Bitcoin Forum

The primary goals of EnCoin are as follows:

•   To maintain a relatively stable cost-to-produce where 1 ENC costs about 1 ENC to produce.
•   To maintain a relatively stable exchange point where the effects of price inflation or deflation are smoothed out by economic and monetary policy.
•   To provide a stable currency that merchants and the people can rely on in value, security, and dependability.

Some features:

•   10 second initial verifications that debit the "from" account and are pretty much impossible to reverse.
•   No bloated block chain, only a tiny file that is updated once a day that stores account balances and other information. Detailed info (such as specific transactions) is available on request.
•   Mandatory transaction fees are partially refunded to merchants by securing the network. Hashing power only creates new coins.
•   Any transaction fees not refunded are paid as interest to all holders of ENC.
•   Bandwidth usage becomes more efficient as the network increases in popularity.


edit: A backup of the encoin wiki is available here: http://justinbporter.com/encoin/doku.php but it is not my site so I can't guarantee that it will remain available.

I've seen you and Red going back and forth about GEM/Encoin.  Both of your proposals go over my head, but you guys seem to have an intimate understanding of what ya'll are talking about.

Looking forward to the tl;dr though!

Supply or demand manipulation for the purpose of controlling any price, whether for goods or monies, is folly. Price of all things SHOULD fluctuate, it is how scarcity is measured against demand and resources are, over time, arranged in efficient order.

There is no manipulation, only encouragement by opportunity. What you quote is referring to the price of ENC vs fiat. In the end, it always rests in the hands of the people to decide what happens, not a central authority and not early adopters.

Folly! Woot! I thought only I used that word.

Clearly, Encoin and Bitcoin have different goals. Encoin is in no way designed to become a digital scarce commodity. No one will get rich by becoming an Encoin early adopter.

Encoin is attempting to design digital currency with the specific goal of facilitating trade. With Encoin, if you have willing traders but no money to facilitate trading then you have a flaw in monetary policy. To rectify the flaw you simply make more money. However, to avoid price inflation, you constrain the creation of money by assigning it a specific proof-of-work cost to create. That cost must be paid-on-demand to the electric company.

As such, in Encoin, money is created only when it is profitable to do so. The makes Encoin creation extremely market based.


Bitcoin uses a similar electricity cost constraint, but instead of fixing the proof-of-work cost it raises the cost in scale with coin demand. Each bitcoin now costs about $3.41 to create. But if a bitcoin becomes worth $30 again, it will cost $30 in electricity to create each new coin. So when there is little demand for BTC, bitcoin makes them cheaper and easier to create. When there is high demand, bitcoin makes them expensive and hard to create.

This seems like folly in a system designed to facilitate trade.

But Yes, Bitcoin makes a much better digital scarce commodity than Encoin. Bitcoin will always crush Encoin in the digital coin speculation marketplace.

It appears someone had Encoin in mind when proofing this: http://nslab.kaist.ac.kr/courses/2009/cs712/paperlist/2-12.pdf (red you would be very interested in this as you mentioned low-power wireless network groups)

Adding signatures together can be used to prove that those signatures were added together based on adding the public keys together. Cryptography really is amazing.

One signature verification can validate an unlimited number of signatures. This would reduce the CPU and bandwidth load of approving transaction blocks infinitely. It was essentially the last thing I needed.

I believe this absolutely can work. I have always had doubts prior to this version of the proposal, but I am getting very confident. The pieces are falling into place.

And Red, thanks for being more eloquent at explaining things than I am. :P

Almost everything I would have a problem with in GEM is a problem I have with Bitcoin.

Two GEM-specific things I can think of:

1) The koomey's law adjustment is a constant. Hard constants are bad for something should be able to adapt to future circumstance without intervention. It is possible that with further thought it could work similarly to the latest encoin proposal.
If the computer hardware cycle fell outside of koomey's law (and, like Moore's, it always does to some degree and is only a measure of history, not predictive of the future), the value of GEMs would be less stable than ENC.
2) It centralizes trust. It would be very complicated to use the block chain to keep track of this trust (or reputation), so Red's idea was to have peers use well-known merchants/exchanges as the basis for trust. I'm sure it would end up being more complex and more secure than just that, but his implementation ideas are still at the early stages; I've had a bit of a head start. But since the bitcoin block chain does not scale well at all, it is likely always going to revolve around a small number of entities.

I believe Encoin is capable of scaling to the point where anyone with a reasonable internet connection and CPU will always be able to fully participate in the network if they so choose (the "cloudnet" per the proposal). This adds immense amounts of security against DoS attacks, hacking, un/intentional network splits, and other undesirable outcomes when any part of the network is centralized.

I don't have a deep understand of all the Encoin details, but I understand the concepts and what drove the decision making.

Basically nothing in GEM is superior to Encoin. However, given the tools at hand (meaning Bitcoin's code base) GEM is easier to implement. That goes a long way when you are lazy like me.

A major difference is Encoin uses a balance sheet approach, in addition to recording all the transactions. This means every node does not have to download and keep the entire block chain. It just starts with the balances and runs. However, this requires a bit of "faith" that those you received the latest balance sheet from never lied in creating it. There is really nothing stopping bitcoin or GEM from rolling the old blocks up into a balance sheet for efficiency. However, Bitcoin isn't big on faith in ones peers.

A subtile difference is that Bitcoin relies on a plethora of "accounts" to aid in anonymity. I'm pretty sure this is why Satoshi opted not to create a rolled up summary of accounts. If everyone uses a new account for every transaction, and keeps hundreds of funded personal accounts, then the balance sheet would grow pretty huge pretty fast. The block chain tends to grow linearly with the number of transactions but it is agnostic to the number of accounts.

The balance sheet in Encoin will grow linearly with the number of accounts but it is agnostic to the number of transactions. This will be substantially smaller than the total block chain. However, Encoin does record every transaction into its own chain. It's just that every node isn't required to keep up with them all. This adds slight historical risk to Encoin. Since fewer nodes keep up with every transaction, those that do not are required to trust those that do to accurately maintain the historical record. Losing historical transactions does not invalidate the current balances of course, it just makes auditing them impossible.

Depending on how you spin this, it either adds to or detracts from anonymity. Having fewer accounts detracts and makes it easier for those with every transaction block to profile account holders. However, not distributing every historical transactions to every node removes the triviality of anyone poking through the history. I tend to think it adds anonymity than it takes away.

If the destruction of historical transaction records could be automated and mandated, anonymity would greatly improve. It does not appear to be plausible though.

Still working my way though your new section on how you do this in Encoin. I'm behind on my reading.

Koomey's law is the best way I could explain what the goal is. I am still not sure how variances from Koomey's law could be measured of automatically compensated for. I do still think those differences will be swamped by actual economic changes though. This compounds the measurements.



The basic problem is that given varying necessity for coin generation, there is no absolute way to resolve network partitioning like Bitcoin proposes. Both Encoin and GEM attempt to avoid the problem, by identifying network partitioning up front. Nodes should know ASAP if they have been partitioned from the main network.

GEM does this on a 10 minute block basis using the announcements from non-anonymous nodes. Encoin does it for each transaction independently.


Both require a benchmark for how a node can measure if they are in the majority or minority network partition. This benchmark is a very difficult thing to name. Encoin proposals have called it by several different names "Trust" being the most common. GEM also uses the term "Trust" but it does so differently than Encoin.

Trust in GEM is basically human to human pragmatic trust. If you don't see your friend, you get worried. Trust in Encoin is more of a mathematical relationship. It is (sort of) a summation of "node compliance to the specification" (times) "node availability over time". Consistency or Dependability might be good alternate terms to describe what Encoin is measuring. But these terms don't work in most of the sentences discussing how a node can "trust" that its transactions have been confirmed.


Both of these Encoin and GEMs "trust" benchmarks are designed to frustrate Sybil attacks. In this case that means creating additional entities in hopes of convincing a node it is in the majority partition when it is indeed in the minority partition. GEM frustrates this by requiring trusted nodes to be non-anonymous and trusted in the human to human sense. Encoin frustrates this by requiring anonymous nodes to put in extended effort over time (electricity) to build "trust". If a node violates the compliance rules, their expensive trust is easily revoked.


The main drawback with Encoin's "trust" implementation is it requires almost as many words to describe (and lines of code to implement) as is needed for the rest of the transaction processing. This does not imply that it won't work or that it isn't worth doing.

The main drawback with GEMs "trust" implementation is that it is difficult to guarantee that it is sufficient to frustrate deliberate network DOS or forking attacks. I tend to think it is. However, it requires acknowledging that when things get deliberately wonky, humans are going to step in no matter how much we hope they won't.

I've always imagined that a website would be available where one could check the entire history if one so desired. I believe it will be somewhat necessary for people to have faith in it and that the earliest group of people didn't do anything shady. There's really nothing that can be done to prevent someone from checking up on you, so may as well make it available to all. This is why I wanted blind signatures to be part of the protocol. I really don't believe that it is anyone's business what you do with your money. It is a very visible thing though, and it might draw some undue attention to the money laundering capability. With bitcoin it is obviously possible (although not as secure as you generally have to trust a third party), but it isn't handled by the protocol.

I think I said previously that I wondered if merchants would have a problem with how visible transactions are. Arguably most merchants would be fairly visible in bitcoin anyway even if they used a different wallet for each transaction or customer. At some point they are going to have to move this money, and it will link the accounts. So it just takes longer. But with Encoin they are essentially required to always use the same account so that they can refund the most possible transaction fees.

If the benefits of using Encoin outweigh the cons for merchants, then we may enter a new era of accountability. Banks would certainly not be able to manipulate the money like they can in the real world, and businesses would not be able to cook the books, at least the books based on encoin anyway. It is interesting to think about, but very unpredictable at this point. I worry that it would lead to merchants using a bank-like intermediary to receive funds, which perhaps isn't that big of a deal.


I've briefly thought about it, but I can't come up with anything even close.


You're not the first to make the argument that the system is too complex. I, predictably, disagree. :) While there are many rules that govern how the network operates, independently all the rules are quite simple and it is easy to come to a consensus by following the transaction block chain.

It took me several weeks to comprehend bitcoin, and I still learn new things about it all the time. It is nowhere near a simple system, but it sometimes gives off that vibe because it has worked almost flawlessly to date. I really doubt you could have convinced even 1% of the people that post on this board that what bitcoin has achieved was possible and that it would work before the implementation was proven in front of their eyes.

I'm not making the argument it is too complex. I'm only saying, I'm too lazy to put in that much work. :)

Actually, I'm going to have to think more on this, but I think a blind signature/voting protocol (such as: http://ethesis.nitrkl.ac.in/1683/1/Thesis_evoting.pdf ) could possibly be tweaked to work with transactions. The only trouble is it requires the list of unclaimed transactions to be maintained between consensus blocks. With some of the other designs I have in my head for reducing bandwidth and storage requirements, I'm thinking this might not be a big deal though even if there are a ton of unclaimed transactions.

? No it doesnt. The amount of BTCs created is not variable, its constant, 50BTC / 10 minutes (for now). Whats variable is the amount of hashing power securing the block chain. The more valuable the block chain, the better protected it will be from 51% attacks. The less valuable it is, the less hashing power will be wasted securing it. That makes *perfect* sense regardless if you are designing a casino or the next paypal.

BTW, your proposal is illegible to me. If you can make an executive summary I might (likely waste) some time reading it, but Im not going to wade through the entire document when it appears you arent grasping the basics of even bitcoin. News flash, 1BTC will cost on average 1BTC to produce. Is that the big flaw you guys are addressing?

That "on average" is quite misleading. When the price of BTC was $30 USD, the average cost to produce was around a dollar or so. And it doesn't change the fact that millions of coins will have always been produced for pennies. Yes, the effect of this will be lessened over time assuming those coins make it in to circulation, but it happens in the manner of transferring wealth. Whether or not they deserved it or whatever, I don't really care, because no matter what it leads to instability. This is bad for the future prospect of bitcoin.

If the price of ENC rises vs. fiat because of hoarding, either the hoarders need to sell to get coins in circulation or more people are going to take up minting coins. Hoarders can win by selling, or they can lose by waiting. In bitcoin, hoarders win by selling and win by waiting. In winning by waiting, other people are forced to pay more than what the coins really should be worth, and eventually the price will correct itself when a hoarder decides that the fiat value is too great to keep hoarding. Then with the potential rush of selling because the impending doom cries, these same people can buy their coins back for half or less of what they sold them for and retain their power. This is not the basis of a healthy currency.

ENC still allows for a profit margin based on what people are willing to pay for the convenience to have someone else spend 50 computer-hours or whatever it takes to create each coin. There may well be a 100% margin, who knows. But it will be determined by the market and the market alone, not someone(s) who hoards the lion's share of the currency. Isn't putting the power back in the hands of the people supposed to be what bitcoin is all about?

Beyond this, there are many other flaws addressed, such as no need for hashing to secure the network at all. I'm sure coming from a background in bitcoin this concept may be hard to grasp, but I do believe it is possible and I believe it will be better for the future of the network. I do need to make the proposal into a wiki though so that it's easier to follow. I'm trying to explain a lot of concepts that work very differently from bitcoin, and doing it in a 20+ page paper is not the easiest thing to digest. I'm gonna start working on that.

By the way, if you have something specific that you don't think will work, please point it out. Generalizations and ad hominems do not legitimately help. I do want discussion after all, and the previous threads have helped me come to this proposal which I think is very close to being the stable medium of exchange that a lot of people do want.

No it isnt. Its quite clear, accurate and a key point. Short term fluctuations are irrelevant and averaged out. If your point is that difficulty adjustments are too slow, I might even agree, but that issue is more easily addressed by.. you know, a minor tweak in the algorithm. But there are also arguments to be made for a slow difficulty adjustment, as it allows miner to plan at least a little bit ahead. Fact is on average, 1BTC will cost around 1BTC to produce. That for a week or so it might be more or less expensive is a non issue.


So?


What are you blabbering? Instability of what? This has nothing to do with BTC valuation, it only affects the hash rate which, for short periods of time, might be comparatively high or low compared to the exchange value of the block chain. So what?


I havent fully read your proposal, as Im still waiting for an executive summary outlining the basic underlying principles, rather than just the goals and long pages descibing what certainly appears like an overly complicated scheme. It should not be hard to describe the main principles in a few paragraphs. Price is the meeting of supply and demand. Am I correct guessing you intend to vary money supply to match demand, using aggregate hash power (a proxy for electricity cost) as a measure of demand?

The basic TL;DR description is that EnCoin is designed as a pure digital currency with coins (ENC) that cost a fixed amount of electricity to create. The system-wide goal is to hold this amount of electricity fixed over time. Even though, electrical costs will change and technologies will change. Hence, the slightly inside joke "1 ENC costs about 1 ENC to produce". This means if it cost your grandfather 10 kwh to create 1 ENC, it will cost you 10 kwh to create 1 ENC. This ratio remains constant regardless of adoption rate or demand for ENC.

The better way to visualize the goal, is that if 1 ENC bought 1 loaf of bread for your grandfather, it will likely 1 loaf of bread for you even in the face of fiat currency inflation.
(pre-inflation) 1 ENC generated at $0.10 kwh = $1 loaf of bread
(post-inflation)1 ENC generated at $1.00 kwh = $10 loaf of bread

The simplest way to understand the implementation concept is to think of bitcoin but with a monotonically increasing difficulty level. Each day the hash difficulty is raised a little to compensate for Koomey's law. Over time that difficulty will double about every 18 months. That way future increases in processor efficiency are offset by increased computational difficulty.

The most important difference from bitcoin is that this creates a stable valued coin that is created in differing quantities base upon demand. So if a million new folks want to trade $20 each worth of eggs, butter and cheese each month, they can buy or generate as many coins as they need to make it happen. There is never a hoarding issue because ENC values spikes are designed to be momentary.

I'm sorry, but you are wrong. It has nothing to do with short term fluctuations, it has to do with long-term growth. There is a very limited supply of money, and a large percentage of it has already been produced for less than what later coins will be produced for. The more people that want bitcoins, the more they cost to create. This does not mean 1 BTC costs 1 BTC to produce on average. If 7.5 million BTC cost $2 to produce on average and bitcoin doubled in popularity and the award halved, and a BTC now costs $8 to produce on average between 7.5 and 15 million, that means the average cost to produce was $4 but currently costs $8 to produce. That value goes to those who mined or bought coins when they were $2 to produce. This can be brought out to extreme examples. It is meant to be deflationary, it is meant that later coins will cost more to produce assuming a growing economy. It definitely does not mean that 1 BTC will cost, on average, around 1 BTC.


Instability in the value of BTC. The halving of the hash rate because of the price halving does not suddenly refund those who didn't sell their BTC when the hash rate and value was double. I want a system where people can actually confidently store their wealth rather than having it be an investment vehicle that is, as far as anyone can tell, just as likely to go up or down. And it is much more likely that early adopters are the market force rather than any combined thinking of the people. This is power removed from the people in a manner very similar to government-backed currency. I do not believe that bitcoin is an improvement at all in this respect.


Rather than pooling resources together in large groups like bitcoin, small groups of peers are randomly assigned together to create coins (supplynet groups). There is no limit on the amount of groups there can be. Each group only competes within itself to grab a share of the mint block award which is proposed as either 4.5 or 6 coins. Based on the mint block rules described in TD-9, it is very un-advantageous to use a botnet or a super computer or even a 4x GPU rig to try to mint coins. It encourages everyday GPUs which means less overhead in creating coins; just electricity, not a huge investment in hardware.

Based on how quickly coins have recently been created, difficulty increases in a manner similar to bitcoin, except the difficulty is on a per-coin basis. However, after a certain time period has passed, the award will drop to 4.5 coins. This means more efficient machines can run at full power and still be profitable while less efficient machines will now make less money. This again increases the difficulty to account for improvements in electrical efficiency. When the award is raised again to 6, the difficulty will multiply back up now taking in to account this efficiency increase.

So it is not just based on hashing power = coins, it takes into account the improvements in hashing power over time plus the improvements in hashing power based on a restricted supply.

The example from TD-2 (assumes no improvement in hashing power based on hardware upgrades):

EXAMPLE:
1.   The current difficulty for creating coins is a value of 100 which causes the average coin to be produced in 50 coin-hours.
2.   The Network originally had 100% of computers producing coins using 150W of electricity to produce a coin in 50 coin-hours, 50 * 150W or 7.5kWh per coin.
3.   50% of the computers producing coins now use 125W of electricity while 50% continue to use 150W, while both produce coins at the same rate.
4.   The cost to produce a coin in 50 coin-hours is now 50 * 137.5W or 6.875kWh.
5.   When the Mint Block award drops to 4.5 coins, the difficulty drops to 75 as well and the client scales back computer output to 75% so that 125W computers are using 95W and 150W are using 115W.
6.   By using the client calculator, those using 95W can easily see that they will make more coins at a profit by increasing their output to 115W (17%). Those using 150W computers cannot profitably increase their output because they are only getting 4.5 coins where they were once getting 6. The client can even be used to automatically increase this power output based on the market price supplied by the user (or by having the client contact a site in lieu of this).
7.   Now the original 125W computers are producing coins at a 17% faster rate than their 150W competitors. This will cause the difficulty to increase by 8.5%.
8.   When the block award returns to 6 coins, the difficulty will be 108.5, or 54.25 coin-hours to make the same coin as before. 54.25 * 137.5W ~ 7.5kWh.

kWh is only used as an example, but the cost per kWh is important as well, and this still works. Even if fusion comes around, it still works. People can pour more electricity in in times of short supply to make money. It's all market-based. The coin won't have a set kWh value, it will have a market value and it is up to the minter if they can profitably make coins.

The variable money supply allows the supply to grow as the economy grows, something bitcoin is designed not to do because "printing money is bad." Well this money is actually backed by its difficulty to produce; *always*. Not easy to produce from the start and progressively more difficult to produce, in more ways than one, as it gets more popular and time passes. And the difficulty to produce will remain relatively constant over time.

This is possible because hashing power is not required to secure the network, but describing that is the bulk of the proposal. In a few, quick points:

* Every transaction has a mandatory fee of 0.25% (min 0.05 max 10).
* Merchants are encouraged to secure the network by joining the tradenet, in which transaction fees will be refunded beginning at 25% on a tiered scale based on their reputation.
* Reputation is gained by receiving transactions and producing a confirmed transaction block containing transactions in a 10 second window. It is harder to gain reputation (more tx fees and txs are required) as your reputation increases.
* Reputation is awarded only once a day, so all merchants compete for these transaction blocks (that are randomly assigned based on previously confirmed transaction blocks). As more merchants compete, it will be tougher and tougher and cost more and more (in tx fees) for an agency to subvert this reputation.
* Merchants are required to hold a certain amount of ENC to reach the higher fee refund tiers (and reputation), which both creates demand for the currency and a real cost for anyone trying to subvert the reputation. When a node subverts the reputation intentionally by confirming a bad transaction, they will lose the money in the account (somewhat up for debate, but if it is a hacked account they are going to lose the money anyway).
* If they subvert reputation by splitting the network, all they can accomplish is delay transactions until reputation reaches a minimum of 50% of the total reputation ever seen in a day (see ATK-3 for more info). Assuming they are trying to make their own network, the "cloudnet" will be able to send transactions between both networks, and both networks will kill the others' reputation. Average users will be able to see which network has your Amazons and Neweggs and such while the other has a bunch of unknown and shady "merchants." They can't change even basic network operations because even end-users won't use the network then because the consensus block will not be valid in the client. This, I believe, is a better option than having developers intervene and having to release a new client in the case of a >50% hash power take over. Even then, someone with >50% of the hash will always be able to reverse transactions to some degree in bitcoin. Once a transaction is level 2 confirmed in Encoin, it is not reversible. This could take as little as 20 seconds. And no hashing power is necessary.

No time to read it all, Ill read it later, but from what little I read, you seem to think production cost has anything to do with price? BTC price doesnt adjust to mining cost, its the opposite. Whatever scheme you come up with that regulates the production cost will have no effect on the value, the only thing that will remain stable is hash power for a given electricity cost. That makes no sense at all, if there is one thing you dont need or even want to be stable its hashing power. You want it to grow with the value of the block chain. And if you regulate neither supply nor demand in, there is nothing to prevent the exact same excessive speculation that is causing btc volatility.

If I got that part right, there is no point in reading the rest.

What about those that have free electricity or steal coins or steal electricity ( broken power meter BS ) etc. How will EnCoin sort that aspect out ?

Or large enterprise setting up massive farm in an ultra low energy cost country?
What about the effects of falling energy prices?  
Say a breakthrough in solar power bringing cost below current grid parity?

With electrical costs varying from free/stolen/unmetered to as low as $0.01 per kWh up to $0.48 per kWh any price point selected results in massive profit for some and non-viability for others.

At least existing systems allow alternatives to compete.  For example Venezuala has ultra low energy costs (subsidized) but highly developed countries like Finland have high standards of living meaning that FPGA are more viable alternative. 

Encoin is the opposite of Bitcoin. If you like the idea of a fixed number of coins that grow in value based on population growth, you will hate Encoin. There is no early adopter premium in Encoin. Nor does ENC grow in value based upon increases in the trading economy nor number of users.



Supply is constrained by generation cost bounded by trading value. It doesn't make sense to spend $X in electricity to generate an ENC when it is worth $<X in trade. If the demand for ENC increases then 1 ENC will be worth $>X in trade. This will stimulate new minting which brings the value back down to $X.



The transaction record is not secured by hashing power. There is no concept of a hidden 51% attack that can change history.

Are you referring to my post just above? because this "The more people that want bitcoins, the more they cost to create." was like the 4th sentence.


This is based on a bitcoin-centric view. When demand increases, prices will rise, this is obvious and I think we can agree here. However, with encoin, more people will mint coins to meet that demand so that the price will level back off to being near its cost to produce plus a return on investment in the computer-hours it takes to produce coins.


Hash power per cost in electricity is most definitely not stable, and that's why there are two different ways encoin will compensate for it.


Hashing does not secure the block chain. There is no block chain. Security is achieved through consensus based on reputation.


A regulated and difficult cost to produce makes supply inherently difficult. No one will be able to monopolize supply without putting in a lot of real-world value. And even then, the monopoly is highly temporary as the price will rise and encourage more people to make coins. Any speculation would be in the form of currency arbitration which is a common practice among real-world currencies, and in fact helps currencies stay stable relative to each other.


Free electricity is never free. Someone is always paying for it and that is all that really matters. Effort was made to produce the coins. And encoin discourages high-end rigs by using a payout structure. No matter how awesome your 8x gpu rig is, you still have a maximum award per block and a few other rules that basically means you want to be only as efficient as necessary. Being too far above everyone else just means you're wasting electricity. You could divide up your rig into multiple peers on the network, but you still have to account for the high initial costs of these rigs when the profit per month will be quite low. You are no longer competing for a fixed amount of money, a thousand other people could join the supplynet when the price is high and take all of your hopeful profit right out from under you.

The system is bounded by the most efficient producer in terms of electrical efficiency (times) electric costs. So those using efficient hardware in low energy cost areas will run other "minters" out of minting.

I can't answer the "what if electricity prices tend toward zero question." In the GEM system I laid out that contingency requires manual intervention. EnCoin handles it differently. Etlase2 will have to explain his concepts there.



All alternatives compete, but they have the same bound, electrical efficiency (times) electric costs. Personally, I don't care who creates the new coins. I only care that they get created in a timely manner.

However, unlike Bitcoin, minting isn't a continuously running process. Minters will mint until the trade value of the coins is below their electrical cost to create them. Then they stop. When the trade value of the coins increases again, all minters race to create new coins until falling values force them to stop again.

Remember that peers are randomly assigned to SNGs:

TD-9) Mint Block Awards
A Mint Block is awarded to a SNG when a peer finds a hash value that beats a target hash value for a given problem. Peers are then paid out based on how close they were to the winning value.

To encourage SupplyNet peers to use “honest” hardware (everyday GPUs), there are five restrictions to a Mint Block Award:

1.   To be paid in a MB, a peer must have found a minimum target value (TBD – probably 1/3rd or 1/4th of the target value). This prevents very efficient, low-output machines such as FPGAs or ASICs from making it in to most blocks.
2.   A minimum of 20 peers must be paid out. A supercomputer/botnet/4x GPU system will have to wait for other peers before submitting a block. It will also be subsidizing those other peers as the payout structure is fixed.
3.   The payout structure is one where 65% is awarded to the top 50%, 35% is awarded to the bottom 50%. Individual payout structures within those halves is TBD, but 1st place will receive a bonus to incentivize competition.
4.   A minimum amount of time must pass before a SNG may submit a winning MB (likely 1/3rd of the average time to create a block based on the last 10 CCPs – see TD-1). This prevents a supercomputer from being able to adjust the difficulty too much (see ATK-1). It also allows more peers time to find a minimum target value.
5.   If a maximum amount of time (in coin-hours, likely 3 times the average) has passed before submitting a block, the coin award will be reduced.


Farms will have a massive set-up cost that will take many, many years to break even. Maintenance, etc. means it may never be insanely profitable. Regular GPUs will keep upping the difficulty over time, so this server farm will have to keep upgrading to keep up. SupplyNet members need to take part in the network as well, so if a server farm is split among 100 SNGs, it must send/receive 100x the data. Perhaps this will never be a big concern, but it might be.

When the award is dropped as I described in TD-2 on the last page, more efficient miners can realize a greater profit by increasing their output. They can "game" the system by not raising their output, but then they are reducing their potential profit. And everyone has to agree to game the system this way, or the difficulty will still rise.


*shrug* This is really no different from bitcoin. If demand is too high for cheap electric economies to keep up with, then the opportunity opens for those who pay more for electricity. It really is not intended to be a profiting venture, it is meant to pay minters for their services and allow those who want to store wealth without worrying about the machinations of fiat the ability to do so. As well as being a nifty way to send money wherever you want.

I said a few things to help people understand basic concepts. They might not exactly agree with your latest proposal. I suggest you discuss the two concept below based on how Encoin aspires to be different from my rudimentary GEM principles.


This was difficult for me to understand because you mixed intrinsic inflation (variances from Koomey's law) from extrinsic inflation (variances in demand).

Can you explain the basics?


You care more about leveling the playing field than I do. Perhaps you should explain why you do. And how you compensate against efficiency.

Wait

1) Not rewarding early adopters is the stupidest thing I ever heard.  Think Intel would have took the massive risk in making first personal computer microprocessor had it not been for at least the potential to be rewarded for the massive risk they were taking.

2) How exactly are you going to know electrical cost and efficiency of every miner? 

Yeah, Encoin is different like that. People are rewarded for producing/trading goods and services. The coins are designed just to facilitate this exchange. They are not designed to be goods themselves.



Encoin doesn't need to collect or even try to deduce this information. The system starts from a wild-ass-guess (WAG) as to what the difficulty should be. Then it stabilizes on an ENC = X kwh relationship based upon the most efficient of competing minters. After that point it should trade in a narrow range.

How do you know who is the most efficient miner, what their efficiency is, and what their electrical costs are?

Why would an early adopter take the massive risk of ending up with worthless alt-coin for no reward?  Or no reward that provides appropriate compensation for the risk taken?  Had Satoshi done that likely we wouldn't even have Bitcoin (as flawed as it may be) right now.  At some point a project need to get to the point where rubber meets the road and risk needs to be compensated.

I was mildly interested in the idea but the more I learn the more it seems to be some socialist fantasy land where people take risk for no reward and nobody is able to undercut competitors or profit too much. 

Actually, early adopters will be rewarded. How, exactly, is up for debate, but I do have a discussion point on it.

DP-4) Encouraging Early Adopting
With ENC being difficult to create from the start (compared to Bitcoin), several options exist to encourage people to join the Network:

•   Low Initial Difficulty: By setting the initial difficulty on the low side, users who join within the first 10 CCPs will be rewarded with more coins while the difficulty catches up with standard hardware. The effect of these early coins will be continually reduced as more people join the Network.
•   Donations: Because of the low initial difficulty, it is hoped that users will choose to donate to services such as a “faucet” similar to Bitcoin, as well as for bounties to encourage people to develop products necessary for the advanced functioning of the Network. All donations will be voluntary.
•   Beta Testing Payment: As the Network is quite complex, many areas will have to be beta tested prior to official release. Since there is no block chain to build from, initial accounts can be given a strict, set amount as payment for beta testing the software.
•   Merged Mining with Bitcoin: Assuming the SHA2(SHA2()) hash function is used for creating coins, users of the Network could be paid in both ENC and BTC for the same work. If the Network begins this way, it will be intended from the start to eventually break away from merged mining to let the Network stand on its own. But in the beginning, this could absolve almost all risk in switching to ENC.


Merged mining is certainly the biggest boon. And low initial difficulty is not like the low initial difficulty of bitcoin, it will be nowhere near the same order of magnitude. It will be a starting point where the network will work to get to a stable cost to produce. I can't predict what type of hardware or how efficient that hardware will be from the start anyway.


I don't need to know it. The market will figure it out. The network will do its best based on a lot of rules to encourage honest competition, and from there supply/demand/etc. takes over.

This was covered in one of the other threads, but if the entire coin-producing part of the network decided to collude to lower their output in an attempt to keep difficulty down, all it takes is one person to click over to the calculator section of the software to determine that they can mint coins at a huge profit based on their average GPU. You can't hide the efficiency of the network. It doesn't matter what an individual miner can or can't do, it matters what the network as a whole does.


Actually, I was referring to koomey's and moore's laws. Most of the "kilowatt" coins only cover moore's law.


Because some of the rules governing difficulty and awards are based on the assumption that an average peer is one person with an average computer. I don't want botnets or supercomputers to be able to monopolize the supply or increase the difficulty for everybody else. In fact, I want to make it unprofitable for them to do so. I can't guarantee that, but I can make it a lot more difficult with design decisions. I believe it is better for the adoption of the currency if anyone can "get into the game" and make a few coins if they want to. It shouldn't be a constant competition of who can spend more money to make a faster rig to take coins away from you like it is with bitcoin. I don't want there to be a $1000 start up cost just to be competitive. That is my opinion, and it is reflected in those design decisions.

So it is nothing different than Bitcoin.   If efficiency is based on the network average than those who can undercut the network can reap massive rewards.  For example even at $3  Bitcoin is massively profitable (compared to conventional businesses) if you can find a location that has say $0.04 per kWh or less. 

You never do. You simply take all the available information and make a wild-ass-starting guess. By for example saying the most efficient advertised GPU (etc) miner is X hash/joule. The most lowest known electrical cost where miners tend to be is Y. We want 1 ENC to be in the $Z range so (do a little math) the starting difficulty is (WAG).

At that point minters will mint what they want and stop when they want. If they want to mint ENC for $2 and trade them for $1 we don't try to stop them. However, the electric company eventually will.



There really is no "massive risk". The idea is that merchants want to trade in digital money. People want to trade in digital money. How many digital coins do we need? It's a matter of external value and coin velocity. The faster the coins circulate the fewer total coins are needed. If the external value to be traded exceeds the plausible velocity of the existing coins, the coin value rises. This stimulates the creation of new coins.



No one has to take the massive risk of generating 100,000 ENC worth of coins up front. Minters can start by generating 100 ENC. If there is a growing demand, they generate more.

I have some difference from Etlase2 on how cutthroat the competition should be. I think the most efficient should win. He likes to spread the wealth around a little more. He can explain why.

Give me a chance to respond, bro. See the other post, obviously, but to touch on bitcoin, yes bitcoin probably wouldn't be as popular without the built-in pyramid. However, the advantages of a cryptocurrency exist regardless of that pyramid, and I believe with time, people will see that these advantages are very real. And encoin will attract a different group, one that really wants separation from government-controlled fiat to a monetary system that is controlled by the people. Encoin does not need to grow to maintain value. It can grow as slowly or as quickly as necessary.


Sorry but this is the bitcoin mentality. There will be a profit for those who want to mint coins, but it's not going to be huge. It's not going to be in the thousands of percent returns. This is highly unrealistic for turning on a computer and making it do stuff. And it will have a huge advantage over fiat by being immune to government inflation. And it will have a huge advantage over bitcoin by having a stable value. If you don't want or don't like a stable value and would rather play a speculative game with an imaginary commodity, by all means continue with bitcoin. If you want a currency based on a stable medium that is backed by a relatively constant cost to produce, then perhaps you would be interested in encoin. There will still be ways to make a profit on the currency itself, it just won't be like it is with bitcoin, it will be like a more traditional currency. Except that you earn interest on transaction fees in the network, and you earn interest by being immune to fiat inflation.


"Massive rewards" being the tune of a couple dollars per month. I can't control the price of electricity. But hashing power still costs a very significant amount of money. If you want to build that server farm, you have to plunk down the cash for those GPUs or whatever hardware you use. It will take months or years to begin to see returns. That's why I want the everyday GPU to set the bar. Something that is already a sunk cost in a computer. When people buy or upgrade their computers, they are generally not doing it so that they can mint coins faster. They are using it for its intended purpose of having a better computer. Someone who builds a rig or operation intending to profit on the coins must first pay off the costs associated with that operation. This could take many, many years, and in the mean time those upgrading their computers for fun will set the bar higher, lowering the profit margin of existing operations.

Merged mining does cover most of the risk. This is a few posts up. And the risk is a few dollars of electricity from an average computer. Just like the initial bitcoin adopters. You just won't see 3 million % ROIs. 300%? Well within reason. And that is on top of being awarded bitcoins as well. The one who takes the real risk is the one who designs the software and potentially wastes hundreds of hours of coding time. Let's not blow a few dollars of electricity out of proportion.

Can you give the executive summary on how you expect to secure the network if not through hashpower? "Consensus and reputation" sounds vague and inadequate.

Also, you seem to suggest a supercomputer cluster and a PC are equals in your network when it comes to minting. Whats there to prevent a supercomputer cluster owner (or more likely, a botnet operator)  to present himself as 100.000 individual users? What would that do to your "consensus and reputation" model?

To join the tradenet and partake in securing the network, 30 reputation points are required.
This initial 30 points can be gained in two ways: making at least 2 mint blocks per day in a supplynet group to gain 0.25 permanent points (120 days assuming each node is powerful enough to meet the minimum requirement), or having an account balance of 1,000 ENC to get 30 current points. The balance can't go below 1,000 ENC until you get 30 permanent points or the current points will be removed. So the money can't just be transferred around.

Once 30 points are reached, the only way to gain more permanent points is by receiving transactions and making a transaction block (being randomly selected out of 8,730 possibilities per day) that is later confirmed by the rest of the network reputation. 30 points is the starting reputation required for confirming transactions, so the signature weight that it has is worth 0. Since the transaction selection is random and there will be some checks for honest behavior (e.g. not getting transactions only after producing a transaction block), if all of those nodes had 1,000 enc, they would all have to be receiving transactions and associated fees as well before they would start gaining real reputation.

So, say there are 100k merchants and 100k botnets join. First they need 100 million ENC or they need to spend 15 hours or so a day working on mint blocks for 120 days, or roughly $21.6 million in electricity ($0.12/kwh assumed).

Say the average reputation of the existing 100k merchants is 60. To gain reputation between 30-60, a minimum of 5 ENC is required in tx fees to gain 0.25 reputation per day, and it is only gained if they produce a valid transaction block. Since 25% will be refunded of that 5 ENC, it costs 3.75 ENC per node per day for a possible 2,182.5 reputation per day, but they are only getting half of that because the 100k honest nodes are getting the other half of transaction blocks. So 3.75x100k = 375,000 ENC to gain 1,091.25 reputation per day. Since 100k x 30 (60-30 for the signature weight) = 3 million, 3 million / 1,091.25 = 2,749 days to equal the amount of reputation currently in the network, assuming it never increases among honest nodes. So a cost of 1.031 billion (375kx2749) ENC to equal the reputation and be able to fork the network.

And all they can do is fork. They can't reverse transactions because the honest nodes will not approve it and the cloudnet peers will only transfer honest data. They could take over the cloudnet as well, but there is no 50% in the cloudnet, if there are honest nodes honest data will eventually get around. If they do fork the network, the client will see that only around half of the total reputation signed the last consensus block so they are easily aware that something has gone awry. They can't change any of the underlying network structure (such as awards or whatever) because the clients know that this data is invalid. They could change account balances, but when the client sees that a fork has happened via reputation, they can ask for the transaction log and see that one side of the fork doesn't add up.

The only thing that can really be accomplished is the delaying of transactions. There will be backups to backups to backups of who is supposed to create a transaction block so that too much time doesn't pass.

Anyone who doesn't make a valid transaction block will lose a lot of reputation, or if they make an invalid block they will go very negative and their account balance will be either inaccessible or simply destroyed/redistributed.

TD-3, TD-5, TD-6, ATK-2, and ATK-3 covers these details in the proposal.

In essence, unless you work on creating a large chunk of the coins in existence, you won't be able to subvert the reputation.

Sounds good. Please let me know when it launches so I can get in early and pump and dump. Thank you !

My point : how will you prevent pump and dump and early adopters getting loaded ?

By not subscribing to the bitcoin formula of coin distribution.


Thanks to SgtSpike of www.bitcoinforums.net, there is now an EnCoin Wiki here: http://encoin.bitcoinforums.net/doku.php?id=start
Hopefully this will make the proposal easier to digest. Please let me know where improvements can be made or if there are any broken links.

I want to address this specifically because I have been thinking about it and have come to the conclusion that your system for GEM is really no different from mine, if it works by simply basing the award amount on hash power (divided by koomey's law and such).

All the payout structure and managed pools do are normalize distribution and prevent or heavily limit the ability of server farms to make a profit. But really, server farms were never going to profit on either of these systems because they are not taking anything away from others as in a bitcoin-like system. However, the EnCoin system does make it much more difficult for a botnet to attempt to profit off of it. And I do think that is a worthy goal. Pools need to be implemented in one way or another and I prefer the slightly more bandwidth-heavy option of having the network regulate it and using it as a basis for a minimum entry requirement to the reputable tradenet.

4x GPU rigs will still be able to make more profit by using multiple nodes (after they pay off the totally useless 3 extra GPUs that is), but because the profit per coin will always be rather low, there is no reason to encourage it. Since difficulty in EnCoin is based on a per-mint block basis, 4x GPU rigs would insensibly increase the difficulty. It would eventually hurt all 4x GPU rigs because if they are the only ones profiting, the difficulty is going to increase so that a 4x GPU rig is required just to mint coins. With the way I now have the system described, if a 4x GPU finds a winning hash before 20 other members have found a minimum hash, it is just going to idle anyway so there really is no unwarranted distribution.

So rather than "spreading the wealth" it is really just "keeping difficulty sane." More efficient machines will still win.



ALSO: minor update to the wiki--reputation is awarded based on the previous consensus block transactions and fees, this way it is impossible for someone to game the reputation by only sending txs around after they get a transaction block. also, came up with an idea to reduce supplynet join spam (possible attack) by requiring using a recent transaction block hash and finding a 1/20th difficulty (or some significant amount) solution before it will be transferred to the tradenet.

edit: I just came up with a crazy idea that would help distribute more coins for less electricity. I'm still kinda working on it, but if a new supplynet group is formed and makes a minimum number of new mint blocks (at least 4 or so) within 1 or 2 days, all mint blocks from existing SNGs made during that 1 to 2 day period could get a 1 coin bonus. I'd have to make sure it couldn't be gamed, but I think that's possible.

I still haven't worked out exactly what data mint blocks will use as seed data, so this could affect things.

I haven't read all the details, so I'm open to correction but my understanding is that ENC would effectively have a maximum price.

Now if I owned ENC and it was currently trading at its maximum price, I would sell them. So would everyone else. This kind of thinking would be re-inforcing, driving the price down either to nothing and collapse.  Holding ENC would seem to have downside, with no upside.

What am I missing?

Since ENC is actually intended to be a currency, everyone selling would be no more likely (barring unusual circumstances such as the cryptography being weakened/broken) than a regular currency.

There is no "maximum price" if you mean in terms of fiat. As fiat is inflated by the will of the banks and the governments, more fiat will exist to buy (relatively limited) ENC thus increasing demand on a fiat->ENC basis. If electricity price remains the same in the face of fiat inflation (due to government regulation, for example), competition will increase to see who can make coins faster to make the interim profit on the market. This causes the difficulty to rise accordingly. If electricity price increases along with inflation (which it eventually will), then the fiat value to create ENC remains the same.

The goal is to provide a more stable purchasing power than fiat. It won't be perfect, but it will definitely be better, and inflation is controlled by the people, not the central bank. No government agency can bail out those who choose banks with a 10% reserve. And that inflation goes TO the people, not the banks.

And the whole "1 enc costs about 1 enc to produce" is ambiguous on purpose. No one person can determine what an average ENC cost to produce, they can only see what it would cost them to produce and figure out whether or not it is profitable. If cheap electric economies cannot keep up with demand, more expensive electric economies have an opportunity to step in.

Other properties create demand such as requiring merchants to keep a certain balance of ENC to attain higher levels of transaction fee refunds. Any tx fees not refunded are split up as interest among all holders of ENC proportionally. Plus the fact that creating coins will always be computationally and electrically difficult. No one can hoard cheap coins from the start, or even if that were possible, coins can be created to fill the void in the supply and those hoarding would lose value by not selling.

Well I'm thinking of a market panic - it might be for any reason. People sell because they expect the value to decline in a self-re-inforcing cycle.

Now I understand how Bitcoin arrests this cycle - through scarcity. Eventually everyone who is going to sell has sold and the bottom of the market is found. Anyone who calls the bottom correctly and buys can profit. Boom follows Bust as it ever was.

I don't understand how ENC addresses this. The bottom is never found because people can continue printing and selling into the falling market. There is no reward for holding in the falling market, because when the market recovers, holders are competing with printers on the same footing.

[/quote]



This sounds like an interest rate. You'd need a very high interest rate to compensate for potential capital loss.

The point is that printing is very difficult. Although I don't like saying "it's backed by electricity and processing cycles" it essentially is. The difficulty cannot decrease, only increase, and it increases to account for two separate phenomena:

Moore's Law (http://encoin.bitcoinforums.net/doku.php?id=moore_s_law) and Koomey's Law (http://encoin.bitcoinforums.net/doku.php?id=koomey_s_law).

Accounting for moore's law attempts to keep the time for 1 computer to create 1 coin stable. Accounting for koomey's law attempts to keep the electrical cost to create 1 coin stable. The moore's law section needs to be tweaked though to reduce the vulnerability of hash weakening or something like what happened with cpu to gpu mining in bitcoin. I have an idea, I just haven't updated it yet.


It is actually supposed to encourage merchants to be apart of the TradeNet which is what secures the network in lieu of hashing power. The actual interest payments are meant to help smooth out any losses that might be incurred due to future technology jumps or reductions in the price of electricity or whatever that lowers the long-term value of ENC slightly. In addition, if the economy contracts slightly, existing holders can "ride out the storm" on the transaction fee interest of those who do not hold ENC but are now buying in and do not feel the effects of price inflation.

I read the proposal wiki and skimmed this thread with interest.  I wish you well with this project.

I have many questions about your proposal, but the part I'm currently vaguest on is how the reputation management system works.  Is there a centralized reputation server?  If it is decentralized, how are reputation values tracked and validated?

The "transaction block" stores every kind of transaction there is in a chain. The next transaction block will include a hash of the previous transaction block, as well as the signature blocks of all the reputed TradeNet peers that signed it as being valid. When enough transaction blocks have passed that it is time to settle up accounts (the consensus block), all members of the TradeNet can follow the chain backwards to find all the data necessary to change reputation values (as well as account balances and every other piece of data that needs to be updated). Since only transaction blocks that have been signed by >50% of the reputation are included in the consensus block, everyone settling up these accounts will know what the majority of the TradeNet agreed upon. While there are a lot of rules governing this process, they are all based on simple math. "Peer X created 2 mint blocks, add 0.25 reputation points" etc. After that point, only peers that agree on the same consensus block hash will communicate with each other, so any disagreements based on missing information will be settled then. Since what was signed can always be proven, any peer refusing to accept this data must be malicious.

The system will be designed to keep the IP addresses of trusted peers relatively anonymous to non-trusted peers, and even most trusted peers. Any given peer will only be able to associate an IP address with a peer that they are supposed to be communicating with based on the random functions that assign a peer to the TradeNet. This insanely reduces the chances of some l33t h4x0r group from being able to DDoS the network. Even if they are successful in getting 50% of the reputation offline, transactions simply won't be Level 2 confirmed until enough of them come back. Once they're back, all they need to do is follow the chain back to see what they've missed, ensure it is valid, then sign the most recent block and every previous block is now signed as well.

It might be a bit more of a juggling act than the bitcoin block chain, but I think it is a lot more elegant too, assuming it eventually works. :P It will use more bandwidth initially, but at transaction volumes similar to visa, EnCoin should be able to use a hell of a lot less data than bitcoin, allowing more people to partake fully in the network instead of relying on someone else. But also because of the nature of simple transactions, a "dumb" credit card-like thing can be used that only need a private key and no additional data. No need to rely in fee-charging intermediaries to reduce transaction times or give easy access to your money. A debit card would be a direct link to your account, no cell phone necessary.

I thought there was no block chain? I'm still confused about how wallets and transactions are secured. Could you dumb it down into a YouTube video?

I was actually considering doing a power point presentation or two. There isn't a block chain like bitcoin, but there is still a chain that keeps an ordered version of events and allows newer transaction blocks to verify older transaction blocks.

It might help to imagine the first transaction block and go from there. The first consensus block will be a file written by hand.

Transaction Block 1:
{
consensus block 1 hash,
<all transaction data in this 10 second window>
}

One peer is selected to put TB 1 together and then pass this data around to the rest of the network. Each TradeNet group will then have a peer collect and aggregate digital signatures together so that 1 signature can verify that the whole tradenet group signed it (or most of it). This data is then sent around as a signature block.

Transaction Block 2:
{
transaction block 1 hash,
<all tx data for this 10 second window>
<all signature blocks for tx block 1>
}

After enough transaction blocks have passed that it is time for a new consensus block, the peer in charge of creating the next transaction block will include a hash of the new consensus block based on adding all of the data up since the last consensus block

Transaction Block 8,730:
{
consensus block 2 hash
transaction block 8,729 hash
<all tx data for this 10 second window>
<all signature blocks for tx block 8,729>
}

The consensus block 2 hash contains all the data changed in the last 8,730 transaction blocks. Once it is approved in the next TB:

Transaction block 8,731:
{
transaction block 8,730 hash (including CB 2)
<tx data>
<sig data for 8,730>
}

Assuming the signature block data equals more than 50% of the MCR (http://encoin.bitcoinforums.net/doku.php?id=reputation), a new peer joining the network can get the CB 2 data plus the signature blocks in TB 8,731 to prove that more than 50% of the reputation agreed that CB 2 is correct. Even if 100,000 tradenet peers signed the CB, the total data is 4 bytes per peer (to identify the signing peers based on their wallet number (http://encoin.bitcoinforums.net/doku.php?id=wallet_number_block)) + 40 bytes per tradenet group (# of TNGs is currently the cube root of peers) for the aggregate signature, plus the CB data which is mostly just hashes of other data that is available on request.

At 100k peers there will be 46 tradenet groups, so 400,000 bytes + 1,840 bytes + CB (probably a couple kb) + 46 signature verifications = absolutely reliable consensus block data. And this is all that ever needs to be sent to a new peer (well they would also need the wallet number block and reputation block if they don't already have it). Anyone can request specific data as necessary from tradenet peers or cloudnet peers (which are just regular peers that are keeping up with all the blocks too).

Since 400kbytes is a lot to send around to every peer every 10 seconds, I might have it so that tradenet groups only sign every 10th or 100th or whatever tx block. Anyone in the tradenet or cloudnet can still verify valid transactions within about 10 seconds, but they won't be "rock solid" until the signatures come in. But also, for regular tx blocks, less than 50% of the total sigs will ever be required because the peer collecting the signatures only needs to get about half of the reputation (and since some peers have higher reputation they have higher weight, less sigs would be required unless those are offline) so even with 100k tradenet peers we're still looking at around a measly 150kb or so every 10 seconds or 15kb/s. 4,000 simple transactions per second (70 bytes) is about 275kb/s so 290kb/s times roughly 50% of connected nodes which would probably be around 100, or times 50 for half. So (call it 300 for additional data) 300x50 is 15MB/s or a 120Mbit connection required, which is currently within the realm of available consumer bandwidth. CURRENTLY. And there is no requirement to store all that data, just the last few days or months worth, so storage implications are moot.

So I believe I've come up with an idea that solves several issues with the creation of new currency and would make Red happy.

At first, I did not like this because it seems like it is another transfer of wealth. Then I was able to rationalize how this was not the case.

A hard figure has to be used here, but I don't think misjudging the figure can have catastrophic consequences. The figure I propose is 4%. 4% is the yearly amount of increase, based on a daily supply, allowed in the currency before additional currency will be created "for free."

For example, there are 1 million coins in existence. At 4%/365 days, if more than 109.59 coins are created a day, any amount above that figure will be spread out to existing currency holders. So if 120 coins were created, 10.41 coins would be distributed to the rest of the economy based on their existing proportion of the total coins (like interest from tx fees that don't get refunded--I might now consider actually destroying unrefunded tx fees for more balance).

Pros:
Protection from weakened cryptography. If someone was able to pre-image SHA2 to make currency for much cheaper, they would only be able to abuse this ability to a very small degree.
Left over transaction fees could again be destroyed to help account for an economy that has contracted without effectively destroying work.

Cons:
Those with wealth in ENC would gain more wealth for doing nothing productive. An issue with inflationary and deflationary currencies that I am trying to hotly avoid.

Now... One way or another, those with wealth in ENC are going to gain in times of high demand. Nothing can be done to counteract this anyway. And nothing should be done to counteract this. However, by exchanging their wealth for fiat, they are again taking on the risks of fiat currency. In the far future, fiat risk may be even higher if ENC were becoming the replacement currency. So if they only benefited by a one-time sell off in exchanging to fiat, they lose by no longer having a stable store of wealth in ENC.

Therefore I believe this scenario is truly a win-win.

Some things I'd like to discuss:

1) Should there be an amount of coins produced before this takes effect, or should the figure be higher earlier on and gradually lower (I worry it would cause too much hoarding early on if at 4%)? Is 4% a good number?
2) Should the coins be given to all holders of ENC, or only economic producers such as merchants that secure the TradeNet? Would this be seen as unfair?
3) Should transaction fees be destroyed, or is this really just the same effect as giving unrefunded tx fees to all holders of ENC (perhaps by destroying them the psychological effect of inflation will be reduced and the currency will appear more stable)?
4) Should it always simply be based on daily creation, or should yearly factors be taken into account? (i.e. if 10 days went by with no creation then on the 11th day 120 coins were created, should we give out free money?)

I have also significantly updated the section on Economy (http://encoin.bitcoinforums.net/doku.php?id=economy&#the_real_problem) in the wiki. Not related to this discussion topic.

 I believe the 80:20 wealth distribution is a result of a network effect that we see in nature. 

 Esoteric maths is very advanced in technical stock market analysis. What if this model could be built into a cryptocurrency itself to redistribute wealth fairly?

 Further, what if the calculation to work this out was also the proof of work?

 The simplest way I could imagine this as an analogy would be a using a Forex fund as a currency.

How do you prevent GPU farms from posing as different peers so they can always hash?

Point 1: Ignore Everhooes. Communicating with him will waste your time.

Point 2: The design of a decentralized system to stabilize price via coin supply manipulation is going to be complex. You would need to lay out the incentives of all the agents involved in mathematical detail. Do you have the skill-set necessary for this? Have you made any progress in this direction?

Edit: From the looks of the wiki, the answer to my questions is no and no, so i come to point 3

Point 3: You are not sufficiently qualified to make a contribution here.

I believe I have the skillset to lay a foundation for this. My intent would always be to get the input of as many minds as possible rather than forging ahead without. I'm smart, but I have no qualms about (eventually) admitting that someone has a better idea than me. :P As far as progress, I came up with some more ideas and never fully fleshed out the wiki, but that was due to a relative lack of interest, Red's disappearance, and point 3.


This is a bit harsh, but yes I admitted from the start that this project was over my head to bring to fruition. However, I do excel at designing programmatical structures, if mostly in principle and less so in practice (but not that much less so). I was willing to pay someone to help. The design isn't over my head though some of the programming may be. But I wanted input and got very little. Mostly the same claims of "it can't be done" just as many would have and did say about p2p digital currency before the existence of bitcoin. If I can't do it on my own and no one will help, the project has little chance of succeeding. There it lies.

I didn't say you were not smart. I believe you are smart.

I was referring to high-level design and not programming when I said you were not qualified. The high-level design requires you to explain how rational agents will behave in mathematical detail. You must do things like explicitly define agents' payoffs and choice sets. You don't make an effort in this direction.

This is interesting, and refreshingly new for an AltCoin. I see problems though:

1. Technical: The balances & reputation framework may be too weak to secure this. Attackers might find a way to game reputation. The fee rules may hit scalability limits.

2. New developments: Some people might find ingenious new ways of minting money in defiance of Koomeys law just because of you,
and everyone else will resent this.

3. Risk/Reward: No large early adopter benefit will keep exactly those away. You need to find a way to also reduce the risk of
early adopters. Short of guaranteed buy-back contracts and reserves I can't see this happen.

4. Bitcoin mentality and market saturation: It's hard to convince invested Bitcoin people to switch, the first mover advantage is gone.

Good luck for the future in this!

-coinft

1. Problem with gaming the reputation is that even if they were able to do so, there isn't much that they could do. Delaying transactions is really the only thing. Fees are something that do need to be worked on a little.
2. You don't "defy" the laws of physics. Not to put koomey's law anywhere near that pedestal, but if there is a technological leap, either everyone will soon have access to it, or the few that do can't accomplish much with it. Also, a big part of the next revision of this project would be the free coins given away as stated a few posts earlier. I'm not gonna go into too much detail on this now because I plan on releasing a simple version of this proposal that is based heavily on this idea that would make it impossible for someone to game coin creation.
3. Bitcoin merged mining absolves all risk as long as bitcoin remains useful.
4. There really are not that many people using Bitcoin. And all of the shadiness surrounding its beginnings, and those like Solidcoin, would not exist here. And give this project a couple years to show price stability, and you just might see people use it for actual commerce instead of rampant speculation. Businesses, I believe, would be more likely to adopt a stable currency rather than one so volatile. But it will take time, of course.



I did do this in earlier revisions of the proposal, to some degree anyway. It's a tiring process though, and I'm not too keen on wasting more of my free time for this project.

New ideas that will eventually make their way into the wiki:

Big TradeNet change: I kept worrying about businesses not wanting to be part of the TN because they would have to use 1 account only to get their transaction fee refunds and that would take away any anonymity they would have. This bothered me a lot and I think it would have hindered acceptance. So I've come up with a very good compromise: proof-of-stake. Before, the proposal used proof-of-economic activity to gain reputation. Now, there will be 5 or 6 levels of reputation that are based solely on a stake amount. Example: level 0 would be around 500 ENC or like 50 or 100 ENC mined in the SupplyNet (in lieu of a stake). Level 5 would be around 30-35k ENC with steps in between.

This is just hand-waving for now, but something like this:

Level 0) 10%
1) 10%
2) 20%
3) 20%
4) 20%
5) 20%

These are the shares of the transaction fee refunds that each level gets. On top of that, a level 5 gets a share in levels 0-4, level 4 in 0-3, and so on. Additionally, if any merchant does not care about anonymity, they can use their stake account to collect transactions and get refunds specific to their transactions in amounts of 30-70% depending on their level. There will still be some kind of reputation system but it will be more to track if an account did not create a transaction block when they were supposed to and so on. Once deposited in a stake, the stake money cannot be used in the network. There will probably be a 10 day waiting period or some such before a stake can be removed.

On SupplyNets: to further create competition, SupplyNets will now compete against each other. If the 6 ENC award is used per block, then the top half will receive 8 ENC and the bottom 4 ENC. There will also be a minimum number of SNGs required before mining can begin. It will probably be equal to the number of TNGs. That way at any given time, there will need to be at least 100 or so people looking to mine before a mining competition can begin. This competition among groups will help keep the difficulty honest and reduce the possibility of an attack on the difficulty.


Also, MoneyIsDebt, a programmer of 15 years, has tentatively agreed to help work on the project, so hopefully it will begin development soon.