All I was focusing on is a way to enable people to make bets with strangers with minimal trust. After that, people can find each other via whatever channels they like.
But I agree with you that a decentralized exchange will be terrible for efficient high volume trading and price discovery - it would do best to rely on centralized transaction servers for this. There I think the focus for improvement should be low-trust operation (e.g. Open-Transactions (I thought it did have functioning exchanges? Haven't checked personally.), and MPC*).
* http://fc09.ifca.ai/papers/15_Secure_MPC_goes_live.pdf
Topic: I predict a lot of strain on the Bitcoin network soon due to Mastercoin (Read 8714 times)
January 26, 2014, 09:21:53 PM
January 26, 2014, 06:25:58 AM
1. all that an exchange does is: a) establish a price by aggregating orders in a continuous auction b) exchange goods after orders are matched. what Peter is suggesting doesn't solve either of those problems. he has a theory, but not the code. same as all the other attempts in this direction (mastercoin, bitshares, ethereum, OT). otherwise, prove me wrong: I bet 1 BTC that BTC will close under 1000$ this month on bitstamp at 1.8x. any bids? see, exchanges without price discovery are not exchanges.
2. without external inputs smart contracts are worthless. you can't run this on p2p nodes.
3. this is not O(1). order matching is time-dependent.
again, there are some very basic concepts missing which are obvious to people who have worked in the field. a good start is a good book on exchanges, i.e. auction systems. usually it also takes a couple of years to acquire the necessary concepts in practical microstructure of auction, to understand the issues such as latency, reference prices, etc. etc.
I can tell you what P2P scheme works for certain asset classes, but its simply impossible to do this for liquid public assets as of now.
2. without external inputs smart contracts are worthless. you can't run this on p2p nodes.
3. this is not O(1). order matching is time-dependent.
again, there are some very basic concepts missing which are obvious to people who have worked in the field. a good start is a good book on exchanges, i.e. auction systems. usually it also takes a couple of years to acquire the necessary concepts in practical microstructure of auction, to understand the issues such as latency, reference prices, etc. etc.
I can tell you what P2P scheme works for certain asset classes, but its simply impossible to do this for liquid public assets as of now.
January 26, 2014, 05:44:11 AM
The oracle scheme I linked to is "m-of-n" compatible, and has O(1) scaling with the number of participants in a given bet. It's just simple publishing of secrets and their hashes. Furthermore, you could build a transaction based on this today using the rawtransactions API and Eligius to get it mined (it's currently non-standard).
January 26, 2014, 04:38:09 AM
I know you don't clearing for swaps. but swaps doesn't produce much meaningful economic activity and there all kinds of problem with them. if prices move too quickly there can be negative overhang which breaks the system (margin calls). to prevent this you can do these as binary options. btcoracle does this, and guess what - there system is being gamed, and the price you get are horrible.
for "oracles" you need to trust servers anyway, so this is kind of pointless (and completely inefficient at scale). there is no such thing currently, and to make them work you need a lot of things which haven't been invented yet. too much talk, too little code that actually works.
for "oracles" you need to trust servers anyway, so this is kind of pointless (and completely inefficient at scale). there is no such thing currently, and to make them work you need a lot of things which haven't been invented yet. too much talk, too little code that actually works.
January 26, 2014, 04:25:36 AM
You actually don't need any kind of clearing for the predictions market I mentioned; it can all be done with Bitcoin scripts, and one or more reliable oracles who don't even need to be active participants in transactions. Here's a nice explanation: https://bitcointalksearch.org/topic/m.2804469
Sure, a decentralized predictions market would rely on external infrastructure for actual price discovery of assets, but being able to gain financial exposure to these without needing verified accounts on centralized exchanges seems useful to me.
Sure, a decentralized predictions market would rely on external infrastructure for actual price discovery of assets, but being able to gain financial exposure to these without needing verified accounts on centralized exchanges seems useful to me.
January 26, 2014, 03:22:58 AM
d'aniel. you need clearing. that's hard to do. mastercoin and others don't do clearing. you can't really transfer goods this way. say I want to sell you 1 ounce of gold. how do you make sure you know I have it, and they you are going to be in possession after the transaction? somebody is going to safely store the gold in a vault. then I have to physically hand it over to you, or someone you trust. also you want to make sure that nothing goes wrong during the transaction. in bank-less societies this is part of the counterparty risk.
frankly, not even the largest commodities exchange in the world, CME, has a perfect answer, as they are e.g. gaming their silver holdings. and some of the largest central banks in the world are lying about their gold holdings. this shows you its a highly non trivial matter, although it might seem easy.
with synthetic markets (swaps, prediction markets), you have the problem you don't have really natural supply & demand, as goods never change hands. its a betting market on real exchanges. what we need is a real exchange of goods and services, not gambling markets (which have their use cases).
frankly, not even the largest commodities exchange in the world, CME, has a perfect answer, as they are e.g. gaming their silver holdings. and some of the largest central banks in the world are lying about their gold holdings. this shows you its a highly non trivial matter, although it might seem easy.
with synthetic markets (swaps, prediction markets), you have the problem you don't have really natural supply & demand, as goods never change hands. its a betting market on real exchanges. what we need is a real exchange of goods and services, not gambling markets (which have their use cases).
January 25, 2014, 09:24:11 PM
finance is very complicated and has evolved over many centuries. the fact that we have now a global virtual currency, does not at all mean we will have a global stock/bond/commodities/currency/... market anytime soon, although that is the current meme.
I agree that the "Cryptocurrency 2.0" meme is a bit over the top. Though if we get some reliable oracles operating and the relevant scripts made standard, then I can imagine a reasonably successful predictions market springing up. Intrade showed there's demand for this, and it being rubbed out by USG has left a vacuum. Incidentally, this could also be used to insure bitcoins against FX risk, provided volatility isn't too crazy. 
January 25, 2014, 08:32:51 AM
I was a bit hyperbolic in my optimism regarding our pace of progress, I a bit.
You should see our development pace quicken significantly next months, our team is ramping out quite nicely.
You should see our development pace quicken significantly next months, our team is ramping out quite nicely.
January 25, 2014, 05:33:02 AM
as of now the "strain" on the network is exactly 0.000%. yes, the TCP/IP analogy is heavily flawed in so many ways, but probably not in the way you might think. finance is very complicated and has evolved over many centuries. the fact that we have now a global virtual currency, does not at all mean we will have a global stock/bond/commodities/currency/... market anytime soon, although that is the current meme. I'm not trying to comment on mastercoin and the other efforts, so not to talk my own book, but its puzzling to me what people believe these systems are doing.
January 25, 2014, 01:33:05 AM
Do these scalability issues make the Bitcoin blockchain poorly suited as an all-encompassing protocol layer for supporting non-currency related applications? Maybe the TCP/IP analogy is flawed. I'm starting to see why the Litecoin devs are pushing to position the "liteness" of Litecoin as a competitive advantage...
January 24, 2014, 01:04:38 PM
I'm actually pretty optimistic that the Master Protocol and the Bitcoin Protocol can co-exist and even benefit each other.
I was very glad to see Gavin include the Provably Prune-able Outputs in 0.9 of the Bitcoin client and the Master Protocol devs adopt this as their preferred method for embedding meta data in the block chain.
I cover this topic a bit in my white paper on Decentralized Applications and how they are evolving on top of the existing blockchains.
https://github.com/DavidJohnstonCEO/DecentralizedApplications
I agree with some of the comments here that it will be interesting to see how the miner fees get worked out for those that host "archive nodes" as Gavin terms that, that keep a complete unpruned record.
I was very glad to see Gavin include the Provably Prune-able Outputs in 0.9 of the Bitcoin client and the Master Protocol devs adopt this as their preferred method for embedding meta data in the block chain.
I cover this topic a bit in my white paper on Decentralized Applications and how they are evolving on top of the existing blockchains.
https://github.com/DavidJohnstonCEO/DecentralizedApplications
I agree with some of the comments here that it will be interesting to see how the miner fees get worked out for those that host "archive nodes" as Gavin terms that, that keep a complete unpruned record.
November 22, 2013, 11:36:27 AM
Bitcoin works because its a self-contained system - MasterCoin and such supposedly give you ownership over other stuff/stocks/gold or such... which means you rely on the state to make your claims in the end... a state that has zero motive to help you.
You rely on the custodian who holds the asset as backing for the colored coin (xcc)/mastercoin (msc). However if the asset represents a bearer share in a company you dont trust anyone.
You know that share buy backs and fresh share issues are not the normal way that you redeem company stock - you redeem it by selling it to someone else.
Quote
Decentralized stock exchanges are also a problem because once you have the startup stock money you have zero incentive to pay dividends - unless again you bring in the state, in which case you may be better off using regular exchanges.
You are not thinking for enough ahead. The company transacts entirely in bitcoin, its shares are represented in color coin. The dividend payment subject to shareholder approval (holding colore shares gives you the right to vote proportionally) and measured against the share prospectus shareholder vote threshold, defines the dividend. Ownership of the shares definitionally grants you authority over the dividend amount. The company is powerless to renege.
Same for the entire banking & finance ecosystem and governmental policy. Its in the constitution (a countries prospectus) they cant change it without a super-majority vote defined as part of the constitution.
This is why smart-contracts are the future.
Obviously second and third generation of scripting is required for such things, but thats the direction IMO. So you have to architect to that assumption.
Adam
November 21, 2013, 05:26:49 PM
Sounds like a self correcting problem. The solution is a merge mined separate chain. If MC does implode under its own created tx "spam" then hopefully the outcome will encourage others that follow to a better solution.
Agreed.+ I never understood colored coins; Bitcoin works because its a self-contained system - MasterCoin and such supposedly give you ownership over other stuff/stocks/gold or such... which means you rely on the state to make your claims in the end... a state that has zero motive to help you.
Decentralized stock exchanges are also a problem because once you have the startup stock money you have zero incentive to pay dividends - unless again you bring in the state, in which case you may be better off using regular exchanges.
I would like it to work, but I don't see it.
November 21, 2013, 05:10:47 PM
The problem as I see it is bitcoin has a scaling limit, like transactions per second, which it can support in full p2p bearer form. It can be scaled but only at the cost of reducing its decentralization. eg if block sizes go to 1GB, that counts me out of running a full node. Its an issue because if you can only be a full node, with an OC3 line, most people will be pool mining without validating what they're mining, and then defacto control remains unavoidably central. These will grow into large companies, be acquired etc. And then become defacto policy points and they'd just as well sign contracts and stop mining. OK so committed transactions can till prevent policy by making transactions opaque to miners, but it is not quite ideal itelf.
I haven't thought this through completely, but what if we had some sort of hybrid Bitcoin proof-of-work and Ripple-style consensus system, whereby miners could query multiple full nodes which are known to be "unlikely to collude to defraud us" to check validity?
November 21, 2013, 02:40:57 AM
FYI, I added this bounty (no specific bounty amount, let us know how much you want for this analysis):
https://trello.com/c/CrTosrYl/56-long-term-scalability
https://trello.com/c/CrTosrYl/56-long-term-scalability
The scalability of Mastercoin - whether or not it uses merge-mining - is a very similar question to the scalability of Bitcoin itself. I'd be interested in taking this on. What kind of timeline do you want an analysis finished by?
The sooner the better?
We're very flexible. You can give us different price quotes for different timelines.
November 21, 2013, 02:20:05 AM
FYI, I added this bounty (no specific bounty amount, let us know how much you want for this analysis):
https://trello.com/c/CrTosrYl/56-long-term-scalability
https://trello.com/c/CrTosrYl/56-long-term-scalability
The scalability of Mastercoin - whether or not it uses merge-mining - is a very similar question to the scalability of Bitcoin itself. I'd be interested in taking this on. What kind of timeline do you want an analysis finished by?
November 19, 2013, 11:30:41 PM
FYI, I added this bounty (no specific bounty amount, let us know how much you want for this analysis):
https://trello.com/c/CrTosrYl/56-long-term-scalability
https://trello.com/c/CrTosrYl/56-long-term-scalability
Quote
We need a page describing the eventual scalability of Mastercoin.
How many transactions per second can the network sustain? How fast this number is expected to grow? What are our main challanges? What about Lite Mastercoin Clients?
Something like https://en.bitcoin.it/wiki/Scalability
This task is left for someone qualified to take and propose a suitable bounty.
How many transactions per second can the network sustain? How fast this number is expected to grow? What are our main challanges? What about Lite Mastercoin Clients?
Something like https://en.bitcoin.it/wiki/Scalability
This task is left for someone qualified to take and propose a suitable bounty.
November 17, 2013, 09:45:14 PM
Thanks D&T, I think we'll start investigating and detailing what it means to do merged mining for Mastercoin.
Merge mining Mastercoin is an awful idea and will make Mastercoin significantly less secure. Unfortunately merge mining just means that attacking your chain becomes something miners can do for free - unless you have a majority of hashing power merge-mining your chain you are not safe.
I strongly recommend that Mastercoin stick with the current, secure, design.
We plan to stick with the current design as long as it's possible.
However threads such as this show we must prepare for a scenario where the Bitcoin network rejects us to some degree. Merged mining is a possible interim compromise.
November 15, 2013, 04:08:32 AM
Thanks D&T, I think we'll start investigating and detailing what it means to do merged mining for Mastercoin.
Merge mining Mastercoin is an awful idea and will make Mastercoin significantly less secure. Unfortunately merge mining just means that attacking your chain becomes something miners can do for free - unless you have a majority of hashing power merge-mining your chain you are not safe.
I strongly recommend that Mastercoin stick with the current, secure, design.
November 15, 2013, 03:26:34 AM
Thanks D&T, I think we'll start investigating and detailing what it means to do merged mining for Mastercoin.
I'm proposing to increase the bounty for this btw.
I asked Vitalik Buterin to look into it, anyone else can contribute their opinion.
The current focal point for that discussion is the Trello card (we can also move to a dedicated thread on bitcointalk if someone opens it).
I'm proposing to increase the bounty for this btw.
I asked Vitalik Buterin to look into it, anyone else can contribute their opinion.
The current focal point for that discussion is the Trello card (we can also move to a dedicated thread on bitcointalk if someone opens it).
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