Topic: about alternate chains vs using bitcoin blockchain - page 2. (Read 2251 times)

if you do this, then you lose the 'atomic swap' functionality, which was a key sell of the whole color coins platform.

The Color Coins project seems to be in a perpetual state of disrepair and revision.  I've found many unreliable claims come out of that project.

What I'm trying to say is that the protocol to mint decentralized colored coins all depends on the domain.

The only purpose of minting coins in a decentralized manner is to provide some kind of fair distribution.

So if your coin represents gold bullion,  then you aren't going to perform any decentralized minting.  You would just issue coins from a central point.   This in fact is the majority of use cases for colored coins.

Now,  there are plenty of ways to distribute a coin,  proof of work, proof of stake, proof of burn, random distribution, game playing etc.  That of course will all depend on exactly what the coin is for.

There's no concept of 'overpowering' with this method. The ACTUAL hashing power goes to Bitcoin's network. Bitcoin as currency is used as "proxy" hashing power towards alt-coins. And it is always proportional to the amount of BTC donated per block. Hashing power in this case is only used for the minting process, not the security of the network.

Regarding PoS. This method is kind of similar to this, but now you can take out the inherent inflation that happens with PoS. Instead of using coins to generate NEW coins of the same type, you are generating NEW alts.

But yes. I'm going to sit down and design the technical aspects fully once I kick this last thesis revision I'm busy with to the curb.


This is exactly what I'm hoping to achieve. A protocol to mint decentralized colored coins.

It makes perfect sense to use the Bitcoin blockchain for colored coins. The infrastructure for Bitcoin is already in place, making colored coins on its blockchain much more accessible than on a new blockchain. Also, Bitcoin has the most secure blockchain in the world, which any protocol built on top of it will benefit from. A merged mine blockchain is not as secure as Bitcoin because miners don't have the economic incentive to act honestly like they do with Bitcoin. In fact, a large Bitcoin mining pool could quite easily do a double spend attack on an alternate blockchain that is merge-mined with Bitcoin at little financial cost.

seems like no one has the answers yet how this will play out. simon - interesting, but what's the difference to merged mining?

I don't see how you can mine independent of hashing power of the network. so even a small alt-coin with a different hashing algorithm can be quickly overpowered. the network isn't worth much if attackers have an incentive to destroy it and the miners don't have enough incentive to prevent the attack.

IMHO the best path forward is to think of proof of work as one CPU = one vote (as mentioned in the bitcoin paper). PoW is just a work around to that goal (more or less, as cycles are needed for verification). I'm not sure anyone regards PoS as serious, as money supply is unlimited. Key would be to fix certain properties while allow others to float freely.

At the rate altcoins are launching, I think coins specifically built for use as currency should be added onto the Bitcoin blockchain. Small alts have way too weak security. I've conceptually devised a way to do mint decentralized colored coins on the Bitcoin blockchain that's nice to miners and keeps the small alts' hashing power dedicated to them (you won't have to compete with Bitcoin miners to mine Dogecoin for example).

I'm copy pasting my idea from the colored coins google groups (https://groups.google.com/forum/#!topic/bitcoinx/mUb86IOeXdU).

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"Colored altcoins can be minted on the Bitcoin blockchain in a decentralized manner through the donation (or 'sacrifice') of Bitcoin to miners: turning those Bitcoin into a new colored altcoin at pre-determined rate."


In the past 2 years, plenty of new alternative cryptocurrencies (altcoins) have been created (namecoin, litecoin, dogecoin, etc), resulting in separate blockchains, and a distribution of hashing power. As we are heading towards a future where each idea, theme, and person will have their own currency, there are some problems with having the value locked up in different altchains. The problem is mainly due to the fact there will be a long-tail of chains with small hashing powers that will be extremely vulnerable to attack.

Why?

Currently, private or personal currencies can be minted through colored coins. These coins are unfortunately centralised. If I mint 1million Simoncoin, it will invariably be in my control. If other people want them, they will have to pay me Bitcoin in exchange for the Simoncoins. In some cases, this is what is wanted, but it brings about trust in me to maintain it. The beauty of the traditional mining process is that it is freer, and more democratic. It gives people 2 ways to get involved with the currency: through contributing processing power to it OR buying it from someone who has already contributed processing power to it. The pre-determined rate at which it is minted AND the fact that it is not to the benefit of a centralised entity allows trust (and invariably value) to more easily flow into it. What if the 21 million Bitcoin were minted instantly in the beginning? It also means that the entity/theme behind it (be it Simoncoin, a meme, a band, etc) have more incentive to make their currency work as they have to keep its network effect growing. Admittedly I'm trying to articulate a difficult concept. If some currency (or stock) only 'represented' an entity (decentralized), instead of being 'backed' by the entity (centralized), its value will be more. The psychological barriers to entry feels lower: because people are taking part collectively in the concept.

So, a future where colored coins can be minted in a decentralized manner, whilst simultaneously keeping the hashing power on one chain, solves the problem where the myriad of new altcoins will have to worry about keeping their chain secure and running smoothly. It should also be beneficial to the network.

How?

This scheme works by looking at Bitcoin (the currency) as a proxy for hashing power. By donating to Bitcoin to miners, you are contributing hashing power as a proxy for a new colored alt. For each block, depending on how many people donated to a specific colored alt (say Simoncoin), you are rewarded proportionally at a pre-determined rate.

As the idea is in a conceptual phase, I have not delved too deeply into the technical aspects of it, so I'm going to be using some 'psuedo-txes' to explain some parts of the technical implementation.

Let's create Simoncoin. In block 400000, there is a genesis tx that specifies a standard monetary policy: 50 initial coins, 210k halving: something like "OP_RETURN gsimoncoin50210000".

From the next block, Bitcoin donations can be transmogrified into Simoncoin. If only I am mining it, and I donate 0.00001 BTC to the block, I will receive all of the 50 Simoncoin. If 2 people donated 2 BTC each, it will be split 25, 25. As you can see, altcoins which are popular will have more competition in terms "proxy hashing power", meaning more Bitcoin is donated per block. Once the halving block is reached, less Simoncoin will be available to split up between the miners.

The donation tx should (probably) specify for what colored alt it is for, and which address the reward should go to (thinking quickly in terms of technical specification).

What about miners, mining their own donations?

If a miner donates 5 btc for Simoncoin, and he mines the block, he will get the 5BTC AND a large portion of Simoncoin, not really 'donating' or 'sacrificing' the Bitcoin.

I need some help thinking about this, but I don't see it as a big issue. Miners will have incentive to include all the colored alt minting donations as it will collectively be a bigger reward than keeping out other donations for a specific alt reward. In other words, all the transaction fees will be greater than the value of the colored alt rewards (that's what I'm thinking at least). Using Bitcoin as proxy hashing power also means that unlike traditional mining, ALL participants get their fair share. It's as if all Bitcoin miners (or miners part of a pool) got their fair share, even if they did not solve the block.

There are thus cases where a miner will donate some BTC and re-earn it as reward, but that won't be the intent. They were just lucky. If they want to continue minting the colored alt they'll have to respend the Bitcoin as donation anyway, potentially losing it to other miners.

There should also be a time-based incentives as well, mainly that IF no one contributed Bitcoin to Simoncoin for that block, the 50 Simoncoin is lost. This means miners won't just wait for a next block to win the reward.

Alternatively, similarly to proof-of-stake, "coin-age" could be used in some way. But you don't want to detriment users who buy bitcoin to mint quickly to alts.

Security

This process is beneficial to Bitcoin. It means hashing power don't have to distributed across alt-chains. One of the reasons why some miners turn to other altcoins are due to profitability. ie the altcoins are worth more than the hashing power when turned back into BTC or Fiat, compared to the hashing power being spent on Bitcoin itself. This process solves this. Miners will contribute to Bitcoin's success, but ALSO be able to rake in with the profitability of colored alts. If my small FPGA is earning 0.0001 Bitcoin per block, and I'm the only one mining Simoncoin, I will receive my full reward as IF I was the only one mining Simoncoin (ie taking the 0.0001 and donating it). It means like any altcoin, you are competing with the people hashing with you on that altcoin, but that hashing power now ALSO contributes to keeping the whole ecosystem of cryptocurrencies secure.

Strain on the network?

If this starts working, there will be a lot more donations per block, for each colored alt that exists. Miners will be happy as it is a lot more money, but it could push the transactions per second quite a lot higher, as for someone that is mining a coin will have to donate BTC for EACH block to be able to receive the reward.

A purer version could be where the mining rewards go straight as donations for the next block, paying/minting new colored alt addresses. In other words, miners also turn into minting pools. Your payout address is a donation directly to the next block, whilst simultaneously generating colored alts. I don't know if this is even possible.

SPV?

Personal currencies need to be used as easily as Bitcoin. Thanks to SPV, you don't need the whole blockchain to transact. It's unclear whether this scheme will work.

Bitcoins are being re-used again and again to create new currencies?

Yes. Value is subjective. Bitcoin acts here as the token for the security of the public ledger it moves upon. It's turning the hashing power into the system of the cryptographic shared ledger into support for additional currencies. It's like blood, keeping the system pumping.

So. A request for comments: please. I have to do my own research into colored coins first to think up technical implementations. If anyone wants to help design this scheme in a feasible manner, I would love your help!

Any questions are also welcome! Would love to hear your thoughts. Anything.

Let's take namecoin as one example,  namecoin is merged mine, so it has at this time around 80% of the hash rate of Bitcoin.  Namecoin performs a naming registry function that may be outside the scope of the current bitcoin functionality.

Now what about iXcoin (internet exchange coin),  like namecoin, this is merged mined with around 40% of the hash rate of Bitcoin  (in the 5 peta hash range).  iXcoin can be specialized to handled 'colored coins'.   It doesn't make sense to handle colored coins in the bitcoin blockchain.   It may make more sense to do it in iXcoin where in fact you could add 'colored coin' support natively so you don't have to build a layer on top like the current implementation.

re: twister and other protocol layers.

the argument to use the bitcoin blockchain is that it offers absolute security. by using a new chain, some portion of that power can peel off and attack you. this means that alt chains will always have trouble getting through that initial hump where they are vulnerable to mining attacks.

however alt chains increasingly serve a variety of market purposes (such as twister). there's varying degrees of risk on how much X mining power is likely to be used (like when pools attack some altcoins in the past to prove a point), but if the market incentive is greater and grows quickly enough it can get past this hump.

especially now since the bitcoin blockchain is associated with money and has a high level of security (money demands high level of security), it's difficult to design a successful altcoin. but there are chains providing other purposes and can tolerate more risk. they are also optimised for their use case and so more efficient than simply relying on bitcoin blockchain, and hence far cheaper.

twister is the best example of this. i've been thinking and they've made the right decision making an altchain. it's the future, and i think beats bitmessage. i'm making some notes here:

https://wiki.unsystem.net/index.php/Twister

edit: changed my mind about twister. It's more nuanced than that. we can use a combination. see this discussion here:
https://groups.google.com/d/msg/twister-users/cgxyB2oOQkk/Ov-MUUv3uG4J
This is a good project using an altchain: http://ethereum.org/ethereum.html