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Mike3574
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February 06, 2012, 10:43:55 PM
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please delete

project abandoned long time ago
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February 06, 2012, 10:52:00 PM
 #2

Couple issues:
You haven't explained how the trade happens without 3rd party.  This is a non-trivial problem.
Buyer has USD.  Seller has BTC.  They agree on an exchange.  How EXACTLY do you intend to faciltate the transfer so that Seller's BTC go  to Buyer's wallet and Buyer's USD get transfered to seller's Dwolla account without one party just taking both and leaving.

You haven't explained how you will enforce bids without a 3rd party.  This is a non-trivial problem.
I offer for sale 1,000,000 BTC @ $1 ea.  How do you ensure that I have 1,000,000 BTC and that I can't remove the order once matched and executed. 

There likely are solutions but you seem to have glossed away the entire problem which isn't reassuring.
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February 06, 2012, 11:00:07 PM
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Couple issues:
You haven't explained how the trade happens without 3rd party.  This is a non-trivial problem.
Buyer has USD.  Seller has BTC.  They agree on an exchange.  How EXACTLY do you intend to faciltate the transfer so that Seller's BTC go  to Buyer's wallet and Buyer's USD get transfered to seller's Dwolla account without one party just taking both and leaving.

You haven't explained how you will enforce bids without a 3rd party.  This is a non-trivial problem.
I offer for sale 1,000,000 BTC @ $1 ea.  How do you ensure that I have 1,000,000 BTC and that I can't remove the order once matched and executed. 

There likely are solutions but you seem to have glossed away the entire problem which isn't reassuring.

I haven't glossed away anything. I said that I want people to give their ideas. I'm aware (and even said so) that the trade system is not full-proof. However, the bids are simple as far as I can see. Before placing a bid the software will check to see if the amount you are trading exists in your wallet before allowing it to go through.

All Best,

Michael
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Gerald Davis


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February 06, 2012, 11:02:45 PM
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However, the bids are simple as far as I can see. Before placing a bid the software will check to see if the amount you are trading exists in your wallet before allowing it to go through.

These are difficult to solve problem which will likely require some kind of distributed escrow, multi-signature solution, or fiat based crypto-currency.  To say it is "easy" would indicate you haven't thought this out.

So the checking is done in the client?  
The client which will be open source?  
The source code anyone can modify to include the "checking portion"?

So my modified version will let me spam the network with bogus bids and asks?

A 3rd party exchange serves two major functions:
a) to ensure the trader has the asset being traded.
b) to ensure the trader can't avoid trading when his trade is matched.

The entire decentralized p2p exchange boils down to solving those two problems.

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February 06, 2012, 11:05:58 PM
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However, the bids are simple as far as I can see. Before placing a bid the software will check to see if the amount you are trading exists in your wallet before allowing it to go through.

These are difficult to solve problem which will likely require some kind of distributed escrow, multi-signature solution, or fiat based crypto-currency.  To say it is "easy" would indicate you haven't thought this out.

So the checking is done in the client? 
The client which will be open source? 
The source code anyone can modify to include the "checking portion"?

So my modified version will let me spam the network with bogus bids and asks?

A 3rd party exchange serves two major functions:
a) to ensure the trader has the asset being traded.
b) to ensure the trader can't avoid trading when his trade is matched.

The entire decentralized p2p exchange boils down to solving those two problems.

So you've found holes! Now tell me how to fix them! My goal in this posting is to have people find the holes and give their ideas on how to make it work. When a full-proof workable system is developed then the coding will begin. I like your idea of the distributed escrow. Tell me more!

All Best,

Michael
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February 06, 2012, 11:23:18 PM
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<quote>Unlike other attempts at creating a peer-to-peer exchange, P2P Exchange does not rely on a web-of-trust system. How is this possible? The answer is quite simple. I like to call the mechanism that executes the trade a "Trader Bot"</quote>
Your proposed trader bot does nothing except error checking before offering a trade.  As an open source client, a malicious party could bypass these checks if desired.

I think you're headed down the wrong path, and should integrate in support for a web of trust.  I know of no other possible solution to the problem of a distributed exchange.
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February 06, 2012, 11:28:55 PM
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Quote
Unlike other attempts at creating a peer-to-peer exchange, P2P Exchange does not rely on a web-of-trust system. How is this possible? The answer is quite simple. I like to call the mechanism that executes the trade a "Trader Bot"
Your proposed trader bot does nothing except error checking before offering a trade.  As an open source client, a malicious party could bypass these checks if desired.

Say something that hasn't already been said please! If you have a solution share it! Smiley

Quote
I think you're headed down the wrong path, and should integrate in support for a web of trust.  I know of no other possible solution to the problem of a distributed exchange.

I'm open to whatever works. I'd like to make it work without a web-of-trust but if it comes down to it then that's what we'll do.
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February 07, 2012, 12:01:29 AM
 #8

yes why can't it be similar to what #bitcoin-otc does in irc.  effectively bringing the irc channel to an easy to use automated program.  a user could specify the lowest rating they allow to complete a trade
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February 07, 2012, 12:54:10 AM
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yes why can't it be similar to what #bitcoin-otc does in irc.  effectively bringing the irc channel to an easy to use automated program.  a user could specify the lowest rating they allow to complete a trade


A web of trust mechanism might be a solution.

I buy/sell/trade on this Forum because I have been vetted by the Bitcoin community.

Seems to be a fairly decent self-regulating system, could we not do that w/ this P2P exchange?


I would like to forward a quote by 1QaZxSw2 on why this is so important for the crypto-coin community:

"P2PX (p2p exchange, yes I just invented an acronym) is an essential step to securing the future of bitcoin commerce.
Right now the exchanges are the possible targets of government shutdown."


We have a decentralized currency;  now we need to do the same for our exchanges.

Micheal, keep up the good work!
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February 07, 2012, 02:50:16 AM
 #10

Exchanges perform several functions, of which the following are relevant to the bitcoin community:

  • They are a central place where traders can place their trades
  • Provides fiscal safety in dealings
  • Provides clearing house functions

All other functions such as capital formation, speculation etc are facilitated by the above basic functions

Of the above, fiscal safety is the paramount function. Every trade that occurs on the exchange should somehow be enforceable. In the fiat world, you would need to deposit cash or securities with your broker (actually held by your broker's clearinghouse) and they will ensure that you cannot place a trade unless you can fulfill its obligation. If a trader cannot fulfill his obligations, the clearinghouse is liable and the exchange will ensure the other party in the trade is not impacted negatively. Clearinghouses periodically "clear" their balances by transferring cash or securities from each other.

This model is successful because of clear separation of responsibilities and risks. There are several layers of risk management that allows the exchanges to transact large volumes of cash with confidence. For example, the exchange itself requires clearinghouses to be insured against default and so on.

To adapt this to a P2P model, we would still need to figure out how to have a p2p exchange and a p2p clearinghouse.

Clearinghouse:

In a pure P2p model, every person is his own clearinghouse. When the amount of money is so huge, it would be extremely hard to trust the system would work on blind trust or even historical trust. If a 80+ year old institution like Bear Sterns could not keep its financial commitments, how can you trust random bitcoiners to remain solvent?

To keep everyone honest, we absolutely need a clearinghouse.  One simple option is to have the bitcoin network itself as the clearinghouse. Once someone puts in a trade, that money/currency has to go somewhere out of the persons control. Perhaps it could linger in the bitcoin network or some alt-blockchain. If the order is filled, the money/asset can go to the other party. If the order is cancelled, it should go back to the trader. This allows the bitcoin network itself as the clearing house. This may require some protocol changes and dudes smarter than me need to step up here.

Fiscal Safety:

The above approach also raises some interesting questions. Can the money lingering around in the bitcoin network be stolen? It should not be possible. It should not be double spendable either. It still belongs to the person who put in the order, they are just unable to do anything with it.

I realize that a lot of these are hard to implement unless everything is denominated in BTC, which is why my current project denominates everything in BTC and would love to use this p2p exchange instead of creating my own exchange which would be a possible target of government shutdown: https://bitcointalk.org/index.php?topic=62907.0 (please vote on this poll)

For example, transactions in blockchains currently only talk about BTC. Can alternative products be added in there? What are the procedures for creating a new instrument? Assign a code? Is this done by committee? Won't this all lead to some centralization anyway? How do we ensure blockchains remain in sync? A BTC to LTC trade should be reflected in both chains. Perhaps a brand new p2px chain just for this?








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February 07, 2012, 02:59:48 AM
 #11

perhaps Open Transaction Server and this p2p project could somehow be the answer to the problems.
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February 07, 2012, 03:04:50 AM
 #12

I've never used Paxum, but dwolla charges $0.25 for each transfer. Though still cheaper than Mt Gox in many cases, for someone selling .1BTC, it would be a large fee. If they (or any other funding option) have an issue regarding the frequency of transactions, this may not be a viable option for a day-trader, esp. a HFT bot.

This  does give an easy straight forward means of getting money in to BTC for the average Joe just trying to make a quick purchase though.

Good Luck with your project.

Mike3574
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February 07, 2012, 03:09:52 AM
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I've never used Paxum, but dwolla charges $0.25 for each transfer. Though still cheaper than Mt Gox in many cases, for someone selling .1BTC, it would be a large fee. If they (or any other funding option) have an issue regarding the frequency of transactions, this may not be a viable option for a day-trader, esp. a HFT bot.

This  does give an easy straight forward means of getting money in to BTC for the average Joe just trying to make a quick purchase though.

Good Luck with your project.

Dwolla was only for an example. My goal is to have EVERY payment gateway available eventually.
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Gerald Davis


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February 07, 2012, 03:51:17 AM
 #14

I've never used Paxum, but dwolla charges $0.25 for each transfer. Though still cheaper than Mt Gox in many cases, for someone selling .1BTC, it would be a large fee.

Transfers less than $10 are free.
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February 07, 2012, 05:09:25 AM
 #15

This is an interesting project.  However p2p trade systems have cost; that is the cost of protecting from double spending.  Either you have a distributed verification network (like bitcoin with the block generation), or you have some sort of trusted centralized user that 'clears' the trades...  (this is normally called a 'clearing house').

If by some miracle you have come up with an algorithm to solve this problem in a distributed p2p manner; it would be wonderful if you could produce a white paper that explains how you propose to solve this doubble spending problem.


I'm working on the Open Transactions project;  this project is building secure (and centralized, but to a server of your choice, in the future we can have a group of federated trusted servers);  the market software executes in a similar mechanism to the Bitcoin scripting.  (through the use of cryptographic market contracts).

I really hope the best for your project, except I'm really scared if it doesn't have the well-thought-out cryptographic foundations (that we are still working on for the Open Transactions project); you will be opening your users up to easy scamming.

One off NP-Hard.
Mike3574
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February 07, 2012, 05:35:14 AM
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This is an interesting project.  However p2p trade systems have cost; that is the cost of protecting from double spending.  Either you have a distributed verification network (like bitcoin with the block generation), or you have some sort of trusted centralized user that 'clears' the trades...  (this is normally called a 'clearing house').

If by some miracle you have come up with an algorithm to solve this problem in a distributed p2p manner; it would be wonderful if you could produce a white paper that explains how you propose to solve this doubble spending problem.


I'm working on the Open Transactions project;  this project is building secure (and centralized, but to a server of your choice, in the future we can have a group of federated trusted servers);  the market software executes in a similar mechanism to the Bitcoin scripting.  (through the use of cryptographic market contracts).

I really hope the best for your project, except I'm really scared if it doesn't have the well-thought-out cryptographic foundations (that we are still working on for the Open Transactions project); you will be opening your users up to easy scamming.

Thank you for your response! At first I didn't want to create a new blockchain because I felt there are already so many and it would only complicate things. But now I'm thinking it may be the only possible way to do this securely without a web-of-trust. We are currently designing an algorithm for this. At the moment we're calling it P2Coin. Both me and the one coder for this project that I have so far are working on it. We both enjoy and are good at designing these types of systems. This will be a fun experiment!

I will also advise that no one trade any amount that would really hurt them if they lost it until it is announced as a stable system. Due to the nature of what's at stake here (people's money) there will be extensive testing involved.

All Best,

Michael
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February 07, 2012, 05:43:55 AM
 #17

This is an interesting project.  However p2p trade systems have cost; that is the cost of protecting from double spending.  Either you have a distributed verification network (like bitcoin with the block generation), or you have some sort of trusted centralized user that 'clears' the trades...  (this is normally called a 'clearing house').

If by some miracle you have come up with an algorithm to solve this problem in a distributed p2p manner; it would be wonderful if you could produce a white paper that explains how you propose to solve this doubble spending problem.

The "miracle" already exists but people don't see the big picture yet. The solution is a combination of federated, p2p, and f2f architectures.

Earlier in this thread it was said that the exchanges are the natural "bottleneck" in the system that are likely to be targeted by "the authorities" (which is patently true.) But the purpose of these institutions is not trading, per se, but exchanging between fiat and crypto currencies--and this function will someday soon be subsumed by implementations of the Ripple protocol. (You will not need exchanges anymore, because people will be able to exchange in-and-out of various fiat currencies via friend-to-friend technology instead.)

We are standing at an epoch in history.

Normal market interactions will be processed by transaction servers (such as OT) and the security of the Bitcoins traded on those sites will be protected by multi-sign voting pools (on the blockchain) composed of federations of those servers (and someday in combination with auditing and insurance entities as well.) Systems such as OT will perform most of the actual transactions. Bitcoin/Namecoin will be the universal medium that glues it all together, and Ripple will be the gateway in-and-out of the system, which will forever eliminate any need for banks, money transmitters, monetary policy, or tax authorities. At the end of it, I expect to see precious metals re-monetized. (For the masses, I mean. Obviously it's already money for the elite.)



co-founder, Monetas
creator, Open-Transactions
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February 07, 2012, 09:40:57 AM
 #18

I have to put much more work into this, but I've a proposal that would allow this (and more):

https://bitcointalk.org/index.php?topic=60591

It is based on fiat based crypto-currencies or Ripple.
Fiat based cryptocurrencies could be issued within a chain or just with signatures (needing Timestampers and accounters in that case).
Cash-like IOUs could be traded atomically for bitcoins without the need of accounts in any server (like is the case for OT). It can be argued that my cash-like IOUs are not as untraceable as OT's, I would like Fellow Traveler to clarify this for me.

https://bitcointalk.org/index.php?topic=53329.msg710842#msg710842

2 different forms of free-money: Freicoin (free of basic interest because it's perishable), Mutual credit (no interest because it's abundant)
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February 07, 2012, 11:21:05 AM
 #19

Very excited about this! Keep up the good work!

https://www.bitbuy.nl - Koop eenvoudig, snel en goedkoop bitcoins bij Bitbuy!
Bitcointalk topic over Bitbuy!
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February 14, 2012, 01:28:19 AM
 #20

If this solution can be FULLY integrated with Bitcoin-OTC, using some IRC Library... It will be a killer app! Wink
BTW, it is open source, right?!
Ah! And it works under Linux... RIGHT?!?!  Tongue

Mercado Forex acessível para todos os Brasileiros que tenham Bitcoins! Cadastre-se hoje mesmo! Bastar acessar aqui: https://1broker.com/m/r.php?i=8879
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