Bitcoin.com’s new “Trading Platform” really just for online gambling?

No KYC?? Yikes! Risky. That is just thumbing your nose at the FBI isn’t it?

 

Bitcoin.com recently launched a new trading platform. Bitcoin.com Trading
Except that they don’t list it as a trading platform, as that would fall under the new FINCEN guidelines, and potentially land them in trouble with the law.

 

Even if we believe Bitcoin.com’s pitch that his exchange is for trade, it is probably more useful for unlicensed betting. Why?

From their own FAQ:

https://local.bitcoin.com/faq

Oracle needs only to decide offline who the “winner” is. The oracle cannot arbitrate a settlement or change the payout of the escrow in any way.  Bitcoin.com is calling this “Blind Escrow” service, where the ‘escrow’ is not really custody of any funds, they just decide the winner of the pot.  This is not escrow at all.  This is bookmaking, just thinly disguised.  This is allowing online betting in a trust-less way. (or not having to trust the bookie… or do you? More on this later)

As an escrow-ed exchange service, Bitcoin.com’s trading platform is not any better than standard escrow contracts.  So it is a POOR replacement for the service that they are ostensibly trying to put themselves off as.

  1. Why? Think of this example:
  2. Alice agrees with Bob to buy 100 DASH for 10 BCH.
  3. Alice locks up 10 BCH into Bitcoin.com’s blind escrow contract.
  4. Bob never pays Alice the DASH, but tells Bitcoin.com that he did
    Bitcoin.com (oracle) investigates and asks Alice if she received the the 100 DASH

    1. If she has (and bob has paid): (ignoring for a moment how she can prove this) then the oracle signs the txn and gives to Bob
    2. If she has NOT: (once again, ignoring the problem of proving this) then the oracle signs the txn and gives it to Alice.
  5. Alice OR Bob, gets the FULL 10 BCH, that is the only 2 outcomes…. OR IS IT?
  6. The third outcome is that Alice refuses to sign the txn to Bob, AND the Oracle is given a cease and desist order to stop signing txns as it is acting as an unlicensed exchange market operator, which means it cannot sign. This means Alice’s 10 BCH LOST FOREVER

Compare this to the standard Escrow contract in Bitcoin, (using Multi-sign or thresholds sigs) where if the escrow company is shut down for whatever reason, the 2 parties (despite their dispute, may be able to broker a compromise and send the 10BCH to a new Escrow company who can arbitrate a mutual settlement between Alice and Bob. There are countless reasons why Bob may refuse to pay the full original agreed amount of 100DASH to Alice…. perhaps the market crashed and Alice delayed the trade, perhaps there was a fork, and Bob doesn’t want to send pre-fork coins. etc. etc. etc. In these cases, it may be necessary to renegotiate the amount that is paid to which party, as well as perhaps pay a new escrow additional fees.

The real world is full of agreements that need to be renegotiated everyday. Bitcoin.com’s exchange does not allow for that.

The way they have it currently setup, even though they advertise it as ‘trust-less’ ironically means that the seller has to bear the risk of trusting that the trading platform is not forced to stop their service in the middle of a transaction that has gone bad.  Which will limit the amount of legitimate uses for this system.  The kind of activities or actors which won’t be too fussed about this? You guessed it, illegal actors, gamblers, money launderers.  They will be willing to take the risk, because they have no where else to go to be served.

In truth, the PROPER way to handle this type of peer-to-peer swapping is via an atomic on-chain swap which swaps the keys on both sides at the same time, coupled with a timed refund txn. (one of nChain’s patents).  If the deal were to go bad, then the parties can always seek a licensed escrow to provide an arbitration service, for a fee.

More on that next time.

/EOL

/begin Metanet

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