Comment by Animats | Hacker News Reader

Comment by Animats | Hacker News Reader

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Ah. That's helpful.

It's peer to peer, but not trustless. There's a moment in the transaction at which one party can default. So they need a reputation and dispute resolution system.[1]

You'd think there would be trustless decentralized exchanges by now. Ones have been proposed.[2] Some even exist. It's possible to have a truly trustless exchange where orders are smart contracts on a blockchain, transactions are atomic swaps, and at no moment does a third party have custody of anything. This is called an "on-chain order book". It's rarely seen, because it's slow, lacks liquidity providers, and is subject to front-running. Also, nobody makes a billion dollars running one. Most so-called "decentralized exchanges" turn out not to be totally trustless inside.

[1] https://lnp2pbot.com/learn/common-problems-and-solutions.htm...

[2] https://www.smartcontractresearch.org/t/research-summary-tex...

There’s a neat paper showing that you can have trustless decentralised exchanges only for on-chain assets, ie exchanging one crypto for another. Real world assets (including fiat) cannot be securely bought on blockchains.

Irrationality, Extortion, or Trusted Third-parties: Why it is Impossible to Buy and Sell Physical Goods Securely on the Blockchain

https://arxiv.org/abs/2110.09857

Sorry but, do you know exactly what trustless means?

This concept applies to custody, not to fiat-to-crypto exchanges. Because a fiat-to-crypto exchange is an on/off ramp into/outside crypto. And as fiat cannot be held in a trustless way, the most "trustless" way to make a swap without the exchange holding the fiat amount is by using an escrow system. If the escrow system can only be moved to party A or party B during a trade-dispute, then it's the most trustless thing you can get, my friend.

PS: Your 2nd link seems to suggest that you're saying "DEXes are better than p2p exchanges!", well, DEXes don't have fiat-to-crypto pairs, only crypto-to-crypto. Nice try.

I was going to write the same post. All you need is escrow and no, escrow is not as dangerous as cryptoexchanges holding onto fiat deposits because you don't give them your money ahead of time, you only give them exactly how much you want to transfer for any given transaction down to the cent. If they screw you over, they will lose their payment service provider license and go out of business.

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