Topic: Method for decentralized crypto-exchange (Not Ripple!) - page 2. (Read 1576 times)

Agreed. I have no interest in fiat exchanging here. This is just a crypto-exchange network.

I've noticed that when people start to mine new altcoins, they quickly gain their value relative to bitcoin, based on the amount of mining power put into their creation... ie. if it takes so much mining power to create $80/hr in bitcoin, then however many of the altcoin you can mine in an hour with that power, ends up being priced also at around $80 on the exchanges. In this way, this particular innovative coin, basecoin, would quickly be priced relative to other crypto currencies through mining, and then it would be come the defacto way to exchange and price crypto.

This would definitely work! However, it cannot be used to exchange fiat through - only decentralized cryptocurrencies.

There is also the issue of figuring out double spends. For this to succeed, you'll need to build a light node that connects to multiple ports, support for multiple network magic numbers, etc. Cryptocurrencies would be associated with their magic numbers.

I believe I've come up with a simple, elegant method to achieve a decentralized crypto exchange that does not require anyone's trust for anyone else. I call it basecoin.

Basecoins are not something you can spend directly.

Basecoins, you can only hold, and you can submit offers to the network for the number of basecoins you are willing to trade for another crypto-currency.

How this works:

1. You link a crypto-currency address (such as bitcoin)  to a basecoin address (you sign this transaction to prove you own the basecoin address). There is no need to prove to the network that you own that crypto address at this stage (when you make an exchange, your sending of payment proves this).

2. You submit an offer to the network. ie. willing to spend so many of your crypto for certain amount of basecoin.

3. Other people, who have applicable crypto address linked to their basecoin address on network submit an offer for wanting your type of crypto for their basecoin, which they must already possess in the quantity they need to fulfill the transaction.

4. network determines what crypto-address you send the crypto coins to and in what amounts. When network determines your crypto is received by those recipient addresses, network automatically deducts the basecoin in appropriate amounts from those addresses and associates it with your basecoin address.

In this way, the only way to move your basecoin around the decentralized network, is by spending some alternative crypto currency that others want.

The lure to owning basecoin, is that it allows you to submit an offer in order to obtain any crypto-currency of your choice.

The basecoin itself could be mined like any crypto-coin in order to circulate it.

What do you think? See any flaws with this? It seems so simple, but so powerful, because it allows the basecoin network to establish relative prices for all the crypto-coins in existence in a decentralized way, as well as allowing people to exchange them in a decentralized way.