Topic: "Failure to Understand Bitcoin Could Cost Investors Billions" (Bitcoin's flaws) - page 14. (Read 43212 times)

I have never agreed with giving coins away for free. Jason Hommel ingrained into my mind, "you can't give away something for free which isn't free". I am writing about distribution efficiency for currency.

Perhaps you are writing this in support of my argument and not still thinking that I am proposing giving anything away for free? I don't think you are arguing Auroracoin will be a positive outcome, because you explained to me in the past how when the former Soviets distributed formerly collectively owned land back to the individuals, the recipients promptly sold it and consumed the revenues (on Vodka, etc). The poorest of the Icelanders will promptly sell the Auroracoin driving the price down or retarding its price growth! I have no qualms about home-PC miners spending their recently mined coins at a net-loss[1] if they so desire, as this increases the velocity of money and is totally different as they have recent electric bill cost to factor in.

Miners compete to earn a profit. The only socialist aspect is the perpetual coin rewards (debasement). As I have explained upthread, this is necessary (and it is why socialism exists), because otherwise the wealthy will destroy themselves (and society) because usury (backstopped by purchasing the government) eventually accumulates 100% of the wealth and then we collapse the velocity of money[2] (because wealthy consume very small % of their wealth) into another feudal (lords) Dark Age.

Those (hard-on money tin foil hats) who advocate no debasement at all will actually force socialism to create a central bank. It is unavoidable that we have to dilute the usurists. It is how we go about it that is new. Now we can do it decentralized so the usurists are not in the driver's seat of the attempts to rebalance their overconcentrated wealth. And the rate of debasement is very subtle, perhaps 2 - 5% per year which is insignificant to the fast-moving entrepreneurs who are increasing their wealth much faster.

Essentially this redistributes wealth away from usurists who (inject very little new knowledge and) are a drag on the economy to fast-moving entrepreneurs who are a boon to capitalist risk and prosperity. Usurists don't take any risk at all, they buy the government backstop[3]. Thus they don't care who they loan to.

An argument which claims we can just stop the usurists from capturing the government is unrealistic. The power vacuum of democracy can't be eliminated entirely. Thus view the perpetual coin rewards more in terms of their importance for mining security, i.e. anarchistic-leaning-contentionism (click that link!), than for the impossible dream of eliminating all centralized wealth redistribution a.k.a. socialism.

[1] I posited upthread that the home miners will be mining at a loss (electricity will cost more than the value of the coin), and that this will drive the price of the coin higher faster than Bitcoin. I pointed out this will move the value of the existing PCs into the value of Bitcoin. Unlike with ASICs, there is nothing to buy, that capital is already idle and being wasted every night when they sleep. Thus this will skyrocket past Bitcoin!

[2] V in the Quantity Theory of Money

[3] Even long-term private insurance, e.g. life or bank deposit insurance (but not insuring a package delivery), is ultimately backstopped at the government because it forces capital to be managed by a central fund manager, thus the fund manager can't lose for some and gain for others and all are locked into a single outcome, i.e. no risk allowed. Thus insurance is usury, i.e. invested in bonds.

Auroracoin is an interesting approach of provably giving most of the the coins away equitably for free in a non-wasteful procedure.

Last time I checked it was trading at $40M post-airdrop marketcap.

I don't claim to be omniscient, so everyone should proceed with what they want to experiment with. Let's see how it ends up.


I am confident that if it reached 10% of the dollar's reach, the USA government would act to protect the dollar's hegemony well before it had destroyed the dollar.

Besides they can tax it at will, especially since there is no strong anonymity in these PoS systems. I believe they can't build in the anonymity, because the only way I could contemplate to do this was via the pool mining (and PoS doesn't have pool mining).  

Thus they can drain value from it back to dollar.

The NSA is tasked to pay attention to security threats to the hegemony. I doubt they are oblivious.


The current plan of the globalist elite is for a single global base currency, tentatively called "SDR", then the regional and national currencies will float against.

W.r.t. to the physical economy which government will always be able to tax and thus control, they will make sure the crypto-currencies float against this global reserve unit.

I don't propose to challenge that plan. I don't think anyone can.

Rather I propose that if we successfully make a crypto-currency strongly anonymous that can withstand the NSA, then we also have to protect the other means to controlling it, because (I assume) the government's plan is to control the cryto-currencies through taxation, giving them an unfavorable tax rate relative to the SDR. So if they are faced with a currency they can't tax in the virtual economy, I think they would attack it any other way, such as 51% attack for PoW or buying up a majority shares for PoS.

Thus I conclude PoS is unworkable as the strongly anonymous coin. If I have a failure in my logic or have stated something subjective, please point it out.


They will try to obfuscate and confuse you (and themselves) on this issue by employing much complex discussion and design, but in the end they can't avoid this because this was the genius of the PoW invention.


My (and the Austrian) point is that money has to gain adoption over a period of time, so we need a system that provides continuous competitive distribution, not a one-shot affair.

The PoS IPO is the antithesis of currency distribution, because the wealthy spend a fraction of their wealth on consumption. So you won't be distributing this coin from wealthy to merchants, rather from wealthy to the greater fool investor. The mechanism isn't there to create a currency. The greater fool investor isn't buying it to spend as a currency, rather buying in frenzy, then a collapse in price. There is no mechanism to adopt the use as a currency. Whereas with cpu-only PoW, the currency gets pushed out via home-scale mining to anyone with PC. The home-scale miner is selling it to the wealthy. This is night and day in terms of currency distribution.

Whereas with cpu-only PoW, we are continuously diluting the wealthy (at a small, reasonable annual debasement) to get the coin into consumer's hands.

Do the wealthy play an important role? Yes indeed. They invest after the early adopters (another reason you don't want the IPO at the very start). Balance. Balance. Balance. PoS doesn't have it.


Ditto logic I wrote above. Thus they are not currency distributions. It appears they are some genre of pyramid scheme (for a lack of a better term to describe greater fool selling of what can't be a currency to people who think it can be).


Maybe they should read this post of mine.

Any way, I think there comes a time for me to stop arguing with words.

I think by the time a PoS system become big, it will be too expansive to buy it, even for the wealthiest. Therefore they will need to buy it somewhere in its ascent, and that will deter the market to use it and another PoS system will win the adoption race.

And all of that is assuming there will be only one dominant currency. Which will probably not be the case. A lot of the socialist thinking come from the false premise that free market lead to monopolies. In the same manner that there is not one corporation which address each human wish, there will be no unique money. And if the wealthiest will not be able to even capture one succesful PoS system, a fortiori they won't be able to capture all the succesful PoS system.

XCP is the antithesis of a scam. It was distributed by proof of burn, even the developpers had to burn their BTC to get some. It's arguably the fairest coin distribution since Bitcoin.
They are doing both. They will issue X ether via an IPO and then 0.4*X ether will be distributed each year via PoW.

thanks

(I am so tired of hearing from self-important, do-gooders who want to stomp on the free market. I was in California too long I guess. Now they want to tax breathing, i.e. carbon, so they can protect their perfect suburban habitat of manicured lawns. Spain even taxes sunlight. Efficiency and conservation? It is always the other guy. I program from a Nipa Hut and there is no lawn nor sidewalk rather chaotic natural weeds and mud. So please don't tell me about conservation. Do it. Instead they always want to spend other people's money. Guard your wallet! That is what this thread is about accomplishing.)

P.S. I further refuted the myopia that says electricity consumption with PoW is a problem.

Completely separate issues it would not be rational to conflate them.
In fact one could even argue that to do so would have made me a myopic dimwit and insane.

 

I too am interested if any group can implement some or all of the proposed ideas. Also I am interested to study some of the orthogonal ideas (not mining security design nor anonymity) coming out of the Etherium project.

I too appreciate the quality of the community and especially that you did not get put-off by our discussion about AGW in the other thread to emotionally change your views on this issue.

Note cpu-only may be as or more important than stronger anonymity, as well the economic implications of the design to fund mining security not from transaction fees.

I am very appreciative of the rationality of the debate thus far in this thread. For example, rationally there was no falsifiable proof made on PoW vs. PoS, rather readers will have to form their own opinion from the debate. For non-falsifiable issues, the market must decide.

I have likewise been very impressed by the community.

I first came across some of the concepts discussed up-thread in a few months back.
https://bitcointalksearch.org/topic/is-bitcoin-a-pyramid-or-ponzi-scheme-what-are-the-ramifications-342007

Since then the OP has managed to convert about a third of the audience to his point of view.
That is impressive considering that the initial reception was so poor and he was battling against entrenched views.

Regardless of the OP plans for his own alt coin. I think a critical mass has been obtained and market has is now primed. I know that I personally will be taking a very close look all upcoming alt-coins with strong built in anonymity.

I wrote upthread that I am not that fearful of hyperinflation due to a proliferation of altcoins. To expound a bit, I doubt very much the market will choose to give equal weighting to numerous xerox coins. I think the market will focus in on one winner, or possibly two for example if one coin needs to be 90+% anonymous and the other needs to be compliant with government oversight. Perhaps someone can think of another market segmentation for why we might need 3 dominant coins. And the market may invest in a few best alternatives at lower market caps to keep the leading coin(s) honest, e.g. analogous to the bimetallic gold and silver standard. This should stabilize and not spiral off into hyperinflation, due the value of network effects, the market cost of changing brands (a.k.a. good will ... see how much difficulty moolaching has in finding a good alternative brand name), and the fact that the variables for a better design are limited (eventually we will stabilize and not be able to find a much better design any more). I agree with Adam Beck that we should try to find the minimum set of features that need to be in the coin protocol, so that extra features can be built orthogonally on top of that base protocol.

Also currency is not a store-of-value. It never has been due to Gresham's Law. The purpose of the dominant currency is unit-of-exchange. If you make the currency too finite (Impaler uses the word too "hard"), the bad (more debased) currency drives it out-of-circulation. Just look what happened to silver coinage in the 1960s all over the world it disappeared into private hoards. Note Gresham's Law requires the force of legal tender, i.e. the bad currency must be the one sanctioned by society.

So if we really want to build a dominant currency, we need perpetual debasement (or Impaler's Freicoin demurrage). And Bitcoin is never going to change to that because there are people who don't understand what I have written in this thread about perpetual debasement, and they will not change their (I assert is incorrect) logic any time soon. To change that in Bitcoin would fork the coin.

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Edit: https://bitcointalksearch.org/topic/m.5346113

Addressing only this point.  This is Adam Beck's perspective on this only.  He is likely correct, but if the alt-coin killer feature is obvious after implementation, Bitcoiners will quickly choose to either migrate to the new coin (selling their stake in Bitcoin, and therefore losing interest in the outcome) or advocate for the change to be completed quickly.  Or both at the same time.  In the long run, it doesn't really matter which is true, or whether or not Bitcoin remains the cryptocurrency of choice.

They control all the fiat and credit of the world via the Central Banks. I surmise they can surely buy up a PoS system, transferring their control from existing fiat to this new fiat PoS system.


Tragedy of the Commons. These systems won't be secure. Their designers are Communists disguised in Austrian economics facade, i.e. wolves in sheepskin.


Sorry this is not the "best of both worlds". This is a Frankenstein combo. The perpetual security of mining and ongoing (small, reasonable, annual percentage akin to gold's debasement rate) redistribution of wealth from the upper 1% to those who apply their ingenuity, risk, and effort to provide the security is replaced with a Tragedy of the Commons which is precisely the power vacuum chaos that will demand a leader step in and take control, i.e. fiat.

Bitcoin has similar Tragedy of the Commons problem, because new coin rewards decline and are replaced by transaction fees. I have explained this exhaustively already, so I won't repeat the argument.


A one time event, like a land rush for money. Brilliant.    

They have no clue about the Austrian theory of how money comes to be adopted, nor any sane logic about how to make a coin that sustains adoption and security growth ongoing.


Scams abound now.


I thought it was a PoW coin. Are they doing a land rush sale of a pre-mine? Or do you mean invested in mining it at launch?


Agreed. But this should be done through competitive mining, as this is a decentralized security and money model ongoing.

For instance the distribution of PTS is done by POW mining, and PTS give a stake in Bitshares, which is PoS. So with Bitshares you have a PoS coin where coin distribution is done by mining. The best of both world.

Also when Bitcoin was mineable with a CPU, only a tiny fraction of the population was aware of what's going on. I think it's quite possible that today more people have the possibility to have a stake in a PoS coin via an IPO, than people had the possibility to mine Bitcoin in 2009/2010.
Recently roughly 2m$ were burnt for the distribution of XCP. I think a lot less than 2 millions $ were spend in BTC mining materiel in 2009. Furthermore we can except that several dozen m$ will be dedicated for the acquistion of Etherium coins.

Today if more ressources are devoted to coins acquisition than before, it's because there is more awareness among the crowd. More ressources devoted to coin acquisition mean today's coin (included PoS coins) start with a level of marketing/adoption which is way higher that the first PoW coins had.

The reason Bitcoin can't reliably lower the block confirmation time is because the network latency between full nodes can not be known to be below some value. As well the validation delay can be significant for some full clients, because we don't know the hardware they are running.

Here is the discussion of and the equation for the orphan (i.e. transactions stall) rate.

This problem is theoretically solved in the holistic altcoin design I have proposed in the OP because fast network propagation and validation is assured by the design of the new hash, mini block chain account balances, mining only in pools to achieve the required anonymity while pools are prevented from being too large. I chose 1 minute to be conservative. I think this design could work reliably at 30 seconds or less. It could be lowered after extensive testing to confirm my calculations.

Also it may not be necessary to resend all transactions or separate the send from PoW header.

Edit to insert a followup:

From private message (I do speak behind the scenes with those who disagree with me):


In the Adam Beck interview he says that drastic changes can not be made to Bitcoin until they've been heavily tested by an altcoin, because the risk to Bitcoin of an error is far too great. But by the time they've been heavily tested in altcoin, it is very possible for that altcoin to have established itself.

And there is one thing that Bitcoin will never implement, and that is always-on-by-default strong IP address anonymity. The vested interests (pools, exchanges, payment providers such as Bitpay) would never allow this, because they would fear government retribution. There is already too much inertia in Bitcoin being non-anonymous and thus amenable to the government KYC and AML laws.

The killer feature is cpu-only PoW, and no one knows how to do it.

Are you thinking that a SHA 256 ASIC could be used to mine the proposed altcoin? The "provably cpu-only mining" means never could any ASIC nor GPU profitably mine the proposed altcoin.

So, I am left wondering why this requirement is listed for the killer alt coin in the OP;

"provably cpu-only mining"

It seems to me that now that SHA 256 ASICs exit that are much less electricity hungry, that they would get pointed to the alt coin as BTC becomes too hard to mine.  That hardware can ONLY mine coins.  As BTC gets too difficult, owners of older ASICs will simply point them at other SHA 256 coins.  That is my theory.  Am I missing something?

Broken fungibility could destroy Bitcoin, as Bitcoin would not longer have just one price.

Name new altcoin Digitoin, Masscoin, PCcoin, Silicoin, Ubiqoin, or Unigit ...?

Requesting your vote.

I don't agree that Protoshares is ASIC resistant. It is compute bound and thus it can be implemented to run more efficiently on an ASIC. The cpu-only PoW can not be compute bound (and that is yet another hint of my secrets).

But your point isn't that Protoshares will remain cpu-only, rather you are claiming that while a coin can be mined with a cpu (ASICs not yet developed for it), then server farms will dominate the mining.

I have a solid logic as to why I don't agree.

For the moment the masses are not interested in mining Protoshares because a) it isn't popular enough yet, b) the mining client isn't something Grandma could download and operate, c) Protoshares development was funded by the Chinese so they were ready from way before release to mine it with server farms.

Once the masses are mining they will mine at a loss, because their electricity costs will exceed the value of the coin. They won't care, because the coin value is rising, they won't notice the change to their electric bill, and the virgin anonymous coin is intrinsically worth more (even if sells for same price) than a coin obtained via an exchange. I think it has been established that the cost of mining determines the price of the coin, so this will push the price of the coin higher and higher much faster than Bitcoin (because the hardware is already owned, i.e. the value of all the PCs in the world gets moved into the marketcap of the cpu-only altcoin).

Thus server farms won't be profitable. Perhaps only micro-hydropower stream driven mining will be profitable. This was really a major epiphany when it hit me, I said "A ha!, this is it!".