JoshuaChen

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Business

Whatever deals, you face the pre-settlement risk, a.k.a. PSR, that your counterparty walks away while you win. In case of speculation and hedge in fiat currency / bitcoin exchange rate, the two parties of a deal can avoid PSR by mark-to-market (MTM) operation. The mark-to-market data shows the bitcoin spot and forward levels based on the public data. I provide the PSR protection service in the deal.

Who Needs

My service is good to those who are:

  1. afraid that the keys in the exchange are stolen
  2. afraid that the fund manager or the exchange is in scam and don't want to risk even any initial margin or deposit in BTC or fiat currency.
  3. afraid that the government may order to hold the exchange
  4. lack of the connection to the settlement of the fiat currency
  5. more caring the market trend and not much caring about the market movement by the high frequency trading.

Method

Short version:

You find your deal counterparty. Each of you set a bitcoin address for the deal. I create a 3-of-4 address for you both so that the money in this address can only be moved by one or both of you and me. You both agree a highest discrepancy number between the MTM earning and real earning. You both deposit the agreed tolerant number to the 3-of-4 address. You both send to the other's address to maintain the discrepancy within the agreed tolerant number after the deal effective date and before the maturity date. Eventually I and one or both of you will clear the initial deposit in the 3-of-4 address.

Long version:

There is an IRC channel #BitcoinOtcTrade which is hosted by a bot BtcPsrBot who provides some service. See here for help on the operation with the bot.

  1. You find your deal counterparty. Post/see your trading advertisement in the bot.
  2. To agree the contract of the term about the deal, you can chat with others in the channel or by any means you like.
  3. You and your deal counterparty both sign the contract and send the contract and the signature to the bot by the contract command.
    • You can go to BTC Signature Tool for the signing.
    • By the signing, you and your counterparty understand the mechanism and commit to each other.
    • Also the bot will be able to create the 3-of-4 address and send the redeemscript to you both.
    • This 3-of-4 address is unique and also serves as the deal number of the trade. You and your counterparty shall subscribe the RSS message about this address in BtcDealMessage because the final concluding refund transaction will be sent to one of you by there. If you like, you may create a wiki page (see HowToAddPage) whose page ID is this 3-of-4 address for memo purpose with each other.
    • You may verify the correctness of the redeemscript by the verify tab in BTC ATM if you like.
  4. You both send the agreed tolerant number to the 3-of-4 address.
    • If you are losing and want to stop the loss, your counterparty must be winning and disapprove the termination of the deal. Therefore this number is the only practical way to terminate a losing deal so you shall be cautious about this number.
    • Based on the size of the deal, this number is suggested to be larger than a typical one week movement of the underlying market; the smaller the number, the easier one party would default unintentionally and the other party comes to me to ask for clear. If you prefer not to handle the mark-to-market tasks often, then this number can be a big number.
    • A historical data is available in the relevant currency sheets provided in the mark-to-market data for your reference.
  5. Based on the MTM gain/loss, you and your counterparty shall send the proper amount of bitcoin to the other's address from time to time.
    • the pl command of the bot calculates the gain/loss of the deal by the blockchain.
    • It would be better to have a wallet in which you can set all the outgoing addresses so that you save the fee. If your wallet doesn't have this feature, try Bitcoin ATM.
    • You can send or withdraw the money in the address as usual. But when you are handling mark-to-market task with your counterparty about this deal, you can ONLY send to the agreed address from the agreed address. Same rule applies to your counterparty.
  6. At any time you think your counterparty fails the obligation, post an early-terminate intention message to the bot and I will start the investigation of the MTM gain and the real gain and help to clear the initial deposit. The situations are such as:
    • If one of the parties walks away intentionally
    • If one of the parties forget the mark-to-market tasks unintentionally and exhaust the initial 3-of-4 address deposit.
    • ....
  7. Or at the end, I will help to clear the initial deposit by the consensus of you both about the deal. When everything goes normal, eventually you both and I shall clear the bitcoin amount in the 3-of-4 address based on the final MTM earning and the real earning.
  8. In any clearing case, I will draft the transaction and signed it and request signatures from you or both of you. I will request the loser's signature first and winner's signature second. In case I don't receive the signature timely, I will bypass and go on to the next. The back-and-forth data exchange will be done in BtcDealMessage . After you or both of you sign the transaction, the winner can broadcast it into the bitcoin network. Again, the winner can do this work in Bitcoin ATM if the wallet doesn't have the functionality to broadcast a signed transaction not prepared by the wallet.

Identity

You may verify my ownership of the service bitcoin address here and have some degree of confidence that I am not in conspiracy with your counterparty:

challenge text 
service bitcoin address 1751QheCMobUVgkKWDKn7qto7iFHd1NLdK 1AuCnGy1ULrRJKM3KTmzzvE9fUzvF8ChBe
bitcoin address 1 1AuCnGy1ULrRJKM3KTmzzvE9fUzvF8ChBe
bitcoin address 1 signature 
HwZptUeguU5PhmYYxQDEAxrT7FnAVJRZPPfgTapt4WpYZj1D2dF0vz81AgSy2GNoBnKHm1kLeDtqZSOa+uGs8wY=
bitcoin address 2 1751QheCMobUVgkKWDKn7qto7iFHd1NLdK
bitcoin address 2 signature 
H1inClIez4Nm7hfkZwAhblNqz61wXLMORyHZs0N7ooPrZe5bhKDnuKz1JE2LMGOLCzOo5oviyqmCmUL+97GDZ1k=

Contract Template

a trade is (in one single line):

address1 address2 contractcode amount ED YYYY-MM-DD MTM https://goo.gl/TyHln8 PSR 1AuCnGy1ULrRJKM3KTmzzvE9fUzvF8ChBe 1751QheCMobUVgkKWDKn7qto7iFHd1NLdK

a contractcode is (in one single line):

(USD|TWD|EUR|CNY|JPY|BRL|RUB)(|20|24|28|32|36)

  • address1 is the bitcoin address of the long position trader
  • address2 is the bitcoin address of the short position trader
  • contractcode is the currency and maturity year, for example, USD24. If no year specified, it means FX spot. See mark-to-market data for detail.
  • amount is currency amount. the base currency is all bitcoin, so this is the amount of the currency you want to speculate or hedge. For example, short an amount of 1000 USD24 contract, is to buy in the direction that makes a profit if the number USDBTC is decreasing (equivalently, the number BTCUSD is increasing).
  • ED YYYY-MM-DD is the effective date

Service fee

At the end, a 5% charge of the final clearing bitcoin settlement for each party shall pay to me. Denote your initial deposit into the 3-of-4 address is X, for example:

  • if assuming without my service and miner fee, you shall get paid and the other party shall get paid zero, then you would get paid and the other party gets zero and I get .
  • if assuming without my service and miner fee, you shall get paid and the other party shall get paid , then you would get paid and the other party would get paid and I would get paid .

IMPORTANT

  • I judge only by the transactions ledger in the blockchain between the two agreed bitcoin addresses. Never tell me that you accidentally send the counterparty bitcoin from some other address or to the wrong counterparty's address and hope my mercy to you.
  • Every bitcoin transaction requires fee to the miners. Nothing to do with me.

Question and Answer

Feel free to ask questions here.