[Passed] Motion to provide seed funding for B&C Exchange - a decentralized exchange built on the Peershares platform

[crypto_coiner]

Can anybody explain/elaborate to me what is decentralized in Coinffeine?
I gave it a read, but could not detect anything decentralized

[dysconnect]

I agree, it really just replaces a website with an app where settlements are arranged directly among users. It’s still bottlenecked by the transaction frequency of the blockchain and by the costs/risks of traditional payment processors, although it does take exchange hacks out of the picture.

[Sebsebzen]

I downloaded the client and also don’t really understand it. It asks you to login with OKCoin. Maybe that’s just BETA. But yeah, like you said, it just replaces the website.

[cryptog]

This thread might help. The decentralized exchange development watcher thread
What i got is that it is based on smart contracts but i feel it will not achieve anything useful sadly.

[desrever]

Can anybody explain/elaborate to me what is decentralized in Coinffeine?

Well, beside all the criticism, you hold bitcoins locally versus transfer to an exchange. This is the “breakthrough” we all should be looking at.
If they “hack” coinffeine website, they won’t take your shares.

I suggest everybody to read and try to participate to the r/Bitcoin discussion and learn from community reaction :

[crypto_coiner]

Well, beside all the criticism, you hold bitcoins locally versus transfer to an exchange.

OK - but you cant hold bitcoins locally in a self contained manner (for size issue) unless you are big enough

[ttutdxh]

Ok, so Coinffeine is the equivalent of buying BTC in a exchange, depositing money in very small quantities, withdrawing immediately the bought BTC and repeating the process over and over again? What is the advantage? Why would I want to add Coinffeine to the equation and add more risk, because it is more automated?

I only see another piece of software, and with it new risks such as malicious code or bugs. As long as Coinffeine can make and verify the transactions for you, it is in fact, taking control over your bitcoin wallet and OKcoin account.

[desrever]

unless you are big enough

I am not sure I understand this correctly.

Ok, so Coinffeine is the equivalent of buying BTC in a exchange, depositing money in very small quantities, withdrawing immediately the bought BTC and repeating the process over and over again?

Not at all, where di you read this? I am not familiar with their design at all, but if it’s anywhere near Bitsquare or Lighthouse design, Coinfeine is an open source wallet with some multi-sig and collateralization feature.

[desrever]

Do other people have the same problem?

yep, they were all there right after importing from NSR wallet

[ttutdxh]

No. It is not a wallet. It is a client that connects to your running bitcoin wallet https://github.com/Coinffeine/coinffeine/blob/master/coinffeine-peer/src/main/scala/coinffeine/peer/bitcoin/BitcoinPeerActor.scala and uses your OKpay login data https://github.com/Coinffeine/coinffeine/blob/master/coinffeine-peer/src/main/scala/coinffeine/peer/payment/okpay/OkPayClient.scala to access your account on your behalf and make/verify payments. Just like a bot.

[crypto_coiner]

I am not sure I understand this correctly.

ttutdxh:

Do/can you hold bitcoin locally on your local machine from the first place?

[desrever]

It is a client that connects to your running bitcoin wallet

Which “bitcoin wallet” ?

Okpay is for fiat, not crypto .

from user manual

The first step expects you to introduce the OKPay wallet ID and seed token. This information will be used by Coinffeine to consume the OKPay API to send and receive fiat payments. The second step shows a resume of your Bitcoin wallet, including the public address where you can transfer some funds to start exchanging.

https://github.com/Coinffeine/coinffeine/wiki/Exchange-algorithm

[cryptog]

I have another set of questions about the design of B&C.

In my understanding, a trader that wants to use B&C Exchange will only need to access the Web interface (provided by a server) without having to download any blockchain.

So the following risks still remain:

• risk of DDoS of the web site: no access to the web site
  –> Any particular envisioned way to minimize that?

• hacking of your account: a rogue user could steal your login credentials and steal your money.
  –> Would your password be stored in the server or in the browser a la blockchain.info or somewhere else?

In order words, no “money” would be stored by a hot/cold wallet centralized by the service itself but you could still be stolen your account.

Am I correct?

Thank you.

[JordanLee]

So the following risks still remain:

• risk of DDoS of the web site: no access to the web site
  –> Any particular envisioned way to minimize that?

Such websites permit access to the B&C Exchange network, but they will not actually be a part of the network. In order to provide access, such websites will run the B&C Exchange client (either on the same server but ideally a separate one) and allow the web server to access the B&C Exchange client to communicate with the B&C Exchange network. So, even if the DDoS attack is severe and extremely successful, it will have zero effect on the B&C Exchange network, because it will only affect the web server.

Because the website will use only the B&C blockchain as its database, users will not be dependent on the website to access their exchange account. They can use another website or the B&C Exchange client itself.

It is possible to launch a DDoS against B&C Exchange. Such an attack would be extremely lucrative for BlockShare holders, so we can only hope someone is foolish enough to do it. While the fees for B&C Exchange will be determined by shareholders in real time, one BlockCredit per kilobyte might be a reasonable choice. In that case, a DDoS attack will bring revenues of around $1000 per minute.

• hacking of your account: a rogue user could steal your login credentials and steal your money.
  –> Would your password be stored in the server or in the browser a la blockchain.info or somewhere else?

In order words, no “money” would be stored by a hot/cold wallet centralized by the service itself but you could still be stolen your account.

Login credentials will be nothing more than a BlockCredit private key, which will never be known to the server. It will stay in the browser using javascript, in some ways similar to blockchain.info. It is different from blockchain.info in that they store encrypted private keys on their servers, and there will be no need to do that in our case. Without a backup, blockchain.info users cannot access their Bitcoins if blockchain.info suddenly ceases operations. In contrast, B&C Exchange users will be able to access their exchange account if the website suddenly ceases operations through any other user interface.

It is true that if an attacker gains access to one’s BlockCredit private key they can steal all funds in the exchange account, just like if an attacker gains access to a Bitcoin private key they can steal the Bitcoins.

[Raythma]

Is there any data about Centralized and decentralized Exchange’s Average No. of daily trades So we can Roughly Calculate B&C’s Profitability?
Unlike Nu, B&C is not the first, and historical data should be used to assist Expected Revenues and Compare it to the Blockshares Current Price, At least as a Marketing move!

[mhps]

Roughly Calculate B&C’s Profitability

My quick and dirty attempt.

If B&C volume is 1% of today’s total BTC volume ($0.3M, size of bittrex), divendends is $0.2/10k/mo. Reaching 10% (BTC-e) the dividends will be $2/10k/mo. Reaching 30% (Bitfinex) it will be $6.7/10k/mo.

note that 10k bks then is 1 bks now.

[Raythma]

I did my own Too dirty attempt minute ago depending on JL calculations by assuming that the DDoS attack would need 1000 times the usual network transactions!

DDoS attack will bring revenues of around $1000 per minute.

and surprisingly it turned out to give the same result as your least expectation

divendends is $0.2/10k/mo.

Thanks @mhps , this helps.

[masterOfDisaster]

The calculations seem to be valid considering on the assumptions they are based on.
One difference between traditional (centralized) exchanges and BCE is the fee model.
At traditional exchanges you pay a fee for a successful transaction (buy/sell), but nothing for placing or deleting orders.
That’s different at BCE, because each transaction has a size and requires a fee.
So BCE is foremost interesting for buying and selling big amounts (values) of coins. It’s interesting because the security of BCE is higher than that of centralized exchanges and the fee is not per transaction (value of transaction) amount, but per transaction volume (transaction size in the blockchain).

For that reason I expect BCE to “underperform” in terms of “fee per transaction volume (USD)” compared to the exchanges we know.
It will be hard to change that. Raising the fees would be an obvious measure to adjust this, but if BCE really wants to be decentralized, it should not offer a decentralized trading place for whales, but for all people.
That’s the reason why the fee per byte should only be raised to a certain level.

I’d very much like to see a layered fee model where customers can choose the security level by choosing different m-of-n multi signature options that can have different fees per byte.
That way you could keep BCE affordable for people trading comparably small amounts while requesting a disproportionately higher fee for big (USD volume) transactions (disproportionately, because more signatures already lead to bigger transaction sizes).

Now I’m far from understanding the inner working of BCE and I’m not sure whether the details are already designed.
So far I only know about multi signature related to deposit addresses. I don’t know how order transactions will be designed.

By current BCE design (page 3) only one level of multi signature will be voted on by the shareholders

number of required reputed signers of deposit addresses to effect a transfer by blockchain ID

So the only way to steer the “fee per traded USD value” is to make use of another vote that is in the design

maximum trade size permitted by asset ID

If you limit the maximum trade size you effectively have a kind of “fee per traded USD volume”

My idea regarding different fee levels might make things overly complicated (or impossible at all).
Following the Unix philosophy (and I recognize the Peershares design follow that very successful philosophy) it might be better to create another fork (or forks) of BCE with a different set of “multi signature / maximum trade size” settings. Maybe I should call that instance instead of fork.
Technically it would be a fork, but from customer perspective it might be an instance, still BCE, but with a different flavor.
Transferring coins between different BCE instances would only be a matter of transferring them between “accounts” as the UTXO from the multi signature addresses would only be sent to a different multi signature address (on another BCE instance) in a combination of a withdraw (from one BCE instance) and a deposit (on another BCE instance).
Even 0-confirmation transactions between BCE instances might be possible, because either one or the other multi signature address would be in control of the coins. That would require to identify the deposit address as a BCE multi signature address (not sure whether and if how that is possible).

As long as the protocol for different BCE instances stays the same, the development efforts should not be much higher compared to one BCE instance.
Economically the different instances would need to be treated as different corporations, different entities with independent ownership.
Initially the shareholders would be identical. And even if that changes over time there’s a big incentive for shareholders not to hard fork from (the) other BCE instance(s) and follow the development of the main dev team.

I want to voice idea that early - it might be included in development decisions; just in case that sounds useful…

[tomjoad]

it might be better to create another fork (or forks) of BCE with a different set of “multi signature / maximum trade size” settings. Maybe I should call that instance instead of fork.Technically it would be a fork, but from customer perspective it might be an instance, still BCE, but with a different flavor.

That’s a neat idea. B&C Exchange for everyday transactions using a lower m-of-n requirement, and B&C Exchange Premium for whale trading at higher m-of-n (and higher fee) requirements, all packaged together in one web UI. As you mention, an interesting result would be that BKS and BKS-Premium shares would mirror each other in ownership initially (if a 1-1 ratio was held for creation), but would quickly have different owners who place different valuations on each business.

I suspect that if competitors choose to create forks of B&C Exchange, changing the signing requirements and transaction fees will be one way they attempt to differentiate themselves. Your idea above strategically gets in front of a duplication attempt.

[masterOfDisaster]

I suspect that if competitors choose to create forks of B&C Exchange, changing the signing requirements and transaction fees will be one way they attempt to differentiate themselves.

Absolutely!
My intention when I thought about a staged fee model was to provide customers with the best offer for their needs while giving BCE the chance to get appropriately paid for its service.
Having market needs/niches filled by BCE casually protects BCE from competitors trying to fill that market niche.

Competitors that fork BCE will already have a hard time being successful without the support of a stable crypto currency like NBT. As it’s unlikely that Nu will support that anytime soon (due to at least 40% of BCE being in the hands of Nu at the beginning) they need to find other support.
1:0 for BCE

Providing a BCE instance with the same basic data as a potential competitor’s will be more convenient for customers already familiar with BCE.
2:0 for BCE

Your idea above strategically gets in front of a duplication attempt.

It should lower the attractiveness of copying BCE very much having instances provided by BCE that support the major needs of customers