Will multisignture transaction wallets solve trust issues with exchanges?

[cuddaloreappu]

So if  a user stores  funds in an online crypto exchange and do trading,there is always a fear in this post gox era of funds being lost or stolen.

what if there are two public keys or passwords needed to withdraw fund from the wallet that stores the users fund in the exchange, one  which the exchange has and other which the user generates.

By this the user can live without fear the exchange will scam him and the exchange can be without fear of any hack.

as far as trading when the user makes more money there will be no problem for the exchange to add that to the user wallet.

However what is the solution for  the losses  the user makes while trading and how it will be reduced from the user account ?

Is this line of thought correct..are multisignature wallets a good solution?

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[Meuh6879]

only in your dream, the exchange accept this.
this feature only work for cold storage ... or to pay an invoice (strong).

[CoinATMRadar]

Is this line of thought correct..are multisignature wallets a good solution?

You simply don't understand how it works. The exchange can not operate without full control over the funds.
The multisignature addresses can not be used here.

[activebiz]

Most exchangers would like full control of funds, it is a great idea but will take a while before its implemented

[Bitcoinpro]

so you mean we could with draw 50X our actual bitcoin ie the rate the exchange has inflated their books

[cuddaloreappu]

so you mean we could with draw 50X our actual bitcoin ie the rate the exchange has inflated their books

Why would an exchange do that?

[justusranvier]

Exchanges need to be able to process orders faster than the blockchain can process transactions. Nobody wants an exchange where they can only trade once every 10 minutes. So multisignature by itself is not enough to make exchanges secure.

What you need is some way to track user accounts on a server that implements cryptographically secure triple-entry accounting. You could use that system to track customer balances and then all you'd need is some way to manipulate Bitcoins held in multisignature outputs that was somehow tied to those signed receipts.

[cuddaloreappu]

i very well understand that exchanges need fast tranaction times and blockchain tech is not applicable...but a funding wallet which gets added if a trader makes a profit and exchange request to minus funds if the trader losses a trade, if the user fails to pay that to exchange, the exchange will not comply with any withdrawal further until the money is paid.

In this way i think both the trader and the exchange can have complete trust with each other.

[Bitcoinpro]

so you mean we could with draw 50X our actual bitcoin ie the rate the exchange has inflated their books

Why would an exchange do that?

well for starters they wouldn't keep all the funds for clients accounts in crypto, they should store

at least a percentage in assets like 50% and those assets need to have high liquidity,

but really you need me to answer the rest of it ?

[cuddaloreappu]

so you mean we could with draw 50X our actual bitcoin ie the rate the exchange has inflated their books

Why would an exchange do that?

well for starters they wouldn't keep all the funds for clients accounts in crypto, they should store

at least a percentage in assets like 50% and those assets need to have high liquidity,

but really you need me to answer the rest of it ?

please go ahead, i want to learn how an exchange holds funds

[Bitcoinpro]

so you mean we could with draw 50X our actual bitcoin ie the rate the exchange has inflated their books

Why would an exchange do that?

well for starters they wouldn't keep all the funds for clients accounts in crypto, they should store

at least a percentage in assets like 50% and those assets need to have high liquidity,

but really you need me to answer the rest of it ?

please go ahead, i want to learn how an exchange holds funds

I was being a bit sarcastic I wasn't really intending on answering, but I have this much Bitcoin 100,000,000,000 if you want to buy some,

 ill even make a site which you can log on to which says you own that much, just don't try getting it all out at once cause I might

be forced to appear before a Japanese bankruptcy court

[acoindr]

This is a great question.

Actually Chris Odom's Open Transaction may do just that. I haven't researched into or wrapped my head around it, but OT solves the exchange trust issue with multi-sig via something called voting pools. I highly recommend this video to anyone who hasn't seen it:

http://www.youtube.com/watch?v=teNzIFu5L70

Open Transactions may also provide instant bitcoin transactions and easy scalability. I also like it as an open source completely transparent alternative to Ripple. It may be quite promising.

[justusranvier]

This is a great question.

Actually Chris Odom's Open Transaction may do just that. I haven't researched into or wrapped my head around it, but OT solves the exchange trust issue with multi-sig via something called voting pools. I highly recommend this video to anyone who hasn't seen it:

http://www.youtube.com/watch?v=teNzIFu5L70

Open Transactions may also provide instant bitcoin transactions and easy scalability. I also like it as an open source completely transparent alternative to Ripple. It may be quite promising.

http://opentransactions.org/wiki/index.php?title=Voting_Pools

[jl2012]

Despite many people say no, I say yes, at least partially. Many people simply don't know the great potential of bitcoin.

Sending bitcoin to an exchange will take a few confirmations. Therefore, some people have no choice but to store bitcoin on exchange if they want to be able to sell at any time.

With proper use of multisig, bitcoin could be transferred to the exchange and be available for selling immediately:

1. Create a 2-of-2 multisig address with user's key and exchange's key

2. User sends bitcoin the the multisig address. Wait for 6 confirmations. Now the bitcoin couldn't be spent without signatures from BOTH user and exchange. Since the bitcoin is not under exchange's solo possession, it is not available for selling (not even for placing an open ask order). However, the exchange has no way to run with the locked bitcoin.*

3. Some time later when the user wants to sell the bitcoin, he signs a transaction to send the locked bitcoin to an address exclusively owned by the exchange, and forwards the partially signed transaction to the exchange

4. The exchange completes the partially signed transaction and publishes it on the bitcoin network. Since the user has no way to double spend, the bitcoin could be sold on the exchange immediately.

A system like this will minimize the exposure of the bitcoin to the exchange, while still allows users to sell bitcoin at anytime they want. It also demonstrates how bitcoin is superior to fiat: the same scheme could never be possible with fiat.

*If the user worries that the exchange will suddenly vanish and make the bitcoin permanently locked in the multisig address, there are some tricks: please read https://en.bitcoin.it/wiki/Contracts#Example_1:_Providing_a_deposit

[cuddaloreappu]

This is a great question.

Actually Chris Odom's Open Transaction may do just that. I haven't researched into or wrapped my head around it, but OT solves the exchange trust issue with multi-sig via something called voting pools. I highly recommend this video to anyone who hasn't seen it:

http://www.youtube.com/watch?v=teNzIFu5L70

Open Transactions may also provide instant bitcoin transactions and easy scalability. I also like it as an open source completely transparent alternative to Ripple. It may be quite promising.

thank you, i will go through the link

[cuddaloreappu]

Despite many people say no, I say yes, at least partially. Many people simply don't know the great potential of bitcoin.

Sending bitcoin to an exchange will take a few confirmations. Therefore, some people have no choice but to store bitcoin on exchange if they want to be able to sell at any time.

With proper use of multisig, bitcoin could be transferred to the exchange and be available for selling immediately:

1. Create a 2-of-2 multisig address with user's key and exchange's key

2. User sends bitcoin the the multisig address. Wait for 6 confirmations. Now the bitcoin couldn't be spent without signatures from BOTH user and exchange. Since the bitcoin is not under exchange's solo possession, it is not available for selling (not even for placing an open ask order). However, the exchange has no way to run with the locked bitcoin.*

3. Some time later when the user wants to sell the bitcoin, he signs a transaction to send the locked bitcoin to an address exclusively owned by the exchange, and forwards the partially signed transaction to the exchange

4. The exchange completes the partially signed transaction and publishes it on the bitcoin network. Since the user has no way to double spend, the bitcoin could be sold on the exchange immediately.

A system like this will minimize the exposure of the bitcoin to the exchange, while still allows users to sell bitcoin at anytime they want. It also demonstrates how bitcoin is superior to fiat: the same scheme could never be possible with fiat.

*If the user worries that the exchange will suddenly vanish and make the bitcoin permanently locked in the multisig address, there are some tricks: please read https://en.bitcoin.it/wiki/Contracts#Example_1:_Providing_a_deposit

These concepts seems very interesting.