Author Topic: Great news for our decentralized exchange?  (Read 5428 times)

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Offline maqifrnswa

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You can have UIA's represent tokens and have custody somewhere in the traditional broker-dealer model, but UIA's can also mimic the bitAsset model where you're just creating a derivative such as bitAAPL, bitGOOG etc.  You don't really need to custody securities or assets. Essentially bitAssets are Total Return Swap contracts or contracts-for-difference and are non-deliverable, but give you the same effect as holding an asset. [...snip...]

In terms of why I said it would be 'unregulated' is because just like bitAssets there is essentially no custodian for real assets, no central clearing house, & no money transmission.  You are essentially just allowing people to create swap contracts p2p.  There will be debate and a strong attempt to regulate, but legally governments will have weak grounds.   Enforcement will be difficult.  In the end regulating code or the blockchain will be futile..... the Blockchain has arrived , and it's a new world everybody.

That's pretty articulate: what is it that bitshares "does?" It's a token exchange where outstanding interest can expand and contract such that demand and supply meet at a price determined by some external market where the real value is held. It's still all theoretical and academic, and the fact that there will be debate and legal pressure from regulatory agencies will deter people from innovating - but there is great value in what you describe, safe (maybe regulated?) micro-exchanges that could serve local mom-and-pop pizza shops.
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Offline merivercap

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1) This recent ruling is very good especially for an economy that seems to be facing some headwinds.  I like the idea of giving opportunity to non-accredited investors.  However we'll see what limits the SEC puts on equity crowdfunding to non-accredited investors.  It may be around $1 million.
The SEC release said that their would be to tiers for non-accredited crowdfunding: $25 million with limited reporting, and $50 million with expanded reporting. Non-accredited investors can invest up to 10% of their annual salary.
Hmmm... yeah I'm not sure how they get the $1 million number I referenced from the article below.. it may be under Title III that is a different section yet to be determined.
http://www.xconomy.com/national/2015/04/01/equity-crowdfunding-backers-clash-over-fundraising-limits-in-states/

Anyways under Title IV, the Tier I Reg A rules of funding up to $25 million require Blue Sky laws so you need to register with each of the states so I doubt any company goes this route.  Tier 2 Reg A+ is slightly better because there are no state registrations and you can raise up to $50 million, but then you have to have 2 yrs audited financials, and an offering circular that will get the level of scrutiny of a Form S-1 (for IPOs).  The average man hours to get a Form S-1 together is about 1,000 hours.   So it will be $75k to $100k for all the reporting and a lot of time... then you'll have to start issuing a light version of a 10-K, 10-Q, 8-K etc. which is another burden.  This is all extremely disappointing and I actually doubt many small companies will use either methods and instead fundraise from accredited investors.   Poor people get screwed again. 

It seems better to stick to fundraising from accredited investors using Reg D  506(b) or 506(c) crowdfunding or just go the typical VC/angel route. 
http://www.crowdfundinsider.com/2015/03/65007-the-reg-a-bombshell-50m-unaccredited-equity-crowdfunding-title-iv-takes-center-stage/


This is a good idea, and I think things like this is where "legitimacy" can happen: using bitshares as the technology to build real business on top. https://blocktrades.us/ is an example of one of the interfaces businesses can access, so if a bitcoin payment processor can connect to their api, then suddenly bitusd is available everywhere.

Technically, it's not that hard - I think you just create UIA and distribute to accounts you control. There is no value in the UIA since the real assets are somewhere else. I don't know what the benefit over just running your own databases is, since the assets will have be custodied in a centralized location. Could you explain it a bit more? I think it's interesting.

Yeah I don't think it should be a problem for the most part technically because the main part of it is just remaking the UI for the exchange/wallet to trade & hold bitAssets.  You can add Tradingview and other Tech Analysis charting tools, display orderbooks in various ways as well as play around with various types of orders (market/limit/stop & advanced variations of those.)  You can add market making bots.  You can add different maker & taker fees. Not sure what kind of flexibility there is with other parts of the market engine. 

You can have UIA's represent tokens and have custody somewhere in the traditional broker-dealer model, but UIA's can also mimic the bitAsset model where you're just creating a derivative such as bitAAPL, bitGOOG etc.  You don't really need to custody securities or assets. Essentially bitAssets are Total Return Swap contracts or contracts-for-difference and are non-deliverable, but give you the same effect as holding an asset.  If you have scripting/contract language you should be able to create custom bitAssets of any kind with any terms and trade with anyone.   I just went to an Ethereum meetup last night and a guy demo'd a decentralized trading platform and enabled a swap contract trade of Brent Crude Oil between two people, but the same swap contract can be trading among many people. (His website here: http://www.spritzle.io/)  It was impressive.  You can do that with any asset.  I expect bitShares to port over Codius code from Ripple for smart contract capability so you can essentially do the same thing.   I figure as a custom 3rd party bitShares exchange, you can interoperate with Ethereum or use it for different functionality.

In terms of why I said it would be 'unregulated' is because just like bitAssets there is essentially no custodian for real assets, no central clearing house, & no money transmission.  You are essentially just allowing people to create swap contracts p2p.  There will be debate and a strong attempt to regulate, but legally governments will have weak grounds.   Enforcement will be difficult.  In the end regulating code or the blockchain will be futile..... the Blockchain has arrived , and it's a new world everybody.
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Offline maqifrnswa

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1) This recent ruling is very good especially for an economy that seems to be facing some headwinds.  I like the idea of giving opportunity to non-accredited investors.  However we'll see what limits the SEC puts on equity crowdfunding to non-accredited investors.  It may be around $1 million.
The SEC release said that their would be to tiers for non-accredited crowdfunding: $25 million with limited reporting, and $50 million with expanded reporting. Non-accredited investors can invest up to 10% of their annual salary.

4) I was thinking of starting a project for an unregulated customized exchange on top of the Bitshares blockchain/market engine.. just more like having a new interface UI/UX.  Hence it would be something where none of the assets are custodied with the exchange.  The more customized exchanges that compete, the better liquidity for the bitShares ecosystem.  It's just like having a 3rd party bitShares wallet.  This would be a 3rd party bitShares exchange.   What are the issues of this on the technical side?   If it's possible I'll be looking for developers.. I can help raise the money from VCs, Angels, or accredited investors.. (or now with the recent SEC ruling we can raise money from a buncha people off the streets :P)

This is a good idea, and I think things like this is where "legitimacy" can happen: using bitshares as the technology to build real business on top. https://blocktrades.us/ is an example of one of the interfaces businesses can access, so if a bitcoin payment processor can connect to their api, then suddenly bitusd is available everywhere.

Technically, it's not that hard - I think you just create UIA and distribute to accounts you control. There is no value in the UIA since the real assets are somewhere else. I don't know what the benefit over just running your own databases is, since the assets will have be custodied in a centralized location. Could you explain it a bit more? I think it's interesting.
maintains an Ubuntu PPA: https://launchpad.net/~showard314/+archive/ubuntu/bitshares [15% delegate] wallet_account_set_approval maqifrnswa true [50% delegate] wallet_account_set_approval delegate1.maqifrnswa true

Offline particlewave

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Wikipedia:
"The Securities and Exchange Commission recently released a rulemaking agenda revealing that it plans to finalize the Title III Equity Crowdfunding rules and the Title IV Regulation A+ rules from the JOBS Act by October 2015. Given that these rules will then require 60 days to be published in the federal register and become law, it appears likely that the earliest date small businesses will be able to utilize these JOBS Act provisions to raise capital will be the beginning of 2016."

Let's hope so. The SEC has been somewhat dragging its feet on actually publishing it.

Offline merivercap

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1) This recent ruling is very good especially for an economy that seems to be facing some headwinds.  I like the idea of giving opportunity to non-accredited investors.  However we'll see what limits the SEC puts on equity crowdfunding to non-accredited investors.  It may be around $1 million.   

Although this ruling gets publicity, the rulings under the JOBs act in late 2013 already opened up fundraising opportunities.  You could already raise funds from accredited investors using equity crowdfunding (up to $5 million from accredited investor crowdfunding sites) and up to $50 million under Reg D to a limited # of investors (w/o Blue Sky Laws) 

2) It's better to think of these rulings as a way to help build any startup (crypto or otherwise) without having to rely on VCs/angels or going through huge regulatory hurdles. 

3) As far as building a real SEC regulated exchange that trade bitAssets?  There might be some level of interest there, but you get the same costs of compliance, regulation, licensing as any other firm.  You may be able to cut down on trading costs.. sure it's $7-15 these days to trade using an online brokerage, but how much of total operating costs are regulation/compliance/licencing costs + profit?  Not sure how compelling the technology is for a traditional company to adopt .  A brokerage platform's technological costs may not be that significant relative to all the other costs and trades are instant. There are other unique capabilities such as security issuance/UIAs .. I can see some possibilities for some fintech companies to try a model like you mention.

4) I was thinking of starting a project for an unregulated customized exchange on top of the Bitshares blockchain/market engine.. just more like having a new interface UI/UX.  Hence it would be something where none of the assets are custodied with the exchange.  The more customized exchanges that compete, the better liquidity for the bitShares ecosystem.  It's just like having a 3rd party bitShares wallet.  This would be a 3rd party bitShares exchange.   What are the issues of this on the technical side?   If it's possible I'll be looking for developers.. I can help raise the money from VCs, Angels, or accredited investors.. (or now with the recent SEC ruling we can raise money from a buncha people off the streets :P)
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Offline maqifrnswa

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this gives me a theoretical idea for making on ramps, selling securities, accelerating development, in a legal way. I think, as decentralized as bitshares is, there needs to be a centralized on ramp for people to point to. Sort of what coinbase did for bitcoin, red hat & canonical for linux.

someone start a company which will operate an exchange and file for exemption from registration as a national securities exchange with the goal of being an exchange for new crowd funded securities:
http://www.sec.gov/about/forms/form1.pdf

The new company will operate an exchange where real companies can bring them already authorized/sold shares (the new regulation a+ crowdfunding) to list, or potentially IPO shares for crowd funding (underwrite crowd funding). If IPO, the new company is responsible that only authorized investors participate, and the company receives commission for that.

The company receives commissions for listing and running the organization in an SEC-compliant way, bitshares allows for low-cost and rapid transactions. The company should probably also hire consultants from I3. Bitshares holders gain value since securities will be traded in bitUSD, thus tying up collateral, and increased transaction burn rate.

Additionally, the company can run a website where people deposit dollars in their account to buy/sell securities (like etrade). Except the dollars they see are really bitUSD (that is digital assets with the value of $1, just like I see when I log in to my back account, there really isn't a dollar in the bank with my name on it). The company is thus running an on-ramp to bitshares, with bitshares the trading platform back-end. Unlike a full exchange, you just need relationship with a payment processor that can do USD->bitUSD, or USD->BTC then the company itself does BTC->BTS->bitUSD.

Of course, it might just be easier for the exchange to just set up their own site in dollars and make everything centralized... but in this case you're just buying an existing system for free (or at least a lot less than it would cost to make from scratch.) The new company can, but does not need to, buy a significant % of bitshares (heck, for a few million you can pretty much take over bitshares), this way they can hire their own developers on the network/outsource development to the network. If they own a large percentage of the network, they can potentially control security better.

Don't know how it will work if users are semi-anonymous and non-verified, I don't think you can exchange to foreign nationals too... probably some technical issues to be done. Perhaps the company just uses bitshares as its backend and keeps track of all the other stuff in the front end (creates accounts that are hashes of the real accounts on a secure website someone else...)

just a "crazy," circular way of getting stuff done
maintains an Ubuntu PPA: https://launchpad.net/~showard314/+archive/ubuntu/bitshares [15% delegate] wallet_account_set_approval maqifrnswa true [50% delegate] wallet_account_set_approval delegate1.maqifrnswa true

Offline fran2k

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Witness: rmglab /// Buenos Aires BTS Meetup http://www.meetup.com/es-ES/BitSharesBA/ /// [old BTS 1.0 chain] Delegate bitshares-argentina (ex argentina-marketing-matt608) Thread https://bitsharestalk.org/index.php/topic,15781.0.html

Offline nomoreheroes7

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...which side is BTS? Heh, I'd like to think we're the few, powerful Spartans pushing centralized finance off a cliff. Xerxes' endless hordes of bankers/trolls don't stand a chance.

 :P

Offline liondani

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Offline CLains

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Offline fav

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sounds like big news for the US crowd.  +5%

Offline cube

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"All individuals are now free to participate but can only invest up to 10% of their net worth."

"Stock offerings open to crowdfunding will still need to be "qualified" by the SEC"

"Online equity platforms will still need to be registered with the SEC as "broker-dealers," which means they will be regulated financial institutions"

http://mashable.com/2015/03/25/equity-crowdfunding-sec-vote/

Well that's interesting.. it's certainly not the freeforall that people would expect.. these are very similar parameters actually to what has been done in Canada in regards to crowdfunding.. I just hope people get really educated on what the parameters are before they go off and do stuff and get fined into oblivion.

This is good news though! Always good when grey areas in regulations are filed with certainty. Now investment can move accordingly with less risk.

Yes, clarity in the law certainly helps investment.  It is very much expected that the SEC would want these small entities to register with them where they can monitor and regulate their activities.  It is SEC"s duty to protect the investors - big and small.
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Offline BunkerChainLabs-DataSecurityNode

"All individuals are now free to participate but can only invest up to 10% of their net worth."

"Stock offerings open to crowdfunding will still need to be "qualified" by the SEC"

"Online equity platforms will still need to be registered with the SEC as "broker-dealers," which means they will be regulated financial institutions"

http://mashable.com/2015/03/25/equity-crowdfunding-sec-vote/

Well that's interesting.. it's certainly not the freeforall that people would expect.. these are very similar parameters actually to what has been done in Canada in regards to crowdfunding.. I just hope people get really educated on what the parameters are before they go off and do stuff and get fined into oblivion.

This is good news though! Always good when grey areas in regulations are filed with certainty. Now investment can move accordingly with less risk.
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Offline onceuponatime

http://www.sec.gov/news/pressrelease/2015-49.html#.VRNgTUZec0r

Gentlemen, start your engines...




If I may suggest something: noone associated with development or the public facing side of Bitshares should ever comment or even hint at the share price. It's unprofessional and will always come back to hunt you.

You need to get out more and have some fun  ;)

Offline triox

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http://www.sec.gov/news/pressrelease/2015-49.html#.VRNgTUZec0r

Gentlemen, start your engines...




If I may suggest something: noone associated with development or the public facing side of Bitshares should ever comment or even hint at the share price. It's unprofessional and will always come back to hunt you.