Topic: On a decentralized bitcoin-based stock market... (Read 9654 times)

People are totally ignoring the massive elephant in the room and the reason glbse was shut down.

Sure you can have a stock exchange as decentralized as you want but how the fuck do you get past the fact a company needs a physical prescence and can be shut down on a whim by government decree or threats ? The problem gentlemen is one of geography.

Companies are beholden to government which can jail the operators, fine them or simply confiscate their equipment if they dont have the correct "licenses". How will a decentralized stock market work when all the companies cant function in the real world ?

Its hard to operate a company when you are in jail for breaking securities laws.

tl;dr they wont bother taking down the stock exchange they will go after the issuers.

I still see the "shares aren't currencies" argument as irrelevant for the technical implementation.

In any case, to avoid the "non enforceable orders" you need binding advertisements (with an expiry block) and for that you definitely need to modify the protocol. If we did, I would also prefer to implement ripplecoin instead of just using colored coins: more divisibility for non hostcoin assets, not needing to move satoshis around.
At that point you probably also want more divisibility for both the hostcoin and the other assets.
And of course the hostcoin, being cash (a scarce money) should have demurrage.

Absolutely not. That's more or less like saying a computer is worth what you could get by melting it and selling it as scrap metal.

The worth of a company is not the sum of the resell value of its physical assets. It is a reflection of how much profit it is expected to achieve with its combination of people, IP, customer base and physical assets. You can't take any of these away without making the company something completely different which is no longer profitable, and thus no longer valuable.

Since nobody knows how much profit a company will make, everyone has a different evaluation and a market can extract an aggregate valuation. It is still the case that for a liquid market, the most reliable indicator of value is the market price, from which each individual can adjust based on his own analysis.

The difference is whether they represent value, or represent a real thing which possibly might be amenable to being assigned a value.

We know a dollar is worth a dollar, we know a satoshi is worth a satoshi, we know a bitcoin is worth a bitcoin.

What we don't necessarily know is what a company is worth, at least not until we know how many satoshis it owns how many dollars it owns how many bitcoins it owns, and how many satoshis, dollars and bitcoins we can get from a salvage company for its chattels / buildings / inventory / etc.

-MarkM-

For trading purposes I don't see any technical difference. It doesn't matter if satoshis represent usd, shares, bonds, basket-currencies, IOUs or smart property.

Bitcoins and dollars are not stocks/shares. So a stock market is different from a currency exchange.

If I want to know the value of a company that owns 1000 dollars, 1000 bitcoins, 1000 devcoins, 1000 i0coins, and 1000 ixcoins then I know right off the bat that is is worth that basket of purses of currency. If it also owns some land, a few buildings, some furniture, and a million widgets, then I still do not need to know how much shares in the company last sold for nor how much people are offering for the company in order to evaluate how much I think that land, thouse buildings and those widgets add to its value.

So basically a company is a basket, and I can evaluate the contents of it and apply my own situation, since some people looking to buy the whole company might be mostly after the widgets and not be much good at finding good prices for land and buiildings or not have time to dispose of them at a goood price thus be forced to sell them quick at firesale prices, and other people looking to buy the whole company might be very interested in that land and those buildings for some long term plan but have no interest in widgets.

So the whole thing is likely to be of wildly different value to different people, whereas each of the components inside it might have some ideal disposal method or market whereby the best possible price could be gotten for it. So someone expert at breaking up companies into saleable pieces might have yet another value the company is worth to them.

I think if we have excellent details of precisely what assets the so called company actually consists of and most of those things have markets, whether scrapyards or pawnshops or secondhand stores or whatever, we can likely get a better view of how much it is really worth than if we believe the hype of all the fans who think it is special in and of itself quite regardless of whether it owns two dimes to rub together, simply because it is so cool or it was founded upon a clever idea, or because if its manager doesn't get headhunted it, rather than whatever company headhunts that manager, should be able to turn a profit this coming year...

Obviously for bitcoins we do not know how much "reserves" "it" has with which to back itself - how many assets it owns - so we cannot take that approach. But with companies we specifically do want to know how much we could get for its assets if we liquidated it don't we?

-MarkM-

There are two different questions:

1) Binding advertisements

2) Public knowledge of exchange rates

Markm claims that 1 isn't really that important and I agree. Although it could be useful for some cases, it would require to modify the bitcoin core protocol.

About 2...I think it's easy to do.
Say the asset being trade for btc is mtgoxUSD. All the mtgoxUSD issued as satoshis would be issued with the same address, publicly known to all buyers. Buyers only need to identify themselves for redeeming their mtgoxUSD for usd. So all the trades are published in the chain.

The problem is, as you say, that you can always trade with yourself at crazy prices, but if the requirements are anonymity and p2p, there's no way around this. We must learn to ignore random trades at ridiculous prices.

So 2 is simple but at the same time, impossible.

Knowing the going rate of something is essential to deriving your own valuation for it, and for liquid assets the personal valuation is the going rate - plus or minus epsilon to account for friction and personal needs and beliefs.

If I meet you and offer you 1000 bitcoins in exchange for $X, how low will X need to be for you to accept (giving you some time to complete the payment)? I doubt the answer is much different from $12150 (to within ~10%), where $12.15 is the Mtgox last traded price. Because you know that even if you have no need for bitcoins, you could sell them for ~$12150 on the open market (and that if you needed bitcoins and I didn't come to offer them, you could buy them for ~$12150).

So public knowledge of exchange rates is important. And actually traded rates aren't reliable because someone can trade with himself to manipulate price. Only a committing public offer can serve as an indication of the market rate and depth.

Listening to hype about price/value is silly reagrdless of whether hypers are allowed to shout/spam or have to be more subtle.

I spoke of umpteen in progress constructions of atomic transactions precisely because I suspect the vast majority will never happen. So you start taking up everyone on every offer that is not according to your own personal valuation based on actual need a "within reason" or "within budget" offer. and keep doing so on autopilot 24/7 until by some miracle a complete fully valid atomic transaction within your budget does manage to get completed, whereupon you submit it immediately to every large mining pool you know of in hopes it will actually get mined before the other party backs out.

Reputation could be added of course, like aha, there is that famous "green address" that has never backed out of the construction process, I'll prioritise constructing a deal with them!

But listening to purported prices? Whatever happened to the value of a thing to you is its value to you?

I way to actually send messages might help, so you can try to get in actual touch with folk who haven't been seen to back out.

Maybe a newsgroup where you put a bitcoin address as title of a post and anyone who sees one of their addresses in such a title knows its a message aimed at them?

-MarkM-

I'm not sure we're talking about the same thing. As I explained several times, making sure nobody runs away with the money is not a problem, that's easily solvable with both transfers being in the same transaction. I'm talking about manipulating the price by broadcasting orders you have no intention to execute, backing out when a 2nd party wants to take you on your offer.

That should be enough IMO.


We mean this, not currently possible (nLockTime and tx replacements are disabled).


For the all assets in one chain case (possible right now, that's what pybond tries to do), the transaction must be constructed carefully to take the colours into account, but nothing special is required for the signatures, just the default SIGHASH_ALL and all parties involved signing. If anyone moves its coins before the transaction gets into the block it is canceled no matter if all the signatures have been added or not.

Well it's hard to discuss this when we're not sure what the cross-chain system will look like.

But at the basic level, once everything is said and done every party will need to sign the constructed transaction. If he can back away on this last step all the preceding steps aren't committing.

This can be resolved if a signature is provided beforehand with a script saying this is valid as long as anyone pays quantity X of Y to Z. Maybe it's possible but it will surely be complicated (even if it's within the same blockchain, the script will have to recognize the color of coins).

Re Meni's concerns about commited offers and cancelling offers:

Cannot people who want to offer some bitcoins for, say, some litecoins use the cross-chain atomic trades system?

Or, if offering some blue satoshis for some red satoshis, use the in-chain atomic colour-trade system?

Both systems take a few steps, don't they? Until all the steps are complete the transaction the two (or potentially more?) parties are constructing cannot be mined into a block, right?

So one could have countless numbers of partially constructed atomic trades in progress at any particular moment, constantly optimising/prioritising how many steps toward completion/finalisation against how good a deal any particular atomic trade currently being constructed would be compared to others if it does end up being the one that gets finalised.

Cancelling is, surely, simply a matter of spending out from under it the outputs it is secifying as its inputs, so if someone does not finalise an atomic trade sooner than you spend out from under it the coins it planned to use as its input tough, it is invalidated thus in effect cancelled?

-MarkM-

Maybe some of the thread subscribers are interested in pybond, a project by jgarzik that can solve this problem. Some related threads:

https://bitcointalksearch.org/topic/distributed-bond-markets-and-pay-to-policy-outputs-92421
https://bitcointalksearch.org/topic/atomic-coin-swapping-112007
https://bitcointalksearch.org/topic/chromawallet-colored-coins-issue-and-trade-private-currenciesstocksbonds-106373
https://bitcointalksearch.org/topic/colored-bitcoin-tech-discussion-106449
https://bitcointalksearch.org/topic/order-based-coin-coloring-114571

Heh. Well, live and learn.

So far, yes. That is why GMC and GRF chains have been kept private, and now actually might even get abstracted away completely in favour of simply trading in Open Transactions some tokens representing such coins. The actual chain with the actual coins is starting to look like it can simply go away as not really being needed. Though if at some time such a chain does seem useful it can be created from scratch and the tokens in the Open Transactions system can be used to determine how many initial "coins" to issue initially to who.

Similarly with a number of other private blockchains; it is starting to look as if the actual chains can be ignored in favour of working directly with the Open Transactions tokens representing the values that would/could be represented in such chains.

If/when actual chains can be deployed without worry about 51% attacks, fine, that can be done. Meanwhile trading can proceed without waiting for the actual deployment of such a chain and such chains might even end up never actually being needed.

-MarkM-

Open Transactions uses cryptography to sign everything, maybe just publishing transactions can suffice?

Anyone interested could keep histories, even though Open Transactions uses triple-signed receipts to avoid actually needing to keep transaction histories. (The receipt, signed by the two parties to the transaction and the server that executed it, serves as "proof" both parties and the notary server all agreed as to the balance, making the history of how that balance was arrived at moot/irrelevant.)

Since we depend on the issuer anyway - the company of which shares are issued - they could simply run a server themselves. They need not though, as any other server can allow them to do an issue. Either way there is their signed contract describing the issue, and triple-signed transactions whenever any units of the issue change ownership.

Ultimately we probably don't really care much how many people or entities who can do nothing in the way of actually grabbing for us some portion of the real assets of a company we have shares in think we have such shares. It is those who can actually give us something real when the company dies that need to know how much of the assets should be shipped to us or sold for something that is shipped/transferred to us.

But if all the transactions get published, so that the issuer and anyone else can see a server never issued any more than the actual issuer of the contract ordered them to, does it really matter what kind of storage or database various observers choose to use to store that info?

If a company's only assets are to be p2p assets though, such as holdings of various alt coins for example, then possibly it might make sense to try to run the whole company as a p2p application. As soon as you want it to hold non p2p assets though, there is centralisation, in that the value of each such asset is probably centralised at the location of that asset and/or the legal/de-facto ownership/control of that asset.

("Smart assets" can help with that though so maybe we should work on developing those while at it.)

-MarkM-

@markm
But what's wrong with having various types shares within the same chain?

Remember that even with merged mining miners need an incentive to secure the chain. Are the fees for trading a single company going to be enough to secure a chain?

If merged mining can work with arbitrary numbers of blockchains, maybe shares could be issued simply by starting a new chain that issues that many units in its genesis block? The issuing ocmpany would own those, and ownership can spread from there by normal operations of changing ownership on blockchains.

There are already supposedly methods one can use to lock in change of ownership on one chain so a change of ownership of something on another chain has to happen too.

Basically each type of share would be another alt currency, like the GMC (General Mining Corp) and GRF (General Retirement Funds) chains.

-MarkM-

Well technically AFAIK when shares are issued and traded on the markets more than one organisation knows who owns the shares, including the company for who they are issued from. Are paper shares still given out anymore?