Proposal Idea for Bitshares - Use SmartCoins instead of User Assets for Altcoins

[severo]

The witness account is a third party, but I like the method, and this thread.

I want to trade bitETH. That should be so simple, compared with the wider liquidity problem. And there's a chicken and egg aspect to the liquidity problem.

Frankly, there are coins that you can't short on Poloniex. Bitshares should serve those clients.

No, the witness is not a third party because he could never spend those coins. Alice, Bob and the witness create a 2-of-3 multisign BTS address. Two signatures are required, the witness and Alice or Bob to withdraw the deposit.

I think this system would work very well and revolutionize Bitshares, taking it to another level. I edit the proposal to include the multisign system.

[Methodise]

There is at least one possibility to exchange BitBTC and BTC in the DEX, without any need of Gateway or third parties.

For example: A has 0.1 BTC and B has 0.1 BitBTC and both want to exchange them. For this, A and B deposit an escrow of 0.12 BitBTC each in the  witness account. A and B report their bitcoin addresses to the DEX and both close the operation. The DEX checks periodically if the bitcoin has been transferred between the specified addresses and if so and there is a confirmation, returns the escrow to A. It also checks if BitBTC has been transferred. In that case it returns the escrow to B and the operation ends completely.

It is necessary to have BitBTC to buy BitBTC, but as it is possible to iterate the procedure, a very small amount is enough. The Dex could handle this iteration, performing the interchange in stages.

The witness account is a third party, but I like the method, and this thread.

I want to trade bitETH. That should be so simple, compared with the wider liquidity problem. And there's a chicken and egg aspect to the liquidity problem.

Frankly, there are coins that you can't short on Poloniex. Bitshares should serve those clients.

[severo]

There is at least one possibility to exchange BitBTC and BTC in the DEX, without any need of Gateway or third parties.

For example: Alice, Bob and the witness create a 2-of-3 multisign BTS address. Two signatures are required, the witness and Alice or Bob to withdraw the deposit.

A has 0.1 BTC and B has 0.1 BitBTC and both want to exchange them. For this, A and B deposit an escrow of 0.12 BitBTC each in the BTS multisign address. A and B report their bitcoin addresses to the DEX and both close the operation. The DEX checks periodically if the bitcoin has been transferred between the specified addresses and if so and there is a confirmation, he signs and returns the escrow to A. It also checks if BitBTC has been transferred. In that case he signs and returns the escrow to B and the operation ends completely.

It is necessary to have BitBTC to buy BitBTC, but as it is possible to iterate the procedure, a very small amount is enough. The Dex could handle this iteration, performing the interchange in stages.

[sudo]

bitBTC is not a successful example.

BTC is not as stable as CNY/USD, so borrowing or holding bitBTC means much more risk  than doing the same to bitCNY/bitUSD, and BTC itself is a blockchain token, no enough necessity to create other token to peg it.

OpenLedger is good, but what they do is far from enough, as a gateway, they should do much more market making work to their UIA but they do not, that's why I am preparing another gateway, the name is GDEX.

one key point for BTS to grow is the demand for smart coins grow, which means there should be many assets in DEX for traders to trade. in other words, we need to make DEX an exchange with liquidity and depth similar to central exchange.

surely if we can realize side chain or some other cross-chain way to move tokens from otherchains to BTS, we may not need most of the UIA, but now in my view we still need to rely on UIA to make DEX to grow.

the other key point for BTS is to be listed in more central exchanges, we need more volume for BTS, we need BTS price to grow, only then it's possible for smartcoin supply to grow and attract more people to accept it.

for example, as China banned cryptocurrency exchange, now it's not  easy for people to buy tokens with CNY, some exchanges outside China are considering to open bitCNY markets, their main concern is that bitCNY supply is too low.

that's also what I am trying to do: make BTS be listed in more exchanges and create a gateway to make DEX have much more trading volume.

 

[yvv]

Such a gateway would centralized, but trustless.

Care to explain? I cannot imagine how that would work.

If a gateway gives bitBTC in exchange of BTC, you don't need to trust it. It still stays a centralized business.

But that's a completely different business model, with a whole bunch of additional risks (on the side of the gateway owner). I perfectly understand that they do not offer such a service.

This business model may be actually not that risky as it seems. Gateway don't need to keep 100% BTC reserve in this case, just enough to satisfy daily withdrawal volume. When users deposit BTC, gateway would buy bitBTC on DEX, if the offer exists, or issue in other case. Risk of margin call would not be a problem for them, because they would keep BTC and bitBTC reserves, and if BTS price falls, they would sell a fraction of their reserves and add to collateral. When users withdraw their bitBTC, gateway would settle its debt. They don't offer such a service because they think that everybody should be happy with their IOU, and they don't need to bother to improve their service, but evidently many people are not happy with the current business model.

[pc]

even with actual bitcoins (you would simply need to exchange those bitcoins for BitBTC first on the Dex, then trade for BitUSD. Or,  even better, trade for BitUSD directly, although this doesn't seem to currently be offered anywhere).

I think you are contradicting yourself here. HOW would you exchange BTC for bitBTC or trade BTC for bitUSD without a centralized gateway? I thought that's exactly what you're proposing to get rid of.

Such a gateway would centralized, but trustless.

Care to explain? I cannot imagine how that would work.

And surely, if OL offered deposits/withdrawals in bitBTC instead of OPEN.BTC, bitBTC volume would be as high as OPEN.BTC volume now.

But that's a completely different business model, with a whole bunch of additional risks (on the side of the gateway owner). I perfectly understand that they do not offer such a service.

Again, BTS provides only infrastructure. Anyone can use it. You are free to provide such a gateway if you think it's worth it.

[yvv]

even with actual bitcoins (you would simply need to exchange those bitcoins for BitBTC first on the Dex, then trade for BitUSD. Or,  even better, trade for BitUSD directly, although this doesn't seem to currently be offered anywhere).

I think you are contradicting yourself here. HOW would you exchange BTC for bitBTC or trade BTC for bitUSD without a centralized gateway? I thought that's exactly what you're proposing to get rid of.

Such a gateway would centralized, but trustless. This is much better, than centralized gateway, which requires to trust your funds to it.

And surely, if OL offered deposits/withdrawals in bitBTC instead of OPEN.BTC, bitBTC volume would be as high as OPEN.BTC volume now.

[bitcrab]

bitBTC is not a successful example.

BTC is not as stable as CNY/USD, so borrowing or holding bitBTC means much more risk  than doing the same to bitCNY/bitUSD, and BTC itself is a blockchain token, no enough necessity to create other token to peg it.

OpenLedger is good, but what they do is far from enough, as a gateway, they should do much more market making work to their UIA but they do not, that's why I am preparing another gateway, the name is GDEX.

one key point for BTS to grow is the demand for smart coins grow, which means there should be many assets in DEX for traders to trade. in other words, we need to make DEX an exchange with liquidity and depth similar to central exchange.

surely if we can realize side chain or some other cross-chain way to move tokens from otherchains to BTS, we may not need most of the UIA, but now in my view we still need to rely on UIA to make DEX to grow.

the other key point for BTS is to be listed in more central exchanges, we need more volume for BTS, we need BTS price to grow, only then it's possible for smartcoin supply to grow and attract more people to accept it.

for example, as China banned cryptocurrency exchange, now it's not  easy for people to buy tokens with CNY, some exchanges outside China are considering to open bitCNY markets, their main concern is that bitCNY supply is too low.

that's also what I am trying to do: make BTS be listed in more exchanges and create a gateway to make DEX have much more trading volume.
 

[pc]

A SmartCoin is not the same as its underlying counterpart. If you have actual bitcoins in your BTC wallet and want to exchange them for USD, the bitBTC/bitUSD market is useless to you.

SmartCoins are useful for traders (because they're derivatives), and they could be useful to merchants/users for transferring value (at least in the case of FIAT derivatives). The latter is unlikely to happen for altcoins.

First of all, I disagree, and believe the BitBTC / BitUSD has no downsides currently (besides liquidity) for anyone looking to speculate between the value of BTC and USD,

That's what I said - they are interesting for traders.

even with actual bitcoins (you would simply need to exchange those bitcoins for BitBTC first on the Dex, then trade for BitUSD. Or,  even better, trade for BitUSD directly, although this doesn't seem to currently be offered anywhere).

I think you are contradicting yourself here. HOW would you exchange BTC for bitBTC or trade BTC for bitUSD without a centralized gateway? I thought that's exactly what you're proposing to get rid of.

Also, you didn't give any reasons why SmartCoins are not effective for Altcoins.

Oh, they would be as effective as they are for BTC/USD/CNY. I just don't see a use for altcoins at all.
Providing feeds for additional coin means additional work for the witnesses, so we should only add SmartCoins if there's a benefit to be expected. I don't expect significant volume from altcoins, and therefore no benefit either.

Not sure if you're aware of it, but *anyone* can create SmartCoins. No need to lobby for this - if you want them, just go ahead and create them.

[renkcub]

A SmartCoin is not the same as its underlying counterpart. If you have actual bitcoins in your BTC wallet and want to exchange them for USD, the bitBTC/bitUSD market is useless to you.

SmartCoins are useful for traders (because they're derivatives), and they could be useful to merchants/users for transferring value (at least in the case of FIAT derivatives). The latter is unlikely to happen for altcoins.

I'm not understanding your argument. First of all, I disagree, and believe the BitBTC / BitUSD has no downsides currently (besides liquidity) for anyone looking to speculate between the value of BTC and USD, even with actual bitcoins (you would simply need to exchange those bitcoins for BitBTC first on the Dex, then trade for BitUSD. Or,  even better, trade for BitUSD directly, although this doesn't seem to currently be offered anywhere).

Also, you didn't give any reasons why SmartCoins are not effective for Altcoins. Personally, I totally disagree with you, and even believe the reverse is true - that SmartCoins would be MORE effective for Altcoins than Fiat, Gold, etc., in small part because their value is correlated to BTS (less volatile against the collateral), and largely because  "instant send gateways" would be easier to support by companies like OL for crypto than Fiat (less regulatory requirements and no traditional banking required). Merchants could eventually also alternatively simply support payment in Smartcoins, if BTS became dominant enough.

Additionally, they would have all the usual benefits over UIA including no "exchange black swan", less fees, decentralized...

Not trying to criticize. Just honestly trying to understand and get people onboard to this idea. If we don't go this way, I see much less value in BTS long term. Why leave Crypto off the BitShares current number one value add (Dex)?

[renkcub]

To me, that was the main idea of the DEX and only smart coins give you true decentralized exchange. Imagine if OL is going down and all these people are stuck with open.xxx. This will just kill completely Bitshares. OL much better then a classic exchange it is still a single point of failure for the DEX.
I guess the smart coin idea never caught up for alts because of the low liquidity of smart coins, not sure how your proposal solves that.  Imagine OL issuing smart coins instead of UA.

Thanks for the comments!  I don't think liquidity is the main hurdle... it's just that nobody ever made and supported SmartCoins for Altcoins, so all volume went to OL
 by default (which actually hurts MM's and liquidity, due to brutal fees, and partially thanks to OL marketing, also)

So, I need help from those who know how to submit a proper BTS Proposal to get the SmartCoins and maintained, and added to the default DEX BitBTC trading tab that already exists, as well as the below suggestions... any ideas?

2) Encourage liquidity on SmartCoins through implementation of a Maker Taker model, in which limit orders are free or receive credit back. 3. Less Important - Fund an official "bot" for users to run and add liquidity to the Dex (see BTSBOTS))

[oco101]

To me, that was the main idea of the DEX and only smart coins give you true decentralized exchange. Imagine if OL is going down and all these people are stuck with open.xxx. This will just kill completely Bitshares. OL much better then a classic exchange it is still a single point of failure for the DEX.
I guess the smart coin idea never caught up for alts because of the low liquidity of smart coins, not sure how your proposal solves that.  Imagine OL issuing smart coins instead of UA.

[severo]

A SmartCoin is not the same as its underlying counterpart. If you have actual bitcoins in your BTC wallet and want to exchange them for USD, the bitBTC/bitUSD market is useless to you.

SmartCoins are useful for traders (because they're derivatives), and they could be useful to merchants/users for transferring value (at least in the case of FIAT derivatives). The latter is unlikely to happen for altcoins.

It is not the same an accounting note that a real BTC and nevertheless millions of operations are done with these notes in the centralized exchanges. With SmartCoins it will be the same, but without counterpart risk.

[pc]

A SmartCoin is not the same as its underlying counterpart. If you have actual bitcoins in your BTC wallet and want to exchange them for USD, the bitBTC/bitUSD market is useless to you.

SmartCoins are useful for traders (because they're derivatives), and they could be useful to merchants/users for transferring value (at least in the case of FIAT derivatives). The latter is unlikely to happen for altcoins.

[oldman]

I agree and would vote for this. Ideally Bitshares would work just like Polo - deposit, trade, withdraw any coins directly without any funny business or the user ever knowing there was a smartcoin in the middle.