Topic: Bitcoin & Tragedy of the Commons - page 6. (Read 21930 times)

Jeffrey Christian has stated many times that the main investment category for gold is from speculation.  can't give you exact figures but it should be easily obtained.

That is exactly why I am predicting that miners in the zero-block-reward future will be of two kinds
1/payment processors
2/bitcoin hoarders and supporters
I just don't know in what proprotions (equilibrium point has yet to be figured out).
I'd be interested if anyone has a math model for gold usage because it has a nice stable 40%-60% balance between hoarding (investment gold) and industrial applications (jewelry, mint, electronics, etc..) i.e circulating gold.

Tragedy of the Commons is a debunked argument. This fallacy was refuted by Nobel laureate Elinor Ostrom. The problem facing Bitcoin is better labeled "Tragedy of the Unmanaged Commons." There are many more reasons than mere financial incentives to keep the Bitcoin network healthy.
When folks use Tragedy of the Commons, it sets up a red flag. Then there's the Proof-of-Stake. I am genuinely interested in better management solutions, but overtly promoting monopolies belies ulterior motives even further. In democratic societies, monopolies usually exist at the pleasure of governmental regulation. Offering a Price Auction as an experiment in monopoly control is at best highly experimental. I would like to see this attempted with a cryptocurrency, but not Bitcoin. At least not until it is thoroughly tested.

I still think technological advancement will offer more than enough solutions in the far future.

But when a small player can make 300 dollars a block for processing payments an ASIC will get you virtually no chance of solving a block anyway.

I don't think guessing numbers is really helpful since there there are so many unknown variables. There needs to be a good theoretical game theory type reason why it will work. And I'm pretty sure I know it.

Miners are all different sizes, this gives some of them pricing power in terms of selling "get my txs into a block soon". If all miners are very small and all use the "accept all with fee rule" many may indeed drop out lowering overall power and difficulty. This will make it easier and more likely for someone to gain a pricing power ability. The existence of someone with pricing power ability raises the profitability of all miners causing more small players to enter the mining biz and reducing the possibility/ease with which one party can get >50% (which may not be disastrous anyway, but still makes me uncomfortable).

For example, suppose DeepBit changed policy to only include tx that had fee >= .01BTC. Some people will not care because they can with high likelihood get in a block within 10 blocks anyway. But the few people who need near certainty of getting in within an hour now attach a .01 fee. All miners profit from this in proportion to their hashing power except DeepBit. DeepBit profits (or maybe not if they pick the wrong price) by less depending on how many of the .0005 fees they no longer get.

Interestingly this means that an individual mining at DeepBit will want to leave for solo or a smaller pool when DeepBit makes this change.

I don't claim to completely understand the equilibrium. Some very interesting things can and will happen. Suppose DeepBit wasn't a pool but one entity with a lot of hashing power. Would they "split off" some of their power? This would be the same as using a probabilistic method of determining which tx to include in order to give users incentive to add more fee for better chance, but not completely give up the small fees. I think the right strategy depends heavily on the "willingness to pay distribution". If it is a smooth curve a many tiered solution is probably most profitable. If it's pretty binary then the profit maximizing solution is probably simpler.

The payment processors will have incentive to pay fees and maybe also to hold very rapidly exercisable "latest top of the line ASIC mining rig" options.

The latter in order to be ready to rapidly jump to the support of the chain in case of attack or just to enter the mining biz. (Merely paying higher fees might not suffice if a monopolist is secretly setting up top of the line ASIC rigs in co-hosting sites all over the world as you'd be paying the monopolist more and more the closer they got to taking control of the network.)

If you can make over 300 dollars a block just processing payments, a current top of the line ASIC rig would only take what, half a day or less to pay for?

-MarkM-

This is not a complete answer. If the network is healthy the payment proc will just mooch, if it is too weak there isn't anything he can do anyway without spending more than all of his profits (unless his actual mining power will bring him profit, which is what is in question).

You are missing the point: the payment porcessor will make 325€ ONLY if the network is functionnal and secure. So the value add fees are his/her incentive to mine (not the bitcoin mining fees).

He's going to have to pay the others. Maybe a tiny miner will include all those tx for a small fee, but the tiny miner won't likely get a block soon so if the payment processor wants high assurance of getting in a block before X time he needs to pay what the most expensive miners are demanding.


Not really. There might be thousands or more banks and payment processors and there will be no central body keeping anyone out. All you need to get in is to be competitive with the existing services in some way no artificial gatekeeper.

I meant a payment processor like Bit-pay.

A miner IS a payment processor

You're overlooking what "tragedy of the commons" means. As you said yourself, the payment processor will make 325 € per block whether he mines or not, so he has no incentive to mine himself - he would much rather have others mine instead.

Besides, if payment processors and banks are the only ones doing mining, it means Bitcoin has become fairly centralized.

It seems that this thread overlooks the fact that merchant acceptance  is what determines success or failure of just any currency, including bitcoin.

If bitcoin is accepted by major retailers or by a large number of retailers, certainly third party services (like bitcoin-central merchant API) will add value by mitigating the exchange rate risk or the double-spend risk.

In other words, transactions fees in the future will be made of bitcoin network transaction fees (very low fees, hypothetically zero fees) and value add service fees (more competitive than today bank card fees but non zero fees).

Those who will collect the value add fees have a strong incentive to mine even for zero bitcoin network fees and zero block reward.

Just a sanity check: in France today, 1% of the bank card transactions amounts to 65 000 € in 2000 transactions per block (every ten minutes).

If I command just a 1% share of that market with my bitcoin payment app and charge merchants 0.5%, I am making 325 € per block (with zero reward and zero tx fees, whether I mine the block or not), roughly the same as all the miners combined today.
If I charge mechants 25 cts per transactions (à la Dwolla), I am making 500 € per block.

Hence I am afraid this thread is addressing a dilemma that wo'nt exist.

You can include signature fees in transactions and in assurance contracts. Since the cost of signing is low, the token incentives that can be obtained from assurance contracts, quid-pro-quo, direct interest and so on should be sufficient.

For the purpose of preventing double-spending, stakeholders aren't supposed to make any judgment about which block is better. As long as enough of them sign, and they never sign more than one block in a given height, the system should work. Preventing other attacks may require a more sophisticated system.

The incentive for stakeholders is to keep the Bitcoin network working well and decentralized. Most people (including I believe most Bitcoin stakeholders) believe a centralized/monopolistic network is not a huge improvement over current Fiat money, and prefer a true decentralized network. Most people believe this means no double spends or monopolies. So, if a clear (public) mining monopoly emerges, stake holders can reject some of the blocks it signs, especially if they deem that this monopoly is not signing blocks mined by other miners.

Are there incentives for stakeholders to participate actively? If not, isn't there another tragedy of the commons problem [most stakeholders will passively sign off on whatever the miners send to them]?

Then this reduces to waiting to see if there is any conflicting transaction, which is a service which can be provided by any node, it needn't be a miner. In fact waiting a few seconds and querying nodes gives superior security to contracts with miners, so this fails as an extra revenue source for miners.

If Walmart pays deepbit (and arguably other pools) to include his block he could also ask to be notified to detect double spends, or simply to ignore other tentative double spendings.
So Joe has to double spend his money to other pools, but if walmart is able to have contracts with a majority of pools (of hashing rate) he can be sure enough.

If the transaction is big enough walmart could decide to change policy as waiting for confirmations, having contracts with more pools (thus paying more) etc.

Stakeholders will only validate a block if it currently enjoys acceptance among miners. But once they do, their validation overrides anything miners have to say on the matter.

I would be tremendously excited to see a proof-of-concept, but please don't name anything after my handle. The coder will deserve most of the credit for doing the actual work.

Thanks for the wiki entry Ripper. I will edit the wiki, eventually including my conception of how proof-of-stake would work. I will also allot separate space for criticism of this conception. I'm not the best communicator so anyone can feel free to edit what I write for clarity.

I'm not going to describe my own idea or Meni's idea in detail here, but here is an overview of three important differences.

My system aggregates information about stake and work to generate a composite vote about block validity. Validity is determined by whoever can muster the most composite votes. My system distributes the majority of fees and generations to people who already have a lot of coins. An advantage of this is that it is associated with lower txn fees in equilibrium.

Meni's system polls stake and work separately. I believe validity requires concurrence of votes by miners and votes by stakeholders (but am not sure, Meni?).  Meni's system distributes most (maybe all) fees and generations to miners. Advantages of this are increased economic mobility and reduced inequality.

FYI, I added these two entries to the wiki, you're all invited to edit:

https://en.bitcoin.it/wiki/Tragedy_of_the_Commons
https://en.bitcoin.it/wiki/Proof_of_Stake