Topic: Announcing Project Invictus: a P2P Exchange Collaboration (Read 11242 times)

Thanks everyone for your contributions to Project Invictus. We have collected some great feedback and have developed a large mailing list. Stay tuned for our bounty campaign coming soon.

You remind me a lot of another Josh from BFL....

 
 Perhaps it's just me, or is everyone on this forum a crackpot, lunatic, or complete fraud?

Perhaps it is just me, but *if* Charles is telling the truth then your attitude and pre-judgment of the actions of those whom have money and connections may not the best way to win funding for your ideas.    If you want to presume he is lying then that is a fairly serious accusation.

So, perhaps we can get past the VC funding / management debate and talk about what you are bringing to the table.    Part of BitShares is an attempt to eliminate the need to store the transaction history for all time.  Without the full transaction history there needs to be a way to have 'confidence' in the initial condition of the 'chain'.   I have been discussing ideas and have some approaches that I think will work, but part of confidence is simply trusting others and perhaps there is some use of combining confidence chains to help certify the initial condition of the block chain from which the past months transactions are built upon.

I see, so we have to play along until the point at which you announce the secret VC that will grant someone money to develop an open source P2P bitcoin exchange.

would the VC just announce themselves that they are looking for proposals?  I mean that's what normal sane people do when they want to fund something.

Nice try, you'll find out when everyone else does when we make the joint announcement.

and which VC would that be?

yes and now you are.

The challenge is making an analogy to existing instruments.  I can describe it and make analogies that approximate it.  

I will make my an attempt to describe it here:

1) BitShares have value for the same reason as Bitcoin.  
2) A crypto-USD is created by holding 2x BitShares as collateral.  When you create (by selling/shorting) crypto-USD you are betting BitShares will go up vs crypto-USD.   When you buy crypto-USD you are betting that BitShares will go down relative to crypto-USD.     At the end of the day you can exit your position in crypto-USD by either trading it to someone for fiat or by selling it for BitShares.    Thus you can convert crypto-USD to fiat-USD but it is not a REDEMPTION it is a SALE.  

So what do you call this 'instrument'?   It is very similar to a collateralized naked-short in 'gold' that can only be redeemed in USD and where you cannot take delivery.    The difference between crypto-Gold and say traditional COMEX is that the collateral backing the short cannot be printed, incurs opportunity cost, and requires 2x the collateral as the longs and thus not be easily or cheaply manipulated like the COMEX.

There is a ton of precedent for the nature of the contract, but I am not sure how to 'name' the contract vehicle.  

Sorry Charles, are you working with a VC fund?  If so I wasn't aware.

Blue, this is an aggregation of ideas and implementations surrounding a list of design criterion and challenges. I'm the one here with the money and also access to the developers so I'm really not worried about the leadership component. I want to see what the range of solutions are to the issues of a p2p exchange both legal and technological.

For your sake I hope you can make the 'instrument' understandable. Making it a new thing that doesn't exist already is bad enough for adoption, because people have to stop and think if that new thing is inherently valuable to them. But BitShares have the extra hurdle there to be damn near impossible for people to wrap their head around at all. Most people don't even have a clue what a derivative is in the first place...

"Wait, it's not payable in fiat? Then what, in ongoing dividends? Not exactly? What's backing it again? And what if nobody is mining that anymore? And when do I get my freaking money?!?"  -It just begs all kinds of questions like these that you practically have to write a manual to answer before people can adopt it.

If you could find a way to make it easily understandable, be it by video, using small words, whatever, easy enough for a layman to be willing to trade fiat for, I'd be more willing to try out the concept of using those as the fiat inside DEX instead of cryptobonds.

Blue,
    Using BitShares I create assets that are only 'redeemable' in crypto-currency *but* they track the purchasing power of outside assets.  Therefore you can 'redeem' them by purchasing gold/silver/etc on the market.  Having such an asset class can be very useful in facilitating the actual trade of the physical good. 

    I am collateralizing debt, *but* the debt is not a promise to pay gold or silver, but instead a 'promise to buy back the promise' on the market.  The 'price of the promise' on the market adjusts automatically as participants attempt to bet on the movement of actual gold/silver/dollars relative to BitShares.     The primary difference is that no one can ever default on the 'promise' because the 'promise' is enforced by the blockchain.    Also, all promises have 'intrinsic value' based entirely upon the BitShares that you are paid to hold on to that 'promise'.   This is what sets BitShares apart from DEX, confidence-chains, and Open Transactions and is also what causes most people trouble understanding the concept.   

    In my system there is no outside information that is entered *except* the users who place bids/asks.  No ticker, etc.   

    Also note that my system enables 3 different speeds of trading.... low-frequency between bids already placed in the blockchain.   medium frequency with exchanges that occur between the bid/ask price in the block chain.  And high-frequency with trading that occurs on anonymous OT servers with collateral held on the block chain and redemptions managed on the block chain. 

    There will still be a place for centralized exchanges, but they would no longer have to maintain any bank accounts and could deal entirely with crypto-currency.  They would not be trading in bearer bonds.

    I really need to identify exactly what my 'instrument' is because it could be thought of like a derivative where both sides of the trade are 'betting' on the movement of this crypto-Currency and the only profitable / logical bet is to bet it will follow Gold/Silver.    Thus it is almost closer to intrade or some other system than a real security (like a bearer bond).  This has legal advantages that are far superior than all other solutions for digitizing fiat. 
     

hey thanks for the positive comment.  It seems you've given thought to these issues, that much is clear.


"server resources"?  we're actually advertising destructable records as saving disk space?  that's just funny to me.  Some of you other comments don't make sense.  If the bank(admin of an OT server) wanted to screw the customer, they most certainly could, in many ways.  Historically, this is what happened to such systems.  It's not altogether clear to me how these 'voting pool' devices are going to protect against that.  Seems to me just another complex way of putting up a trustee bond against accounts.  It doesnt offer any significant technological advantages.


again seems like what you're doing is just creating collateralized debt, and then marketing it.  I notice you have the term 'interest' in your writings, and the only thing you could do with this basic notion of credit is to create mechanisms that pay off in the case of depreciation or appreciation.  You have not tied them to some outside asset.  Last time I visited this topic, seems like what you were doing was setting the interest rate on some kind of outside information service, and this Debt Collateral was used interchangeably with that asset.  The only problem is that no one can predict the outcome of markets.  These things are interesting kinds of devices and it's true that they are marketable, in the same way T-bills are marketable and valuable.

put it this way- there is a reason why they want to illegalize asset conversion.  Because THEY KNOW that this is the key ingredient in building monetary value.  You simply must have this at some level in order to build an alternative value schema- isn't that what we're doing here?  It's a given that 'the government' doesnt want people to do that.


this is true you can have a functional exchange that operates at those speeds, but if you actually bother to implement it- I should hope you consider that others might be able to outdo you in terms of speed(thus making the whole effort worthless).  People expect fairly quick turnaround times these days.  Confidence Chains certainly can give you that.

blue,  thank you for providing a solid post.

I have seen a total of 5? white papers on this topic:  DEX, Confidence Chains, Market Coin, Open Transactions and BitShares.    All of them have been far from pointless and each tackles this problem from a unique angle with different degrees of success and different limitations.   

I agree with your first paragraph in line #2, however, your second paragraph makes some assumptions that are not founded.

BitShares actually eliminates the need for any specific backer.   It is the only solution proposed where no users create bearer bonds nor have any way to default aside from massive volatility that all longs are aware of when they take the position.   It is also the only system that has opportunity cost and compensation for risk in the form of interest.  The result is that no user of BitShares is exposed to any more liability than a user of Bitcoin.

Server Architecture
Open Transactions does indeed suffer from most of the problems you just outlined.  As designed by FellowTraveler, it can only be run by a public entity and all issuers are public creators of illegal bearer bonds... a non-starter.
The primary benefit of destructive account history is 'instant validation' and 'server resources' and also prevents opportunity for the server to scam the customer.  You could of course always keep the transaction history for legal purposes.   But then again, bank records have screwed many innocent men and represent a means of tracking people that should be avoided if possible.

The challenge to make OT work is to eliminate the issuers and prevent the server operator from being able to take the money.   You can use BitShares to actually store the funds and 'audit' the server while allowing the high-speed trading / instant transactions to occur on the server.   In this case, destruction of account history is critical because it keeps the amount of information the server/user must produce to the blockchain to 'withdraw' money to a minimum.  It is almost a technical requirement that account history be destroyed.

I also think that the expectation of very high trading speeds and very low latency taking a very narrow view based upon the last 20 years or so of exchanges.  For the past several hundred years all exchanges and trades had to occur at 'human speed'.   Even today, most people don't 'day-trade' and instead decided to buy on day X and sell months or weeks later.   The intra-day price movement is not all that relevant to their buy-sell decision nor the long-term direction of the market.    High speed trading has its place, but is not a requirement for a fully functional exchange.   

That said, it should be noted that in a P2P network no one should have a profitable opportunity 'manipulate' the market by withholding bids/orders.   BitShares solves this with several approaches: 1) all 'real-time' trades must occur between the bid/ask spread from the last block.   2) All trades against open bids/asks stored in the block chain are deterministic.   3) All users make a profit (via dividends) when the bid is entered  4) professional traders are all competing to mine their own trades and the result of this competition is to drive up the difficulty and thus make it harder for any one miner to actually gain any meaningful advantage.

Just wanted to make a few points here...

#1) too many chefs in the kitchen.

I agree with some of the comments on here, we don't need any more 'leaders' to 'get developers'.  If you are one of these volunteer 'project managers', as it stands you are in very low demand, and the developers who can actually deliver on a system that people want are in high demand.  Some of these 'whitepapers' are just pointless regurgitation of fairly basic assumptions about these problems.  Please stop making distractions.  Creating a Github project does not put you in charge of things.


#2) the nature of IOUs.

There is no way to factor this notion of IOUs and collateral from the equation.  Would BTC have any value if I couldn't exchange it out for USD or EUR?  of course not.  Yes there is a inherent legal liability associated with converting these digital assets to REAL WORLD assets.  This sort of activity is mentioned directly in FinCEN guidelines.  The point here is that we want to develop a system that distributes the legal liability such that enforcement becomes impractical.  eg. it's illegal to distribute copyrighted material, but people do it because BitTorrent makes it very easy.

In all cases these distributed exchanges instead move the liability and gains(through seigniorage) to individuals rather than organizations.  No fancy use of crypto assets will eliminate this basic relationship.  An exchange needs only two things:

 1) a system whereby assets can be issued.

 2) a system whereby assets can be exchanged.

With these two basic functions, the other familiar devices can be developed.


#3) server architecture

As many of you know I have a history with the Open Transactions project, and it had been suggested that it could be used to run a marketplace.  1) destructable history- no where has this particular feature ever demonstrated or indicated any utility.  For instance if I were running some illicit business and authorities came to shut me down, and I paper shredded all my records, does this absolve me of responsibility?  2) anonymous servers: we saw this scenario recently with TorBroker, they were a client/server architecture hosted behind Tor.  Would you give these people your money?  Open Transactions offers nothing beyond that- even if they produce some kind of crypto document that tells you what your balance is.  We've had many such e-currencies before and they all failed in user adoption.  ASMOF, there is precisely nothing new in the Open Transactions architecture, thus I can't think of why we would expect a new result.


#4) marketcoin

I did read some of the comments regarding Marketcoin, and it looked interesting.  My first preliminary question is: how will it be mined?  Show me some Use Cases.  I think it is very possible to host an order book in a block chain.  I had originally thought to make an 'altcoin' that did just that, however I found this route to be unworkable.


#5) messaging

Messaging is indeed a key problem with markets, in particular latency which caused me to rule out the possibility of using a mined chain to host an order book.  Also it is probably impossible to rely on a p2p messaging architecture eg. WASTE,  as you rely on potentially uninvested peers for message relay.  Signals must be relayed by impartial parties, and they must relay them faithfully and quickly.  Any system that has the possibility of bias in the messaging can disqualify the system from many important applications.

-bm

I decided to put together a 'concrete' example of what the block-chain would look like for BitShares... high level... and may have slight math errors, but should communicate the idea in example form.

If you didn't realize I had an exchange at the very heart of bitshares then perhaps you need to go over the white paper.  If it is not clear then I am a terrible communicator.  The very creation of crypto usd is a short position on th exchange. 

Crypto-usd is not tied to the issuer.  There is 0 trust in my system except in the block chain margin covering algo. 

There is a button in Dex Wallet Vaults to simply redeem for them.

Remember? Apple product easy.

When the button is clicked the vendorID attached to the bond will be used to start the redemption process and track down the current owner of the bond, and start the clock ticking for his redemption window.


Thanks. I'm not too egomaniacal to think I've solved every problem yet... I just like my approach better.
 
Modifying the bitcoin blockchain structure is not something I think I can accomplish this week. I'm looking for solutions in the short-term only. (I know I sometimes sound paranoid, but who can deny that the powers that be haven't already started breathing down our necks pretty heavily?)


It's not perfect, I agree. But it's been working for OTC boards quite a lot lately. The WOT we build inside DEX can be specifically tailored to the task, and even if it's still the weak link to DEX, the overall product of DEX will be desireable in comparison to exchanges like Gox that are centralized and anti-private. (And offer no income sources.)

Divisible: Every bond in dex will be for $1 or 1 Yen or 1 whatever currency. I see no reason to include fractionals like cents when people won't likely go buy a bond for 50 cents... Rounding is good enough in this case.

Fungible: Also close enough, addressed well on page 11:
Did I just hear the twilight zone theme music...??

Bitshares seems many orders of magnitudes more complex to me. I still haven't wrapped my head around it yet...  

Everything about DEX is Apple-product simple. The concepts are simple... $1 will always be $1 to users. There is no interest, no shares of what is that stock? Nothing but a mt-gox interface for newbs who can use it to buy their first bitcoin with.

Vendors will have a little to learn, but nothing hard at all, they already know what a bearer bond is I'd think. The software does the work for them and the bond aftermarket is designed after an OTC board... So again, brain-dead simple.

Perhaps we have too much of our own system in our heads to fully understand the other person's system. It happens.
Let's let others be the judge over simplicity.


First of all, I wasn't aware that you had an exchange worked out. Do you mean attract people to our fiat replacements?

Well let's see... There are so many different people mine targets...

For the laymen, all we have to say is: "Download this app and get paid to simply let it run."

For the entrepreneurs: "The world of finance now has new investment vehicles that have never existed before and you can make a business for yourself selling and trading them with no overhead whatsoever, from anywhere in the world!"

For the daytraders: "Any currency. Any cryptocurrency. Any trade you want to make at all... No restrictions, global markets. TINY FEES."

For the libertarians: "This single software client that can't be stopped by any government or attacker can literally replace all financial institutions worldwide. It can hold and transport any kind of money with tiny fees and absolutely no restrictions on whom you can trade them with! You can even trade in new, exotic financial instruments that most governments wouldn't allow! Ignore the fed, the markets, and even banks too."

And for the hardcore traders: "New opportunities like global VPN Arbitrage and exotic cryptosecurities not seen elsewhere make this the platform you can't afford to miss."

...There's more, but you get the point. DEX is meant to be a full-featured exchange for everyone to use.

More feedback on DEX:

Upon closer look at DEX I can see that you have a 'good' approach but not the 'best' and can recommend some potential improvements.

1) Place the backing BTC into an ESCROW output on the bitcoin blockchain where it requires two parties to spend it.  Then allow those who 'hold the bond' to transfer their signature rights to someone else.  As a result the bond is always 'valid' and you no longer have to trust the issuer not to run with the collateral.  If you can run with the collateral then you have a massive incentive to defect after issuing a large number of bonds.   This would require an update to Bitcoin to support. 

2) Ratings systems are HARD and easily spoofed by Sybil attacks.  Ultimately they depend upon Web of Trust to avoid Sybil.   A Web of Trust creates a social network and ultimately the issuer IS NOT ANONYMOUS.  You would want users to 'mine' their identity to prove uniqueness.

3) Your bonds are not divisible nor fungible.  Find a way to enable this.

Despite the merits of your idea which clearly has had much thought put into it, I think it is ultimately more complex for all users and provides no benefits over BitShares.   Lets assume that both systems were implemented and competing against each other in the market.   We are both creating ads trying to attract customers to use our exchange.   What would your pitch be?

Mine is: Trade your dollars for crypto-Dollars and earn 10-15% interest (first few years).    Your crypto-Dollar will be backed by the full faith and credit of the blockchain which holds fully 2x collateral and will automatically cover before any losses are possible.   No need to trust anyone, rate anyone, or worry about anyone defaulting.   Trade in any 'volume' and make easy payments in any amount (event fractions of a cent).   Deposit your Bitcoins and earn interest on your Bitcoins!    Trade in your eTrade account and speculate in the EUR/USD market.    Buy call and put options and have risk-free escrow of all fiat transfers.

Yours?