Topic: Yet another Decentralized Exchange Topic - page 2. (Read 2471 times)
Following on from the 'colored coins' idea, where we represent some subset of Bitcoin as having special value, what about ...
1) Bob sends $10k to MtBox
2) Bob creates a Bitcoin wallet
3) When satisfied, MtBox sends a symbolic and tiny amount of Bitcoin to Bob's address. This symbolic quantity of Bitcoin will represent a specific USD amount.
Bob can then send a certain quantity of his colored Bitcoin to a seller for 'real' bitcoin.
4) The seller can send the received colored Bitcoin back to MtBox.
5) MtBox checks the transaction history of the coin, ensuring that it is indeed of the MtBox color
6) MtBox calculates the appropriate USD amount and credits it to the Seller's account.
Anyone could act as a colored coins provider (though legal issues may arise). It would be up to the market to decide which providers to trust or not. We would see differing exchange rates between say MtBoxUSD/Bitcoin and say ZhouTongUSD/Bitcoin, according to the risk factor!
- MtBox maintains a special Bitcoin address, any coins that originate from this address are considered special.
- Anyone can see if a coin is of the MtBox colour and ascertain its true USD value.
1) Bob sends $10k to MtBox
2) Bob creates a Bitcoin wallet
3) When satisfied, MtBox sends a symbolic and tiny amount of Bitcoin to Bob's address. This symbolic quantity of Bitcoin will represent a specific USD amount.
Bob can then send a certain quantity of his colored Bitcoin to a seller for 'real' bitcoin.
4) The seller can send the received colored Bitcoin back to MtBox.
5) MtBox checks the transaction history of the coin, ensuring that it is indeed of the MtBox color
6) MtBox calculates the appropriate USD amount and credits it to the Seller's account.
Anyone could act as a colored coins provider (though legal issues may arise). It would be up to the market to decide which providers to trust or not. We would see differing exchange rates between say MtBoxUSD/Bitcoin and say ZhouTongUSD/Bitcoin, according to the risk factor!
Even with the current system, MTGox is the focal point for a lot of price indicators.
With a totally decentralised exchange, that price indicator would be a single number, which would also make the price stronger - think of it like the effect ebay has on second hand goods, where it eliminates local differences in price, and ensures everyone pays the highest market price.
It would protect bitcoin from the kind of dirty tricks that can only escalate if nothing is done now - although I can't see MTGox being very supportive of this idea!
With a totally decentralised exchange, that price indicator would be a single number, which would also make the price stronger - think of it like the effect ebay has on second hand goods, where it eliminates local differences in price, and ensures everyone pays the highest market price.
It would protect bitcoin from the kind of dirty tricks that can only escalate if nothing is done now - although I can't see MTGox being very supportive of this idea!
Yeah there are an increasing number of exchanges - we have mtGox, bitstamp, bitcoin-central, bitcoin.de ... - but it is still limited in number.
A motivated group of people can still fairly easily take down all of them down with a DDOS attack, or failure can happen naturally when panic sets in, overloading the exchanges.
If we had a true decentralised manner to perform the buying and selling agreements, this would be close to impossible to shut down.
Only the clearing of 'contracts' into fiat, which does not have the same real-time requirement, would need to happen over the centralised infrastructures.
A motivated group of people can still fairly easily take down all of them down with a DDOS attack, or failure can happen naturally when panic sets in, overloading the exchanges.
If we had a true decentralised manner to perform the buying and selling agreements, this would be close to impossible to shut down.
Only the clearing of 'contracts' into fiat, which does not have the same real-time requirement, would need to happen over the centralised infrastructures.
How does the price discovery happen in (different from now) decentralized way? It is already decentralized. We have already a lot of exchanges around the world. People just have to stop using MtGox and switch to alternatives. That simple it is.
I guess having Colored Coins would be ideal - no need to have a separate MtBox alt-coin blockchain.
Depositor can just withdraw a miniscule amount of Bitcoin from his clearing house, but where MtBox adds 'colour', to specify its real USD value, along with a cryptographic signature to prevent forgeries.
Depositor can just withdraw a miniscule amount of Bitcoin from his clearing house, but where MtBox adds 'colour', to specify its real USD value, along with a cryptographic signature to prevent forgeries.
Apologies if this has already been brought up a million times.
TLDR;
We need a decentralised mechanism for buying and selling Bitcoin
Why is it hard?
Is there not some way to separate out two distinct problems involved. i.e.
For example:
1) Bob chooses from a list of USD clearing houses and decides to use MtBox.
2) He creates an account and does all the AML verification stuff to become authorized.
3) He transfers $10k to MtBox's account.
4) Depending on his account level, MtBox can issue Bob with a number of cryptographic tokens that act as Dollar promises.
5) Now he has amassed say $2k in MtBox coins he can go ahead and place trades on the P2P decentralized marketplace. Seller can chose to accept whichever Alt-coins he wants in exchange for Bitcoin.
TLDR;
- A degree of centralization is needed when dealing with large quantities of fiat currency
- Mitigate this by making the centralized institutions perform only the simplest possible task
- Price discovery / market place, occurs in a decentralized fashion - in realtime
We need a decentralised mechanism for buying and selling Bitcoin
- After last night, I don't think I need to justify our need for this!
Why is it hard?
- Because we need to deal with fiat currencies over existing banking infrastructure
- Customers' dollars need to be handed over to the control of the exchange engine
- This pretty much requires centralization to be trusted/efficient/legal
Is there not some way to separate out two distinct problems involved. i.e.
- A) Having an efficient medium of communication for allowing a buyer to commit to a contract with a seller to buy X bitcoins for Y dollars
- B) Having a fiat currency escrow service. A clearing house.
For example:
1) Bob chooses from a list of USD clearing houses and decides to use MtBox.
2) He creates an account and does all the AML verification stuff to become authorized.
3) He transfers $10k to MtBox's account.
4) Depending on his account level, MtBox can issue Bob with a number of cryptographic tokens that act as Dollar promises.
- i.e. Just like MtGox redeem codes, but which are protected in a similar fashion to Bitcoin against double spends
- or an Alt-coin, backed by an institution, here they are backed by MtBox
5) Now he has amassed say $2k in MtBox coins he can go ahead and place trades on the P2P decentralized marketplace. Seller can chose to accept whichever Alt-coins he wants in exchange for Bitcoin.
- P2P marketplace is 100% dealing with cryptocoins
- Thus far easier to make super resilient and can easily cope with DDOS attacks/large trading volumes
- The spending of MtBox coins is like Bitcoin non-refundable, so sellers can trust it.
- The MtBox coins can be tied to the identity of the depositor, to satisfy AML regulations - the clearing house can see the source & destination of fiat currency
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