What if bitcoins were used in high-frequency trading?

[jgarzik]

do you want to see how is the future of bitcoin + regulations ?
see paypal ... no thanks

PayPal is a layer on top of bitcoin.

Bitcoin will be a success when PayPal-BTC currency is offered alongside PayPal-USD and PayPal-EUR.

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[bittersweet]

Call me a dreamer but I would like Bitcoin to demonstrate anarcho-capitalism. You know, without government involvement?

Keep dreaming.

Keep dreaming that governments will allow a currency that can't be manipulated by them to compete with their money...
If it will be regulated, it will be done in a way that will make BitCoin basically useless.

[N12]

do you want to see how is the future of bitcoin + regulations ?
see paypal ... no thanks

What’s your problem? You don’t have to use the exchange. Bitcoin will NOT be that decentralized if it will be widespread because people like convenience. Most people don’t want to backup their wallets, be their own bank etc. Seriously, what do you guys imagine?

The real difference with bitcoin is: You have the freedom to be your own bank.

[jgarzik]

I don't currently see any benefit in having stocks in a bitcoin like system. It's probably better to just have companies subcontract out their shareholder registry management to a company specialized in doing that sort of thing (exactly how they do now infact). Ultimately the investors are required to trust the company they invest in - if they don't there are a million ways things will go wrong and having the shareholder registry in a block chain won't stop that. With bitcoin as a currency there is now no single point of failure, with company stocks there is always a singe point of failure - the company. Having the company manage it's shareholder registry (or more likely subcontract it out to a register management firm) doesn't make any difference. If people want to invest in totally black companies that aren't registered with any government the same thing applies - the black company can still manage the shareholder registry with no additional risk. You're just trusting the management.. but you have no other option.

Quite the opposite.

Satoshi's key invention is that bitcoin is really a distributed notary service.

Securely transferring stock from person A to person B is a perfect application for this invention.

As is securely transferring a DNS domain, or another digital entity.

[rebuilder]

Call me a dreamer but I would like Bitcoin to demonstrate anarcho-capitalism. You know, without government involvement? It would be wonderful to see it succeed on its own.

As long as the Bitcoin system itself cannot be regulated, it demonstrates anarcho-capitalism just fine. In a free market, anything that results in increased profits will be done, right?

Incidentally this is why I'm doubtful a truly anarchist society can function as such very long - there is too strong a profit incentive in using coercion. To  guarantee freedom to any reasonable degree, you must make coercion impossible or at the very least extremely difficult. But then that's what we have crypto and p2p communications for...

[nanotube]

+1 to macrohard on all counts.

Except for his appalling inability to quote properly...

haha yea. i almost missed his replies.

[gusti]

do you want to see how is the future of bitcoin + regulations ?
see paypal ... no thanks

PayPal is a layer on top of bitcoin.

Bitcoin will be a success when PayPal-BTC currency is offered alongside PayPal-USD and PayPal-EUR.

and why do you think nobody in this forum is happy to take paypal when amounts are high ?
if ever BTC have paypal as a model to follow, it is doomed to fail big

[nanotube]

I don't currently see any benefit in having stocks in a bitcoin like system. It's probably better to just have companies subcontract out their shareholder registry management to a company specialized in doing that sort of thing (exactly how they do now infact). Ultimately the investors are required to trust the company they invest in - if they don't there are a million ways things will go wrong and having the shareholder registry in a block chain won't stop that. With bitcoin as a currency there is now no single point of failure, with company stocks there is always a singe point of failure - the company. Having the company manage it's shareholder registry (or more likely subcontract it out to a register management firm) doesn't make any difference. If people want to invest in totally black companies that aren't registered with any government the same thing applies - the black company can still manage the shareholder registry with no additional risk. You're just trusting the management.. but you have no other option.

Quite the opposite.

Satoshi's key invention is that bitcoin is really a distributed notary service.

Securely transferring stock from person A to person B is a perfect application for this invention.

As is securely transferring a DNS domain, or another digital entity.

yes, but having each company start their own chain to trade its units of stock is not feasible, since securing a chain from attack (by throwing a bunch of gpus at it) is much more expensive for your average company than it would be to just pay someone to run a regular centralized database of shareholders.

decentralized databases are great for some things. but in case where ultimately you are trusting $entity to not screw you (such as in investing in a company's stock)... you might as well trust the same entity to maintain a centralized database.

just thinking out loud here.

[gusti]

do you want to see how is the future of bitcoin + regulations ?
see paypal ... no thanks

What’s your problem? You don’t have to use the exchange. Bitcoin will NOT be that decentralized if it will be widespread because people like convenience. Most people don’t want to backup their wallets, be their own bank etc. Seriously, what do you guys imagine?

The real difference with bitcoin is: You have the freedom to be your own bank.

you already have mybitcoin for people wanting convenience

I agree with you if you can convince any traditional institution to adopt bitcoin without introducing
any changes in bitcoin functioning

[jgarzik]

yes, but having each company start their own chain[...]

Who said anything about each company starting their own chain?  That's not distributed, nor decentralized.

The future of satoshi's proof-of-work technology is a chain marketplace.  Multiple chains will exist for different purposes (bitcoin, BitDNS, BitX).  Multiple chains will exist in the same competitive space (bitcoins, jgarzik-coins).

Wall Street firms may cooperate on a single "Wall Street NASDAQ chain", where all NASDAQ stocks are traded, for example.  That would be cooperative and super-strong, yet secure against double-spending (aka naked shorting, etc.)

[hozer]

yes, but having each company start their own chain[...]

The future of satoshi's proof-of-work technology is a chain marketplace.  Multiple chains will exist for different purposes (bitcoin, BitDNS, BitX).  Multiple chains will exist in the same competitive space (bitcoins, jgarzik-coins).

Anyone interested in starting a chain for commodities trading? (corn, soybeans, etc..). What would be REALLY interesting is a chain for trading real-time 5-minute LMP electricity price futures.

[eMansipater]

Call me a dreamer but I would like Bitcoin to demonstrate anarcho-capitalism. You know, without government involvement?

Keep dreaming.

I totally agree with S3052.

+1

BitCoin is a protocol, not a political philosophy.  The latter can be your reason for supporting the former, but don't confuse them.

[Jered Kenna (TradeHill)]

Call me a dreamer but I would like Bitcoin to demonstrate anarcho-capitalism. You know, without government involvement?

Keep dreaming.

I totally agree with S3052.

+1

BitCoin is protocol, not a political philosophy.  The latter can be your reason for supporting the former, but don't confuse them.

Exactly, while I agree with most of the extreme political views on this board they're not going to help spread bitcoin.
Bitcoin might help spread your views though...

[mndrix]

Idea #3: What if our company could provide a "forex" marketplace for BTC/USD? This has certainly been done already (MtGox, etc.), however it seems there is still a lot of barrier to entry for many participants. How might a big player help? Would it hinder bitcoin's progress in any way?

As mentioned elsewhere, the trust a big player could lend to Bitcoin could help enormously.  I can't imagine a big player hindering Bitcoin anymore than GitHub hinders the distributed nature of Git.  Those who want centralization through a big player can have it.  Those who don't can use the natural, peer-to-peer mode.

Idea #4: Does bitcoin need a market maker in its exchange markets? Market makers usually help narrow the spread between the "bid price" and "ask price" by taking some of the risk in moments when there are no natural market participants (e.g. if you want to sell, but at this moment no one is willing to buy, you either have to lower your price to gain attention, or wait a while for more buyers to show up). My sense is that bitcoin is too young to need a market maker, and perhaps does not yet have enough volume to make the role worthwhile. What are your thoughts?

A market maker would be nice.  In my limited experience, the volumes are still too low for it to be profitable though.

[beala]

Call me a dreamer but I would like Bitcoin to demonstrate anarcho-capitalism. You know, without government involvement?

Keep dreaming.

I totally agree with S3052.

+1

BitCoin is protocol, not a political philosophy.  The latter can be your reason for supporting the former, but don't confuse them.

I agree that we need a trustworthy established forex. If a large institution doesn't throw its weight behind bitcoin, all it'll ever be is a highly volatile currency used by a few thousand computer geeks with fringe political leanings. There's no way I can convince my local coffee shop to start using bitcoin if they're totally dependent on small operations like CoinPal to convert their btc earnings to usd (and, as much as we'd like them to keep their btc as btc, they will want to do this). The same goes for operations like MyBitcoin. Maybe we totally trust these organizations, but the view from the outside is much different ("you want me to wire my money all over the world, then convert it on mtgox, then store it in mybitwhat? No thanks, I'll use paypal.").

[MacRohard]

yes, but having each company start their own chain[...]

Who said anything about each company starting their own chain?  That's not distributed, nor decentralized.

The future of satoshi's proof-of-work technology is a chain marketplace.  Multiple chains will exist for different purposes (bitcoin, BitDNS, BitX).  Multiple chains will exist in the same competitive space (bitcoins, jgarzik-coins).

Wall Street firms may cooperate on a single "Wall Street NASDAQ chain", where all NASDAQ stocks are traded, for example.  That would be cooperative and super-strong, yet secure against double-spending (aka naked shorting, etc.)

The thing that you're missing is that with bitcoins the bitcoin is the deliverable. It doesn't represent anything at all and that's what allows it to be settled electronically.

If you want things in the block chain to represent shares (ie: you want the management to count your vote come agm time or pay you a dividend) or you want some farmer to deliver you some corn then they (the management or the farmer) becomes the point of failure. You're relying on them.. the fact that there's a block chain that says they should do something is completely irrelevant. They might as well just keep their shares/corn orders in a very ordinary spreadsheet.

BitDNS is a different matter.. with DNS there is something that can be delivered electronically where the thing itself is stored in the blockchain. This would work.. but you don't really need the whole proof of work thing. If all you want is a first-come-first-served name grabbing model that is basically just a simple distributed database where the p2p swarm stores the zonefile and accepts updates from keyholders and allows new registrations where the name doesn't already exist. I don't see a role for proof-of-works here. Double spending doesn't really exist.. I guess the analogy would be if you tried to transfer (sign away to a new controlling private key) the same domain name to two different new owners.. how much of a problem would that be? Is it really worth doing proofs of work to stop it? Maybe.. but I'm not really convinced. With coins you can doublespend them to anyone.. with a domain name you'd have to find two people who wanted to buy the exact same domain from you at the same time. The motivation for fraud is significantly lower.

[jgarzik]

If you want things in the block chain to represent shares (ie: you want the management to count your vote come agm time or pay you a dividend) or you want some farmer to deliver you some corn then they (the management or the farmer) becomes the point of failure. You're relying on them.. the fact that there's a block chain that says they should do something is completely irrelevant. They might as well just keep their shares/corn orders in a very ordinary spreadsheet.

That's true for corn, yes, but not stock, which can be traded electronically, automatically and securely.

And for corn, that is analagous to selling a coffee or a car for bitcoins.  You are relying on an external point of failure.

So what if the corn (or coffee) is never delivered.  Having one element outside the scope of the project does not eliminate the utility of the bitcoin approach.

[iya]

If you want things in the block chain to represent shares (ie: you want the management to count your vote come agm time or pay you a dividend) or you want some farmer to deliver you some corn then they (the management or the farmer) becomes the point of failure. You're relying on them.. the fact that there's a block chain that says they should do something is completely irrelevant. They might as well just keep their shares/corn orders in a very ordinary spreadsheet.

That's true for corn, yes, but not stock, which can be traded electronically, automatically and securely.

And for corn, that is analagous to selling a coffee or a car for bitcoins.  You are relying on an external point of failure.

So what if the corn (or coffee) is never delivered.  Having one element outside the scope of the project does not eliminate the utility of the bitcoin approach.

What would be the difference between coffee and corn? Why do you think the virtual futures would be priced anywhere near their real world counterpart?
Bitcoins and anything like it cannot be backed by something real. If it could, it would have been done.

[MacRohard]

If you want things in the block chain to represent shares (ie: you want the management to count your vote come agm time or pay you a dividend) or you want some farmer to deliver you some corn then they (the management or the farmer) becomes the point of failure. You're relying on them.. the fact that there's a block chain that says they should do something is completely irrelevant. They might as well just keep their shares/corn orders in a very ordinary spreadsheet.

That's true for corn, yes, but not stock, which can be traded electronically, automatically and securely.

And for corn, that is analagous to selling a coffee or a car for bitcoins.  You are relying on an external point of failure.

So what if the corn (or coffee) is never delivered.  Having one element outside the scope of the project does not eliminate the utility of the bitcoin approach.

No, you're still missing the point.

Stock is only useful if honored by the company management. If you have to trust them (which you do) they might as well just maintain the share register (which is exactly how it currently works, although most companies outsource the maintenance of the database).

There's no point in using a complicated proof-of-work system to maintain a simple spreadsheet when at the end of the day you're effectively just going to print off a copy and hand it to someone and just trust that they do whatever it says. They might as well maintain it centrally as it's much simpler. There's no value add for this huge p2p network crunching thousands of Ghash/s when at the end of the day someone can just ignore it.

The only reason the bitcoin network works for bitcoins is there are no external trust dependencies. That won't be true in the case of any of the physical goods trading you described.

BitDNS could be done that way, but it could also be done a much simpler way without proofs of work.

[jgarzik]

What would be the difference between coffee and corn?

None, for the purposes of this thread's examples.

Why do you think the virtual futures would be priced anywhere near their real world counterpart?

I have no idea what a virtual future is.

But if you wanted to trade corn contracts, bitcoin is an excellent notary service for such contracts.

Bitcoins and anything like it cannot be backed by something real. If it could, it would have been done.

Everyone who purchases a real-world good with bitcoins, or fulfills a contract with bitcoins, begs to differ.

With cryptographically-signed digital certificates, you have as much flexibility as you need, to describe anything in the world.

Corporate entities can certainly back digital certificates if it is in their interest to do so.  If I was rich and wanted to back bitcoins with gold, there is no reason why I cannot do that.