Topic: [XMR] rpietila Monero Economics thread - page 4. (Read 70088 times)

I am reminded of Aldous Huxley's "The Doors of Perception." It is important to keep things in perspective.

I would expect more passive mining schemata, like MAID and STORJ, would be more appealling to botnets in the long run, as you can remain undetected in a much wider range of host environments.  ASIC algos are not botnet friendly, but they raise the barrier for punters by requiring a hardware purchase to stay in the game.  CPU/GPU algos I still think, despite the botnet issues, are a better choice for a new coin.  Botnets are providing transactional security no less than any other hash source.  We can prefer more upright sources, but I take comfort in the fact that botnet operators will likely dump ASAP, and distribute coins well, rather than hoarding.

It's not surprising that the CryptoNote/Bytecoin scamdevs, one of whom (it was speculated in the rethink-your-strategy thread) may be a known botnet coder (see: http://www.computerworld.com/article/2500323/cybercrime-hacking/accused-kelihos-botnet-maker-worked-for-two-security-firms.html), would have chosen mining algorithms that favor botnets.

Edit: I have no idea how botnet mining helps or hurts a crypto-currency's ecosystem.

or just go YOLO and hope XMR will succeed

One should keep in mind that Kelly criterion doesn't really dominate until you get to a statistically usable number of bets.  
Our lives are technicolor anecdotes of miracles painted on a grey background of statistical ensembles which are scientifically determined.

As dewdeded recognized, my post above concerning the rules of the game might have merit.

Kelly betting formula suggests that in a situation that is +EV and essentially binary (with a high probability you lose all, but with a small one you gain greatly), in absence of other investment opportunities, not considering the preferential entry point, not considering partial early cashout, you should invest the equal percentage of your capital to what is your probability of success.

Many have invested what they call "all" in monero. That is stupid. My thinking is that the probability of success is 10-20% (see how many altcoins have succeeded  ) and this is the cap of what you should invest, as a percentage of your bankroll.

Then there is the "aminorex cap" of how many % of monero you should buy at maximum. This comes into effect with surprisingly small investment capital - if you have even BTC1,000 you should also consider this and possibly limit the XMR amount accordingly.

With very small stakes that can effortlessly cash out at a whim, the situation cannot be regarded as a Kelly binary bet, and short term considerations of price over/undervaluation and scenario analysis come into play.

I see more potential for disgorgement in BTC, and put wider variance bands around demand, but have higher confidence that the demand will trend up over the next year.  In particular I have a strong expectation that COIN will get listed before 2016 (i.e. the constant amendments to the filing will eventually annoy the SEC enough to overcome their motivation to sit on it any longer), and will generate demand.

I would like to ask the people, who posted math- and statistic-based models or proofs which showed as clear outcome or resulted to the thesis, that Monero has a significant, long-term botmining-problem, that is harming the ecosystem und ecology development in for e.g. price.

Are you seeing, general problems, that all CPU-minable or maybe all CryptoNote-based coins share? (no specific Monero design related reasons)

Or you see a problem, that is inherent from Moneros coin setup restrictions (esp. distribution, mining setup, etc.). Meaning, it's a specific problem only Monero has in this strength.

Do you feel the same about bitcoin?

For clarity, my assumptions above were that demand simply can't go lower, because it is as dead as it can get, and that supply to market is essentially equal to emission.

I think a rational risk-rating would be more like 10%, by hand-waving, so I think a fair value would be about 185 ksat, on what I regard as conservatively pessimistic grounds.

An alternative theory suggests itself, that the notional opportunity costs are higher in crypto, that the fiat RFR is a bad discounter, that the 40 ksat gap between my FVE of 185 and the market at 145 represents a 22%/an opportunity cost baked in by the crypto market.

Indeed.  This is why we are here isn't it?

I loaned a friend a few bucks for a poker game recently.  From my wallet to his hand.   I busted out, but he cashed.  He paid me a portion of his winnings.  From his hand to my wallet.

The only people who know about this transaction are those I chose to tell.  And there is pretty much no way to confirm or deny my experience.  You take it on good faith that my story is true or you assume I made it up. 

This is one way money has been transacted for millennia.

Bitcoin brings speed and verifiable transparency to commerce.  <- Valuable!

Monero inherits that speed but allows for the privacy we are accustomed to for cash transactions.  <- also valuable!

In the end, I agree that 12 months is too long to assume demand being constant. It's reasonable to think that the demand next week will be similar to the demand today, but Anything past a month gets into very shaky territory. You cannot calculate demand when there are basically no fundamentals.

What he said

No. That is by design.

 Would it be possible to analyze the inputs to claymores wallet and estimate the percentage of mining done by GPU clients over time?

The assumption that demand for a crypto currency will be constant for any significant period of time has been proven very wrong by the markets since the creation of Bitcoin.
Demand for a crypto currency comes from two primary sources:
1) Demand for a crypto currency for actual use in commerce.
2) Demand for a crypto currency by investors and speculators because they expect 1 above (directly or indirectly) to occur at some point in the future.
2 is the dominant source of demand at this point now for all crypto currencies including Bitcoin, and the market perception of this future value varies widely as is evident by the fluctuations in price. In the case of Monero the market perception of this future value varies even more widely than for Bitcoin.

Given that there is actually minimal commerce currently going on with Monero it is fair to say that the current market perception of the future value must be significantly higher than 0 to support the current prices.

To be fair, he didn't say that his model was valid over the long-term. The assumption that demand will remain about the same as today is reasonable only in the short term. There needs to be much, much more of a discount if we go out 4 years to account for the possibility that demand 4 years from now is 0.

I dont think Botnet mining will stay a big danger, in the long term.

Only the very worst botmasters, really choose to install crypto currency miners on their victim machines.
There are several other sources of income, like DDoS attacks, theft of confidential information, spam, phishing, SEO spam, click fraud and distribution of adware and malicious programs that are paying better in total and have better risk/reward-ratio mining.

Have a short look at:
http://old.securelist.com/en/analysis/204792068/The_economics_of_Botnets?print_mode=1
http://krebsonsecurity.com/2012/10/the-scrap-value-of-a-hacked-pc-revisited/
https://www.iseclab.org/papers/cutwail-LEET11.pdf
http://arxiv.org/pdf/1309.0522v1.pdf


Besides making way more money with other streams of generated income (with less work).
What are other reasons why is mining a bad choice to monetize your botnet?

- the big, permanent full CPU usage even noobs will notice (and raise infection concerns or lead to OS reinstall, buying new PC, bad because new install is not infected)

- the introduced new CPU usage from mining could harm other services or tools you run on the victims (that are not usable with new permanent usage load, like webcam spying, RDP usage on victim, ...)

- cooling problems

- it often slows the victims computer to strongly to be able to do general computer work

- antivirus software is actively searching for findings (files, traffic or process activites) are related to mining (adds big unessacry AV detection risk)

- risk of victims provider or mining pool admin noticing the botnet mining and informing the victim

- u cant run out-of-the-box mining software, because you need encrypt the well known binaries (obfuscate it so much) so you dont get dectected by AV software (i think with most working crypters that make your suspious binaries undetected by AV you lose at least factor 4 in performance vs. unencrypted standard mining software)

- botmasters want to automatization as much so possible, a mining operation on the big botnet is to much work (selling the coins, switching pools, avoiding bans by pools, advoiding frozen exchange  accounts, finding correct time to sell the CC, updating mining software encryption, optimizing whats possible for you, choosing the right hype coin, which change often, ...)

- bad footprint on the mining network: because your clients arent using specific hardware options regular miners would turn on for there mining client (because you have to roll out a general setup that works everywhere)

- bad footprint on the mining network: you dont have the same hardware power as the general legitime CPU miners in average per machine,
the majority of botnet-member have old, slow hardware vs. the global average of deployed CPU - because the majority of botnet-members are old computers with old hardware (win 2000, win xp, vista) and in a typical botnet the majority of install are in poor underdeveloped countries (china, india, brasil, poor regions of turkey, ....) -> no money -> no fast pc
(another factor why alot installs are in poor countries because people use pirated windows the cant update -> security holes stay open forever)

- crypting is expensive; adding a miner to your current intalled malware will encrease monthly crypting costs (can be big jump, if u for example are currently reencrypt your malware every 7 days to stay undected and now with an added cryptocurrency miner you need now to encrypt daily, -> 7x your current crypting-costs)

- costs of changing your crypting-setup (establishing are working configuration & testing),
in most cases with more re-encrypts you need to invest in more botnet-infostructure, more C&C-servers to handle the increased work load (doing more encryption, serving it) and new proxy-server to roll out the new crypts (because increased traffics, avoid IDS dections by to often using the same proxies, which were enough, when there were old longer crypting-setup with with less routinly connections) needed with the new demands

- maybe your subscribed favourite crypting-service or software solutions doesnt even offer the possibility of your new encryption demand (alot have unchangable rules like: "re-encrypt only ever 72 h" or stuff like "only 4 re-encrypts per month")

- added of work managing thousands of different mining pools accounts or setting & running your own pool

- there are some AV-industry & IT-Security-people that actively fight mining botnet, because they want to support CryptoCurrency in general or a specific coin they support) a significant increased risk losing your whole botnet, vs. the small added benefits of adding mining software

- over 90% of botnet-members are multi-infected with typically being member from average 3 botnets and bad unpatched PCs that are members 7 or more botnets
---> mining cant get popular as income stream for botnets, because the victim has one CPU but alot of infections  



I think you get idea why long running mining operation in big botnets are very unlikely.

--> there always will be kids that are new to boting scene, that fool around and may run mining on their new SMALL botnet for 4 weeks or maybe 3 months before removing mining from there setup or giving up botting for various reasons (botnet get sold to serious operator or becomes inactive/be turned off)

--> no serious botnet-operation (the ones running the huge ones) will pick up mining because its endangeres their whole botnet, often being an $$$$$$$$$$-business they depent on and have certain responsabilites to third cybercrime partys they do business with

The result
In an scenario with Monero mainstream adoption they legitime miners will strongly outnumber the number botnet miners in the network.
Because the number of botnet miners is strongly limited by the fact that only small, new botnets with newb botmasters (kids) will mining clients on their victims computers for a small very limited amount of time.
(Also see, not all botnet miners will mine Monero, AFAIK the most profitable CPU-mineable coins often changes and is on alot of days not Monero)

Big text. I hope I did add some useful information to thread.

On Mintpal was traded like 5% of Moneros, main exchanges always was Poloniex and HitBtc.
The day when all happen on Mintpal, there was huge XMR sells on Poloniex. What is sort of opposite as you predicted.
I am sorry to tell your friend that his Minpal XMR was probably sold by Mintpal exchange owners on Poloniex and with that money they now run parties in London.

Exactly.  I assume demand is negligible at present.  We are running on zero-point energy.