Topic: Bitcoin as computational commodity - page 2. (Read 3208 times)

On a possibly related tangent I heard that was Marx's big theory that money was inherently derived from work (labor).

You should read one of the inspirations for the orignal Bitcoin paper:
W. Dai, "b-money," http://www.weidai.com/bmoney.txt, 1998.

If the work has value, by itself, that is a problem for establishing "Proof of work". It would essentially allow participants to sell the same work twice. If not carefully implemented, it also opens up the possibility of "banking" up work in isolation from the network in order to mount an attack on the network.

I do not think a hobby demand, which I believe you are attributing to mining at a loss, is sustainable. I don't see any relationship between the cost of validation with cost of holding or using bitcoins. The transaction fee is not negotiated regardless of exchange rate. The variable difficulty ensures a correlation between production cost and exchange rates no matter what the real costs. Bitcoin are equally functional at any real value, but are more secure with computational power and thus higher exchange rates. Value derives from demand. Demand does not seem to derive from value, at least not until a high threshold of both (chicken and egg or fiat bootstrap problem).

Anyway, there already exist computational demand and secure replicated storage demand. I believe the bitcoin network is in a unique position to capitalize and commodify these demands.

Very true indeed.  I took an interest in mining for the first time just a few days ago and started researching what was available in FPGA-land.  'winning' a few BTC now and then is very much a secondary interest of mine (no pun intended.)

I have an internal debate about whether it makes more sense to go for some big-iron GPU machines to use periodically in times of crisis.  Maybe if some demoralized miners are giving there gear away I would think about it, but Moores law and supply-chain factors tend to argue against this investment.

This is where the slashdotter gets it wrong.  Everyone wants the work that is done to generate a bitcoin because without it, there would be no agreement on the official block chain and there would be no effective prohibition against double spending short of a centralized authority that maintains an official chain.  So, if you value the decentralized nature of bitcoin, then yes, that work is valuable to you.  Maybe you wonder why people continue mining at a loss?  Well, it's perhaps because they value the integrity of the network as much as they value the bitcoins it generates.

If such a computational network and exchange existed, then it would be very easy for a company to accept existing fiat money from customers, including credit card transactions, to purchase computational time denominated in bitcoin. Similarly a miner could negotiate contracts and accept cash from any company offering the commoditized service of computational power.

If commodification drove prices down and reliability up, then anonymous, secure, distributed computing funded by crypto-currency would truly establish the vision of 'the cloud'.

I consider my 'investment' in Bitcoin to be obtaining spots for secrets keys that I alone control in the block chain (or ledger.)

The block chain itself represents a huge amount of investment in time, money, energy, etc.  My gamble is that this will make it a likely starting point for future efforts (or potentially a continuation of the original.)  It's not unlike gold in that while a lot of substances could serve in the role that gold does, someone it always goes back to gold since there is an 'infrastructure' of sorts existing for it.  This infrastructure is as much as anything a shared mental scaffolding, but it seems to be effective.

A giant flaw in my logic (or one of them, at least) is that there is nothing to enforce a condition where my entries in the ledger are honored in any what that would further my goals even if the block chain were the basis for further developments.  That is, to me, one of the most risky part of my gamble here.

I looked into smart contracts a bit and they are very fascinating, but much of it went over my head. They tend to be very tiny though, such as escrow, multiple signatures, delayed processing, etc. As execution and state external to the blockchain...

A computational exchange could be established (within the blockchain?) in which users and 'miners' negotiate prices for CPU or GPU cycles, temporary storage during computation, input/output bandwidth, and even long term encrypted/replicated storage.

As a user, I could create or use an existing program (perhaps compiled ECMAScript or a minimal turing-complete language such as brainfuck) to run within a specific amount of RAM, and receive periodic state and proof-of-work dumps. As long as the program were single-threaded (or the user acted as the mult-thread control center) then the user could start, stop, restart, and switch processing between any number of miner nodes after any periodic state dump.

I imagine most of this is already well researched in the field of grid computing and darknets. What may not already exist is a mechanism to monetize processes in a fully decentralized environment. Crypto-money like bitcoin would be necessary without a central mediator such as IBM or Amazon. Why not just use Amazon? Perhaps you'd prefer anonymity. Perhaps your computational units are many but infrequent or tiny. Perhaps a commoditized service will have greater liquidity and competition would drive prices down and reliability up. Perhaps you need a resource with no single point of failure. Services could be funded directly by the users who find them useful (through donations or usage tax).

Bitcoin is an inherently valuable unit of work in the sense that a dollar is a valuable unit of work if I bury it in a field and give 100 people shovels and the first to find it gets to keep the dollar, and then everyone gets to try again in the next field.

It would have to have the requirement that your computational problem is easily verified, but it sounds feasible as a separate kind of transaction. Gavin Anderson wrote a bit about the possible types of different "smart contract" transactions that are possible. Solving a given computational problem sounds like something that would fall into that realm.

Many economists have argued against bitcoin's adoption as a money because while it could be a medium of exchange, unit of account, and store of value, bitcoin did not originate as commodity. Many have argued that this historical property is not necessary, others like me have argued that a scarce bitcoin derives value from the transactional service that bitcoin makes possible, while others claim that the computational power required to validate the transactions back up the digital commodity. Few are confident with these assertions and therein lies the problem.

What if a bitcoin unit represented a promise to execute computation (or store encrypted data)? Either within the bitcoin network directly or externally but payed for in bitcoin. The idea is inspired directly from a slashdot dissenter quoted in part below. Bitcoin already has a scripting language, indeed all transactions are a common and immediately executed signed script.

Suppose one could compile a multi-threaded script and pay bitcoin "transaction" fees to have it executed by the enormous computational power of the network. Perhaps with different GPU vs CPU costs (memory, speed, etc). Then suppose that one could simply produce computational credit, the promise to compute a specific number of cycles. Block reward would simply be an inflationary tax for otherwise 'idle cycles' as it more or less is today.

I have not yet come up with a way to merge useful computational proof-of-work with validation (hash < target), but I believe if an elegant solution (both economic and technical) were discovered, bitcoin would be unstoppable.