It's not totally clear from this quoted example - it looks like 1 was 'replaced', but actually the original '1' still needs to make it into the blockchain in order for the system to decide to adjust the difficulty downwards.

I love the idea, though.

Cheers, Paul.

edit: scratch that, I now see its just the numbering that was throwing me.

Yes, this is a common attack vector for new coins using the same hashing algorithm as established players. Basically, this is "do not do" no. 1 in the rules of PoW.

He's talking about making a side chain token, not replacing bitcoin with it. See tether.

It's bad because its against the nash-equilibrium. Minting empty blocks does not benefit the users of the system, who are trying to transact. Nash equilibrium says that it ought to be more profitable for miners to include transactions due to the fees, but if miners are finding that 's not the case, we've got problems.

Stable compared to what? You are surely referring to fiat currencies, and in order to achieve that you need, at the very least, some reference for the value of, say USD which has to come from somewhere.

After that you need a way of achieving a nash-equilibrium whereby undervaluation rewards buyers and overvaluation rewards sellers. Markets are a perfectly suitable way to achieve this.

The price sticks at $1 because you can redeem it for USD, there's even a market for that on 'finex.

Even if you are right, and somehow manage to launch a crypto that people expect to use as a currency and not for speculation (you'd better not include any other features than pegging, if so, or it will become speculative), then this proposal still cannot work because you can't do anything when the market undervalues the coin.

This is just pure speculation.

In fact, almost all altcoins follow the exact opposite pattern to what you've described. They launch, and price rallies massively, then they slowly tail off down to effectively 0. There are exceptions, but most follow this pattern.

You need a nash equilibrium in order to create a stable-coin. What you are proposing does not constitute one, or at least it fails to address reduction in valuation.

Depends how fast that happens. If gradually. Nothing. If black swan, then you have a liquidity shortage which would need some kind of deleveraging functionality. That is the edge case, though.


And what if it varies between $0.000001 and $10 in a massively volatile pattern over the course of its life?

The USD and pretty much every fiat currency in the world is non backed. They operate perfectly well. The point is, there are degrees of valuation; it is not as binary as your quote suggests it would be.

For example, you could imagine a BTC side-chain, which was a CFD market for BTC/USD. Shorts of BTC in this market could be issued as stable coin tokens, valued $1. As long as there existed sufficient liquidity this would be a tenable stable coin implementation which would indeed cope with a devalued BTC price.

By contrast, your proposition does nothing at all with devaluation, such that a value of $0.3 could exist forever (when it was supposed to be $1), making the idea of it being stable laughable.

I largely agree with your analysis. What I don't agree with is your assertion that it is sufficient to only control the increase in supply. If the market values the coin less than $10, there is no mechanism to compensate and the price has the potential to crash to $0, or worse, to slowly bleed in value over years towards $0.

There must be some way to reward holders of the coin when the market price falls under $10, such that it becomes attractive to be a holder, therefore pushing the price back up.

We've been over and over PoS vs PoW in the other thread, so I'm not going to bother digging those old arguments up again. But this one about price stability needs some more attention.

You cannot regulate the price of an item without controlling both supply AND demand. Just changing the supply side isn't enough, and there's no way to control the demand side with this proposal.

To be able to do it, you need a market for selling PoW; miners are buying PoW with their electricity costs - if you had a market where you could buy and sell PoW against USD, you could short it and each short would represented a USD pegged value, but this is a nonsensical example because the value of PoW is ephemeral if its used only for minting coins (this is probably something to think about a little more deeply).

It can be done, it's just hard.

You need a decentralised version of bitmex's BTC/USD market running on a side chain, then you can sell shorts as USD pegged tokens.

I couldn't disagree more with that statement, but I'm not wasting any more time arguing this point.

I agree, and I bored of the argument.

Lets just agree the following:

* PoW uses a lot more energy than PoS, but is objectively more secure than PoS
* PoS can be secure if a majority of nodes remain online at all times

?

Double spends are erasure of former consensus. You can't just accept them blindly, the currency would be worthless.

If you refuse to wind back, you will end up with a corrupt blockchain, as latency and temporary outages will present you with missing and or incorrect data with no malintent.

No, it's much worse than that. Because I am persistent, I make sure my nodes are UPS protected and geographically distributed such that they become the nodes with the most up-time across the entire network. Therefore, over time it is not my blockchain that is rejected as fake, but the original one.

There only way to prevent this is to use subjectivity by manual intervention. This is a horrible way to run something as important as a currency; credibility would be destroyed.


So, I perform a long-con whereby my majority of nodes start out trustworthy, enough to acquire the trust of nodes like yours, then I carry out my attack, by purchasing old private keys, for example from the genuine chain with which I can become a staker and broadcast a fork where I can do what I like, which will be accepted by your syncing node, or even your regular node, potentially due to network latency.

This is insufficient in providing the necessary resilience that a p2p currency should enjoy.


List's of buddies are ephemeral. Even when they remain consistent, as an attacker in such a network, I can create a majority of false online nodes at near zero cost, all broadcasting impostor blockchain data which a syncing node will not be able to distinguish from reality - and since I've been doing this for a while, your list of buddies will contain all my nodes, which do not start their attack until much later on.

Web of trust = web of fail. Just look at all the sites selling reddit upvotes, or twitter followers for $5 per 100,000.

You're basically saying: without double spends, we don't need a blockchain. Guess what?

As soon as you bring trust into the equation, you throw away the security model, making all the other sacrifices that go along with using a cryptocurrency over the banking system, pointless.


He doesn't need to care. Either one of these two conditions is true:

a) He has a client installed on his machine, which knows the chain it expects to receive, offline or online, doesn't matter
b) He doesn't have a client in the first place

The only aspect of trust here is that he trusts his existing client to be correct, or he locates the genuine client if he never had it to start with.

There isn't a way to achieve one without it. Without a profit motive, the rational behaviour to maximise gains is to attack the system, this is the opposite of a nash equilibrium.


No, they don't need to do anything. Their client, which can be offline, then online, will always know whether it is being presented with a candidate blockchain on the right hard fork, in the right blockchain.

You seem to be suggesting that the attack vector is to convince someone who's never had a bitcoin, or ethereum client before to install an impostor client. This is a social engineering attack, not a technical one.