Project Invictus Vs. Project Holy Grail

[marcus_of_augustus]

Alt-chain, no pre-mine, early adopters ...  shouldn't this really be posted in "Alternate Cryptocurrencies" ... Mods?

[1714514839]

1714514839

[1714514839]

1714514839

[1714514839]

1714514839

[1714514839]

1714514839

[bytemaster]

Alt-chain, no pre-mine, early adopters ...  shouldn't this really be posted in "Alternate Cryptocurrencies" ... Mods?

I think this system is much more than an alt-coin and will enable trading of BTC for fiat as well as earning interest on BTC.    It will enable you to move fiat into the centralized exchanges or purchase BitUSD with actual USD and then use cross-chain trading to buy BTC.  

So there are many aspects of this that make BitShares a meta-system rather than just a crypto-currency.   I also think this has far broader application to Bitcoin community than a 'alt-coin' does.  

For example, the name coin thread hasn't been moved by the mods.  

Alternate cryptocurrencies
Discussion of cryptocurrencies other than Bitcoin. Note that discussion of how these currencies *relate to* Bitcoin may fit in other categories.

[marcus_of_augustus]

Alt-chain, no pre-mine, early adopters ...  shouldn't this really be posted in "Alternate Cryptocurrencies" ... Mods?

I think this system is much more than an alt-coin and will enable trading of BTC for fiat as well as earning interest on BTC.    It will enable you to move fiat into the centralized exchanges or purchase BitUSD with actual USD and then use cross-chain trading to buy BTC.  

So there are many aspects of this that make BitShares a meta-system rather than just a crypto-currency.   I also think this has far broader application to Bitcoin community than a 'alt-coin' does.  

For example, the name coin thread hasn't been moved by the mods.  

Alternate cryptocurrencies
Discussion of cryptocurrencies other than Bitcoin. Note that discussion of how these currencies *relate to* Bitcoin may fit in other categories.

... so this is basically another ripple (more distributed but open source eventually when the VC's allow it) with it's own currency (bitshares) right? (From a high level view)

[bytemaster]

Alt-chain, no pre-mine, early adopters ...  shouldn't this really be posted in "Alternate Cryptocurrencies" ... Mods?

I think this system is much more than an alt-coin and will enable trading of BTC for fiat as well as earning interest on BTC.    It will enable you to move fiat into the centralized exchanges or purchase BitUSD with actual USD and then use cross-chain trading to buy BTC.  

So there are many aspects of this that make BitShares a meta-system rather than just a crypto-currency.   I also think this has far broader application to Bitcoin community than a 'alt-coin' does.  

For example, the name coin thread hasn't been moved by the mods.  

Alternate cryptocurrencies
Discussion of cryptocurrencies other than Bitcoin. Note that discussion of how these currencies *relate to* Bitcoin may fit in other categories.

... so this is basically another ripple (more distributed but open source eventually when the VC's allow it) with it's own currency (bitshares) right? (From a high level view)

We are vastly different than ripple in almost every respect.   The white paper has the complete comparison.

[bytemaster]

From white paper:

Ripple is a peer-to-peer network with its own currency (XRP) that facilitates transferring and trading or exchanging currency in any unit.    Ripple is not a trustless network, but instead a means of shifting credit through a network of friends and family.   Each individual must publish a line of credit extended to everyone they know and is at risk of default.   In our opinion, this is not a socially viable arrangement which means that most people will end up using Ripple Gateways.  A Ripple Gateway acts like a bank by accepting deposits in exchange for credit on the Ripple network.  Gateways are likely subject to all of the laws and regulations that apply to money transmitters or any company that accepts deposits.   The end result is that Ripple is not Decentralized and does not provided Limited Liability for all parties.

Furthermore, Ripple does not support shorts, call, or put options and is therefore not Diverse.   Without relying on a centralized Gateway such as Mt. Gox or Bitstamp, currency trades are not aggregated, atomic, nor passive.   

Lastly, Ripple is not private because everyone must link their Ripple identity with their real world identity in order to establish lines of credit with friends, family, or Gateways.  Ripple is currently not Open Source despite promises to change that in the future. 

Lastly, Ripple is not viral in that it offers little value that would appeal to anyone outside of the crypto-currency movement or perhaps businesses that wish to start a Gateway.

[CurbsideProphet]

bytemaster,

Perhaps you should put a link to the white paper in your signature or at least a general link to the project.  I know you've posted the link here but since this is constantly evolving, it would make it easier for those trying to keep up to date.

[fellowtraveler]

2) The model of broadcasting price information via BitMessage is not a valid means of establishing a market price.

This is not entirely accurate...

See this post on the subject: https://bitcointalk.org/index.php?topic=220603.msg2758330#msg2758330

Basically a client's "order book" is an amalgamation of the order books on the various OT servers he's using.

Most trades will happen instantly on those servers, since no Bitmessage "discovery" process is necessary in such cases.

Arbitrage should normalize prices across them all.

Using Bitmessage for discovery is only necessary for finding a new server, after which point any trades there will also happen instantly.

Also, any delays introduced by Bitmessage are a result of BM's p2p nature, but other (faster) discovery layers are also possible.

Just wanted to clarify that.

P.S. good luck on the project, looks cool.

[bytemaster]

What prevents false-bids from being published from other OT servers?

I fully recognize that within a single server the price mechanism is valid, just not sure the purpose of BitMessage aside from finding arbitrage opportunities and that would imply some kind of trading bot and the ability to rapidly move funds between to OT servers.     

[charleshoskinson]

P.S. good luck on the project, looks cool.

Thanks Chris, I really appreciate you taking the time. We'll have a technical preview available in the coming months and I'm wondering if you can find the time to come see what we've built and give us some feedback. I really value your contributions to this community with OT and respect your skills. It would be great to get some of your feedback and suggestions.

[fellowtraveler]

OT fails almost all of the criteria.

...

All of that said, I still believe that there is a place for OT servers as high-frequency trading hubs and *trusted* banks for digital cash.   OT needs to be marketed at current exchanges as a far more secure, audit-able, and accountable system.  If Mt. Gox or BitStamp implemented an OT api for managing your account it would be a major selling point.

Some more replies / comments...

1) It is based upon trust in issuers

In the case of Bitcoin and other cryptocurrencies, it will be based on trust in voting pools, with the risk distributed across pools on the client side.

In the case of gold, dollars, euros, etc you are correct that you have to trust the issuer who is holding your gold. But how else could you trade gold digitally, if there were not an issuer holding the gold? The same goes with dollars. I'm curious how you would have dollar trades without issuers.

OT has a user-centric philosophy. We cannot entirely eliminate the risk of issuers, but the idea is to distribute the risk across multiple issuers, for example, using basket currencies. I don't know how you would eliminate issuers entirely, and still be able to trade fiat and asset-based currencies digitally, but I'm curious how you plan to do so.

4) Issuers are creating bearer bonds (illegal)

I suppose this depends on the jurisdiction. But I should point out that the issuer would be fully KYC/AML compliant.

MtGox, for example, allows users to trade "dollar units" and "BTC units" that are issued by MtGox -- and MtGox allows users to withdraw those units, through a KYC/AML compliant process.

(And MtGox is still operating...)

3) Operating an OT server is like operating a mini centralized exchange.

The big difference being that OT servers are unable to forge receipts -- and with voting pools, an OT server will also be unable to steal your coins.

5) No dividends / financial incentive for *everyone* to use the system.

I'm not sure if I'm interpreting this correctly, but FYI, OT does allow you to issue stocks, and to pay dividends on those to shareholders.

What prevents false-bids from being published from other OT servers?

Currently OT allows you to create bids even when there isn't enough money in your account to cover them. (But the bid will be removed from the market automatically if it ever fails to complete a trade.)

It would be possible, though, to alter OT so that it "stashes" the funds inside the bid itself, similarly to escrow, if that is preferable.

In either case, a trade could not complete unless there were funds to back it  up.

I fully recognize that within a single server the price mechanism is valid, just not sure the purpose of BitMessage aside from finding arbitrage opportunities and that would imply some kind of trading bot and the ability to rapidly move funds between to OT servers.

I think the actual discovery process would be very rare. Most of the time your client will already have the list of servers it's using. And if its configured to perform arbitrage between any given two servers, presumably it's already created accounts on both sides.

We haven't added server-to-server wiring of funds yet, but it could be done (with or without Bitmessage) relatively easily.

We'll have a technical preview available in the coming months and I'm wondering if you can find the time to come see what we've built and give us some feedback. I really value your contributions to this community with OT and respect your skills. It would be great to get some of your feedback and suggestions.

Thank you. As you know, we are in our second round of funding and so we are extremely busy on this end, but if I get time to check it out I'd be happy to let you know my thoughts.

Good luck again.

[jimbobway]

I want to let everyone know I appreciate everyone for being civil in this thread.  I didn't start this thread to cause tension, but just to understand the parallels in the two different developments. Thanks everyone for their input.

[bytemaster]

FT,
    The difference between Mt.Gox USD and Bearer bonds is that Mt. Gox is a middle man in all transactions and can enforce KYC.   Mt. Gox does not issue bearer bonds.   If an OT server practiced full KYC regulations for all accounts and the issuer 'knows the server' then clearly OT will work and be entirely legal.   In fact, it probably offers better privacy than Bitcoin because only 3 parties know about any given transaction and only 2 parties know all of your transactions.   With Bitcoin & Bitshares once your identity is tied to an address or the address of someone you have done business with your privacy is heavily compromised.

   The problem with most traditional approaches to USD vs X trading is the expectation that the USD must be an IOU.   On Gox you are trading  Gox Owes Me USD vs  Gox Owes Me BTC  and not actually trading USD vs BTC.   The paradigm is then adopted by OT with issuers.   What only savvy economists recognize is that Gox USD != Bank of America USD != Treasuries != Paper USD and that all of these IOU's actually trade against one another based upon the time-value-cost of moving value between these different instruments.   That said, most people recognize that the value of an IOU USD from most public / trusted entities is about the same (unless Gox blocks USD withdraws)

   In all of the cases above there is a counter-party who can default either intentionally, accidentally, or through government coercion.  All that customers really care about is that the purchasing power of Gox USD is relatively stable (+/- transaction fees) with the purchasing power of BOA USD.  So if you can create a crypto-currency that achieves this relative stability against USD then it is a suitable proxy for trading actual USD.   If this crypto-currency is not an IOU backed by a 'trusted' issuer, then you have a unique and useful alternative to OT issuers.

  BitShares is a crypto-'currency' that allows users to take collateralized short positions in USD.  The collateral is measured in BitShares and the cost of going short equal to the cost of the USD you are short.   While you are short your funds are tied up along with the proceeds you received by selling the BitUSD.    This will force users to cover their short position in the future.  The loss of dividends enforces a carrying cost on the short position and a profit on the long position.

  The last ingredient is having the block-chain automatically cover the short position (via placing a bid in the market) any time the margin starts to fall.  This protects the long position (BitUSD) from losses.

  With enough participants in the market the price of BitUSD will be just as stable as GoxUSD vs BOA USD and yet there are no issuers per-say.   In theory you could claim that the shorts are the issuers, but they are anonymous and there is no need to trust them.  They cannot run with the money nor fail to redeem it.

   Lastly, simply depositing USD into an OT server does not earn me interest where as simply owning BitUSD will pay you dividends (from all trx fees in the market).  This makes it far more compelling to own BitUSD over OT USD.

   All of that said, I would love to know how we can work together to automate voting pools because I would like to have a trust-free way of transacting with BitUSD on a OT server.  This would provide a lot of privacy enhancements and help scale the transaction volume.

[charleshoskinson]

Thank you. As you know, we are in our second round of funding and so we are extremely busy on this end, but if I get time to check it out I'd be happy to let you know my thoughts.

Good luck again.

We just closed our first round of funding and it was quite substantial. I know the feeling Chris about being busy. 

[fellowtraveler]

FT,
    The difference between Mt.Gox USD and Bearer bonds is that Mt. Gox is a middle man in all transactions and can enforce KYC.   Mt. Gox does not issue bearer bonds.   If an OT server practiced full KYC regulations for all accounts and the issuer 'knows the server' then clearly OT will work and be entirely legal.   In fact, it probably offers better privacy than Bitcoin because only 3 parties know about any given transaction and only 2 parties know all of your transactions.   With Bitcoin & Bitshares once your identity is tied to an address or the address of someone you have done business with your privacy is heavily compromised.

   The problem with most traditional approaches to USD vs X trading is the expectation that the USD must be an IOU.   On Gox you are trading  Gox Owes Me USD vs  Gox Owes Me BTC  and not actually trading USD vs BTC.   The paradigm is then adopted by OT with issuers.   What only savvy economists recognize is that Gox USD != Bank of America USD != Treasuries != Paper USD and that all of these IOU's actually trade against one another based upon the time-value-cost of moving value between these different instruments.   That said, most people recognize that the value of an IOU USD from most public / trusted entities is about the same (unless Gox blocks USD withdraws)

   In all of the cases above there is a counter-party who can default either intentionally, accidentally, or through government coercion.  All that customers really care about is that the purchasing power of Gox USD is relatively stable (+/- transaction fees) with the purchasing power of BOA USD.  So if you can create a crypto-currency that achieves this relative stability against USD then it is a suitable proxy for trading actual USD.   If this crypto-currency is not an IOU backed by a 'trusted' issuer, then you have a unique and useful alternative to OT issuers.

  BitShares is a crypto-'currency' that allows users to take collateralized short positions in USD.  The collateral is measured in BitShares and the cost of going short equal to the cost of the USD you are short.   While you are short your funds are tied up along with the proceeds you received by selling the BitUSD.    This will force users to cover their short position in the future.  The loss of dividends enforces a carrying cost on the short position and a profit on the long position.

  The last ingredient is having the block-chain automatically cover the short position (via placing a bid in the market) any time the margin starts to fall.  This protects the long position (BitUSD) from losses.

  With enough participants in the market the price of BitUSD will be just as stable as GoxUSD vs BOA USD and yet there are no issuers per-say.   In theory you could claim that the shorts are the issuers, but they are anonymous and there is no need to trust them.  They cannot run with the money nor fail to redeem it.

   Lastly, simply depositing USD into an OT server does not earn me interest where as simply owning BitUSD will pay you dividends (from all trx fees in the market).  This makes it far more compelling to own BitUSD over OT USD.

I guess I would need to know more to be sure, but so far it seems intriguing. If it works (if this allows you to issue USD digitally without needing any USD issuer) then it would be great. I'm sure OT could take advantage of it.

  All of that said, I would love to know how we can work together to automate voting pools because I would like to have a trust-free way of transacting with BitUSD on a OT server.  This would provide a lot of privacy enhancements and help scale the transaction volume.

I assume it's blockchain-based. I think as long as the blockchain you are using supports multi-sig, then we could put "BitUSD" into a voting pool just as easily as putting BTC or colored coins. I'd definitely be interested in doing so, if you've managed to eliminate the issuer.

Let's say I actually have $100 cash USD -- how do I get it into the system?

Let's say I have $100 in BitUSD -- how do I get it back out into cash again?

As I said, intriguing idea so far.

[becoin]

 BitShares is a crypto-'currency' that allows users to take collateralized short positions in USD.  The collateral is measured in BitShares and the cost of going short equal to the cost of the USD you are short.

A collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan. The collateral serves as protection for a lender against a borrower's default. Users that take short positions in FedUSD are borrowers that receive BitUSD. Who is the lender that lends FedUSD?

While you are short your funds are tied up along with the proceeds you received by selling the BitUSD. This will force users to cover their short position in the future.  The loss of dividends enforces a carrying cost on the short position and a profit on the long position.

If I'm short I don't care that what I'm short of doesn't bring me dividends.

[bytemaster]

 BitShares is a crypto-'currency' that allows users to take collateralized short positions in USD.  The collateral is measured in BitShares and the cost of going short equal to the cost of the USD you are short.

A collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan. The collateral serves as protection for a lender against a borrower's default. Users that take short positions in FedUSD are borrowers that receive BitUSD. Who is the lender that lends FedUSD?

You have two people, A thinks that  Bitcoin is going UP relative to FedUSD and B thinks it is going down relative to FedUSD.   They both agree that *today* 1 BTC is worth 100 FedUSD so they both put in 1 BTC.   A essentially 'promises' B that he will buy back the BitUSD at the future price.  B trusts A's promise because the blockchain will enforce it long before A lacks sufficient funds.  The reason the blockchain can enforce it is because of the collateral. 

In this case no FedUSD actually had to change hands and no party actually had to own any FedUSD because all they did is make bets where the payout was proportional to the price change between BTC and FedUSD.  This is similar to a prediction market where the 'future outcome' is tomorrows exchange rate.

While you are short your funds are tied up along with the proceeds you received by selling the BitUSD. This will force users to cover their short position in the future.  The loss of dividends enforces a carrying cost on the short position and a profit on the long position.

If I'm short I don't care that what I'm short of doesn't bring me dividends.

Sure you do.  If you have 1 BTC paying you 10% / year.  You sell that 1 BTC into a Short position in 100 BitUSD and instead of receiving 100 BitUSD that you can spend, it is locked as collateral for your position.    Your initial condition was earning 10% / year on 1 BTC, your interim position while you are 'short' you are earning nothing if the BTC/USD price is not changing.   Therefore, there is a 10% opportunity cost and you would benefit from covering your position.

This is really no different than being short in the traditional stock market where you have to pay interest on the stock you have borrowed.  The difference is that my interest payments take the form of opportunity cost.

[bytemaster]

I assume it's blockchain-based. I think as long as the blockchain you are using supports multi-sig, then we could put "BitUSD" into a voting pool just as easily as putting BTC or colored coins. I'd definitely be interested in doing so, if you've managed to eliminate the issuer.

Let's say I actually have $100 cash USD -- how do I get it into the system?

Let's say I have $100 in BitUSD -- how do I get it back out into cash again?

As I said, intriguing idea so far.

Yes, blockchain based with multi-sig support.    

1 BitUSD will always have a market-value similar to a variable rate, interest bearing, AAA USD bond because it is fully backed by 1.5 to 2.5 times its value in BitShares held in the most secure / automated blockchain brokerage developers can code.  Therefore, you can buy and sell BitUSD via 'LocalBitShares', OTC, or any other system.    Because you are ultimately trusting the market and no BitUSD is tied to any individual, all BitUSD is fungible.  Because it is fungible it is divisible.

BitUSD is really just a hedge against price changes in the BitShare / USD exchange rate and that hedge is funded / provided by those who think BitShares are going to go up in value and are willing to bet their money on it.

[becoin]

You have two people, A thinks that  Bitcoin is going UP relative to FedUSD and B thinks it is going down relative to FedUSD.   They both agree that *today* 1 BTC is worth 100 FedUSD so they both put in 1 BTC.   A essentially 'promises' B that he will buy back the BitUSD at the future price.  B trusts A's promise because the blockchain will enforce it long before A lacks sufficient funds.  The reason the blockchain can enforce it is because of the collateral. 

Certainly, I can see the rationale behind your idea, bytemaster. But this is not a P2P exchange. Every exchange has 2 main functions - price discovery and delivery. Here I can see partial price discovery mechanism using alt blockchain. The delivery part is entirely missing.

Sure you do.  If you have 1 BTC paying you 10% / year. 

Well, then I don't have 1 BTC. I have an investment denominated in BTC having a face value of 1 BTC. The price discovery mechanism will eventually find the price of this investment instrument not the BTC itself!

[bytemaster]

You have two people, A thinks that  Bitcoin is going UP relative to FedUSD and B thinks it is going down relative to FedUSD.   They both agree that *today* 1 BTC is worth 100 FedUSD so they both put in 1 BTC.   A essentially 'promises' B that he will buy back the BitUSD at the future price.  B trusts A's promise because the blockchain will enforce it long before A lacks sufficient funds.  The reason the blockchain can enforce it is because of the collateral. 

Certainly, I can see the rationale behind your idea, bytemaster. But this is not a P2P exchange. Every exchange has 2 main functions - price discovery and delivery. Here I can see partial price discovery mechanism using alt blockchain. The delivery part is entirely missing.

Sure you do.  If you have 1 BTC paying you 10% / year. 

Well, then I don't have 1 BTC. I have an investment denominated in BTC having a face value of 1 BTC. The price discovery mechanism will eventually find the price of this investment instrument not the BTC itself!

I probably should have clarified, it my example I was using BTC in place of BTS.   There is clearly a difference between BitBTC and actual BTC as BitBTC pays dividends is and is backed by BitBTS and will have different transaction fees / etc.   

The 'delivery' is greatly simplified because instead of having to match price & location with LocalBitcoins all you really need to do is match location.   Instead of only appealing to those who want to use Bitcoins, BitUSD can appeal to anyone who wants to save USD and earn a return.  These two factors conspire to make BitUSD far more liquid on the local market than USD.

Further if you are going to do a multi-day escrow transaction involving a wire transfer then it is best to trade in BitUSD because you do not suffer exchange rate risk while your funds are in escrow. 

Through integration with Ripple we should be able to automate USD IOU exchanges for BitUSD and then allow you to withdraw your USD via BitStamp or the like. 

[Lethn]

I don't understand why people are so keen on clinging to hyperinflated paper money, especially with what has just happened in Detroit. A decentralised stock exchange I think would be entirely possible if it was just in cryptocurrencies. In fact just about anything can be possible in cryptocurrencies as long as it's all open source. The problem is though you're all trying to re-write the rulebook for paper money when central banks have it locked away in a safe under armed guard. I think it's pretty pointless, the only way you could make this work is if you found a friendly country to exchange money in, even then they are bound to come under all sorts of political pressure and maybe even embargo's etc. until they change.

Stick with precious metals and cryptocurrencies, the current system is a dying one and if they aren't going to be diplomatic with us I don't see why we should with them.