Explain like I'm 5 - How do SmartCoins and the Decentralized Exchange work?

[xeroc]

yes .. smartcoins are just another "token" on the blockchain .. not the same way as colored coins .. but kind of ..

[CoinHoarder]

I'm unable to offer the technical perspective you ask for but maybe this will be a bit helpful if you are familiar with the smart contract concept: SmartCoin is a kind of smart contract hard-coded into the blockchain (hard-coded by the devs as opposed to Ethereum's approach where smart contracts are created on the fly by the users).

So SmartCoin manifests itself as a separate currency in the BitShares user interface but underneath there is only one currency (i.e. BTS) and hard-coded smart contracts gluing it all together.

Thank you, that does help. So there is no side chain or anything, just smart contracts and BTSX. I am assuming SmartCoins work similar to colored coins then.

[jakub]

I'm unable to offer the technical perspective you ask for but maybe this will be a bit helpful if you are familiar with the smart contract concept: SmartCoin is a kind of smart contract hard-coded into the blockchain (hard-coded by the devs as opposed to Ethereum's approach where smart contracts are created on the fly by the users).

So SmartCoin manifests itself as a separate currency in the BitShares user interface but underneath there is only one currency (i.e. BTS) and hard-coded smart contracts gluing it all together.

[CoinHoarder]

My apologies, I think perhaps I worded my questions poorly. Thank you all though for trying to help me it is much appreciated. I have a basic economic understanding of SmartCoins... they are supposed to resemble the real life value of whatever asset they represent (USD, CNY, etc), they are backed by collateral BTS from short positions, and come into existence by matching a short with a long position. What I am more interested in is how this is made possible.

How does the Bitshares client/blockchain tell the difference in between BTS, bitUSD, bitCNY, etc? I know it automatically does this in the client, but how does it come to the determination that I own X amount of bitUSD, X amount of BTS, and X amount of bitCNY? Are they what people in the Bitcoin world call "sidechains" or what? The only information I can find is that "they are stored on the blockchain", so I am trying to understand exactly how they are stored on the blockchain.

I have the same question with the decentralized exchange. I understand that all bids and asks are stored on the blockchain, but how exactly does it function? There is apparently no counter-party risks, so I assume bids and asks are published on the blockchain and peers trade BTS for bitAssets directly with other peers. Is this a correct assumption?

I am trying to understand how Bitshares' SmartCoins and the Decentralized Exchange work on a technical level, not the economics and theories behind how SmartCoins function.

[santaclause102]

most 5 year olds cannot comprehend bitcoin

but if you do understand why bitcoin and bitcoin clones have value, then:

smartcoins have value because they are created by locking up BTS (bitcoin clones) on a blockchain at their current "real life property" value

or

if you blindly trust that bitcoins have value, then you can logically extend that trust bitcoin clone backed smartcoins

BitShares - a bitcoin clone that backs smartcoins

I thought these were really good eli5 explanations. Here is mine:  A price stable cryto currency backed by collateral that does not have a counterparty but is digital (=definition of crypto currency if you will). 

[xeroc]

https://bitshares.org/technology/price-stable-cryptocurrencies/

[jakub]

You can try your luck here:
http://wiki.bitshares.org/index.php/Main_Page
and especially this:
http://wiki.bitshares.org/index.php/GettingStarted/ELI5

But bear in mind that most of the stuff there is probably outdated and definitely does not reflect the changes that are about to happen when 2.0 goes live.

To get on overview of the 2.0 stuff (including multi signature addresses) try here:
https://bitshares.org/technology/

In one sentence: SmartCoins (previously known as bit-assets) are the byproduct of a market process matching people who want more risk with people who want less risk.

Or looking from a different perspective: a bitUSD (i.e. one of the SmartCoins) is a package of dynamically changing amount of our core currency (i.e. BTS) so that the value of this package is always worth 1 USD, no matter how the BTS/USD price fluctuates. This means that the content of this package adjusts itself automatically as the BTS/USD price changes.

[CoinHoarder]

No one knows or has a link? 

Please move to the questions subforum, I posted this in the wrong place I guess. I didn't notice that subforum before posting this.

Thanks

[CoinHoarder]

I am looking for an easy to understand explanation of how SmartCoins and Bitshares' Decentralized Exchange work on a technical level. While perusing google I was able to find a lot of economic discussion of the ideas behind SmartCoins (I think that's what you guys are calling them now.. previously bitAssets, right?) and how they work, but there is so much of that information out there that I am having trouble finding out how they work on a technical level. I think that information is out there somewhere, but it is buried in Google search results due to there being so much economic discussion of how SmartCoins work.

What I am asking is mainly... are SmartCoins sidechains, colored coins, etc, or what?? Is the decentralized exchange an array of multi signature addresses, or how does it work?? How does it fit together and work on a technical level? If anyone has a link for me that works too. I for the life of me can't find this info... maybe I need to work on my Google skills.

Hi everyone btw.. long time no talk.  Looking forward to getting more involved with the BTS community after a long hiatus, as I still see it as one of the top crypto currencies as far as the technology and feature set.