There is no bitcoin problem. Just me pointing out that all the pooled hashing is just an elaborate way to:
1) Generate a random number.
The random number is used to arbitrarily decide whose transaction list to use as the system consensus for which transaction have actually taken place. (Random number between 1 and the number of validating peers)
2) Decide roughly when 10 minutes have passed.
It is basically a timer to help sync the global system consensus.

It no longer has anything to do with transactional security. The rest is pure marketing.

So the point of my ramblings is...

1) Given that the exchanges can never operate on different chains. And
2) They can't allow invalidation of confirmed transactions to ever occur. So
3) If the exchanges decide that a particular chain is the only chain they'll all trade on. THEN
4) The mining pools MUST follow their direction. and
5) So MUST everyone else.

So how can "Accumulated Hashing" protect the chain, if the exchanges can throw it out willy nilly and everyone else must accept their decision?

QED.

Gee thanks. I'm a noob... (sarcasm)

Ironic isn't it. Given trust no one banter that goes on here.

But what I'm saying is really more basic than that. Bitcoin logic says [roughtly] the longest chain with the most computing power is always the valid one. That leads to what is called a "chain fork" attack.

So say yesterday the block chain looked like this:

[A-B-C-D-E-F-G-H-I-J-K-L-M]-N-O-P-Q-R
 confirmed blocks

Furthermore presume that every block up through and including M has been considered confirmed. That means that exchanges have taken in and payed out hard fiat currency based on these confirmations. Merchants have parted with goods based on these confirmations.

Now way today, out of the blue, the block chain starts to look like this:

[A-B-C-D-E-F-G-H-I≠T-U-V-W-X-Y-Z-a-b-c-d-e-f-g-h]-i-j-k-l-m-n
when it should look like this given the time that has passed.
[A-B-C-D-E-F-G-H-I=J-K-L-M-N-O-P-Q-R-S]-T-U-V-W-X

Now both are valid block chains and the new one is longer so clients PRESUME it to be the true chain and everyone switches over. But the exchanges and merchants have already payed out on confirmed blocks that have now disappeared. Their bitcoins were STOLEN.

Now the only way that can happen is for someone to have more than 51% of the computing power and plan this attack. But still that is NOT ENOUGH.

Because the exchanges and merchants CANNOT let this fork stand. Real life police can come and arrest them for fraud. So they HALT TRADING get on the telephone/IRC/email and start calling each other. Together they decide the last common confirmed block was "S". So each of them calls their respective programming team and says restore from backups and refuse to accept any block chain that does not contain "S". (That is called a Locking a block into the chain. Last I checked there were a half dozen or so blocks locked into the chain.)

At this point the all the exchanges can begin trading again on their agreed upon chain.

Now keep in mind all of the miners might still be extending the other chain but THEY HAVE TO CHANGE FORKS or their mining work will have no value on the exchanges.

Of course most of the conversion will happen on this sight so everyone knows what happened and can decide that following is their free will. But really, following is inevitable.

No, I'm saying that even with 51+% of the computing power, you CAN'T decide which fork is the valid one if the wizards don't agree.

Take for example the current situation.

"If you are using Bitcoin-Qt/bitcoind version 0.7.2 or earlier, you must take action before 15 May, 2013. If you do nothing, you are likely to be left behind and will be out of sync with the rest of the Bitcoin network."

Notice it doesn't say that if 51% of the computing power decides not to upgrade... never mind.
It says, we've decided. Come along or not.

[edit]
So the significance of what I'm saying is that, if a handful of people already make these decisions. And the rest to the bitcoin users already trust these people to make these kind of decisions, THEN
there are trivial ways to create a distributed consensus among a handful of known individuals.
It doesn't require an ever growing amount of computing power.

We are using the same context. And yes, beyond "wanting" everyone to be on the same block chain, it is a socially and economically mandatory. Their can never be a viable second fork.

For example notice again the wizards speaking here.
http://bitcoin.org/may15.html

I'm sure there was discussion among "actual peers" but there was no popular vote on the topic. Your node can't veto the decision. Nor can you decide to continue down the original fork by yourself.

I'm not saying this situation is a good thing or a bad thing. I'm just saying that's the way the bitcoin ecosystem works. You can trust the  "actual peers" or you can avoid bitcoin altogether. But you don't get to be a full peer just for showing up anymore.

Good we're on the same page!

But do you realize that the exchanges as a group CANNOT ever be forked from one another?

I mean hackers could physically try to isolate one from the rest of the network. But after 20 minutes or so the exchange must notice and stop trading before anything is confirmed. At that point it is not a coding problem. It's a humans figure out WTF is happening problem.

No exchange can ever willing decide to be permanently forked from the others.
Agreed?

LMAO! I didn't do it! I've been gone for a couple of years.

I'm just the kid saying that guy over their in the Emperor's Clothes... He's the Emperor.
Why are you people naked?

Thanks for all the replies. Yes I intimately understand the block chain and the point. I personally exchanged PMs with Satoshi on some low level technical details.

Qoheleth's paraphrase comes closest to what I'm trying to say.
At the beginning bitcoin was a philosophical problem. How do we do all these things in complete anonymity with everyone being an equal peer. Today, bitcoin and its ecosystem isn't the same beast.

I'm not saying trusted bookkeepers aren't so bad. I'm saying they exist and you discuss them everyday. The Bitcoin community is just pretty pnambic.
http://jargon.net/jargonfile/p/pnambic.html

Ever considered what happens when a block chain fork actually occurs? This:
https://bitcointalk.org/index.php?topic=152030.0

The wizards spring into action!

I wrote on that earlier today.
https://bitcointalk.org/index.php?topic=174378.msg1829444#msg1829444

It turns out that's not really true. The calculations are pretty pointless now. Except as a really expensive random number generator.

[EDIT]

I wrote on this last night.
https://bitcointalk.org/index.php?topic=174378.msg1826040#msg1826040

Are you interested in contributing to the solution to that?

What you write here seems quite fair, but the suppositions that follow don't really follow...

Some people are more productive and others less. What you describe above restates that fact.

However, bitcoin inequities don't follow from the same principles. Very productive people have zero bitcoins because they are busy building houses with their time. Other chronically unproductive people chose to burn cpu cycles instead. It seems like all cpu work was valuable, but it really wasn't. If one tenth as many people has burned one tenth as many cpu cycles... the same amount of work would have been done.

Thanks for the link and clarity. I remember discussing the concept way back.
It's a clever idea but I'm thinking more like chodpaba now.

I do love your sig! It basically restates the thesis of this thread.

This thread is moving so fast I can barely keep up!


Wow, brilliant insights! (My confirmation bias is showing! :-) )

I've been having similar ideas. That's what brought me back to this forum. If you're interested we can talk offline or start a new thread.



Qoheleth, Is this statement related to chodpaba's?
And could you like me to a reference on Colored Coins? I'm only recently back here.

It turns out the the computing power to coin relationship is a red herring. More people doing something completely unnecessary doesn't create more value.

Currency value must be bound to real world economic value. A loaf of bread today needs to trade for pretty close to a loaf of bread tomorrow. Otherwise, as you pointed out at the beginning you get into a hoard and dump mindset. Not exactly the point of a "currency"

If a million more people want to trade loaves of bread tomorrow you're going to need more coins to enable the transactions. If they eat all the bread, you may need less coins to rectify the glut. The real interesting questions are where to do they come from, and where do they go?


There have been some really interesting an maddening threads in the past. A french guy proposed what he called the Universal Dividend. Everyone should get coins every year just for being alive. He argued it evened out the early adopter problem. I argued against him!

https://bitcointalk.org/index.php?topic=796.0

(UD is a proposed real world solution that goes way beyond bit coin!)

Thanks Coincrazy.

Of course bitcoin's transaction graph is the implementation of that central party. However the task of recording entries into the transaction graph is distributed via random chance.

The major difference between LETS and bitcoin is that LETS usually presumes that everyone is non-anonymous.

I mention LETS not as a possible replacement to Bitcoin but as a concrete example that stable value (or unbounded coin) implementations are indeed within reasonable possibility.

I've written threads on stable money before. There have been three possible implementation proposed that I know of GEM, EnCoin, Decrits.

https://bitcointalk.org/index.php?topic=47628.0
https://bitcointalk.org/index.php?topic=49683.0
https://bitcointalk.org/index.php?topic=91183.0

I'm partial but I like my GEM discussion best. I think it's easiest to follow.

But in general I think stabilizing currency values based on energy use is un-necessary.
I've been working on some new ideas for stabilizing values while preserving the anonymous nature of bitcoin.

NOTE: I'm not a crypto anarchist. I came to bitcoin because I want to preserve the anonymous nature of physical cash, in an internet environment. Privacy is under greater threat than my money will ever be under.

Interesting post chodpaba. I've been arguing for a long time that the deck is stacked against Pareto Efficiency. Do you actually see a path from the here and now to there? Meaning using the current Bitcoin implementation and user base.

I think that kind of efficiency will be a possibility of the the next crypto currency. I have serious doubts there is a coherent path from here to there utilizing bitcoin.

LMAO!

You wrote your post as if you were trying to make a rhetorical point.


It turns out this is no longer true. Keeping an impeachable ledger is pretty trivial. Lots of industries do it with much less computing power. Preserving the illusion that all that computing power is important, is the primary use of that computer power now.


The problem is not that they got "a lot of coins". The problem is that they got a large percentage out of a fixed set of coins. Had they gotten a large number of coins out of an unbounded set of coins there would be no problem at all.


Most of the "steady value" models involve generating and destroying coins on an as needed basis. None have been implemented yet (as far as I know) because there isn't a ground swell of interest in creating a currency in which the early adopters don't get rich.

However, for insights you might consider learning about Local Exchange Trading Systems.
http://en.wikipedia.org/wiki/Local_exchange_trading_system

Suppose Alice grows Apples, Bob grows Beans, and Charlie makes Cheese. But none of them have any money.
Now if Bob wants an Apple, but Alice doesn't want Beans, then in a LETS system they agree on a price $1 and Alice gives Bob an Apple. The transaction is accounted for using double entry book keeping. Alice + $1, Bob - $1. With LETS it is OK to have a negative balance (within limits)
Now Alice wants $1 worth of Cheese so Charlie gives it to her. Balances now are:
Alice = 0
Charley = +1
Bob = -1
Finally Charlie wants $1 from Bob so he gives them to him. That puts all balances back at zero again.
No currency exists at the moment, because no currency is needed.
When currency is needed again, it is simply created. A flexible currency supply is indeed a magical thing!

Compare that to Bitcoin.
Say I have a Ferrari and you want to buy my Ferrari but neither of us have Bitcoins.
It should be a transaction that only involves us, it shouldn't make anyone else richer. But with bitcoin, of course, it does.
How do we know how many Bitcoins is a Ferraris worth? Early adopters get to decide. Something about that seems fishy. :-)