Topic: Bitcoin Is Not A Democracy. Then What It Is? - page 3. (Read 2739 times)

I think deisik already answered the essence, but I join him that if the major HOLDERS of the coins decide to blow up their own coin system, that's their affair.  If the holders of the coins want to modify their system, that's their affair.  Nobody NOT holding any coins is affected. 

I would think that if coins are distributed in the same way as hash rate is now distributed amongst mining pools, then IN ANY CASE the game is "gamed".  Currently, in bitcoin, 5 mining pools have more than 50% of all hash rate, and in fact, most probably, these five pools are under the control of FEWER economic agents (read Jihan).  20 mining pools have 99% of the hash rate under their control.  If a coin were for 99% owned by 20 different people, you understand that this coin is a very closed game.  If these 20 people, owning 99% of the coins X, were to decide to blow up coins X, that's their good right and their affair, it wouldn't affect much other people.

A coin with such a centralized ownership is a small club coin.  If they want to shuffle their coins amongst themselves according to other rules, that's their good right.  But such a coin wouldn't have any large scope of usage.  Imagine 99% of bitcoin owned by 20 entities (and maybe less real people).  It would make bitcoin into a club game of these few people and nobody would care about it.  I could make such a coin and use it exclusively in my family, and maybe we would be 20 people too playing the coin game.

The problem is that 20 entities (most probably less) control 99% of the consensus decisions in bitcoin, but bitcoin stake holders are much more distributed, and nevertheless at this quite centralized decision mercy.


I think that a bitcoin stake holder that has 10% of all bitcoin has more to lose than a miner that has 10% of hash rate.  That's quite easy to prove: if the cost of HASH RATE material would equal the same fraction of MARKET CAP, the inflation would be over 100% if mining were to be profitable.  Someone having 10% of bitcoin stake would own 4 billion dollars in coins.  I don't think that a mining equipment representing 10% of the current hash rate costs 4 billion dollars.


Hardforking is indeed the only way to keep bitcoin "decentralized" and "competitive".  However, bitcoin being essentially a brand name, you can't even do that.  This is what refrains all battling parties from hard forking: bitcoin's value is essentially tied up to the special status of bitcoin as first mover - it doesn't have any other technical aspect in favour of it.  As such, forking away into an "alt coin" would lose that "bitcoin brand" which is the essence of its value.

Look at litecoin.  It is technically superior to bitcoin (it has segwit, and is for the rest identical, but has 4 times faster block times, and 4 times more capacity).  Why is litecoin not overtaking bitcoin ?  Simply a matter of brand name.


On the contrary.  A big staker IS a big user.  He will listen to himself, and his financial engagement is way, way stronger than the miner.  In as much as the coin means anything, there are many many more stake holders than there are miner pools.  And all those stake holders will, for sure, listen to themselves.  Nobody else is affected.


None of that big-mouthing means anything.  You don't *threaten* with a fork, you do it if you're serious.  If you "threaten", it means that you won't do it.  This sounds like someone who would threaten to make, say, litecoin.  No, people just went ahead and MADE litecoin.  The only reason why these people threaten, is that they want the bitcoin brand name for their pet modification, and hence CANNOT fork away.

That is like going to Toyota, and tell them that if they don't make cars with, say, 7 gears, you threaten to bring out your own car on the market with the feature.  No, if you think that 7 gears is going to win the market, you bring out your own car.  It is only if you don't think you can manage bringing out your own car, that you play that game with Toyota.

I think you are misusing the terms here

First, what you mean by "the cost to attack" is actually the cost of buying the controlling stake. If you are willing to buy something and then destroy it, more power to you. But don't speak about an attack here since the notion of attack assumes a hostile action, something which is not desired (in the case of PoW system, by the majority of "system" users). If you are an owner of a company and you want to liquidate it, you can't talk about "attack" there. Further, whether it is more costly or not is in fact a matter of belief since (major) stake holders may simply refuse to sell you their stakes at any price, and then you are stuck, as simple as it gets. This is obviously not the case with PoW. I guess that's where the primary, fundamental difference between these two systems lies. In other words, you can't "attack" the PoS system, you can destroy it only via "voluntary" action

I wasn't trying to literally connect any political ideology with bitcoin, I was just trying to figure out if the working model/base of bitcoin could have any similarities with any political systems and it does have, developers and miners make it meritocracy, elites could disrupt the market if and when they want to, plutocracy, and being decentralized makes it similar to anarchism. Someone even mentioned monarchy That's what most of the people are doing, simply investing without even wondering how it works.

I just feel that if you are looking for less control and a more costly attack, proof of work is better. Also, your reasoning implies that people are rewarded for hoarding stake rather than transact it. This makes sense for company shares. Not for any currency.

As for the insiders killing it, it is irrelevant. What is relevant is the cost to attack. Because an outsider can just buy enough stake at X cost and become an insider. As for Proof of Work, I believe it is more costly.

I think Miners have greater incentive than Stakers honestly. And Miners cannot cashout so easily, and are open to all kinds of attacks from users and economic majorities. Miners are committed to the long haul. Whereas Stakers are not. And the only way to incentivize that is incentivizing hoarding, which is not what you want.

democracy is nothin mo than dictatorship by the masses....
just my 2 cents

I am okay with this explanation as I can't define also to where bitcoin will be input.
Can it be half Anarchy and somehow democracy?
I guess it depends on the usage of every bitcoin user.
The question would be what is bitcoin for you first? What is the purpose of being involved in it.
Then maybe this could be answered.

It kinda looks that you are not really looking for an explanation

Stake holders are what the system itself is made up of, so you can't possibly exclude or eliminate the possibility of shutting it down by those who essentially own it. This is a natural course of things or events, you either render the system vulnerable from outside (PoW) or leave it vulnerable from inside (PoS), there is no third option available in this world (provided you go for some level of invulnerability, of course). But with the PoS system only the insiders (read owners) can kill it (but that will be their deliberate choice), while with the PoW one, anyone who has enough power can do that (it is just a matter of resources) and you don't need to become a major stake holder as is the case with the PoS system (the latter would be equal to buying and owning it)

Thank you for the explanation.

I do not understand how "Big Stake Holders" are any different than "Big Mining Pools" in your explanation.

Under the above assumption that the risks presented by both are the same, I predict it is less costly for a Big Stake Holder to attack the system rather than a Big Mining Pool.

Mining Pool has Equipment, Operating and Energy Costs throughout time and it's profit comes also from a continuous service, rather than immediate. So it is a long term plan. I argue they stand much more to lose than an equivalent in size stake holder.

I don't see how proof of stake is better security and more decentralization. But then again, I don't feel Bitcoin is centralized when you can fork it anytime you want. It is effectively impossible to control bar physical coercion. Your argument to defend against a centralized Proof of Stake also stands for Proof of Work. Effectively fork it and let them keep their coin.

A Miner with a long term plan has much more incentive to listen to users and less to deviate than a staker with a big stake.

Right now, we are witnessing that. There is an looming threat to change proof of work. We see Miners, Users all threatening forks and let the economy decide. UASF is effectively banking on the fact that users vote with their money. Only Miners stand to lose here. And if it so happens that Miners win, it is because the users decided their coin was better... Not because the Miners imposed that their coin was better.

If it is the Democratic Party there will be several sound systems and developing furture certainly can be controlled by the Director while bitcoin free agent there are certain words for what you can call a bitcoin So btcoin Lo are free without limit but follow the rules if you follow an advertisement. in other words bitcoin not democracy

The goal of the consensus voting system is that "the users are to come to consensus to what payments have been done, according to what rules".  After all, a crypto currency is nothing else but a "token game" where two things count:
- the rules of the game
- the ownership of the tokens

which is to be agreed upon collectively and uniquely: the "consensus".  

Given that there is material advantage to be had in the ownership of tokens (given that their ownership is traded against value, which is the use of the system), the consensus decision cannot be in the hands of a few, that could otherwise take advantage of it: the whole trick of cryptocurrencies is that this consensus decision is taken in a decentralized way, in such a way, that each decider keeps the other deciders in check, and no-one can cheat, because the cheater's decisions will not be re-validated by later deciders.  Note that here, "cheating" comes down to "deviating from the rules", which implies somehow immutability: if the decentralized decision system is such, that every decision that deviates from the "rules in place" is discarded by the next deciders, only immutable rules can emerge from this, if there is no explicit "rule changing mechanism" other than all deciders deciding collectively to apply new rules at day X, which is hard or impossible to do in a fully decentralized system.

The decentralization in consensus decision taking is explicitly necessary to avoid all possible collusion between deciders, and hence, to have only the "true rule set" to be recognized by all players in the game.  This is why a mechanism is needed to have this decentralized decision to be kept truly decentralized.  

There are two ways to come to a unique consensus decision amongst entities: "voting" and "random unique decider".   In both cases, there needs to be a "weighting factor" applied to each entity, because the entities being anonymous and permissionless, it is impossible to know how many "declared voting entities" are in fact just sybils of one single economic entity. In "voting" the weight is the weight of the vote ; in "random decider", the weight is the probability to be the next decider.  Voting is difficult, because one never knows who is actively participating at a certain point, and absolute majority is impossible to achieve on a continuous basis.  So bitcoin and most crypto without master nodes comes down to random unique decider, which needs a "probability of being the next one".  Proof of work was supposed to apply this weight.  But if you think about it, stake is a better measure.  After all, the VALUE of the token system in the market will be judged partly by the belief in the correct functioning of the system according to the rules.  Now the bigger stake holders are also the bigger exposed risk takers if the system turns out to fail to work according to rules.   So the bigger stake holders are most prone to want to keep the system honest: they have most to lose if the system is visibly corrupted.  Big stake holders can be trusted to want to keep the system honest, because if the system turns out to be visibly corrupt, their big stake will drop in market value.

As such, big stake holders are not to be incentivized to come to (honest) consensus: their stake is, well, at stake !

The error in most proof of stake systems is that they REWARD stakers.  That is not necessary.  Stake holders are already incentivised by their very stake in the system.   We only need stake holders to come to consensus, not to reward them.  

Of course, if the ownership of coins becomes a small oligarchy of a few big whales that hold 99% of the stake, we would be in the same situation as in bitcoin, but it would also mean that they are also the only OWNERS of the system - so it is somehow normal that they decide on what they do with their own token system !  

And in as much as the coins are distributed over large amounts of economic entities, we get true decentralization of consensus decision, according to the stake owners.

In other words, proof of stake is about the best distribution of consensus decision power, because it are the owners of the system themselves that decide on the workings of the system - no external powers or forces.

But again, I'm talking about "benevolent" consensus decision without any other reward than contributing to the good workings of the system in which one has a lot of stake.  Not about what is usually presented as proof of stake, with rewards, fees and so on.

Your definitions are really heavy, and going by the vote decision every one agrees it's should be looked at an investment, and I really don't understand why you feel like that, I feel you should simply use it like a investment rather than anything else, you are confusing Bitcoin and democracy and I don't think it's right to do so. Maybe you need to look at your concepts

What is proof of stake to vote other than substituting Work for Capital and how does that equate for less centralization but rather, different centralization? Also, without reward, aka Transaction fees, or punishment, how do you incentivize following consensus?

Furthermore, if you do reward it, does this not decrease the rate at which money is exchanged thus rendering it less useful and less valuable, since all of its value comes from its utility and there is a reward in hoarding?

Please enlighten me. (I am not being ironic).

Amen.  And this is due to the proof of work consensus mechanism.

No, you are thinking again in terms of mixing coin creation and voting consensus.  I'm talking about proof of stake to vote, but without any reward.

BTW, there's nothing wrong with a debt backed inflationary financial system, but that's another discussion.   The problem of our financial system is not so much the fact that it is debt backed, or that it is inflationary, but rather that it is regulated, and that there are privileged actors (that not everyone can be a central bank for instance).


But that is exactly what it is.

It is an error to think that bitcoin is backed by waste.

Bitcoin is an obvious case of plutocracy

Users as such are irrelevant. Those who are just idly sitting on their coins in their personal wallets are irrelevant altogether since these coins are effectively not existing (for decision making and power struggles), and therefore they can be safely discarded. Users who are actively trading their stashes give their voice to exchanges which act on their behalf. The same basically pertains to merchants since they are not involved with Bitcoin in any meaningful degree because they get rid of bitcoins as soon as they get them (via exchanges or payment processors, which are basically the same exchanges). Developers could be counted toward meritocracy (with a lot of reservations) but they are essentially a tool in the hands of those who pay them, so they are out of the equation as well. In this manner, it all comes down to groups representing miners on the one side and exchanges on the other. Note that it is only a conceptual distinction, i.e. it doesn't mean that the miners are enemies of the exchanges (things are obviously more complicated than that). It should pretty evident that between these groups the financial muscle plays the most important role

We can make another post so we can discuss End Game Theory, because it is becoming an interesting discussion.

Anyway, what you say is not correct in my opinion.

A Free Market doesn't mean endless suppliers for the same task. It just means anyone can try and outperform another with no barriers.

This in fact, always tends to a Monopoly or Cartel. Always. We should cherish monopolies in an unregulated business. Meaning, in a non protected endeavor. Not like Microsoft and their 1Billion Patents. That is a foul Monopoly.

A real Free Market Monopoly comes from providing the most efficient services. And is only ever created by user choice. Choice is encompassed and guaranteed in Bitcoin, so it cannot be gamed.

If you ever have a Monopoly, if said Monopoly doesn't want to lose its status, it has to abide by the user base and the economic majority. Because if ever they try to impose, any user can just put together the software to fork it. And if Mining is profitable, for sure there will be volunteers to replace said Monopoly, and for sure the Economic nodes will also be on board. The choice is always with users. They can dump the foul chain for the healthy one. And the Monopoly Miner's only choice is either to abide by the users or buy his own coins back and try and ICO to recoup the losses.

The losses of losing a Monopoly of Bitcoin Mining, are more than the Profit the Monopoly would make. This is why I feel it is so well designed and incetivized. And it is very easy to overthrow a Monopoly.

This is because Bitcoin has real choice, real ownership, and noone is under ransom. Legal Tender bars you from choosing. Otherwise everyone would get paid in Gold.

You seem to forget what proof of work was meant for: it was meant to make it EXPENSIVE to do a sybil vote, that is to say, that if "voting entities" (nodes, say) were under the control of one single economic agent, he could only "pretend to be different entities" by suffering more expenses that were truly wasted (that he couldn't recover in any other way, be it useful heat or whatever), so that overwhelming the system with a sybil attack in the consensus voting would become so expensive that it wouldn't be worth it.  Proof of work was hence meant to be a proof of wasted economic value.

Ideally one would have a DIRECT proof of work, in terms of spent value on waste (say, by buying labour at a given salary that is perfectly useless, like digging holes in the morning, and filling them up again in the afternoon).  But bitcoin uses a cryptographic proxy to proof of wasted value, namely the cryptographic proof that one has wasted calculation power.  However, this proxy is of course subject to variable calibration between the actually wanted proof (namely wasted value) and the provided proof (a hash with leading zeros).  The amount of leading zeros is not in a fixed relationship with the amount of wasted economic value.  If you do the calculation with a home PC using domestic electricity, you waste much more resources for a given amount of leading zeros, than if you use large scale installations with specialized hardware, and you use industrial electricity at subsidized prices in specific regions.  So the same "proof of leading zeros" doesn't correspond to the same amount of wasted economic value, and hence, the system breaks down, and fails on its initial premise, which was to make conglomeration of voting power EXPENSIVE ; it actually obtains the inverse result, of making decentralized voting power in the consensus system (which was its AIM) impossibly expensive as compared to conglomerated oligarchic voting in said consensus system.  Where "proof of wasted economic value" was INTENDED to make it difficult for a guy to pretend to be 100 users, we now have only a few guys being able to vote in the name of hundreds of thousands of users and have these hundreds of thousands of users consensus-less.


No, you are forgetting what proof of work was introduced for: to avoid sybilling of consensus voters, so that each one of the users could use their vote (or at most "a few" votes) but would become too expensive to pretend to be 100 voters.

The energy wasted is not essential.  It is the economic value wasted that was to be a brake on the possibility of a few entities taking all the voting power.  Proof of work was simply a (failed, it turns out) way to keep many people voting, and avoid some to pretend to be entitled to many votes.  It actually did the opposite.

Normally, the system should have been largely resource-less.  Proof of stake is waste less.  Your voting weight in the consensus is equal to your stake in the system.  The cryptographic effort to produce a signature is insignificant as compared to the effort needed to break it (proof of work is the opposite: the cryptographic effort to break it is in fact decreasing as compared to the cryptographic effort to secure it: totally stupid cryptography).

But again, one should separate the consensus voting mechanism (which should be largely decentralized) and the "coin creation mechanism" and its inherent seigniorage.  The fact of rewarding voters has been a paramount error in bitcoin (and most crypto).


Of course it is gamed.  You get monopoly-like power, and effective barriers of entry (economies of scale, hierarchies of influence, possibility of cartel formation....).  You only have a true free market when the amount of suppliers is near infinity, and the amount of consumers is also near-infinity.  You also only have a true free market when there is variability in the offer.  In a system like bitcoin or any other "fungible" system, that is impossible.  If all car suppliers have to make exactly the same car, and you get only a few car suppliers in the end, the free market fails for two reasons:
1) the actual design of the car that cannot be modified (needs global consensus) is maybe not the ideal one and could be improved, but there's an essentially impossible barrier to make a different and better car
2) the economies made for the waste of resources in production of said car will be eaten away for power games between the few suppliers, on disinformation, propaganda, customer binding and other things.

It is gamed, not because of laws and violence monopolists, but because the power imbalance between the decentralized large customer base, and the centralized and hence much more powerful suppliers that cannot be challenged by diversity in the offering and are protected behind large effective barriers of economies of scale, and other barriers they will introduce to keep their oligarch status (and on which they will waste the possible economies they could have made).

Democracy, anarchy, plutocracy, meritocracy - it's all political systems, and Bitcoin is not a government or some organization, it's a p2p network, and current political systems do not apply to it with 100% accuracy.

Now, lets look at distribution of power in this network. Miners seem to have the most power, but anyone can become a miner, and miners tend to mine whatever yields the best returns.

Having fiat wealth allows you to influence the price, so this is an element of plutocracy and market capitalism.

Developers dictate the direction of Bitcoin, but anyone can become a developer and release their own fork. This is democracy and meritocracy.

The point is not that change is bad because of the fact that it would "warp bitcoin".  The point is that bitcoin is a collective system with a monopolistic rule set: you cannot have different incompatible rule sets in bitcoin, there has only to be one.  Now everywhere there is a monopolistic rule set that can change, it means that there are people that can dictate the changes to the rule set ("aristocrats") and there are people that can't (the "populace").  Only if the rule set cannot change, and is graved in stone, there cannot be an aristocracy. An aristocracy obtains larger-than-merited gains because of their power to change the rules, which allows them to obtain benefit for different reasons:
1) they know the calendar and the kind of change they will impose, and hence have an unfair advantage in the gambling game of speculation
2) they can tie "courts" to them, trading advantageous rules for allegiance
3) they can of course bend the rules to their specific advantages, directly or indirectly
4) they obtain notoriety and celebrity which can be traded again for advantages

Note that in a direct democracy, the "aristocracy" is the majority, which can still crush a minority and take advantage of them.  So even a "fair vote" is a form of aristocracy.  Only when there's no vote at all, you get a level play field and a truly free market, because the rules of the game are known and fixed.  In all other forms of game, some players are also the arbiters, which is maybe a clearer reason of the bias.  You better be in the team that has the arbiter in it.
 

The big misunderstanding in crypto is to think that it is some form of coding.  The coding is just the technical support of a contractual rule set.  The importance of the code is over-estimated.  Imagine that we are thinking about "voting laws" and that we are quibbling over what is the code to be used for the voting system.  The coding is secondary.  What counts is the exact rule set, the agreed-upon contract between the participants in human terms.  The "smart contract" code-is-law is a failure if the code is too complicated to be read and understood by most participants.  Imagine a politician's campaign projecting lines of code and arguing about it.  Silly.   Crypto is not about code or computers, it is about the rule set of a game, rule set that should be simple enough to be understood by most players.   The actual implementation of that rule set should be manifold (no "reference implementation") and decentralized.  Like there are many e-mail clients that all talk "SMTP", but are written independently.

The raison-d'etre of open source is twofold.  One is that you can inspect it and see that it does what it CLAIMS it does.  This is necessary for all cryptographic software.  But the main reason of open source is that you can take it, modify it, and adapt it to your needs.  This is somewhat problematic in a crypto currency, where there can only be one rule set.  Nevertheless, there should be many diversified implementations of that rule set, so that "coders" have nothing to say and have no power position.  It was a big mistake to have a "reference implementation" unless the goal was to not modify it and keep it immutable.

The network's resource intensivity and the will to use those resources or not are to be decided by the free market.  If you think that you gain advantage in spending those resources, then you invest in them ; if you don't think so, or you can't afford them, then don't invest in them.

But the argument for non-mining full nodes is bogus.  There's no need for single users to have them, they contribute nothing.  There need to be SOME full nodes from which you can download whatever partial information you need, and that's it, because those servers cannot lie.  The headers are linked and can be verified by every simple wallet, and the Merkle tree cannot lie either, and is also checked for the necessary transactions by a user by his simple wallet.  Running a full node is a bit akin to downloading the source software and reading it.  Most linux users, me included, have never read the entire linux kernel.  If I want to, that's a huge investment (in time) on my side.  I won't.  Downloading the entire full block chain to "check" it against a rule set is a fun occupation that you can do if you want to but doesn't serve a big purpose:

1) in any case there's no OTHER block chain out there so this is the only one, if you don't like it, there's no alternative
2) miners check them before applying their consensus decision (building on top of it), and as they are the only consensus deciders, you have to accept their decision in any case
3) there's no cryptographic possibility to serve fake pieces of chain as they are all linked together with hashes (between headers, and in the Merkle tree).  If these are correct, then there's no fake data served.

Bitcoin is a currency, full stop. It is not the tool for political ideals or anti-government sentiments. I agree that some people might think that it can be used to weaken governments or big financial systems, but in all honesty it is just a decentralized currency. You can do with it what you want, but if all the hype is stripped away, you will still be left with a technology that can be used to move or store wealth.

The underlining concept of decision making is based on a democracy, where the majority rule. ^hmmmmmm^