Published on: 2016-08-08T11:01:57+00:00
There is a discussion about the possibility of doing instant trades between altcoins using channels and the exchange as a hub. However, this doesn't work with fiat accounts. To eliminate counter-party risk, a "100% reserve" company could issue fiat tokens that the exchange could trade. This would ensure that investors still have their altcoins and fiat tokens even if the exchange goes down. However, there is still a risk that the token company could go bankrupt. This risk could be mitigated by requiring verified accounts to cash out tokens. The company could set up a blockchain where it signs blocks instead of mining, earning transaction fees and minting fees.Matthew Roberts discusses the usage of centralized exchanges for speculative purposes. Many users do not care about decentralization or security, but use these exchanges to enter and exit complex positions quickly. Centralized exchanges also allow for limit orders, which cannot be executed with channels. However, using channels alongside a centralized exchange can provide the benefits of a distributed exchange. Channels allow for instant funding while giving customers control over their funds. Margin account holders appreciate knowing which funds are under their control versus those held by the exchange.Centralized exchanges play an important role in the Bitcoin ecosystem by allowing efficient price discovery and improving liquidity. Decentralized exchanges may offer greater security, but they are not as efficient for speculators who need to enter and exit complex positions quickly. Erik Aronesty suggests using lightning networks for margin trading to avoid centralization. He proposes a P2P order routing system with market makers running nodes to facilitate routing and execute channel trades instantly.The conversation also touches on the topic of protecting coins in hot wallets from theft. One proposed solution is using output scripts that only allow coins to be sent to a new transaction whose output script is redeemable after several confirmations. This approach could benefit crucial services such as wallets, gambling websites, e-commerce websites, and exchange hot/cold wallets. Managing private keys is also discussed as a way to mitigate risks associated with key management. Keeping some keys offline is an important part of managing risk.The recent hack on Bitcoin has sparked discussions about creating a new address type with a reversal key and settlement layer to revoke transactions. However, this proposal conflicts with Bitcoin's design, which makes transaction reversals impossible. There are also concerns about security and the acceptance of payments from "vaults" by merchants. The author argues that hacks and losses are often due to wrong implementations or poor security practices, rather than flaws in Bitcoin's design.On the Bitcoin-dev mailing list, Matthew Roberts proposed the idea of creating a new address type with a reversal key and settlement layer to revoke transactions. However, it was pointed out that transactions are not sent from addresses, and nLockTime can be used to prevent unauthorized transactions. The discussion explores different ideas for preventing hacks and improving security, including the use of offline keys as firebreaks and the implementation of an "instant" system to prevent double spending.A proposal has been made on the bitcoin-dev mailing list to address the recent hack by creating a new address type with a reversal key and settlement layer. This would provide users with key revocation in case of a breach, as there is currently no defined process to roll back unexpected behavior in computer systems. The proposed address type would require transactions to receive N confirmations before they can't be revoked, and after that, the transaction would be "settled" and coins would become redeemable from their destination output.One of the main advantages of this proposal is that it would improve centralized exchange security by making it impossible for a hot wallet to be raided all at once. Currently, OP codes and TX types are not suitable for a secure clearing mechanism. Existing options such as Nlocktimed TXs and OP_CHECKLOCKTIMEVERIFY have limitations. The proposed settlement phase would also allow for transparent fraud prevention and auditing, as transaction progress would be publicly visible.The proposal builds upon existing background material, including a time-based clearing house proposal by Hacking Distributed and a similar idea for secure wallet design implemented using time-locked ECDSA keys by Matthew Roberts. These related ideas contribute to the development of a more robust and secure system for handling transactions.However, some members of the community argue that the proposed time-based clearing house using blockchains directly is a much better idea than the current proposal. They believe that this approach would offer greater security and efficiency when dealing with reversals and settlements.In conclusion, the discussion around creating a new address type with a reversal key and settlement layer aims to address the recent hack and provide users with key revocation in case of breaches. The proposed system would require transactions to receive N confirmations before becoming irreversible, and a settlement phase would allow for transparent fraud prevention and auditing. While the proposal builds upon existing background material and offers improvements to centralized exchange security, there are alternative ideas, such as a time-based clearing house using blockchains directly, that some members of the community consider to be a better solution.
Updated on: 2023-08-01T18:50:10.053142+00:00