New Bitcoin Trading Exchange available on the i2p Network

[maxkoda]

I have started a Bitcoin Trading Exchange on the Invisible Internet Project (i2p) network.

If you have access to the i2p network you can reach the Bitcoin Exchange at: http://bitcoinexchange.i2p

If you do not have direct access to i2p you can reach the site from the i2p proxy at:

https://www.awxcnx.de/tor-i2p-proxy2-en.htm
(in the address field for the eepsite type in: http://bitcoinexchange.i2p If you intend to Register or Login to the site through this proxy service, uncheck the "Remove all cookies" checkbox.). This will end up taking you to:

https://www.awxcnx.de/cgi-bin/proxy2/nph-proxy.cgi/010000A/http/bitcoinexchange.i2p/

This is a brand new Bitcoin Exchange trading site on the i2p network. The reason for deploying the exchange on the i2p network is to hide the location of the exchange from any entity attempting to halt bitcoin trading activities. Buying and selling is conducted anonymously. All exchange users are strongly encouraged to remain anonymous. The site requires an email address which is used as a unique user id in the system which also provides a communication link. WE STRONGLY ENCOURAGE ALL EXCHANGE USERS TO PROVIDE AN ANONYMOUS EMAIL ADDRESS! Such as those provided by the i2p Postman (which has the format of: <user>@mail.i2p).

I will be looking to make improvements to the site moving forward so please provide your feedback. The exchange sites top priority is reliable trading anonymously, not a glossy UI.  I purposely avoid javascript to protect anonymity. A web service API will be released at the end of the month and I will look into providing technology that will support real-time tick data to support various trading platforms.

I started off with trading Bitcoin/USD pair. The site will be extended to trade other commodities and will be (probably one of very few of the FREE MARKET) trading sites left on Earth.

For more info on i2p check out: http://www.i2p2.de/

Please let me know what you think.

Cheers!

Max Koda

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[1714858900]

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[Keefe]

It appears that USD in your exchange cannot be withdrawn, but can only be traded back to BTC. Am I missing something?

If it's as it appears, USD there (I'll call it BE-USD) is an artificially created currency with no relation to actual USD except psychological. Also, where did the BE-USD initially come from? How did the first trader buy BE-USD with BTC, if USD can't be deposited to the exchange?

[maxkoda]

Yes, you are correct in that USD can't be withdrawn and are only used as a reference for trading purposes.

I wanted to trade my bitcoins in an anonymous system (I don't believe that anyone else needs to know or track my personal trading activity). All the other systems I see out there, such as MT. Gox, Bitcoin Market, etc. can be traced and shutdown by authorities if they feel like shutting them down). So I thought why not create an anonymous exchange site that would be nearly impossible to track and shutdown.

Exchanging currency from bitcoin to USD (or any other fiat currency) have the potential to leave traceable transaction trails through an external payment processor (paypal as an example). You are correct in that the USD is used only as a reference on this exchange, however,  this is not unusual and is similar to trading the NYMEX Uranium Futures (UX) Contract (not many of us could take physical delivery of the Uranium we traded).

I provided the initial pool of USD to bootstrap the trading of bitcoins on the exchange.

Max Koda

[matonis]

You are correct in that the USD is used only as a reference on this exchange, however,  this is not unusual and is similar to trading the NYMEX Uranium Futures (UX) Contract (not many of us could take physical delivery of the Uranium we traded).

I provided the initial pool of USD to bootstrap the trading of bitcoins on the exchange.

True, but with a futures exchange, trading the contracts requires only a minimal margin deposit and the contracts that do not deliver instead utilize a cash settlement mechanism (like the S&P 500).  It is still not clear to me how the USD balance in your exchange can ever surpass the initial injection balance. But I really like the idea.

[Stephen Gornick]

Will there be the ability to transfer USD from one account to another?

In effect, that would make this service functional for transacting anonymously using USD funds as well.  i.e, can use the account as an eWallet or "bank" for USD funds.

[edited]

[­­­Atlas_]

I'll be all over this if you can trade USD to other accounts.

[Nefario]

I'll be all over this if you can trade USD to other accounts.

I don't know how you'd go about doing this but yeah, I second Atlases sentiment.

[Stephen Gornick]

I don't know how you'd go about doing this

Are you saying you don't know how it could be done anonymously?  One way would be to emulate how bitcoin does it -- the exchange creates a unique identifier for each USD payment request.

[NghtRppr]

I'll be all over this if you can trade USD to other accounts.

I see this as such a popular request that I'm eventually going to be adding this to my service.

[­­­Atlas_]

It would essentially back these US dollars with Bitcoins.

[Nefario]

On closer inspection, these are loafers. In other words, I hand't read the op's explantion correctly, that it doesn't actually trade in real USD.

OP mentions he's looking for an anonymous exchange, well look no further.

http://whiterockcottage.com/open/index.php?q=article/anonymous-money-needs-anonymous-exchange

It's something we need, and all it takes is someone willing to give it a go.

[maxkoda]

I understand the confusion regarding the USDs on the Bitcoin Exchange and I will publish a short paper describing the Bitcoin Exchange funding model. It takes a few cycles around the concept before it becomes clear and the uncertainty dissipates. I'll give a summary level description of the key points below leaving the detail in the paper which I will publish on the Bitcoin Exchange site:


WHY NO CURRENCY EXCHANGE SERVICES?
To avoid being classified as a Money Services Business (MSB).  Any partner providing such currency exchange services would be classified as a MSB and would be required to comply with FinCEN and Egmont Group to ensure the loss of financial privacy on a global basis (record keeping and reporting requirements). Providing currency exchange services would introduce a significant threat to preserving anonymity as well as introduce inefficiencies in the current automated trader self-service provisioning deposit/withdraw facilities. I'LL PROVIDE ADDITIONAL DETAIL IN THE PAPER.

WHY VIRTUAL USDs?
The Bitcoin Exchange was designed such that, only Bitcoins enter the Bitcoin Exchange through deposits, and only Bitcoins exit the Bitcoin Exchange through withdrawls. Since traders are buying and selling Bitcoins, they need some other point of reference during the course of trading. The USD was picked as that reference.

Now, nowhere in this model, is something created from nothing! It remains a zero-sum game!

(The trading model was conceived from a much more elegant model that I will not go into here.) Suffice it to say, that I seeded the funding model with a finite amount of Bitcoins that I placed into my own account. To provide the capacity to trade, I divided my balance by two - with 1/2 representing Bitcoins and the other virtual USDs. This was a one time event, and the amount of USDs in the Bitcoin Exchange will never change it is a constant force that enables the ability to trade. The amount of Bitcoins traded on the Bitcoin Exchange can only grow through traders depositing Bitcoins into the Bitcoin Exchange. Total bitcoins on the exchange will be reduced as a result of withdraws.

As we all know, there is an upper limit to the number of Bitcoins traded on the Bitcoin Exchange. It will never exceed 21,000,000.

The amount of virtual USDs (polarized bitcoins) will remain constant to enable the ability to trade.

As I stated I will take the time to explain this in more detail in the promised paper. I'll provide the mathematical model for your review and describes an example scenario that describes how it all works.

Cheers!

Max Koda
 

[toffoo]

Hi, I just wanted to say that I just signed into the site and it looks pretty good.  I've never used i2p before, but I managed to get it downloaded, installed, and working without "too much" trouble.  I really like the idea and I "get" the concept.  I'll definitely be giving it a try trading there soon.
Best of luck with the project.

[Stephen Gornick]

This was a one time event, and the amount of USDs in the Bitcoin Exchange will never change it is a constant force that enables the ability to trade.

I'm missing something basic then.

So though your service might not be able to be shut down by technical means, wouldn't the same end result be possible by simply selling bitcoins until all USD in the exchange become owned by the opposing force?

[maxkoda]

Sorry, my mistake.  While it is an event (not a one-time event) to enable the capacity to buy, it is adjusted/repeated  by the exchange relative to demand and supply by the exchange market making mechanism. This is necessary to scale the exchange as new bitcoins enter through deposits (and is also adjusted the other way according to the model, as bitcoins leave the exchange through withdraws). There is an event model that manages this within defined limits. This control mechanism keeps the rate of USDs constant between these events.

There are limits, in that, there will never be over 21,000,000 bitcoins in existence and a much smaller amount on the exchange.

There are risks to the Bitcoin Exchange:

One is that if no traders see it as a value added service, it will atrophy and die. I need others to come and trade with me if I wish to trade anonymously.

Certainly a trader with a large position in Bitcoins could influence prices i.e., sell large number at low prices to drive the price down.
Other such behaviors that exist on any trading exchange.

I'm confident that the market making mechanism will play it's part to enable a free market exchange without placing constraints on individual traders.

Cheers!

Max Koda

[Anonymous]

I think a lot of sites will use the ledger method for pushing money around and only touch the physical currency when someone actually goes to withdraw their cash.

It works the same for bitcoin where a site only makes a transaction on the actual bitcoin network when someone is either transferring to the site or to their own client or another bitcoin address.

This allows users to trade without waiting for confirmations and is why ewallets are useful. Its then a  matter of trusting the service to record your in site payments correctly.

[maxkoda]

The Bitcoin Exchange does use a ledger method for trading accounts. The bitcoin client and wallet are used simply as a payment gateway to send and receive bitcoins between the exchange and the traders. I suppose it would be possible to transfer funds from one account to another (bitcoins and USDs). However, this is not currently supported.

One model would be that a trader could have multiple accounts and have the ability to transfer funds amongst those accounts without having to use the Bitcoin network. Is there interest in this option?

Another, that I'm not real keen on, would be where a trader could transfer funds to another trader's account. My response would be, why not just use the bitcoin network for this? The goal of the exchange is to facilitate trading anonymously, not to send payments faster. You would still have a delay withdrawing funds and waiting for confirmation. I'd have to be persuaded of a value-add here!

Remember only bitcoins enter and exit the Bitcoin Exchange. The USDs are a reference for trading bitcoins. The Bitcoin Exchange doesn't perform currency exchanges or send USDs to traders.

Let me know your thoughts,

Max Koda

[Keefe]

I think the inability to deposit and withdraw USD is a critical limitation to usability. It effectively limits a trader to only shorting BTC. I don't believe you can have an effective exchange with only short speculators. You need long speculators as well, and that's currently not possible. If you enable USD transfers between accounts, and encourage people to trade BE-USD for other USD externally (PayPal, cash, wire, whatever), you can partially mitigate the problem.

[Stephen Gornick]

Another, that I'm not real keen on, would be where a trader could transfer funds to another trader's account. My response would be, why not just use the bitcoin network for this?

Because the BTC/USD exchange rate fluctuations are so signficant.  Assuming the exchange rates on this exchange don't deviate too far from those on Mt. Gox, for instance, then the USD funds held in the exchange can be transferred out (as BTC) at a future date without causing concern that losses could occur should the exchange rate drop in the meantime.

There are those who desire a method to electronically transfer funds (in USD) anonymously with their trading partners.  I was thinking that theres no reason this exchange cannot serve that function as well.

[edited]

[maxkoda]

Due to overwhelming requests from the user base, I have made some significant changes to the system. These changes will be rolled out with a beta test period to be in effect from April 23, 2011 until May 10, 2011. To better illustrate the intent and objectives of the site, I added the ability to trade multiple contracts and thus a trading portfolio construct. To move the focus away from currency exchange, I decided to open the testing phase with a Copper (CU) contract. This contract is being designed to offer physical delivery through a partner firm. Physical delivery of the copper will involve additional cost (i.e., shipping and handling). After the testing phase is complete, additional contracts will be offered for trading. Examples include; Gold, Silver, Crude Oil, Corn, Wheat, Beans, Rice, and various fiat currencies.

My goal is not to just provide a mechanism for exchanging bitcoins for  fiat currency, but a trading exchange for the bitcoin economy.

For details go to: http://bitcoinexchange.i2p (if you have access to the i2p network).

or enter the above URL at the i2p proxy site at: https://www.awxcnx.de/tor-i2p-proxy2-en.htm

If your using the proxy, you will need to uncheck the "Remove all cookies" checkbox.

Cheers!

Max Koda

[­­­Atlas_]

Will there be an API for trading bots?

[maxkoda]

Yes, a trading API is in the works and a beta is planned to be released shortly after the May 10, 2011 milestone. I currently have some prototype json services that can be called to get market data (order book, and trades) and I'm working on account management authentication and authorization functions that would enable secure algorithmic trading.

I'm also working on providing real-time services so that remote trading platforms can subscribe to, and obtain, real-time tick data using distributed message queues.

Cheers!

Max Koda

[maxkoda]

I just made the multi-contract interface available for testing. There are four contracts that are able to be traded (AG-Silver, AU-Gold, CU-Copper, and OIL-Crude Oil).
Please let me know if you find any issues or bugs.

Cheers!

Max Koda

[bitcoinBull]

I just made the multi-contract interface available for testing. There are four contracts that are able to be traded (AG-Silver, AU-Gold, CU-Copper, and OIL-Crude Oil).
Please let me know if you find any issues or bugs.

Cheers!

Max Koda

I'm not sure I understand this.  These AG/AU/CU/OIL contracts are traded solely on http://bitcoinexchange.i2p, so the price of these contracts won't necessarily reflect the price on e.g. the NYMEX market, is that correct?

[UncleIroh]

hey
does anybody know how do i get rid of this warning i2p gets me?

Code:

Warning: Eepsite Not Found in Addressbook
The eepsite was not found in your router's addressbook. Check the link or find a BASE64 address. If you have the BASE64 address, paste it into your userhosts.txt using SusiDNS, use a BASE64 address helper, or use a jump service link below.

im kind of a noob with i2p
do you the website in the tor network?

[maxkoda]

bitcoinBull,

Yes these contracts will be traded soley on the Bitcoin Exchange and they will have different prices namely because the price on the Bitcoin Exchange will be in Bitcoins not USD. This is no different than how commodities trade on other exchanges around the world. Ultimately the traders on the Bitcoin Exchange will be the entities that set the prices for these commodities.

Max Koda

[maxkoda]

UncleIroh,

The website is an i2p eepsite.

To eliminate this message you need to add the eepsite key to your i2p addressbook.

add the following to your i2p Address book (hosts file):

host name: bitcoinexchange.i2p
destination key:

6bomT0qWEXHZ59WT2DHrttmhgZiokjJqSTGZocuvjEEJ8fYvqzS4kLkb2lbx~a7elSFlv5FyKgi5XvCjeNO3vbev6yBzzKHVPA5BrIElnSBunvfUrLBt5PL6nmJSnfExi6OtHVsL3a74Pl~9UQU3X6QPYrhWbJbXx5TB0zi1hulBMYBGRm7tEEpqllVfJXzc2jtXnrnf14HH6dFweBgB04Wb2oK4ZCjysVC4DRdKk5bt4fT4hJZAgjl4AFy46cuDuR~klhzxUasfIuFbDJkWc7h0O7igKZppZVh8pKOB52T2HLL0YGX07ktl1g54~RbtMjgVMNx1ThdRQOFbIGKM3R9~VldacN~R1oxvEGkcNHjyd2NB6oC758oYDVKI6S-9q6nP37J-sHbNXwME5~vk4Sk6NR3PK9JUr8bBhdg~giEWQmhwo2orP0QRW~eRDp~nIuNNVrinDzBUh65lmSyuec15vu5J9f4f9Bbc63JlOgUCW8rWkx2OS0R9G4tzVkwRAAAA

Then the message will go away.

Max Koda

[UncleIroh]

do I have to register with a real email?

[maxkoda]

I recommend a real but anonymous email address. That way, if necessary, there is a communications path allowing the exchange to communicate with you. However, technically speaking, you do not have to provide a real email address if you prefer not to.

I recommend using the i2p built-in mail client. You can create your own free anonymous email account at:

http://hq.postman.i2p/


Max Koda

[bitcoinBull]

bitcoinBull,

Yes these contracts will be traded soley on the Bitcoin Exchange and they will have different prices namely because the price on the Bitcoin Exchange will be in Bitcoins not USD. This is no different than how commodities trade on other exchanges around the world. Ultimately the traders on the Bitcoin Exchange will be the entities that set the prices for these commodities.

Max Koda

The prices will be different not because of the denomination, but because traders won't be willing to risk an arbitrage on an untrusted market which makes no guarantees of delivering.

Other commodity exchanges actually trade the commodities, where the paper contracts are obligated by regulatory law to deliver in real goods at least a portion of the of the contract.

Your i2P BTC/USD market seems probable to work, because even if unable to withdraw in USD, one can already withdraw the USD elsewhere.  But will anyone risk an arbitrage on an electronic market for a commodities contract with zero backing, not even one single other buyer?  I might risk a tiny bit, if someone else goes first.

[maxkoda]

bitcoinBull,

I see your point. I would agree that the reputation and integrity of the exchange will need to develop and prove itself over time. I am committed to make this exchange a success along with the Bitcoin currency! The current system is corrupt and free markets no longer exist. I'm attempting to play my part in changing this!
Time will tell...

Regarding physical delivery, many systems in place today provide only cash settlements. I know in that I have experienced difficulty taking physical delivery on Gold and Silver futures. Some items traded can only be settled for cash i.e., Electricity, Uranium, Weather, etc. My thinking is that the majority of contracts that trade on the Bitcoin Exchange will be cash settlement since physical delivery poses risks to anonymity. However, I am looking at providing the option for traders to take physical delivery on some of the contracts traded on the Bitcoin Exchange. Physical delivery will involve additional costs (to cover the cost of shipping and handling). The first contract that will offer physical delivery will be the CU copper contract. I'm still working out the details, but if you trade that contract and elect to take physical delivery, you will be able to take delivery of pure copper.

Max Koda