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A decentralized Bitcoin exchange

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Re: A decentralized Bitcoin exchange

#101

Post by ManfredKarrer »

lordnacho wrote: post #75
thinkloop wrote: post #60

Earlier quoted context omitted.

I believe the safety is in that you can't frequently issue chargebacks. Once, twice, but eventually the bank starts investigating. It's not a scalable scam.

But often they are using a stolen account, which is the whole reason why the bank is willing to issue the chargeback. If you can steal a lot of accounts, you don't care.

We have an open discussion about that topic and additional protection mechanisms which are planned for the next months here: https://forum.bisq.io/t/new-requirement-for-payment-accounts...

Some facts: We had about 4500 trades with 2500 BTC in one year and there have been only one charge back case with 300 USD (via ClearXchange). If we get more issues with charge backs on ClearXchange we will remove that payment method.

Re: A decentralized Bitcoin exchange

#102

Post by ManfredKarrer »

runeks wrote: post #67

The fundamental problem is that practically all exchanges are credit-based, and decentralized credit doesn't make sense. When you want to purchase bitcoins on an exchange, you start out by depositing e.g. dollars on the exchange, thus converting your dollars to that exchange's dollar token (IOU x USD). You then sell your dollar tokens for bitcoin tokens on the exchange, which is super fast because it centrally contro…

You define centralized exchanges as banks (as they are usually). A decentralized exchange has a different model. There is no credit and IOU conversion but a direct exchange of BTC to Fiat (or other altcoin). For escrowing the trade amount we use Bitcoins Multi-signature feature so the blockchain is the escrow. Here is a basic overview about the process: https://bisq.io/overview.png

Re: A decentralized Bitcoin exchange

#103

Post by ManfredKarrer »

oelmekki wrote: post #77
runeks wrote: post #67

The fundamental problem is that practically all exchanges are credit-based, and decentralized credit doesn't make sense. When you want to purchase bitcoins on an exchange, you start out by depositing e.g. dollars on the exchange, thus converting your dollars to that exchange's dollar token (IOU x USD). You then sell your dollar tokens for bitcoin tokens on the exchange, which is super fast because it centrally contro…

> When you want to purchase bitcoins on an exchange, you start out by depositing e.g. dollars on the exchange, thus converting your dollars to that exchange's dollar token (IOU x USD). You then sell your dollar tokens for bitcoin tokens on the exchange, which is super fast because it centrally controls token ownership, and when you want to get your bitcoins out you sell/redeem your BTC tokens for actual BTC. Wouldn't…

IOU exchanges are just postponing the real problem, that the gateway to the legacy system (Fiat). With gateways converting and issuing IOUs to Fiat you make the gateway to the actual exchange including all problems of trust and security.

Re: A decentralized Bitcoin exchange

#104

Post by ManfredKarrer »

Jaepa wrote: post #11

This is interesting, but I could see some possible issues. It would be fun to ask the Devs some questions. eg: if peers are able to select their arbitrators, how do you prevent a peer and & arbitrator from gaming the system. There is a secondary arbitrator but from the docs it looks like after the initial arbitration the funds are released. Is there a way to protect against root DHT node hijack? Only refernce I see t…

Yes the trader can select his arbitrator. The arbitration system got a conceptual change with the upcoming DAO and will be secured by locked up security deposit of the arbitrator as well as an introduction of a mediator who will cover most cases and who has no key to the 2of3 MS. See: https://docs.google.com/document/d/1DXEVEfk4x1qN6QgIcb2PjZwU...

Most arbitration cases are customer care cases and there have been actually no real dispute at all where the traders delivered conflicting statements. We use PageSigner/TLSNotary (https://tlsnotary.org/) for the case that traders have a real dispute. With that we can get a tamper evident proof if the bank transfer took place.

WE don't use a DHT but a custom P2P network based on a floodfill algorithm. All traffic is routed over Tor and each node is a hidden service.

Re: A decentralized Bitcoin exchange

#105

Post by giergirey »

zdkl wrote: post #96
giergirey wrote: post #91

Earlier quoted context omitted.

OK, suppose you want to sell Litecoins for USD cash in a bank account. Now, admittedly, it might be that today a one stop centralised exchange is the best choice for you. But by introducing intermediate Ethereum based tokens, you've broken down the task into three parts, potentally allowing more competition for each part: 1. finding someone willing to exchange your Litecoins for an Ethereum tethered-LTC token 2. find…

Thank you for taking the time to answer. Respectfully, I see no point in the mechanism you outline above. You're moving the icky cash-for-tokens risk source from the established coin markets to your private coin with no added benefit I can discern. If you already assume I as user don't trust the established exchange, what makes you confident that this setup with the added complexity alters any downside/risk/cost of t…

I agree you probably won't see much benefit if most of your transactions involve cash-in-a-bank-account or coins on non-Ethereum chains.

However, if:

- Ethereum continues to grow; and

- we continue to see more and more successful/useful coins/tokens built on top of Ethereum (especially if asset-backed ones are accepted as payment);

Then we're going to see a lot more coin-coin transactions that /can/ be done on-chain - at which point a smart contract exchange is attractive (no counterparty risk, no fees, no waiting weeks for document verification, no limits).

Right now today it's possible for me and you to trade millions of dollars worth of tokens such as WINGS, BAT, USD.DC, GNO with each other on https://etherdelta.github.io or https://oasisdex.com/ (and soon https://ubitok.io/) - without needing to get verified or sign up, and only needing to trust that the exchange smart contract behaves as claimed (well, and that we're interacting with the right contract!).

If you don't see smart contracts / decentralised apps working well here, are there any problems where you do see them as being a good solution? A distributed exchange always seemed to me like a bit of a poster child for smart contracts ...

Re: A decentralized Bitcoin exchange

#106

Post by zdkl »

giergirey wrote: post #105
zdkl wrote: post #96

Earlier quoted context omitted.

Thank you for taking the time to answer. Respectfully, I see no point in the mechanism you outline above. You're moving the icky cash-for-tokens risk source from the established coin markets to your private coin with no added benefit I can discern. If you already assume I as user don't trust the established exchange, what makes you confident that this setup with the added complexity alters any downside/risk/cost of t…

I agree you probably won't see much benefit if most of your transactions involve cash-in-a-bank-account or coins on non-Ethereum chains. However, if: - Ethereum continues to grow; and - we continue to see more and more successful/useful coins/tokens built on top of Ethereum (especially if asset-backed ones are accepted as payment); Then we're going to see a lot more coin-coin transactions that /can/ be done on-chain…

What I don't follow is why Ethereum is a good target to implement this type of program on. If you have the know-how to implement a bulletproof/trustable multi-token transaction clearing platform, why would you want to tie yourself to this platform?

The only advantage I see for smart contracts is that it would allow you to implement security-like mechanisms without regulatory burden associated with the SEC and other financial entities. Apart from this "new world" thing, in what concrete ways is using an etherium based exchange more advantageous for me-user than traditional financial organisms who must submit to oversight and scrutiny with safeguards in place to prevent hostile behaviour from my peers?

Re: A decentralized Bitcoin exchange

#107

Post by [deleted] »

giergirey wrote: post #105
zdkl wrote: post #96

Earlier quoted context omitted.

Thank you for taking the time to answer. Respectfully, I see no point in the mechanism you outline above. You're moving the icky cash-for-tokens risk source from the established coin markets to your private coin with no added benefit I can discern. If you already assume I as user don't trust the established exchange, what makes you confident that this setup with the added complexity alters any downside/risk/cost of t…

I agree you probably won't see much benefit if most of your transactions involve cash-in-a-bank-account or coins on non-Ethereum chains. However, if: - Ethereum continues to grow; and - we continue to see more and more successful/useful coins/tokens built on top of Ethereum (especially if asset-backed ones are accepted as payment); Then we're going to see a lot more coin-coin transactions that /can/ be done on-chain…

[deleted]

Re: A decentralized Bitcoin exchange

#108

Post by [deleted] »

giergirey wrote: post #105
zdkl wrote: post #96

Earlier quoted context omitted.

Thank you for taking the time to answer. Respectfully, I see no point in the mechanism you outline above. You're moving the icky cash-for-tokens risk source from the established coin markets to your private coin with no added benefit I can discern. If you already assume I as user don't trust the established exchange, what makes you confident that this setup with the added complexity alters any downside/risk/cost of t…

I agree you probably won't see much benefit if most of your transactions involve cash-in-a-bank-account or coins on non-Ethereum chains. However, if: - Ethereum continues to grow; and - we continue to see more and more successful/useful coins/tokens built on top of Ethereum (especially if asset-backed ones are accepted as payment); Then we're going to see a lot more coin-coin transactions that /can/ be done on-chain…

[deleted]

Re: A decentralized Bitcoin exchange

#109

Post by ManfredKarrer »

oelmekki wrote: post #78
Jaepa wrote: post #11

This is interesting, but I could see some possible issues. It would be fun to ask the Devs some questions. eg: if peers are able to select their arbitrators, how do you prevent a peer and & arbitrator from gaming the system. There is a secondary arbitrator but from the docs it looks like after the initial arbitration the funds are released. Is there a way to protect against root DHT node hijack? Only refernce I see t…

> if peers are able to select their arbitrators, how do you prevent a peer and & arbitrator from gaming the system Actually, it doesn't even need a criminal association : what if arbitrator is malicious? FAQ answers both our questions : https://bisq.io/faq/#8 and https://bisq.io/faq/#10 The defense mechanism chosen is to make arbitrators pay a high registration fee, so that it would supposedly cost them more to trick…

Good questions: See the new concept for securing the arbitration system by the DAO tokens: https://docs.google.com/document/d/1DXEVEfk4x1qN6QgIcb2PjZwU...

In short: The arbitrator will have to lockup a high amount of BSQ (DAO tokens)and in case he would default that deposit can get confiscated by voting. He also is limited to do not more than 20 cases.

Re: A decentralized Bitcoin exchange

#110

Post by ManfredKarrer »

Uptrenda wrote: post #40
tgb wrote: post #37

Earlier quoted context omitted.

Thanks for the summary. Just to make it clear, if either party refuses to sign the escrow release, then neither of them gets the escrow-ed funds? If so, then doesn't that mean that I lose out on 2X money when the other party fails to pay me X (I send them X and I lose X or more from the escrow)? If not, then doesn't that mean that a "troll" can refuse to sign after a trade just to screw me out of X? Or am I missing s…

This is the same problem that BitHalo has (in my opinion.) But the escrow step for Bitsquare is done with multiple third-party mediators instead of between the users. This has problems of its own because now you have to trust that the mediators are going to act honestly (and pseudo-anonymous reputation systems don't reveal what prior relationships might exist between actors.) I guess the assumption here is that reput…

At the moment I (the founder) is the only arbitrator as the project has not implemented the fully decentralized arbitration system. We recently changed the concept how to get there with using a high security deposit in BSQ tokens (DAO tokens) which the arbitrator need to lock up. In case he would cheat he would risk that his deposit get confiscated by voting of the DAO stakeholders. There will be also introduced mediators who don't have the 3rd key, and who are handling the big majority of cases (customer care, there have been basically no real disputes so far). See https://docs.google.com/document/d/1DXEVEfk4x1qN6QgIcb2PjZwU... for more details...

We did not had time to update all the information on the web page and older documents to reflect the new concept.

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