Topic: [If tx limit is removed] Disturbingly low future difficulty equilibrium - page 6. (Read 37667 times)

if i understand proof of stake, its a system to prevent attacks on the bitcoin network. so far there have been almost no successful large scale attacks on the network.

however if you really want proof of stake, feel free to make your own client with it inside and prove us wrong.

the 37% is just what you need to maintain the current hash rate. It is the current amount issued by bitcoin. 3% or 4% might work, but the aggregate hash rate would probably be at least 10-fold less.
The low aggregate hash rate might be enough or it might not. Because of the "might not" scenario, it makes sense to investigate alternative solutions such as proof of stake.

You are righ that it is poorly thought out, but that doesn't mean it can't work with more thinking. For example, I dismissed Meni's idea, but on further thought i believe that i may be wrong. His idea may be viiable. We need to have more people thinking about the issues.

I would prefer a system ith the following features:
1) the value of your vote is tied to both hashing power and your stake in a pool of voting coins
2) it is possible to destroy txn fees to take reduce the money supply if the aggregate hash rate falls or fails to grow
3) people who participate in voting receive a monetary reward if their votes match those of the majority of votes.
4) disagreement with the majority of votes can result in confiscation of your money
5) there is a significant time lag between acquiring bitcoin and being allowed to vote.
6) there is a significant time lag between ceasing to vote and being able to transfer coins used for voting.
7) money supply growth is pegged at a small fraction of txn fees
txn fees are a very small fraction of the median txn, say 0.1% or less
9) there is no plan to alter the system in the future

You don't need all these features in a proof of stake system, so it can be much simpler than this. However, I think all the features are useful.

Add to that, some people prefer their proof of steak on the rare side, while other would demand well done.  And then there are all the proof of A1 sauce proponents!  I'll never understand it all!

Thank you for the numbers. I will look into these stake ideas.
But first I would like to know why freicoin's eternal reward to miners must be that high.


Or where the 37.5428571 % annual reward came from?
Why a 3% or 4% of the monetary base annual reward for miners is not enough?

What you're missing is that it may be necessary, as in Bitcoin won't be able to work without it. So the fact that it adds complexity (which has no effect on regular users) is moot.

And like I said there's more than one idea and they're all rough sketches, figuring out the optimal solution requires serious discussion.

the proof of steak idea not only would be hard to implement, it also is poorly thought out, introducing more complexity into the system would only make it more difficult to use bitcoin, unless i am missing something?

There are more than one stake ideas. Both cunicula and I described our respective stake ideas earlier in this thread (post #113, #116).

can someone fully explain the "stake" idea?

Why is stake meaningless? Do you mean that it won't work in theory? If so, why?

When does the block reward get halved? That event will be a good test of my assumptions. If I am right difficulty should fall following the reduction in rewards. Other than that I don't see the point in arguing abput it with you. Explain to me why proof of stake won't work instead, please.

Actually, yes, I did.  I'll repeat it here for you now.  Listing a few of your invalid assumptions is the polite way to say that your arguments are stupid.



A lock, sure.  But bitcoin is not a lock.  The metaphor is not the reality, it is an imaginary construct.   In reality, security is not provided by the block reward.  Security is provided by the network forcing an attacker to accumulate over 15 trillion hashes per second of computing power, and this is for a trivial attack of no consequence.  A meaningful attack would require several times that, and we can trivially extend the margin from a multiplier to an exponent if we ever want to.  The block reward provides an incentive, only.


This analysis is still based on a ton of assumptions.  Some of these assumptions have been shown to be false, and the rest are at best unproven


I never said that it was inequitable, I said that it was stupid.  Stake is meaningless.  Proving it is doubly meaningless.  Basing a system on a meaningless expression of meaninglessness is stupid.

I'll note that you did not pose any kind of argument to back up your claim that anything I said was stupid.

Generally, wouldn't youink that the probability of a lock being broken is an increasing as a function of the ratio between the value of assets behind the lock and the cost of breaking the lock. This is what I am calling security. Please propose and defend a better metric.

As far as people mining at ass to defend the network. This is ridiculous. A charity vault is not where I would put my money.



As far as bitcoin not needing to be better than VISA. You are right it doesn't need to process VISA's volume of transactions. However the situation gets WORSE not better if you reduce txn volume. I agree that my assumptions were excessively optimistic.

As far as propf of stake being inequitable, i dont care. It can duplicate bitcoin's functions at lower txn costs. Does anything else matter?

Your assumptions are invalid.  I'm not talking about your stated assumptions, but your unstated ones.

First invalid unstated assumption:  The ratio of block reward to total BTC supply is meaningful.  You actually do state this assumption, but you do it in a way that makes it look like an established fact, and not the baseless assumption that it is.  Rather than give it a cute and emotionally charged name like security, I prefer to name this ratio cerulean.  Do you have any reasons to believe that anyone should care about this ratio?

Second invalid unstated assumption:  The current value of cerulean, or security as you may still prefer to call it, is the correct value, even though this value is an accident of time.  If you had written this post a day earlier, or even 10 minutes, or for that matter 10 minutes later, the value of the ratio would be different.  Not by much, if the interval is small, but by a lot if we get into months.  What was special about yesterday that make that day's value correct?  How did bitcoin even get this far, since a month ago, the ratio was different by 3%, and a whopping 38% a year ago?

Third invalid unstated assumption:  Bitcoin needs to be the best store of value, or the best medium of transaction.  This is a false dichotomy.  There are other things it can do, and even if it were only used for those two things, it wouldn't need to be the best at either of them to be successful.

I would keep going, but in your second scenario, your thoughts get very non-linear, and I can no longer follow you.  In particular, your sentence "This doesn't sound sound [sic] like much until you think about how much BTC will be worth under this scenario." could be replaced, with no loss of clarity, by "This doesn't sound like much until you think about a unicorn appearing right in front of you.".  I think that we are supposed to assume that the name of the unicorn value of bitcoins is so horrible, in some way, that you can't even speak of it.

Here are some things you should think about.

1)  Bitcoin does not need to replace VISA.  VISA does things that bitcoin cannot do, such as providing a way to roll back a transaction.  In a bitcoin future, VISA will still exist, and still do the same things it does today, just with one more currency.

2)  Even at $4.00, a bitcoin transaction is still far cheaper than several entire classes of financial transfers, like bank wire transfers.  These types of transfers currently do happen today in the real world, even though they cost at least an order of magnitude more than $4.00.

3)  Transaction fees do not cause security any more than ATM fees do.  People with an interest in the security of the system will continue to work on the chain, to at least some extent, even if the reward is zero.

4)  Proof-of-stake is still stupid.  I'm sorry that there is no nice way to say that.  I think that you start to go off the rails when you think of proof-of-work, which is also pretty stupid when looked at in positive terms.  If you think that proof-of-work as something that the network should reward you for, then nothing else in the system makes any sense.  What you need to do is think in terms of proving that someone else has to do an infeasible amount of work to roll back the clock.  We don't care about anything else, really.

Let's see if I'm getting this right.

(150 / 21 000 000) * 100 = 0.000714285714 % of monetary base to miners each block
So, per annum...
365 * 24 * 6 * 0.000714285714 = 37.5428571 % of the money supply.

Now, where did this 0.000714285714 came from ?

So you think that if the difficulty was pushed up artificially by one group more than 51% of the network would immediately bail and sell their cards to them?

Say that you purchased enough hashing power to drive up difficulty to a break even or loss making level. Suddenly, huge numbers of cards would become available. Purchase these and you could own the network.

Right now, this kind of attack strategy is to costly given the btc market cap. In the future, if market cap grows, the strategy will offer larger and larger rewards. Essentially the cost-reward profile will increasingly favor attacks on the network rather than legit mining.

Just wait for the block reward to drop. A fall in mining profitability will follow. This will repeat itself until the network is a cheap date.

1) Yes they can, simply not in enough quantity within a realistic time span.

2) The only way to use cards without telling us is to have a virus, and i am sorry to say that 99% of the population does not have a graphics card capable of anything more than a couple of M/hashes , so even if they somehow make a virus capable of installing the needed drivers, and then preventing the computer from overheating, all the while having a constant enough supply of hashing power to maintain 51% reliably (difficult to estimate hashing power when your zombie pc's are being turned on and off by their users all the time). If they somehow overcome all those hurdles, your still not going to have enough hashing power to compete with the people running high-end cards with 1000 times the hashing power, and as they tend to be smart enough to not get viruses you cant hope to snag some of them in your pool (they would notice their hashing going to the wrong person nearly immediately even if they did get infected) as such the specialization creates a barrier.


3) Yes they will produce more cards, but they will not scale production to the point where they produce enough to sell enough cards to exceed 51% as the current network speed represents years worth of card production, unless they increase by a factor of 100 they can not buy that many cards in a reasonable time span. And if they did bring production up that much it would be because the miners bough the cards, hence the same situation would repeat it self as the number of cards produced goes up.

More denial.

1) the bad guys can buy the cards
2) the bad guys can construct malicious pools and use your cards without telling you.
3) if you keep buying cards AMD will make more

I see, it would be 150 for a 21 M base.
I have to take a deeper look at the proof-of-stake thing, I'm not sure I have understand it.

But I don't understand why so much people here thinks demurrage is the same as inflation.
In the system I propose the monetary base is fixed, so there's no monetary inflation.
Do you mean that demurrage is factored in the price of the currency and a currency with demurrage would have a lower value than the same currency without it?
I still don't know how that's inflationary.