Benefits of Becoming a BitShares Gateway [posted]

[nz]

I believe that this was posted to the BM blog on Dec 18th. I assume that BM sent it to Coinbase shortly afterwards.
Be interesting t hear their feedback.

[hpenvy2]

Any additional thoughts? This is such an important topic as we reach out to different gateways.

[clayop]

Any additional thoughts on this topic? BM, do you have a timeline in mind when you want to present it to Coinbase?

I will be processing this some more tomorrow.  Then posting it to my blog and presenting it to coinbase.

Hopefully, BitUSD in Coinbase

[cass]

Any additional thoughts on this topic? BM, do you have a timeline in mind when you want to present it to Coinbase?

I will be processing this some more tomorrow.  Then posting it to my blog and presenting it to coinbase.

  i'll create a beautiful doc then

[bytemaster]

Any additional thoughts on this topic? BM, do you have a timeline in mind when you want to present it to Coinbase?

I will be processing this some more tomorrow.  Then posting it to my blog and presenting it to coinbase.

[hpenvy]

Any additional thoughts on this topic? BM, do you have a timeline in mind when you want to present it to Coinbase?

[Rune]

I was hoping BM would address this in yesterday's mumble, but he wasn't available. How would you defend the safety of BitShares against a negative, (but true) perspective like "the ability to freeze assets is built into every BitShares client"? Tho the statement is true it does sound like a sophist sound bite.

Issuers of certain UIA will have the ability to freeze the UIA they own. This doesn't actually vest any extra trust in them or make them any more centralized because they already fully decide if they are going to honor the UIA or not.

[Thom]

I was hoping BM would address this in yesterday's mumble, but he wasn't available. How would you defend the safety of BitShares against a negative, (but true) perspective like "the ability to freeze assets is built into every BitShares client"? Tho the statement is true it does sound like a sophist sound bite.

Is a simple explanation possible for non crypto nerds and techie types? If you qualified the quoted statement by adding ", but only for those accounts that trade through a gateway service", would that be accurate? What assurances (if any) could be made about how safe from "gateway tool control" such accounts would be? Are such assurances applicable to accounts that used a gateway once in the distant past but no longer do?

We've always said if you protect your private account keys and keep them private, there is no way anyone can take your funds. Are we now saying that such safety is impossible if you ever use a gateway? How is a "gateway" different from Mt. Gox?

quote author=Thom link=topic=12183.msg160892#msg160892 date=1418342971]
Here's one I would like BM to answer. It jumped off the page as I was perusing the nullstreet marketing newsletter.

Legal Compliance

Any company that takes deposits from customers and facilitates transfers among customers is heavily regulated in most countries.   These regulations include license requirements, bonds, insurance, know your customer laws, and anti-money-laundering compliance among others.   The BitShares block chain provides gateways with all of the tools necessary to comply with these regulations.

If you are in this business you are already maintaining a database tracking user deposits and your database is probably logging every single transaction and balance change.    Your database knows exactly who is owed what at any point in time.   You also have the power to seize or freeze user balances at the demand of law enforcement.    BitShares provides you with all of these features as well including:

  1) Ability to white list public keys that may control a balance of your asset.
  2) Ability to freeze all funds and stop all trading of your assets
  3) Ability to transfer any balance of your asset from any user to any other user
 
In other words, if you are operating a legally complaint crypto currency exchange, then you can easily expand your business to becoming a BitShares gateway. 

My question is, how are these toolkit features limited to gateways only, and what safeguards insure they cannot be used against non-gateway accounts / addresses?

There's probably many ways this could be accomplished, and I'd be shocked if there was any possibility non-gateway accounts could "fall prey" to asset seizure, but I would like this answered by BM explicitly given how onerous it sounds. Less technical types may be driven away if they hear "the ability to freeze assets is built into every BitShares client".
[/quote]

[clayop]

Are there any legal benefits if exchanges or gateway adopt BitUSD? It may depend on the country where they locate, but I'm just curious.

[hpenvy]

any updates on this !? Want to transform it cass*fast like into a kick ass doc

Any other thoughts? This is a big deal to get right.

[cass]

any updates on this !? Want to transform it cass*fast like into a kick ass doc

[hpenvy]

Adding this thread to the weekly newsletter. Hopefully we'll be able to encourage a few new fresh sets of eyes to review the document.

[zerosum]

Yes all of the above is maybe fine...
I just cannot get over the fact that there are 2 matching orders for the same amount ( a buy and a sell for 80 bitUSD) and the system after doing its thing leaves an outstanding buy order for 16 dollars.

It helps if you think in terms of BTS. There is a sell order at the 0.025 BitUSD/BTS price (or lower) for some amount of BitUSD valued at 3200 BTS no matter the price point. Let us assume that is the only sell order in the entire order book for simplicity. It doesn't matter how much BTS I have, how much BitUSD I want, and what price I am willing to pay for it. There is only 3200 BTS worth of BitUSD available.

If I choose to over pay by using my BTS to buy BitUSD at a price lower than 0.025 BitUSD/BTS, the system will collect the difference as overlap. Since there is only 3200 BTS worth of BitUSD available no matter what price I choose, the lower my bid price is, the less BitUSD I can get out of it. So If I choose a price of 0.02 BitUSD/BTS, there is only 64 BitUSD available for me to buy (costing me 3200 BTS). If I choose a price of 0.01 BitUSD/BTS, there is only 32 BitUSD available for me to buy (again costing me 3200 BTS).

I told you I got the idea after your first explanation (thanks btw for explaining it).
I can look for angles trying to find it just... but the facts remain there were 2 orders (a buy and a sell) for equal amounts of bitUSD. They matched pricewise. But after execution one of them was left not fully filled. Why? - The system likes its fees in certain asset types. Even if it does, here is my more fair solution:
Match them, use the collected fees to buy the asset you desire.

There sure is mechanism to execute triggered (margin called or expired) cover orders at the feed price. Just use the same mechanism to convert the fee collected in BTS  to bitUSD. The only change needed is to direct the bitUSD bought by such orders to the yield fund, instead of closing the short order.

[What is the problem with such approach? Too many smaller than the fee orders? You must have a way to deal with them as you are already handling small short position...I have several shorts smaller than the fee as we speak. I am not closing them (and paying the fee) let the system deal with them as it pleases. Or just make such orders fee free.]

This has been throughly discussed and documented.  It is necessary to prevent front runners from stealing the fees.

Collecting the fees in BTS will not enable front running (everything else staying the same - in particular keeping the 'get what you asked for matching').  I have to think a bit if  buying of bitUSD with said BTS will enable front running, but my instinctive answer is - if it does, they will front run on the expiring/margin-called shorts as well.

[GaltReport]

Haven't read the whole thread yet, just saw "feedback wanted," and dug in. Hope there's still time for feedback on this, looks like I'm late to the thread. Even if not, there may be other uses for this text to continue improving.

Benefits of Becoming a BitShares Gateway

The BitShares network allows anyone to issue digital assets known as User Issued Assets (UIA).  These assets can be used to track shares in a company, deposits in a bank, reward points, among other uses.   Once an asset has been issued it can be freely traded against all of the other asset types on the network including the fully collateralized market issued assets, which are capable of tracking the price of real world assets like the dollar, and the price of an ounce gold. 

UIAs and collateralized market pegged assets are not the same thing, right? UIAs being like BitShares ME and the later being the more interesting, more generally important advancement, so I would start by describing those instead of UIAs first. I think it's important to be more clear about what you mean when you say "fully collateralized market issued assets."

Is the fact that the assets are collateralized important enough to point it out? I kind of feel like by including that as a selling point in the wrong context we could be misleading people into thinking they're insured, when really if the system fails (we're pretty damn sure it wont but they aren't), they're still boned. The collateralization really only makes sure there'll be a buyer later, and regulates the supply. It doesn't impact the price. It's just an extra needlessly confusing long word taking up space.

Are we stuck on "User Issued Assets" as a name? When I read that it invokes imagery from the Nxt client of a bunch of worthless assets that may or may not have been created by some random joker and may or may not be worthless tomorrow. How about "individualized value tokens?" I think it could get confusing referring to two different stores of value under the same "asset" umbrella.

This guide will provide a brief overview of the business opportunities available for those who wish to become a BitShares Gateway.   A Gateway provides the service of bridging external assets such as fiat dollars, gold, silver, and Bitcoin into the BitShares network.   This service is critical to the success of BitShares because the vast majority of value moving into and out of the BitShares network must flow through a Gateway. Benefits to the providers of such services include several extra added income streams since not just one asset is being traded, access to a more stable and interest producing way to store value digitally than a young and volatile cryptocurrency, and the reputation and potential speculative gains that come along with being an early adopter of a promising new advancement in cryptocurrency.

I feel like this is a better introductory paragraph for the whole paper, consider cutting and pasting to the top of the whole thing. It tells succinctly why you're writing, what and a gateway is. I dislike the third sentence though. Coinbase probably doesn't care about what is critical for BitShares success, they care about their own asses! Not to mention implying that something is critical to the products success also implies there's a decent chance the product could fail (if the critical condition is not met). You might instead say it's an important role. And instead of saying why the service is critical to BitShare's success, spell out some of the benefits for Coinbase instead.

Generating Revenue as a Gateway

Gateways have many ways of generating revenue.  The most straightforward method is by charging transaction fee every time someone moves value through your service.   You can also make money by charging users a fee every time they move one of your assets on the BitShares network and from market fees on the BitShares network.   In addition to transaction fees of various sorts, gateways also have an opportunity to generate revenue interest on the float they hold for their customers.

This is good, but I wonder if it's redundant. Their business model is being a gateway, I'm sure they are aware that that's how they would make money off this. Better to focus on new ways we could bring them revenue, by bringing more people into the fold by solving problems Bitcoin hasn't yet, by introducing multiple new potential trading pairs instead of just one, and by generating interest on their holdings.

How It Works

Every single Bitcoin exchange is already performing a similar role to a gateway.  Users transfer funds to the exchange, the exchange tracks how much it owes each user, and when a user asks for a withdraw the exchange sends the funds back.    While the funds are on the exchange users can quickly and safely perform trades with other users of the same exchange.

A BitShares gateway does the exact same process, the only difference is that the database that tracks the users deposits to the exchange is the BItShares blockchain.   When a user transfers fiat dollars or bitcoin to a gateway, the gateway responds by transferring an IOU asset issued by the gateway back to the user.    When the user returns the IOU to the gateway the gateway sends fiat dollars or bitcoin back to the user.   (What is the benefit of this?)

The IOU asset is tremendously useful to users in the BitShares ecosystem because it serves as a very flexible multi-party escrow asset.   Users will use an IOU USD from your gateway to trade against BitUSD and/or IOUs from other gateways.    Users want to store value in BitUSD because it is mostly free of counter party risk, but when it comes time to convert BitUSD back to fiat USD they will do so through a gateway.   

I think a simpler explanation is in order here, the whole IOU thing is confusing and cumbersome. Instead of trying to paint the picture with the whole IOU thing, consider just being like, "users register in the bitshares network similarly to how they do at your exchange. Instead of providing an escrow service and trading platform, your role would be to interface with the bitshares blockchain to effect trades directly on the blockchain. the only trust that need to be placed in your hands is that of handling fiat money, but from the end users perspective nothing has changed, except there are more (stable) assets to choose from now."

Legal Compliance

Any company that takes deposits from customers and facilitates transfers among customers is heavily regulated in most countries.   These regulations include license requirements, bonds, insurance, know your customer laws, and anti-money-laundering compliance among others.   The BitShares block chain provides gateways with all of the tools necessary all necessary tools and resources to comply with these regulations.

If you are in this business you are already maintaining a database tracking user deposits and your database is probably logging every single transaction and balance change.    Your database knows exactly who is owed what at any point in time.   You also have the power to seize or freeze user balances at the demand of law enforcement.   BitShares provides you with all of these features as well as including the following features:

  1) Ability to white list public keys that may control a balance of your asset.
  2) Ability to freeze all funds and stop all trading of your assets
  3) Ability to transfer any balance of your asset from any user to any other user
 
In other words, if you are operating a legally complaintcompliant crypto currency exchange, then you can easily expand your business to becoming a BitShares gateway.  then the next logical step to expand is to become a BitShares gateway and embrace all the new steps forward the BitShares network has to offer. We make implementation easy, so you can focus on your customers.

The Security paragraph sounds good. But again, I would try to move away from the IOU example, it's cliche. There has got to be a better way to explain this.

General thought: perhaps there's a way we could insert a subtle suggestion that when there's enough volume bitUSD will be interchangeable with the dollar completely, and they would have the option to restructure their business entirely around reselling bitUSD which can then be used to trade for other cryptos, or converted back into a dollar. You already kind of pitched it above as a security benefit (which is fucking brilliant, by the way), but you could also pitch it as a way to simplify their own infrastructure. If we can do a better job of emphasizing the benefits of this, then we could end up with people who might not otherwise be interested in bitshares buying bitusd so they could buy bitcoin.

I'm sure I can come up with more input on this, and I will come back, it's a very important document. Brain hurts for now though.

  - I think this is what I would say if I understood everything and could provide detailed feedback!
Good to simplify things and speak to how they and their customers can benefit.

[bytemaster]

Thanks for input.  Will factor it in