not yet published a solution that I am aware of).   

Development roadmap is to release a BitMessage / BitID system in October, a beta of BitShares by Thanskgiving, and launch the genesis block in early 2014. 

So, BitShares is a sort of alt-currency / alt-chain? Is it mined like Bitcoin, or differently?

Can you explain how a BitUDS is represented on the BitShares protocol, and how is its value determined? In what way does Bitshares act as a prediction market?

Also, I don't understand the roadmap. If the genesis blocks launches in 2014, what are the components that are launched before that? What does it mean to launch them without a genesis block?

BitShares is a distributed autonomous corporation (DAC) where the 'shares' of the corporation are mined into existence and pay dividends based upon transaction fees.  These shares can be held as collateral for USD loans (BitUSD) from the DAC and other people can buy these collateralized debts of the DAC and earn 'interest' paid from the dividends due the collateral. 

Therefore, BitUSD acts as a way for two parties to speculate on the direction that the value of BitShares (aka the stock of the DAC) will move relative to USD.   If the price of BitShares relative to USD goes up, the short position makes money, if the price goes down the short loses money.   Either way the holder of USD maintains the purchasing power of 1 USD worth of BitShares plus interest.

We are releasing a product code named Project Quixote that provides a decentralized 'id' system that maps a human readable account to a public key and will be a complete alternative to Open-ID and entirely eliminate the need to ever share a 'bitcoin address' again.   These IDs are also used as part of a communication system similar to BitMessage (without having to share 'bitmessage addresses'). 

The foundation for the messages and IDs will be released first and will help us harden our network and P2P infrastructure while we implement the blockchain logic separately.    THe gensis block for the ID system will be launched in October, the BitShares test network will launch in November, and the live network will be in feburary after we are sure that there are no glaring bugs / redesign necessary.

Project Quixote will also double as a Bitcoin wallet that eliminates the need for Bitcoin addresses.

[td services]

Will users have a way to create new asset types like Loom or Ripple? This could be a lot of fun as a derivatives market, seeing as even BitUSD and BitGold will be derivatives.

[bytemaster]

Will users have a way to create new asset types like Loom or Ripple? This could be a lot of fun as a derivatives market, seeing as even BitUSD and BitGold will be derivatives.

BitShares is a concept, a generalization of an idea.   There will be many 'BitShares' chains and unlike Bitcoin, we will actively seek and promote new 'alt-chains' each with their own derivatives. 

To support user generated assets, dynamically (originally the goal), I will have to change the features that exist on the main chain... which we are tentatively dubbing 'CashShares'.    Other chains will include 'CryptoShares' for most alt-coins.

We have started the design for general purpose prediction markets but will probably have the following differences:

1) long positions will not pay dividends, though short positions would still incur opportunity cost as their dividends are forfeited.
2) Require people to update their positions faster (say 3 months rather than 1 year).

There are many other details, but I am still working on them.

[btcmind]

I don't understand how you could have transferable owernship in such a network, because owernship is a legal term. If I hold one stock of AAPL corp this is a legal concept subject to US law. If I hold a stock of BMW in Germany, this is subject to German law. Similarly ETFs and Futures have a lot necessarily regulation. We don't have a legal layer for this (yet), so I can't even transfer the most simple asset from one country to another without a lot of hassle. So whatever these kinds of concepts are, they have little to do with shares as they currently exist. Markets and property without laws are not very useful. Bitcoin and Cryptocurrencies are really the exception, because they are an entire new construction, but they don't standard for anything else. Money is a medium and assets are not money. In order for something like this to work I think one first has to have the legal constructions in place, which I believe will take decades. Hopefully the economic system will function much better by then.

[bytemaster]

You do not have transferrable ownership of the underlying good, you have transferrable ownership on a bet backed by a crytpo-currency about which way the value of the asset will move relative to the crypto-currency.  This bet is entirely within the realm of the crypto-currency and all profits and losses occur in the crypto-currency.