Topic: Decentralized P2P Exchange Proposals: exactly how do you fix the fiat issue? (Read 2247 times)

Not only that, but how in hell do you know the person that you are selling to isn't some gov related force setting a honeypot?

I would make jokes about this being an incredible display of necromancy, but the timing actually makes a lot of sense.

For years, even as early as 2011, many of us have been searching for a P2P exchange solution primarily because we're concerned that a day would come when we'd run out of options to buy bitcoins privately.

Now, especially with the coinbase and bitlicense news lately, the time is rapidly catching up to us. Localbitcoins is the only sure way for 'murikans to find 'unmarked coins' these days if you don't have an inside deal... And there have been stings recently against localbitcoin sellers.

So it's time to re-open the subject, this time out of more desperation than idealism.

I see lots of projects like Bitsquare that are trying to make a P2P OTC Exchange, but never an attempt at a real-time exchange, that works like a P2P bitstamp. These OTC exchanges can certainly help ease the problem, but I don't really see them being any better than OpenBazaar or localbitcoins itself for the purpose of helping anyone get coins privately... And that's simply not good enough for most people.

Why have real-time P2P exchanges been given up? Because no one has invented yet an easily-obtainable, universal crypto-token that represents the USD or other nationalized Fiat on these exchanges. Or have they?

The fear was that such a financial instrument would be hunted down by the secret service like eGold and Liberty Reserve were, for 'counterfeiting USD.' I felt this was as valid fear and haven't looked into it in over a year.

However now we have Fiat-locked-value financial assets from Coinapult, BitReserve, and now Tether!

They may be chased down and destroyed by the SS too one day, but they're here now and perhaps the right coder might figure out a way to tokenize these assets and feed them into a real time exchange like the DEX proposal I made years ago.

If successful, that would allow people to sell properly-backed, trustless Fiat tokens, which would make the exchange flow as follows:

• Alice buys Crypto-USD tokens from anyone in places like OpenBazaar or LocalBitcoins. She can trust that someone will always buy them back for the same USD later. (Unless the backing company like Coinapult goes under.)
• Alice loads them into her P2P Exchange app, where they look and act exactly like USD in real-time exchanges with massive, global, borderless order books.
• Alice trades them to Bob for bitcoins for any cryptosecurity, in whatever quantity she wants.
• Bob 'cashes them out' back to real USD when he wants, at a place like OpenBazaar or Localbitcoins.

This appears totally do-able now with the financial products from Bitreserve, coinapult and Tether... And a lighthouse campaign could raise the funds to make such an exchange pretty easily, I'd think.

Now the question becomes: Is the process above too unwieldy for most people? Would fewer people want to put their trust in those three token-issuers than they do in the localbitcoins traders of today? In other words, is it simply too much to ask humans to trust crypto-fiat tokens to be as good as the real thing? (Especially since there is a little risk.)

I know that this topic is a bit out of date, but just in case you are still interested in a P2P Fiat-BTC exchange, I wanted to post an update of our project and announcement for our crowd funding campaign which will end in a few days (on February 9th).

Bitsquare released an alpha version in December and it can be tested at our regular testing sessions with other traders (testnet).
Today 17:00 CET we have such a session. Feel free to join us on our IRC channel #bitsquare-trading on Freenode.
Further information can be found here:
https://github.com/bitsquare/bitsquare/wiki/Bitsquare-WAN-Parties

Regarding the crowd funding campaign:
We are using Lighthouse as decentralized crowd funding solution to iteratively fund the development of every milestone, leading to a fully functional version 1.0.
The funding goal is 120 BTC for the next milestone and the campaign ends in a few days on February 9th. 
Please visit our web page for more details:
https://bitsquare.io/crowdfunding

If you like to support that project please help us to spread the word.

Best regards,
Manfred

The very existence of Bitcoin is based on the fact that it can't be stopped. All previous digital currencies, however much they were based on entirely honest and moral principles and processes, were attacked and shut down. The only processes in this financial area that are allowed to continue are - well, none - none are allowed to continue, it's just that some can't be prevented.

The more you try to move fiat into Bitcoin anonymously the more problems you will have. And I am not talking just technical or trust ones.

Which is why we (well some of us) are trying to make the process basically invisible. It will not be perfectly so, but we have to move in that direction. I like to call it "steganographic banking".


Nobody is trying to mix fiat into Bitcoin - the problem is that fiat exists, whereas for 99% of people today, Bitcoin does not.

Exactly.


A single escrow agent can be required to post collateral to a large M of N multisig, where the N are the whole set/pool of escrows. This is part of what I proposed in this post: https://bitcointalksearch.org/topic/m.4029782

No government will allow you to get fiat into Bitcoin anonymously, they will start cracking down on anyone doing these types of transactions very soon. Best idea for people is to start using Bitcoin itself, this is what Bitcoin was meant to be. People need to start offer their goods and services for Bitcoin. Any form of fiat is poison to the Bitcoin ecosystem. Bitcoin and fiat do not mix well and never will.

The more fiat gets mixed in with Bitcoin the more excuses governments will have to get involved, by cutting out fiat you are cutting the root of the problem.

Yes and no. We take our lead from Satoshi, who showed that there are two angles to attack the problem of trust: (1) replace trust with cryptographic proof (2) distribute and decentralize trust around a P2P network. (1) is the real game changer in bitcoin, and many people would say we can never get that with fiat.

But it is possible to partially get (1) with a kind of hack. Use existing cryptographic mechanisms within the legacy system, in particular use bank's own ssl certificates as proof of the validity of a receipt/invoice from them, without them ever knowing you've used it.

I'd also like an answer to that. As far as I'm aware, it's not possible in Bitcoin.

Those of us working on this issue of course are aiming at that goal. The question is how to get there. For many of us, it's inconvenient but fully achievable to transfer funds into Bitcoin. For many other people around the world, it is not easy at all. And more subtly, the existence of friction at the gateway into crypto greatly slows down the flow and gives the authorities opportunities to control us. So actually, in practice you're quite wrong: there is a fiat issue, and it needs to be solved.

You damn skippy.

You don't solve the fiat issue. You get rid of fiat altogether and you do not use it.

It's simple: We trust respectable banks such as JP Morgan, Goldman Sachs, DB to issue digital IOU-coins that are claims for US Dollar.
Bye bye mining and waste of energy and computing power.

it comes by having a plug in to the p2p so banks don't know their not sending to the p2p exchange, or receiving from

Instead of trust you can use a collateral and a game strategy where any inhonest behavior will lead to loss on both sides.

Here is my proposal for a solution:
https://bitcointalksearch.org/topic/bank-run-p2p-fiat-bitcoin-exchange-462236

That works in a trust-less environment without 3rd party escrows.

We're talking about decentralized exchanges, so the law will have to sit aside.

The issue is more having trusted escrow of the BTC using 2 of 3.

I think the solution is a web of trust, when someone has a large amount of trust they can be an escrow agent. But only for the BTC part of it, which uses 2 of 3 keys. This way he can't steal.

The only issue is what if I get a trusted account, and keep posting trades until I get myself as the agent.

This is not a technical problem, but a trust problem, you always need trust when doing trades, and a trusted third party is always needed to do the escrow. You can limit the trading amount each time to reduce the risk on your side, but the risk on escrow still exists

Can you describe that more in detail? I don't understand how that should work.

2-of-3 signatures required for a forward release, but only 1 of 3 required for reversal.

There should never, ever be an arbitrator involved. Any system that settles for arbitration existing at any step is being dangerously lazy.

Please read here:
https://bitcointalksearch.org/topic/m.2210078
and here:
https://bitcointalksearch.org/topic/m.2304618
and we would appreciate you and anyone else joining the discussion.