Topic: Creating metacoin for a decentralized exchange? - page 3. (Read 3210 times)

You'd certainly think that wouldn't you, but actually you are wrong.  There are NO BITCOINS backing up bitBTC.  "bitBTC" is actually a Bitshares' derivative.

"The Bitshares Foundation" claims all their "bitassets" are "backed" by their physical counterparts.  This is categorically false.  I don't know whether they claim this because they have absolutely no idea what they are doing or because they are intentionally trying to mislead investors.  "The Bitshares Foundation" claims that because you can sell your bitUSD for Bitshares and then sell your Bitshares for BTC and then sell your BTC for USD that bitUSD is backed by USD.  Obviously, that is the most ludicrous thing I have ever heard.  On that same logic I can claim bitGold is backed by tomatoes because I can sell my bitGold for Bitshares, then sell my Bitshares for BTC, then sell my BTC for USD and then take my USD and go to the grocery and buy tomatoes.  GENIUS!

Of course none of this stops Bitshares(TM) from claiming that Bitshares is "Safer than a Swiss Bank account!".  I'd still like to hear the explanation on how BTS derivatives are "safer" than physical assets in a vault.

So I should first buy some bitBTCs, which are presumably backed up by bitcoins, right? If so, where are those bitcoins, who controls them? And how is this bitBTC different from an IOU then?

Bitshares has a lot of new and interesting stuff going on that makes it hard to follow at first until you've grokked it. I'd recommend reading some of bytemasters posts to understand some of the concepts better.

http://bytemaster.bitshares.org/article/2015/01/05/The-Future-of-Crypto-Currency-Exchanges/
http://bytemaster.bitshares.org/article/2015/01/07/The-Worlds-First-Decentalized-Exchange/

If you wanted to trade BTC on bitshares, you'd need to bridge between bitBTC. So you trade your BTC for bitBTC, then bitBTC for whatever you want on the bitshares DEX. Say you wanted to go from BTC to DOGE (hypothetical, bitDOGE isn't an active market atm), but you didn't want to take the risk of having funds on a centralized exchange. You could trade BTC for bitBTC, then trade bitBTC / bitDOGE, then trade bitDOGE:DOGE again. In this way, you went from BTC to DOGE via a decentralized exchange.

It's worth noting that you get paid a variable % yield for holding bitassets as well out of fees collected by the market.

http://bitsharesblocks.com/assets/market

BTC cannot be stored directly on the bitshares blockchain- it is its own native chain (BTS). There are some very interesting ideas from bitsapphire about how to use DPOS + OT to achieve what you are thinking though... I imagine we will see some ideas for that type of thing in the coming year.

I recall a coin that tried to do it, but was a false prophet and dumped their coins on us.

As far as I know, you can't really make a decentralized exchange with all these guys who have harden themselves from coin IPOs. If you want that to happen, you would have to try really hard to convince people that your coin will make it.

I still don't understand it. You say that each user with assets in a bitshares wallet controls their own keys to their bitshares accounts, very good. But where is the money in this scheme? And I don't mean BitShares (or whatever), but good ol' bitcoins. Should I buy (in a way) these "bitshares assets"?

The exchange is baked into the bitshares blockchain protocol... hence it is decentralized. There isn't counterparty risk as with the traditional exchange when trading on the Bitshares DEX; only systemic risk insofar as the integrity of the software from irrecoverable hacks or exploits. Each user with assets in a bitshares wallet control their own keys to their bitshares accounts and hence, to their money.

You can play around with the newly released web wallet here: wallet.bitshares.org.

The web wallet doesn't have trading enabled yet (hopefully soon) so you'll have to grab the desktop client if you want to see how it works: https://github.com/BitShares/bitshares/releases/tag/bts%2F0.6.2

I didn't understand what you wrote after that part (in fact, I don't quite understand even this part), but how is the user protected from the exchange robbery or the exchange deciding to just run away with their clients funds? In short, who actually owns or, rather, controls the money?

When I said new kind of asset, I meant in crypto-space. These assets are similar to contracts for difference outside of the crypto-space, yet they are fungible and divisible.

The short and long positions are at risk for the potential loss when they take their voluntary position.

The collateral is BTS (for the 3rd time).

Also there are people willing to exchange bitassets for their "real world" asset. You can convert between BTC:bitBTC on metaexchange.info, and another startup Cryptosmith is working on a bitSilver:physical silver offramp so you can receive physical silver in exchange for bitsilver.

Fiat gateways are more difficult, but the Chinese have a CNY:bitCNY bridge over at tradebts.com, and bitUSD:USD fiat gateways are in exploratory phase.

Just because the stream is calm now doesn't mean that the dam won't burst in the future. Bring on the liquidity, baby.

We give the asset class a different name because they have different properties. They aren't IOUs- hence, they aren't user issued assets as claimed.

I mentioned in my previous post that the backing collateral is BTS. So, all bitasset markets start at supply 0. Bitshares uses DPOS to secure the ledger which involves BTS holders electing delegates to sign blocks via approval voting. The 101 delegates with the most stake voting for them are the active signers. Another task for the delegates to perform is publishing feed data for registered market assets. New bitassets can be shorted into existence after 51 delegates are publishing feeds, the median of which is used for the short price.

To create the asset and increase the supply, an order must be filled. That means there must be a buyer on the other end of the trade looking to hold said asset. The short must put up 2x the value of whatever asset they are shorting in terms of BTS. The long puts up 1x, for a combined total of 300% collateral. This collateral is held by the market in the bitshares protocol itself, as if it were taken out of supply. It becomes liquid again when the short order is covered. This can be triggered by a margin call if the price of BTS falls past a certain point, which means the short position is automatically covered. The short will also automatically cover after 30 days pass as an expiration date is built in to guarantee liquidity. Lastly, the short position could cover by buying bitUSD or whatever asset they are shorting off the free market, then using it to cover. The act of covering frees the collateral again and destroys the bitasset used to cover, shrinking the supply. So the market caps for bitassets are actually proportional to their demand in this respect.

Read this whitepaper for a better understanding: whatisbitusd.com/whitepaper

These market-pegged assets are pegged by whom exactly?  Who takes the loss if the relative value of assets changes and then someone wants their asset back? If they cannot be restored to the real world from the block chain, then they are not two-way pegged.  And a one-way pegged asset is indistinguishable from an IOU.  Someone took the real-world asset and manipulated the block chain to create the "pegged" asset - but if he did not keep the real-world asset at some actual place in the real world where you can trade in your "pegged" asset to get it back, then your pegged asset does not have its value.


DANGER WILL ROBINSON!!!  When someone tells you something is a new type of asset, there is a 99% chance they are trying to scam you!  This has been true for thousands of years! 


If the same set of merchants who accept the real-world counterparts are willing to accept the bitasset on the same terms, then it has the same value.  But they aren't.  And they won't, because, as you admit, there is no one who is willing to exchange the bitasset for the real-world asset they value.  Also, the "value" frozen on the block chain is measured in what units?  Hint:  There IS NO unit of value that does not constantly shift in its exchange rate relative to other units of value.  Even if there were, there is no way anyone can guarantee that unit of value is retained, unless there is a way to exchange the bitasset for that asset -- which would mean that the real-world assets are, in fact, stored someplace where you can get them back. 

The point here is not how these assets are called. It is more interesting to see what this collateral is (in respect to it actually being collateral), and how it can be locked on the blockchain. Is it bitcoins that you send to some address and lose control over? If so, who has the keys, BitShares?

Yes you are incorrect. BitShares is a decentralized exchange- it doesn't trade only IOUs as you are claiming, it trades assets that peg the value of their real world counterpart, also known as market pegged assets or bitassets. A gateway could issue their own IOU on bitshares and trade it 1:1 for bitUSD however. BUT the market pegged assets are not IOUs! These assets have collateral locked on the blockchain.

Hence, a bitUSD is a stablecoin with the properties of Bitcoin (i.e. lower counterparty risk), backed by BTS as collateral.


This is just plain wrong. Market pegged assets like bitUSD, bitGOLD are a new type of asset... not user issued IOUs. Read more about them here: http://whatisbitusd.com/whitepaper/


We use these terms because the bitasset has the same buying power as the real world counterpart. AND it is not because someone is promising to redeem it as such (as with an IOU)! The value is frozen on the blockchain when a short order is matched to create the new bitasset. And technically the proper term is BitGOLD, BitUSD, etc.

BitShares is like a decentralized Ripple with a stable liquidity token (bitUSD vs. XRP) that can facilitate the same type of IOU payment network between gateways, only in a way requiring less trust of the user, a fair distribution, and Ripple doesn't have market pegged bitassets that eliminate the need for businesses to cash out of crypto into fiat... now they can hold bitUSD or whatever their favorite relatively stable asset is instead. Of course, this is pending more liquid markets... which has been improving as more bridges open up like metaexchange.info and shapeshift.io.

In fact there is a discussion over at the bitsharestalk forums about adding cryptocurrencies so other communities can trade on a decentralized exchange too. BitShares wants to bolster the overall crypto community with a platform for safer trades... not scam it as CIYAM suggests. I suggest you do your research before you make claims about projects you are unfamiliar with.

https://bitsharestalk.org/index.php?topic=14847.0

Okay, did that.  Serialization and constructor calls were a heck of a thing to sort out, but now txOuts have a spendable time - a block height before which they cannot be spent.  At this time it's only supported in raw RPC transactions - the wallet doesn't know boo about it except to not display them for its current balance until they are valid and not use them to try to make payments until they are valid.  It always creates txouts that are not limited to a spendable time.

At this point I think I've provided ways to prevent most of the potential attacks on atomic cross-chain transfer, at least from my side.  

But since I now have StakeTime and StakeBlock, I can't resist going ahead to implement a non-stupid implementation of Proof-of-Stake.  

For the record, all implementations of Proof-of-Stake  that I've seen so far are in fact stupid.  

What I'm going to do is a PoW/TaPoS hybrid (that is, Proof-of-Work combined with Transactions as Proof of Stake).   Who forms the block is determined by PoW.  Each transaction 'stakes' a given block, and is not valid in any blockchain that forked before that block - making txOuts that exist before the fork into a finite resource that either supports one side of the fork, or cancels itself out by supporting both.  Resolving the conflict between two block chain branches will depend on both the relative proof-of-work between the branches and the total amount of txouts created before and staked after the split.  The stakers and the PoW miners will both get payments for securing the chain in the same proportion that their contributions to chain security are counted relative to each other.

I'm probably going to find dozens of bugs when I start testing this....  

Okay, I thought about it.  It is not just necessary for txOuts to have a spendable time, it is also necessary that people can see what the spendable time is without anyone having actually provided the script to spend it. 

So I'm hacking an nSpendableHeight into txOuts.  This will get serialized in the txOuts of each transaction and will permit transactions to have a minimum block height before which they cannot be spent. And importantly for auditable protocol,  people can look at the block chain and see what that height is.  I don't think a maximum spendable height is going to be necessary. 

Well, there was already an nLockTime (minimum block/time for a tx to be valid).  I added an nLastTime (maximum block/time for a tx to be valid), plus an nStakeTime and an nStakeBlock;  nStakeTime is the height of a 'stake block' for the tx, and nStakeBlock is the last 32 bits of that block's ID.  And I implemented functions IsAliveTx and IsStakedTx to check for these conditions being wrong, and hacked IsStandardTx to keep such tx out of the blocks, and IsValid to keep blocks containing such tx from being accepted in a blockchain.

So, you can have a tx that is valid only between block A and block B; you know for sure that it won't be included in any block before A, and you also know for sure that it won't be included in any block after B. 

The idea with nStakeTime and nStakeBlock is that a tx is not valid in any chain other than one where the block at the named height has a hash whose last 32 bits matches the named nStakeBlock.  And this means that if a bunch of related tx all stake the same block, you can guarantee that if any of a them disappears in a reorg, then ALL of them disappear in the same reorg.  And that also puts in the infrastructure for proof-of-stake that doesn't suffer from the "nothing-at-stake" problem, although I have not implemented any PoS yet - and if/when I do it'll be a true hybrid where proof-of-work is still required to find blocks.

I have not implemented time-locked outputs yet; the more I think about it the more I'm certain that there is a better way to do it than by having another data field in the txout.  Time-locked outputs and much more become possible if the scripting language has an op that pushes the current block height.  Then the time-locked output becomes a P2SH output, where the script pushes the block height, compares it to a number that's already there, and returns true iff one is greater than the other. 

This makes several ways to 'backstop' the cross-chain trading risks involving playing silly-buggers with block timing and reorgs.

But now I need to think hard about whether that new scripting op introduces new vulnerabilities and scams.

Looking more closely at the atomic cross-chain trading protocol, I have a bit more coding to do for security.  

It works fine as long as both chains are proceeding, neither party can block the other from making a transaction in a given timeframe, and a reorg doesn't block out just part of the protocol on one or both chains.  But dealing with alts, often the block chain security is kinda thin, and I can't really trust that there'll not be long reorgs created by attackers -- either on my chain or one of the others.  

First thing, for secure cross-chain trades, because the protocol depends on transactions waiting until after other transactions have occurred,  I'll absolutely have to add minimum and maximum block heights to transactions. That is, a transaction would not be valid in any block prior to its minimum block height, nor in any block after its maximum block height.  

Second, I'll want to implement time-locked outputs;  That is, different outputs, even if created in the same transaction, will need to be able to specify different minimum block heights before which they cannot be validly spent and possibly even different maximum block heights after which they cannot be validly spent.

Finally related to secure trades, and also to eventually implementing proof-of-stake that doesn't give attackers infinite free shots at causing reorgs,  I'll need each tx to specify a very recent block (current block as of the time the tx is created) and not be valid in any block chain that does not have that block as its ancestor.  This will prevent a couple of possible scams involving chain reorgs either on the metacoin chain or the chain it's crossing with; if a given tx is invalidated by a reorg, then other tx in the same sequence must also be invalidated by the very same reorg.

I keep spending coding effort on this thing, like a hobby; maybe in the back of my mind I have already decided to do it.  With my conscious mind I still have huge doubts.

Litecoin seems to me like a bastard child of Bitcoin. Neither here nor there. It tries to clothe itself with bitcoin's fame, but since there can only be one Bitcoin, it looks grotesque. Dogecoin, on the contrary, doesn't pretend to take after anything, and as a result we have fast (in terms of confirmation times) and cheap (in terms of transaction fees) coin, perfectly fit for trading.


Can't say anything about Namecoin. Though providing real service doesn't make it invulnerable to pumping (in fact, more prone).

Doge, for all that I don't care much for its prospects, at least doesn't appear to be a scam.  Or at least, not actively scamming at this time.  Litecoin likewise doesn't appear to have any active scams going. 

But, honestly?  The single most non-scammy alt I can think of is Namecoin.  Thousands of nodes on their network all the time, mostly just because people are running full nodes in order to keep their browsers updated on the .bit domains.  Namecoin actually provides a real service, so there's a constant non-pump demand for it.

I don't (as I know it is just crap) but unfortunately they are sucking more and more people into their "prediction market" crap (which is really "newspeak" for "let's steal your money by trying to make you think our snake oil is the real thing").

I suspect that they'll try and evade prosecution by eventually leaving the US and setting up overseas (as others are doing).

To use the terms "USD", "BTC", "gold" and "silver" when there is no such actual underlying asset is "deceitful to say the least".