custom exchange rate between two parties

[distcoin]

Is there a way for two parties to agree on a fixed exchange rate for their transaction at a future date regardless of the actual bitcoin exchange rate? Does that capability exist?

[gmaxwell]

Capability?  Agreements between two people are between two people, they can do whatever they like.  Perhaps you intended to ask a question that was directed to actual technology? If so— I can't extract it from your message.

[DannyHamilton]

If you are concerned about one of the parties failing to uphold their end of the deal, you could use multisig or trusted escrow to force both parties to suffer a greater loss by refusing the deal than by honoring it.

[Nagle]

Is there a way for two parties to agree on a fixed exchange rate for their transaction at a future date regardless of the actual bitcoin exchange rate? Does that capability exist?

You just re-invented options.

[jl2012]

Is there a way for two parties to agree on a fixed exchange rate for their transaction at a future date regardless of the actual bitcoin exchange rate? Does that capability exist?

You just re-invented options.

Which was probably first used in ancient Greek: http://en.wikipedia.org/wiki/Option_(finance)

[titulng]

You gotta have a reference to it, if there is no exchange, who knows a bitcoin can be worth $ 600

[DavidHume]

Is there a way for two parties to agree on a fixed exchange rate for their transaction at a future date regardless of the actual bitcoin exchange rate? Does that capability exist?

Future and option have features similar to what you are asking. But the "current" rate and rate on the settlement date have big influence on price of the settlement date.

[MoonTime]

I have did same kind of deals in the past while I did some exchange between bitcoin to other currency and not to follow the fluctuation but the rate agreed

[wasserman99]

If you are concerned about one of the parties failing to uphold their end of the deal, you could use multisig or trusted escrow to force both parties to suffer a greater loss by refusing the deal than by honoring it.

I don't see how either of these options would force a transaction to go through. Especially for the person selling their fiat. I think this would also be problematic because the person selling their bitcoin would essentially be giving up control of their bitcoin right away, but not receive their funds until later; I do not see a reason why they would not simply sell it then).

[DannyHamilton]

If you are concerned about one of the parties failing to uphold their end of the deal, you could use multisig or trusted escrow to force both parties to suffer a greater loss by refusing the deal than by honoring it.

I don't see how either of these options would force a transaction to go through. Especially for the person selling their fiat.

Both parties would have to put something of value into escrow.  If the buyer of the bitcoins already has some bitcoins of their own, they could place enough bitcoins into escrow to make it more costly to refuse the transaction than to honor it.

I think this would also be problematic because the person selling their bitcoin would essentially be giving up control of their bitcoin right away, but not receive their funds until later;

While they seller wouldn't necessarily have to place bitcoins in escrow, they would have to place something of value into escrow.  It would need to be something valuable enough that it would be more costly to refuse the transaction than to honor it.

I do not see a reason why they would not simply sell it then).

There may be several reasons that someone wants to lock in an exchange price at a given time, but is willing to wait to complete the transaction.

As just one example:

Alan wants to sell 100 bitcoins today for $51,000 cash.
Bob is willing to pay $51,000 for the bitcoins.
Unfortunately, Alan and Bob are unable to meet to complete the exchange of $51,000 until Saturday.
Alan is concerned that if the exchange rate drops below $500/BTC, then Bob might not show up.
Bob is concerned that if the exchange rate grows above $520/BTC, then Alan might not show up.

Both Alan and Bob send 100 BTC to a 2 of 2 multisig address.
Now they both have to show up, or else they both lose 100 BTC.

When Bob show up he brings $51,000 and a signed transaction that sends the 200 BTC to his address.
When Alan receives the $51,000 he signs the transaction and Bob broadcasts it.

Problem solved.

[botany]

Is there a way for two parties to agree on a fixed exchange rate for their transaction at a future date regardless of the actual bitcoin exchange rate? Does that capability exist?

You just re-invented options.

He just reinvented forward contracts.

[Plank]

If you are concerned about one of the parties failing to uphold their end of the deal, you could use multisig or trusted escrow to force both parties to suffer a greater loss by refusing the deal than by honoring it.

I don't see how either of these options would force a transaction to go through. Especially for the person selling their fiat.

Both parties would have to put something of value into escrow.  If the buyer of the bitcoins already has some bitcoins of their own, they could place enough bitcoins into escrow to make it more costly to refuse the transaction than to honor it.

I think this would also be problematic because the person selling their bitcoin would essentially be giving up control of their bitcoin right away, but not receive their funds until later;

While they seller wouldn't necessarily have to place bitcoins in escrow, they would have to place something of value into escrow.  It would need to be something valuable enough that it would be more costly to refuse the transaction than to honor it.

I do not see a reason why they would not simply sell it then).

There may be several reasons that someone wants to lock in an exchange price at a given time, but is willing to wait to complete the transaction.

As just one example:

Alan wants to sell 100 bitcoins today for $51,000 cash.
Bob is willing to pay $51,000 for the bitcoins.
Unfortunately, Alan and Bob are unable to meet to complete the exchange of $51,000 until Saturday.
Alan is concerned that if the exchange rate drops below $500/BTC, then Bob might not show up.
Bob is concerned that if the exchange rate grows above $520/BTC, then Alan might not show up.

Both Alan and Bob send 100 BTC to a 2 of 2 multisig address.
Now they both have to show up, or else they both lose 100 BTC.

When Bob show up he brings $51,000 and a signed transaction that sends the 200 BTC to his address.
When Alan receives the $51,000 he signs the transaction and Bob broadcasts it.

Problem solved.

A hero member of community with a heroic solutions,sometimes these kind of problem arises and this is the exact solution

[wasserman99]

I do not see a reason why they would not simply sell it then).

There may be several reasons that someone wants to lock in an exchange price at a given time, but is willing to wait to complete the transaction.

As just one example:

Alan wants to sell 100 bitcoins today for $51,000 cash.
Bob is willing to pay $51,000 for the bitcoins.
Unfortunately, Alan and Bob are unable to meet to complete the exchange of $51,000 until Saturday.
Alan is concerned that if the exchange rate drops below $500/BTC, then Bob might not show up.
Bob is concerned that if the exchange rate grows above $520/BTC, then Alan might not show up.

Both Alan and Bob send 100 BTC to a 2 of 2 multisig address.
Now they both have to show up, or else they both lose 100 BTC.

When Bob show up he brings $51,000 and a signed transaction that sends the 200 BTC to his address.
When Alan receives the $51,000 he signs the transaction and Bob broadcasts it.

Problem solved.

This could easily turn into a very high stakes game of chicken. If one party knew that the other person needs the 100 BTC more then they do then they could hold the entire 200 BTC hostage until the other person signs a TX with 100 + n BTC going to a address controlled by them (with "n" being a positive number greater then 0). The person who needs this money would eventually give in and sign such a transaction because they need the money (or they do not want to risk permanently loosing the money).

[DannyHamilton]

This could easily turn into a very high stakes game of chicken. If one party knew that the other person needs the 100 BTC more then they do then they could hold the entire 200 BTC hostage until the other person signs a TX with 100 + n BTC going to a address controlled by them (with "n" being a positive number greater then 0). The person who needs this money would eventually give in and sign such a transaction because they need the money (or they do not want to risk permanently loosing the money).

Sounds like a good reason to use a 2 of 3 transaction and an escrow agent that can force the release of the transaction in a case where one party is attempting to extort the other.

[wasserman99]

This could easily turn into a very high stakes game of chicken. If one party knew that the other person needs the 100 BTC more then they do then they could hold the entire 200 BTC hostage until the other person signs a TX with 100 + n BTC going to a address controlled by them (with "n" being a positive number greater then 0). The person who needs this money would eventually give in and sign such a transaction because they need the money (or they do not want to risk permanently loosing the money).

Sounds like a good reason to use a 2 of 3 transaction and an escrow agent that can force the release of the transaction in a case where one party is attempting to extort the other.

You would need to trust the escrow agent enough to not collude with the other party to not release the entire 200 BTC to themselves. Considering the large amount of money at stake, an escrow party's reputation would likely be worth less then a cut from a 100 (the half being stolen) BTC transaction.

Since it is hard to trace who exactly transmitted a TX it would be difficult to prove in court as to which two parties broadcasted the disbursement from the 2 of 3 address. It would be also hard to prove who the BTC was sent to as specific inputs are difficult to trace, especially when a mixer like bitmixer is used (you would actually now have very different inputs, but the point remains). Even if you all PGP signed a message saying that you agree which addresses to disburse the coins to all you could prove is the escrow person betrayed one of them, but couldn't prove which person they betrayed.

[DannyHamilton]

You would need to trust the escrow agent

Well, yes.  That is the purpose of an escrow provider after all.

However, any escrow agent worth using should be willing to provide contact information:

Name, address, phone number, email address, etc.  With a well written escrow agreement they should be liable for loss or theft of the bitcoins.

enough to not collude with the other party to not release the entire 200 BTC to themselves.

Yes.  If you are going to use an escrow provider, you should definitely choose one that you feel is trustworthy.

Considering the large amount of money at stake, an escrow party's reputation would likely be worth less then a cut from a 100 (the half being stolen) BTC transaction.

This says a lot about your moral character. Personally my honor is worth much more to me than 100 BTC. There are other escrow providers here on this forum that have also been reliably trusted with more than 100 BTC.

Since it is hard to trace who exactly transmitted a TX it would be difficult to prove in court as to which two parties broadcasted the disbursement from the 2 of 3 address.

This is not true.

When a 2 of 3 multi-sig transaction is signed, it is very clear exactly which addresses were used to sign the transaction.

It would be also hard to prove who the BTC was sent to as specific inputs are difficult to trace, especially when a mixer like bitmixer is used (you would actually now have very different inputs, but the point remains).

It doesn't matter who the BTC was sent to.  The escrow provider should only release escrow to an address provided by the intended recipient. With a transaction that large, it would be best for the escrow provider to require a signed message from the recipient that includes the address, so that they can prove that the escrow was indeed released to the appropriate address.

Even if you all PGP signed a message saying that you agree which addresses to disburse the coins to all you could prove is the escrow person betrayed one of them, but couldn't prove which person they betrayed.

Of course you could.  The escrow provider can't betray someone without getting a valid signature from the other party.  The second signature would indicate who the thief is and who was betrayed.