Here's the [ formula ] I use:
Bmo = N x A
Bmo ~ total value bitcoin M0 (also called 'market cap')
N ~ total number of entities holding bitcoins
A ~ average Amount of value holding entities are willing to hold in btc
It appears likely that N is only going to keep increasing for the forseeable future (perhaps with exponential adoption rates at times).
A will stay around the same but also may increase as the confidence in holding value in btc becomes firmer.
You can let N to be any number of people, as long as it includes all people holding bitcoins in some time interval of interest and A is the average over that same set of people. So, let N be the number of all people who have held some bitcoin at any time since January. Then N is fixed. The Bmo of bitcoin has fallen 50% since January. Therefore A must have fallen by that much, too. So much for "A will stay around the same". The formula is problematic also because it does not take into account the dynamics of BTC investing. It seems that most of the extant bitcoins are held by "old" inactive investors, who are confident enough to hold them for a while longer, but were not confident enough to buy more coins over the last year. (If the price keeps falling and they eventually decide to sell at 100 $/BTC, their old bitcoins would still have been a great investment, but any bitcoins acquired over the last year would have been a terrible one.) So, the contribution to the A factor of those old investors does not depend on their confidence in bitcoin. Rather, the amount of BTC that they are willing to hold is constant, and the amount of value that they are wlling to hold in BTC varies according to the market price of BTC, as determined by the Chinese traders. In that case the value of A does not determine the market price, but is passively determined by it -- making the formula useless as a predictor of price. VC's are doing their value added inputs (like the miners before them) once that market has a little more hierarchy, I can visualize it will be like the miners before them they'll realise it's cheaper to buy coins than build business to skim off the top. Some smarter ones have realized it already. In fact, most diversify their porftfolio by buying the underlying asset. I believe Chamath Palihapitiya is solely buying Bitcoins and has expressed his opinion that this is the very best bet one could make at the moment. |
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I know 1 satoshi = $1 is pushing it  It took 9 years to give 70% of US homes broadband internet. If only the US would get into Bitcoin at the same rate that would be $55 billion (70% of 1.46m households with $54k per household per year). That would put bitcoin atleast in the range $4000 to $10000 with todays mined coins. Then take two bitcoin halvings in oncomming 10 years and we go to $16k to $40k a coin. Now take the above and imagine China, India or Europe getting in then $100k to $1m a coin isn't such a far stretch. $100m a coin will be a far stretch but could happen once all coins are mined  IF 1 satoshi=$1, then market capitalization of bitcoin=2.1 quadrillion $$ or 2100 trillion. World GDP is 71-81 trillion. Total world wealth is 241 trillion, so with 4% world GDP and similar % of wealth growth, I guess, it is possible in ~90 years or around 2104 if all wealth will be in bitcoin. A bet one could make is that Bitcoin will significantly hasten the growth of the world economy. A reduction in transportation costs in a trade network by a factor of two increases the potential value of that network by a factor of sixteen. http://unenumerated.blogspot.ca/2014/10/transportation-divergence-and.html |
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I know 1 satoshi = $1 is pushing it It took 9 years to give 70% of US homes broadband internet.
If only the US would get into Bitcoin at the same rate that would be $55 billion (70% of 1.46m households with $54k per household per year). That would put bitcoin atleast in the range $4000 to $10000 with todays mined coins. Then take two bitcoin halvings in oncomming 10 years and we go to $16k to $40k a coin. Now take the above and imagine China, India or Europe getting in then $100k to $1m a coin isn't such a far stretch. $100m a coin will be a far stretch but could happen once all coins are mined Now consider that the adoption rate of Bitcoin is magnified by some orders of magnitude by being able to harness this global internet infrastructure. |
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TC is a pathetic example and an obvious scam that will attract so much suckers before it gets exposed.
TC in this statement is TruthCoin. brg444 This guy has a much better take on what SC are than you. He understand the mining incentives that make Bitcoin, the only scam he's pulling is capitalizing on the inflation effect offered by the idea of SC's, someone who gets mining like this and looks for a win win without addressing the effect the proposed protocol change will have on mining incentives is a businessman, he isn't the scanner you think he is. We'll see thousand of these  brg444 read the article you may learn something please address all criticism on the appropriate blog, feel free to invite my input over there if you like. http://www.truthcoin.info/blog/pow-and-mining/I have been waiting for your input on our discussion over here for awhile. Hopefully you will deliver, I'll be patient. Thanks for the heads up though, looks interesting. I will frankly say I did not even bother looking into him or his website after having a glance at his "sales pitch" |
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Yes but the population of earth is 7.125 billion people and they aren't all adults. I don't think that kind of adoption could happen in 10 years. Didn't credit card / card adoption take a large time?
Its a nice thought but i think we should all be a bit more realistic in possibilities instead of excited. It could happen yes but so could $1000 a satoshi but its not likely.
If we can get to $10,000 i'd be happy and i think it can do it .... just not in the near future.
The combination of an internet protocol and money is one of the most powerful application of network effect the world has seen. Credit card were not bootstrapped by the internet and globalization of communications. Bitcoin will grow at speeds that will catch most of us off guard. Once we reach the tipping point the growth of users will become hyper-exponential (think Facebook but with monetary value incentive) |
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Fiat is designed to lose value, 2 percent in some countries, 2 1/2 in others. Bitcoin not.
Bitcoin too, until the year 2150 or something ! Although you are right that bitcoin has monetary mass inflation until then, while many central banks have price inflation targets. The difference between both is (at constant velocity) given by economic growth. The danger is altcoins. Altcoins = infinite inflation potential for crypto-currencies as a class. Though so far they aren't catching on. ### absolutely correct i expected them to gain ground in 2014 and to take a big bite out of bitcoins marketcap. but they didnt. with sidechains in the making innovations could eventually build into the bitcoin protocol in the future. but generally speaking altcoins could act as the inflation that bitcoin was trying to avoid. altcoins are as inflationary to Bitcoin as my monopoly money is to the USD |
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Generally speaking, there are two different ways in which a miner can behave: they can operate in good faith or they can grief.
Griefer miners have to pay a real cost for their bad behaviour - they expend significant quantities of electricity and capex depreciation which they will never recover.
What if a Bitcoin miner decides to grief the Namecoin blockchain? Mine empty blocks, intentionally orphan valid parts of the chain, run difficulty up and then pull out, attempt double spends of Namecoins, etc.
Their electricity and capex is paid for by the Bitcoins they mine. Sure, they have to spend a little bit in bandwidth to run a Namecoin node, but that cost is insignificant compared to the cost of mining Bitcoin.
This is why merged mining doesn't provide the kind of security that people think it provides. The only security comes from the goodwill of the mining pool operators, without strong economic incentives that make good behaviour much more profitable than bad behaviour.
Just like proof of stake, and also just like central banks.
I understand. But this changes in respect to the economic incentive of the chain, correct? If miners profit from the considerable value transfer (transactions fees) on a sidechain then there is more incentive for miners to operate in good faith, right? If we consider an ideal situation where there is economic incentive for miners to act with good faith do you agree with this model?  |
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When a Bitcoin miner starts merge mining Namecoin, how much more opportunity cost do they forfeit compared to the case where they only mine Bitcoin?
The time, electricity, and capex needed for mining Bitcoin doesn't count because that cost is paid for with Bitcoin. From the perspective of Namecoin's security model, it's not an opportunity cost.
If a Bitcoin miner wants to attack Bitcoin's ledger, they have to pay a real cost for it. If a Bitcoin miner wants to attack Namecoin, the cost of the attack is effectively free.
We know how easy it is for Bitcoin miners to attack other double SHA256 ledgers, because they've done it before.
At best, merge mining creates security equivalent to proof of stake.
How is it free if the chain is secured by the same work as BTC !? If the work produced to secure Namecoin runs parallel to Bitcoins' and is equivalent then the opportunity cost to attack is the same. No? I understand that there is no more additional work required from the miner but the work produced is enough to simultaneously secure both chains is it not? |
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I have read those a while ago and I appreciate you sharing them again but could you explain how MM creates a different opportunity cost and maybe provide an example? |
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Are you insinuating that this mechanism leads to more centralization and therefore more counterparty risk?
Stop playing around and just say what's on your mind, you don't appear to me to be someone who usually play the cat and mouse game. I'm insinuating that you have no idea what you're talking about with regards to counterparty risk, centralization, or distributed consensus. The reason I know this is because of how you worded your previous comment - your scenario was a "100% merge mined" sidechain. Of course that makes sense, right? 1. Hashing is what makes Bitcoin secure 2. More hashing equals more security 3. Therefore any chain that has an equal amount of hashing power as Bitcoin will be equally secure. Sounds great, except the first premise is false, therefore so is the conclusion. Hashing isn't what secures Bitcoin - opportunity cost is what secures Bitcoin. Anybody who doesn't understand that is not qualified to evaluate the security properties of sidechains. It seems to me attacking any sidechain that is mined by all miners offers no less opportunity cost than attacking BTC. I don't claim to understand everything. I do know that comparing sidechains to mere promissory notes is disingenuous in itself. Bottom line is it appears to me sidechains are our best attempt so far at reducing the counterparty risk implied by off-chain/sidechain schemes. This blog post is a very interesting practical demonstration of the way I'm seeing it. http://gendal.wordpress.com/2014/11/14/the-unbundling-of-trust-how-to-identify-good-cryptocurrency-opportunities/Using his centralization continuum here is my view on the debate  |
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Are you insinuating that this mechanism leads to more centralization and therefore more counterparty risk?
Stop playing around and just say what's on your mind, you don't appear to me to be someone who usually play the cat and mouse game. I'm insinuating that you have no idea what you're talking about with regards to counterparty risk, centralization, or distributed consensus. The reason I know this is because of how you worded your previous comment - your scenario was a "100% merge mined" sidechain. Of course that makes sense, right? 1. Hashing is what makes Bitcoin secure 2. More hashing equals more security 3. Therefore any chain that has an equal amount of hashing power as Bitcoin will be equally secure. Sounds great, except the first premise is false, therefore so is the conclusion. Hashing isn't what secures Bitcoin - opportunity cost is what secures Bitcoin. Anybody who doesn't understand that is not qualified to evaluate the security properties of sidechains. It seems to me attacking any sidechain that is mined by all miners offers no less opportunity cost than attacking BTC. I don't claim to understand everything. I do know that comparing sidechains to mere promissory notes is disingenuous in itself. Bottom line is it appears to me sidechains are our best attempt so far at reducing the counterparty risk implied by off-chain/sidechain schemes. |
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Please point out the additional counterparty risk of a 1:1 open-source & properly implemented sidechain that is MM 100%. Please explain the mechanism via which merged mining solves the distributed consensus problem. Are you insinuating that this mechanism leads to more centralization and therefore more counterparty risk? Stop playing around and just say what's on your mind, you don't appear to me to be someone who usually play the cat and mouse game. I expect your usual candor in your next response. |
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no counter-party risk.
Bullshit. Find one credible source who will go on record saying that sidechain units carry zero counterparty risk compared to bitcoins. Actually the sidechains whitepaper was fairly explicit about saying the opposite. Reducing counterparty risk is a worthy goal, however one can't build solutions to a problem that one refuses to acknowledge. Anybody who thinks that counterparty risk for promissory notes can be eliminated is delusional. Managed? Sure. Reduced? Absolutely. Eliminated? Never. It can be reduced to the same extent that counterparty is reduced in Bitcoin. Sidechains are open source code integrated to Bitcoin on the protocol level. If you trust the maths and they are sound, I don't see how they are any less protected from counterparty risk than Bitcoin is. They are effectively an extension of Bitcoin. Please point out the additional counterparty risk of a 1:1 open-source & properly implemented sidechain that is MM 100%. |
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I see something happening here that's been a long standing problem in the Bitcoin space, especially in "Bitcoin 2.0" circles.
Quite a few people, sometimes out of ignorance and sometimes out of malice, blur the lines between money and promissory notes.
yes. most ppl missed the point of a post i made the other night. by destroying Bitcoins sound money principle by inserting an offramp into source, you effectively make the destination speculative SC's inflationary.This is complete non-sense. Off ramp created by federated sidechains can be equally speculative & inflationary. SPVProof is neutral and has no inherent inflation attached. The sidechain issued from a SPVProof are whatever their creator make them to be. yes, and they can't get to 1st base unless the spvp is inserted into source. Yes they can : create a speculative federated sidechain today! |
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c'mon man, you do realize what you're saying and how contorted it is? let me summarize: "b/c spvp SC's are insecure b/c they won't be MM'd, Blockstream will develop federated SC's instead. b/c federated SC's will prevent miners from collecting tx fees, we should therefore adopt spvp SC's even though they're insecure and then they can be MM'd."  You are so basic. SPvp SC's will be MM only at the extent that they support a considerable part of the economy and enable a service/feature/application that command a level of decentralization & security on the same level as BTC. Examples are utility sidechains that serve a money function : fast txs, anonymity. I'm sure there will be more of these but not 1000s or BILLIONS. These chains are likely the ones that will be supporting a majority of the network transactions, surely enough to satisfy the miners' incentives. Federated servers sidechains will support more corporation type, centralized sidechains that demand more control and oversight over the chain's parameters. They will be the model of choice for any entity that cannot secure the backing of a majority of the mining network. SPVProof enables a balance between both types and provides an insurance for the miners incentives. |
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I see something happening here that's been a long standing problem in the Bitcoin space, especially in "Bitcoin 2.0" circles.
Quite a few people, sometimes out of ignorance and sometimes out of malice, blur the lines between money and promissory notes.
yes. most ppl missed the point of a post i made the other night. by destroying Bitcoins sound money principle by inserting an offramp into source, you effectively make the destination speculative SC's inflationary.This is complete non-sense. Off ramp created by federated sidechains can be equally speculative & inflationary. SPVProof is neutral and has no inherent inflation attached. The sidechain issued from a SPVProof are whatever their creator make them to be. |
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I see something happening here that's been a long standing problem in the Bitcoin space, especially in "Bitcoin 2.0" circles.
Quite a few people, sometimes out of ignorance and sometimes out of malice, blur the lines between money and promissory notes.
Promissory notes engineered on the protocol level are a whole different animal : no counter-party risk. |
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Do we have a consensus on the unsolved issues in this debate yet?
Correct me if I'm wrong; I've only had time to skim (not read) the last, oh, 150 pages or so (sheesh):
brg444's position:
Sidechains will reduce demand for alt-coins, and increase demand for bitcoins, by allowing alt-coin experimentation that doesn't require a completely new unit.
The economic dynamics are no different than those that would/will arise from implementing Sidechains via a federated model, such as with OT, which does not require any code change to Bitcoin. Thus, there's no more ecosystem risk to adding SIDECHAINPROOFVERIFY to Bitcoin versus doing it on OT anyways.
cypher's position:
The economic incentives surrounding Sidechains may be more complex than they look, especially when merged-mining is taken into account.
The developer incentives/precedent created by allowing a code-change to Bitcoin to get this done may have long run negative consequences, especially since the entity pushing this is for-profit, and comprised of many Bitcoin core-devs.
Fair?
i've actually refined my argument down to that being the mere introduction of spvp into the source code may break Bitcoin's ability to act as Sound Money. the spvp should be viewed as an off ramp for BTC to escape to speculative assets of all types on SC's, not only to research utility chains. once Bitoins sound money function is broken, there will be no incentive to keep BTC on MC. yes, these offramps and the SC's they lead to will be sold by Blockstream to any willing buyers. And you still don't get it.... Federated pegs create the SAME off-ramp using a different proof mechanism. The proof mechanism has no incident on the possibility to create sidechains where BTC can escape to speculative asset. You should take back what you said and use Melbustus' spoon fed argument for you because yours really makes no sense, once again. and you still aren't listening. who cares about federated servers? they pose no threat cuz they don't change source code. What breaks Bitcoin Sound Money principle? The introduction of a change to its source code or the detachement of the BTC asset from its mainchain? the answer is clear. the spvp is the biggest threat cuz it breaks the sound money principle by changing source. yes, you can't stop all stupid ppl from doing a 2wp to a federated server. i'm sure some will but it won't be a large # b/c they are centralized and insecure and represent niche local community uses. they won't gain any traction and thus don't threaten the sound money principle as they are not institutionalized into the protocol. The SPVP introduces a new proof verification method. It does not guarantee that everyone will be able to leverage it because to do so you have to depend on miners adopting your chain. This is a very shaky proposition and it is very likely that federated servers will have an important place in the sidechain ecosystem. In fact, any of the proposed malicious schemes you have described will likely use that format. Only community approved and adopted sidechains will be able to command MM from the miners. These are very likely to be utility chains that are 100% open source, transparent and serves the public good. The very SPECULATIVE chains you are so concerned about will most certainly be supported by federated servers. The reason is evident and logic very intuitive : since it is impossible for them to guarantee a sufficient enough level of MM by miners, they will opt to provide "security" through a more centralized proof mechanism. I believe you had agreed that only a certain number of chains would be MM to provide a security level equivalent to BTC. Any others are subject to the necessary centralization tradeoff. It is for that reason that a great majority of Blockstream's chains built for clients will be AT LEAST bootstrapped on top of federated server model. It only makes sense. Therefore, yes federated model sidechains will absolutely gain traction and detach a considerable portion of the BTC assets off the mainchain. Their off ramp, while different from SPVproof, results in the exact same mechanism. SPVproof only enables the possibility to bestow the ultimate decentralization to the chains that command this feature. They are most certainly not an open door that allow anyone to magically "siphon" more BTC than they would through a federated sidechain. |
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Do we have a consensus on the unsolved issues in this debate yet?
Correct me if I'm wrong; I've only had time to skim (not read) the last, oh, 150 pages or so (sheesh):
brg444's position:
Sidechains will reduce demand for alt-coins, and increase demand for bitcoins, by allowing alt-coin experimentation that doesn't require a completely new unit.
The economic dynamics are no different than those that would/will arise from implementing Sidechains via a federated model, such as with OT, which does not require any code change to Bitcoin. Thus, there's no more ecosystem risk to adding SIDECHAINPROOFVERIFY to Bitcoin versus doing it on OT anyways.
cypher's position:
The economic incentives surrounding Sidechains may be more complex than they look, especially when merged-mining is taken into account.
The developer incentives/precedent created by allowing a code-change to Bitcoin to get this done may have long run negative consequences, especially since the entity pushing this is for-profit, and comprised of many Bitcoin core-devs.
Fair?
i've actually refined my argument down to that being the mere introduction of spvp into the source code may break Bitcoin's ability to act as Sound Money. the spvp should be viewed as an off ramp for BTC to escape to speculative assets of all types on SC's, not only to research utility chains. once Bitoins sound money function is broken, there will be no incentive to keep BTC on MC. yes, these offramps and the SC's they lead to will be sold by Blockstream to any willing buyers. And you still don't get it.... Federated pegs create the SAME off-ramp using a different proof mechanism. The proof mechanism has no incident on the possibility to create sidechains where BTC can escape to speculative asset. You should take back what you said and use Melbustus' spoon fed argument for you because yours really makes no sense, once again. and you still aren't listening. who cares about federated servers? they pose no threat cuz they don't change source code. What breaks Bitcoin Sound Money principle? The introduction of a change to its source code or the detachement of the BTC asset from its mainchain? |
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Does anyone think there is any validity to the suggestion that SPV proofs should be implemented into the Bitcoin protocol simply because a "federated model is not as good for the side chain"? There are better arguments, this one should not be repeated any more please.
Please understand that I am hoping to help you refine your message here. Quite a bit of this is really not good at all for the cause you are advocating.
Thanks for distilling the essence of the issues being discussed. let me distill it even further. brg444 is trying to scare us into believing that unless we implement spvp to core, all these thousands of SC entities are going to move to federated servers which are opaque and much more ominous and threatening to Bitcoin. somehow. that's reality. unless you want to argue there is no demand for transactions types that are not implementable on Bitcoin's mainchain and i accept that. i just don't think it represents the existential danger you're trying to make it out to be and certainly is not to be used as a "reason" to implement spvp. you have used this argument ad nauseam in previous pages. you and buddy Adrian-x have made it a concern to the sound money principle of Bitcoin that the miners incentive to mine the mainchain be lost or tampered with. you are not being very honest once again cypher its not a question of honesty, which is one of your favorite ad hominem attacks. it's our different assessments of the threat of the federated server SC's to Bitcoin. i don't see any threat at all. you do. fine. others will have to evaluate themselves. I repeat you have used this argument ad nauseam in previous pages. you and buddy Adrian-x have made it a concern to the sound money principle of Bitcoin that the miners incentive to mine the mainchain be lost or tampered with. This is exactly what is going to happen with more off-chain/federated servers sidechains. |
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