Can someone help me understand how a decentralized exchange would work?

What really is it and how exactly would it work?
How would one go about getting USD onto the exchange?
Anything you understand about it would be beneficial info for me.



  • ThePatientThePatient Member Posts: 5
    no one can describe a decentralized exchange for me?
  • PauliousPaulious Member Posts: 1
    One could post a sell bid or a contract on a block-chain and another one could post a bid on a block-chain and the transaction would get executed in the fairest way possible.. No money would be kept centralized (uploading fund to mt.gox etc) blockchain would also freeze the asset that you have placed for the transaction... Just my way of thinking how it might be acomplished... not sure if it is true but is seems rather logical
  • MilanMilan San Diego, CAMember Posts: 46
    I have a lot of trouble with this concept too. For example, who do I hand or wire my dollars (or Yen, or Euro, or whatever) to if I want to buy ether (or bitcoin, or whatever) on a decentralized exchange? Is there really a way to do this without trusting anyone?

    Perhaps escrow mechanisms and reputation systems can play an important role here, I just haven't wrapped my head around a really good way of setting up a fully decentralized exchange yet either...
  • Manfred_KarrerManfred_Karrer Member Posts: 17
    We are working on a concept for a P2P Fiat-Btc Exchange:
    The basic concept was based on collaterals to lead to fair behaviour. But it turned out that this will be not covering all attack scenarios, so we will use a 3rd party escrow. There is a solution for logging the SSL data of the banking session, so the escrow get real evidence of the bank tx.
    We would also like to introduce identity (use hash of Bank account nr.) and a reputation system. We need some kind of storage system for that, which is a bit difficult in the BTC world, so I would like to find out how to implement that in Ethereum.
    Does anybody know how to access the BTC blockchain from Ethereum? Is there an equivalent to MultiSig addresses in Ethereum, or has that to be done as a contract?
  • SatCaSatCa Member Posts: 29
    edited March 2014
    Hi my friend, great to see you're gaining perspectives of others in the community.

    A decentralized exchange, would work on the basis of adoption. If a person is ready to back the system, with his USD.

    He may bring to life an interface for people to exchange their money. But any business will require control measures, therefore the exchange either works on absolute reserves or fractional reserves.

    In any case, the core investors in the business need to be professional bankers for good growth.
  • JasperJasper Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
    One way is that A provides H(S) where S is a secret. He also puts out a contract(or in case of bitcoin a transaction) that will only pay out using that secret toward B. B, can use H(S) to make a contract that only pays out using the secret.

    Both parties are safe. A simply wont send out the secret if B doesnt show up with his side of the contract. B is safe because in order for A to collect, he must reveal S. (It would need some kind of time-out refunding mechanism where A's transaction times out first, then B)

    This can work *across disconnected currencies*. Really, exchanges should use this, and clients should implement it.. (obviously it doesnt work with fiat)

    I believe coinswap kindah works like that,, but i dont understand the details.
  • giuliogiulio Member Posts: 7
    Perhaps a Hawala-like system:

    Z wants to sell 1 BTC to remote A for 500$ cash.
    Z places 1 BTC in escrow
    A gives 500$ to B (high reputation or known to A). Both confirm
    B gives 500$ to C (high reputation or known to B). Both confirm.
    ... and so on until the 500$ reach Y ((high reputation or known to Z, local to Z).
    Y gives 500$ to Z. Both confirm.
    1 BTC is sent to A.
  • JasperJasper Eindhoven, the NetherlandsMember Posts: 514 ✭✭✭
    Note: Manfred_Karrer's fiat exchange can be done with money replaced with any product or service. Which is a two-out-of-two multisig. However in some cases it might be better to have a third party who can decide to refund the money.

    The Hawalla system looks really trustful the me. If A can find anyone that can sell him 1BTC directly, that quickly is prefferable i reckon. That person might not want to own less bitcoin, but all it requires that he has a larger range he can send is dollars/euros/whatever, then he can immediately use that to buy back 1BTC elsewhere.
  • tym4ttym4t Nagata-ku, Kobe-shi, Hyogo-ken, JapanMember Posts: 71 ✭✭✭
    One way is to have deposit vending machines that are participants in the transaction system. Vending machine operators would put in a crypto currency deposit equal or greater the amount that they handle at any given time into an escrow as a way for them to prove their liquidity. You then take your cash into one of these vending machines (after validating that this machine is part of a legitimate operation through digital signatures, etc..)

    No risk to any members of the transaction. If the deposit vending machine vendor does not deliver then the deposit is released to the seller.
  • Manfred_KarrerManfred_Karrer Member Posts: 17

    We are working on a concept for a P2P Fiat-Btc Exchange:

    That project is now in alpha stage:

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