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A decentralized Bitcoin exchange

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Re: A decentralized Bitcoin exchange

#91

Post by giergirey »

zdkl wrote: post #89
giergirey wrote: post #87

Earlier quoted context omitted.

Yes, I also think exchanging tokens is one of the (few?) situations where a smart contract really is a great solution to a real world problem (as opposed to blockchain hype). Definitely an interesting area, I've been watching this space, here's some interesting ones: On the tethered tokens side, https://decentralizedcapital.com seem to be offering tethered tokens backed by real currencies (and cryptocurrencies on oth…

If I want to transform (BTC|LTC|eth) tokens to cash, how does introducing an intermediate token help?

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. finding someone willing to exchange your Ethereum tethered-LTC token for an Ethereum tethered-USD token

3. finding someone willing to exchange Ethereum tethered-USD tokens for bank account USD.

Part 1 is purely crypto-currency-based (albeit on different chains), and so should have lower fees than anything involving fiat transactions. It's also free of exchange rate risk, so doesn't need a fully-fledged exchange - should be easy to automated and audit.

Part 2 is purely Ethereum-based, and this is where competition should drive fees down to near-zero. Because a smart-contract can run this, there's (potentially!) zero risk of the exchange being hacked / running off with your coins / taking weeks to verify you / being shut down by regulators.

Part 3 still involves the ugly movement from crypto to banking. But now it's just going from tethered-USD to USD - so for the processor there's no exchange rate risk, or need to deal with weird and wonderful cryptocurrency networks.

And perhaps one day you'll be able to live without Part 3 - you might start to find you can spend tethered-USD in more and more places without needing to go to a bank account ...

Disclaimer: I'm involved with the https://ubitok.io decentralised Ethereum exchange so I do have a bit of a vested interest in decentralised exchanges! Would love to hear some counter opinions though ...

Re: A decentralized Bitcoin exchange

#92

Post by giergirey »

Animats wrote: post #65

The fundamental problem with this is the same problem Ethereum has - the hooks to the real world aren't very good. Making them better implies trusting a third party. If you have to trust a third party, why do you need this?

Yes, that's been my worry with many blockchain projects - it all sounds great until it needs to interface with the messy real-world.

But - regardless of the merits of this particular project - I think there is still some benefit in having a decentralised cryptocurrency exchange even if it doesn't totally eliminate the need for trust. Provided it reduces the scope of what needs to be trusted, or makes it easier to audit, or reduces how often it needs to be trusted, then that's still an improvement.

Suppose you want to sell some ethereum-based FOO tokens for US Dollars in your bank account.

Now, you could trust a centralised exchange to do the whole thing and hope they don't get hacked / run off with your money / steal your identity docs / take weeks to verify you / get shut down by regulators. And cough up the 0.25% fees.

Or, with a decentralised exchange, you can split your problem into two problems:

1. finding someone willing to exchange your Ethereum FOO token for an Ethereum tethered-USD token

2. finding someone willing to exchange Ethereum tethered-USD tokens for bank account USD.

Part 1 is purely Ethereum-based, and this is where competition should drive fees down to near-zero. Because a smart-contract can run this, there's almost no need to trust - this can be done on-chain.

Part 2 is where you have a point - there is still some trust required. But we don't need to trust the tethered-USD processor in Part 2 nearly as much as a full-fledged exchange - and they're easier to audit. There's also a lot less to go wrong - they're not dealing with lots of different crypto-currencies and networks, all they have to do is burn Ethereum tethered-USD tokens in exchange for real USD in a bank account. Fees should be lower, you'd hope.

Also, eventually we might get to the point where part 2 isn't needed - if you can spend tethered-USD tokens in enough places, why would you need banking-system-USD?

Disclaimer: I'm involved with the https://ubitok.io decentralised Ethereum exchange so I do have a bit of a vested interest in decentralised exchanges! Would love to hear some counter opinions though ..

Re: A decentralized Bitcoin exchange

#93

Post by xj9 »

Paul_S wrote: post #29
equalunique wrote: post #12

Interesting. Previously, the only incarnation of this idea was, to my knowledge, NVO: https://nvo.io/

And it went awfully quiet after the ico. I hate myself for using words like ico in every day speech. This the 80s all over again except with shittier music.

the good music is on the internet (no not on spotify)

http://hypem.com http://bandcamp.com

Re: A decentralized Bitcoin exchange

#94

Post by runeks »

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…

A smart contract cannot hold USD because it doesn't exist on a blockchain. With USD, all you get is credit, and going through a Blockchain when the weak link is the USD debitor doesn't make much sense (blockchains are decentralized, credit is inherently centralized).

Secondly, blockchains are generally too slow due to their broadcast-all nature. There's really no reason to broadcast my coffee purchase to the entire world so they can embed it in history for all eternity. The merchant and me can keep the receipt if we want, but there's little reason for anyone else to participate, particularly if we want to do it cheaply/efficiently.

Re: A decentralized Bitcoin exchange

#95

Post by Mahn »

cupcakestand wrote: post #72

Ultra fast trading in millisenconds + real-time updates of all orders are the key requirements for any exchange. Not sure how a decentralized exhange could manage this.

That's if you want to trade in real-time, but a slow decentralized exchange still has value for casual buyers and sellers. An exchange is typically both a trading platform and a marketplace, but it doesn't have to do both to be useful.

Re: A decentralized Bitcoin exchange

#96

Post by zdkl »

giergirey wrote: post #91
zdkl wrote: post #89

Earlier quoted context omitted.

If I want to transform (BTC|LTC|eth) tokens to cash, how does introducing an intermediate token help?

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 transferring value from coin tokens to cash?

[Edit] For instance given a user with a diversified portfolio of coins, in what way does adding another coin like asset facilitate any of the coin-coin or coin-cash transactions?

Re: A decentralized Bitcoin exchange

#97

Post by DKnoll »

notahacker wrote: post #81
patio11 wrote: post #41

Earlier quoted context omitted.

There is a trade limit of one bitcoin, which is generally too small to attract criminals (though this limit may be lifted in the future). I feel like technologists consistently overestimate where the lower bound is for size of an opportunity which causes it to attract adversarial attention, given an adversary who understands e.g. specialization of labor or, more prosaically, how for loops work.

I'm pretty sure 1 BTC is well above the amount the card cloning industry expects to make per account...

You can't send a bank transfer (EFT) with a credit card.

Re: A decentralized Bitcoin exchange

#99

Post by ManfredKarrer »

thinkloop wrote: post #60
patio11 wrote: post #41

Earlier quoted context omitted.

There is a trade limit of one bitcoin, which is generally too small to attract criminals (though this limit may be lifted in the future). I feel like technologists consistently overestimate where the lower bound is for size of an opportunity which causes it to attract adversarial attention, given an adversary who understands e.g. specialization of labor or, more prosaically, how for loops work.

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.

With SEPA in Europe the victim of the charge back need to agree to it (in most cases at least, there are a few reports that banks did the charge back without asking). So traders should simply not accept the charge back. Payment methods which are easy to charge back like PayPal are not supported in Bisq.

Re: A decentralized Bitcoin exchange

#100

Post by meapistol »

bkolobara wrote: post #9
cocktailpeanuts wrote: post #3

Just finished watching their video and got nothing other than "Read our white paper if you're interested", plus bunch of buzzwords. Why make the video at all? If I were them I would scrap all the bullshit and just spend the two minutes in the video explaining the basics of WHY and HOW it works. People visiting that site already know what a "decentralized bitcoin exchange" is.

I felt the same way. There are so many open questions after watching the video. How do I get my Euros to someone selling me bitcoin? Is there a central bank account everyone deposits the money? Some cryptocurrencies like Stellar have a built-in decentralised exchange[1]. They solve the problem of getting fiat into the system through anchors[2]. I wonder if there is a better way. [1] https://www.stellar.org/developers…

You send fiat money to the trading peer using e. g. SEPA, OKPay, national bank transfer, ClearXchange and some other methods. There is no central bank account and Bisq does not control any money and can thus not steal any money.
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