Decentralized exchanges will never work

[NeuroticFish]

So, every now and then I see a post about the beauty of a decentralized exchange. Well here's the thing. You can't get USD on a Decentralized Exchange, adding new coins to trade will always be a headache, and since there won't be any censorship, scamming with new, random, 2 day old altcoins will be abundant, among other things

Decentralized Exchanges sound good in theory, but in practice it just isn't plausible.

I think that these are non-problems. A big market for decentralized exchanges are the altcoins. Also you forgot(?) electronic transfer for money (with all the problems today, I know).
Spam and scams are around here everyday too and still, it's a good forum and we got used to live with the goods and bads.

The actual problems may be the fees because every transaction means, as far as I understood, the coins to really move between wallets. In current exchanges you can make 1000 transactions or one big and the sum of the fees is the same. For decentralized... this may be a problem.

But still, I'd leave this idea get implemented for real. Then give it 2 years to get properly known and .. then we'll see how many are using it and if it was a good idea or bad.

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[CIYAM]

If we take fiat out of the equation then the technology to create 100% trustless safe transfers exists.

The technique is known as "atomic cross-chain transfers" and the Automated Transactions system (AT) that is running live on the Burst platform *has this capability* (once we have deployed AT on the Qora platform we will demonstrate ACCTs between those two blockchains on their "mainnets" which will be a world's first).

No need for any website or centralised service at all (can all be done neatly and easily from the two blockchain wallets involved in the transfer).

It should be possible to get AT to work on a Bitcoin clone (and I've offered a 20 BTC bounty for just that) so if the community would like to be doing trustless trades across blockchains they should be requesting their favourite coin devs incorporate AT so they can get this feature.

[QuestionAuthority]

If we take fiat out of the equation then the technology to create 100% trustless safe transfers exists.

The technique is known as "atomic cross-chain transfers" and the Automated Transactions system (AT) that is running live on the Burst platform *has this capability* (once we have deployed AT on the Qora platform we will demonstrate ACCTs between those two blockchains on their "mainnets" which will be a world's first).

No need for any website or centralised service at all (can all be done neatly and easily from the two blockchain wallets involved in the transfer).

It should be possible to get AT to work on a Bitcoin clone (and I've offered a 20 BTC bounty for just that) so if the community would like to be doing trustless trades across blockchains they should be requesting their favourite coin devs incorporate AT so they can get this feature.

If you take fiat out of the equation then I used Bitcoin to do 100% trustless trades using escrow four years ago. That's easy to do. The problem is we can't remove fiat from the equation. If you want to do something impressive then find a way to safely move Bitcoin into and out of the fiat world without requiring some licensed business that needs to gouge you with fees to pay for their initial investment.

[CIYAM]

If you take fiat out of the equation then I used Bitcoin to do 100% trustless trades using escrow four years ago.

That is not 100% trustless at all as you were trusting an escrow.

ACCT needs no escrow - it is *truly trustless* (read here http://ciyam.org/at/at_atomic.html).

There is *no third party* as the escrow is actually the ATs (which are smart contracts not people).

So no-one was doing this four years ago and in fact no-one is even doing it today - it will be done in about a month though between the two blockchains that support Automated Transactions.

[QuestionAuthority]

If you take fiat out of the equation then I used Bitcoin to do 100% trustless trades using escrow four years ago.

That is not 100% trustless at all as you were trusting an escrow.

ACCT needs no escrow - it is *truly trustless* (read here http://ciyam.org/at/at_atomic.html).

There is *no third party* as the escrow is actually the ATs (which are smart contracts not people).

So no-one was doing this four years ago and in fact no-one is even doing it today - it will be done in about a month though between the two blockchains that support Automated Transactions.

Ok, not trustless but it works. We're still not solving the big problem that needs to be solved. I don't need a way to exchange Bitcoin for product or Bitcoin for services. I already have that. I need to exchange Bitcoin for dollars without getting screwed. LBC has become too hot for me lately.

[Ingatqhvq]

So, every now and then I see a post about the beauty of a decentralized exchange. Well here's the thing. You can't get USD on a Decentralized Exchange, adding new coins to trade will always be a headache, and since there won't be any censorship, scamming with new, random, 2 day old altcoins will be abundant, among other things

Decentralized Exchanges sound good in theory, but in practice it just isn't plausible.

Decentralized Exchanges  can works, but never replace the Centralized Exchanges.

Of course they can replace , so you are telling me that Exchanges that defeats the purpose of Bitcoin (being annonymus) as I said above cannot replace Decentralized Exchange ? could disagree more to be honest .
Centralized Exchange is the worst thing that happened to Bitcoin if you ask me , BTER , MtGox , Bitsmap hacks are a proove for that .

~ Madness

Decentralized Exchanges can't be real time, like several seconds. and can't deal too much trade at the same time, as 10K per seconds.
Sure, if you use Centralized Exchange, you have to trust it.
But it's more convenient than Decentralized Exchanges.

[moriartybitcoin]

lol the OP is smoking crack.  LocalBitcoins is a decentralized exchange, and it works fine. 

[EcuaMobi]

Have you guys already seen Mercury:

https://bitcointalk.org/index.php?topic=946174.0

The world's first trustless cryptocurrency exchange

Mercury is a desktop wallet that eliminates the need for centralized exchanges. Currencies can be traded peer-to-peer, directly from the wallets of the traders.

I'm just checking it but seems interesting.

[ajareselde]

I definetly like the idea of decentralised exchanges, but the idea to use another coin as means of exchange i,e. bitcoin-altcoin exchange,
is an apsolute nonsence. You cant say you are making progress when you end up with the same problem; exchanging that altcoin for fiat..
Bitcoin was made to be used to replace the current fiat system, so let it do just that, and fight one on one with fiat, nothing else.

cheers

[cryptworld]

I think decentralized exchanges are the only solution to speculation and manipulation of bitcoin so we hope that they work

[lucasjkr]

So, every now and then I see a post about the beauty of a decentralized exchange. Well here's the thing. You can't get USD on a Decentralized Exchange, adding new coins to trade will always be a headache, and since there won't be any censorship, scamming with new, random, 2 day old altcoins will be abundant, among other things

Decentralized Exchanges sound good in theory, but in practice it just isn't plausible.

Why do you need to get USD in for a decentralised exchange to work?

I've used and traded cryptos for years yet not once have I ever used USD (I've never even seen any US currency) nor have I traded cryptos for fiat.

The whole point of cryptos is to be an alternative to fiat (but thats lost on most the in cryptos for the fiat crowd).

Well, yes - if your looking for a cryptsy type exchange. Most people here don't like alt's though, and when speaking of exchanges, they mean as a means of moving between fiat currency and BTC. Some people throw out the term "decentralized exchange" thinking that will do away with the risks, but as OP points out, that won't ever be a part of the future... Bitcoin can be held in some decentralized fashion, I"m sure, but dollars and euros, they need to be in bank accounts, and bank accounts need to be tied to individuals.

[shawshankinmate37927]

Well, yes - if your looking for a cryptsy type exchange. Most people here don't like alt's though, and when speaking of exchanges, they mean as a means of moving between fiat currency and BTC. Some people throw out the term "decentralized exchange" thinking that will do away with the risks, but as OP points out, that won't ever be a part of the future... Bitcoin can be held in some decentralized fashion, I"m sure, but dollars and euros, they need to be in bank accounts, and bank accounts need to be tied to individuals.

Nope.  Dollars and euros can be held in physical form as paper bills and metal coins.  No bank is required for that.

[Lorenzo]

Fiat has always been a problem for decentralized exchanges. Another poster here said that in order for fiat to be deposited and withdrawn from an exchange, the exchange must have a bank account somewhere that holds this fiat. Once that happens, it can no longer be decentralized, and he is correct. People recognized this in 2011 when Mt. Gox was having problems and the situation isn't any different today.

As another poster here said, it is possible to create an exchange where funds are kept in your bank account and trades occur between other people's wallets and bank accounts. Bank accounts are not really an ideal solution though since they can be used for chargeback fraud. Cash eliminates this problem but also introduces new problems such as the risk of counterfeiting and the difficulty involved with transporting it in a safe manner. You would also need an escrow and a reputation system. I believe this is similar to what LocalBitcoins is doing right now.

On the other hand, I believe altcoin exchanges can be decentralized and still retain most of the usability that they have today. It won't be easy though and I highly doubt they will fully supplant traditional centralized exchanges such as Cryptsy. Traditional centralized exchanges are far more scalable, familiar, newbie-friendly, and require no downloads or technical know-how to use. And they work pretty well as long as you don't use them as a wallet. Just deposit your coins, make your trades, and then withdraw them immediately afterwards.

You can buy a CoinoUSD asset, which represents the actual USD price, 1 CoinoUSD = 1$ (or 74.2936 NXT - latest ask order), on NXT decentralized asset exchange (as I can see same is in BitShares). And if you want to cash out, you just exchange CoinoUSD using Coinomat service to USD (see here).

There is definetely not enough volume right now, but that's just a matter of time. SuperNET is coming

Check NXT wallets, the exchange is built into client: SuperNET 1.2b (try Advanced mode, using SuperNET plugin you can withdraw cash to your bankcard directly from the wallet), NXTLite (no need to download blockchain) or try Secure Asset Exchange (SAE) 

Coinomat has a fee when withdrawing USD and while coinoUSD might act as a good proxy to represent USD on the NXT AE, it isn't really a decentralized solution.

Nope.  Dollars and euros can be held in physical form as paper bills and metal coins.  No bank is required for that.

Yes, that would be a decentralized exchange, albeit a rather cumbersome one.

EDIT: There are also altcoins and assets that are pegged to the price of USD which could act as a proxy for USD when trading on exchanges. Examples include NuBits and bitUSD.

[shawshankinmate37927]

Nope.  Dollars and euros can be held in physical form as paper bills and metal coins.  No bank is required for that.

Yes, that would be a decentralized exchange, albeit a rather cumbersome one.

"Decentralized" doesn't mean "zero-risk".  Whether it's cumbersome or imperfect is immaterial.  Using paper bills and metal coins is the only way to implement a fiat-to-crypto/crypto-to-fiat decentralized exchange because it's the only fiat payment method that eliminates the need for an intermediary, avoids counter party risk, and is the one that is most difficult to reverse.  Any fiat payment method involving a financial institution is by definition centralized.

[Lorenzo]

Nope.  Dollars and euros can be held in physical form as paper bills and metal coins.  No bank is required for that.

Yes, that would be a decentralized exchange, albeit a rather cumbersome one.

"Decentralized" doesn't mean "zero-risk".  Whether it's cumbersome or imperfect is immaterial.  Using paper bills and metal coins is the only way to implement a fiat-to-crypto/crypto-to-fiat decentralized exchange because it's the only fiat payment method that eliminates the need for an intermediary, avoids counter party risk, and is the one that is most difficult to reverse.  Any fiat payment method involving a financial institution is by definition centralized.

Makes sense. However, if using paper bills and metal coins is the only way to implement a decentralized fiat-crypto exchange then I would think that decentralized exchanges will remain a minority and never supplant centralized exchanges like Bitstamp. For example, I live in New Zealand and the nearest person willing to sell cash for BTC or BTC for cash is located 900 miles away. Therefore, a centralized exchange or an exchange with centralized elements would be necessary if I ever wanted to buy or sell BTC.

Now, if BTC adoption were widespread enough to the point where most people had some BTC then I could see how it could work. But that's really no different from the usual buying and selling of goods and services. After all, if I sold you 5 pencils for $10 in cash then that's decentralized too.

[Amph]

i'm still curious how they can address the "middle man" that's the only reason why this thing can't work properly, there is always a thing to trust

unless you do it automatic, i don't know how it can work( a bot that manage the money with a cold storage maybe?)

[CIYAM]

unless you do it automatic, i don't know how it can work( a bot that manage the money with a cold storage maybe?)

In the case of using Automated Transactions it is indeed effectively a "bot" that manages the funds in accordance with its code being executed (and thus verified) by every peer in the network.

Once the funds have been sent to the AT (it effectively has its own "account") then only the AT can decide what to do with them.

[monkeybars]

You could easily do a better decentralized exchange than Local Bitoins with today's release of the Abra p2p cash app (which happens to operate on invisible backend bitcoin rails).