p2p securities exchange. Now being developed (again)

[El Cabron]

I was in a p2p kick a while ago and started a p2p stock exchange based on using alt coins as representations for stocks.

I would like to state this is back in development. Since the details have been posted on IRC I will make this post here. More information soon.

Thank you.

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[Ben Walsh (beamer)]

Excellent news. Will you be releasing the code under an open source licence ? I would require this in order to run any node of such an exchange - same as the Bitcoin client itself.

[Sukrim]

Blockchain based stock exchanges are actually something I find very interesting!

Will it work completely without central authorities (that for example take BTC deposits) or black-box exchanges (for trading BTC to "stockcoins")?

[miscreanity]

Is this intended as a merged-mining chain, or fully independent?

[memvola]

Will it work completely without central authorities (that for example take BTC deposits) or black-box exchanges (for trading BTC to "stockcoins")?

Don't know about Goat's, but I had my own ideas about using the Bitcoin network as the notary, with real Bitcoin transactions, so I'm confident it can be accomplished. On the other hand, I don't have any clue on how it could be made robust.

I think some people actually worked on this before. For instance, this one is a pretty mature design: https://bitcointalk.org/index.php?topic=54033.0

It all seems to boil down to the difficulties in making high frequency trading possible.

[Sukrim]

It all seems to boil down to the difficulties in making high frequency trading possible.

High frequency trading is anyways not really useful - the extra liquidity it provides only is provided during relatively calm phases - any smart bot will take a step back once the market starts to jump weirdly.

I personally would be perfectly fine, if trades are not even able to be executed at extremely high frequencies in Bitcoin stock exchanges. Take a look at algo trading and what kind of weird "businesses" this produces - there is no real need for that anyways in my opinion.

[Garr255]

If you can make this completely decentralized, I will be very impressed and excited to create the first p2p mining contract!

Best of luck!

[guruvan]

As discussed on irc, it sounded like a premined blockchain for each security, and then merged-mining of all the blockchains.

It's not clear to me how scalable this is as initially stated, but surely the technical hurdles can be crossed.

If higher frequency trading is to be supported, perhaps something similar to the p2pool sharechain can be used for

Not the least interesting aspect of this is the necessity of mining the many blockchains. I'm curious how this will work, and how it is miners might derive operating income from such an activity. (one would think from mining shares of the underlying security or something)

[Sukrim]

If you have a central authority, you don't need that much security... The real masterpiece would be to have no authorities besides asset issuers at all - and these should not be allowed to manipulate anything beyond submitting their new sharechain.

Miners could be paid from Bitcoins, I think I already saw some concepts about P2P exchanges between Bitcoin-style currencies (like Namecoins <--> Bitcoins).

All in all I hope you think this through a LOT and get a lot of feedback on that - this is a task that requires more than just an idea and a coder, it requires answering some serious design questions.

[jackmaninov]

Oooh, trade fees supporting mining of the share blockchain. Me likey.

[BinaryMage]

Sub. Glad to see this up and running again.

[BinaryMage]

The alt coins would be a representation of a stock. If you hold a coin, you really hold a stock.

Let us say Company Taco Stand wants to sell 1000 shares of stock to get funding to open a second taco stand. What they will do is premine 1000 alt coins and then trade them for BTC.

The free market would set the fair value on the stock of that company.

So each asset issued would require its own blockchain? Trade fees won't be enough to bring too many miners in. Someone could easily 51% the alt-chain and invalidate/steal the asset.

Not trying to play devil's advocate, just pointing out a possible problem.

[BinaryMage]

The alt coins would be a representation of a stock. If you hold a coin, you really hold a stock.

Let us say Company Taco Stand wants to sell 1000 shares of stock to get funding to open a second taco stand. What they will do is premine 1000 alt coins and then trade them for BTC.

The free market would set the fair value on the stock of that company.

So each asset issued would require its own blockchain? Trade fees won't be enough to bring too many miners in. Someone could easily 51% the alt-chain and invalidate/steal the asset.

Not trying to play devil's advocate, just pointing out a possible problem.

Clearly if we take this path we will need the support of the community to keep that from happening, however we have a couple of other options that might work better.

One option would be to just make a master alt coin and have it trade freely like all other alt coins. However make it so, when ever this gets mined they have to mine the other sub alt coins. 

I think some community support is possible, but many people easily control ~25-50 GH, and getting enough miners to kick 25-50 GH (enough to prevent a 51% by the former) towards an asset's chain for no tangible reward seems unlikely, especially when assets start to crop up in large numbers.

The concept of a master alt coin seems much more viable in the sense of less susceptibility, but less viable in the sense that the whole exchange would be reliant upon it. (To say nothing of the technical difficulties.) I just can't see enough trade fees to support ~250 GH of miners, which is IMO around the minimum needed for bare minimum protection from a 51%. Maybe after a long time in operation and a significant expansion in the number of Bitcoins invested, but certainly not at the start.

For example, about 100k BTC have been invested into GLBSE in the last month. (No, this isn't a calculated number, just an estimate, pinpoint precision isn't important here.) If we assume a similar volume, at a trade fee of 0.5% (excessive), that would mean 500 BTC a month, for the whole chain, which would translate to a little under 30 GH/s with equivalent profits to direct Bitcoin mining.

30 GH/s is extremely 51%-able. (Interestingly, spell-check doesn't consider that incorrect. Google Chrome coder = Satoshi? )
I don't think people would feel comfortable investing with that level of vulnerability.

Again, I know I sound very negative, don't take it too harshly. I really want this to succeed, and would be glad to do whatever I can to make it possible. It's just important to have these discussions now, rather than after a catastrophe occurs.

[MoneyIsDebt]

Doesn't open transactions have much of what's needed for this already?
For holding the securities at least, not the bidding / trading part.

[miscreanity]

Doesn't open transactions have much of what's needed for this already?
For holding the securities at least, not the bidding / trading part.

Yes using traditional exchanges, from what I know. Is there something that fully decentralizes the system?

[Garr255]

What would be great is a mixed node/client. One that supports all of the chains. This would greatly increase liquidity in all assets.

[rdponticelli]

Doesn't open transactions have much of what's needed for this already?
For holding the securities at least, not the bidding / trading part.

Yes using traditional exchanges, from what I know. Is there something that fully decentralizes the system?

I also think that OT is the way to go. Even as much as I like decentralization and p2p, I believe that the proposed solution would suffer all kind of performance and scalability issues besides adding unmanageable extra complexity. The federated solution of OT addresses the problem of decreasing the trust needed in the centralized servers by implementing a partial decentralization in a satisfactory way. I already recommended it to Kluge for Hermes, and I believe that you have to consider it too. If every trading platform has its own OT implementation, sharing the same assets, the net result would be a effective decentralization of trust without extra complexity, minimizing performance issues and maximizing liquidity.

[byronbb]

I would suggest forgetting a stock exchange mainly because you will get limited volume, and  instead focus on developing a p2p sports betting exchange where the volumes could become tremendous. Here is a snap shot of betfairs market for the Barcelona-Chelsea game minutes before kickoff. Note at the top we can see more than 20million had be traded already, and on the bottom left a single bet placed on Barca for a cool 900k.

[Garr255]

Why not both

[Bitcoin Oz]

How do you verify asset owners under a p2p securities exchange / share market ? I remember when glbse first started people would create scam assets so nefario introduced the verification process.

Honest question Goat