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November 21, 2011, 07:30:09 PM
 #1

Let's discuss how a peer-to-peer, decentralized bitcoin-based stock exchange might be best implemented.

Anybody who has a company on GLBSE: if a new exchange opened up and promised to be more reliable, would you move your company there?
I'd like to hear the answer to this too.  An exchange with a much more intuitive interface could be made.
I think the effort should be put into a decentralized stock exchange, not another autonomous one.  One where the tickers, issues, portfolios, contracts, etc are all kept in a blockchain type system.  The entry nodes are merely market makers much like the real stock exchange, you could also route your orders through a preferred market maker etc.. Your portfolio, balance, etc is not actually stored on any of the sites, but in the blockchain unlocked only by your private key.  There is obvious logistics issues to work out here, but I think through the use of PKC and the blockchain system, it is all doable.

I really do love the GLBSE, but it obviously needs alot of work, and the centralization is a blatant problem especially given the politics involved.  However, I think the just like cryptocurrency we are in the infancy on this idea and the development of an idea like i stated above is more or less natural progression given what we know about p2p / decentralization and how it has been implemented in the cryptocurrency world.

I would love to get involved in such a project someday and would be willing to throw some resources at it.

I think the effort should be put into a decentralized stock exchange, not another autonomous one.  One where the tickers, issues, portfolios, contracts, etc are all kept in a blockchain type system.  The entry nodes are merely market makers much like the real stock exchange, you could also route your orders through a preferred market maker etc.. Your portfolio, balance, etc is not actually stored on any of the sites, but in the blockchain unlocked only by your private key.  There is obvious logistics issues to work out here, but I think through the use of PKC and the blockchain system, it is all doable.

For a decentralized stock exchange, one could consider basing it on Open-Transactions:

https://github.com/FellowTraveler/Open-Transactions

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November 21, 2011, 11:27:32 PM
Last edit: November 21, 2011, 11:49:06 PM by Red Emerald
 #2

A blockchain implementation sounds nice for keeping everything distributed over p2p, but I see some potential problems (that I hope we can work out).

For the sake of simplicity, lets call our fork stockcoin.

Would you mine stockcoins just like bitcoins or would merged mining be a good idea? (I think merged mining would be smart)

Would stockcoins be destroyed when a stock is purchased?  Would there be a limited number of stockcoins? If there are a limited number, and they are being destroyed, what do we do when they are all gone?

How do we tie the chains together? Right now you buy stocks on GLBSE with BTC. I'm assuming we would want to keep this ability even though our transactions are outside of the bitcoin chain. If we can tie our stockcoin to any other chain (not just bitcoin), I think we will be better off.

Could we somehow tie into namecoin (or at least take their ideas)?  We could use the personal namespace (or a similar namespace) to register an asset and it's pgp keys.  http://dot-bit.org/Personal_Namespace

I think actually using namecoin might not be a good idea as it doesn't really have anything for issuing/selling stocks, but using some of its ideas could give us a head start.

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November 22, 2011, 12:22:11 AM
 #3

like I stated on the other thread, BTCWebHost.com would be happy to offer full scale free hosting on our server.
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November 22, 2011, 12:27:15 AM
 #4

like I stated on the other thread, BTCWebHost.com would be happy to offer full scale free hosting on our server.
Thanks for the support.  If this is done right, we won't need any web hosting for the chain.  However, hosting an e-portfolio service could still be of benefit. Just because we don't need web wallets, doesn't mean they don't exist (see instawallet)

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November 22, 2011, 12:29:56 AM
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OK Smiley But if you need WebHostng or VPS at all in the development of this let me know!
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November 22, 2011, 12:44:49 AM
 #6

I wrote about something similar to this in another thread:
https://bitcointalk.org/index.php?topic=49163.0

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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November 22, 2011, 01:01:16 AM
 #7

So it looks like people have tried to build this before.  Lets actually do it this time Smiley

Looks like it's already been figured out how to trade across chains.  https://en.bitcoin.it/wiki/Contracts#Example_5:_Trading_across_chains

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November 22, 2011, 01:23:56 AM
 #8

So it looks like people have tried to build this before.  Lets actually do it this time Smiley

Looks like it's already been figured out how to trade across chains.  https://en.bitcoin.it/wiki/Contracts#Example_5:_Trading_across_chains

An anonymous contract? That would be an interesting document to try to take to court. It might work for a business like Silk Road. It might reduce the overhead on dark-nets.

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November 22, 2011, 02:04:20 AM
 #9

From this and some of the other threads I have read regarding GLBSE, you guys kinda seem out for blood.  Though I don't know Nefario, I can definitely sympathize with having too many projects on the go and not being able to devote all the time needed.  As well, anybody that has been involved in a bitcoin based business or idea, sure they were gung ho when it was 15-20$ but the negative sentiment sure bumps people down a peg (myself incluided).  Life takes over, whats paying your bills, today, has to take precedence again..  Add to that, if he was infact in a accident, and has recovery ontop of it?? I think working with the existing GLBSE (or at least trying to extend an olive branch), seeing what the roadmap looks like (if any) and seeing if there is any common ground between what is being discussed here and what is already slated for production is a good start.  

I have read alot of Nefarios past posts and such because the GLBSE really intrigued me.  Like I said in my original post, decentralization of this thing seems like a natural progression to me, and I don't think based on some of the very interesting topics Nefario has talked about etc, that it isn't already in the works or at least on paper..  I do not think "the plan" has even started yet, this is alpha level stuff.  I am not saying don't start any new projects..   I am just saying, don't fragment further what is already very small and half broken without giving it a chance.  The reason why the GLBSE volume is peanuts is because of the lack of trust, if a bunch of different "stock exchanges" come up, well, who is going to invest?  

If any of the core GLBSE crew would like to chime in on this, we're all ears.  I mean if the project is not going to be further developed by the creator, then hopefully he /they  gives it to the community to develop further.  Again though, these things do not happen over night...  Nefario has talked about open sourcing the GLBSE in the past, if / when he does, I think the first logical step is to get an alpha up using a blockchain backend.  After that we could worry about which chain.  My personal thoughts would lean towards it's own chain utilizing merged mining.. There would be network level transaction fees, and the network would operate at a very low level just like bitcoin, just enough to faciliate transactions and not interfere in anyones business.  Broker sites can give users the nice fluffy interface they're after and charge a premium on that to monetize their sites etc.. Premium features = premium fees, etc etc..

Moving a couple companies to an alternate "stock exchange" at the stage of the game though, I think it will set us back quite a bit.  Even more so then glbse dying once a week or something.  However, I sure would like to get some type of commitment from GLBSE management that they aren't just going to up and shut down or on a whim because there is no time or money or something.  As alpha as it is, there is still a metric shit ton of peoples livelihood already tied up in it.. and it is too late too call it quits, if they aren''t going to run it, it has to be given to the community.  They couldn't even issue "refunds" if they wanted too..




 

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November 22, 2011, 03:51:17 AM
 #10

From this and some of the other threads I have read regarding GLBSE, you guys kinda seem out for blood.  Though I don't know Nefario, I can definitely sympathize with having too many projects on the go and not being able to devote all the time needed.  As well, anybody that has been involved in a bitcoin based business or idea, sure they were gung ho when it was 15-20$ but the negative sentiment sure bumps people down a peg (myself incluided).  Life takes over, whats paying your bills, today, has to take precedence again..  Add to that, if he was infact in a accident, and has recovery ontop of it?? I think working with the existing GLBSE (or at least trying to extend an olive branch), seeing what the roadmap looks like (if any) and seeing if there is any common ground between what is being discussed here and what is already slated for production is a good start.  

I have read alot of Nefarios past posts and such because the GLBSE really intrigued me.  Like I said in my original post, decentralization of this thing seems like a natural progression to me, and I don't think based on some of the very interesting topics Nefario has talked about etc, that it isn't already in the works or at least on paper..  I do not think "the plan" has even started yet, this is alpha level stuff.  I am not saying don't start any new projects..   I am just saying, don't fragment further what is already very small and half broken without giving it a chance.  The reason why the GLBSE volume is peanuts is because of the lack of trust, if a bunch of different "stock exchanges" come up, well, who is going to invest?  

If any of the core GLBSE crew would like to chime in on this, we're all ears.  I mean if the project is not going to be further developed by the creator, then hopefully he /they  gives it to the community to develop further.  Again though, these things do not happen over night...  Nefario has talked about open sourcing the GLBSE in the past, if / when he does, I think the first logical step is to get an alpha up using a blockchain backend.  After that we could worry about which chain.  My personal thoughts would lean towards it's own chain utilizing merged mining.. There would be network level transaction fees, and the network would operate at a very low level just like bitcoin, just enough to faciliate transactions and not interfere in anyones business.  Broker sites can give users the nice fluffy interface they're after and charge a premium on that to monetize their sites etc.. Premium features = premium fees, etc etc..

Moving a couple companies to an alternate "stock exchange" at the stage of the game though, I think it will set us back quite a bit.  Even more so then glbse dying once a week or something.  However, I sure would like to get some type of commitment from GLBSE management that they aren't just going to up and shut down or on a whim because there is no time or money or something.  As alpha as it is, there is still a metric shit ton of peoples livelihood already tied up in it.. and it is too late too call it quits, if they aren''t going to run it, it has to be given to the community.  They couldn't even issue "refunds" if they wanted too..
 

  I couldn't agree more, m8. Incentivise not demonstranize, community peoples.....

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November 22, 2011, 05:45:25 AM
 #11

Let's discuss how a peer-to-peer, decentralized bitcoin-based stock exchange might be best implemented.

Watching this thread, would love to participate in the project.
It should be open source, of course.

I haven't given serious thought to it, I'm sure people have.
If there's a serious effort, and other developers to pitch in, I'd love to dedicate some of my free time to this project
(I'm an experienced programmer with 10+ years of experience)

I wouldn't do it as a full time job, just to be clear, but would love to contribute/kickstart this, if it's technically doable.

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November 22, 2011, 05:47:49 AM
 #12

Posted to Stack Exchange: http://bitcoin.stackexchange.com/questions/2039/is-a-distributed-version-of-glbse-possible-how-would-you-design-it

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November 22, 2011, 10:42:25 AM
 #13

You may be interested in this thread:

https://bitcointalk.org/index.php?topic=46834.0

A decentralized stock exchange is possible today within the bitcoin chain.

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November 22, 2011, 10:51:52 AM
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You may be interested in this thread:
https://bitcointalk.org/index.php?topic=46834.0
A decentralized stock exchange is possible today within the bitcoin chain.
As far as I understand, this only allows essentially OTC stock trading. But to be a stock exchange it should have some mechanism to commit people to their orders. If I broadcast an order and someone wants to take me up on it, I can just decline. I can be required to tie up my coins/shares for the trade but I can't be required to go forward with it. This IMO will lead to inefficiency and manipulation.

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November 22, 2011, 10:52:26 AM
 #15

Check out this detailed answer by Meni Rosenfeld.

The idea seem sound. I would want other developers, more versed in Bitcoin protocol than I am, to review his proposal. This seems to be a large project, but one that could be one of the killer features of Bitcoin.

Anyone with free time willing to take the lead on this project?
I'll be willing to donate some BTC towards this end (as well as some undefined portion of my time for dev work).

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November 22, 2011, 11:38:00 AM
 #16

You may be interested in this thread:
https://bitcointalk.org/index.php?topic=46834.0
A decentralized stock exchange is possible today within the bitcoin chain.
As far as I understand, this only allows essentially OTC stock trading. But to be a stock exchange it should have some mechanism to commit people to their orders. If I broadcast an order and someone wants to take me up on it, I can just decline. I can be required to tie up my coins/shares for the trade but I can't be required to go forward with it. This IMO will lead to inefficiency and manipulation.

Well, yes. This only serves for representing the shares and trading them atomically for bitcoins.
For the actual market you need another mechanism, but there's lots of possibilities for that.
But, yes, one can always make an offer and then not execute it (just cancel it instead when he receives an accept offer message). I don't see a way around this, I guess I should think more about it.

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November 23, 2011, 03:22:52 AM
 #17

Hey buddies.

So my 2c is that this is not a technical problem.

Bitcoin is already the decentralised medium of exchange and works great for that.

The reason GLBSE has been kind of crappy is not because it's centralised but because it's just crappy. I made a much more in dept post as to where I went wrong and where I'll be improving GLBSE here.
https://bitcointalk.org/index.php?topic=52310.msg628049#msg628049

Bitcoin has come along and is the first working non-centralised solution to an already existing very centralised world (banking and money).

Markets ALL markets are by their very definition centralised, that's the whole point, everyone comes to the one place to trade, that way they will find a buy for their sell and vice versa.

The problems here are to do with size, as in the small size of the market (small markets don't thrive).
Enforcing contracts
Anonymity

They are not technical, at least not yet.

Nefario

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November 23, 2011, 05:50:23 AM
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The reason GLBSE has been kind of crappy is not because it's centralised but because it's just crappy.
I'm sure we can have a great centralized stock exchange service. This doesn't obviate the need for a decentralized stock exchange.

Markets ALL markets are by their very definition centralised, that's the whole point, everyone comes to the one place to trade, that way they will find a buy for their sell and vice versa.
The "one place" is an abstract concept. It doesn't need to be a single physical location, and it doesn't need to be provided by a single service. If there is a p2p network where I can place a bid and have someone on the other side of the globe accept it, then the entire world is the one place where people come to trade.

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November 23, 2011, 12:53:19 PM
 #19

Maybe not all the services GLBSE can be decentralized, but the stock issuance and exchange can be.
That would make GLBSE more resilient and less dependent on government regulations.

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November 23, 2011, 01:55:35 PM
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It's pretty easy.

Create a separate message system with messages that handle asset creation, voting, transfer of assets, etc. These messages will contain all of the public-key crypto. A centralized message distribution server instead of a P2P protocol would be OK, since the server doesn't have all that much power.

To prevent double-spending during asset transfer, some of the messages need to be timestamped by including a hash in the Bitcoin block chain. You wouldn't even need to modify Bitcoin to do timestamping: just send some BTC to an address that is not real and actually consists of message data. (Modifying Bitcoin would allow you to do this without destroying any BTC.)

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November 23, 2011, 02:09:53 PM
 #21

It's pretty easy.

Create a separate message system with messages that handle asset creation, voting, transfer of assets, etc. These messages will contain all of the public-key crypto. A centralized message distribution server instead of a P2P protocol would be OK, since the server doesn't have all that much power.

To prevent double-spending during asset transfer, some of the messages need to be timestamped by including a hash in the Bitcoin block chain. You wouldn't even need to modify Bitcoin to do timestamping: just send some BTC to an address that is not real and actually consists of message data. (Modifying Bitcoin would allow you to do this without destroying any BTC.)
Unless I'm missing something, this still doesn't allow placing committing orders.

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November 23, 2011, 02:28:44 PM
 #22

Maybe not all the services GLBSE can be decentralized, but the stock issuance and exchange can be.
That would make GLBSE more resilient and less dependent on government regulations.

A hybrid is a way to bootstrap it quickly.

A decentralized network for issuance and ownership.  Centralized tools (like GLBSE) could be built on top of that.  One of the difficulties in decentralized exchanges is enforcing open orders.  Having the decentralized network handle issurance and ownership changes is much easier.

Then centralized exchanges (much like there are more than 1 exchange which trades NYSE or NASDAQ stock shares) can handle trades.  

Granted a completely decentralized network which can handle:
* issuance
* order enforcement
* ownership changes
* internal escrow (trading 1 share for 1 BTC neither party can cheat and end up w/ both)
* dividend payments
* voting
* etc

would be superior but it is much more challenging to build and would require some proof-of-work type method to reach consensus and prevent attacks.

A network which only handles issuance and ownership changes is "decentralized lite".  It would require centralized exchanges to handle "higher level functions" but would allow competing exchanges and even OTC trades not involving any exchange.

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November 23, 2011, 02:38:57 PM
Last edit: November 23, 2011, 04:46:03 PM by theymos
 #23

Unless I'm missing something, this still doesn't allow placing committing orders.

You can use the "trading across chains" scheme.

What I described is a lot like having a separate chain with merged mining, but without the mining. So you can do most of the fancy things that Bitcoin-based chains can do.

(Maybe this kind of trading is also possible with your design, but I intuitively don't like tying assets to BTC, since BTC is meant to be split and combined, and assets are not.)

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November 23, 2011, 02:45:49 PM
 #24

(Maybe this kind of trading is also possible with your design, but I intuitively don't like tying assets to BTC, since BTC is meant to be split and combined, and assets are not.)

Assets are certainly meant to be split ... why wouldn't they?
It wouldn't make sense to combine assets of different "types", but of the same type - why not?

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November 23, 2011, 02:56:55 PM
 #25

(Maybe this kind of trading is also possible with your design, but I intuitively don't like tying assets to BTC, since BTC is meant to be split and combined, and assets are not.)

Assets are certainly meant to be split ... why wouldn't they?
It wouldn't make sense to combine assets of different "types", but of the same type - why not?

The issue is across different types.

I have asked this everytime this method comes up and never got a good answer.

Say Address 123 has 1 satoshi to represent 1 "something" (share/USD/ounce of gold/etc).

What happens if I send 1000 satoshis to that address.  Address 123 now has 1001 satoshis.  Obviously you don't have 1001 "somethings".

To make it a little bit more complicated say you then send 1 satoshi to Address 999 and 1 satoshi to Address 888 and the change gets sent to adresss 456.

So it is now
Address 999: 1 satoshi
Address 888: 1 satoshi
Address 456: 999 satoshi

who has the share?
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November 23, 2011, 03:07:47 PM
 #26

Say Address 123 has 1 satoshi to represent 1 "something" (share/USD/ounce of gold/etc).

What happens if I send 1000 satoshis to that address.  Address 123 now has 1001 satoshis.  Obviously you don't have 1001 "somethings".

According to Meni's "design", only the specific Bitcoins that were part of the generating transaction (that was signed by the issuer) signify any ownership of the asset. It doesn't matter what other Bitcoins also reside in the same address - since every satoshi can be traced back to its origin, you can never artificially inflate an asset, because the number of satoshis in the original transaction is constant.

To make it a little bit more complicated say you then send 1 satoshi to Address 999 and 1 satoshi to Address 888 and the change gets sent to adresss 456.

So it is now
Address 999: 1 satoshi
Address 888: 1 satoshi
Address 456: 999 satoshi

who has the share?

You can't do arbitrary transactions with assets - the special "asset tokens" satoshis are colored, and don't relate at all to normal satoshis. The one who owns the colored satoshi owns the asset.

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November 23, 2011, 03:13:21 PM
Last edit: November 23, 2011, 03:30:35 PM by DeathAndTaxes
 #27

only the specific Bitcoins that were part of the generating transaction (that was signed by the issuer) signify any ownership of the asset. It doesn't matter what other Bitcoins also reside in the same address - since every satoshi can be traced back to its origin, you can never artificially inflate an asset, because the number of satoshis in the original transaction is constant.

Except you can't.
Bitcoin can't trace unique satoshis anywhere (that would be very bad for psuedo-anonymous network).

Bitcoin actually has no concept of unique coins/bills/satoshis.

Bitcoin simply tracks VALUE.  

You can't do arbitrary transactions with assets - the special "asset tokens" satoshis are colored, and don't relate at all to normal satoshis. The one who owns the colored satoshi owns the asset.

That is the problem or misconception.

If you have an account with 1000 Satoshis it isn't 1000 uniquely identifable satoshis.  It is simply a unique ADDRESS which currently has a value of 1000.

Thus in the example above:
Address 123 has a value of 1 satoshi which represents a share.  That satoshi isn't unique.  The address is unique.  The satoshi is simply a integer value of 1 (same as any other address w/ 1 satoshi in it).

Bitcoin doesn't track satohi's back to their source it tracks values back to their source.  Once combined you can no longer say which value came from where.  You can simply say the value is correct.

Maybe I am not being clear but take this no share example.

Address 123:  5000s
Address 456:  1s

I make a transaction using 123 & 456 as input and sending 2s to 888 & 4999s to 999.
The ending output is
Address 888: 2s
Address 999: 4999s.  The only thing you (and network can say) is the combined value of 5001s is CORRECT because it matches the inputs VALUES (not unique coins) of 5000 + 1.  If the transaction is valid we know the ending output values are also valid.

However you can't say "where" the 2s in address 888 "came from".  You simply know the value 2 is accurate.

TL/DR version:
While we call it Bitcoin there are no "coins".  
There is no unique identifier on each unit.

Bitcoin is simply an accounting system.  It ensures the inputs match the outputs in "value".
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November 23, 2011, 03:18:38 PM
 #28

TL/DR version:
While we call it Bitcoin there are no coins.  There is no unique identifier on any "coin".  It is simply integer values tied to addresses.

I heard this argument all the time, and only now I understood what it means - thanks!

My original thoughts about implementing a p2p stock network revolved around Namecoins or a Namecoin-esque coin.

A name is something unique that can be tracked. See also this post about the cost of "long Namecoins".

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November 23, 2011, 04:31:45 PM
Last edit: November 23, 2011, 08:26:43 PM by Meni Rosenfeld
 #29

only the specific Bitcoins that were part of the generating transaction (that was signed by the issuer) signify any ownership of the asset. It doesn't matter what other Bitcoins also reside in the same address - since every satoshi can be traced back to its origin, you can never artificially inflate an asset, because the number of satoshis in the original transaction is constant.

Except you can't.
You can if you're careful. Bitcoins are fungible only at the intra-transaction level, not the address level.

If you carelessly combine token bitcoins with normal bitcoins in the same transaction then yeah, in the outputs you can't tell which one is the real one. But an address that has coins from several outputs can certainly tell how many came from each output.

Suppose that you never pay transaction fees, and never merge several tokens in the same transaction. Then there is a linear chain leading from the original output to wherever the token ended up (there can be multiple chains for the original output, but one chain for the endpoint). When an address wants to show it has tokens, it simply references the output from which it received them, and by assumption the transaction with this output only has a single input, so you just follow the chain backwards until the original output.

Transaction fees complicate things a little, because you need an unambiguous way to determine which inputs are tx fees and needn't be traced back. But it should be possible to agree on such a designation (eg tokens are only transferred in multiples of 10 satoshis, and for tx fees the input will be chosen not to be a multiple of 10).

Merging tokens also adds complication because for each output it's possible that several inputs will need to be verified. But the total work shouldn't exceed the total token transfers done.

And this whole thing becomes trivial if a protocol-enforced way is introduced to add markers to outputs. So a marker will be the hash of an output, and a transaction is valid only if the marked total in the output is at most the marked total in the input, where the output itself which has this hash is also considered marked. If not in Bitcoin itself, then in an alternative Bitstock blockchain (or maybe it will be BitAsset to make it more general).

Bitcoin can't trace unique satoshis anywhere (that would be very bad for psuedo-anonymous network).
You can't trace them if you're careful to cover your tracks. You can trace them if you're careful to "expose your tracks" (distinguishing tokens from normal BTC). Depending on the implementation you can still obfuscate tokens with other tokens.

Address 123:  5000s
Address 456:  1s

I make a transaction using 123 & 456 as input and sending 2s to 888 & 4999s to 999.
The ending output is
Address 888: 2s
Address 999: 4999s.
This is exactly the kind of transaction you will avoid if the 1s is a token.

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November 23, 2011, 04:41:32 PM
 #30

Unless I'm missing something, this still doesn't allow placing committing orders.
You can use the "trading across chains" scheme.
It looks like you're talking about enabling atomic trades where one side can't run away with the money. That's indeed easy. I'm talking about preventing people from not going through with an order they've placed. That is, someone puts an offer, he is contacted to execute it, and ignores the request if it's no longer profitable for him or he never intended to honor it but just wanted to manipulate the market.

(Maybe this kind of trading is also possible with your design, but I intuitively don't like tying assets to BTC, since BTC is meant to be split and combined, and assets are not.)
The design of using BTC as tokens, which is by no means mine, also can't enforce orders. Which is why I suggested on SE that indeed a separate system/blockchain will be needed for the shares. But I only went as far as saying that such a system can be designed to have the functionality required to enforce orders (as well as other asset-friendly features, such as markers) - but how exactly to implement this is still an open problem.

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November 23, 2011, 05:03:12 PM
Last edit: November 23, 2011, 08:10:24 PM by DeathAndTaxes
 #31

If you carelessly combine token bitcoins with normal bitcoins in the same transaction then yeah, in the outputs you can't tell which one is the real one. But an address that has coins from several inputs can certainly tell how many came from each output.

On edit:  I am wrong & Meni is right.  A third party couldn't pollute the "chain of custody" for a unique share.  Using satoshis as tokens should work fine.  The key point is that each transaction includes not only the address (which I knew) but also the prior address (which I didn't). 

You can't prevent the combining.

You have 100 satoshi in address 123 which represents 1 share.
I (the attacker) send 1 BTC to address 123.

The value of address is now  1000000123s.

How do you sell 50 shares?

Maybe I am just not seeing it?  Maybe you need to write a white paper but AFAIK Bitcoin doesn't track unique "coins" or unique satoshis.  It tracks value.  

If an address has a value >1 satoshi and that value is the result of multiple prior inputs (and those inputs have multiple inputs, etc) you can trace where each individual satoshi came from.  You can trace all the potential sources but not a definitive source.

So in the example above the 1000000123s all came either from the "stock address" or the "BTC address".  You can say in aggregate you have 1 BTC & 123 shares but you can't identify a single satoshi as a share.  

You can't create a transaction that for example
1 BTC (1000000000s) -> Address A
70s (representing 70 shares) -> Address B
30s (representing 30 shares) -> Address C

TLDR
An attack can comingle assets by simply sending you BTC.
Once comingled the assets can never be split without losing definitive ownership of the shares v/ "attack coins".
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November 23, 2011, 07:56:58 PM
 #32

Maybe I am just not seeing it?  Maybe you need to write a white paper but AFAIK Bitcoin doesn't track unique "coins" or unique satoshis.  It tracks value.
You are confused about how Bitcoin transactions work. And while what you're describing may be the ideal, where all bitcoins are fungible, the reality is different.

When I have BTC in an address A and I want to send some to address B, I don't say "Hey, I have bitcoins in address A, I'm sending amount X to address B", I say "Hey, I have bitcoins in address A which I got from some specific output, and I want to redeem this particular output in a transaction whose input is this output, and has an output sending X coins to B, and if the output I redeemed has more than X coins then I'm sending the extra to a change address in a second output".

So an attacker can't force me to comingle tokens with normal bitcoins. If he sends me 1 BTC I still have one redeemable output with 1 BTC and one redeemable output which can be traced back to the agreed upon token output with 123 satoshis.

I certainly can, and will, choose the output that traces back to the original output when I want to transfer tokens. As I said it can be tricky with tx fees and merging of tokens but still doable.

This will become much clearer if you spend some time in block explorer.

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November 23, 2011, 08:07:43 PM
 #33

Maybe I am just not seeing it?  Maybe you need to write a white paper but AFAIK Bitcoin doesn't track unique "coins" or unique satoshis.  It tracks value.
You are confused about how Bitcoin transactions work. And while what you're describing may be the ideal, where all bitcoins are fungible, the reality is different.

I am completely wrong.  Learned something new today.  Yeah based on the actual transaction data it doesn't look like your could "pollute" the chain of custody for a share. 

Quote
This will become much clearer if you spend some time in block explorer.

It is.  Thanks.

I would go bad and delete my misinformation but it has been quoted so much it would make the thread even more confusing I think.
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November 23, 2011, 08:23:35 PM
Last edit: November 23, 2011, 08:35:25 PM by jtimon
 #34

I fear the only soulution to the "committing orders" would be through extending the bitcoin scripting language.
You could sign and broadcast partially completed transactions as "binding advertisements" like
"I send 1 shatoshi (share) to $BUYER_PUT_YOUR_ADDRESS_HERE if this transaction also satisfies 4.33 btc to addressC "
This also removes the need for secrets to achieve atomicity but would probably need an expiry condition too.

The btc tokens implementation is feasible, But the altchain is another possibility. The only problem I see is that you still have to incentive miners (even with MM). You could do it directly through bitcoin fees or by issuing a new currency. Although it seems less optimal, I would prefer to not creating it for this purpose (unless it has demurrage). Because unlike in namecoin where miners are actually "mining domains", the tokens here only represent promises from the companies and can be issued at will without the need of new currency. Anyway, although directly related, this is a controversial issue that can wait for later.
The question of having another chain or use the btc tokens is more important (and probably also controversial).
I guess it depends on how many changes bitcoin requires to make it work that don't serve to the currency itself.

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November 23, 2011, 08:38:15 PM
 #35

I fear the only soulution to the "committing orders" would be through extending the bitcoin scripting language.
You could sign and broadcast partially completed transactions as "binding advertisements" like
"I send 1 shatoshi (share) to $BUYER_PUT_YOUR_ADDRESS_HERE if this transaction also satisfies 4.33 btc to addressC "
This also removes the need for secrets to achieve atomicity but would probably need an expiry condition too.
The difficult part is how to retract orders. When I put an order I don't want it to stand forever, I want either to be able to retract it (which is difficulty to synchronize and probably won't be supported), or to set in advance a time limit. So you need to have a transaction like you described, but which is only accepted if completed up to a given time. And it needs to be able to be completed even without the issuer's cooperation. And the proof that it was indeed executed before expiration needs to survive block reorgs. This seems challenging even if you design a new blockchain just for that.

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November 23, 2011, 09:08:23 PM
Last edit: November 24, 2011, 07:47:37 AM by jtimon
 #36

I fear the only soulution to the "committing orders" would be through extending the bitcoin scripting language.
You could sign and broadcast partially completed transactions as "binding advertisements" like
"I send 1 shatoshi (share) to $BUYER_PUT_YOUR_ADDRESS_HERE if this transaction also satisfies 4.33 btc to addressC "
This also removes the need for secrets to achieve atomicity but would probably need an expiry condition too.
The difficult part is how to retract orders. When I put an order I don't want it to stand forever, I want either to be able to retract it (which is difficulty to synchronize and probably won't be supported), or to set in advance a time limit. So you need to have a transaction like you described, but which is only accepted if completed up to a given time. And it needs to be able to be completed even without the issuer's cooperation. And the proof that it was indeed executed before expiration needs to survive block reorgs. This seems challenging even if you design a new blockchain just for that.

That's the expiry condition I was talking about. To see if the trade has been executed both parties need to wait until they think no block reorgs can occur to be sure that the trade has been made or not. But they don't lose anything, being the trade atomic it is either executed or not as a whole.
But that's two extra features for standard transactions: "if there's also an output for X btc to AAA address within this transaction" and "if it is included in the chain before the block Exp".

I wonder if what fellowTraveller is coding for open transactions could be useful for this.

My latest project, which I will be announcing soon, is a full implementation of smart contracts, agnostic to scripting language, which will allow users to design their own financial instruments by adding scripted clauses to their contracts.  If you are curious to see the progress, look at the github code for OT, there is a "smartcontracts" branch where I have been checking in commits every night (lately.) It's not done yet.

Maybe a single standard contract protocol should be developed for the whole ecosystem of "crypto-financial tools" (I'm thinking about bitcoin, OT and Ripple right now) to be adopted for all of them. But identifying use cases and reusable messages seems hard work, because you want to make it once and don't need to extend or change it significantly later.
Sorry for going a little off-topic.

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November 24, 2011, 04:25:04 AM
 #37

That is the problem or misconception.

If you have an account with 1000 Satoshis it isn't 1000 uniquely identifable satoshis.  It is simply a unique ADDRESS which currently has a value of 1000.

...

You are confused about how Bitcoin transactions work. And while what you're describing may be the ideal, where all bitcoins are fungible, the reality is different.

I am completely wrong.  Learned something new today.  Yeah based on the actual transaction data it doesn't look like your could "pollute" the chain of custody for a share. 

I see. If a Hero Member of this forum can be confused about this, then I'm sure many others are getting it wrong as well.
I believe this is a common misconception indeed, that is repeated a lot. Most people don't open up blockexplorer and dig this deep.

I wonder if there's a way to propagate this bit of knowledge so misinformation about this stops spreading.

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November 24, 2011, 04:31:45 AM
 #38

It can't be succeed, because the dealy of the p2p network is too big.

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November 24, 2011, 04:34:09 AM
 #39

It can't be succeed, because the dealy of the p2p network is too big.

So Bitcoin can't succeed as well because its p2p?

Most people don't care so much about high frequency trading, and wouldn't actually mind a delay.
For those who do want to do HFT, they can use Green Addresses or simply trade inside an exchange that is built on top of the p2p backbone.

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November 24, 2011, 05:35:02 AM
 #40

I wonder if there's a way to propagate this bit of knowledge so misinformation about this stops spreading.
Does it matter? For most intents and purposes this is just a technical implementation issue. For normal use it doesn't really have anonymity implications either, it's known that all funds in a given address belong to the same entity, so it doesn't matter which of the outputs they choose to use to send. Only when you want to do fancy stuff like we've discussed here it matters.

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November 24, 2011, 05:48:09 AM
 #41

I wonder if there's a way to propagate this bit of knowledge so misinformation about this stops spreading.
Does it matter? For most intents and purposes this is just a technical implementation issue. For normal use it doesn't really have anonymity implications either, it's known that all funds in a given address belong to the same entity, so it doesn't matter which of the outputs they choose to use to send. Only when you want to do fancy stuff like we've discussed here it matters.

I agree it's not relevant for 99.9% of Bitcoin users. Oh well.

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November 28, 2011, 07:00:16 AM
 #42

There isn't any reason why this project can't work along side GLBSE. In fact, I think that would help make it much more successful.

The genesis block for our chain could contain everything in GLBSE at whatever time we decide to launch.  When the chain gets launched, a new GLBSE back-end would also be launched that would use our chain instead of w/e database it is using right now.

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November 28, 2011, 07:46:17 AM
 #43

There isn't any reason why this project can't work along side GLBSE. In fact, I think that would help make it much more successful.

The genesis block for our chain could contain everything in GLBSE at whatever time we decide to launch.  When the chain gets launched, a new GLBSE back-end would also be launched that would use our chain instead of w/e database it is using right now.

Maybe they prefer to stay the way they are. Remember that the trades will be slower if they're executed within a chain.
But they can always do both.

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November 28, 2011, 02:08:45 PM
 #44

There's no reason there can't be more than one stock exchange.

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November 28, 2011, 02:10:51 PM
 #45

There's no reason there can't be more than one stock exchange.

Which is why I think a hybrid solution may be the best bet.

Have the stock ownership and transfers handled by a decentralized blockchain and then allow multiple exchanges to support higher level tools like placing trades/orders against that blockchain.
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November 28, 2011, 02:16:29 PM
 #46

There's no reason there can't be more than one stock exchange.

Which is why I think a hybrid solution may be the best bet.

Have the stock ownership and transfers handled by a decentralized blockchain and then allow multiple exchanges to support higher level tools like placing trades/orders against that blockchain.
I agree.

But even if GLBSE wants nothing to do with a blockchain based solution, they could keep running.

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November 28, 2011, 02:45:07 PM
 #47

There's no reason there can't be more than one stock exchange.

Which is why I think a hybrid solution may be the best bet.

Have the stock ownership and transfers handled by a decentralized blockchain and then allow multiple exchanges to support higher level tools like placing trades/orders against that blockchain.
I agree.

But even if GLBSE wants nothing to do with a blockchain based solution, they could keep running.

True but I hope they would see the advantage (maybe not personal advantage) of having the actual "shares" exist outside of GLBSE.  Imagine if for whatever reason GLBSE goes down forever tomorrow.  The chaos and yet more negative PR that brings to Bitcoin.
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November 28, 2011, 02:52:27 PM
 #48

There's no reason there can't be more than one stock exchange.

Which is why I think a hybrid solution may be the best bet.

Have the stock ownership and transfers handled by a decentralized blockchain and then allow multiple exchanges to support higher level tools like placing trades/orders against that blockchain.
I agree.

But even if GLBSE wants nothing to do with a blockchain based solution, they could keep running.

True but I hope they would see the advantage (maybe not personal advantage) of having the actual "shares" exist outside of GLBSE.  Imagine if for whatever reason GLBSE goes down forever tomorrow.  The chaos and yet more negative PR that brings to Bitcoin.
I agree 100%.

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December 09, 2011, 08:56:43 PM
 #49

Just wanted to point everyone watching this thread to this new thread by btc_artist about DBSE

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December 09, 2011, 09:03:48 PM
 #50

There's no reason there can't be more than one stock exchange.

Which is why I think a hybrid solution may be the best bet.

Have the stock ownership and transfers handled by a decentralized blockchain and then allow multiple exchanges to support higher level tools like placing trades/orders against that blockchain.
I agree.

But even if GLBSE wants nothing to do with a blockchain based solution, they could keep running.

True but I hope they would see the advantage (maybe not personal advantage) of having the actual "shares" exist outside of GLBSE.  Imagine if for whatever reason GLBSE goes down forever tomorrow.  The chaos and yet more negative PR that brings to Bitcoin.

Well technically AFAIK when shares are issued and traded on the markets more than one organisation knows who owns the shares, including the company for who they are issued from. Are paper shares still given out anymore?

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December 10, 2011, 12:24:07 PM
Last edit: October 09, 2012, 07:11:48 AM by markm
 #51

If merged mining can work with arbitrary numbers of blockchains, maybe shares could be issued simply by starting a new chain that issues that many units in its genesis block? The issuing ocmpany would own those, and ownership can spread from there by normal operations of changing ownership on blockchains.

There are already supposedly methods one can use to lock in change of ownership on one chain so a change of ownership of something on another chain has to happen too.

Basically each type of share would be another alt currency, like the GMC (General Mining Corp) and GRF (General Retirement Funds) chains.

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December 10, 2011, 12:35:06 PM
 #52

@markm
But what's wrong with having various types shares within the same chain?

Remember that even with merged mining miners need an incentive to secure the chain. Are the fees for trading a single company going to be enough to secure a chain?

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December 10, 2011, 12:59:58 PM
 #53

Open Transactions uses cryptography to sign everything, maybe just publishing transactions can suffice?

Anyone interested could keep histories, even though Open Transactions uses triple-signed receipts to avoid actually needing to keep transaction histories. (The receipt, signed by the two parties to the transaction and the server that executed it, serves as "proof" both parties and the notary server all agreed as to the balance, making the history of how that balance was arrived at moot/irrelevant.)

Since we depend on the issuer anyway - the company of which shares are issued - they could simply run a server themselves. They need not though, as any other server can allow them to do an issue. Either way there is their signed contract describing the issue, and triple-signed transactions whenever any units of the issue change ownership.

Ultimately we probably don't really care much how many people or entities who can do nothing in the way of actually grabbing for us some portion of the real assets of a company we have shares in think we have such shares. It is those who can actually give us something real when the company dies that need to know how much of the assets should be shipped to us or sold for something that is shipped/transferred to us.

But if all the transactions get published, so that the issuer and anyone else can see a server never issued any more than the actual issuer of the contract ordered them to, does it really matter what kind of storage or database various observers choose to use to store that info?

If a company's only assets are to be p2p assets though, such as holdings of various alt coins for example, then possibly it might make sense to try to run the whole company as a p2p application. As soon as you want it to hold non p2p assets though, there is centralisation, in that the value of each such asset is probably centralised at the location of that asset and/or the legal/de-facto ownership/control of that asset.

("Smart assets" can help with that though so maybe we should work on developing those while at it.)

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December 10, 2011, 01:28:38 PM
 #54

If merged mining can work with arbitrary numbers of blockchains, maybe shares could be issued simply by starting a new chain that issues that many units in its genesis block? The issuing ocmpany would own those, and ownership can spread from there by normal operatinos of changing ownership on blockchains.

There are already supposedly methods one can use to lock in change of ownership on one chain so a change of ownership of something on another chain has to happen too.

Basically each type of share would be another alt currency, like the GMC (General Mining Corp) and GRF (General Retirement Funds) chains.

-MarkM-


I thought about this, but could this be susceptible to the 51% attack?

So far, yes. That is why GMC and GRF chains have been kept private, and now actually might even get abstracted away completely in favour of simply trading in Open Transactions some tokens representing such coins. The actual chain with the actual coins is starting to look like it can simply go away as not really being needed. Though if at some time such a chain does seem useful it can be created from scratch and the tokens in the Open Transactions system can be used to determine how many initial "coins" to issue initially to who.

Similarly with a number of other private blockchains; it is starting to look as if the actual chains can be ignored in favour of working directly with the Open Transactions tokens representing the values that would/could be represented in such chains.

If/when actual chains can be deployed without worry about 51% attacks, fine, that can be done. Meanwhile trading can proceed without waiting for the actual deployment of such a chain and such chains might even end up never actually being needed.

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October 08, 2012, 01:38:34 PM
 #55

Hey buddies.

So my 2c is that this is not a technical problem.

Bitcoin is already the decentralised medium of exchange and works great for that.

The reason GLBSE has been kind of crappy is not because it's centralised but because it's just crappy. I made a much more in dept post as to where I went wrong and where I'll be improving GLBSE here.
https://bitcointalk.org/index.php?topic=52310.msg628049#msg628049

Bitcoin has come along and is the first working non-centralised solution to an already existing very centralised world (banking and money).

Markets ALL markets are by their very definition centralised, that's the whole point, everyone comes to the one place to trade, that way they will find a buy for their sell and vice versa.

The problems here are to do with size, as in the small size of the market (small markets don't thrive).
Enforcing contracts
Anonymity

They are not technical, at least not yet.

Nefario

Heh. Well, live and learn.

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October 08, 2012, 08:22:52 PM
 #56

Maybe some of the thread subscribers are interested in pybond, a project by jgarzik that can solve this problem. Some related threads:

https://bitcointalk.org/index.php?topic=92421.0
https://bitcointalk.org/index.php?topic=112007.0
https://bitcointalk.org/index.php?topic=106373.0
https://bitcointalk.org/index.php?topic=106449.0
https://bitcointalk.org/index.php?topic=114571.0


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October 09, 2012, 07:22:13 AM
 #57

Re Meni's concerns about commited offers and cancelling offers:

Cannot people who want to offer some bitcoins for, say, some litecoins use the cross-chain atomic trades system?

Or, if offering some blue satoshis for some red satoshis, use the in-chain atomic colour-trade system?

Both systems take a few steps, don't they? Until all the steps are complete the transaction the two (or potentially more?) parties are constructing cannot be mined into a block, right?

So one could have countless numbers of partially constructed atomic trades in progress at any particular moment, constantly optimising/prioritising how many steps toward completion/finalisation against how good a deal any particular atomic trade currently being constructed would be compared to others if it does end up being the one that gets finalised.

Cancelling is, surely, simply a matter of spending out from under it the outputs it is secifying as its inputs, so if someone does not finalise an atomic trade sooner than you spend out from under it the coins it planned to use as its input tough, it is invalidated thus in effect cancelled?

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October 09, 2012, 07:36:38 AM
 #58

Re Meni's concerns about commited offers and cancelling offers:

Cannot people who want to offer some bitcoins for, say, some litecoins use the cross-chain atomic trades system?

Or, if offering some blue satoshis for some red satoshis, use the in-chain atomic colour-trade system?

Both systems take a few steps, don't they? Until all the steps are complete the transaction the two (or potentially more?) parties are constructing cannot be mined into a block, right?

So one could have countless numbers of partially constructed atomic trades in progress at any particular moment, constantly optimising/prioritising how many steps toward completion/finalisation against how good a deal any particular atomic trade currently being constructed would be compared to others if it does end up being the one that gets finalised.

Cancelling is, surely, simply a matter of spending out from under it the outputs it is secifying as its inputs, so if someone does not finalise an atomic trade sooner than you spend out from under it the coins it planned to use as its input tough, it is invalidated thus in effect cancelled?

-MarkM-
Well it's hard to discuss this when we're not sure what the cross-chain system will look like.

But at the basic level, once everything is said and done every party will need to sign the constructed transaction. If he can back away on this last step all the preceding steps aren't committing.

This can be resolved if a signature is provided beforehand with a script saying this is valid as long as anyone pays quantity X of Y to Z. Maybe it's possible but it will surely be complicated (even if it's within the same blockchain, the script will have to recognize the color of coins).

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October 09, 2012, 10:46:57 AM
 #59

Cancelling is, surely, simply a matter of spending out from under it the outputs it is secifying as its inputs, so if someone does not finalise an atomic trade sooner than you spend out from under it the coins it planned to use as its input tough, it is invalidated thus in effect cancelled?

That should be enough IMO.

Well it's hard to discuss this when we're not sure what the cross-chain system will look like.

We mean this, not currently possible (nLockTime and tx replacements are disabled).

But at the basic level, once everything is said and done every party will need to sign the constructed transaction. If he can back away on this last step all the preceding steps aren't committing.

This can be resolved if a signature is provided beforehand with a script saying this is valid as long as anyone pays quantity X of Y to Z. Maybe it's possible but it will surely be complicated (even if it's within the same blockchain, the script will have to recognize the color of coins).

For the all assets in one chain case (possible right now, that's what pybond tries to do), the transaction must be constructed carefully to take the colours into account, but nothing special is required for the signatures, just the default SIGHASH_ALL and all parties involved signing. If anyone moves its coins before the transaction gets into the block it is canceled no matter if all the signatures have been added or not.

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October 09, 2012, 10:57:48 AM
 #60

For the all assets in one chain case (possible right now, that's what pybond tries to do), the transaction must be constructed carefully to take the colours into account, but nothing special is required for the signatures, just the default SIGHASH_ALL and all parties involved signing. If anyone moves its coins before the transaction gets into the block it is canceled no matter if all the signatures have been added or not.
I'm not sure we're talking about the same thing. As I explained several times, making sure nobody runs away with the money is not a problem, that's easily solvable with both transfers being in the same transaction. I'm talking about manipulating the price by broadcasting orders you have no intention to execute, backing out when a 2nd party wants to take you on your offer.

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October 09, 2012, 12:05:12 PM
 #61

Listening to hype about price/value is silly reagrdless of whether hypers are allowed to shout/spam or have to be more subtle.

I spoke of umpteen in progress constructions of atomic transactions precisely because I suspect the vast majority will never happen. So you start taking up everyone on every offer that is not according to your own personal valuation based on actual need a "within reason" or "within budget" offer. and keep doing so on autopilot 24/7 until by some miracle a complete fully valid atomic transaction within your budget does manage to get completed, whereupon you submit it immediately to every large mining pool you know of in hopes it will actually get mined before the other party backs out.

Reputation could be added of course, like aha, there is that famous "green address" that has never backed out of the construction process, I'll prioritise constructing a deal with them!

But listening to purported prices? Whatever happened to the value of a thing to you is its value to you?

I way to actually send messages might help, so you can try to get in actual touch with folk who haven't been seen to back out.

Maybe a newsgroup where you put a bitcoin address as title of a post and anyone who sees one of their addresses in such a title knows its a message aimed at them?

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October 09, 2012, 03:59:55 PM
 #62

Listening to hype about price/value is silly reagrdless of whether hypers are allowed to shout/spam or have to be more subtle.

I spoke of umpteen in progress constructions of atomic transactions precisely because I suspect the vast majority will never happen. So you start taking up everyone on every offer that is not according to your own personal valuation based on actual need a "within reason" or "within budget" offer. and keep doing so on autopilot 24/7 until by some miracle a complete fully valid atomic transaction within your budget does manage to get completed, whereupon you submit it immediately to every large mining pool you know of in hopes it will actually get mined before the other party backs out.

Reputation could be added of course, like aha, there is that famous "green address" that has never backed out of the construction process, I'll prioritise constructing a deal with them!

But listening to purported prices? Whatever happened to the value of a thing to you is its value to you?

I way to actually send messages might help, so you can try to get in actual touch with folk who haven't been seen to back out.

Maybe a newsgroup where you put a bitcoin address as title of a post and anyone who sees one of their addresses in such a title knows its a message aimed at them?

-MarkM-
Knowing the going rate of something is essential to deriving your own valuation for it, and for liquid assets the personal valuation is the going rate - plus or minus epsilon to account for friction and personal needs and beliefs.

If I meet you and offer you 1000 bitcoins in exchange for $X, how low will X need to be for you to accept (giving you some time to complete the payment)? I doubt the answer is much different from $12150 (to within ~10%), where $12.15 is the Mtgox last traded price. Because you know that even if you have no need for bitcoins, you could sell them for ~$12150 on the open market (and that if you needed bitcoins and I didn't come to offer them, you could buy them for ~$12150).

So public knowledge of exchange rates is important. And actually traded rates aren't reliable because someone can trade with himself to manipulate price. Only a committing public offer can serve as an indication of the market rate and depth.

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October 12, 2012, 02:56:04 PM
 #63

I'm talking about manipulating the price by broadcasting orders you have no intention to execute, backing out when a 2nd party wants to take you on your offer.

So public knowledge of exchange rates is important. And actually traded rates aren't reliable because someone can trade with himself to manipulate price. Only a committing public offer can serve as an indication of the market rate and depth.

There are two different questions:

1) Binding advertisements

2) Public knowledge of exchange rates

Markm claims that 1 isn't really that important and I agree. Although it could be useful for some cases, it would require to modify the bitcoin core protocol.

About 2...I think it's easy to do.
Say the asset being trade for btc is mtgoxUSD. All the mtgoxUSD issued as satoshis would be issued with the same address, publicly known to all buyers. Buyers only need to identify themselves for redeeming their mtgoxUSD for usd. So all the trades are published in the chain.

The problem is, as you say, that you can always trade with yourself at crazy prices, but if the requirements are anonymity and p2p, there's no way around this. We must learn to ignore random trades at ridiculous prices.

So 2 is simple but at the same time, impossible.

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October 12, 2012, 03:21:36 PM
 #64

So public knowledge of exchange rates is important. And actually traded rates aren't reliable because someone can trade with himself to manipulate price. Only a committing public offer can serve as an indication of the market rate and depth.

Bitcoins and dollars are not stocks/shares. So a stock market is different from a currency exchange.

If I want to know the value of a company that owns 1000 dollars, 1000 bitcoins, 1000 devcoins, 1000 i0coins, and 1000 ixcoins then I know right off the bat that is is worth that basket of purses of currency. If it also owns some land, a few buildings, some furniture, and a million widgets, then I still do not need to know how much shares in the company last sold for nor how much people are offering for the company in order to evaluate how much I think that land, thouse buildings and those widgets add to its value.

So basically a company is a basket, and I can evaluate the contents of it and apply my own situation, since some people looking to buy the whole company might be mostly after the widgets and not be much good at finding good prices for land and buiildings or not have time to dispose of them at a goood price thus be forced to sell them quick at firesale prices, and other people looking to buy the whole company might be very interested in that land and those buildings for some long term plan but have no interest in widgets.

So the whole thing is likely to be of wildly different value to different people, whereas each of the components inside it might have some ideal disposal method or market whereby the best possible price could be gotten for it. So someone expert at breaking up companies into saleable pieces might have yet another value the company is worth to them.

I think if we have excellent details of precisely what assets the so called company actually consists of and most of those things have markets, whether scrapyards or pawnshops or secondhand stores or whatever, we can likely get a better view of how much it is really worth than if we believe the hype of all the fans who think it is special in and of itself quite regardless of whether it owns two dimes to rub together, simply because it is so cool or it was founded upon a clever idea, or because if its manager doesn't get headhunted it, rather than whatever company headhunts that manager, should be able to turn a profit this coming year...

Obviously for bitcoins we do not know how much "reserves" "it" has with which to back itself - how many assets it owns - so we cannot take that approach. But with companies we specifically do want to know how much we could get for its assets if we liquidated it don't we?

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October 12, 2012, 04:00:00 PM
 #65

Bitcoins and dollars are not stocks/shares. So a stock market is different from a currency exchange.

For trading purposes I don't see any technical difference. It doesn't matter if satoshis represent usd, shares, bonds, basket-currencies, IOUs or smart property.

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October 12, 2012, 05:03:35 PM
 #66

Bitcoins and dollars are not stocks/shares. So a stock market is different from a currency exchange.

For trading purposes I don't see any technical difference. It doesn't matter if satoshis represent usd, shares, bonds, basket-currencies, IOUs or smart property.

The difference is whether they represent value, or represent a real thing which possibly might be amenable to being assigned a value.

We know a dollar is worth a dollar, we know a satoshi is worth a satoshi, we know a bitcoin is worth a bitcoin.

What we don't necessarily know is what a company is worth, at least not until we know how many satoshis it owns how many dollars it owns how many bitcoins it owns, and how many satoshis, dollars and bitcoins we can get from a salvage company for its chattels / buildings / inventory / etc.

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October 13, 2012, 07:47:40 PM
 #67

But with companies we specifically do want to know how much we could get for its assets if we liquidated it don't we?
Absolutely not. That's more or less like saying a computer is worth what you could get by melting it and selling it as scrap metal.

The worth of a company is not the sum of the resell value of its physical assets. It is a reflection of how much profit it is expected to achieve with its combination of people, IP, customer base and physical assets. You can't take any of these away without making the company something completely different which is no longer profitable, and thus no longer valuable.

Since nobody knows how much profit a company will make, everyone has a different evaluation and a market can extract an aggregate valuation. It is still the case that for a liquid market, the most reliable indicator of value is the market price, from which each individual can adjust based on his own analysis.

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October 15, 2012, 09:08:31 AM
 #68

I still see the "shares aren't currencies" argument as irrelevant for the technical implementation.

In any case, to avoid the "non enforceable orders" you need binding advertisements (with an expiry block) and for that you definitely need to modify the protocol. If we did, I would also prefer to implement ripplecoin instead of just using colored coins: more divisibility for non hostcoin assets, not needing to move satoshis around.
At that point you probably also want more divisibility for both the hostcoin and the other assets.
And of course the hostcoin, being cash (a scarce money) should have demurrage.

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October 15, 2012, 10:32:24 AM
 #69

People are totally ignoring the massive elephant in the room and the reason glbse was shut down.

Sure you can have a stock exchange as decentralized as you want but how the fuck do you get past the fact a company needs a physical prescence and can be shut down on a whim by government decree or threats ? The problem gentlemen is one of geography.

Companies are beholden to government which can jail the operators, fine them or simply confiscate their equipment if they dont have the correct "licenses". How will a decentralized stock market work when all the companies cant function in the real world ?

Its hard to operate a company when you are in jail for breaking securities laws.

tl;dr they wont bother taking down the stock exchange they will go after the issuers.

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