ChromaWallet (colored coins): issue and trade private currencies/stocks/bonds/.. - page 27.

jgarzik

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Quote from: killerstorm on September 29, 2012, 01:50:16 PM

Quote from: jgarzik on September 29, 2012, 12:17:32 PM

I raise the point because that is precisely what distributed bonds proposes, with its financial P2P network and financial hashmap.

I feel like a simpler and a bit more centralized solution would offer 95% of joy for 5% of effort. I haven't analyzed it thoroughly, though, so I can be very wrong here... But still, I would prefer seeing something simple up and running to waiting for a perfect solution to be built.

Oh, I completely agreed with you

Centralized solutions are easier, and still provide plenty of value.

However, given real world experience in this community, such exchanges also have a nearly 100% chance of (a) getting DDoS'd and (b) getting attacked by determined, knowledgeable thieves.

That is why decentralized, open-review systems are preferred.

killerstorm

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Quote from: jgarzik on September 29, 2012, 12:17:32 PM

I raise the point because that is precisely what distributed bonds proposes, with its financial P2P network and financial hashmap.

I feel like a simpler and a bit more centralized solution would offer 95% of joy for 5% of effort. I haven't analyzed it thoroughly, though, so I can be very wrong here... But still, I would prefer seeing something simple up and running to waiting for a perfect solution to be built.

jgarzik

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Quote from: killerstorm on September 29, 2012, 12:02:31 PM

Quote from: jgarzik on September 29, 2012, 11:25:12 AM

Fully decentralized would mean any two users may meet at any time, and there is an efficient method of advertising (bids, asks) and meeting in the middle (transacting).

Um, maybe. It depends on how you define "decentralized". But, of course, there is a whole spectrum of solutions from a handful of large providers to full p2p with millions of nodes. (Which I would call 'distributed', maybe.)

Somewhere in the middle there is a federation of order book providers with a significant number of members. I would liken them to mining pool operators (which are numerous), thus it might be "decentralized enough" for Bitcoin crowd's taste.

Full p2p would be cool, but it has numerous problems.

I raise the point because that is precisely what distributed bonds proposes, with its financial P2P network and financial hashmap.

killerstorm

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Quote from: jgarzik on September 29, 2012, 11:25:12 AM

Fully decentralized would mean any two users may meet at any time, and there is an efficient method of advertising (bids, asks) and meeting in the middle (transacting).

Um, maybe. It depends on how you define "decentralized". But, of course, there is a whole spectrum of solutions from a handful of large providers to full p2p with millions of nodes. (Which I would call 'distributed', maybe.)

Somewhere in the middle there is a federation of order book providers with a significant number of members. I would liken them to mining pool operators (which are numerous), thus it might be "decentralized enough" for Bitcoin crowd's taste.

Full p2p would be cool, but it has numerous problems.

Quote

Creating your own exchange, due to lower barrier of entry, simply means it is less centralized. As you can see with, e.g. MtGox, being able to start your own exchange does not imply lack of defacto centralization.

Not quite the same thing: there is much higher barrier to entry for exchange which deal with USD, and also an exchange like MtGox holds people's money, which creates a trust issue.

But I would agree that a solution with completely independent order book providers is far from perfect. But much better than what we have now...

Perhaps a federated protocol won't be too hard to implement...

jgarzik

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Quote from: killerstorm on September 29, 2012, 05:09:36 AM

If you think all three operators are assholes, you can run your own exchange software: there is almost no barrier for entry. Your exchange will be just as good as any other in terms of security and compatibility. Your only challenge is to attract users to get some market depth.

Yes, agreed.

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I believe this means that exchange is fully decentralized. And colored coins are important here because they are the substrate which guarantees security and universal recognition of asset ownership.

Fully decentralized would mean any two users may meet at any time, and there is an efficient method of advertising (bids, asks) and meeting in the middle (transacting).

Creating your own exchange, due to lower barrier of entry, simply means it is less centralized. As you can see with, e.g. MtGox, being able to start your own exchange does not imply lack of defacto centralization.

killerstorm

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Quote from: Red Emerald on September 28, 2012, 08:43:52 PM

This is an interesting idea. However I don't see how it makes a distributed exchange possible. The hard part is keeping track of buy/sell orders and colored coins don't do anything for that.

We can start with decentralized exchange first. Decentralized means that it lacks single center, not that it is strictly p2p.

For example, there might be three independent operators with their own order books. You can buy/sell via any of them, as security is guaranteed by colored coin protocol, and no matter where you buy, your ownership will be recognized.

If you think all three operators are assholes, you can run your own exchange software: there is almost no barrier for entry. Your exchange will be just as good as any other in terms of security and compatibility. Your only challenge is to attract users to get some market depth.

I believe this means that exchange is fully decentralized. And colored coins are important here because they are the substrate which guarantees security and universal recognition of asset ownership.

jgarzik

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Quote from: Red Emerald on September 28, 2012, 08:43:52 PM

This is an interesting idea. However I don't see how it makes a distributed exchange possible. The hard part is keeping track of buy/sell orders and colored coins don't do anything for that.

You're right that colored coins alone do not enable the tracking of buy/sell orders.

The distributed bonds example describes how an added layer would enable this.

Distributed bonds are just a special type of colored coin; the concept is the same.

Red Emerald

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This is an interesting idea. However I don't see how it makes a distributed exchange possible. The hard part is keeping track of buy/sell orders and colored coins don't do anything for that.

jgarzik

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Great stuff. Glad to see others working on this.

pybond will also be a colored coin implementation, with a subset of colored coins being distributed bonds. Have a lot of networking boilerplate to write first; the basic design is simply following "rules for colored coins" and "atomic coin swapping" though.

P.S. My name for colored coins is "smartcoins." Sexier, more marketing friendly name ;p

Other thread references:

Rules for colored coins - https://bitcointalksearch.org/topic/m.1203918
Smart property - https://bitcointalksearch.org/topic/smart-property-41550
Distributed bonds - https://bitcointalksearch.org/topic/distributed-bond-markets-and-pay-to-policy-outputs-92421
Atomic coin swapping - https://bitcointalksearch.org/topic/atomic-coin-swapping-112007

On the wiki:

https://en.bitcoin.it/wiki/Smart_Property
https://en.bitcoin.it/wiki/Contracts

Evolvex

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Cheers killerstorm - man I love bitcoins, the more I hear the more I like them

(where as my mrs on the other hand, the more she hears me on about them, the more she hates them lol)

killerstorm

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Quote from: Evolvex on September 10, 2012, 04:28:05 PM

Can a coloured/tagged coin be attributed to something else, ie a digital trading card?

Sure.

It's even possible to control ownership of physical property this way: https://en.bitcoin.it/wiki/Smart_Property

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Thus said game can be played and traded securely, and even sold at a higher premium to a "normal" bitcoin?

Yep. It can be used for any trade-able game items and for in-game money.

(Why not make in-game money bitcoin? Game owners might want to control money supply within the game and get some profit too

).

Evolvex

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Not MOT, I meant MTG

... cant find the edit button Grin

Evolvex

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I like the idea, I wonder tho.... would it be possible to....

As an idea....

Can a coloured/tagged coin be attributed to something else, ie a digital trading card?

(think magic the gathering, pokomon, top trumps), brought in a pack of say 10 (for day 1BTC - giving you 10 x 0.1 coloured bitcoins or digital cards in this example)..

Thus said game can be played and traded securely, and even sold at a higher premium to a "normal" bitcoin?

A digital MOT style game is something I've thought about before, the way bitcoin works makes me wonder if the two could work together - coloured bitcoins just makes me wonder more

Mushroomized

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Hello!

Quote from: ElectricMucus on September 09, 2012, 11:14:57 PM

Well, what this actually does is expanding the space of currency from one dimensional to n-dimensional.

But to use that consistently trade would have to be done upon an agreement of angle the corresponding vector... not something that non-nerds would be comfortable of doing Wink

I like the idea anyway, especially because you have just done it instead of bragging about it first.

Exactly! Actually, my friend Ryland-Almanza and I where working on an altcoin based from solidcoin that would have colored coins, but we called them patterned coins, like plaid and checkered etc (ryland is colorblind).

I definitely think that this is a good idea and great work so far!

killerstorm

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Quote from: cbeast on September 10, 2012, 06:52:59 AM

I like this idea, but not the fact that it would require the global Bitcoin network to verify the colored flags. Would it not be better to just verify the coins on a firewall network and broadcast to the network from there? On the client side, colored wallets can keep the coins separated. If someone wants to spend their locally deflated coins outside their local network, they would need to go through an exchange or lose the value of the colored tag.

Well, the solution right now is to trace history using full block chain on clients. It's easy to implement and it works fine right now.

Once performance will be a problem we can look for solutions. Apparently there are several options available and which one is the best would depend on environment. So it's a bit too early to discuss which solution is the best.

At least we know that options are available.

DHT can be a drop-in solution: it doesn't require switching to a different chain or using special transaction format or adding extra script complexity. People simply can switch to using DHT instead of using local full chain.

cbeast

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Let's talk governance, lipstick, and pigs.

I like this idea, but not the fact that it would require the global Bitcoin network to verify the colored flags. Would it not be better to just verify the coins on a firewall network and broadcast to the network from there? On the client side, colored wallets can keep the coins separated. If someone wants to spend their locally deflated coins outside their local network, they would need to go through an exchange or lose the value of the colored tag.

killerstorm

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Quote from: eb3full on September 10, 2012, 04:50:57 AM

There are some disadvantages to maintaining a record of colored coins. New participants in a theoretical exchange will need to bootstrap from the issuer or other interested peers to verify colored coins, and then maintain an archive of derivative transactions. (You can imagine the problems at high transaction volumes.) If they only had to bootstrap from a single transaction hash, peers could begin verifying and trading "securities" immediately, and nobody would need to maintain a list of colored outputs -- the blockchain itself would serve that purpose.

Sure, it's a trade-off: we either have a complex, but fast solution; or we have simple, but resource-hungry. We should take both development costs and performance costs into account.

It's also possible that colored bitcoin history will be hosted either on some for-profit service (i.e. for a small fee you get access to a whole archive) or in a DHT (since transactions are already secure it is sufficient to have key-value store to fetch history).

Quote from: eb3full on September 10, 2012, 04:50:57 AM

This is true... I can't think of any easy way to implement this (yet). But if someone finds out, that'd be interesting.

Well, the most straightforward way to do that is to add color tags to all colored inputs/outputs and to ask miners to verify those tags. (I.e. in addition to normal verification rules they will also check for conservation of colored coins, i.e. that coins do not appear out ouf nowhere.)

Of course, it's unlikely that we'll ever see that in Bitcoin, but it's fairly easy to implement it in an alt-chain.

eb3full

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Quote from: killerstorm on September 10, 2012, 12:35:58 AM

I don't think this is necessary: people who are interested in having their coins colored will keep part of transaction history which would trace them to genesis transaction. Then they can show this history to prove that their coins are colored. Sale of colored coins would include sharing history with counterparty.

There are some disadvantages to maintaining a record of colored coins. New participants in a theoretical exchange will need to bootstrap from the issuer or other interested peers to verify colored coins, and then maintain an archive of derivative transactions. (You can imagine the problems at high transaction volumes.) If they only had to bootstrap from a single transaction hash, peers could begin verifying and trading "securities" immediately, and nobody would need to maintain a list of colored outputs -- the blockchain itself would serve that purpose.

Quote from: killerstorm on September 10, 2012, 12:35:58 AM

That would be cool, but I doubt there is a chance to see this implemented in Bitcoin in observable future.

Maybe in some alt-chain, but it would create an additional problem of trading with specifically bitcoins.

Also I'm afraid it would be rather complex...

This is true... I can't think of any easy way to implement this (yet). But if someone finds out, that'd be interesting.

killerstorm

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Quote from: lebing on September 09, 2012, 09:04:16 PM

I understand the coloring part, but I don't get how this paves the way for distributed exchanges. What am I missing?

People having coins of different colors can exchange them securely via a simple bitcoin transaction which would be atomic.

E.g. one person gives 1 red coin and gets 5 blue coins, other person gives 5 blue coins and gets 1 red coins, they construct a transaction, sign it, and once it is in blockchain trade is done. (If one person signs but other doesn't transaction would be invalid. If there is a double-spend, it would also invalidate whole txn. So trade transactions are in fact more secure than accepting bitcoins.)

So what's left is order matching logic, i.e. allowing person which is willing to trade red coins for blue coins to find a person who wants the opposite.

This is fairly simple to implement and straightforward.

killerstorm

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Quote from: eb3full on September 09, 2012, 05:17:08 PM

Can the colored bitcoin concept be accomplished without having to traverse the blockchain to ensure the coins came from an issuing transaction? This is probably necessary anyway because of blockchain pruning.

I don't think this is necessary: people who are interested in having their coins colored will keep part of transaction history which would trace them to genesis transaction. Then they can show this history to prove that their coins are colored. Sale of colored coins would include sharing history with counterparty.

Quote from: eb3full on September 09, 2012, 05:17:08 PM

Perhaps allowing output scripts to compare/analyze serialized input scripts to ensure that an input is derived from an issuing script or transaction.

That would be cool, but I doubt there is a chance to see this implemented in Bitcoin in observable future.

Maybe in some alt-chain, but it would create an additional problem of trading with specifically bitcoins.

Also I'm afraid it would be rather complex...

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