4 ms·

> When you want to purchase bitcoins on an exchange, you start out by depositing e.g. dollars on the exchange, thus converting your dollars to that exchange's d

> When you want to purchase bitcoins on an exchange, you start out by depositing e.g. dollars on the exchange, thus converting your dollars to that exchange's dollar token (IOU x USD). You then sell your dollar tokens for bitcoin tokens on the exchange, which is super fast because it centrally controls token ownership, and when you want to get your bitcoins out you sell/redeem your BTC tokens for actual BTC. Wouldn't that be a perfect problem for a smart contract? It could be used to generate such tethering tokens, hold all real coins (ethereum, here, but if I got it correctly, lightning will implement smart contracts in btc blockchain as well in the future), allow for fast token exchanges and then slower withdrawal from the contract stash. Converting fiat to tokens is still the problem, here, obviously.

giergirey 9y ago
Yes, I also think exchanging tokens is one of the (few?) situations where a smart contract really is a great solution to a real world problem (as opposed to blockchain hype). Definitely an interesting area, I've been watching this space, here's some interesting ones: On the tethered tokens side, https://decentralizedcapital.com https://decentralizedcapital.com seem to be offering tethered tokens backed by real currencies (and cryptocurrencies on other chains). Not heard much about them though. Implementing full exchange matching rules is pushing at the limit of what's possible in an Ethereum smart contract - https://ubitok.io https://ubitok.io are working on it (disclaimer: I'm involved with them!). As others have mentioned, https://etherdelta.github.io https://etherdelta.github.io is one of the better known decentralised token exchanges - though they do use an off-chain matching engine so it's not totally on-chain. https://oasisdex.com https://oasisdex.com have gone the other way - they're 100% on-chain, but they don't try to do best execution / automated matching - you have to pick an order to trade with.
- zdkl 9y ago
  If I want to transform (BTC|LTC|eth) tokens to cash, how does introducing an intermediate token help?
  - giergirey 9y ago
    OK, suppose you want to sell Litecoins for USD cash in a bank account. Now, admittedly, it might be that today a one stop centralised exchange is the best choice for you. But by introducing intermediate Ethereum based tokens, you've broken down the task into three parts, potentally allowing more competition for each part: 1. finding someone willing to exchange your Litecoins for an Ethereum tethered-LTC token 2. finding someone willing to exchange your Ethereum tethered-LTC token for an Ethereum tethered-USD token 3. finding someone willing to exchange Ethereum tethered-USD tokens for bank account USD. Part 1 is purely crypto-currency-based (albeit on different chains), and so should have lower fees than anything involving fiat transactions. It's also free of exchange rate risk, so doesn't need a fully-fledged exchange - should be easy to automated and audit. Part 2 is purely Ethereum-based, and this is where competition should drive fees down to near-zero. Because a smart-contract can run this, there's (potentially!) zero risk of the exchange being hacked / running off with your coins / taking weeks to verify you / being shut down by regulators. Part 3 still involves the ugly movement from crypto to banking. But now it's just going from tethered-USD to USD - so for the processor there's no exchange rate risk, or need to deal with weird and wonderful cryptocurrency networks. And perhaps one day you'll be able to live without Part 3 - you might start to find you can spend tethered-USD in more and more places without needing to go to a bank account ... Disclaimer: I'm involved with the https://ubitok.io https://ubitok.io decentralised Ethereum exchange so I do have a bit of a vested interest in decentralised exchanges! Would love to hear some counter opinions though ...
    - zdkl 9y ago
      Thank you for taking the time to answer. Respectfully, I see no point in the mechanism you outline above. You're moving the icky cash-for-tokens risk source from the established coin markets to your private coin with no added benefit I can discern. If you already assume I as user don't trust the established exchange, what makes you confident that this setup with the added complexity alters any downside/risk/cost of transferring value from coin tokens to cash? [Edit] For instance given a user with a diversified portfolio of coins, in what way does adding another coin like asset facilitate any of the coin-coin or coin-cash transactions?
runeks 9y ago
A smart contract cannot hold USD because it doesn't exist on a blockchain. With USD, all you get is credit, and going through a Blockchain when the weak link is the USD debitor doesn't make much sense (blockchains are decentralized, credit is inherently centralized). Secondly, blockchains are generally too slow due to their broadcast-all nature. There's really no reason to broadcast my coffee purchase to the entire world so they can embed it in history for all eternity. The merchant and me can keep the receipt if we want, but there's little reason for anyone else to participate, particularly if we want to do it cheaply/efficiently.
ManfredKarrer 9y ago
IOU exchanges are just postponing the real problem, that the gateway to the legacy system (Fiat). With gateways converting and issuing IOUs to Fiat you make the gateway to the actual exchange including all problems of trust and security.

giergirey 9y ago

Yes, I also think exchanging tokens is one of the (few?) situations where a smart contract really is a great solution to a real world problem (as opposed to blockchain hype). Definitely an interesting area, I've been watching this space, here's some interesting ones: On the tethered tokens side, https://decentralizedcapital.com https://decentralizedcapital.com seem to be offering tethered tokens backed by real currencies (and cryptocurrencies on other chains). Not heard much about them though. Implementing full exchange matching rules is pushing at the limit of what's possible in an Ethereum smart contract - https://ubitok.io https://ubitok.io are working on it (disclaimer: I'm involved with them!). As others have mentioned, https://etherdelta.github.io https://etherdelta.github.io is one of the better known decentralised token exchanges - though they do use an off-chain matching engine so it's not totally on-chain. https://oasisdex.com https://oasisdex.com have gone the other way - they're 100% on-chain, but they don't try to do best execution / automated matching - you have to pick an order to trade with.

zdkl 9y ago
If I want to transform (BTC|LTC|eth) tokens to cash, how does introducing an intermediate token help?
- giergirey 9y ago
  OK, suppose you want to sell Litecoins for USD cash in a bank account. Now, admittedly, it might be that today a one stop centralised exchange is the best choice for you. But by introducing intermediate Ethereum based tokens, you've broken down the task into three parts, potentally allowing more competition for each part: 1. finding someone willing to exchange your Litecoins for an Ethereum tethered-LTC token 2. finding someone willing to exchange your Ethereum tethered-LTC token for an Ethereum tethered-USD token 3. finding someone willing to exchange Ethereum tethered-USD tokens for bank account USD. Part 1 is purely crypto-currency-based (albeit on different chains), and so should have lower fees than anything involving fiat transactions. It's also free of exchange rate risk, so doesn't need a fully-fledged exchange - should be easy to automated and audit. Part 2 is purely Ethereum-based, and this is where competition should drive fees down to near-zero. Because a smart-contract can run this, there's (potentially!) zero risk of the exchange being hacked / running off with your coins / taking weeks to verify you / being shut down by regulators. Part 3 still involves the ugly movement from crypto to banking. But now it's just going from tethered-USD to USD - so for the processor there's no exchange rate risk, or need to deal with weird and wonderful cryptocurrency networks. And perhaps one day you'll be able to live without Part 3 - you might start to find you can spend tethered-USD in more and more places without needing to go to a bank account ... Disclaimer: I'm involved with the https://ubitok.io https://ubitok.io decentralised Ethereum exchange so I do have a bit of a vested interest in decentralised exchanges! Would love to hear some counter opinions though ...
  - zdkl 9y ago
    Thank you for taking the time to answer. Respectfully, I see no point in the mechanism you outline above. You're moving the icky cash-for-tokens risk source from the established coin markets to your private coin with no added benefit I can discern. If you already assume I as user don't trust the established exchange, what makes you confident that this setup with the added complexity alters any downside/risk/cost of transferring value from coin tokens to cash? [Edit] For instance given a user with a diversified portfolio of coins, in what way does adding another coin like asset facilitate any of the coin-coin or coin-cash transactions?

runeks 9y ago

A smart contract cannot hold USD because it doesn't exist on a blockchain. With USD, all you get is credit, and going through a Blockchain when the weak link is the USD debitor doesn't make much sense (blockchains are decentralized, credit is inherently centralized). Secondly, blockchains are generally too slow due to their broadcast-all nature. There's really no reason to broadcast my coffee purchase to the entire world so they can embed it in history for all eternity. The merchant and me can keep the receipt if we want, but there's little reason for anyone else to participate, particularly if we want to do it cheaply/efficiently.

ManfredKarrer 9y ago

IOU exchanges are just postponing the real problem, that the gateway to the legacy system (Fiat). With gateways converting and issuing IOUs to Fiat you make the gateway to the actual exchange including all problems of trust and security.