P2P EXCHANGE

[flix]

----I have withdrawn the bounty due to lack of interest----


There are several teams working on P2P Bitcoin Exchanges based on a completely decentralised, no-third party trust required, no need to know your counterparty, zero fee models.

I am very much looking forward to this exciting tech coming online, and I want to give the guys working on it an extra incentive to hurry up and get it out there.

So I propose a bounty for the developers to first release an open source P2P exchange software. If we can get a decent-sized bounty going maybe that will give these developers a good reason to work on this full time.


You don't have to send me (or anyone) BTCs, just state your pledges here. I trust you guys to pay up when the time comes!


As well as your pledges, I welcome your suggestions on what conditions the software should meet to deserve our reward.

Needless to say the benefits of such a development would be huge for anybody holding or using bitcoins. It would  remove a major vulnerability for the network embodied by the centralised exchanges. It would make Bitcoin accessible to a much wider audience. It would make regulation of Bitcoin exchangers irrelevant. It would remove exposure to the banking network with its delays and unending rules. It would make knowing your counterparty and his reputation unnecessary.

CONDITIONS

1. Open source
2. No third-party trust required (no third party escrow, server, website, etc..)
3. No commissions (except for network fees)
4. No need for identity verification. No need for reputation.
5. Include a mechanism that ensures that transactions, once initiated, are completed.
6. Allows users to exchange $ € ¥  <--> BTC within hours.

[1713893688]

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[1713893688]

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[1713893688]

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[flix]

----reserved----

[bybitcoin]

Mastercoin and Coloredcoins both are working for obtaining this objective, both good projects, first one with huge funding and second with a good development bounty. There is another one, claiming to pay dividends too, but it is an obvious ponzi.
Nxt and eMunie both will have p2pexchanges natively attached (both altcoins). Nxt is a pure POS and will be launched in a few days..
And there is Freimarkets which called for crowd funding to start developing the whitepaper scheme, but the last time I spoke with its creator, he told me that crowd funding has not been satisfactory yet (about month ago)
Among those three (mastercoin-coloredcoin-freimarket) I found freimarket the advanced one, you may have a look into their whitepapers each to decide for yourself. Also Nxt if what its creator said before become true will be a very suitable choice to use for trading securites (decentralized coloredcoin exchange+instant transactions+internal messaging+decentralized DNS features). This is to be seen soon in practice of course. eMunie will be launched in January with several similar advanced features promised. There is the possibility to use these altcoins as a dilemma to exchange btc securities, commodities or any other token.. Have a look into them as well.

[flix]

Mastercoin and Coloredcoins both are working for obtaining this objective, both good projects, first one with huge funding and second with a good development bounty. There is another one, claiming to pay dividends too, but it is an obvious ponzi.
Nxt and eMunie both will have p2pexchanges natively attached (both altcoins). Nxt is a pure POS and will be launched in a few days..
And there is Freimarkets which called for crowd funding to start developing the whitepaper scheme, but the last time I spoke with its creator, he told me that crowd funding has not been satisfactory yet (about month ago)
Among those three (mastercoin-coloredcoin-freimarket) I found freimarket the advanced one, you may have a look into their whitepapers each to decide for yourself. Also Nxt if what its creator said before become true will be a very suitable choice to use for trading securites (decentralized coloredcoin exchange+instant transactions+internal messaging+decentralized DNS features). This is to be seen soon in practice, you may have a look too. eMunie will be launched in January with several similar advanced features promised. There is the possibility to use these altcoins as a dilemma to to exchange btc securities, commodities and any other token.. Have a look into them too.

..that's a lot more people working on this than I thought.  Thanks.

MasterCoin white paper:   https://github.com/mastercoin-MSC/spec
Coloredcoins:                  http://coloredcoins.org/
Freimarkets:                   http://freico.in/docs/freimarkets-v0.0.1.pdf
Pauv:                            http://pauv.org/paper.pdf
Emunie                          http://emunie.com/
DACs                            http://invictus-innovations.com/i-dac/  
Factum Exchange            http://xk.io/wp/?p=34
Elqnt Exchange                https://secure.elqnt.org/

DO you have ETAs for a working P2P exchange that can be used to exchange BTC<->$ from any of these?

[bluemeanie1]

all the projects I've looked at in this realm don't have anything concrete.  The color coins people have an idea that in my view is not really a 'P2P Exchange' or even a Distributed Exchange.  I did talk to a developer not so long ago who was working on some ideas, but he hadn't made much progress.

I have already described in detail how a Distributed Exchange could be constructed: http://goo.gl/vy1uUr

The idea is public domain and the code will be open source.

[bybitcoin]

Mastercoin and Coloredcoins both are working for obtaining this objective, both good projects, first one with huge funding and second with a good development bounty. There is another one, claiming to pay dividends too, but it is an obvious ponzi.
Nxt and eMunie both will have p2pexchanges natively attached (both altcoins). Nxt is a pure POS and will be launched in a few days..
And there is Freimarkets which called for crowd funding to start developing the whitepaper scheme, but the last time I spoke with its creator, he told me that crowd funding has not been satisfactory yet (about month ago)
Among those three (mastercoin-coloredcoin-freimarket) I found freimarket the advanced one, you may have a look into their whitepapers each to decide for yourself. Also Nxt if what its creator said before become true will be a very suitable choice to use for trading securites (decentralized coloredcoin exchange+instant transactions+internal messaging+decentralized DNS features). This is to be seen soon in practice, you may have a look too. eMunie will be launched in January with several similar advanced features promised. There is the possibility to use these altcoins as a dilemma to to exchange btc securities, commodities and any other token.. Have a look into them too.

..that's a lot more people working on this than I thought.  Thanks.

MasterCoin white paper:   https://github.com/mastercoin-MSC/spec
Coloredcoins:                  http://coloredcoins.org/
Freimarkets:                   http://freico.in/docs/freimarkets-v0.0.1.pdf
Pauv:                            http://pauv.org/paper.pdf



DO you have ETAs for a working P2P exchange that can be used to exchange BTC<->$ from any of these?

Mastercoin and Coloredcoins are under development.. Freimarkets not started yet (needs donations)
Nxt genesis block just has been released today, and will start this week AFAIK. It has colored coins feature implemented natively in a decentralized manner. It is possible to use it for trading any kind of tokens. There will be a direct BTC to Nxt exchange as well. Can't say more because it is to be seen before making practical judgement and also because I invested a small part (I have not the morality of Bump and Dump). I recommend you to have a look into it and decide for yourself. Also have an eye on eMunie which will be launched in January.
As for donations, the most deserved one is Freimarkets (I am not involved with it).
To answer the other guy who posted after you: yes coloredcoins themselves are not decentralized but they could be implemented in a decentralized manner (which is what the Nxt guys promised us). I saw your scheme too, it has been the recent one and I couldn't make a review and judgement yet.

[BombaUcigasa]

I think there are two missing proposals from these lists. This is one: https://bitcointalk.org/index.php?topic=291108.0, and the other one I forget now.

[arc45]

Mastercoin's distributed exchange seems to be up.

http://mastercoin-explorer.com/order_books

[Fuserleer]

Only just noticed this....nice gesture!

Our exchange will be pretty advanced and also take some effort to get running full steam due to various logistics required, so I imagine some other developers will beat us to it.

With ours in brief, not only can you exchange eMu for ANY other currency (be it fiat or other cryptos), it is also able to facilitate the transfer of any asset providing there is an entry in the system for it and someone is trading that item, be it physical or digital.  I guess our exchange will be more like a P2P decentralized marketplace.

In addition to that, the fiat in and out points will be stable, and within the exchange itself there will be fiat assets.  So you can trade eMu on the exchange for fiat, and hold that fiat in your wallet until you either decide to cash it out, or perhaps the price of eMu has dropped and you want to buy back in and profit.

There are still some points in our execution that we are still wrapping up, but I hope to have the eMunie system whitepaper finished this week with a section on the exchange/marketplace.  A more detailed paper for the exchange will be published separately at a later date.

[gotoalberto]

In order to clarify, these should be the requirements to win the bounty proposed by @flix:

1 - The software must provide a automatic way to exchange BTC by fiat money. The user just provide the price/BTC and the amount to buy or to sell.

2 - The software must not require any personal information about the user, just run and use the program.

3 - The software must be decentralized, it must not use any server, tracker or infrastructure, it must be P2P, for example as the Gnutella Protocol:
http://en.wikipedia.org/wiki/Gnutella

4 - It must not use any third party services (as social networks), reputation methods (as LocalBitcoins, etc) or support from others users in the P2P network to ensure the exchange safety.
It must use Game Theory to ensure the safety.
http://en.wikipedia.org/wiki/Game_theory

5 - The software can uses third party services APIs (as banks, etc) to move FIAT money automatically between users, but the bank activity of these kind of services should not be related to the exchange activity.

6 - The software must allow to exchange money and BTC to users from anywhere in the world. For example, users from USA must be able to exchange money or BTC with users from EU.

7 - The software must be safe and opensource.

[flix]

Mastercoin's distributed exchange seems to be up.

http://mastercoin-explorer.com/order_books

Sure MTC <-> BTC...

But the biggest hurdle remains BTC <--> $

[foroplus]

That's what I would also add. Not only for BTCs, but also for other main alt coins like at least LTCs, and exchanging between them.

It would be awesome to have a tool like this Flix. Good point.

[gotoalberto]

That's what I would also add. Not only for BTCs, but also for other main alt coins like at least LTCs, and exchanging between them.

It would be awesome to have a tool like this Flix. Good point.

I don't agree, the objectives should be realistic and attainable.
@Foroplus, It is also desirable that we can exchange others cryptocurrencies in a P2P way, but i think that is better to create the Bitcoin Exchange in the first place, and then create another exchanges to other cryptocurrencies.
Also, the difficulty of exchange which works with multiple cryptocurrencies is much higher for a initial development.

[Sukrim]

CONDITIONS

1. Open source
2. No third-party trust required (no third party escrow, server, website, etc..)
3. No commissions (except for network fees)
4. No need for identity verification. No need for reputation.
5. Include a mechanism that ensures that transactions, once initiated, are completed.
6. Allows users to exchange $ € ¥  <--> BTC within hours.

1. Is a given one
2. THIS is the most difficult (if not impossible?) part - you can try to limit this as much as possible, but in the end there is no way to transact fiat money without third party trust, as it is transacting on a different system than BTC.
3. clear
4. Might be quite difficult - if 2 was in place of course you don't need it anyways (you don't need it for BTC). If 2 were possible somehow thoug, there would be no need for BTC in the first place!
5. slightly difficult, fees should be low on one hand but prevent spamming and overloading on the other. I'd rewrite it to "once initiated, you quickly (within seconds) get a decision if it will be completed"
6. That's one of the main points I guess, it makes the other parts (especially 2 and 4) very hard if not impossible. Trading BTC for LTC and others is easy, because these altcoins fulfill #2. USD doesn't.

In order to clarify, these should be the requirements to win the bounty proposed by @flix:

1 - The software must provide a automatic way to exchange BTC by fiat money. The user just provide the price/BTC and the amount to buy or to sell.

2 - The software must not require any personal information about the user, just run and use the program.

3 - The software must be decentralized, it must not use any server, tracker or infrastructure, it must be P2P, for example as the Gnutella Protocol:
http://en.wikipedia.org/wiki/Gnutella

4 - It must not use any third party services (as social networks), reputation methods (as LocalBitcoins, etc) or support from others users in the P2P network to ensure the exchange safety.
It must use Game Theory to ensure the safety.
http://en.wikipedia.org/wiki/Game_theory

5 - The software can uses third party services APIs (as banks, etc) to move FIAT money automatically between users, but the bank activity of these kind of services should not be related to the exchange activity.

6 - The software must allow to exchange money and BTC to users from anywhere in the world. For example, users from USA must be able to exchange money or BTC with users from EU.

7 - The software must be safe and opensource.

1 - Where would each user send the money to and how? There must be no third party involved, so the only way this is possible (well, the only third party is the FED then) is when you have a physical dollar bill in your hand and the seller has e.g. 1 BTC on a private key only he knows. The transaction then needs to happen in a way that none of the two can shy away and also that they don't know or care about each other.
2 - of course!
3 - Must not even use any infrastructure?! Even Gnutella runs nodes and supernodes, which both act as servers and clients at the same time. I'm not too sure you mean what you just wrote the way it looks like to me - I think you mean something along the lines of "anyone with a fairly decent computer + internet connection can run a server and participate in the network"
4 - That looks more like the NashX approach - Game Theory only works if you have rational market participants (and look at current BTCUSD markets and tell me again that the participants there are acting rationally!)
5 - Which ones are "banks APIs" exactly by the way? I am currently checking out quite a few of them and the API part in the international finance community seems to be an utter and complete MESS beyond any imagination. Also you wrote about no infrastructure and no 3rd party risk, now we are allowed to use bank wires?! Nice, I'll open an account in Cyprus right away!
6 -Must they also be able to receive BTC and pay someone in North Korea? Kuba? Iran?
7 - of course, though "safe" is a bit weakly defined and I think you are talking about free software, not just open source.


There is already an exchange that fulfills nearly all the points you mention here by the way and it is live + trading as we speak.

[flix]

2. No third-party trust required (no third party escrow, server, website, etc..)

2. THIS is the most difficult (if not impossible?) part - you can try to limit this as much as possible, but in the end there is no way to transact fiat money without third party trust, as it is transacting on a different system than BTC.

I agree, it is pretty difficult. However necessary trust is greatly reduced if there is no single provider on which you must rely.. for example localbitcoins lets you list different payment methods (SEPA wires, OKPay, Paypal, Swift wires, Western Union, Neteller, Skrill, etc...) Similarly with Bitcoin-otc which lets you choose payment method.

I would be fine with trusting an external provider as long as the P2P exchange did not add another level of required trust... The greater the number of required intermediaries, the more points of attack/failure... The greater choice of payment mechanisms, the more flexibility and resilience of the system.



https://en.bitcoin.it/wiki/Payment_methods

So if an exchange involves only 3 parties (Buyer-money processor-Seller) it would be a great step up from the current situation (Buyer - money processor - exchange - seller). Of course you can do true P2P in person (buyer - seller) thanks to localbitcoins and other ad listing sites.. but you can't do that online. That's the big challenge.

I think it's difficult, but not impossible.

If you think that it is impossible, feel free to add your pledge to the bounty in the hope that you won't have to pay up  

[Sukrim]

Well, if you only need to involve 3 parties (actually maybe 4, as the Bitcoin block chain is also a party in this, although very transparent concerning trust), you can already use the platform I hinted about... it's good enough for me. The parties involved for a BTC trade are: BTC blockchain --> web wallet funds storage (in BTC) --> distributed exchange --> web wallet funds storage (in USD) --> whatever payout method is supported by the web wallet funds provider (e.g. SEPA, PayPal...). These providers might need a license as e-money issuers in most western jurisdictions, but not as money exchangers as all they do is issue a balance on the distributed exchange, not do the actual trading.
Currently the fund storage on both ends as well as the trading engine is supplied by 1 single entity (e.g. MtGox) which is likely what you want to overcome. Most likely there will still be a need to give away funds to a trusted third party and to trust the same or another third party to release funds on a different channel unless there are ways other than cash to truly send fiat money that you own and that is not at a service provider (bank, paypal, dwolla...) electronically without ANY POSSIBLE way to withdraw the transaction after the fact.

The actual other person on the other side of the trade is abstracted away, since I don't know or care about her, only about the offer that is put on the distributed exchange.

[wiggi]

Mastercoin's distributed exchange seems to be up.

http://mastercoin-explorer.com/order_books

Sure MTC <-> BTC...

But the biggest hurdle remains BTC <--> $

And even if there were a Bitcoin-MTC and a Litecoin-MTC-clone you still couldn't exchange Btc vs Ltc
with them because they would be totally separated.

[flix]

This looks interesting... Paysty
https://bitcointalk.org/index.php?topic=326233

It attempts to resolve disputes over bitcoin seller denying having received funds and refusing to release escrow...  but it is no way close enough to what we are aiming for.. it still requires a trusted third party for the escrow, it still relies on bank wires and other slow payment methods.. transactions are still not automatic..

[wiggi]

The 'trustless' requirement for a cryptocoin<->cryptocoin exchange seems to be the show stopper
because it would probably require a hardfork in one of the coins.

What if the exchange does require trust but
-makes it easy to split orders into reasonably small parts
-is really just an user friendly piece of software so everyone can set up an exchange (making it p2p)
-records all trades in the blockchains so the exchanges could earn trust over time
This would still be an improvement over the current state of things.

[rarkenin]

For cryptographic purposes, what assumptions may we make about fiat currency serial numbers? Nonrepetitive? Unpredictable for a given denomination (above guessing chance)?

[coins101]

2. No third-party trust required (no third party escrow, server, website, etc..)

2. THIS is the most difficult (if not impossible?) part - you can try to limit this as much as possible, but in the end there is no way to transact fiat money without third party trust, as it is transacting on a different system than BTC.

I agree, it is pretty difficult. However necessary trust is greatly reduced if there is no single provider on which you must rely.. for example localbitcoins lets you list different payment methods (SEPA wires, OKPay, Paypal, Swift wires, Western Union, Neteller, Skrill, etc...) Similarly with Bitcoin-otc which lets you choose payment method.

I would be fine with trusting an external provider as long as the P2P exchange did not add another level of required trust... The greater the number of required intermediaries, the more points of attack/failure... The greater choice of payment mechanisms, the more flexibility and resilience of the system.



https://en.bitcoin.it/wiki/Payment_methods

So if an exchange involves only 3 parties (Buyer-money processor-Seller) it would be a great step up from the current situation (Buyer - money processor - exchange - seller). Of course you can do true P2P in person (buyer - seller) thanks to localbitcoins and other ad listing sites.. but you can't do that online. That's the big challenge.

I think it's difficult, but not impossible.

If you think that it is impossible, feel free to add your pledge to the bounty in the hope that you won't have to pay up  

"but you can't do that online. That's the big challenge."

Having seen how operations like western union work, there are a few possible ways to move fiat money around, but it has to be relatively small amounts, less than ~$1,000.

is there a limit on transaction values for a p2p exchange?

[flix]

December 18, 2013

FT:  China bans new Bitcoin deposits

http://www.ft.com/intl/cms/s/0/6707013a-67af-11e3-8ada-00144feabdc0.html#axzz2npDcRmGA

China has blocked the country’s Bitcoin exchanges from accepting new inflows of cash, a move that imperils the much-hyped virtual currency in its biggest market.
The head of BTCChina, the world’s largest Bitcoin exchange by trading volume, said he had received word at midday on Wednesday that his platform would no longer be able to accept renminbi from would-be Bitcoin buyers.

This is why we need a P2P exchange.

[amonymous]

Happy to pledge 1 BTC

[flix]

Happy to pledge 1 BTC

Added.

[justusranvier]

I think this problem is going to be solved, but not in a way that meets the conditions of the OP.

[JohnBlack]

I think this should be included in the official development roadmap as it is basically vital for anyone holding the currency, as you can see centralized exchanges have only brought problems so far (Mt Gox, BTC China) and they could continue to do so in the future.
 

[flix]

I think this should be included in the official development roadmap as it is basically vital for anyone holding the currency, as you can see centralized exchanges have only brought problems so far (Mt Gox, BTC China) and they could continue to do so in the future.
 

To be fair to them, they have been very valuable in advancing liquidity and driving the growth of the network in the past years... but yes, they are way too vulnerable, we need the next stage in evolution soon...

[amincd]

The best idea so far is:

SSL logs as proof of money transfer for p2p exchanges

[flix]

The best idea so far is:

SSL logs as proof of money transfer for p2p exchanges

Hmmm... I would definitely not be the first to give access to my online banking, even with all the assurances, single session, etc. I would rather trust an escrow agent, at least in that case my risk would be limited...

[sprinkle]

I'm building a decentralized, anonymous, and p2p exchange called Elqnt.

Take a look at the Whitepaper -- feedback much appreciated!  

I'm currently in talks to secure some funding to continue development into next year -- I'd already built the framework for the exchange nodes, but we're working on refactoring them to decentralize the signaling process as well, which is taking some time.  

If anyone is interested on jumping in on development, let me know, we're looking for node and chrome devs primarily -- also android or other mobile platforms.  

Our platform won't 100% comply w/ the stipulations lined out by OP, but gets damn close to a fluid process for fiat <-> BTC exchange in a decentralized manner.

Stephen

[JohnBlack]

The best idea so far is:

SSL logs as proof of money transfer for p2p exchanges

Hmmm... I would definitely not be the first to give access to my online banking, even with all the assurances, single session, etc. I would rather trust an escrow agent, at least in that case my risk would be limited...

I am sure there can be better solutions than ssl logs..something interesting is already in the works I heard

[flix]

I am sure there can be better solutions than ssl logs..something interesting is already in the works I heard

I keep hearing hints that "something is in the works" too.. but nobody will say what or when. All these rumours... I'm still waiting for somebody to release a beta already!

If you have any info.. an ETA would be very welcome.

[idev]

Don't forget Nxt The first sole PoS crypto currency and decentralized application network not based on bitcoin or any other altcoin coin. 

Nxt will be implementing decentralized services such as Asset, Currency exchange, Colored coins, Marketplace, Auctions,
Transaction mixing, Encrypted Messaging, Chat DNS, Alias name scheme and more.

[Prayer]

In order to clarify, these should be the requirements to win the bounty proposed by @flix:

1 - The software must provide a automatic way to exchange BTC by fiat money. The user just provide the price/BTC and the amount to buy or to sell.

I've been thinking about this off and on for a couple years, and the only way I can see a zero-trust P2P fiat exchange, is if the issuing authority (or maybe a highly trusted institution) issues their own P2P crypto currency.  All they would need to do, is clone/develop their own PoS fiat system, issue themselves a trillion dollars, then release the network to the public. They can then issue their currency to banks and other institutions for further dissemination to the public at large.

This still does not solve the problem of a zero-trust P2P currency exchange.  A previous poster suggested that this would require a hard fork in one of the existing currencies.  This is true, but a proof-of-concept can be done without a hard fork.  Just create a new currency with the features required to solve the problem.

This new exchange and trade currency will have the ability to process a transaction based on transactions in 3rd party block chains.  A payment script that would be way too experimental to include in an established blockchain before proving itself.

Here's what would happen if Bob wanted to buy BTC for SNC (some new coin):

Bob announces that he wishes to buy 1 BTC for 100 SNC in the next hour.

Alice sees the announcement and sends a reply to accept.

Bob sees the acceptance and sends 100 SNC to Alice on the condition that 1 BTC be sent within the next hour and receives 5 confirmations.

Project launch?  Need some developers and/or investors to make this a reality.  Any takers?

The SNC network receives Bob's transaction and adds it to the public ledger.

Alice sees the transaction in the SNC blockchain, then after a sufficient number of confirmations, she sends 1 BTC to Bob.

The SNC network sees the BTC transaction, which triggers the first transaction to start confirming.  Once the confirmation count is reached, the SNC network completes the transaction, sending 100 SNC to Alice.

If the hour is up, and 1 BTC was not sent, the transaction will be completed/reversed, giving the 100 SNC back to Bob.

The proof of concept will only allow for 1-way transactions that must originate by sending SNC.  To exchange BTC for LTC, you must first buy SNC with one, then sell SNC for the other.

Incentive for mining this new currency would include block rewards with a built-in halving rate, and market driven transaction fees as a percentage and/or a fixed minimum.  IOW, no major change from how Bitcoin works.