A decentralized Bitcoin exchange
github.com
github.com
Examples:
https://medium.com/@TheAlexGalaxy/why-i-m-suing-td-canada-tr...
https://www.reddit.com/r/PersonalFinanceCanada/comments/6guh...
https://www.reddit.com/r/Bitcoin/comments/1zruvf/warning_cas...
https://www.reddit.com/r/Bitcoin/comments/1sglge/the_bank_ar...
What happens if the person buying bitcoin does a
chargeback on their national currency after the bitcoin
has been released from the multisig escrow?
We only support payment methods in which chargebacks
are not easy (i.e. we don’t support Paypal). But there
is still certain chargeback risk with banks. If a bank
executes a chargeback after the cryptocurrency escrow
has released, there is nothing the arbitrator can do.
Bisq’s goal is to make this scenario as unattractive
as possible, using three primary mechanisms:
1. 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).
2. We will remove national currency payment methods
which are found to be used for chargebacks.
3. Bisq has support for delayed payouts using the
“locktime” feature, which might help if the chargeback
is done quickly after the transfer.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 skimmed through the white paper and it sounded like a whole bunch of "trust us, this will totally work."
Of course, they make out no ma what
>transaction fees go in part to the developers and in part to the arbitrators
Anyone who has run an online business that moves money can tell you that fraudsters are ever-probing for that weak spot and, if it is there, they will find it.
There is too much "generally" and "might" in their risk mitigation here, such that their primary line of defense really boils down to hope. Meanwhile, they've managed to create limitations that may well infringe on legitimate activity.
They really need to re-think this problem or they'll have their hats handed to them in short order.
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.
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. This system, which is how all large exchanges work, is inherently centralized, because it uses a central debitor (owes USD/BTC to customers) to handle token ownership, which works really well because it puts no limit on performance (as opposed to a system where we use a blockchain to define ownership).
One partial solution is to separate the debitor (funds holder) from the actual exchange: instead of exchanges issuing their own tokens (bitstampBTC, bitfinexUSD, mtggoxBTC, etc.), there would be dedicated issuers (lots of them), and an exchange would constitute a central meeting place, which accepts a specific set of issuers, and to whom people can sign over their tokens in order to engage in a trade. So, for example, a buy order would constitute signing over a token worth the buy order's value to the exchange, which immediately matches it with a sell order, swaps the owner of the matched tokens (after deducting a small fee), and sends the tokens to the buyer and seller.
Wouldn't that be a perfect problem for a smart contract? It could be used to generate such tethering tokens, hold all real coins (ethereum, here, but if I got it correctly, lightning will implement smart contracts in btc blockchain as well in the future), allow for fast token exchanges and then slower withdrawal from the contract stash. Converting fiat to tokens is still the problem, here, obviously.
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 other chains). Not heard much about them though.
Implementing full exchange matching rules is pushing at the limit of what's possible in an Ethereum smart contract - https://ubitok.io are working on it (disclaimer: I'm involved with them!).
As others have mentioned, https://etherdelta.github.io is one of the better known decentralised token exchanges - though they do use an off-chain matching engine so it's not totally on-chain.
https://oasisdex.com have gone the other way - they're 100% on-chain, but they don't try to do best execution / automated matching - you have to pick an order to trade with.
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 ...
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?
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 ...
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?
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.
The problem with assuming good faith and using actor reputation (even third-party arbitrated) is that, in becoming a trusted actor, the amount of money available for cut-and-run scenarios increases exponentially (both for arbitrator and actor), until it ultimately makes sense and happens (eg. numerous scam darknet markets, etc.)... often the claim is "sorry we got hacked!"
Using real world user identities as insurance has the issue that using one's fiat bank account to perform automated or semi-automated trades on behalf of others is probably dubious to against terms of service, or at a minimum vaguely arguably so when politically expedient. Therefore, revealing the real world user identity of an accused bad actor (ie. fiat account holder) as an insurance against bad behavior is likely to expose them to an undue scale of legal hassle and/or asset seizure, which is not something wise to trust a third party with no matter how trustworthy the arbitrators are supposed to be.
My gut feeling is that such systems work only at small scale, with a veneer of trust that can be established in different ways: deposit is placed with counterparty, reputation within some shared community, mafia boss will murder you if you rip off the system, etc. Between absolute strangers, it is exceptionally difficult to reliably scale, even if you can establish it.
Finally, an important point is that frequent <1BTC transfer activity to random destinations on conventional fiat accounts are likely to trigger bank anti money laundering (AML) heuristics.
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 to this is a TODO: See how btc does this.
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 the system than they would win (because of the 1btc trade limit). To be noted is that current arbitrators are handpicked by founders, but they want it to be fully decentralized ultimately.
What is not addressed is this : if arbitrator management is fully decentralized, how will people be triggering their safety payment if they do something bad? Will there be some kind of a vote or something? How much time would it takes? (because if it's long enough, malicious arbitrator can steal money from several trades and outperform their safety deposit). It seems like the hardest part to decentralize, and I don't think it's addressed well enough yet.
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.
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.
My original question I think still applies how every so I'll try and rephrase it: Is there a way to secure the Peer Discovery service in such a to secure against creating a secondary network of peers, then running a bookkeepers odds scheme. (Using the secondary marketplace as an options market for transactions on the first)
Associating the ERC-20 protocol with the current mania and nonsense of cryptocurrencies doesn't seem fair. It's simply a method of creating a sub-currency, which yes is often unnecessary but marketing is a powerful force so it happens.
Having seen small rural communities try and fail to create their own local currency years ago it's only a matter of time before some try again digitally.
1. There are two sides to a trade, Alice and Bob.
2. Alice has USD and Bob has Bitcoins.
3. Both sides wish to trade money but they don't trust each other.
4. To do this, they deposit collateral in the form of Bitcoins into a escrow
account (multiple mediators need to sign to give back the collateral to their owners.)
This is a bond separate from the money they are already trading.
5. Alice sends her USD to Bob.
6. Bob sends his Bitcoins to Alice.
7. If either side cheated the mediators won't sign
the "check" to release funds from the Escrow account.
Therefore, so long as the value of the collateral is
worth more than their potential profit from scamming
-- there is no incentive to scam.
As you can see this scheme has a few problems:
1. Users are required to have Bitcoins for collateral.
So if you don't already have Bitcoins you can't buy
any (strange scenario.)
2. It relies on collateral, period, so you can never
buy and sell the full amount of funds that you have.
3. Liquidity is poor. BitSquare could be improved if
they had more investors and structured the exchange
to provide liquidity themselves at a premium.
4. It's unclear how secure the notaries are and whether
or not it can be cheated.
5. Reputation isn't that secure and the model
doesn't account for attackers, though I think
BitSquare solves this with multiple mediators.
It's good to see that BitSquare is still around though. Decentralized exchanges haven't had much adoption so far and I haven't seen anyone who nailed every usability problem that these exchanges have. Even assets on Ethereum where you can literally write simple code that says "a transfer occurs if two users agree to it" are traded on "decentralized exchanges" with multiple vulnerabilities and bad UX for traders.
I guess the assumption here is that reputation is good enough.
Edit: I edited the explanation for clarity.
We did not had time to update all the information on the web page and older documents to reflect the new concept.
Like localbitcoin but no need to meet up
Reversal - might be better solutions but couldn't the smart contract escrow simply have a timer built in that would allow the fiat receiver to move the money out of his PayPal account, thus preventing reversal?
I'm just running with a half-baked idea, but it feels like it could work. Doesn't need to be PayPal, could be any fiat transaction provider that has an API that allows confirmation of the fiat transfer that the smart contract can access
PayPal cooperation is needed because they shut down accounts that appear to be breaking their rules.
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 ..
I hate myself for using words like ico in every day speech. This the 80s all over again except with shittier music.
Not sure how a decentralized exhange could manage this.
decentralized technology has its own strengths.
It's a shame that Ethereum tokens are getting a bit of a bad reputation, because an exchange like EtherDelta coupled with asset-backed tokens could really open up all kinds of possibilities.
Disclaimer: I'm involved with https://ubitok.io which are similar to EtherDelta (but /totally/ on-chain, no off-chain matching engine needed!)
As there is no concept of arbitrator reputation, it makes
no sense to deselect arbitrators, as this will only
reduce his trading possibilities. Traders will only be
able to take offers of users with whom they have at least
one overlapping selected arbitrator
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.
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/guides/concepts/exchange.... [2] https://www.stellar.org/developers/guides/concepts/assets.ht...
By running Bisq on their local machines, users form a peer-to-peer network. Offers to buy and sell bitcoin are broadcast to that network, and through the process of offering and accepting these trades via the Bisq UI, a market is established.
There are no central points of control or failure in the Bisq network. There are no trusted third parties. When two parties agree to trade national currency for bitcoin, the bitcoin to be bought or sold is held in escrow using multisignature transaction capabilities native to the bitcoin protocol.
Because the national currency portion of any trade must be transferred via traditional means such as a wire transfer, Bisq incorporates first-class support for human arbitration to resolve any errors or disputes.
Well, it's more the “explicit line breaks only” part of code formatting, rather than the monospacing, which makes it unreadable on mobile.
>By running Bisq on their local machines, users form a peer-to-peer network. Offers to buy and sell bitcoin are broadcast to that network, and through the process of offering and accepting these trades via the Bisq UI, a market is established.
>There are no central points of control or failure in the Bisq network. There are no trusted third parties. When two parties agree to trade national currency for bitcoin, the bitcoin to be bought or sold is held in escrow using multisignature transaction capabilities native to the bitcoin protocol.
>Because the national currency portion of any trade must be transferred via traditional means such as a wire transfer, Bisq incorporates first-class support for human arbitration to resolve any errors or disputes.
It also doesn't help they have that immature quote "To change something, build a model that makes the existing model obsolete" as their tagline, which has nothing to do with the hypothetical value they claim to provide.
At least the creators spent time and effort doing something they find valuable. That's 100x better than your comment.
Secondly, do you feel there's no room for criticism just because something is provided for free? To me, the grandparents criticism is valid. Maybe it doesn't tell the whole story, I don't know, but it's a concern that deserves an answer. Any reasonable maintainer would welcome valif criticism; this is the process we use to make improvements. This is how software works in general (build something, show consumers, gather feedback, iterate) and literally how all of science works (peer review.)
Again, I don't understand your comment at all. I find your last sentence ironic in that your comment provides exactly zero value to a reader of this thread.
Bitcoin is decentralised, but one can choose to trade it for dollars, et al., at e.g. Bitstamp.