Bitcoin stocks follow-up: decentralized exchanges experiment.

This is a follow-up to the previous post dedicated to Bitcoin securities, here we’d like to give a short review of current decentralized exchanges and announce our plans to run some field experiments with them.

Actually my previous post was rather optimistic in regards to the prospects of centralized exchanges. I cannot say that I’m ready to dismiss it now, but recent SEC initiated trial against the issuer of Satoshidice stock at MPEX really makes you start thinking. They showed that they do care and will pursue their goals no matter in which currency the stocks are issued. There are some developments which could help Bitcoin stocks, such as crowdfunding legislation which is being developed by SEC now, but anyway probably the decentralized exchanges could have a brighter future. In any case, they are closer to the true decentralized nature of Bitcoin protocol, so if Bitcoin is successful they will be successful too.

Currently there are three functioning or about to be launched decentralized exchanges: NXT Asset Exchange, Counterparty decentralized exchange, and Mastercoin crowdsale model.

Let’s give a short review of each of them.

NXT Asset exchange is based on the NXT protocol, which is a decentralized protocol built completely from scratch (which is in the stark contrast to most altcoins, built on Bitcoin code). Initially the NXT coins were distributed through some sort of IPO among not so many early adopters. NXT uses proof-of-stake to verify transactions, has almost instant confirmations, offers custom aliases, and supports Asset Exchange. Anyone can issue an asset for a fee of 1000 NXT (around $60). Issued stocks are traded in a completely decentralized manner using desktop NXT client. NXT currently has a great momentum, having reached the third place in the total market capitalization among all cryptocurrencies. What makes NXT stand out is the unique source code, stable desktop clients, unique realization of proof-of-stake agorithm.

Counterparty and Mastercoin both live on top of the Bitcoin blockchain. They attempt to use the ability to validate through the Bitcoin blockchain any kind of payload, putting custom data in Bitcoin transactions. Counterparty has a fully functioning decentralized exchange, Mastercoin has started with “crowdsale” of securities, which is actually a form of IPO. The issued securities will be traded at a to-be-launched decentralized exchange. Mastercoin sports an impressive list of upcoming crowdsales http://wiki.mastercoin.org/index.php/Upcoming_Crowdsales which includes some applications which can become revolutionary.

Coinomat.com is actually a cryptocurrency exchange service; we can provide an exchange service for all the mentioned systems, offering instant crypto and fiat exchanges. At the same time we could use virtual IPO’s at these platforms to evaluate the user activity and potential transaction volume.

We’re thinking to start with NXT, which seems to be the most mature platform at the moment. We plan to provide an exchange service for NXT cryptocurrency at the same time enganging NXT community by means of an asset exchange issue. If this experiment proves to be a success, we will go on with the other platforms, testing them out and comparing them. We will be one of the first asset issuers, isn’t that exciting? :) Let’s do it, we will report our experience along the way.

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