1. Bitcoin price approaches 1M USD.
2. Value of USD quickly goes to zero. Everything is accounted in BTC.

Universe is just a matter. Atoms are sitting here and floating there. There is no meaning in anything. Physics and evolution are just about how things are, not how they should be. Only an acting human being (or alien, or animal) can look at all this stuff and say "this is good", "this is bad". And act based on that evaluation. If he likes warmth, he'd go to a warmer place or invent a fire. If he does not like cutting precious trees, he'd freeze and die. Either way, universe does not care, it just does what it does.

Consider voluntary transaction where we exchange Apple and Orange. I have Orange, but value Apple more. You have Apple, but value Orange more. Thus, we exchange. To make this exchange the values should be different.

Sorry for the repost from here: https://bitcointalk.org/index.php?topic=321819.0

Who is in Vienna this weekend? I planned a visit in March when Unsystem was announced, but it was cancelled and I am going anyway.

Would like to meet some folks in Vienna.

Bitcoin was conceived in Satoshi's words few years before he contacted cypherpunks mailing list. Whitepaper was written after the working prototype (in Satoshi's own words). It was just to discuss the concept before he committed to any particular design choices. Whitepaper did not contain much technological details, nor even some built-in limits like 21 million BTC top or linear inflation. It's only about theoretical basics of blockchain.

The only true Bitcoin is what was released to mine blocks starting with genesis block and evolved ever since.

Hi there,

I'm spending 4 days in Vienna from 31st of October till 3rd of November. Who's in Vienna these days and wants to chat about futuristic tech stuff related to Bitcoin? I planned a trip for Unsystem conference, but it was cancelled. So I thought, how about a meet up instead?

If one day something about Bitcoin is cracked, it will be fixed, bogus transactions reverted by miners, some people will lose some money and then life will go on. Abandoning Bitcoin is equivalent to everyone losing all their wealth. That's not going to happen without a fight.

No probs. I love all brainstorming going on here. Thanks for sharing ideas and links.

Oops, you are right. The whole scheme allows double spending easily. Thanks for pointing this out to me.

Yep, sipa already corrected me on that one.  A guy from Coinbase in San Jose told me that their index of all addresses is beyond 100 Gb (BitcoinQT indexes only your addresses). I mistakenly thought it was the same as UTXO.

Anyway, I've seen a lot of talk about growing UTXO and "dust" transactions and I don't like shifting technical problems into social ones (e.g. blaming users for "spamming" blockchain etc.) So I think we should simply find nonjudgmental technical solution to it instead of pointing fingers.

Edit-2: this scheme is completely broken as pointed out by Mike Hearn below (allows double spending).


If it was already proposed somewhere, I'll appreciate the link.

Problem: as more people use Bitcoin, number of spendable transactions inevitably grows (UTXO set). Today full nodes must maintain full UTXO set ("previous transactions") to verify incoming transactions. This is a duplicated effort which would be nice to distribute more fairly. (Also, full efficient UTXO index today takes >100 Gb, so miners have to simply scan blockchain to find parents.)

Solution:

1. Each full node only stores all block headers that it considers valid (not simply most POW-ed, but really valid).

2. Users send not only a transaction, but all parent transactions and their merkle branches.

3. Full node does not need to lookup UTXO to check if the parents are valid. This part of UTXO is already provided by the sender. Node needs only to check that merkle branches are valid and point to a block that was already validated.

4. Mining nodes collect all incoming transactions this way. When the block is mined, they don't need to keep those transactions in UTXO.

5. Some nodes still need to store full blocks to send to users — so users know if their transactions are included and where. So they can further send parent txs for each new tx.

As a result, UTXO is proportionally distributed among all users with insignificant overhead for network bandwidth. (At least, now users pay for that overhead, not miners for scanning the blockchain.)

This does not address the blockchain storage. Someone should store all or some blocks so users can know about merkle branches for their spendable transactions. But block storage does not require high-performance indexing like UTXO.

Block storage can be further reduced by having nodes store random portions of old history or not having old blocks at all - only blocks for the last month (so that receiving clients have enough time to catch up and find their new spendable txs). Full history could be provided for payment by specialized services.


Edit: this behavior can be an extension to a protocol which can be promoted by lower transaction fees. If the miner needs to lookup your parent transactions, you'd have to pay for that. If you send them along your own, it'll be cheaper. In other words, your tx priority is lower if it incurs extra validation costs.

Edit-2: as pointed out by Mike Hearn below, this scheme allows double-spending as node does not check if the inputs were already spent.

Fractional reserve banking started because gold and silver were not useful as a currency in an emerging economy (too expensive to divide and transfer). So gold ("money") was stored in banks and their receipts were used instead as a "currency". Banks were constantly lending out more receipts than they have gold and ultimately, took over the government to legalize the procedure. Then, the gold was almost outlawed as money (see 1933 confiscation decree by Roosevelt) and finally Nixon ditched any gold obligations from under USD.

Bitcoin is not only money (like gold), but also currency (like USD bills). When there will be efficient standalone wallets and vault apps and devices, people wouldn't need banks and wouldn't need money substitutes (bank promises). Therefore, discussing fractional or full "reserve" would be irrelevant. There simply won't be currency that needs to be "backed" by anything.

In certain cases of some clearing houses or networks, there will be some IOUs, but those would be automatically redeemed on regular basis without any emerging risk of bank run. Those IOUs will only be useful as means for micropayments or frequent payments. Since Bitcoin encourages savings, demand for credit would be much smaller and certainly not in realm of micropayments, so even small fraud in these clearing mechanisms won't be even viable.

G cannot be SHA256 * N because both SHA256 and N are scalar numbers in your example. You need a 2D point somewhere in this equation.

Economically speaking, no one is paying for having transactions in memory pool. Today people store transactions very briefly just enough time to get them into block and support Bitcoin for free. The costs are low with great benefits (transactions are moved around quickly which gives value to everyone's bitcoins). However, once you allow some longer-outstanding transactions (say, weeks), then the cost rapidly increases while the marginal benefit decreases: there aren't that many contracts with lock time (and escrow-like contracts may not need quasi-protection against double spends like you describe was done originally). The problem is not in designing a good anti-DoS strategy, but in finding economical incentives to every node keep unconfirmed time-locked transactions for years. And reviewing whether it's really necessary. Also, the security of blocking double spends on mempool level is inherently low.

To me it seems like an issue with american non-metric tradition. In Europe people easily say "1.86 meters" while in US it would sound too complex. There you have "6 feet 4 inches" - all whole numbers.

On the other hand, people are simply not used to use hard appreciating currency. Normally all dollars/franks/roubles are losing value and everyone uses bigger whole amounts for the same products. If you give people a deal "your money will increase its value, but for that you'd have to deal with smaller and smaller fractional units over time", would it be considered a great deal? I think people will educate themselves very quickly about anything when their money is involved (and could be controlled by them).

It is not a stretch. And Bitcoin is a value-free currency, not of peace or war.

Government money is never value-free because it is controlled and printed by a single entity. Thus, users of currency support whatever agenda this entity has. U.S. government uses a lot of "budget deficit" (aka "debt", aka "printed money") for military/police purposes. Therefore we can say that  USD is a currency used largely for violent purposes.

Bitcoin is controlled by every user who are very different (there are socialists, anarchists, catholics etc.), so there isn't any specific value to identify. Most importantly, every user acts on his/her beliefs with their own funds, not by taxing every other user like in case with USD inflation.

Thanks for a great FAQ.

I'd like to note that splitting initial payment into 10 addresses does not help with privacy much. When you run out of money, your next payment will aggregate several "change" outputs thus linking you to the very first salary payment. Real privacy can only be achieved when you link several outputs that have very big distance between each other in blockchain. For that you'd need real mixing.

Also, when you pay to the same person from different chunks into which your salary was split, he now can detect that you own all those chunks. If the salary was not split from well-mixed (very far from each other) outputs by your employer, it'll be easy to estimate your whole salary size just by seeing a couple of chunks connected together.

Meni Rosenfeld already started escrow for wikipedia:

https://bitcointalk.org/index.php?topic=270255.0

There is nothing "wrong" in playing with monetary bases. What's wrong is to force people to use *your* money under *your* rules without a good moral proof for the violence (so far no one who uses violence bothers to prove their morality). Everything else is okay with me.

If Krugman likes inflationary currency, he may use one. If you like deflationary currency, you choose yours. The problem arises when either you or Krugman starts proclaiming which one is "good for society". Then the guns are out and war begins.

By trying to cheat, Alice puts herself at risk: what if Bob won't play along and let *her* lose her deposit. The first person who breaks the delicate balance of trust increases his own risk. This balance is maintained best when neither party knows much about another (Alice should not know if it was Bob's last money and he is desperate to recover it).

It could work even better when Alice and Bob are completely automated programs with predefined timeouts (leading to deposit destruction). If you try to cheat by modifying your program, you'll simply lose your money — there is nobody to negotiate with. This principle can be used for two nice applications:

1. Automatic coin mixing: your wallet connects to random other wallets, establishes a contract and then they exchange some coins. Both nodes before accepting coins, do their own statistical analysis and may reject a coin if one node doesn't like it. Misbehaving nodes are punished automatically by destruction of the deposit. Since attacker does not really know who he'll be trolling by wasting his own money, it makes very little sense to do so in the first place.

2. Instant payment network based on mesh of nodes that exchange/propagate IOUs from Alice to Bob via Carl and David. Each node has contracts based on bilateral deposits, so nodes come to agreements completely automatically and anonymously. If the debt from one node to another becomes greater than, say, 30% of the deposit, a real blockchain transaction must be created towards the creditor to clear the balance. Misbehaving nodes risk losing more money than they owe. Network could be kept pretty decentralized because big fat nodes with many connections would have to have a lot of money locked up.