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Author Topic: A Decentralized Exchange?  (Read 3217 times)
El Emperador (OP)
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November 12, 2014, 08:45:51 PM
 #1

Several attempts have been made, but with no relevant result.

In your opinion how may be possible to develop a trading platform which is fully automated, decentralized, open-source, without any fees and with no verification needed?
Maybe with Ethereum protocol this will become more feasible... Any ideas?

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November 13, 2014, 09:06:09 PM
 #2

Most of the people talking about that are handwaving, and not even defining the boundaries of the technical problem they seek to solve. No shock there hasn't been progress.
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November 13, 2014, 09:15:06 PM
 #3

A decentralized exchange would make for a good idea but the problem is one might still see a few transactions because the exchange has to make a few bucks themselves.
waxwing
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November 13, 2014, 10:20:22 PM
 #4

I presume you are talking about fiat-[btc/crypto exchange]; but you need to clarify.

If not, and you are talking about crypto-crypto exchange, I think it's fair to say there are already several implementations.

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November 14, 2014, 09:44:29 AM
 #5

but are you talking about the exchange features inside wallet???
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November 14, 2014, 10:35:42 AM
 #6

but are you talking about the exchange features inside wallet???

Some have taken into considerations this, even integrating somehow blockchain into equation. Asicminer was developing something but it got dropped as far as i know
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November 14, 2014, 11:54:59 AM
 #7

but are you talking about the exchange features inside wallet???

Some have taken into considerations this, even integrating somehow blockchain into equation. Asicminer was developing something but it got dropped as far as i know

Maybe they Have other priority... But i think the idea to insert exchange features inside wallet is great!
Some alt coin are.trying to do that.
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November 14, 2014, 02:21:42 PM
 #8

A decentralized exchange would make for a good idea but the problem is one might still see a few transactions because the exchange has to make a few bucks themselves.

A decentralized exchange should not be profit driven and need not. It can be done with a contract on a decentralized platform like open bazaar.

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November 14, 2014, 03:19:38 PM
 #9

A decentralized exchange would make for a good idea but the problem is one might still see a few transactions because the exchange has to make a few bucks themselves.

A decentralized exchange should not be profit driven and need not. It can be done with a contract on a decentralized platform like open bazaar.

really gooooooooooooooooood project!!!
i'm talking about open Bazaar

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November 15, 2014, 03:17:36 PM
 #10

A decentralized exchange would make for a good idea but the problem is one might still see a few transactions because the exchange has to make a few bucks themselves.

A decentralized exchange should not be profit driven and need not. It can be done with a contract on a decentralized platform like open bazaar.

Can you please elaborate on that a bit more? Thank you.
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November 15, 2014, 03:18:53 PM
 #11

A decentralized exchange would make for a good idea but the problem is one might still see a few transactions because the exchange has to make a few bucks themselves.

A decentralized exchange should not be profit driven and need not. It can be done with a contract on a decentralized platform like open bazaar.

really gooooooooooooooooood project!!!
i'm talking about open Bazaar

I live open bazar project too. Hope he will start soon

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November 15, 2014, 05:58:46 PM
Last edit: November 15, 2014, 06:21:02 PM by inBitweTrust
 #12

Can you please elaborate on that a bit more? Thank you.

Although currencies are not the central focus.
Open Bazaar will allow for individuals to exchange physical and crypto currencies in a decentralized manner.

Ricardian contracts, reputation systems and multi-sig escrow with proof of burn will enforce honesty.

https://openbazaar.org/

It is being tested now and should not be used for real exchanges till out of Beta.

The reason we don't want a decentralized exchange to be controlled by a single entity or for profit company is because it creates a possible conflict of interest, vector of attack, creates possible privacy concerns, and really isn't completely decentralized.

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November 15, 2014, 06:17:51 PM
 #13

Can you please elaborate on that a bit more? Thank you.

Although currencies not the central focus.
Open Bazaar will allow for individuals to exchange physical and crypto currencies in a decentralized manner.

Ricardian contracts, reputation systems and multi-sig escrow with proof of burn will enforce honesty.

https://openbazaar.org/

It is being tested now and should not be used for real exchanges till out of Beta.

The reason we don't want a decentralized exchange to be controlled by a single entity or for profit company is because it creates a possible conflict of interest, vector of attack, creates possible privacy concerns, really isn't completely decentralized.

Thank you for the explanation!

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November 16, 2014, 11:50:02 AM
 #14

OK, since we're mentioning projects, I'd also mention bitsquare: https://bitsquare.io

Decentralized fiat for btc exchange project.

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November 16, 2014, 02:35:51 PM
 #15

OK, since we're mentioning projects, I'd also mention bitsquare: https://bitsquare.io

Decentralized fiat for btc exchange project.

sure i will check it!!!

thanks

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November 17, 2014, 01:30:06 PM
 #16

Decentralized exchange requires all parts to be decentralized.

If you exchange BTC to wire transfers, you already lose because banks are centralized and ask questions. LocalBitcoins is somewhat decentralized, it allows trading person-to-person, but it does not work in all jurisdictions and not when you have a big turnover. And it's inherently not safe: you rely on reputation of the trader or opinion of the arbiter.

Cash is decentralized. You can use joint escrow with a trader, swap cash for coins and go home. Both put insurance deposit in 2-of-2 multisig BTC before meeting (must be 200% of the value exchanged from each side). When coming home safe and with valid cash and confirmed coins, both unlock the deposit. This is somewhat secure and better protected from all-observing eye, but: 1) it requires owning considerable amount of BTC from both sides prior to action; 2) it's a physical meetup, so some AML/KYC folks could kick in (especially if they monitor the seller for a few deals already) and arrest all your belongings and maybe charge you with conspiring with some drug money laundering or whatever.

People who want to change their surveillancecoin (usd in banks) or drugcoin (physical paper cash) for Bitcoin must realize these inherent limitations. The best strategy is to not do anything illegal, buy a bunch of coins once on a safe platform or from trusted people you know, and then simply secure and hold your stash until hard times are over and you can simply buy things with it without exchanging back to fiat.

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waxwing
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November 17, 2014, 04:47:37 PM
 #17

Decentralized exchange requires all parts to be decentralized.

If you exchange BTC to wire transfers, you already lose because banks are centralized and ask questions. LocalBitcoins is somewhat decentralized, it allows trading person-to-person, but it does not work in all jurisdictions and not when you have a big turnover. And it's inherently not safe: you rely on reputation of the trader or opinion of the arbiter.
Sorta kinda agree.. a *perfect* decentralised exchange with bank wires could never occur, sure. The Localbtc model has a lot of advantages, but the big disadvantage is the centralised server and hot wallets involved. If you can do the same, including reputation systems and multisig, but with a p2p network, it's clearly a step forward. Arbitration/escrow might still be needed (I believe it is), but it can be turned into a market instead of your only option being localbtc themselves. Arbitration requires evidence, but TLSNotary can address that (actual cryptographic proof of a transfer). Reputation systems are a problem on localbtc and they'll still be a problem on a future decentralised version like bitsquare; problematic in that it'll never be perfect.

Quote
Cash is decentralized. You can use joint escrow with a trader, swap cash for coins and go home. Both put insurance deposit in 2-of-2 multisig BTC before meeting (must be 200% of the value exchanged from each side). When coming home safe and with valid cash and confirmed coins, both unlock the deposit. This is somewhat secure and better protected from all-observing eye, but: 1) it requires owning considerable amount of BTC from both sides prior to action; 2) it's a physical meetup, so some AML/KYC folks could kick in (especially if they monitor the seller for a few deals already) and arrest all your belongings and maybe charge you with conspiring with some drug money laundering or whatever.
The 2 of 2 model is very problematic. It didn't work for NashX, and I don't see it working for more recent implementations either. Side-channel blackmail is always a major flaw as far as I can see. The "fiat micropayments channel" idea from Coinffeine would make sense to address that; the only problem is that "fiat micropayments channel" doesn't really make sense except in the context of a centralised system, in which case why are we going to all this trouble?

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People who want to change their surveillancecoin (usd in banks) or drugcoin (physical paper cash) for Bitcoin must realize these inherent limitations. The best strategy is to not do anything illegal, buy a bunch of coins once on a safe platform or from trusted people you know, and then simply secure and hold your stash until hard times are over and you can simply buy things with it without exchanging back to fiat.
Definitely agree with this advice, at least today.

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November 18, 2014, 04:49:17 PM
 #18

Exchanges are already "decentralized". There has got to be at least a half-dozen decent exchanges. They can be started by pretty much anyone, anywhere, at any time. If you don't like or trust current exchanges, you can start your own and show everyone how it's done, or if you don't like that, you can exchange directly person to person.

There is trust involved with exchanges, but I don't see why I should care. When I buy something from Amazon I need to trust them. I don't lose sleep at night wondering if Amazon is going to run away with my money.

In order to make an exchange that achieves decentralized trust-free consensus you'd have to build a program that is similar to Bitcoin and then only currencies that rigidly follow certain design patterns would be allowed to be traded on the platform (Fiat never works), and then at the end of the day it would be much more expensive and slow to use than a traditional centralized exchange.

Another solution looking for a problem...

By their (dumb) fruits shall ye know them indeed...
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November 18, 2014, 06:26:25 PM
 #19

Exchanges are already "decentralized". There has got to be at least a half-dozen decent exchanges. They can be started by pretty much anyone, anywhere, at any time. If you don't like or trust current exchanges, you can start your own and show everyone how it's done, or if you don't like that, you can exchange directly person to person.
There is some truth in this perspective, but it does miss an important distinction. There is value in centralization for exchange; (let's not forget that currency itself is an example of exactly this centralization) it's faster, it's cheaper, it's more liquid. So people naturally gravitate to a smaller number of highly liquid marketplaces. On the other hand, this creates tremendous risk *specifically* because Bitcoin is digital cash. If it is stolen, it is stolen irretrievably, and within minutes. Consider the equivalent scenario with banknotes or gold, and you can see such an opportunity is rare in the modern world.

A central store of wealth like that, even if there's 5 of them in the world rather than 1, is a magnet not only for hackers (certainly that's a huge risk) but also for political actors; see Liberty Reserve and e-gold for good examples.

Quote
There is trust involved with exchanges, but I don't see why I should care. When I buy something from Amazon I need to trust them. I don't lose sleep at night wondering if Amazon is going to run away with my money.
You don't give Amazon cash. Bitcoin is digital cash. Of course, Amazon is not the best example to make my point; but you feel comfortable online shopping with smaller businesses mainly because you are not sending cash thousands of miles away with no recourse. Similarly, crime/hacking against Amazon is greatly limited by the fact that it isn't holding cash on its servers.

Quote
In order to make an exchange that achieves decentralized trust-free consensus you'd have to build a program that is similar to Bitcoin and then only currencies that rigidly follow certain design patterns would be allowed to be traded on the platform (Fiat never works), and then at the end of the day it would be much more expensive and slow to use than a traditional centralized exchange.
Another solution looking for a problem...
As stated above, crypto-crypto decentralized exchange already exists in various forms. Not a very hard problem to solve, once you've figured out Bitcoin. More expensive/slow? Generally yes, but it can still offer advantages as discussed. As for fiat being impossible to do decentralised, well, it's discussed above, but solutions that are less than perfect do exist, and I argue, are worth looking into.

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November 19, 2014, 05:08:05 AM
 #20

If you want large liquidity and you don't want to trade by 50 dollars bits (and having to do a cash/wire/other transfer each time) you have to go to someone that centralizes liquidity on the USD side, there's just no way around that as long as you are dealing with a centralized side on the equation (the USD)

OTC works only so far as you can find the good match, if you need agregation, then you need a bit of centralization. That does not mean we should have ONE exchange, they are pretty decentralized now, with several good choices in the market. It's just different levels of decentralization, I don't see why people always think that you need to be peer to peer to be decentralized...
Peer to peer is just the extreme level of decentralization.
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November 19, 2014, 05:41:12 AM
 #21

and I would add that all these new - Yes-I-found-the-solution - "decentralized" exchanges are just pushing to the user the burden of:
1) KYC (and all the risks it carries) and of
2) doing the bank to bank transfers,

while they keep centralized the most important part: trust.

In my view, being a trusted, centralized, escrow (and arbitrator in the very probable case of some issue arising) does not solve anything. Or I am missing something and in that case please enlighten me...
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November 19, 2014, 03:44:31 PM
 #22

In my view, being a trusted, centralized, escrow (and arbitrator in the very probable case of some issue arising) does not solve anything. Or I am missing something and in that case please enlighten me...
I don't think you're missing anything. Decentralized "exchanges" can decentralize communication between buyers and sellers but when the rubber meets the road, when the actual transaction takes place, there either needs to be a centralized escrow, or the "exchange" just dumps the responsibility on the end users to take care of it themselves.

By their (dumb) fruits shall ye know them indeed...
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November 19, 2014, 04:00:20 PM
 #23

http://www.coinffeine.com/
is trying something like that
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November 19, 2014, 04:03:40 PM
Last edit: November 19, 2014, 04:14:27 PM by DumbFruit
 #24

http://www.coinffeine.com/
is trying something like that
No...

Quote
Fiat transactions fingerprinting

The fiat financial system is based on trust: you are trusting your central bank authority not to devalue your money and you are trusting your bank to keep your money safe and not lose it in bad investments. Coinffeine is designed to minimize or even eliminate trust wherever possible, but since the fiat financial system is based on trust, you still need to chose [sic] a trusted payment processor to handle your fiat money.

The fingerprinting attack involves the payment processor blocking the Coinffeine-related transactions. This is possible since Coinffeine transactions will have a distinct pattern (lots of small, identical transactions between two accounts). We can mitigate this attack by supporting several payment processors in the client. If one of the payment processor chooses to block Coinffeine payments, then users will be able to move to another payment processor, which will increase its revenue with the flux of new users.
Emphasis added.

https://github.com/Coinffeine/coinffeine/wiki/Exchange-algorithm

In other words, coinffeine decentralizes the communication between buyers and sellers and then offloads the responsibility of actually performing the transaction on normal fiat transaction avenues.

By their (dumb) fruits shall ye know them indeed...
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November 19, 2014, 08:10:03 PM
 #25

DumbFruit, you're greatly oversimplifying.

First, we have multisignature in Bitcoin. This means that a third party can arbitrate on the result of a transaction *without* holding funds. So they would have to be trusted to not collude with buyer and seller, and would have to be trusted to make a sound judgement on whether the fiat side of an exchange was carried out correctly, but they would *not* have to be trusted to hold funds. In this way it is dramatically different from a traditional escrow, in which the funds are transferred to and held by the escrow agent/arbitrator during the period of the transaction.

Then there are two problems remaining to be solved: how can you accurately assess whether a fiat transaction has taken place or not, and second, how (if at all) is it possible to decentralize this function of arbitration. The project I'm involved with, TLSNotary, attempts to address the first problem. And without what TLSNotary attempts (cryptographic proof of fiat transfer), you already have many ways used today to try to verify that a transaction took place (see for example the way that localbitcoins attempts to address this problem - there are lots of methods, although outside of tlsnotary they don't have *cryptographic* soundness). The second problem, decentralization of arbitration, is also extremely difficult to address perfectly, but that doesn't mean it isn't worth trying. Take a look at bitrated.com for an example of how you could have a market in arbitration, using multisig as mentioned above. This is clearly a step forward compared with Paypal, for example, where you have only one, centralized arbitration service available - Paypal themselves.

With regard to Coinffeine, don't ignore the game theoretic aspect of their attempted solution. It takes away the problem of having all the funds at risk at one time. However, I have never been convinced as I have always thought that you will end up with centralization anyway, as there is no real 'fiat micropayment channel' without centralizing that part. So I kind of agree with you on that, but maybe for a different reason.


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November 19, 2014, 08:58:47 PM
 #26

http://voluntary.net/bitmarkets

This one is using Bitmessage protocol.
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