Author Topic: BitSharesTV #5 2015: The year of the decentralized bitcoin exchange  (Read 2430 times)

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Offline bitmarket

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Re: BitSharesTV #5 2015: The year of the decentralized bitcoin exchange
« Reply #15 on: January 05, 2015, 08:01:48 pm »
Front page of /r/bitcoin on a high traffic day.   This is cool.
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Offline santaclause102

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Re: BitSharesTV #5 2015: The year of the decentralized bitcoin exchange
« Reply #16 on: January 05, 2015, 08:11:48 pm »
What if a gateway only wants to provide a one way USD -> someAsset,   they wouldn't need to create a iou UIA right?  is that still considered a 'gateway' ? 

If localbitcoins sellers can exchange without meeting KYC requirements how does this differ from the above simple gateway?  Could not anyone with a bank account offer that immediately without any hoops?

I guess a localbitcoins example would use escrow and a gateway wouldn't ?
A centralized party can do two things:
1) USD <-> USD-IOU or any_asset <-> any_asset-ÍOU (gateway described in the video)
2) asset1 <-> asset2. Could be automated (not sure). The agent (if automated) would then buy the respective asset on various exchanges. Rune described it above as a "market maker gateway". You would only have to give up trust for as long as the process takes. Disadvantage: I guess higher fees.

Local Bitcoins only matches buyer and seller, they themselves don't do any trades. But I heard a while ago that the Bitcoin sellers on localbitcoins need to follow some regulation. Not up to date there.
« Last Edit: January 05, 2015, 08:23:25 pm by delulo »

Offline bitmarket

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Re: BitSharesTV #5 2015: The year of the decentralized bitcoin exchange
« Reply #17 on: January 05, 2015, 10:13:04 pm »
What really is the advantage of a decentralized exchange compared to say Bitstamp (in the light of the recent Bitstamp hack)? Gateways would also have to store BTC. And also have a hot wallet?
yes .. bitstampUSD (IOU) have the same issue .. IF THERE wasn't the power of user-issued assets that allow a MASTER key to manipulate (freeze, withdraw, deposit, burn,...)  individual account balances .. :)

If a bitshares gateway gets hacked ... the gateway identifies those balances in time (critical) and freezes the IOUs

The key is that you can convert your gateway IOU into a securitized asset and then place it on the order book.  The balances held in IOU's will be significantly less at any given point in time.
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Offline bitmarket

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Re: BitSharesTV #5 2015: The year of the decentralized bitcoin exchange
« Reply #18 on: January 05, 2015, 10:19:31 pm »
Great episode!

If we pretend I'm a gateway, is this how it works?

I accept £100 to my bank account from a buyer who wants to buy bitGBP.

I issue issue 100 matt608GBP to the buyer - which is an IOU from me to the buyer for 100 GBP, an iouGBP - NOT ioubitGBP.

An order book is created in the BitShares client for matt608GBP/bitGBP

People who want to cash out of bitGBP into GBP buy my GBP iou.  To withdraw to their bank account means I send them £100 from my bank account. - is that correct?

So each gateway still has their own separate orderboook except its on the BitShares blockchain.

bitstamp doesn't issue "bitstamp bitUSD", they issue "bitstamp  iouUSD", then if someone buys it they can redeem it at the exchange for USD.

So it appears this means anyone who has achieved local regulatory approval can be a gateway? You could have lots of small gateways starting up in any country providing the person can use their bank account.

Can it all be done entirely within the BitShares client - no exchange website even needed?!  I could simply announce I am now a gateway and provide bank account deposit details on my wall on my BitShares account. People could start making GBP deposits. I issue them matt608GBP.  People who want to sell their bitGBP for GBP buy the IOU from my depositors.  They can then send me the IOU with a memo including their bank account details.  I send them GBP from my account.  If the person who bought the matt608GBP changed their mind and wanted to sell it back to GBP, they could send it back to me and I would send them 100 GBP from my bank account (minus a tiny exchange fee).

Voila.  An gateway can be launched without even coding anything new!

I have no plans to do this of course due not being able to use my bank account for this, but I'm just thinking theoretically around the world.  Any exchanges that already has completed the KYC + regulatory approval could start doing this without even having to do anything to their website.  They just create an account on BitShares and put up their bank account details on their BitShares account wall, issue an IOU and start trading.  They could optionally just add 1 page to their website displaying iou/bitasset order book if they wanted to.  Or they could even just have page telling users they are now a gateway for BitShares and direct them to download the client and visit their account where they will find the banking deposit details.

The only problem is to have regulatory approval they have to have your ID info which means the user would have to verify themselves on the gateways website first before trading, but thats no big deal.  It means all currently approved users of any exchange could trade like this, all an exchange has to do to become a BitShares gateway is make a BitShares account, issue an IOU and start trading.  No integration is even required.  Customers would just need an unique ID that ties them to their exchange account.  Simple.

Is my understanding correct?

You nailed it.
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Offline bitmarket

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Re: BitSharesTV #5 2015: The year of the decentralized bitcoin exchange
« Reply #19 on: January 05, 2015, 10:24:45 pm »
What if a gateway only wants to provide a one way USD -> someAsset,   they wouldn't need to create a iou UIA right?  is that still considered a 'gateway' ? 

If localbitcoins sellers can exchange without meeting KYC requirements how does this differ from the above simple gateway?  Could not anyone with a bank account offer that immediately without any hoops?

I guess a localbitcoins example would use escrow and a gateway wouldn't ?

The way they would do it is, they accept USD dollars into their account.  and they issue XeldarIOU's on the blockchain.  Now the user can trade those for any asset on the bitshares exchange. Its up to Xelder to be a market maker for all their IOU's.   So what is likely to happen is Xelder will be a market maker for XeldarIOU <> bitUSD.  In this way bitUSD becomes the reserve currency of the exchange.
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Offline bytemaster

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Re: BitSharesTV #5 2015: The year of the decentralized bitcoin exchange
« Reply #21 on: January 05, 2015, 10:58:12 pm »
What if a gateway only wants to provide a one way USD -> someAsset,   they wouldn't need to create a iou UIA right?  is that still considered a 'gateway' ? 

If localbitcoins sellers can exchange without meeting KYC requirements how does this differ from the above simple gateway?  Could not anyone with a bank account offer that immediately without any hoops?

I guess a localbitcoins example would use escrow and a gateway wouldn't ?

The way they would do it is, they accept USD dollars into their account.  and they issue XeldarIOU's on the blockchain.  Now the user can trade those for any asset on the bitshares exchange. Its up to Xelder to be a market maker for all their IOU's.   So what is likely to happen is Xelder will be a market maker for XeldarIOU <> bitUSD.  In this way bitUSD becomes the reserve currency of the exchange.

I must be missing something.  why not just go directly USD -> bitUSD and user can trade that for any asset on the bitshares exchange.  Why add the extra step USD -> Xeldal-IOU-USD -> bitUSD .  What good is the asset Xeldal-IOU-USD if I'm only operating a 1way on-ramp. 

this made sense to me before. I don't know what happened.  I can see the utility in knowing outstanding IOUs for a 2 way gateway to hold reserves but for 1way it just looks like a extra needless step.

Offline bytemaster

Re: BitSharesTV #5 2015: The year of the decentralized bitcoin exchange
« Reply #22 on: January 06, 2015, 02:18:29 am »
What if a gateway only wants to provide a one way USD -> someAsset,   they wouldn't need to create a iou UIA right?  is that still considered a 'gateway' ? 

If localbitcoins sellers can exchange without meeting KYC requirements how does this differ from the above simple gateway?  Could not anyone with a bank account offer that immediately without any hoops?

I guess a localbitcoins example would use escrow and a gateway wouldn't ?

The way they would do it is, they accept USD dollars into their account.  and they issue XeldarIOU's on the blockchain.  Now the user can trade those for any asset on the bitshares exchange. Its up to Xelder to be a market maker for all their IOU's.   So what is likely to happen is Xelder will be a market maker for XeldarIOU <> bitUSD.  In this way bitUSD becomes the reserve currency of the exchange.

I must be missing something.  why not just go directly USD -> bitUSD and user can trade that for any asset on the bitshares exchange.  Why add the extra step USD -> Xeldal-IOU-USD -> bitUSD .  What good is the asset Xeldal-IOU-USD if I'm only operating a 1way on-ramp. 

this made sense to me before. I don't know what happened.  I can see the utility in knowing outstanding IOUs for a 2 way gateway to hold reserves but for 1way it just looks like a extra needless step.

It is not needless if you eliminate centralized exchanges entirely.  We need IOU BTC vs BTS to discover prices for the feeds.   It is also a very different risk proposition.  Both have their place.
For the latest updates checkout my blog: http://bytemaster.bitshares.org
Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.