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Author Topic: On a decentralized bitcoin-based stock market...  (Read 8067 times)
markm
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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?

-MarkM-

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Meni Rosenfeld
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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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jtimon
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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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markm
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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?

-MarkM-

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jtimon
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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.

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
markm
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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.

-MarkM-

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Meni Rosenfeld
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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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jtimon
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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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