Topic: p2p securities exchange. Now being developed (again) (Read 4248 times)

You already are not restricted to one exchange. You can issue on any servers that will let people issue assets. YOu can run umpteen servers yourself distributed all over the world. Shares inherently have centralisation in their issuer so there is no point using a blockchain except possibly in a case where you are timestamping documents by means of a blockchain. There are other timestamp services out there though so even for timestamps maybe a blockchain is not really important. You could put a classified ad in newspapers around the world for example with hash of change of ownership document of a share.

The only time when a blockchain makes sense for shares is in cases such as bitcoin, litecoin, devcoin and so on: cases where the "company" is itself a distributed entity and the "issuing" is also distributed, each miner being an issuer of shares. It is actualyl a miracle that such shares are worth anything considering most of those "issuers" are not actually intended to "back" the coins, merely to "dump" them for fiat...

-MarkM-

To IPO a company could create a genesis block specifying how many coinshares they are releasing. All of those coins might be in the first block which the company then sells off on any exchange or otc. Of course they need to be merge mineable with a master chain.

In this way you can move your shares wherever you want and arent restricted to one exchange.

I agree that blockchain currencies are pretty much shares, albeit highly divisible shares. This is leveraged in my system as a means of computing the worth of the coins, since it is feasible in the case of certain coins to add up the assets of the issuer and divide them by the number of coins to determine the value of the "coins aka shares". It is probably this, in fact, that accounts for the huge values such coins have achieved as compared to various coins that lack a specific "backer" / "issuer".

Voting and dividends are, again, centralised things. Votes go to the central issuer, dividends issue from the central issuer. So no problem doing those on the issuer's Open Transactions server. The dividends can even then be withdrawn as blinded cash tokens, though what those tokens would be backed by I do not know. More shares? Does it make sense to issue dividends in the form of more shares?

I am against dividends anyway myself. They let people monopolise while still getting passive income. I prefer that anyone who wants to extract money have to sell shares to do so, to help encourage liquidity instead of having all shares snapped up at IPO then never traded thereafter.

-MarkM-

There is another idea that would go part-way toward p2p trading of shares, and that is to enable the blinded cash system - the mint - for assets whose type is shares.

Right now I have only created mints for the assets that are considered a type of currency rather than being shares.

However I believe that the only thing stopping people from withdrawing untraceable blinded cash form of shares is simply the fact I have not created mints for assets of that type.

Given blinded token form for shares, people can trade them person to person all they wish. When someone eventually deposits a share, the server cannot tell which share it was. This assumes some volume of course; obviously if only one person ever withdrew a share in cash form the share being deposited cannot be any other one than that one. But if lots of people withdraw them as cash tokens, there is no tellng when one is deposited whose withdrawal that deposit corresponds to.

Since shares have in any case to be centralised as to their issuer, this seems like it should work fine. The issuer runs an Open Transactions server, issues the shares as cash tokens, and people can p2p them all they want by person to person exchanging the cash tokens.

-MarkM-

Bitcoin is basically 21 million "shares" and the network  monitors who owns what. Dont know how you would use it to pay dividends and other things though

Maybe the blockchain is only really needed for proving which transfer of a given share is the most recent, and thus currently valid, one?

I could sign over a share ownership ceritificate to someone else, publish the hash of the new signed certificate, and wait for that hsh to be sufficiently deep in the blockchain. Any certificates purporting to sign over the same share to someone else would then be invalid, as the next one to be valid in the blockchain would have to be the one I just signed, signed over in turn by the person I signed it over to to someone else.

We could either have some kind of p2p protocol by which these actual certificates are published, or they could be published to a usenet group for a public record, and some backup harder to find to shut down means like maybe private/secret usenet networks, p2p filesharing networks (freenet for example) etc.

-MarkM-

Why would it?

Does the newly implemented BIP 16 help with this project? https://en.bitcoin.it/wiki/BIP_0016

That's the same problem as with a GPG (or PGP? I always mix these up) web of trust.

I can trust a signature of a friend of mine to be actually from my friend. If I "trust" him however, it means I trust that his capability to verify OTHERS is as high as mine.

Yes, you could do a web of trust, like with bitcoin-otc, still a few certain elements of centralization would have some serious benefits. These don't even have to be offered by the exchange itself, something like "official verification agents" could also work. It would need some serious time and effort however to become a worldwide trusted verification agent in the bitcoin world I fear... atm I trust GLBSE more than someone in god-knows-where who runs a verification service next to his day job as pig farmer.

I thin glbse was going to look into OT to allow people to use their existing shares/bonds as collateral for loans etc. Therefore any stock exchange asset could be portable as long as there is a federation of servers using OT. I guess you could also issue your own currency backed by the shares you hold in glbse or any other exchange ?

In open transactions you don't need to trust the server, and in fact you can have many servers, making it p2p in a fashion. You DO need to trust the issuer of the bond/share, but that is of course a fact no matter how you do it. So although the ppl behind "company" or project or whatever you invest in might still take the money and run, or default or go bankrupt or just stop doing business - the exchange or server won't be able to, as they can't change a users balance with OT.

bitcoin-otc wot would work. Its basically a p2p exchange already.

FREE MARKET FTW!

Keep up the good work.

Could you implement p2p verification? That's sort of what Goat did with GLBSE, Goat sent ID to Kluge and Kluge sent his to Nef.

You could do a similar thing decentralising the verification process and display that on the exchange. A is verified by B is verified by C. If D trusts C, then he has some trust in B's verification of A.

It's not infallible, but if you work in with the otc WOT, then you can bootstrap an existing trust network.

How do you verify asset owners under a p2p securities exchange / share market ? I remember when glbse first started people would create scam assets so nefario introduced the verification process.

Honest question Goat 

Why not both

I would suggest forgetting a stock exchange mainly because you will get limited volume, and  instead focus on developing a p2p sports betting exchange where the volumes could become tremendous. Here is a snap shot of betfairs market for the Barcelona-Chelsea game minutes before kickoff. Note at the top we can see more than 20million had be traded already, and on the bottom left a single bet placed on Barca for a cool 900k.

I also think that OT is the way to go. Even as much as I like decentralization and p2p, I believe that the proposed solution would suffer all kind of performance and scalability issues besides adding unmanageable extra complexity. The federated solution of OT addresses the problem of decreasing the trust needed in the centralized servers by implementing a partial decentralization in a satisfactory way. I already recommended it to Kluge for Hermes, and I believe that you have to consider it too. If every trading platform has its own OT implementation, sharing the same assets, the net result would be a effective decentralization of trust without extra complexity, minimizing performance issues and maximizing liquidity.

What would be great is a mixed node/client. One that supports all of the chains. This would greatly increase liquidity in all assets.

Yes using traditional exchanges, from what I know. Is there something that fully decentralizes the system?

Doesn't open transactions have much of what's needed for this already?
For holding the securities at least, not the bidding / trading part.

I think some community support is possible, but many people easily control ~25-50 GH, and getting enough miners to kick 25-50 GH (enough to prevent a 51% by the former) towards an asset's chain for no tangible reward seems unlikely, especially when assets start to crop up in large numbers.

The concept of a master alt coin seems much more viable in the sense of less susceptibility, but less viable in the sense that the whole exchange would be reliant upon it. (To say nothing of the technical difficulties.) I just can't see enough trade fees to support ~250 GH of miners, which is IMO around the minimum needed for bare minimum protection from a 51%. Maybe after a long time in operation and a significant expansion in the number of Bitcoins invested, but certainly not at the start.

For example, about 100k BTC have been invested into GLBSE in the last month. (No, this isn't a calculated number, just an estimate, pinpoint precision isn't important here.) If we assume a similar volume, at a trade fee of 0.5% (excessive), that would mean 500 BTC a month, for the whole chain, which would translate to a little under 30 GH/s with equivalent profits to direct Bitcoin mining.

30 GH/s is extremely 51%-able. (Interestingly, spell-check doesn't consider that incorrect. Google Chrome coder = Satoshi? )
I don't think people would feel comfortable investing with that level of vulnerability.

Again, I know I sound very negative, don't take it too harshly. I really want this to succeed, and would be glad to do whatever I can to make it possible. It's just important to have these discussions now, rather than after a catastrophe occurs.

So each asset issued would require its own blockchain? Trade fees won't be enough to bring too many miners in. Someone could easily 51% the alt-chain and invalidate/steal the asset.

Not trying to play devil's advocate, just pointing out a possible problem.

Sub. Glad to see this up and running again.

Oooh, trade fees supporting mining of the share blockchain. Me likey.

If you have a central authority, you don't need that much security... The real masterpiece would be to have no authorities besides asset issuers at all - and these should not be allowed to manipulate anything beyond submitting their new sharechain.

Miners could be paid from Bitcoins, I think I already saw some concepts about P2P exchanges between Bitcoin-style currencies (like Namecoins <--> Bitcoins).

All in all I hope you think this through a LOT and get a lot of feedback on that - this is a task that requires more than just an idea and a coder, it requires answering some serious design questions.

As discussed on irc, it sounded like a premined blockchain for each security, and then merged-mining of all the blockchains.

It's not clear to me how scalable this is as initially stated, but surely the technical hurdles can be crossed.

If higher frequency trading is to be supported, perhaps something similar to the p2pool sharechain can be used for

Not the least interesting aspect of this is the necessity of mining the many blockchains. I'm curious how this will work, and how it is miners might derive operating income from such an activity. (one would think from mining shares of the underlying security or something)

If you can make this completely decentralized, I will be very impressed and excited to create the first p2p mining contract!

Best of luck!

High frequency trading is anyways not really useful - the extra liquidity it provides only is provided during relatively calm phases - any smart bot will take a step back once the market starts to jump weirdly.

I personally would be perfectly fine, if trades are not even able to be executed at extremely high frequencies in Bitcoin stock exchanges. Take a look at algo trading and what kind of weird "businesses" this produces - there is no real need for that anyways in my opinion.

Don't know about Goat's, but I had my own ideas about using the Bitcoin network as the notary, with real Bitcoin transactions, so I'm confident it can be accomplished. On the other hand, I don't have any clue on how it could be made robust.

I think some people actually worked on this before. For instance, this one is a pretty mature design: https://bitcointalksearch.org/topic/rfc-distributed-bitcoin-stock-exchange-dbse-54033

It all seems to boil down to the difficulties in making high frequency trading possible.

Is this intended as a merged-mining chain, or fully independent?

Blockchain based stock exchanges are actually something I find very interesting!

Will it work completely without central authorities (that for example take BTC deposits) or black-box exchanges (for trading BTC to "stockcoins")?

Excellent news. Will you be releasing the code under an open source licence ? I would require this in order to run any node of such an exchange - same as the Bitcoin client itself.

I was in a p2p kick a while ago and started a p2p stock exchange based on using alt coins as representations for stocks.

I would like to state this is back in development. Since the details have been posted on IRC I will make this post here. More information soon.

Thank you.