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Question: adapt open source software to enable turnkey creation of company coins for IPOs which can be traded p2p with bitcoins?
Great idea - 83 (76.1%)
Stupid idea - 8 (7.3%)
Not sure - 18 (16.5%)
Total Voters: 109

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Author Topic: stock coins? p2p virtual stock & debt equity / cryptostocks  (Read 9331 times)
prophetx (OP)
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September 23, 2013, 09:44:10 PM
Last edit: October 09, 2013, 06:08:53 PM by prophetx
 #21

The problem of how to secure a block chain is why coloured coins are so suitable for this kind of application. The whole blockchain thing is already taken care of for them.

-MarkM-


yeah I'd be interested to see what the options are around "coloured coins" and if it fits the needs no need to "reinvent the wheel" - Any recommended reading??



i posted some questions to killerstorm who i beleive is the main perosn working on that concept, and he has some responses here

https://bitcointalk.org/index.php?topic=106373.msg3214545#msg3214545

so overall it seems that it sort of works (but only on testnet?), but i do not understand yet how far away it is from actually working on the real blockchain.  

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September 23, 2013, 11:15:09 PM
 #22

Crapcoins of the day are not "ready for use" either. They are "ready to hand over your loot to anyone with more hashing power", which is NOT the use you hopefully want?

It'd be a massive amount more work to and sheer hardware and electricity cost to secure even just one blockchain let alone one per IPO, compared to just throwing money at programmers to get coloured coins finished off.

Do you want a pretend toy crappy little mickey-mouse pretend thing or some serious financial application software?

Also, what is the big deal about p2p / distributed? You have to trust the issuer regardless, else the crap is worthless. So might as well trust them to keep their server online, whether on Tor or whatever, and transact directly with them. (e.g. using Open Transactions, or Cyclos, or whatever the heck. Open Transactions has markets, altcoins, off the rack, don't and nor does Cyclos really,  just for sale / want to buy ads type of thing.)

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September 23, 2013, 11:56:54 PM
 #23

Crapcoins of the day are not "ready for use" either. They are "ready to hand over your loot to anyone with more hashing power", which is NOT the use you hopefully want?

It'd be a massive amount more work to and sheer hardware and electricity cost to secure even just one blockchain let alone one per IPO, compared to just throwing money at programmers to get coloured coins finished off.

Do you want a pretend toy crappy little mickey-mouse pretend thing or some serious financial application software?

Also, what is the big deal about p2p / distributed? YOu have to trust the issuer regardless, else the crap is worthless. So might as well trust them to keep their server online, whether on Tor or whatever, and transact directly with them. (e.g. using Open Transactions, or Cyclos, or whatever the heck.)

-MarkM-

so you bring up 2 issues, one whether p2p is required and two whether color coins are the answer.  let me know if i misunderstood.

#1 why p2p for this

addressing your question regarding the big deal about p2p. perhaps i misunderstood what you wrote but there are regulatory or legal requirements for running an exchange. no company wants distraction from their focus on their mission. thus they outsource stock issue and exchange operations.

if one is running exchange services for stocks one need to fulfill certain legal requirements, this is true in most countries.  however, the large exchanges are not going to do an IPO for JoeSmoe's ASIC Fund.  thus places like btc-tc pop up. and get shut down.

however people have always been able to take a stock certificate and sell it to another person, as far as i am aware that is still legal in most places.

so p2p allows a person to person exchange of stock, while ensuring that there are no forgeries, and the issuing company need not be involved in the exchange operations. and i presume then the regulatory issues that come with running an exchange.

it may be that miners however are somehow legally obligated under SEC regulations and other national securities authorities to do something.  i have no idea on this.


#2 regarding color coins.  

is it absolutely necessary?  or is there another way to handle the problem of bad actors?  

has anyone done a real analysis of the risks of relying on another blockchain where core developers are not necessarily concerned with other, one may call them parasitic or perhaps symbiotic, applications utilizing the network for tangential purposes?

someone needs to evaluate whether the entire bitcoin network of miners would fall under SEC jurisdiction as well as every other securities exchange governmental entity.  so it may be better to have separate networks for this purpose.  again there is the issue of all our eggs in one basket.

some alternatives:

one way is not to use sha256; bitmessage for example use sha512

another poster proposes limiting the initial miners. possibly the issuing company would be responsible for paying these miners, not sure how that works but if it is possible it is another solution.

-----

i don't think it is about just throwing money at something, that has never been the solution to a problem

i appreciate you taking the time to write all this, i think it is important to understand all of the issues technical and otherwise (bad actors, legal, etc.) that can come up
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September 24, 2013, 02:30:43 AM
 #24

I am pretty sure you have to know who owns your stocks, and that they are not "bearer instruments" thus people passing them around changes nothing, in essence the certificate they are passing around either says on it that it certifies that some specific person owns so many shares of whatever stock or it implicitly "says" that due to some kind of serial number or stock number specifying which share it is so the company or their share-tracking agent can look up who it is exactly that specific instance of the stock belongs to.

That is part of why it can take three days or so to "clear", the shares being exchanged have to be looked up to check who they belong to, then updated to reflect who they belong to now, and maybe the company the shares are shares of might even have to be notified, though maybe they might not need to know every minute, maybe they just have to submit at year-end or something an up to date list of who their shareholders are and how many shares each holds.

It does not seem likely that a company is going to be able to claim like "oh we are innocent, we trusted money-and-stock laundry unicorporated, a p2p network, to do all that legal paperwork for us, if its not done right you should go see them about it...

See for example http://www.quatloos.com/bearer_shares.htm

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September 24, 2013, 07:18:03 AM
Last edit: September 24, 2013, 09:04:24 AM by prophetx
 #25

I am pretty sure you have to know who owns your stocks, and that they are not "bearer instruments" thus people passing them around changes nothing, in essence the certificate they are passing around either says on it that it certifies that some specific person owns so many shares of whatever stock or it implicitly "says" that due to some kind of serial number or stock number specifying which share it is so the company or their share-tracking agent can look up who it is exactly that specific instance of the stock belongs to.

That is part of why it can take three days or so to "clear", the shares being exchanged have to be looked up to check who they belong to, then updated to reflect who they belong to now, and maybe the company the shares are shares of might even have to be notified, though maybe they might not need to know every minute, maybe they just have to submit at year-end or something an up to date list of who their shareholders are and how many shares each holds.

It does not seem likely that a company is going to be able to claim like "oh we are innocent, we trusted money-and-stock laundry unicorporated, a p2p network, to do all that legal paperwork for us, if its not done right you should go see them about it...

See for example http://www.quatloos.com/bearer_shares.htm

-MarkM-


That is a good point you bring up. Most likely the answer depends on jurisdiction.

Ultimately it is every individuals responsibility to abide by the tax laws of their jurisdiction, and each company's directors' to abide by the laws of the jurisdictions under which that company is formed.

And I suppose due to bitcoins nature we are presuming that this p2p network is completely anonymous.  If what is needed to make this kosher is peer recognition at the network level for the issuing entity I am sure no CEO will care as long as he can raise $1m for LatestGreatestIdeaCo.

Just because something is p2p does not mean the identities of participants are anonymous.

But at this point all the companies on btc-tc are likely breaking the law somewhere and they are not even using a p2p network making stock transfer a pain for shareholders.  So we can only improve the legal status of some companies and/or their shareholders by working on this and creating an infrastructure they can use.

I do think we need a lawyer to help out, otherwise we are like blind men stabbing in the dark.  Someone who is familiar with the new crowd funding exemptions and pink sheets.

for example, using registered identity and public blockchain tx record maybe just what is required to ensure these rules are enforced

http://www.sec.gov/info/smallbus/qasbsec.htm

Under JOBS Act crowdfunding, companies will be limited to raising $1 million in any 12-month period. Companies cannot crowdfund on their own, but will have to engage an intermediary that is registered with the SEC. These intermediaries will be subject to a number of requirements.

Individual investors will be limited in the amount they can invest by way of crowdfunding in any 12-month period to:

if your annual income or net worth is less than $100,000—the greater of $2,000 or 5 percent of annual income or net worth, or
 
if your annual income or net worth is more than $100,000—10 percent of annual income or net worth up to a maximum of $100,000.
(When calculating your net worth, you should not count the value of your primary residence.)

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September 24, 2013, 03:33:10 PM
 #26

Legality aside, I think an important first step would be not to get wrapped up in the legality of all this and instead get the underlying concept in place - than consider the legality of trading "Shares" as block-chain entries later if an exchange actually wants to implement it or we'd like to build our own...


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September 24, 2013, 06:29:52 PM
 #27

Legality aside, I think an important first step would be not to get wrapped up in the legality of all this and instead get the underlying concept in place - than consider the legality of trading "Shares" as block-chain entries later if an exchange actually wants to implement it or we'd like to build our own...
+1

Exactly. At this point, all legal arguments would be useless. It is as if Satoshi Nakamoto would have argued about the legality of bitcoin (e.g. is it allowed to mint a new currency). At that point (*EDIT* before it was released) the legality of bitcoin was absolutely unclear because nobody even knew how the system would work.
It's like arguing about the legality of file-sharing softwares before they were developed. Is it illegal? who knows? In the end it always depends on where and how you use it....
Would argue about the legality of building cars/rockets/whatever, before they were invented?

As long as it is not illegal to write an open-source software, then why argue about legality. In the end people will use it or not. Maybe it will be banned in some countries and not in others. And only if the technology is there, politicians will be able to decide about the legal framework.

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September 24, 2013, 09:51:39 PM
 #28

Well maybe ripple will be ideal then.

It avoids the hideously massive cost of paying "hashers" to secure a blockchain, yet anyone can issue assets.

So a company can issue share IOUs, redeemable for actual shares maybe even if someone wants to walk into the office of the secretary of the company or their share owner tracking service they employ if they have chosen not to be anonymous.

Dirt cheap, easy, already up and running, seems like a pretty obvious approach...

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September 25, 2013, 02:59:03 PM
 #29

Well maybe ripple will be ideal then.

It avoids the hideously massive cost of paying "hashers" to secure a blockchain, yet anyone can issue assets.

So a company can issue share IOUs, redeemable for actual shares maybe even if someone wants to walk into the office of the secretary of the company or their share owner tracking service they employ if they have chosen not to be anonymous.

Dirt cheap, easy, already up and running, seems like a pretty obvious approach...

-MarkM-


Sorry for my ignorance, but I don't understand how you could use ripple to trade stocks... You say that the company could issue stock-IOUs. But I couldn't trade these through the ripple network, because none of my friends would accept IOUs denominated in these stocks.

1) Isn't everything you are holding in the ripple network based on IOUs with one of your trusted friends?
So if I want to use ripple to buy a stock of some company I cannot easily transfer that stock through the ripple network considering that I have no friend who would accept that stock as an IOU.

2) Furthermore in ripple the company couldn't easily distribute dividends. In contrast, in a blockchain the public addresses of the shareholders would be known in the blockchains and therefore it would be easy to distribute dividends.

3) The same problem is if the company wants that the shareholders should vote for some investment strategy. In a blockchain like system it would be very easy to implement this using proof-of-stake.

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September 26, 2013, 12:31:16 AM
 #30

Ripple ledgers are public so you know what accounts hold how many of your stocks at any given iteration of a complete accurate ledger.

Your trusted friends are deprecated in modern Ripple, you are advised to trust a "gateway", in this case the secretary of the company, or the service they engage to track and handle their shares, would be the "gateway".

About the only aspect that isn't off hand known for sure right now by me is whether in RIpple you can designate a currency as integer-only, to prevent people from trading fractions of a share.

But if not then lobbying them to support integer "currencies" should commence ASAP if they never thought of this yet themselves.

-MarkM-

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September 26, 2013, 08:40:36 AM
 #31

Ripple ledgers are public so you know what accounts hold how many of your stocks at any given iteration of a complete accurate ledger.

Your trusted friends are deprecated in modern Ripple, you are advised to trust a "gateway", in this case the secretary of the company, or the service they engage to track and handle their shares, would be the "gateway".

About the only aspect that isn't off hand known for sure right now by me is whether in RIpple you can designate a currency as integer-only, to prevent people from trading fractions of a share.

But if not then lobbying them to support integer "currencies" should commence ASAP if they never thought of this yet themselves.

-MarkM-


Interesting I didnt initially think of ripple.  Might be worth looking into, they are supposed to go open  source imminently?

I dont know if the fractional thing is an issue, it may just be a contractual thing, unless their is some specific regulation but I have fractions of mutual fund shares
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September 26, 2013, 01:51:58 PM
 #32

If shares can be issued using ripple, wouldn't that make them dependent on ripple, i.e Open Coin?  I'm still figuring out ripple, so I could be wrong.  Whereas coloured coins would be much more secure, even if the exchange was a website and not in the bitcoin client the transactions would be stored in the blockchain (would they?), so if the exchange went down a new one could be put up and the shares would still be owned by their rightful owners.  Am I correct?
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September 26, 2013, 03:25:37 PM
 #33

If shares can be issued using ripple, wouldn't that make them dependent on ripple, i.e Open Coin?  I'm still figuring out ripple, so I could be wrong.  Whereas coloured coins would be much more secure, even if the exchange was a website and not in the bitcoin client the transactions would be stored in the blockchain (would they?), so if the exchange went down a new one could be put up and the shares would still be owned by their rightful owners.  Am I correct?

Yes and no. It depends...

If OpenCoin open sources their ledger server code as they are supposed to and therefore anyone can run a ledger server if should be possible?

... I have not been following them as of late, but if that is the scenario then it would make sense.  

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October 07, 2013, 08:47:00 PM
 #34

sorry for the delay but i have an initial document for this effort located here.'

i have tried to separate out different efforts so that people from different backgrounds (technical/development, business/marketing, regulatory/legal) can contribute.

the doc should be free to edit

https://docs.google.com/document/d/10YdUCKQ8MLOrjpxZtuQc6PhBVfThX6XU-stTOfGSOQE
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October 07, 2013, 10:13:32 PM
 #35

I have added a voice of customer survey i am working on for this

https://docs.google.com/forms/d/1MIIQCdFV_TutvsL3UqIUHVOrjdrEWlK9vI_XgTZcQmM/edit

feel free to add others or post them to this forum first

first two questions are:

QUESTION 1

Identify your involvement in the use of digital stock or debt equity: *
 have traded stock or debt equity (i.e., perpetual mining bonds)
 have used an online exchange to trade
 have used a message board, email or chat to trade
 have issued stock or debt equity as a company owner
 have participated in the issue of stock or debt equity as an intermediary (you run an exchange or pass through, not a company representative)
 None of the above

QUESTION 2

Rate how important is having physical possession of a financial instrument? *
For example, with bitcoins a person can hold them "physically" in a private key print out or on their own computing device (USB stick etc).

Not Important at All                     Very Important
0
1
2
3
4
5

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October 08, 2013, 10:51:10 PM
 #36

just a quick update

so i started this thread to give away "shares" in a proof of concept, whenever you all on the tech side have something working that can be tested.

https://bitcointalk.org/index.php?topic=307417.msg3295590#msg3295590

go add a comment so you all can be on the list

my main purpose is to build you a userbase, and also use it as a promotional tool so that perhaps we can attract more developers to the effort.  the guys at ripple/opencoin did something similar and i think it appeared to work well for them.

if things go well at some point i envision working with the exchanges or the bitcoin crowd funding folks to raise some money so you all can get financial support.

i'm thinking it would be cool to have a system that uses data from sourceforge (ohloh.com) or github to compensate people based on code lines, check ins, etc...but that's way down the line and I have no clue how that would even work...
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October 09, 2013, 03:06:01 AM
 #37

The problem of how to secure a block chain is why coloured coins are so suitable for this kind of application. The whole blockchain thing is already taken care of for them.

-MarkM-


yeah I'd be interested to see what the options are around "coloured coins" and if it fits the needs no need to "reinvent the wheel" - Any recommended reading??



i posted some questions to killerstorm who i beleive is the main perosn working on that concept, and he has some responses here

https://bitcointalk.org/index.php?topic=106373.msg3214545#msg3214545

so overall it seems that it sort of works (but only on testnet?), but i do not understand yet how far away it is from actually working on the real blockchain.  



Any solution should be builtin to the blockchain itself. It wouldn't be hard to set up an altcoin called stockcoin, use Colored coin or Mastercoin and run that. Hops is one way of doing it, Mastercoin is another, Bitshares is another, Freimarket is another.

What is needed is a kickstarter and bounty system of some sort to get it built.
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October 09, 2013, 10:49:01 AM
 #38



Any solution should be builtin to the blockchain itself. It wouldn't be hard to set up an altcoin called stockcoin, use Colored coin or Mastercoin and run that. Hops is one way of doing it, Mastercoin is another, Bitshares is another, Freimarket is another.

What is needed is a kickstarter and bounty system of some sort to get it built.

ok thanks Luckybit. 

just for everyone's reference, these are the documents relating to Hops (very early stage)

https://bitcointalk.org/index.php?topic=297147.0
https://anonfiles.com/file/14d9ed0ebc60f2fc30bc596c49e7b61f

---
Looks like I will need to create some kind of feature/etc matrix for all of these.

So far the candidates appear to be:

Altcoin/bitcoin clone
Colored coin / bitcoinx
Mastercoin
Bitshares (not exactly an option since it is not FOSS but worth knowing the feature set)
Ripple (something similar to DYM https://bitcointalk.org/index.php?topic=149533.0)
Freimarket
OT

anyone want to throw in anything else?
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October 10, 2013, 10:36:15 PM
 #39

In case you missed the news... bitfunder no longer available for US entities...


Important Notice (October 8th, 2013):

Please be advised that BitFunder is implementing the following rules and procedures:

As of October 8th, 2013, BitFunder will not accept new registrations from any United States persons or entities. All new registrants must supply the information required to obtain "Verified" status on their linked WeExchange account. BitFunder may, in its sole direction, decline to accept any new registrations.

As of October 8th, 2013, all current BitFunder users who are located in the United States or are determined to be United States persons or entities will not be able to enter into any new positions on the Bitfunder website, and, as of November 1, 2013, such users will also not be allowed to sell positions on the BitFunder website.

All current BitFunder users who are not United States persons or entities must supply the information required to obtain "Verified" status on their linked WeExchange account before November 1, 2013. Any such users who fail to provide the necessary information will not be able to enter into or sell positions on the BitFunder website as of November 1, 2013.

Users will be able to withdraw holdings and Bitcoins from their BitFunder accounts before and after November 1, 2013.

All assets and issuers must demonstrate that they meet BitFunder's requirements for the listing of assets, or the assets and issuers will, at BitFunder's sole discretion, be denied access to, or removed from, the site. Issuers will be notified of any additional information needed to demonstrate compliance with BitFunder's requirements.

BitFunder appreciates your understanding in these matters as we move forward.

Sincerely,
BitFunder
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October 11, 2013, 11:03:33 PM
 #40

Saw this ... another one bites the dust. Shoot I need to update my list! Like half of them are gone in the last month...

In case you missed the news... bitfunder no longer available for US entities...


Important Notice (October 8th, 2013):

Please be advised that BitFunder is implementing the following rules and procedures:

As of October 8th, 2013, BitFunder will not accept new registrations from any United States persons or entities. All new registrants must supply the information required to obtain "Verified" status on their linked WeExchange account. BitFunder may, in its sole direction, decline to accept any new registrations.

As of October 8th, 2013, all current BitFunder users who are located in the United States or are determined to be United States persons or entities will not be able to enter into any new positions on the Bitfunder website, and, as of November 1, 2013, such users will also not be allowed to sell positions on the BitFunder website.

All current BitFunder users who are not United States persons or entities must supply the information required to obtain "Verified" status on their linked WeExchange account before November 1, 2013. Any such users who fail to provide the necessary information will not be able to enter into or sell positions on the BitFunder website as of November 1, 2013.

Users will be able to withdraw holdings and Bitcoins from their BitFunder accounts before and after November 1, 2013.

All assets and issuers must demonstrate that they meet BitFunder's requirements for the listing of assets, or the assets and issuers will, at BitFunder's sole discretion, be denied access to, or removed from, the site. Issuers will be notified of any additional information needed to demonstrate compliance with BitFunder's requirements.

BitFunder appreciates your understanding in these matters as we move forward.

Sincerely,
BitFunder

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