Is it time for transparent and probvably-not-fractional-reserve exchange? - page 2.

pening

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Quote from: CryptoPanda on February 27, 2014, 08:48:24 AM

Quote from: SnakeEater on February 27, 2014, 08:37:25 AM

http://blog.cryptsy.com/

Cryptsy is over full reserve exchange.

they all (supposedly) are, the question is how do they prove it so everyone can see for himself at any time

By using some sort of open, transparent system to see where the coins are. Like a public ledger...

I think the problem being asked here is valid but highlights a core problem with Bitcoin exchanges. They aren't. They are deposit accounts with exchange attached. Really you shouldn't be holding any coin on the exchange, you put up your bid/ask, make a trade then complete the transaction within a time limit, possibly off the exchange. Maybe a clearing house to track and followup on trades can back this up.

justusranvier

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Sure, I'll post the link again: http://bitcoinism.blogspot.com/2013/12/voting-pools-how-to-stop-plague-of.html

There are more low level details to it than that, but that should explain what's going on at a high level.

riekinho

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Quote

That's why I like FellowTraveler's voting pool approach.

Could you elaborate some more on what this is?

justusranvier

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Quote from: DannyHamilton on March 04, 2014, 01:42:38 PM

My suggested solution does very little to prevent theft and fraud. That is another matter entirely.

They don't have to be though. That's why I like FellowTraveler's voting pool approach.

I didn't really get it until he was able to explain it in person, but he's taking on the entire problem space. When voting pools launch it won't be possible for an exchange using them to fail to deliver the coins they owe their customers.

DannyHamilton

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Quote from: justusranvier on March 04, 2014, 01:38:11 PM

Three problems:

1) Exchange operators, including operators and employees, might steal your bitcoins.
2) Exchange operators might lose the private keys to your bitcoins.
3) External attackers might compromise the security of the site and steal your bitcoins.

Since 2010, by far the largest problems are 1 and 3.

2 is something hypothetical that aren't even sure even happened.

Why is everybody talking about solutions to 2, especially solutions that do absolutely nothing to stop 1 and 3 (the ones we know happen all the time?)

Certainly. My suggested solution does very little to prevent theft and fraud. That is another matter entirely.

What my suggested solution does do is make it much easier for users to determine if the exchange is engaging in fractional reserve of the user's bitcoin deposits, and limits a single user's ability to use social engineering to convince an exchange to send them someone else's bitcoins.

justusranvier

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Three problems:

1) Exchange operators, including operators and employees, might steal your bitcoins.
2) Exchange operators might lose the private keys to your bitcoins.
3) External attackers might compromise the security of the site and steal your bitcoins.

Since 2010, by far the largest problems are 1 and 3.

2 is something hypothetical that aren't even sure even happened.

Why is everybody talking about solutions to 2, especially solutions that do absolutely nothing to stop 1 and 3 (the ones we know happen all the time?)

DannyHamilton

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Activity: 3472

Merit: 4801

Quote from: CryptoPanda on February 27, 2014, 08:48:24 AM

Quote from: SnakeEater on February 27, 2014, 08:37:25 AM

http://blog.cryptsy.com/

Cryptsy is over full reserve exchange.

they all (supposedly) are, the question is how do they prove it so everyone can see for himself at any time

Give every user a unique set of funding addresses (all cold storage) where their bitcoins are stored. Then each user can see for themselves at the start of the day that their bitcoins are still at the address specified. Do not co-mingle users deposits in any shared address. On a regular basis (once per day?) reconcile bitcoin address balances converting the cold storage addresses to hot wallets and transferring the bitcoin balances to new cold storage addresses for each user. "Withdrawals" are handled at reconcile time, sending you your withdrawal directly from your cold wallet funding address (now a hot wallet), and any "change" back to the new cold wallet funding address.

Users pre-register a set of addresses they will withdraw to when they set up the account. Any change to any of these addresses requires manual communication with the account holder and waiting period (30 days?) before you can withdraw to the new updated address.

Your "account balance" page shows the current bitcoins associated with your account. Any pending debits and credits (as determined by trades placed, withdrawals requested, etc), and a "pending balance" indicating what the balance will be after reconciliation.

CryptoPanda

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bump for that

CryptoPanda

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Activity: 910

Merit: 302

Quote from: SnakeEater on February 27, 2014, 08:37:25 AM

http://blog.cryptsy.com/

Cryptsy is over full reserve exchange.

they all (supposedly) are, the question is how do they prove it so everyone can see for himself at any time

SnakeEater

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http://blog.cryptsy.com/

Cryptsy is over full reserve exchange.

CryptoPanda

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Activity: 910

Merit: 302

Recent news indicate that the major exchanges are into internal audits now or audit each other. They want to show they are not like mtgox.
That's great start. That's what conventional companies would do. But isn't bitcoin all about transparency and no need of trust?
In the bitcoin world if a gambling site isn't provably fair and transparent it doesn't stand much a chance.
Why it isn't the same in the exchange business?

Making an exchange transparent and probvably-not-fractional-reserve, will be somewhat harder, but I believe technically doable.
The idea of this thread is to brainstorm how this could be achieved and show the exchanges that the first to do it, will be greatly rewarded by the community. (hence the poll)

I suppose many people will try to drift the conversation about decentralized exchanges. Yes, that would be even better, but a bit more far ahead. So, lets focus on making the current ones transparent and provably-not-fractional-reserve.

Topic: Is it time for transparent and probvably-not-fractional-reserve exchange? - page 2. (Read 1690 times)