Quote from: Sukrim on October 13, 2013, 02:15:05 AM

Quote from: mgio on October 11, 2013, 11:20:04 PM

But what I am proposing isn't just an abstract idea. I'm saying we need to actually start making a security using an idea like I proposed or maybe just following the colored coins proposal.

OpenSource software exists right now running on servers and being available for listing and trading assets denominated in BTC using Open Transactions (via blinded tokens), Colored Bitcoins and Ripple. Also there are centralized (often closed source) exchanges that put a strong focus on crypto (e.g. MPOE where every trade etc. is signed with PGP keys so it is externally verifiable and auditable).

In contrast your idea, even though a nice one and probably relatively easy to implement, is NOT implemented anywhere that I know of, even in a test/beta scenario.

The problem with these decentralized exchanges is that there are few incentives to operate one. Ripple solved it by creating XRP and they get a lot of hate because of that. Colored Coins seems to piggyback as much as possible on Bitcoin, so it wouldn't really need much anyways besides a note on the company website to trade this asset and OpenTransactions... well I have yet to see someone even using them, though the software exist for years now.

We need people starting a security on ANY existing platform and stop about designing ideas on how to come up with yet another decentralized trading platform. The platforms exist for months and years already, it is just that issuers of securities seem to be more happy with using centralized websites than not-so-nice but secure and distributed exchanges. Similar issue like Chaumian blinded money (which was even being tested live) compared to PayPal (or bitcoin-qt vs. inputs.io). Their selling point is simply "trust us, then all you need is username + pwd". People care about simple more than about security and privacy, even(!) in the Bitcoin ecosystem!

Yes, I'm aware a lot of the software already exists. The more that I think about it, the more I feel like colored bitcoins is the way to go. But a real exchange is a lot more than that. You need everything else that goes along with it. Namely, a p2p way of distributing information regarding the available securities and finding people to trade with.

The thing is, no one runs a decentralized exchange. That's the point. Who runs Bitcoin? The only thing you need is a website or someplace for users to download the client software and there you go.

Now, the better question is why isn't there incentive for people (both traders and issuers) to use a decentralized exchange. Up until now there hasn't been. But BTCT is gone. Bitfunder can't be used by US residents so it might as well be gone. And Havelock Invesments is too small and will likely suffer the same fate as Bitfunder and BTCT if it gets bigger. There is now a HUGE incentive to a decentralized exchange that can't get shut down because we are almost out of options.

Here is what we need:

- Colored coins as the backend to deal with marking transactions as belonging to a specific security, etc. We need an API based on top of colored coins that let's a trader or issuer perform everything they'd need to do with a security and have it happen using colored coins. For example, create a security, trade shares from on address to another for a given price, get the last trade price of a security, etc. I'm working on specifying this API right now.

- A client that runs as a p2p system for distributing security data and facilitating trading. This can work like any other p2p system (gnutella, bit torrent, bitcoin, etc). It will be used to distribute information and updates about each security by the issuers and allow the traders to post orders for buying and selling which can be automatically filled by the network. This is the part that doesn't exist yet, but it is nothing novel, technology-wise. It is also the part that doesn't require the bitcoin network or the same level of security. All the security and anonymity are provided by the bitcoin network. Because this will be a p2p network with no central server, it can not get shut down.