an Exchange that uses multi Sigs ?

[mmitech]

  While implementing a decentralized exchange doesn't seems efficient to me, in way that it would slow down the the adoption or at least complicate things for most people who aren't much technical ( my parent for example), also the Bitcoin payment network application suppose to be fast, easy and trust-less, but relying on exchanges seems to be an obligation, and trusting an exchange no matter how trustworthy and transparent the operators seems to be is just risky, you never know when the shit hits the fan.

 All of that made me think about the possibility of implementing multi sig addresses on existing or new exchanges, I haven't studied the technical complex of the idea yet neither I know if the design would actually work for exchanges. So here what I have in my mind:

-basically when you open an account on an exchange, two private keys would be generated, one that you only control and the second the exchange controls, when you deposit bitcoins there you don't 100% own the coins neither the exchange do .

-if you want to sell your coins (execute a sell order) you have to sign the transaction and the exchange has to do the same in order to move (temporarily) the coins to an address they own (control) and when the order is fulfilled they send the coins to the new owner address that they both control(s). and so on...

This means that the exchange cant run with your coins and a hacker cant get ownership of the exchange coins, the exchange would only make transactions between buyers and sellers (Escrow) as it was meant to be...I don't know if this Idea systematically will fail, but it is worth thinking of making it happen !
 

[grau]

It is not a decentralized exchange, but the first externally audit able that also uses multi sig (P2SH) addresses:

https://bullionbitcoin.com

Funds are controlled similar to your description. The customer, exchange and an independent administrator have keys and all coins
stored in the exchange are at all time on 2-out-of-3 P2SH addresses.

For a withdraw admin and customer signs. For matching orders manager and admin signs.

Presentation: http://prezi.com/y6uew_xckqbz/inside-bitcoins-2014-berlin-next-generation-bitcoin-exchanges/

[monsterer]

The trouble with an exchange that uses multisig deposit addresses is that hardly any clients support sending coins to a P2SH address, blokchain.info included, which really messes with user adoption.

[1JHarshaw]

Even if it weren't hip with the newbies, a P2P exchange would be popular with the regulars. The problem isn't the P2P or the bitcoin part, though, it's the voucher system for the other non-crypto currency.

[bitcoinenthusiast7]

https://www.Cointures.com You can trade contracts locked in multisig so no need to trust exchange with money. Contracts are verifiable by you on blockchain.info. We do face a hurdle with newbie users that no client supports signing etc smoothly. But experienced bitcoin folks use us quite easily.

[grau]

The trouble with an exchange that uses multisig deposit addresses is that hardly any clients support sending coins to a P2SH address, blokchain.info included, which really messes with user adoption.

This is not a practical hurdle as redemption and deposit works with plain vanilla addresses.
blockchain.info displays P2SH payments correctly, therefore audit with it works well.