If exchanges convert to Bitshares 2.0 they could guarantee theft protection

[joele]

I'm waiting for bitshares 2 specially the lending feature, right now I'm using the lending service of poloniex but I don't want to put more fund to it because I don't trust centralize exchanger.

[xeroc]

Agreed ... multi sig exchange deposits

[luckybit]

If you are worried somehow a hacker could steal the IOU tokens, then you could secure it through multisig on Bitshares 2.0. I don't see how an attacker would be able to hack a multisig account in control of the IOU tokens. So the chance of that happening isn't very high, as everyone involved would have to be hacked at the same time.

So even if the exchange controlled the IOU tokens, they could control it through Bitshares 2.0, in a decentralized manner using multi-sig. The only vulnerability I can see would be at the gateway itself, which would basically accept bitBTC for BTC. A smart contract could be programmed to accept bitBTC for BTC automated at the gateway and treat it just like a purchase of BTC.

Ripple could be used, or Ethereum, and I would only see this as necessary when people want to withdraw to actual BTC, when they want to take their BTC off the exchange. So while their BTC is on the exchange they would be safe because it would be bitBTC on Bitshares 2.0, and the risk would happen upon withdraw, but you can minimize it with smart contracts and the trusted entity such as a financial institution or bank to be the gateway.

So the exchange could guarantee that it can't lose your money, but the gateway could not guarantee that. The gateway would have to be regulated but the gateway could be Coinbase or Ripple. If you want to really get fancy, you could probably even sell directly to random people who want to trade BTC for bitBTC using a smart contract, and then give the BTC over to people who want to buy BTC, but that seems unnecessarily complicated, it seems to be how counter party does it.

[luckybit]

How so?
As an attacker .. I can gain access to a server that holds IOUs of the exchange .. I quickly transfer them to me and trade them for bitUSD .. then people that sold their bitUSD to me would end up having a worthless token due to exchange's bankruptcy .. and I hold the bitUSD I traded ..

Can an exchange be so quickly to DETECT an attack AND disable the trading and transfer of their IOUs? In theory .. yes .. but in practice?

The exchange would just be a front end or skin on Bitshares 2.0 so if you could do that attack you would be attacking one of the gateways. The gateways are separate entities from the exchanges which could just be front ends to Bitshares 2.0.

Bytemaster mentioned that you may someday be able to buy bitGold and then send that to a gateway where it becomes real gold. The gateway can be a bank or some heavily regulated trusted entity, but the exchange itself, that could be transformed into just a website or even a plugin of some sort for wordpress.

The IOUs of the exchange wouldn't even have to be on any server, I'm not sure why you would think it couldn't be handled by smart contract. The actual trust is in the gateways and the gateways could just be banks, it would give banks a role.

If you're talking about buying Bitcoins with bitBTC, you would only have to do that when they want to withdraw. Upon the withdraw, it could trade bitBTC for BTC and give them BTC. So there seems to be nothing to steal as the whole process could be automated and decentralized via smart contracts.

[xeroc]

How so?
As an attacker .. I can gain access to a server that holds IOUs of the exchange .. I quickly transfer them to me and trade them for bitUSD .. then people that sold their bitUSD to me would end up having a worthless token due to exchange's bankruptcy .. and I hold the bitUSD I traded ..

Can an exchange be so quickly to DETECT an attack AND disable the trading and transfer of their IOUs? In theory .. yes .. but in practice?

[luckybit]

This would give exchanges an advantage over all exchanges which are centralized and cannot guarantee that. It would seem the era of the centralized exchange might come to an end quickly, at least on the backend.

Shapeshift.io would be able to benefit from Bitshares 2.0 backend. If people use coinbase or some centralized exchange it would offer no practical advantage, if the gateway network for Bitshares works.