Topic: Decentralized Exchange Service (Read 4912 times)

Basically it means No corporate intervention – Just like any other Decentralized platform, it operates entirely on its own, and no developers are needed for its future decisions, structure changes and such. In addition, there is no single body which holds majority tokens in the network.

Just a very rough draft, it probably has millions of flaws that scammers can abuse. But I wouldn't call it a pipe dream. Face 2 face traders would only announce themselves in friendly jurisdictions, otherwise law enforcement can quickly single out individuals with good history and take them out based on the proof of past transactions.

I was thinking more like a dark pool where nobody knows who is who, just the orders get filled by other orders that match. So as a user, you should be able to place orders on your client software and let the network pair up the orders.  

The definition of a "decentralized" exchange is simple 1vs1 people trading bitcoins for cash by mail or paypal or whatever.

I am so glad you mentioned that, I have been trying for months to convince some big name brokers to accept BTC but no luck so far.

Isn't forex THE major, decentralized exchange for currencies? Instead of pouring so many resources into creating our own, wouldn't our efforts be better spent trying to get Bitcoin recognized as a currency that's adopted by forex?

Coding the exchange is easy, that's not where the problem is.

What needs to be done is two things:

• find at least two "currencies" to trade, which can be instantly transferred and is non-refundable.
• Find a way to decentralize trust, i.e. a decentralized clearing house.

The answer to the first point is obviously BTC, and then we have LR, NameCoin and possibly testnet BTC.
I don't know if it's worth the effort, all of those are as hard to buy food with as bitcoin.

The answer to the second point is a bit more hard to come up with, and is possibly impossible to fully implement.
There is two possibilities, both including tradeoffs on the decentralization or function. The first is to have a rating system. We all know how that works, so let's leave it at that.

The second possibility is to do it like this:
Alice have BTC, Bob have LR.
Bob creates a new bitcoin address, and sends the public key to Alice.
Alice uses a modified transaction to send some BTC to Bobs bitcoin address. The modifications consist of signing the transaction using both Alice's and Bob's keys in such a way that both keys are required to claim the coins. How to implement this is described here: https://forum.bitcoin.org/index.php?topic=2728.0.
(This will require a client with implementation of the required scripting opcodes).
Now Bob can see that Alice have spent some bitcoins, and that neither of them can claim them without having both private keys.

This is as good as it gets. Bob can now choose between sending Alice the LR or not sending them.
She then has the choice of giving him the key, completing the transaction, or not giving him the key, forfeiting the bitcoins.

The possibility of being able to make the other person lose money without any risk will make for some good trolling, so this would possibly have to be combined with a rating system anyway.


There is also the possibility of using nLockTime to make the transaction expire after a certain amount of time if someone got scammed, but this is not implemented in clients.

We should start with liberty reserve because they are the biggest e-currency at the moment, then add other methods. The exchange should happen based on the demand and supply of both BTC and LR, meaning, when you open your client ( like bitcoin ) you should see your balance in coins and right next to it, your balance in LR. If this is your first time downloading the program the you should have 0.00 btc and 0.00 LR. The program should not mine or generate coins.

Maria.

A web of trust crossed with a public blockchain in which traders announce their cash-transfer capabilities (Ex. PayPal, Bank, face2face near Lat. X, Long. Y etc.). All trades are instantaneous and recorded in the blockchain at the then current price. When it's time to cash out or deposit money, you use a client program that matches someone who needs cash with someone who wants to deposit cash. The primary distinction from Bitcoin-OTC is that the persons trading cash are not also exchanging bitcoins, each has it's own time and price at which the trade took/will take place.

When a match is found, the users exchange contact credentials encrypted with each other's private key and do the out-of-blockchain money swap. If the PayPal, face 2 face etc. swap was fine, the receiver of the money credits the giver in the blockchain and each is on his way. If not credited, the giver can publicly complain and reduce the receiver's rating. The system automatically computes ratings and updates the web of trust. Highly trusted individuals could ask for a premium for their services, so they are incentivized to stay honest. The bitcoin settlements are automated and the exchange chain refers to the bitcoin blockchain by requiring traders to prove their identity using the bitcoin wallet keys. Automated escrow a-la ClearCoin removes the incentive to steal - if the cash transfer fails the escrowed bitcoin is transferred to a charity and both parties loose.

The system would also require trusted arbiters that hold the excess cash and bitcoins needed to provide liquidity to the market. These could be selected from the highest rating individuals.

Just a very rough draft, it probably has millions of flaws that scammers can abuse. But I wouldn't call it a pipe dream. Face 2 face traders would only announce themselves in friendly jurisdictions, otherwise law enforcement can quickly single out individuals with good history and take them out based on the proof of past transactions.

Who is this guy? Please go somewhere else! Thank You!

Maria.

you fail to comprehend you need to use a 3rd party such as dwolla, which would make this system not decentralized in the first place. what happens if the account gets frozen? someone will HAVE to have control over it, you can't just register the account as a robot. not only will you be using a 3rd party like dwolla, SOMEONE will have access to it.

it would be no different from using the exchanges.

We can start up by coding the platform, I have plenty of USD and BTC in stock, so if there is any talented programmer out there that can get this started and is motivated by money, just shoot me a PM and we could discuss some options. My goal is to never fall victim to a central server that can be easily compromised like MT GOX, so what we need is a system based on bitcoin (torrents) that allows instant exchanges from one form of currency to another (BTC to LR USD).

Maria.