sipa changed the topic of #bitcoin-wizards to: This channel is for discussing theoretical ideas with regard to cryptocurrencies, not about short-term Bitcoin development | http://bitcoin.ninja/ | This channel is logged. | For logs and more information, visit http://bitcoin.ninja
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<tachys>
@belcher thanks for the response. When I think of a decentralized exchange I mostly get excited about the prospect of not having a single service store millions of dollars of value. Instead you just add support for atomic swapping in most of the popular wallets, and then services would arise which maintain trustless orderbooks and act as beacons to alert participants of a revealed preimage
<sipa>
how do you prevent frontrunning?
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<kanzure>
there's no proof that centralization prevents frontrunning
<sipa>
no, but trust does
<sipa>
i'm not claiming that requiring a trusted party to control information flow about the order book is a good thing, but it's the only way i know :)
<tachys>
@sipa I don't know right now. Is frontrunning mostly a problem for large trades? If so, then I guess the decentralized exchanges are only for the day-to-day trades
<sipa>
tachys: decentralized exchanging is great if you have two participants who already have market information which they base their price for selling/buying on
<sipa>
as in: if all you're interested in is trading, and not in establishing a market itself, it's all you need
<sipa>
but generally people don't just want to trade at a specific price, but want to get the best possible trade out of their money
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<tachys>
hmmm so we need decentralized price discovery as well.
<sipa>
so you now need a consensus system that knows about all market orders
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<sipa>
unfortunately, decentralized consensus systems are way too slow for that, and subject to miners colluding with market participants :)
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<mryandao>
decentralised exchanges have a whole class of unsolvable problems too (i.e. how to do you deal with front-running under adversarial conditions?)
<mryandao>
which is blatantly ignored by proponents of decentralised exchanges.
<tachys>
Do you know of any other problems in addition to frontrunning?
<mryandao>
front-running is probably the most obvious deal-breaking problem afaik, other problems are kinda solvable in quirky ways at some expenses.
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<Eliel>
mryandao: I'm sure there's some kind of zkp magic somewhere that allows the actual contents of the transactions to remain hidden until the processing has started and no front running is possible anymore.
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