[IPVO] [Multiple Exchanges] Neo & Bee - LMB Holdings

[N_S]

My views on decentralization as an undesirable concept: https://bitcointalk.org/index.php?topic=308012.msg3309753#msg3309753

Could the same argument not be made for bitcoin itself? Specifically the proposed inevitable centralization of mining?

[ThickAsThieves]

My views on decentralization as an undesirable concept: https://bitcointalk.org/index.php?topic=308012.msg3309753#msg3309753

Could the same argument not be made for bitcoin itself? Specifically the proposed inevitable centralization of mining?

Mining will grow centralized over time, it's already happening.

Bitcoin itself is not as simple to put in this box, as bitcoin is first a protocol, second a commodity, and third a currency. Arguably none of those things are centralized nor decentralized, as they are concepts, not services or products or the like.

[N_S]

Mining will grow centralized over time, it's already happening.

Bitcoin itself is not as simple to put in this box, as bitcoin is first a protocol, second a commodity, and third a currency. Arguably none of those things are centralized nor decentralized, as they are concepts, not services or products or the like.

With the introduction of a concept like colored coins, a certain colored coin that represented shares in a company would, by definition, be grouped in a similar definition as bitcoin itself, no? Simply substitute "shares of Company X" in for "currency" above. I think this is what many people are getting at when referring to decentralized exchanges.

[ThickAsThieves]

Mining will grow centralized over time, it's already happening.

Bitcoin itself is not as simple to put in this box, as bitcoin is first a protocol, second a commodity, and third a currency. Arguably none of those things are centralized nor decentralized, as they are concepts, not services or products or the like.

With the introduction of a concept like colored coins, a certain colored coin that represented shares in a company would, by definition, be grouped in a similar definition as bitcoin itself, no? Simply substitute "shares of Company X" in for "currency" above. I think this is what many people are getting at when referring to decentralized exchanges.

But that ignores the very reason exchanges exist: To provide a convenient, popular, trustworthy, efficient marketplace. Stocks are more than ledgers, they are an entire economy themselves.

This economy is made useful (and profitable) by Exchanges, Investments Banks, Investors, and the Businesses/Financial Instruments made available by and for those parties.

In addition to having this popular marketplace, made of these (centralized) powers, the separation, and expectation of having those powers in place, provides an environment where all 4 parties' interests can be aligned, and thus thrive.

If you break all this into pieces (decentralization), you lose most of benefits of this system, and swap them for only a literal protocol that takes its place.

Everywhere you look in the world, you will find systems defending my argument. In nature, in finance, in society, in politics, it's the very way of life and the universe itself.

[N_S]

But that ignores the very reason exchanges exist: To provide a convenient, popular, trustworthy, efficient marketplace. Stocks are more than ledgers, they are an entire economy themselves.

This economy is made useful (and profitable) by Exchanges, Investments Banks, Investors, and the Businesses/Financial Instruments made available by and for those parties.

In addition to having this popular marketplace, made of these (centralized) powers, the separation, and expectation of having those powers in place, provides an environment where all 4 parties' interests can be aligned, and thus thrive.

If you break all this into pieces (decentralization), you lose most of benefits of this system, and swap them for only a literal protocol that takes its place.

Everywhere you look in the world, you will find systems defending my argument. In nature, in finance, in society, in politics, it's the very way of life and the universe itself.

I may be missing you.

I'm not sure how having shares of a stock represented by a specific colored coin, breaks the economy you've outlined? Since these colored coins/shares are being absorbed by the existing bitcoin ecosystem, I'd imagine convenience, popularity, trustworthiness, and efficiency would simply adjust to wherever bitcoin as a whole ranks in those areas.

Am I mistaken?

[fr33d0miz3r]

In addition to having this popular marketplace, made of these (centralized) powers, the separation, and expectation of having those powers in place, provides an environment where all 4 parties' interests can be aligned, and thus thrive.

If you break all this into pieces (decentralization), you lose most of benefits of this system, and swap them for only a literal protocol that takes its place.

Everywhere you look in the world, you will find systems defending my argument. In nature, in finance, in society, in politics, it's the very way of life and the universe itself.

People only need a "centralized entry point" or a "centralized brand name". But the technological structure of it must/can be decentralized.
"Bitcoin" is like a centralized brand name. But technically (inside) Bitcoin is a decentralized network. All people around here know about Bitcoin (the most popular digital currency), but the centralized thing here is only its name.

It's like gold. All people know about gold. It's a centralized "brand name". But gold itself is decentralized. Yes, some people have a lot of gold, and other people have not any piece of gold. Some corporations have a lot of power for gold mining. But gold is still a decentralized currency anyway - with the "centralized brand name".

Another example: BitTorrent. Everyone knows about this network. Everyone downloads the same BitTorrent client and everyone can use the same torrent tracker website(s) to get new torrent files. But it's only a "centralized brand name". Technically it's a decentralized network.

That's what people need: centralized brand names / entry points with decentralized internal structure.

[bitrich]

In addition to having this popular marketplace, made of these (centralized) powers, the separation, and expectation of having those powers in place, provides an environment where all 4 parties' interests can be aligned, and thus thrive.

If you break all this into pieces (decentralization), you lose most of benefits of this system, and swap them for only a literal protocol that takes its place.

Everywhere you look in the world, you will find systems defending my argument. In nature, in finance, in society, in politics, it's the very way of life and the universe itself.

People only need a "centralized entry point" or a "centralized brand name". But the technological structure of it must/can be decentralized.
"Bitcoin" is like a centralized brand name. But technically (inside) Bitcoin is a decentralized network. All people around here know about Bitcoin (the most popular digital currency), but the centralized thing here is only its name.

It's like gold. All people know about gold. It's a centralized "brand name". But gold itself is decentralized. Yes, some people have a lot of gold, and other people have not any piece of gold. Some corporations have a lot of power for gold mining. But gold is still a decentralized currency anyway - with the "centralized brand name".

Another example: BitTorrent. Everyone knows about this network. Everyone downloads the same BitTorrent client and everyone can use the same torrent tracker website(s) to get new torrent files. But it's only a "centralized brand name". Technically it's a decentralized network.

That's what people need: centralized brand names / entry points with decentralized internal structure.

agreed, I like the idea of colored coins, we could have as many centralized exchanges as we want to trade on, and when one goes down another could always pop up. We could also trade directly P2P as we choose. I'm not sure how this would break the economy either. In fact I think it would expand it. You could have central exchanges with higher or lower requirements for security issuers and this would dictate the risk level. People could choose where they want to trade based on their personal taste or trading strategy, the shares would also be traded privately in a truly open p2p market. People would use the exchanges to calculate share value. Just like bitcoins except marked coins representing company shares. I love it and I hope if anything all this disruption causes programmers and devs to move faster to get something pushed out that we can test and begin developing as a community. This is one reason bitcoin has done so well, we don't need middle men. We still have them, but we can choose. We can buy shares from a company on one exchange and we can trade there or do whatever we want with them but we control them entirely. But of course I don't know everything so please elaborate on why colored coins, mastercoin or something like that would destroy the economy.

[KSV]

Are you saying only the USA has an SEC type institution?
Has there been a single prosecution of a company which you can hold up to show that the SEC is persecuting Bitcoin companies?

Excluding US citizens isn't a solution which benefits the Bitcoin community. It benefits governments who would love to see the Bitcoin community divided along national lines afraid of the SEC or some other institution.

The only result of this is that the centralized exchange idea will be pushed aside because if centralized exchanges divide the community by nationality then it's becoming another kind of nationalist institution which goes against the entire purpose of Bitcoin. Bitcoin is a global currency.

The only real solution if you're going to follow the philosophy of Bitcoin is to decentralize the stock market just as Bitcoin is. This set of events will set into motion that process because I just can't see people trusting an unregistered unregulated market like Bitfunder, Havelock or any of these when they can just wait for crowdfunding law to take effect and go to SecondMarket and buy real shares in a regulated exchange.

Bitfunder is trying to avoid US regulation, under the impression that the market somehow needs their particular solution. It's about supply and demand and they can no longer supply US customers which take up a vast majority of the market. You also have to look at the situation as a fork in the road.

Do we want to be users, or do we want to be customers? If we build a decentralized solution then we are the users and we don't need to trust anybody. The congress would have to negotiate directly with users to set regulations. If we go the centralized route then you have to trust a central authority who will make decisions on your behalf and all the problems associated with that. On top of that you have to pay them a fee for the privilege.

I just don't see any benefit for US citizens to go any route but the decentralized route at this point and this is partially because trust has been permanently breached and the business model of the centralized exchange depends entirely on trust. The SEC has the role to try and protect the interests of customers, but if customers are taken out of the equation then it's just the users and the users have to define themselves because Bitcoin is not USD.

Miners generate coins, but miners are considered users and not money transmitters. If they are considered money transmitters then they have to get together and lobby to change the rules so that it makes snese for the industry and for the technology. The same will have to happen with Bitcoin stocks, otherwise there will be no Bitcoin stocks as people will just go back to trading the real stocks and not bother with it.

I was agreeing with your conclusion.

The real question is where do we go from here?
No one seems to have figured that out. Will NeoBee go on Second Market when the new law takes effect for unaccredited investors? If they will then that is one way of dealing with it.

The next 6 months will see a lot of changes I predict for the better, but I think at the moment the lock-out ideas only do harm and I don't understand why the timing would be right now when crowdfunding is set to take effect in a matter of months making all of this legal.

I think issuers and companies should just wait it out. I think Bitfunder didn't want to wait it out because they are Americans and the FBi is currently arresting Silk Road and others. I also don't think they intended on complying with regulations when the law does take effect or perhaps it is too expensive for them to do it which could explain.

simple, all un-accredited investors enter into a "GB" like scenario with an accredited investor and he/she invests on your behalf But it looks like coloured coins are the way moving forward.

Ps: i m an accredited investor, and willing to help as much as possible.

[Luckybit]

My views on decentralization as an undesirable concept: https://bitcointalk.org/index.php?topic=308012.msg3309753#msg3309753

Could the same argument not be made for bitcoin itself? Specifically the proposed inevitable centralization of mining?

Mining will grow centralized over time, it's already happening.

Bitcoin itself is not as simple to put in this box, as bitcoin is first a protocol, second a commodity, and third a currency. Arguably none of those things are centralized nor decentralized, as they are concepts, not services or products or the like.

It's only happening with Bitcoin. It's not happening as quickly with Litecoin. You're right that mining as it currently is set up will become centralized over time.

However it should be the role of the community to philosophically design future protocols in altcoins and future technologies to resist centralization for as long as possible and to maintain decentralization for as long as possible.

It's very much like saying that over time any encryption will probably be broken or any technology will eventually be hacked. In information security it's usually not the math that breaks first, but the people. People are usually the ones who get put in central authority and become corrupt as power goes to their head. We should expect to see that in the Bitcoin community just like it exists in every other community. The design of any protocol should have precisely that in mind and consider the human the weakest link in the protocol. Any protocol which relies on faith in the goodness of humanity is doomed to fail.

The protocol which relies on faith in mathematics has a chance. Mathematics say you have no absolutely secure system but you can improve the security of an information system by making it extremely expensive to break it. If it's very expensive to break it's not as likely to be broken. Bitcointalk was cheap to break, Bitcoin is expensive to break. The reason Bitcoin is expensive to break is because of the hashrate making a 51% attack expensive (but never impossible). If mining became centralized into one centralized authority then it's already broken because whoever controls that already owns Bitcoin.

This is why altcoins have to constantly be created and why users should not be too attached to Bitcoin. When each altcoin has a different group of miners mining it with completely different technologies then it makes it a lot more difficult to centralize. Some coins will only mine with CPUs, some will mine with GPUs, some like Netcoin will require a bunch of different hardware which will routinely switch, and in my opinion that is where the actual arms race is.

It's not in mining, or in who can get the most hashrate, it's in who can design the most secure and decentralized technology to cater to and facilitate the cryptocurrency community as a whole. The cryptocurrency community's needs can be represented by where the money is being spent and what the community likes to do, because as of right now we don't have much in the way of voting.

There are risks and benefits to any tool. I do not advocate creating tools which have far more risks than benefits. I do not advocate creating tools which create victims or which hurt people. In the case of a decentralized stock market I don't believe that tool hurts anyone. It's as neutral as Bitcoin itself is and the only people who wouldn't like it are people who control the current centralized stock market and even those people know that crowd sourcing laws are coming online. The writing is on the wall.

[cryptocyprus]

Apologies for a lack of updates, I have been extremely busy on the ground.

I spoke yesterday at a conference and the video shall be made available upon receipt of the footage.

In relation to a solution for the issues now faced with BitFunder for US based investors, we are working hard to find a long term solution for investors around the world including those in the US. We do not want to make a statement, manage a migration and then be in the same position within another 4 weeks. We do have plans that were in place prior to the announcements, however I am going to ensure it is sustainable for the long term.

We are not going to be seeing a decentralized currency exchange for quite some time and I personally believe the currency markets will happen before a securities exchange. The idea is a good one in theory but in reality I believe that outside of the tech bubble most of us operate within, investors and the general public will not change behaviours at a rate some believe they will. Centralized exchanges are here for the long term. This is just my opinion on that particular matter.

[memvola]

But that ignores the very reason exchanges exist: To provide a convenient, popular, trustworthy, efficient marketplace. Stocks are more than ledgers, they are an entire economy themselves.

This economy is made useful (and profitable) by Exchanges, Investments Banks, Investors, and the Businesses/Financial Instruments made available by and for those parties.

In addition to having this popular marketplace, made of these (centralized) powers, the separation, and expectation of having those powers in place, provides an environment where all 4 parties' interests can be aligned, and thus thrive.

If you break all this into pieces (decentralization), you lose most of benefits of this system, and swap them for only a literal protocol that takes its place.

Everywhere you look in the world, you will find systems defending my argument. In nature, in finance, in society, in politics, it's the very way of life and the universe itself.

Centralization is easy, decentralization is hard. That's why people flock to centralized solutions. So, although it's a bit of an exaggeration to say that the systems "defend" your argument (they don't, they are just not good enough), I partially agree with you. But we should keep things in perspective and calculate the trade-off's. I remember Nefario making the same argument about a centralized stock exchange.

Companies can keep track of shareholders easily in an automated manner. And accredited investors can run centralized pass-throughs. This is very doable without resorting to future tech. So, let's discuss the downsides.

Convenience: Agreed. Shareholders would have to keep track of issuing companies and relevant escrows. A proper decentralized system that doesn't need an escrow and can harvest a list of issuers will solve this completely and would be even more convenient than having accounts in multiple exchanges. However, in the current atmosphere, it is even less convenient to invest through a centralized exchange, so to me the issue is moot. Will we have risk-free legal exchanges sooner than the proposed decentralized solution? I doubt it.

Popularity: Not sure about this one. Any solution can become popular. If all companies kept their own list of shareholders using the same protocol, there would still be centralized directories and easy to use tools to trade their shares. This isn't as hard a problem as creating a completely decentralized exchange system.

Trust: Disagreed. Is the trust to current exchanges satisfactory? My trust to friedcat is higher than friedcat+exchangeoperator+PToperator. This should be obvious. Although, until we have some system that works without an escrow, there is that.

Efficiency: Agreed. Centralized solutions will always be more efficient. No doubt about that.

Bitcoin actually is a good example.

Bitcoin itself is not as simple to put in this box, as bitcoin is first a protocol, second a commodity, and third a currency. Arguably none of those things are centralized nor decentralized, as they are concepts, not services or products or the like.

We are certainly talking about Bitcoin as a solution to currency. The protocol, the commodity and the currency are all alternatives to centralized systems, so it fits perfectly. It also fits to your above criteria. Central solutions are far more efficient. Transactions are instant, and they can implement any solution to any problem that may arise almost immediately without having to invent a new technology. The protocol is extremely resilient, because you don't need to implement Byzantine fault tolerance. So on and so forth.

Yet, Bitcoin thrives. I have no doubt that people will always prefer a decentralized stock exchange whenever a proper one is developed. Until then, all companies should have a relationship with the shareholders directly. Legal downsides of this is up for discussion, however.

[memvola]

Centralized exchanges are here for the long term. This is just my opinion on that particular matter.

Are you considering an option for those who want their shares to be directly managed my you? I'm a long term non-US investor who would rather give the details of my identity to you than an exchange.

I personally consider centralized exchanges hazardous, and I wouldn't have invested more than a hundred XBT in this company if I knew in advance that I would have to give my identity details to an entity I can't reason about.

[cryptocyprus]

The reasoning behind using a platform and not direct handling of shares for ourselves is down to the man hours required to operate on such a basis, we are operating in the real world, we have multiple aspects of the business that need constant oversight and attention, for myself to assign someone for the task is achievable however it comes at a cost to the business, we as a business do not specialize in the trading of shares or have a platform capable of doing so (at the moment) so the best solution is to operate using the platforms available to us. Do things need to change surrounding these platforms? YES they do, whilst we are investigating the matter in great detail we cannot provide a solution overnight.

[memvola]

whilst we are investigating the matter in great detail we cannot provide a solution overnight.

Sure. Please consider Jeff's solution, as it will occupy far less man hours if properly implemented. Also, the urgency arises because of the WeExchange verification deadline. Since you already have the asset holdings list, it may be possible to convert to direct shares even after the deadline, which would relieve the urgency, although I don't know what sort of protocol would be needed in order to remove those shares from BitFunder.

[Fabrizio89]

[...]

I think most of the people just wanted to know that you have a constantly updated list of all shareholders on Bitfunder and they can rely on it.
Thanks for the update.

[Stelios]

Are you saying only the USA has an SEC type institution?
Has there been a single prosecution of a company which you can hold up to show that the SEC is persecuting Bitcoin companies?

Excluding US citizens isn't a solution which benefits the Bitcoin community. It benefits governments who would love to see the Bitcoin community divided along national lines afraid of the SEC or some other institution.

The only result of this is that the centralized exchange idea will be pushed aside because if centralized exchanges divide the community by nationality then it's becoming another kind of nationalist institution which goes against the entire purpose of Bitcoin. Bitcoin is a global currency.

The only real solution if you're going to follow the philosophy of Bitcoin is to decentralize the stock market just as Bitcoin is. This set of events will set into motion that process because I just can't see people trusting an unregistered unregulated market like Bitfunder, Havelock or any of these when they can just wait for crowdfunding law to take effect and go to SecondMarket and buy real shares in a regulated exchange.

Bitfunder is trying to avoid US regulation, under the impression that the market somehow needs their particular solution. It's about supply and demand and they can no longer supply US customers which take up a vast majority of the market. You also have to look at the situation as a fork in the road.

Do we want to be users, or do we want to be customers? If we build a decentralized solution then we are the users and we don't need to trust anybody. The congress would have to negotiate directly with users to set regulations. If we go the centralized route then you have to trust a central authority who will make decisions on your behalf and all the problems associated with that. On top of that you have to pay them a fee for the privilege.

I just don't see any benefit for US citizens to go any route but the decentralized route at this point and this is partially because trust has been permanently breached and the business model of the centralized exchange depends entirely on trust. The SEC has the role to try and protect the interests of customers, but if customers are taken out of the equation then it's just the users and the users have to define themselves because Bitcoin is not USD.

Miners generate coins, but miners are considered users and not money transmitters. If they are considered money transmitters then they have to get together and lobby to change the rules so that it makes snese for the industry and for the technology. The same will have to happen with Bitcoin stocks, otherwise there will be no Bitcoin stocks as people will just go back to trading the real stocks and not bother with it.

I was agreeing with your conclusion.

+1

[Stelios]

In addition to having this popular marketplace, made of these (centralized) powers, the separation, and expectation of having those powers in place, provides an environment where all 4 parties' interests can be aligned, and thus thrive.

If you break all this into pieces (decentralization), you lose most of benefits of this system, and swap them for only a literal protocol that takes its place.

Everywhere you look in the world, you will find systems defending my argument. In nature, in finance, in society, in politics, it's the very way of life and the universe itself.

People only need a "centralized entry point" or a "centralized brand name". But the technological structure of it must/can be decentralized.
"Bitcoin" is like a centralized brand name. But technically (inside) Bitcoin is a decentralized network. All people around here know about Bitcoin (the most popular digital currency), but the centralized thing here is only its name.

It's like gold. All people know about gold. It's a centralized "brand name". But gold itself is decentralized. Yes, some people have a lot of gold, and other people have not any piece of gold. Some corporations have a lot of power for gold mining. But gold is still a decentralized currency anyway - with the "centralized brand name".

Another example: BitTorrent. Everyone knows about this network. Everyone downloads the same BitTorrent client and everyone can use the same torrent tracker website(s) to get new torrent files. But it's only a "centralized brand name". Technically it's a decentralized network.

That's what people need: centralized brand names / entry points with decentralized internal structure.

agreed, I like the idea of colored coins, we could have as many centralized exchanges as we want to trade on, and when one goes down another could always pop up. We could also trade directly P2P as we choose. I'm not sure how this would break the economy either. In fact I think it would expand it. You could have central exchanges with higher or lower requirements for security issuers and this would dictate the risk level. People could choose where they want to trade based on their personal taste or trading strategy, the shares would also be traded privately in a truly open p2p market. People would use the exchanges to calculate share value. Just like bitcoins except marked coins representing company shares. I love it and I hope if anything all this disruption causes programmers and devs to move faster to get something pushed out that we can test and begin developing as a community. This is one reason bitcoin has done so well, we don't need middle men. We still have them, but we can choose. We can buy shares from a company on one exchange and we can trade there or do whatever we want with them but we control them entirely. But of course I don't know everything so please elaborate on why colored coins, mastercoin or something like that would destroy the economy.

+1

[mutex]

I think most of the people just wanted to know that you have a constantly updated list of all shareholders on Bitfunder and they can rely on it.

It's actually public: https://bitfunder.com/assetlist

[ThickAsThieves]

The reasoning behind using a platform and not direct handling of shares for ourselves is down to the man hours required to operate on such a basis, we are operating in the real world, we have multiple aspects of the business that need constant oversight and attention, for myself to assign someone for the task is achievable however it comes at a cost to the business, we as a business do not specialize in the trading of shares or have a platform capable of doing so (at the moment) so the best solution is to operate using the platforms available to us. Do things need to change surrounding these platforms? YES they do, whilst we are investigating the matter in great detail we cannot provide a solution overnight.

Additionally, people need the convenience of being able to trade on an exchange. The forum tends to respond in extremes, first people will yearn for decentralization, private shares, etc. But if that's where they started, they'd be yearning for convenience, etc.

Neither way is wrong or right, but it's certainly more useful (to all parties) to have a platform.

[jgarzik]

All a shareholder registry needs is a robot/service that receives and verifies digitally-signed messages, updating a ledger of share accounts.  This can be automated today using GPG tools, if PGP is used, or bitcoind, if ECDSA is used.

Other parties -- as shown in the past -- will create pass-through entities for the various exchanges that exist.


Frankly, I would not trust a third party to 100% manage my company's shareholder list.  But that's a business decision.  Plenty of Fortune 500 companies hire a 3rd party platform to manage their shareholder registry.