Bitcoin Forum

To me the idea that "just because we label something as USD automatically now ties it to the value of the USD" is about as retarded as you can get.

Yet this is the very basis of these "prediction markets" that are sitting on some of the latest crypto platforms.

Let's see if anyone can actually really explain how this is supposed to work without resorting to anything complicated (as in don't try and pull the wool over everyone's eyes like the CDS stuff that blew up in 2009).

http://lesswrong.com/lw/dc7/nash_equilibria_and_schelling_points/

Far too complicated - so - now try and explain it in simple terms (if you can't then I would just say you have posted a useless link to some game theory math stuff which is what I'd expect from people trying to "con others").

(i.e. you did *exactly* what I asked poster's not to do)

ELI5 version:

You and me decided to steal candies. We picked the lock to nanny's room and opened the box with candies. Unfortunatelly, the box was empty. We were staring at the open box when the nanny entered the room and saw us. She locked me in a closet and started asking you what happened and what we did to the candies (which were eatten by someone else before us). How can we prove that it wasn't we who had stolen the candies? Telling the truth is the only way to convince the nanny that we don't lie. If you version and mine will be the same then she will believe that someone else ate all the candies.

Is the idea clear?

But the candies got eaten all the same (so who actually cares why?).

If the candies are gone then everyone just lost (it doesn't matter who is to blame especially when they are anonymous and there is no way to ever get back the candies).

It is no different to believing in a "ponzi scheme" (of course we didn't *know* that pirateat40 was actually running a ponzi scheme - but so what?).

The candies are irrelevant, the point is to tell the truth (to publish the correct outcome of a prediction). You expect others to do the same for mutual benefit of all participants.

If the candies are irrelevant then why do we have candies (so you need to rephrase your argument without candies then)?

Candies can be replaced with anything. We could be caught by the police while smoking weed and be forced to explain where we got it from. If we want to get less years in prison then we have to tell the truth. If we lie we can't provide identical details and hence we can't convince the prosecutor that we want to become law abiding citizens.

So how on earth does that relate to having BitUSD?

Saying that we decided to "short" it should somehow land us in prison (when there are no laws even covering such an idea)?

It seems people supporting this want to "go outside of the law" (as selling such things are) and then try and cling to the law when it all goes belly up.

People peddling this stuff should realise that the law is not going to back you or protect you (i.e. best to move to some country that doesn't care about such schemes).

I don't understand how BitUSD works but I think it's because of my low IQ than of hypothetical flaws in BitUSD design.

PS: We could talk about prediction markets in general though.

Lets do that - I challenge that the very idea is basically nothing better than a ponzi scheme.

With zero regulation there is no reason for any party to "honestly" do anything (it is just a new way to relieve stupid people of their money).

It's regulated by laws of Game Theory. Bitcoin mining has been proving for 6 years that it's better to keep extending the longest branch of blocks. Despite of the fact that Selfish Mining would let to earn more bitcoins.

That applies to Bitcoin mining but does not apply to "prediction markets" (so the two things are not the same).

Cheating Bitcoin requires a lot of effort (i.e. >50% control of the network) but cheating on a prediction market (that isn't working just like Bitcoin) does not.

Are you saying that these prediction markets are using Bitcoin (as I have seen no evidence of that in regards to BitShares)?

Both, Bitcoin mining and prediction markets, are "regulated" by the same laws.

Cheating Bitcoin requires 2 times less effort (25% of hashing power).

No, these prediction markets don't use Bitcoin.

Then what exactly stops them from being manipulated (a theory won't do it - as we are talking about actual funds to corrupt it)?

Bitusd is not based on pm vitalik buterin pretty much proved it would break when applied to a constant peg.. Bitusd uses oracles to publish feeds and applies rules to short and long within a 10% band for short term volatility
http://bytemaster.bitshares.org/article/2014/12/18/What-are-BitShares-Market-Pegged-Assets/

It's the same what stops from attacking a city by byzantine generals. If not all of them (or majority in case of prediction markets) agree on a particular day for the attack then the participants will lose the battle.

So it is not decentralised at all but relies upon centralised *oracles* - and who decides who those are?

I think you are confusing the very point of the consensus mechanism with something that apparently depends upon Oracles (read the last post).

They are voted in.. Top 101 become delegates and get paid for it... Mostly developers right now. Part of the delegates job is to host full node in signing mode and publish price feeds. In effect its alot more decenteralized than mining pools.

https://bitsharesblocks.com/delegates

But it is not truly decentralised at all - so it is really not safe against a conspiracy - is it?

My main issue is that it is a "trust system" which is exactly the opposite of what the blockchain invention is all about.

No. Let me paraphrase.

It's the same what stops people from doing a revolution. If the majority collude then they can change the state of things, but if they don't know how many of others support the movement they have to follow the rules or be penalized.

Right.. But 51% participation in a conspiracy is highly unlikely... As it is easy to unvote these guys and have another standy delegate take their place if someone with morals finds out... Worsed case you dont need a hard fork like with bitcoin

When there are huge amounts to be gained then I am pretty sure you'll get the collusion required to gain that (this concept is not using the PoW approach so it isn't like that at all).

It only takes one such event to destroy all confidence in the platform (and social manipulation is always going to win over algorithm manipulation).

Placing trades are dont trsutlessly its just for feeding price which depends on a central price mechanism anyway.. How else do you know price?

As a side effect you can work to earn by marketing yourself as a delegate and get paid while incentisizing the delegate through bitshares compensation. I highly encourage you and CfB to participate im sure you will get voted in easily with your skill level.. I will create your delegate and host it until you are voted in.

Yes. The same is applied to Bitcoin, if you can earn by double-spending more than you need to spend to trigger a chain reorg then it's a no-brainer to attack Bitcoin.

Thank you, Eric. Your advertisement was exactly what we needed in this thread.

Right you talk about a black swan event which is unrealistic but possible... Read
http://bytemaster.bitshares.org/article/2015/01/27/BitAssets-and-Black-Swan-Events/

"The idea behind prediction markets for companies is that the accumulation of informed opinion will be more accurate than the best guesses of ex­ec­utives. They have been billed as a way to tap communities of employees, consumers and experts to generate in­sights into issues affecting businesses and their operations, from product delivery schedules to marketing and quarterly sales."
http://www.ft.com/intl/cms/s/0/f03fc956-9586-11e2-a151-00144feabdc0.html#axzz3T3p3Pekm

Prediction markets (in general) can tap the "wisdom of crowds" and are not always the new snake oil.

Pms are great... But i think hes focused on bitassets from bitshares

I do *get* the idea of the "wisdom of the crowd" but I think that the way this is being *used* currently looks just like pirateat40's "investment scheme" looked like (which took a hold of quite likely 50% of this forum members that were "wanting to get rich quick").

Again not sure where you get the idea of it being USED as an investment scheme... BitAssets are not based on PMs... if PMs were put into the bitshares toolkit they would be for different purposes, like insurance etc

If you read the links I posted to you, you would have answered all of yours questions.

If you want to predict something about a stock... hire some hackers and spys.. works better than trying to predict a graph.

haha so true...

Without me pointing to a particular case here, there's plentiful of examples where in regulated markets customers have been conned, schemes have sometimes been long in the making and are quite elaborate and big. If there would be more fraud with less regulation, I don't know.

I do think however that a businessman or company with integrity is able to conduct business with integrity no matter how they are regulated. So I disagree that with zero regulation there's no reason for any party to "honestly" do anything. Some businesses pride themselves with integrity and doing things in an ethical way. It seems however most companies don't as money is the driving factor, and then corners are cut.

We live very much in a trust based society. When you go to a restaurant and get a glass of water, you trust the waitress not to give you water you will die from. You trust the repository of your favourite linux distro not to contain any malware. Of course there are consequences in the real world to doing wrong things, if the waitress gave you poison in the water, she would probably be prosecuted for murderer. As such you could say society is "regulated". As for the linux distro, the malware would be a confidence blow among its users, so they have an incentive not to do anything like that.

The same exists with businesses in the crypto world. If you are concerned about running a business and having customers, and having integrity, then you run it honestly. If you're a crook, then you run it as a crook. Of course, it might be easier to get away with a fraud scheme online than in the real world. The face and identity of the fraudsters might not even be knows. But for the very sceptical observer, he should not be robbed, as there usually are signs something is up, well in advance before it goes titts up. Very obvious examples are MtGox and Pirateat42 in the bitcoin world. Lots of scams would be avoided if people were much more careful. However, it works like that most people are greedy, so then the fool and his money is easily parted.

I had come to the conclusion that pirateat40 was a scam a good couple of months before its actual collapse and as soon as I saw the huge difference in prices on Mt. Gox compared to other exchanges I knew it was time to remove any BTC from there (there was a window of about a month with that).

Honesty and decentralisation (especially if you want any degree of anonymity) just don't mix IMO.

There is a tradeoff.. good or bad i guess well see:

"Legal Compliance
Any company that takes deposits from customers and facilitates transfers among customers is heavily regulated in most countries.
These regulations include license requirements, bonds, insurance, Know Your Customer (KYC) laws, and anti-money-laundering (AML) compliance among others. The BitShares block chain provides gateways with all of the tools necessary to comply with these regulations.

If you are already in this business then you are maintaining a database tracking user deposits and your database is probably logging every single transaction and balance change. Your database knows exactly who is owed what at any point in time. You also have the power to seize or freeze user balances at the demand of law enforcement. BitShares provides you with all of these features as well including:

Ability to white-list public keys that may control a balance of your asset.
Ability to freeze all funds and stop all trading of your assets.
Ability to transfer any balance of your asset from any user to any other user.
In other words, if you are operating a legally compliant crypto currency exchange, then you can easily expand your business to becoming a BitShares gateway."

CIYAM

Decentralization to one person is different to another.  Also, we need to think about decentralization at what cost and ultimately decide what is decentralized enough.


Check out some of these quick blog posts around this topic:

http://bytemaster.bitshares.org/article/2015/01/20/The-Minimal-Requirement-for-Decentalization/
http://bytemaster.bitshares.org/article/2015/01/12/Decentralization-Scalability-and-Fault-Tolerance-of-Bitcoin/
http://bytemaster.bitshares.org/bitshares/2015/01/04/Delegated-Proof-of-Stake-vs-Proof-of-Work/
http://bytemaster.bitshares.org/article/2015/01/07/The-Most-Decentralized-Proof-of-Stake-System/
http://bytemaster.bitshares.org/article/2015/01/08/Nothing-at-Stake-Nothing-to-Fear/
http://bytemaster.bitshares.org/article/2015/01/07/The-Worlds-First-Decentalized-Exchange/

Now that we have the Bitshares fanboys attention I think it is time to lock this topic.

(beware of anyone trying to change the definition of "decentralised")