Topic: 2012-11-29 LondonNewFinance - Digital Money Seminar (videos) (Read 2191 times)

the second video "Panel Discussion "was interesting

I had the same response to the first interview I saw with Amir over a year ago.  It made me cringe.  He kept brining up Anonymous, etc., etc. and seemed to be answering questions nobody was even asking.

This +21,000,000.   The whole meme of "print free internet moniez your computer for solving puzzles" is a determent for further expansion.  Anyone that meme would have appealed to should have joined 3 years ago.  Today the margins on mining are small and shrinking.  It is requiring real capital, real planning, and involves real risks.   Today most people hearing "free moniez for solving puzzles" either will be pissed to find out this free moniez is going to require putting out thousands (possibly tens of thousands) of dollars into a complex, high risk venture or will just dismiss it as a scam.  Face it the initial reaction to "free moniez" is SCAM. SCAM. SCAM. SCAM. SCAM. 


Bitcoin is a currency and a payment system.  Lets start there.  What is the purpose of mining? Not HOW does Mining work but WHY do we have mining?  PayPal doesn't have mining, VISA doesn't have mining.  Why does Bitcoin have mining?  More importantly what is the only aspect of mining that "Joe Consumer" gives a flying crap about?  It sure as hell isn't "free internet moniez".  Mining keeps his transactions (and thus the value of the coins he holds) SECURE.

Mining = Transaction Validating = Security = Value.  Far more people buy gold then try to excavate their own gold.  The "mining" sales pitch immediately tunes out 99% of potential users.  Personally I wish the word mining would go out of the vocabulary but please please for the love of Satoshi drop this "free moniez for solving puzzles" nonsense.

There is a very simple logical progression.

1) START WITH COMMERCE.  That is what your audience cares about.  Bitcoin is commerce.  Bitcoin enables the end user to send value anywhere in the world, nearly instantly, and at very low (sometimes zero) cost.  Bitcoin enables the user to receive irreversible payments which can't be reversed due to fraud.  If you aren't starting here at commerce and the benefits you are doing it wrong.

2) After you explain the benefits of Bitcoin it becomes immediately obvious that the network must be secured.  The network must ensure coins are only spent once.  To do that requires the work of "transaction validators" = miners.  Miners put transactions in a block and secure them by proving that a certain amount of work was spent to find a solution which solves the block.  This ensures an attacker would need to "spend" just as much work to make a forgery.  Blocks are combined into a blockchain which grows by consensus and .... FORMS A PERMANENT TRANSACTION RECORD which secures transactions against misdirecting funds, forgery or duplication.  The bold part is the only part consumers and merchants care about.  If you don't discuss the why then you are 100% wrong.

3) Now (and only after #1 & #2 are explained and if you have 10 minutes to talk then 9:30 should be spent on #1 & #2) miners are compensated for this WORK they perform to SECURE the network.   Miners receive small transaction fees (far lower than VISA or ACH, or Western Union).   However when the network is young the amount of transactions may be insufficient to justify the expenses of miners to secure the network.  So the network provides a SUBSIDY to miners.  This subsidy is rewarded per block solved and decreases over time until the subsidy is gone.

My guess is most people who talk about Bitcoin are "mining nerds" and thus talk first about mining but honestly if gives a distorted view of Bitcoin and comes off as kinda ponzi/weird/scamish.   It would be like explaining to someone what a personal computer is and starting with a very detailed explanation of how to play Counterstrike.

I think that the audience was a bit harsh with Amir, but...

I liked the part where someone ask how spend some digital money in blow'n'hookers hiding from the wife.

First guy:
- Hum, we wanna empower the users, blablabla

Amir:
- With Bitcoin, you can, it is digital cash.

Third Guy:
- Err, companies will face competition, blablabla


Then another question: How do you guys manage microtransactions?

First Guy:
- Err, there's always a limit, you know? Today our company can transfer 1 dollar, but in the future, who knows? Blablabla

Amir:
- With Bitcoin, you can.

Third Guy:
- Yeah, I think Bitcoin nailed it.

You are right, so I made another attempt:

mining is hard to explain, and its extremely hard to understand why having computers solve pointless number crunching problems acutely gives the network security.

Finally came to watch the videos.

And I must say, especially at the second video you can see that Amir is awfully nervous. In the beginning of the video, just look at his body language and compare it to the current speaker.

As much as I admire efforts like this, it shows that we desperately need more people that feel comfortable in such an environment and actually like promoting Bitcoin and going to such events.

My objection to this sort of explanation is that while it is technically correct, it gives absolutely no insight into why any of this is happening; what's the point of all this bundling and bow-tying anyway? Or who is resetting that combination lock and adding and removing digits from it? You have to convince people that Bitcoin is legit and secure, and in doing that communicating why things are done is much more important than communicating exactly what is being done.

Saying that mining is voting on the order that transactions happen lets you very easily explain why determining transaction order is a problem in the first place, especially when you make analogies to overdrafted cheques, as well as how the problem is solved. In addition it's an explanation that sounds natural and fair; bringing groups to consensus through democratic voting, rather than imposing a central authority, is an explanation that resonates with people.

Sure it's unfortunate that some people start thinking they can swing votes and what not, but again, explain that the voting mechanism is purely about the order of recent transactions and nothing else. (in addition you can also explain that to change a block in the past, you have to have enough computing power to outvote the sum of every subsequent vote) If you want to change something else you'll have to convince a super-majority of the people using Bitcoin to change all at once, and just like, say, replacing the constitution doing that is very difficult, even for changes everyone thinks are reasonable. (I said super-majority for a reason: in practice if a super-majority change, the minority will update their clients as well in practice)

Here's my analogy:

Imagine that every "Bob sends 1bitcoin to Alice" transactions is a envelope. What mining is is listening to the network for any new envelopes flying around and gathering them. At the same time you're gathering all these new envelopes you're trying to bundle those that you already gathered up into a package and tie a nice bow on it. To tie a bow you have to solve a math problem, and the solution to that math problem is the fabric that will give the bow the right shape, a shape everyone else in the network will recognize as valid. So, many people are doing this, they are gathering up all these new envelopes and trying to tie a bow on the package. Who ever is first to successfully tie a bow on their package, then sends this package to everyone else in the network. When someone successfully ties a bow on the package they also automatically insert their own special envelope that isn't coming from anyone but is addressed to them with a reward of Xbitcoins for doing all of this. When the rest of the network receives his package they check the bow and the contents of the package and if all looks like it's following the rules they add it to their chain of packages they already received. After that they again try to bundle up all the new envelopes that aren't included in any of the packages yet into a package of their own and thereby starting a new round of competing for the reward for successfully doing so.

How are bitcoins created? 

I usually explain that its like a 'random lottery' where 50...or now 25, bitcoins are given out every 10 minutes and people are competing to get them, but that it is a professional market. If you wanted gold, you wouldnt go learn how to mine gold...you would trust that other people are out doing that and you would just buy some gold at the market rate.

Then tell them that there will never be more then 21 million bitcoins, and that there are currently 10.5 million in circulation.

I kinda liked that one.

It has a catastrophic flaw in this "Give me democracy!" infected world of leaving the false impression that rules that govern Bitcoin are not fixed but depend on the outcome of some vote in the literal sense when the truth is that rules can't change, anyone can either choose to follow them or not.

Yes you are right, I made a mistake (I made the same mistake once before) of calling it something it's not. See, I do it too.

It's not enforcing, because it's not forcing anyone anything.

It is however validating, and definitely not voting.

Oh and the reason why I don't even address your merchant theory is because I too could say I vote everyday with my feet and my money for products and services on the market but that really isn't voting in the literal sense of the word but it describes something else entirely. Problem is words have subjective definitions, so while yes, merchants and users deciding to use a specific Bitcoin code could be called voting as in expressing their preference and validate that they agree with this service it isn't voting in the literal sense where voting means tallying of ballots and imposing the result on everyone precisely because as you've correctly pointed there is no force involved.

You can-not enforce without force. You choose to value transactions by the strength of the proof of work, but nothing is forcing you to do so other than a consensus.


I disagree with you quite strongly on this one. The thing is there are two separate, but related, issues here: transaction validity and transaction order.

Consider for instance the Iraqi dinar. I'm oversimplifying, but essentially after the fall of the Iraqi Government during the second gulf war there wasn't any force backing the dinar in the way fiat currencies usually are. However the dinar retained its value. Essentially a group of people had a consensus to follow a certain set of rules about the dinar, namely that pieces of paper that looked a certain way were accepted to have value. Even banking survived somewhat, thus in addition there was another set of rules that transactions following accepted accounting principles could be considered to be equivalent to those pieces of paper. This situation lasted until the coalition forces imposed their own will, essentially shifting this consensus to allow an additional rule: the coallition forces are allowed to make more dinars.

Of course all of this happened by consensus purely out of trust that the consensus would continue for however long you wanted to hold dinars.

Bitcoin is of course also a consensus, specifically that transactions that follow rules that the Satoshi client audits should be considered valuable. The thing is it is not miners who enforce those rules. The consensus enforces those rules, simply because the consensus is that any transaction that doesn't follow those rules is considered worthless. It'd be theoretically possible, albeit totally impractical, for someone to decide to accept a transaction after carefully checking the whole blockchain by hand to determine if the rules were being followed. Bitcoin clients simply automate this process.

If you could somehow trust people not to double-spend you would not need mining. However we can't trust people, just like we can't (blindly) trust people not to write checks that will bounce. Thus Bitcoin has an additional rule where we consider a transaction invalid if a transaction spending the same coins exists and has a stronger proof of work. If we could somehow timestamp transactions directly, and in addition have some mechanism to be absolutely sure that everyone has an up-to-date knowledge of every transaction made, again we wouldn't need mining.(1)

Miners of course choose what transactions to include in their blocks, and that part of mining I don't (strongly) consider to be voting. Where the voting comes into play is which block they decide to use as the previous block for their block creation attempts. Sure the outcome of any individual block is discretized in a way that no normal voting system would be - only one lucky miner will solve the proof of work - but after repeated blocks the outcome is effectively a vote proportioned by hashing power. This is particularly evident with cases like non-standard transactions and new types of transactions, and we speak of a "majority" and a "super-majority" of miners for a very good reason.

There are strong parallels in how governments work: you have the law, which enforces how politics and voting is conducting, and then you have the votes themselves, which decides who gets into power. It's just that in Bitcoin takes the "first-past-the-post" effect to the extreme, so much so that changing the rules is exceptionally difficult.


Anyway, more to the point, we're talking about how to explain Bitcoin to non-technical people. Analogies are never perfect, and yes, the analogy that mining is voting certainly has flaws. However I strongly think that using the analogy of voting to explain what mining is, and laws to explain what the transaction rules are, makes far more sense to people and gives them a much better mental model of how Bitcoin works than starting with a much more technical explanation that immediately jumps into the proof-of-work and enforcement. After all, saying that solving a difficult math problem somehow enforces something just doesn't make sense to most people. Saying that you solve that math problem to prove that your vote should be counted does. Your explanation is more technically correct, but the vast majority of people have a good intuition for what voting is, and no intuition at all for what a proof of work is.

1) As a thought experiment, consider what would happen if every Bitcoin client had a magical radio that could broadcast a signal so powerful that every other Bitcoin radio was guaranteed to receive it, and at the same time, everyone had access to one or more radio receivers in secret locations that they used to ensure they weren't just receiving a faked, directional, radio transmission. If everyone could leave their client running 24x7, and everyone had access to a secure time source, you could replace mining with simply the assurance that you would always know what transaction was valid simply because you were guaranteed to see the valid one first. Equally you would know you could spend your coins because everyone else could do the same verification as well. (bootstrapping your client does of course pose problems with this scheme)

Thank you for making your point very clear. /sarcasm

I guess we disagree on the definition of bitcoin merchant then. I define bitcoin merchant as a person who is willing to provide goods or services for bitcoins as verified according to the Bitcoin protocol.

You have a different one. Am I right? I had to guess using very incomplete information, you know.

I think you answered your own question.

I heard about that. How is it relevant? Are you saying that the assumption that the bitcoin merchants will be sticking to bitcoin rules is infeasible, or what?

Ever heard of a fallacy called begging the question?

It's not the miners who determine the rules, it's merchants. Miners don't have a say about rules: they only choose what transactions to include.
Even if some of the miners choose to mine a different currency without the merchant support, their currency will be worth next to zero.
Now, if you don't create your own currency and stick with bitcoin rules, then the larger group of miners will always be able to enforce its opinion about the transaction set. How is that not voting?
This "mining = voting" is not a misnomer, but rather a misfeature of the bitcoin protocol, making it vulnerable to 51% attacks.

It's really not. It's enforcing.

Voting means there's a voting result that gets imposed on all the voters. In Bitcoin if two groups of miners enforce different rules both can operate, they just create a fork and thereby their own currency, that's all.


I'm quite convinced that mining = voting in Bitcoin is the biggest misnomer we have and should do everything we can to rot it out and not in the least try to perpetuate it.