Any work being done on decentralized fiat exchanges?

[Elwar]

I have been working on a decentralized fiat exchange but would like to know if any other work is being put forth toward this.

I know of bisq but that is p2p which is not what I'm looking for.

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[cellard]

I have been working on a decentralized fiat exchange but would like to know if any other work is being put forth toward this.

I know of bisq but that is p2p which is not what I'm looking for.

Well if it's not p2p, how else would you claim to be able to have a decentralized fiat exchange?

There's no other way to do it but to meet with individual parties wanting to exchange fiat in exchange of BTC in person, in exchange of cash. If there are banks involved, then it is no longer decentralized.

As soon as physical cash is finally banned, I wonder what will be left for people that want to buy BTC without bank transfers involved.

[Elwar]

I have been working on a decentralized fiat exchange but would like to know if any other work is being put forth toward this.

I know of bisq but that is p2p which is not what I'm looking for.

Well if it's not p2p, how else would you claim to be able to have a decentralized fiat exchange?

There's no other way to do it but to meet with individual parties wanting to exchange fiat in exchange of BTC in person, in exchange of cash. If there are banks involved, then it is no longer decentralized.

As soon as physical cash is finally banned, I wonder what will be left for people that want to buy BTC without bank transfers involved.

Something where you do a p2p exchange of fiat to a fiat pegged crypto (on something like bisq) and then trade the pegged crypto for BTC in the same way you do on an exchange (on something like Bancor).

[cellard]

I have been working on a decentralized fiat exchange but would like to know if any other work is being put forth toward this.

I know of bisq but that is p2p which is not what I'm looking for.

Well if it's not p2p, how else would you claim to be able to have a decentralized fiat exchange?

There's no other way to do it but to meet with individual parties wanting to exchange fiat in exchange of BTC in person, in exchange of cash. If there are banks involved, then it is no longer decentralized.

As soon as physical cash is finally banned, I wonder what will be left for people that want to buy BTC without bank transfers involved.

Something where you do a p2p exchange of fiat to a fiat pegged crypto (on something like bisq) and then trade the pegged crypto for BTC in the same way you do on an exchange (on something like Bancor).

I don't understand what the point of that intermediate step of converting your fiat into a fiat pegged crypto is for, other than avoiding price fluctuation during the process, but then again, price is frozen at time of buy so that is not an issue.

It doesn't solve the main problem: using a bank. When you use a bank, it is trackable. If you are trying to use the intermediate step for anonymity it's also pointless. In the bank it will show you sent X amount of money at Y time and they can ask for that.

There is no anonymity outside of:

-physical cash to crypto
-crypto to crypto
-doing a job in exchange of physical cash
-doing a job in exchange of crypto

if you find someone weird enough, he may pay you in metals

bank transfer to crypto will never be anonymous or decentralized.

[Elwar]

I don't understand what the point of that intermediate step of converting your fiat into a fiat pegged crypto is for, other than avoiding price fluctuation during the process, but then again, price is frozen at time of buy so that is not an issue.

The problem with p2p exchanges like localbitcoins and bisq is that you have to wait for someone to buy or sell at the price you're looking to buy or sell at, you can't day trade and take advantage of the fluctuations like you can on a centralized exchange. P2P is good for getting money in or money out of BTC but it's not a good trading platform.

It doesn't solve the main problem: using a bank. When you use a bank, it is trackable. If you are trying to use the intermediate step for anonymity it's also pointless. In the bank it will show you sent X amount of money at Y time and they can ask for that.

There is no anonymity outside of:

-physical cash to crypto
-crypto to crypto
-doing a job in exchange of physical cash
-doing a job in exchange of crypto

if you find someone weird enough, he may pay you in metals

bank transfer to crypto will never be anonymous or decentralized.

Anonymity is not the point (though try to track someone's localbitcoins purchase back to them). The main problem to solve is the centralization of exchanges who hold a shit-ton of bitcoins and fiat which can be over-regulated, hacked, held ransom, etc. (ie: btc-e, MtGox, poloniex, etc.).

These centralized exchanges use centralized bank accounts which subjects them to the whims of those banks. Having thousands of bank accounts across the country owned by individuals selling small amounts of crypto is harder to stop than a single bank account. Even in Germany where they essentially outlawed exchanges (it is legal but in order to be compliant it's essentially impossible) it is still perfectly legal for an individual to sell their private asset to another individual (like selling your car online). Even if it becomes illegal it just goes underground like in places like Venezuela.

[Carlton Banks]

Full decentralisation is difficult without atomic swaps to perform the actual trade. And that limits any platform to trading pairs for which atomic swaps can be programmed. As much as I like the concept, having to rely on arbitrators to fall back on is in some ways less desirable that the centralised model. Perhaps this is a good thing though; in a future dominated by p2p trading platforms, if a development team wants their cryptocurrency to be taken seriously, atomic swaps with the major coins they compete against must be easy to implement or else the market may be too thin (and if stable coins can do their job well enough, maybe the same will begin to be said about the currency that a well performing stable coin is pegged to )

Ideally, a fully decentralised trading platform could be more liquid than the centralised exchanges, as the traders can be completely certain that their trading funds will be end-to-end 100% safe if there is no third party custody of coins to be concerned with. We're a long way from that now, atomic swaps are used as a descriptive jargon to advertise DeX website platforms, but it's probably just marketing (not tried it out myself). But I like that idea: a p2p software trading platform with real p2p atomic swaps to trade (plus stable coins that don't need redemption guarantees and controlled supply to maintain the peg). We're a little ways from that right now though, there are few coins that can be swapped atomically AFAIA, and no p2p trading platform uses atomic swaps either (AFAIA).

[Diamond Member]

a fiat pegged crypto

An exchange that uses fiat pegged crypto such as USDT or USDC that trades with BTC is essentially centralized via the issuer of the fiat pegged crypto.

I also don't see a decentralized exchange that trades BTC for ETH, for example, as something that will gain an especially large amount of steam. These types of exchanges will not be able to offer the speed of execution that traditional centralized exchanges offer, even with atomic swaps, and lower execution time will ultimately lead to worse liquidity and higher amounts of slippage.

[Carlton Banks]

a fiat pegged crypto

An exchange that uses fiat pegged crypto such as USDT or USDC that trades with BTC is essentially centralized via the issuer of the fiat pegged crypto.

There are newer models of fiat pegged crypto ("stablecoins") that try to decentralise issuance. There are various models for this, some more convincing than others. But I expect that either the designs will improve, or the quality assurance of the backing will (most probably both).

[monsterer2]

Full decentralisation is difficult without atomic swaps to perform the actual trade. And that limits any platform to trading pairs for which atomic swaps can be programmed. As much as I like the concept, having to rely on arbitrators to fall back on is in some ways less desirable that the centralised model. Perhaps this is a good thing though; in a future dominated by p2p trading platforms, if a development team wants their cryptocurrency to be taken seriously, atomic swaps with the major coins they compete against must be easy to implement or else the market may be too thin

In a first on BCT, I agree with you.

Moreover, what's required is an 'official standard' for implementing atomic swaps which would be functional not just across nakamoto style blockchains, but across all crypto-currencies which implement the standard.

[Elwar]

I'm not really caring about a decentralized exchange of BTC for shitcoins. Was focused more on fiat <-> BTC. The fiat pegged currency would certainly need to use Lightning Network and allow for atomic swaps.

[cellard]

I don't understand what the point of that intermediate step of converting your fiat into a fiat pegged crypto is for, other than avoiding price fluctuation during the process, but then again, price is frozen at time of buy so that is not an issue.

The problem with p2p exchanges like localbitcoins and bisq is that you have to wait for someone to buy or sell at the price you're looking to buy or sell at, you can't day trade and take advantage of the fluctuations like you can on a centralized exchange. P2P is good for getting money in or money out of BTC but it's not a good trading platform.

It doesn't solve the main problem: using a bank. When you use a bank, it is trackable. If you are trying to use the intermediate step for anonymity it's also pointless. In the bank it will show you sent X amount of money at Y time and they can ask for that.

There is no anonymity outside of:

-physical cash to crypto
-crypto to crypto
-doing a job in exchange of physical cash
-doing a job in exchange of crypto

if you find someone weird enough, he may pay you in metals

bank transfer to crypto will never be anonymous or decentralized.

Anonymity is not the point (though try to track someone's localbitcoins purchase back to them). The main problem to solve is the centralization of exchanges who hold a shit-ton of bitcoins and fiat which can be over-regulated, hacked, held ransom, etc. (ie: btc-e, MtGox, poloniex, etc.).

These centralized exchanges use centralized bank accounts which subjects them to the whims of those banks. Having thousands of bank accounts across the country owned by individuals selling small amounts of crypto is harder to stop than a single bank account. Even in Germany where they essentially outlawed exchanges (it is legal but in order to be compliant it's essentially impossible) it is still perfectly legal for an individual to sell their private asset to another individual (like selling your car online). Even if it becomes illegal it just goes underground like in places like Venezuela.

It doesn't solve the fact that without physical cash, there is no way to do it. You can have the decentralized infraestructure at the exchange level, but then so what, the ins and outs of fiat are pegged to the legacy banking system (centralized) outside of physical cash. If it became illegal, you would still need physical cash, which is to be removed in the next decades when governments find it's the right time to do it.

There is no way to solve this, because of the interaction with the legacy system which is out of programmer's controls.

[Elwar]

It doesn't solve the fact that without physical cash, there is no way to do it.

Localbitcoins and more decentralized bisq can already do this.

Having thousands of people exchanging physical cash for crypto is not centralized. Everything you keep saying seems to ignore the fact that localbitcoins exists and is very prevalent all over the world.

[aundroid]

I only know the following Fiat dezentralized exchanges:

1) Bisq (or Bitsquare)

2)  HodlHodl (https://hodlhodl.com/)

and others without Fiat Pairs:

1) Barterdex (komodo - https://komodoplatform.com/en/technology/barterdex)

2) Blocknet XBridge (http://blocknet.co/)

3) BlackHalo (Don't know if there are Fiat Pairs available)

In Developement:

1) Waves Dex with Atomic Swaps!!

2) TenX developes COMIT which is based on the lightning network (https://www.tenx.tech/)


hope I could help a little ...

[Elwar]

hope I could help a little ...

Thank you. I will check these out.

[Thirdspace]

I'm not really caring about a decentralized exchange of BTC for shitcoins. Was focused more on fiat <-> BTC. The fiat pegged currency would certainly need to use Lightning Network and allow for atomic swaps.

I don't understand how we could do DEX on Fiat/BTC,
how do you integrate fiat banking system to blockchain based crypto?
since Fiat is physically real money and not blockchain based then you would need a Fiat gateway
no matter what you would need financial institution for cashing out your Fiat thru this gateway
when you're referring to fiat pegged (crypto)currency, then you shouldn't say Fiat/USD

[Elwar]

The problem with p2p exchanges like localbitcoins and bisq is that you have to wait for someone to buy or sell at the price you're looking to buy or sell at, you can't day trade and take advantage of the fluctuations like you can on a centralized exchange. P2P is good for getting money in or money out of BTC but it's not a good trading platform.

Exactly. Trading P2P for a fiat pegged crypto would allow for onboarding but then allow for decentralized trading from crypto to crypto from there.

[Elwar]

I only know the following Fiat dezentralized exchanges:

1) Bisq (or Bitsquare)

2)  HodlHodl (https://hodlhodl.com/)

and others without Fiat Pairs:

1) Barterdex (komodo - https://komodoplatform.com/en/technology/barterdex)

2) Blocknet XBridge (http://blocknet.co/)

3) BlackHalo (Don't know if there are Fiat Pairs available)

In Developement:

1) Waves Dex with Atomic Swaps!!

2) TenX developes COMIT which is based on the lightning network (https://www.tenx.tech/)


hope I could help a little ...

Ok, I read through TenX which appears more promise than offering solutions. The network relies on their COMIT protocol. The COMIT protocol seems to be reliant on these magical "Liquidity Providers". Which essentially, as it says in the white paper, are the centralized exchanges. It appears to be trying to organize the exchanges a bit more like nodes on a network but it essentially relies heavily on these nodes to handle the fiat to crypto exchange. Whether or not that allows for decentralization down the road or not, possibly. But their solution focuses more on what happens after that is taken care of rather than working on that particular piece.


I like Bisq, have downloaded it and put up some BTC for sale on it. It's like localbitcoins but through a decentralized app. There is a mechanism for arbitration set up which is where the developer plans on making the money via his token. Anyone with the token can be an arbitrator. Also, only the couple of developers have those tokens.
It is certainly a good p2p solution, the low volume is no fault of the platform. I did not like that I had to keep the program running on my PC to keep my listing up but I understand the reason. Unfortunately the program was taking up too much CPU on my machine.

HodlHodl looks like a cleaner version of bisq, I just started checking it out so I will give my thoughts on it after checking under the hood.

[Elwar]

My main reason behind all of this is because I currently live in a country that has a banking oligopoly (only 3 banks) which have basically forbidden any bitcoin exchanges from using their services (I've talked to a bitcoin supporter who works for the bank about this). People have to wire their money to another country, pay the horrible wire fees and currency conversion rates to buy bitcoins.

Most people globally that do p2p like on localbitcoins do so by charging a fee (a few percent) on top of the current price, then they go buy the bitcoins back on the exchange at a better rate.

The airport has said they would accept a bitcoin ATM but again, if you cannot convert the fiat back into bitcoins or vice versa then you are stuck with one currency or the other building up over time due to demand. The currency exchange at the airport charges 15% to convert currencies. The banks charge 20%.

If there was an in-between cryptofiat then locals could buy/sell the cryptofiat without risk of volatility while making money with fees. Once their money is in cryptofiat then they can day trade for bitcoin as much as they want. Sure they might do bank transfers or physical cash transactions but at the individual level the banks can't stop it.

I have sold locally on localbitcoins but I am the only listing. I only sell to get some cash for local purchases, but if someone wanted a high volume I would not be interested because it is too hard for me to turn it back into bitcoins.

[Elwar]

Looked a bit more into hodlhodl and it is a centralized site like localbitcoins but they use multi-sig wallets instead of holding your coins which is a decent improvement.

[goddog]

I have sold locally on localbitcoins but I am the only listing. I only sell to get some cash for local purchases, but if someone wanted a high volume I would not be interested because it is too hard for me to turn it back into bitcoins.

Same problem here, I have solved it with a friend that run an import business.

[Rath_]

Decentralized crypto exchanges are already a thing but unfortunately, they lack users. People still prefer to use big, centralized exchanges such as Bittrex and Binance because they support a huge variety of altcoins. Making decentralized fiat exchange is literally impossible. Even regular exchanges have problems with their bank accounts being frozen for no reason in some countries. Using Bitcoin ATMs and localbitcoins seems to be the best idea. Keep in mind that even localbitcoins started to force some people to pass through KYC verification.

The developers of Lightning Network are working on Atomic Swaps which will allow users to trade cryptocurrencies without any third party. It won't be possible for fiat, though.

[Carlton Banks]

The problem with truly decentralised/market-based stable coins (assuming they're definitely possible) is acceptance: the only way to prove the peg is to have stableUSD trade directly against USD. That means a centralised exchange has to pick up stableUSD for trading, to prove the peg. This might be considered not to be in their interests, and consequently never happen. Although maybe it might work if a p2p stablecoin like Tether was used as a proxy to demonstrate the peg fidelity of a truly decentralised stablecoin... it's a tough challenge

Dare I say it, but the often derided central banking news pieces claiming an interest to create "national cryptocurrency" might be the genuine solution, depending on which central bank actually does this (and under what conditions). I'm not sure if it's more likely that Bitcoin simply gains more share of commercial transactions first instead, although that might be the catalyst that inspires a central bank to make the breakthrough.

[Elwar]

The way Waves DEX handles fiat trades is through a central bank.

[Carlton Banks]

Which central bank?

[Elwar]

Which central bank?

Beneficiary Bank: Fio bank
Beneficiary: CashTan Financial Services s.r.o.
Beneficiary bank address: Fio banka, a.s., V Celnici 1028/10, 117 21 Praha 1
Account No.: 2601191382

[monsterer2]

Dare I say it, but the often derided central banking news pieces claiming an interest to create "national cryptocurrency" might be the genuine solution, depending on which central bank actually does this (and under what conditions). I'm not sure if it's more likely that Bitcoin simply gains more share of commercial transactions first instead, although that might be the catalyst that inspires a central bank to make the breakthrough.

They don't even need to launch their own cryptocurrency - all they need to do is to create a coloured coin on omni ledger (like USDT is). They'd then have all the power to issue/confiscate coins and trace transactions that they require while piggybacking on bitcoin.

[Carlton Banks]

Which central bank?

Beneficiary Bank: Fio bank
Beneficiary: CashTan Financial Services s.r.o.
Beneficiary bank address: Fio banka, a.s., V Celnici 1028/10, 117 21 Praha 1
Account No.: 2601191382

So the Czech central bank?

Dare I say it, but the often derided central banking news pieces claiming an interest to create "national cryptocurrency" might be the genuine solution, depending on which central bank actually does this (and under what conditions). I'm not sure if it's more likely that Bitcoin simply gains more share of commercial transactions first instead, although that might be the catalyst that inspires a central bank to make the breakthrough.

They don't even need to launch their own cryptocurrency - all they need to do is to create a coloured coin on omni ledger (like USDT is). They'd then have all the power to issue/confiscate coins and trace transactions that they require while piggybacking on bitcoin.

Central banks would be unlikely to take that approach, but in principle there's no technical reason why not. The only reason I have for saying central bank cryptocurrency would solve the stablecoin issue is the simplicity, why use omni layer when they could just redeem TCP/IP routed USD 1:1 directly at federalreserve.com, or through whatever regular commercial bank? 

[monsterer2]

Central banks would be unlikely to take that approach, but in principle there's no technical reason why not. The only reason I have for saying central bank cryptocurrency would solve the stablecoin issue is the simplicity, why use omni layer when they could just redeem TCP/IP routed USD 1:1 directly at federalreserve.com, or through whatever regular commercial bank? 

That's not a cryptocurrency you're talking about, its a wire transfer. As you know, cryptocurrencies exist because of the double spend problem - so why go to all the effort of solving it again in your own crypto when you can just piggyback on the most trusted crypto in the world?

[Carlton Banks]

That's not a cryptocurrency you're talking about, its a wire transfer. As you know, cryptocurrencies exist because of the double spend problem - so why go to all the effort of solving it again in your own crypto when you can just piggyback on the most trusted crypto in the world?

No the idea would be to use a p2p network protocol to allow permissionless transfer of the stablecoin, but use direct convertibility with the issuer to maintain the peg.

[monsterer2]

That's not a cryptocurrency you're talking about, its a wire transfer. As you know, cryptocurrencies exist because of the double spend problem - so why go to all the effort of solving it again in your own crypto when you can just piggyback on the most trusted crypto in the world?

No the idea would be to use a p2p network protocol to allow permissionless transfer of the stablecoin, but use direct convertibility with the issuer to maintain the peg.

I'm sorry, I don't follow what you're saying. Why doesn't this allow double spending the stablecoin (or double convertibility to use your terminology)?

[Carlton Banks]

That's not a cryptocurrency you're talking about, its a wire transfer. As you know, cryptocurrencies exist because of the double spend problem - so why go to all the effort of solving it again in your own crypto when you can just piggyback on the most trusted crypto in the world?

No the idea would be to use a p2p network protocol to allow permissionless transfer of the stablecoin, but use direct convertibility with the issuer to maintain the peg.

I'm sorry, I don't follow what you're saying. Why doesn't this allow double spending the stablecoin (or double convertibility to use your terminology)?

Direct convertibility

Either the coins are in the ACH legacy banking network, or they're in p2p stablecoin network. Neither permit double spends. It's simple.

[monsterer2]

Either the coins are in the ACH legacy banking network, or they're in p2p stablecoin network. Neither permit double spends. It's simple.

When coins are in the banking network, they get burnt to nothing, so they don't exist. When they're out in the open, they have to be inside a cryptocurrency to prevent double spends.

[Carlton Banks]

Either the coins are in the ACH legacy banking network, or they're in p2p stablecoin network. Neither permit double spends. It's simple.

When coins are in the banking network, they get burnt to nothing, so they don't exist. When they're out in the open, they have to be inside a cryptocurrency to prevent double spends.

Right, it's the same model as Tether, but with either the issuing central bank or Wells Fargo etc doing the 1:1 redemption

[monsterer2]

Right, it's the same model as Tether, but with either the issuing central bank or Wells Fargo etc doing the 1:1 redemption

Then my question still stands: why invent your own cryptocurrency in order to do that?  Its much easier to use a coloured coin.

[Carlton Banks]

It's simpler just to interchange USD for stableUSD directly on a one-page website, without using any tech inbetween (coloured coins, whatever). The Federal Reserve accepting 1 stableUSD for 1 USD is the most guaranteed peg possible

[goddog]

It's simpler just to interchange USD for stableUSD directly on a one-page website, without using any tech inbetween (coloured coins, whatever). The Federal Reserve accepting 1 stableUSD for 1 USD is the most guaranteed peg possible

This way they can also force kyc for each stablecoin tx :-D
but how is this different from actual online banking?

[monsterer2]

It's simpler just to interchange USD for stableUSD directly on a one-page website, without using any tech inbetween (coloured coins, whatever). The Federal Reserve accepting 1 stableUSD for 1 USD is the most guaranteed peg possible

You can BUY stableUSD that way, yes, but you can't sell it back to them like that, you have to do a cryptocurrency transfer to their wallet address.

[Carlton Banks]

It's simpler just to interchange USD for stableUSD directly on a one-page website, without using any tech inbetween (coloured coins, whatever). The Federal Reserve accepting 1 stableUSD for 1 USD is the most guaranteed peg possible

You can BUY stableUSD that way, yes, but you can't sell it back to them like that, you have to do a cryptocurrency transfer to their wallet address.

The bank can just have a webpage display a stableUSD address they own for every person wanting to exchange to regular USD

This is pretty simple stuff (maybe they might allow an API for doing this programmatically, but I'm afraid I might lose you if we get into that )

[d5000]

I had proposed something very similar here in May, but it was only a concept, there is no work done currently on it.

The idea, in a nutshell: Use the Bisq protocol for fiat-to-stablecoin trades and the BarterDEX atomic swap protocol for trade pairs of stablecoin-to-bitcoin/other cryptos.

The reason for the stablecoin integration is that atomic swaps to a "stable" currency would be theoretically possible, so using the exchange to "hedge" against the fluctuations of Bitcoin's prices is possible, without having to use a centralized IOU or exchange. To "get in" or "get out" of the crypto world (cashing out to fiat or buying for fiat) without exchange price risk, Bisq is actually (imo) more suitable than to exchange volatile cryptocurrencies to fiat.

One could use Ethereum-based Dai as an USD-based stablecoin, which seems to have actually most acceptance (from the more "decentralized" types). As Ethereum is supported by BarterDEX, it should be possible to adapt the swap transactions to transfer Dai-to-BTC instead of ETH-to-BTC. The only problem would be the management of "forced settlements", which are always possible in Dai if the exchange rate diverges too much from the target price.

There may be an intermediate step necessary, if the stablecoin used cannot be exchanged directly via an atomic swap. For example, BitUSD seems not to support the BarterDEX protocol, if I'm not wrong. In the BitShares case one could use a combination of the internal BitShares exchange and BarterDEX; this would be however not desirable, so actually Dai may be a better option.

[Elwar]

I had proposed something very similar here in May, but it was only a concept, there is no work done currently on it.

The idea, in a nutshell: Use the Bisq protocol for fiat-to-stablecoin trades and the BarterDEX atomic swap protocol for trade pairs of stablecoin-to-bitcoin/other cryptos.

The reason for the stablecoin integration is that atomic swaps to a "stable" currency would be theoretically possible, so using the exchange to "hedge" against the fluctuations of Bitcoin's prices is possible, without having to use a centralized IOU or exchange. To "get in" or "get out" of the crypto world (cashing out to fiat or buying for fiat) without exchange price risk, Bisq is actually (imo) more suitable than to exchange volatile cryptocurrencies to fiat.

One could use Ethereum-based Dai as an USD-based stablecoin, which seems to have actually most acceptance (from the more "decentralized" types). As Ethereum is supported by BarterDEX, it should be possible to adapt the swap transactions to transfer Dai-to-BTC instead of ETH-to-BTC. The only problem would be the management of "forced settlements", which are always possible in Dai if the exchange rate diverges too much from the target price.

There may be an intermediate step necessary, if the stablecoin used cannot be exchanged directly via an atomic swap. For example, BitUSD seems not to support the BarterDEX protocol, if I'm not wrong. In the BitShares case one could use a combination of the internal BitShares exchange and BarterDEX; this would be however not desirable, so actually Dai may be a better option.

Yes, I definitely think the Bisq to a cryptofiat would be the key thing to enable more widespread decentralized exchange. The swap from cryptofiat to cryptocurrencies is easier from there.

My proposed solution (and I am currently putting together the pieces to test this out) would be:

-Have a single BTC address from which you can purchase cryptofiat. Initially the price would be set and known throughout the network based on a namecoin list of exchange addresses (more on that in a bit).
-The addresses that purchase the cryptofiat would be known by the network and the amount they purchased could be sent from them in colored coins, with 1 satoshi = 1 unit of the currency, to open a channel on a cryptofiat Lightning Network.
-Bisq can then be used to convert fiat to cryptofiat. User can then open a Lightning channel to receive their colored coins.
-With those colored coins they can easily do an atomic swap for bitcoins, or do multiple micro swaps so that someone can sell just the smallest unit possible adding up to a full purchase rather than needing one person to buy the full amount offered by another person (ie. 50 people can buy from someone offering 1BTC for 7k cryptofiat).

Now back to the cryptofiat price. Initially it would be centralized. It would likely start as a centralized exchange with a website, etc. But using all of the pieces in the background. The user doesn't really even know the difference. Those that buy cryptofiat with bitcoins can start to have some input on the namecoin list of exchanges used (some sort of voting mechanism based on amount purchased and time passed).
Eventually, the goal would be to set the price to the publicly known price of the last trade in the decentralized swap. But initially the volume would be too low to do so. But when that is triggered it becomes truly decentralized and unstoppable.

No tokens needed, ETH not necessary, Rootstock not needed. All done by consensus through Bitcoin. The hope being that a typical user would just log into a website (or open an app), put in how much money they want to send, they get the highest rated Bisq seller for their criteria (bank, amount, location, time, etc.) and they just send their money. They see that they have money "in their account" and can now purchase bitcoins (just like on any other exchange). They purchase it and withdraw their BTC. Same in the other direction.

[d5000]

Thank you for the detailed description. I have some questions/doubts and remarks about it:

-Have a single BTC address from which you can purchase cryptofiat. Initially the price would be set and known throughout the network based on a namecoin list of exchange addresses (more on that in a bit).
-The addresses that purchase the cryptofiat would be known by the network and the amount they purchased could be sent from them in colored coins, with 1 satoshi = 1 unit of the currency, to open a channel on a cryptofiat Lightning Network.

So, if I understand right:
- There is one single issuer of the cryptofiat
- Distribution is only via LN (which makes sense, due to the low amounts of "real" BTC to be expected if 1 sat = 1 unit, e.g. 1 cent), the purchasers having to open a channel to the issuer.

Question: Wouldn't the issuer need a lot of trust for the price of e.g. 1 satoshi = 1 cent to be accepted? From my perspective, the model sounds similar to Tether at first, and he would probably need real fiat (e.g. on a bank account with regular audits ...) to back his cryptofiat, otherwise nobody would buy it.

-Bisq can then be used to convert fiat to cryptofiat. User can then open a Lightning channel to receive their colored coins.

Bisq would need to become LN-compatible for that to work, but I guess you know that.

Those that buy cryptofiat with bitcoins can start to have some input on the namecoin list of exchanges used (some sort of voting mechanism based on amount purchased and time passed).

I don't understand the concept of the "namecoin list of exchanges" and the voting mechanism. Are there multiple (centralized) exchanges involved? I thought there was initially one exchange. What do the users vote, the price or the exchange list?

Eventually, the goal would be to set the price to the publicly known price of the last trade in the decentralized swap. But initially the volume would be too low to do so. But when that is triggered it becomes truly decentralized and unstoppable.

Unfortunately, I don't think that will work, or I don't understand the mechanism. You are saying that a single purchase of the cryptofiat token with Bitcoin will set the price (potentially forever?)? What is if Bitcoin's price fluctuates heavily, how would the price be "rebalanced"? What if the token becomes traded at other platforms, without the fixed price, and manipulated to the upside or to the downside (something what has happened to the Steem Dollar, for example ...)?

Or are you referring to the "cryptofiat" price measured in fiat? While that would solve the first problem, the second problem (trading at other platforms) would persist. There would still be a "backing" (fiat funds controlled by the issuer) needed to establish trust on the cryptofiat token.

From your explanation, I don't see many differences to Tether - the price is set artificially, and is meant to stay at that price.

I think there is something important missing in your explanation, or something I didn't understand still, so if you want, please elaborate on that.

[Elwar]

So, if I understand right:
- There is one single issuer of the cryptofiat
- Distribution is only via LN (which makes sense, due to the low amounts of "real" BTC to be expected if 1 sat = 1 unit, e.g. 1 cent), the purchasers having to open a channel to the issuer.

Question: Wouldn't the issuer need a lot of trust for the price of e.g. 1 satoshi = 1 cent to be accepted? From my perspective, the model sounds similar to Tether at first, and he would probably need real fiat (e.g. on a bank account with regular audits ...) to back his cryptofiat, otherwise nobody would buy it.

There's not so much an issuer of the cryptofiat as basically anyone sending BTC to that single address is now able to "issue" tokens from their own address (up to the amount they "purchased"). The address could even be a burn address like 1XXXXXXXX... But I have been kicking around the idea that the address is used to fund further development or even buy back cryptofiat if the market deems it necessary. Not a single person but likely a decentralized organization of some sort with multi-sig access to the address.

The control of that address could disappear (keys lost, people controlling it die off, etc.) and the system would still continue on with no disruption.

Bisq would need to become LN-compatible for that to work, but I guess you know that.

I use bisq as reference but it would likely be a modified version so a user does not necessarily need to download any software (make it web based). While still being able to download software and avoid the middle man.

I don't understand the concept of the "namecoin list of exchanges" and the voting mechanism. Are there multiple (centralized) exchanges involved? I thought there was initially one exchange. What do the users vote, the price or the exchange list?

This part is a bit unhashed but I believe that it will need to start small and grow (likely starting in a small country with few or no exchanges). It will start as a single server but anyone who downloads the software and wants to run their own server (exchange) can also do so. The exchange could charge fees or advertise or whatever they need to make money which allows them to enhance the user experience and advertise to draw more people in. With more volume on the exchanges they're all using the p2p in the background. It's just that the user doesn't know (or shouldn't even care).

The point of the namecoin list of exchanges is so that initially the price can be set to a specific formula (ie. take the volume from Bitstamp, Bitfinex, GDAX, etc. combine and divide to get the price). The price will need to be known by everyone so that the cryptofiat can be the price of the underlying currency while still using satoshis (ie. when someone sends BTC to the initial address at $7k/BTC and 1 satoshi = $1, then everyone in the network knows that the person can issue 7k satoshis and they can ignore any further satoshis sent from that address by consensus.

Since there will be such low volume initially, the price on the decentralized exchange will be too easily manipulated.

But you can't just have a single issuer deciding the price to be used. So initially it will be centralized, then grow more decentralized over time. Then at a trigger point the price is based on the price on the decentralized exchange (due to high enough volume). I figure the "issuers" should be given the ability to determine the price formula that is used.

Unfortunately, I don't think that will work, or I don't understand the mechanism. You are saying that a single purchase of the cryptofiat token with Bitcoin will set the price (potentially forever?)? What is if Bitcoin's price fluctuates heavily, how would the price be "rebalanced"? What if the token becomes traded at other platforms, without the fixed price, and manipulated to the upside or to the downside (something what has happened to the Steem Dollar, for example ...)?

Or are you referring to the "cryptofiat" price measured in fiat? While that would solve the first problem, the second problem (trading at other platforms) would persist. There would still be a "backing" (fiat funds controlled by the issuer) needed to establish trust on the cryptofiat token.

From your explanation, I don't see many differences to Tether - the price is set artificially, and is meant to stay at that price.

I think there is something important missing in your explanation, or something I didn't understand still, so if you want, please elaborate on that.

It certainly is like a decentralized Tether. The main problem with Tether is that it's run by a single company. They have(had) a bank account. Disruption of that single company/account can bring it all crumbling down.

The Bitcoin price can (will) fluctuate no problem. When issuer X buys at $7k they get 7k satoshis. If the price jumps to $10k when issuer Y buys then they can issue 10k satoshis.

Trade on other platforms is more than welcome. If it is known that 1 satoshi = $1 then not only can it just be used for exchange, it can be used in commerce. Merchants can start accepting cryptofiat alongside regular fiat. My ultimate dream would be that cryptofiat becomes so much easier to use than regular fiat that nobody uses regular fiat anymore. Banks become useless and eventually when BTC price reaches the point where 1 satoshi = $1, people will now just use their cryptofiat as bitcoins. Essentially, bitcoin has now replaced a government currency.

Trust is certainly essential. I believe that if a single exchange is run like this for a while and reaches high enough volume then it will sort of prove itself. Initially it will be centralized and controlled with the mechanisms built in to grow more decentralized over time to the point where it is fully decentralized. People already trust that when they send money to an exchange that the numbers in their database correlate to their money. A lot less trust than I would give but these exchanges are trading hundreds of millions each day so obviously some people trust these database entries.

[d5000]

There's not so much an issuer of the cryptofiat as basically anyone sending BTC to that single address is now able to "issue" tokens from their own address (up to the amount they "purchased").

Ah, ok, I misunderstood. I thought the issuer would sell his BTC on this address for 1 sat/1 cent, which would be exactly like Tether

The point of the namecoin list of exchanges is so that initially the price can be set to a specific formula (ie. take the volume from Bitstamp, Bitfinex, GDAX, etc. combine and divide to get the price). The price will need to be known by everyone so that the cryptofiat can be the price of the underlying currency while still using satoshis (ie. when someone sends BTC to the initial address at $7k/BTC and 1 satoshi = $1, then everyone in the network knows that the person can issue 7k satoshis and they can ignore any further satoshis sent from that address by consensus.

Then at a trigger point the price is based on the price on the decentralized exchange (due to high enough volume). I figure the "issuers" should be given the ability to determine the price formula that is used.

So let me resume the model, as I understand it now:
- everybody has the right to issue currency tokens (I'll call them CFIAT for now) based on the current price, taken from the "namecoin list of exchanges", according to the satoshis he sent to the issuance address. The software would have then to prove that  the issuer has issued the quantity of currency corresponding to the valid price of the moment of issuance - otherwise his tokens wouldn't be valid.
- In parallel, a decentralized exchange is built up, where people can trade BTC/CFIAT via LN atomic swaps, and CFIAT/FIAT pairs via a Bisq-like protocol using LN.
- Once the decentralized exchange has enough volume, a "trigger" determines that the "list of exchanges" is replaced by a decentralized price finding mechanism.

I think I understand now: You hope that when the price is "liberated", the token is already so popular that there is practically no volatility anymore with respect to fiat.

For example, there could be a market like I proposed here for Bitcoin, where merchants could "guarantee" a price in "cryptofiat" for a certain time e.g. 24 hours or a week. Knowing that, if there are price swings to the downside (which is the biggest risk), arbitrators could profit buying the products with "cheap coins". And there could be also emerge exchangers which always would back the token with 1 CFIATUSD=1USD for example.

Still there is the problem that someone that wants to manipulate the price and has enough Bitcoins or cryptofiat tokens can do it. Not even the elaborated "stablecoin" models like BitUSD or Dai are entirely safe from this kind of attack. But it may work if there are enough backing mechanisms in place like those I mentioned in the last paragraph.

Looks definitively like an interesting concept, I have to think about other possible problems.

[Elwar]

There's not so much an issuer of the cryptofiat as basically anyone sending BTC to that single address is now able to "issue" tokens from their own address (up to the amount they "purchased").

Ah, ok, I misunderstood. I thought the issuer would sell his BTC on this address for 1 sat/1 cent, which would be exactly like Tether

The point of the namecoin list of exchanges is so that initially the price can be set to a specific formula (ie. take the volume from Bitstamp, Bitfinex, GDAX, etc. combine and divide to get the price). The price will need to be known by everyone so that the cryptofiat can be the price of the underlying currency while still using satoshis (ie. when someone sends BTC to the initial address at $7k/BTC and 1 satoshi = $1, then everyone in the network knows that the person can issue 7k satoshis and they can ignore any further satoshis sent from that address by consensus.

Then at a trigger point the price is based on the price on the decentralized exchange (due to high enough volume). I figure the "issuers" should be given the ability to determine the price formula that is used.

So let me resume the model, as I understand it now:
- everybody has the right to issue currency tokens (I'll call them CFIAT for now) based on the current price, taken from the "namecoin list of exchanges", according to the satoshis he sent to the issuance address. The software would have then to prove that  the issuer has issued the quantity of currency corresponding to the valid price of the moment of issuance - otherwise his tokens wouldn't be valid.
- In parallel, a decentralized exchange is built up, where people can trade BTC/CFIAT via LN atomic swaps, and CFIAT/FIAT pairs via a Bisq-like protocol using LN.
- Once the decentralized exchange has enough volume, a "trigger" determines that the "list of exchanges" is replaced by a decentralized price finding mechanism.

I think I understand now: You hope that when the price is "liberated", the token is already so popular that there is practically no volatility anymore with respect to fiat.

For example, there could be a market like I proposed here for Bitcoin, where merchants could "guarantee" a price in "cryptofiat" for a certain time e.g. 24 hours or a week. Knowing that, if there are price swings to the downside (which is the biggest risk), arbitrators could profit buying the products with "cheap coins". And there could be also emerge exchangers which always would back the token with 1 CFIATUSD=1USD for example.

Still there is the problem that someone that wants to manipulate the price and has enough Bitcoins or cryptofiat tokens can do it. Not even the elaborated "stablecoin" models like BitUSD or Dai are entirely safe from this kind of attack. But it may work if there are enough backing mechanisms in place like those I mentioned in the last paragraph.

Looks definitively like an interesting concept, I have to think about other possible problems.

Yep. I think you got it down. I think the trigger would be something like "if volume on the decentralized exchange is higher than the volume of the largest exchange (or all of them combined), then set price to the swap price on the dex". I think if the dex is one of the largest exchanges, the difficulty to manipulate the underlying value would be pretty high.

And I do believe the address that is filled with BTC will need to play a large role in maintaining stability but I'm having a hard time figuring out how to do it programatically without needing to go through Rootstock or ETH. Perhaps some sort of game theory which incentivizes the org in charge of the receiving address to maintain stability (like they charge a percentage above the price, and buy back at a percentage that it drops...thus constantly requiring the new issuance of tokens at the current price.