A Timely Exploitation of a Weakness in the Competition

BenTucker

Member
Mar 12, 2015
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Hi all,

(If you'd like to skip my story and butt-kissing, skip to the section labeled "Getting to the Point".)

I don't post much on the forums, but rest assured, I lurk them. I have been keeping abreast of the latest happenings, and really liked the long video interview with the team that Amanda did recently (although it was too long for most mainstream people to watch, but she makes plenty of shorter videos, so that is not a criticism). Big props for hiring her...she is a real asset to the public relations cause. I could see her hosting an actual cable business show about blockchain tech in the future.

Anyways, as usual, I would like to open the post by saying how amazing the project is going and has been for me personally. I'm not a techie. I'm just a person who philosophically believes in decentralization, privacy, etc. As you can imagine, that attracted me to the cryptocurrency space, and eventually to Dash. I am not a well-to-do person (at all), so I had little to invest that I could afford to lose. But invest I did. I first bought Dash in the $2.50 range somewhere (can't exactly recall). When I had extra money, I chose to forego some social pleasures for the pleasure of investing in more Dash. My last buy, before running out of expendable income due to a myriad of medical issues (I'm fine, relax), was quite some time ago, at the $5 range. I never had enough to run a Masternode, etc., but I am MOST pleased with my investment in Dash (and looking forward to Evolution's decentralized Masternode shares). I just saw something different in this project that I didn't see anywhere else, and that is a testament to this community and the developers (especially Evan). I know a lot about reading people, in terms of body language, facial cues, cadence and tonality of voice, etc., and I don't read "scammer" on anyone whose face is associated with this project.

That is why I try to spend some of my free time explaining Dash to people I know, especially on social media and in groups therein. I actually started a group (actually a subgroup of a much larger group/community) inspired by Dash, on a social media platform, but not named for Dash specifically. The point is, I am very enthusiastic about the project, especially what Evan said about it being a decentralized bank. If I had any skills that would allow me to help the project, as a volunteer, or of course paid, I would. I just don't have many skills that apply at all (that I can think of anyways).

So, allow me to say, with a heartfelt purpose, THANK YOU ALL FOR ALL YOUR HARD WORK!

Now, onto the reason for this post...

Getting to the Point:


A major issue cryptocurrencies, and especially Bitcoin (who I see, correctly or not, as Dash's main competition) face is centralized exchanges and thefts that occur on them. Gox, Bitfinex, Kraken...the list, as you know, is large. This, to me, wears the stench of opportunity. The reason I post about this now is the following equation:

Good Luck (also known as Favorable Variance) = Preparation + Opportunity + Well-Timed Aggression

You guys clearly have the skills and smarts. I wanted to mention this early enough to allow for proper prioritization and preparation, as to facilitate the perhaps most important part of making our own "good luck"; well-timed aggression.

Now, I know you guys are super busy with everything already in play, so there isn't an immediacy to this at all, even if you think I'm right. So, don't think I'm trying to throw more on your already full plates. And you guys may already have this idea, so maybe I'm wasting your very precious time (for which I apologize upfront, if that is the case). BUT...I think we can solve this problem due to the on-blockchain funding and the DGBB.

Honestly, what I'm about to say is something I would submit for a vote if 5 Dash wasn't so damn valuable to me in terms of marginal utility (as I said, I am not financially well off, and frankly the future value I would be losing would be relatively large for me). Anyways, here goes...

When Evan said, in the Q&A with Amanda, that no decentralized exchange was in the works as of now on the Dash system itself (if I'm saying that right), I was like "damn...I really am hoping for that". But he mentioned some alternatives that I half recall right now. As I pondered this, and the way the Masternodes and the 2nd tier worked, I got to thinking...

If you guys aren't finding time (or priority, in terms of funding) as of now to build such a thing into Dash itself, that doesn't mean a trusted (as opposed to untrusted or trustless) exchange is not possible before that can be tackled (if ever).

Why can't you guys buy an old exchange, or build (or have built) a new one, and either offer insurance options for a fee to cover losses of traders and regular people trying to just buy Dash, OR why can't you collateralize the exchange, keeping funds transparently right on the blockchain? If whatever amount in deposits/present volume in the exchange was already exceeded by the Dash collateral fund, bingo, we got ourselves a fully collateralized exchange. Further, you could show transparently segregated funds, where deposits by customers are separate from the funds needed to operate the exchange. As Evan pointed out, the profits from this business could be returned in some portion or in total to the Masternodes! And it also could be similar to Shapeshift, if so desired, in terms of ease of use, fast transactions, anonymity and lack of time consuming registration annoyance.

Now, why do I suggest this (admittedly general, and not very detailed) project?

Imagine Bitcoin users fatigued by the internal debates going nowhere over there and FUD about an Ethereum-like hard fork ruining immutability. Imagine how they watch as Dash solves all these issues, enacts capabilities Bitcoin only talks about, like fast transactions, user-friendly UI (Evolution cometh), real anonymity, fungibility, security, privacy, scalability and timely governance.

Now imagine they find out Dash has opened the first exchange, although centralized, that is run by a decentralized organization on the blockchain, and is owned not by some guy or team of guys who need to be trusted, but by an entire network of over 4000 Masternode operators and growing. Further imagine they hear this exchange is either insured, collateralized, or (my suggestion) both. And add segregated funds and transparency to that and we have a real enticement. What would the reaction be?

There are those in that community, and I suspect not a few, who would say "this is the straw that breaks the camel's back. This is not a perfectly decentralized solution, but it is going take away the major stress I have in this whole game...centralized exchange hacks and thefts." Some non-significant amount of users, vendors, etc. will switch, I would think (or at least integrate Dash alongside BTC, especially given all the great developments you guys are pushing out recently). Plus, people who want to use cryptocurrency, like Bitcoin, but haven't yet jumped into the space, would suddenly hear of this comforting thing which could push them over the edge and into the space. It truly is a major reason, aside from the lack of user friendly UI that Evolution will solve, people avoid the space altogether...in fact the main reason, among those somewhat enthusiastic about the possibilities of the technology (who aren't intimidated by the current UI).

If we wanted to leverage the plan even harder? Don't sell Bitcoin on the exchange. Only accept it when people buy Dash or other coins we feel are not direct competitors, and then sell it elsewhere to clear the books of it. This ensures a further decoupling with BTC, and ensures we don't add to their trading volume on the buy side (but do add to the sell side).

Anyways, that's my idea: a centralized exchange owned by the network, transparently accounted on the network (possibly including segregated funds), and collateralized and/or insured by the network (and redundancy by way of an overlap between these ideas wouldn't be a negative for the purposes of why I'm suggesting this).

Trusted, transparent, collateralized, insured, segregated and decentralized ownership...


This could be extremely profitable on its own...but in terms of continuing to grow market cap, Masternode count, price, etc., it would have an even greater impact (in my opinion anyways). Let me know what you think. Any feedback is welcome, and thanks again for all you do. And thanks also for reading this tldr post. I know how precious your time is.
 
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slamdunk

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Jul 31, 2016
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I agree with you that exchange blunders are negatively impacting the cryptocurrency image. I think you are on the right track with regard to reversing that negativity somehow and your outline of "how to" certainly seems plausible to me.
 
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rustycase

Active Member
Apr 19, 2016
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It remains a valid business practice to take advantage of competitors blunders or indisgression.
ymmv
rc
 
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GrandMasterDash

Grizzled Member
Masternode Owner/Operator
Jul 12, 2015
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If this was up for vote, I would say no. Insurance would mean at some point having to actually pay up, which is a double loss; a loss of capital and the underlying coin value would drop. Independent and fully decentralised exchanges will be the norm soon enough... thank god, because personally I can't wait to see the likes of ShapeShit resigned to the history books.

Btw, you don't need to spend 5 dash, you can get an idea by creating a poll here in the forums.
 

xjones

Member
May 22, 2016
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... insurance options for a fee to cover losses of traders ...
Ultimately, all losses must be covered by insurance premiums. Suppose we use Bitfinex as a model. If an exchange expects to lose $60 million once every 5 years, then it will pay about that much, plus some overhead, in insurance premiums. There's no cost savings here.
 

xjones

Member
May 22, 2016
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Synergy between virtual currencies should not be overlooked. The real competition to dash is the banks and credit cards, not bitcoin or ethereum.

Have you noticed how casinos in Las Vegas congregate together in the same area? The more people that visit casino A, the more will also visit casino B in the same neighborhood. The real competition is not the casinos with each other -- the real competition is all the other cities people could visit instead.

Virtual currencies need to be like casinos. Instead of merely competing with one another, they need to work together to attract people from the non-virtual-currency world into the virtual-currency world.
 

BenTucker

Member
Mar 12, 2015
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Ultimately, all losses must be covered by insurance premiums. Suppose we use Bitfinex as a model. If an exchange expects to lose $60 million once every 5 years, then it will pay about that much, plus some overhead, in insurance premiums. There's no cost savings here.
I agree, but insuring your home against fire is not about cost savings IF it happens...it's about A) piece of mind, and B) having insurance to cover an expense you can't afford at the time the bad event happens (replacing the house after the fire). I wasn't looking to save the consumer of the exchange's services money, but trying to make the consumer feel comfortable that, in the case they had a large loss (small accounts would likely mostly forego insurance), they would be made whole quickly, as if nothing happened. Also, collateralizing means we already have the funds. The insurance is a way to reap some extra profits to slowly, assuming nothing happens (which is not realistic, but for the sake of this example), pay for the collateral fund. (That was the overlap I mentioned in the OP.)

In other words, you could collateralize OR charge insurance, but I suggest both. That way we only have to pay claims for insured accounts out of collateral. The rest of the accounts chose not to insure (this lowers how much collateral is at risk at any given time, allowing for lower rates for insurance OR higher profits to pay off the cost of collateralizing faster). If you only insure and do not collateralize, you have to charge more for insurance, as you need to build the collateral necessary to pay out when a theft occurs, and it would not pass along that emotional ease that knowing the collateral is already there in case the worst happens. On the flip side, if you collateralize but do not insure, you have to pay all losses via claims after the theft. Why do that, when you could just pay those who chose the insurance option? That's the advantage of overlap when both are implemented.

The segregated accounts and on-blocchain accounting was just further to ease the minds of the consumers of the centralized site, and costs little (it might save money...I don't know, as I'd have to think over the particulars).

So yeah, cost savings does occur (for Dash, not the consumer necessarily, but could for the consumer too, depending if we pass along savings in the insurance versus collateral, or just decide on higher profits to pay off the cost of collateralization faster) in the sense that the whole collateral would not be at risk, as not every account would be insured....but, of course, that assumes you have both options in place.

But I agree...the point is not about cost savings, per se. It might exist for one side or the other, or maybe be split between the two, but it's not the point.
 
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BenTucker

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Mar 12, 2015
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Synergy between virtual currencies should not be overlooked. The real competition to dash is the banks and credit cards, not bitcoin or ethereum.

Have you noticed how casinos in Las Vegas congregate together in the same area? The more people that visit casino A, the more will also visit casino B in the same neighborhood. The real competition is not the casinos with each other -- the real competition is all the other cities people could visit instead.

Virtual currencies need to be like casinos. Instead of merely competing with one another, they need to work together to attract people from the non-virtual-currency world into the virtual-currency world.
1. I agree on the first point about banks and credit cards, but long before Dash takes the central banking system head-on, we will be taking Litecoin's market cap and Bitcoin's too. I don't see us replacing central banking, or even competing with it to any level that grabs attention, until we're top dog in the crypto space. Now, with Evolution, decentralized banking will begin (interest bearing accounts via decentralized Masternode funding, if I'm understanding it correctly)...but that will serve to increase market share for Dash (and for the entire crypto combined market cap) in the crypto space long before central banks/credit card companies say "oh shoot, we got competition". We can't be Heavyweight Champ of the World until we win a few bouts against other non-champion ranked fighters (if that metaphor makes any sense to you).

2. The real competition with casinos is online gambling, which they address with laws that ban them or force them overseas. I saw it myself first hand when I lost my life savings for 3 years due to Black Friday in online poker (April 15, 2011). I was a pro player for a few years by that time. Not doing anything but low level grinding and getting by, but better than I've done since. Thanks government! :)

And they can have that cooperation in Vegas against Atlantic City casinos or elsewhere only because they are so much closer in market share in their own city. If one casino had 80% market share in Vegas, the smaller casinos would not be cooperating with them more than trying to get some of their market share. At some point an equilibrium was reached where competing over Vegas market share got to be less advantageous than teaming up to fight online gambling and other cities...but with BTC at about 80% market domination, we are not at that point at all, and I'm sure someone could give the math to prove it somehow in an objective way.

3. Yes, they are located near each other...but exchanges facilitate the interactions (like how many casinos form the strips in Vegas). Some wallets do it now too (multi-currencies and ability to exchange in-wallet). We agree on your point to a degree, but in the end, those casinos are not buddies who cooperate all the time...they would bankrupt each other if possible and take all their business from the others. The key is that the one winner would buy up the others and keep them open for the atmosphere of a gambling Mecca. They are cutthroat to each other too...look at who owns what there, and how that came to be. Collusion is selective, albeit constant. But again, this is because they each have significant market share relative to the whole.

In other words, the priority for them is A) kill online gambling, B) kill other cities' business that takes from theirs (like Atlantic city versus Vegas interests), and C) kill the casinos nearby. But your analogy breaks down in that we realistically can't take out the banks and credit cards without first taking over the spot BTC currently holds (or at least a significant amount of their market share dominance percentage). It would be impossible. We would do it even by accident on the way to taking out banks and credit cards. So, we're in a bit of an opposite position. We need to look at it like we're one of the small card rooms in Vegas, and want to become a large casino. In that way, our first competition is the only casino in town (the nearly 80% market domination by BTC). To become a casino, we need some of that market share dominance in our hands. I'm not saying we take focus from projects that try to attack banks and credit cards, I'm just saying long before we get to them, we need to take action on most or all opportunities to gain some of that market share BTC holds. Both will move us along to becoming a casino sooner. Then we can solely, or mostly anyways, focus on competing cities (banks and credit card companies). Really taking their market share dominance is a lot further off than taking BTC's market share dominance, and the latter will occur chronologically before the former no matter what. We're talking trillions versus billions here.
 
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kot

Well-known Member
Foundation Member
Mar 17, 2015
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Synergy between virtual currencies should not be overlooked. The real competition to dash is the banks and credit cards, not bitcoin or ethereum.

Have you noticed how casinos in Las Vegas congregate together in the same area? The more people that visit casino A, the more will also visit casino B in the same neighborhood. The real competition is not the casinos with each other -- the real competition is all the other cities people could visit instead.

Virtual currencies need to be like casinos. Instead of merely competing with one another, they need to work together to attract people from the non-virtual-currency world into the virtual-currency world.
Brilliant!