Should Bitcoin Exchange Bitsquare Adopt Reputation System?
Cointelegraph spoke to Mihail Mihaylov, Bitsquare’s Chief Decentralist, about the possibilities of adopting a decentralised reputation system on its platform.
Despite calls to adopt a decentralised reputation system on its platform, Bitsquare says it will not rely on it even though it is typically used to establish the trustworthiness of users in a network.
Some Redditers, have asked for the system to be included as a feature on the platform. However, in a chat with Cointelegraph, Mihail Mihaylov, Bitsquare’s Chief Decentralist, said the system could be used to defraud others.
“For example, if Jane has a high reputation, it means a lot of users find her to be trustworthy. However, such systems can be manipulated to inflate the reputation of a given user with the aim of defrauding others who rely on this reputation score. If Jane created a large number of fake identities, she can easily boost her reputation, tricking honest users into trusting her. This is called a Sybil attack and it is not too difficult to pull off.”
Filling the gap in Bitcoin ecosystem
Mihaylov explains that this reason has prevented Bitsquare from relying on the system as a primary security measure. Rather, the trustworthiness of its network is established through a combination of three alternative security measures: security deposit, 2-of-3 multisignature escrow address, and a decentralized arbitration system. With this, Mihaylov says Bitsquare is sticking with the true spirit of Bitcoin’s ideology - open, decentralized, transparent and privacy-preserving - as shown in its infrastructure, arbitration, governance, and the focus to fill a gap in the Bitcoin ecosystem as guided by strong philosophy, rather than as a way to make quick profits.
He tells Cointelegraph:
“In addition to these protection mechanisms, there is a limit on the amount of Bitcoins per trade (0.75 BTC for fiat trades and 1 BTC for altcoin), though there is no limit on the number of trades a user can do. This per-trade limit further decreases the risk for users and lowers the incentives to commit fraud.”
Decentralized or centralized?
Following the attack on Bitfinex earlier this month, the debate over centralized and decentralized exchanges has been brought to fore again. As a decentralized platform, Bitsquare prides itself as a free, open-source software which allows peer-to-peer trading directly without any intermediaries.
Bitsquare is planning to apply the decentralization aspect to its organisational layer. Its operation as an open-source project is built by contributors and funded by personal savings and donations, not by venture capital. It will implement a solution for distributing the revenue generated by the trading fees to the contributors or shareholders. The tokens will be represented in the Bitcoin Blockchain as a form of colored coins. Investors will be able to buy them on the Bitsquare market and manage them on its wallet.