Topic: Fundamental bitcoin flaw - revisited - page 4. (Read 9710 times)

The merchant bank I used to work for made their money in many ways, but primarily though through spreads, commissions, interest and capital gain on prop positions. Retail transaction fees are not essential.

Hmm, you do know how banks make most of their money don't you?? 

(here's a hint: I've deliberately highlighted a word in that question)
(incase you still don't get it:  it's NOT by transaction fees)

So let me get this straight,  you' just admitted that, until now, you've been trashing me without actually understanding what it is that I've been talking about?

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Look, just forget the DRM stuff for a minute.  Ask yourself these questions:

In the future when transactions fees are the main source of income (as opposed to block reward) for miners, when someone exchanges bitcoin off-line (however they do it, using casascius coin, bitbills, printcoin bills, or DRM coin) does the miner benefit from it?

The answer is NO.  (except in very rare cases where the transaction is very large in KB size and the fee very small)

So does the miner the lose-out if a transaction that would have been transacted on-chain is moved off-chain?

The answer is YES. Because they lose a potential fee.

Now here's the important one: So if the majority of transactions move off-chain what happens to the miners and consequently what happens to the network hash rate (ie: what happens to the famed bitcoin security)?  

I won't answer this one, instead I'll let you think about this.


Why DRM/TC coin is so dangerous, as opposed to other current off-chain mechanisms, is because potentially it involves no fee, is instant, quite secure and can be done locally or over the internet.  This makes it a very attractive alternative to on-chain transactions for someone who wishes to trade with bitcoin.

I which means that your bitcoins are not being actively traded.  Ie, you are just storing them as an investment.  Anyone who actually *uses* bitcoins and trades them on-chain must trust their machine.

I'm perfectly aware of freicoin and know what demurrage is.  Infact, I mention both in my original post.  (by-the-way I belive freicon takes a fixed percentage of the total money supply every year whereas I perfer a system that takes money form inactive wallets- similar but different)

No, I trust my hardware, but only to a point.  I don't trust your hardware at all.  Trusted computing used for the exchange of bitcoins would require that the vendor trust the sender's machine, and probably more than he should rationally trust his own.

I understood your argument better than you think, and right from the start.  It's one that I thought of myself, three years ago.  I was wrong then and you are wrong now.  At least that I can claim that I actually researched the topic before posting; for over two weeks.  The solution that you are reaching for, but don't know it, is called demurrage; (storage fees for very deep transactions, basicly) and it's a core element to freicoin.  It's also unnecessary.  And even if it wasn't, any successful method of implimenting demurrage that freicoin could come up with would just be taken into Bitcoin proper, should freicoin (or any other alternate cryptocoin) grow legs and offer a real challenge to Bitcoin's superior market position.  The only way that does not happen, is if the new cryptocurrency were to develop an obvious advantage for which Bitcoin could not replicate.  This is not impossible, but is rather unlikley in my view.

You already do trust your hardware!!!  (ie: You trust that your CPU has no backdoors or flaws that people/organizations can exploit to gain access to your machine)

Up to now OP hasn't done his homework.

He claimed that off-chain transactions based on some conventional kind of trust will necessarily drive people to abandon using the Bitcoin network proper.

This is a claim. The proof for this claim is lacking. In fact, any serious argument is lacking
Besides, going just for plausibility: was there ever any trust based secure method of value exchange available free of charge?

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What's the lection we can draw from this?
The innovative nature of Bitcoin is hard to understand. There is more about it than just "mining digital gold".
Once Bitcoin is perceived more as a competitor by existing and upcoming payment networks, we'll see a lot of campaigns using bzzzwords like "trusted computing". Since you can't win with arguments against buzzwords, in the end I think the actual economic and practical properties of those competing system will be what counts.

Grasping at the flaw-straw is what this thread is.

So it is possible to trade bitcoin off the blockchain in a similar way that cash is traded outside of banks.   Guess that is gonna KILL the US dollar banking industry because banks can not profit off of every transaction.

This is not a flaw, it is a feature.  It gives bitcoin a mode of transfer OFFLINE as well as ONLINE making bitcoin that much more flexible. 

Could off blockchain transactions kill bitcoin?  No.  They need to be done in person and MOST bitcoin transactions need to be done online.  If you want to visit SatoshiDice in person and play (if they allowed that) FINE, but that will not cut into the blockchain version of that business.  The blockchain will have plenty of customers.

I think you're the one who missed the point actually. I understand how TC hardware works. Heck I have a copy of the book "The Intel Safer Computing Initiative" on my bookshelf. My response remains - regardless of how you implement it or what the chips do, this does not seem to be a flaw in Bitcoin itself. Indeed it'd be a nice extension of it. If people are passing around value outside the chain, all that means is that less money needs to be spent on mining, because less value is being secured that way. How is that a problem?

I get what you are saying, however I don't get why you keep insisting on bitcoin in that case.
see my other post

I think you've completely missed the point.  There are no chains of coin transaction history that get resolved and there are no fees that get accumulated.  The bitcoin protocol as-is doesn't demand any such thing.

The way to understand how DRM coin exchange works is to picture an electronic version of casascius coin. But instead trusting casascius to load the key-pair in the coin and to not keep a copy of the private key,it relies on the services offered by the TC chips inside the computer.  (ie: you trust the TC chip not a person)
Just like casascius coins, there is NO fee involved when they change hands from person to person.  And they can change hands an arbitrary number of times.  There is no record of who has had the coin.  Indeed, they NEVER need go back on-chain at all to still be useful.  Most importantly, this scheme is perfectly compatible with the bitcoin protocol:  ie, nothing in bitcoin as-is can stop someone from creating this software.

Wow, someone who gets what I'm saying (and a junior member like me too   )

Just as slight clarification, I not against being able to trade coins in this manner.  Infact, I think it is the way-to-go since it is extremely efficient and instant.  However, the fact that they can be traded like this means that the protocol as-it-is will need to be forked/modified to survive.  To address this issue, what I personally would like to see is that the miners can collect dead-coin (ie: coins that haven't been moved for a long time)-- let's say something like the coins can sit untouched in a wallet for 2 years but after that at the end of the every six months the miners can take 5% of the original amount until either the owner transacts the coins on chain or they are completely reclaimed by the miners.

This has been discussed before. I remember talking about use of TC hardware for improving confidence in unconfirmed transactions years ago, and indeed, this is one of the reasons we want to change the default mining algorithm to allow parents to pay for no-fee children.

If people are building long chains of transactions off the chain by relying on secure chips that's absolutely fine and is not a "flaw" in anything, indeed, it's something I'd encourage. When the chains are eventually resolved by broadcasting them online whoever is doing so can attach a fee to the end and that will encourage confirmation of all dependent transactions recursively.

I guess I don't understand how this is meant to cause problems for Bitcoin. The fees that are being placed onto the network are supposed to be high enough to incentivize sufficient mining to keep the double spend rate acceptably low. If people use secure hardware then the double spend rate is made lower via other means and less mining is needed.

no, the OP is talking about a trusted computer model (where you can both prove that data wasn't tampered with, there is only one copy and nobody looked at a certain part(the private key in this case) oh and also be somehow pseudonymous )
I'm not saying this model is feasible or not, or how much it would cost or even if it even would be reliable. That's not the point to discuss. The OP thinks that it's a flaw of bitcoins that they can be traded in such a manner

Exactly what I wanted to point out, too: How can you be sure, that the previous owner of the coin didn't have a look at the private key?

In case some people aren't realizing the simple practice of handing off keys is not a safe way to preform bitcoin transactions. The 'sender' can reuse that money any time, a primary way would be to send it to themselves at a new address by making an actual bitcoin transaction.