For a real currency, that's obviously the case.  This is given by Fisher's formula.  The amount of economic value bought by a fluid currency determines its market cap.  Of course, the tricky thing in that equation is the money velocity, but a fluid currency has a velocity of the order of a few units to a few tens of units, unless it is a very very fluid one.

In Fisher's formula, we have:

Q = the economic value bought with the currency (and hence, indirectly, the economic utility of the currency system itself)

P = the number of currency tokens for a unit of economic value (in which Q is expressed, for instance, "Big Mac": P is the price of a Big Mac in the currency at hand ; but we can also take "dollars", if we consider dollars as representative for economic value in the short term, which is true)

M = the monetary mass (the amount of currency units in circulation)

V = the monetary velocity (usually between 1 and a few times 10, or bigger if it is just a "transition token").

Note that the "price of a currency unit" is 1/P.

Fisher's formula is :  Q . P = M . V, from which:  Q = V . M/P

Now, M/P is what we call the market cap of the currency.

So we see that normally, the market cap of a currency should me the economy bought by the currency, divided by the velocity which is 1 - 10 or bigger if the currency is transitional.

In other words, the market cap, times 10 or so, should be the estimation of the economy bought by the currency.  Well, *no crypto ever did that*, which indicates that no crypto's price is ever driven by its usage as a currency.

No, bitcoin's yearly economy bought as a currency is not $300 billion.  If bitpay is an indication, we're on the order of $300 million a month, or maybe $3 billion a year.  
But bitpay indicates QUICK velocity.  The holding time is not of the order of a month, because the conversion to fiat is done quickly.  This would boost velocity even further.  So grossly, you could say that bitcoin, being an "intermediate currency", is supposed to have higher velocity than fiat currency that is "kept through the month when spending one's salary".   The bitpay model would indicate velocities that would get closer to 100 than to 1.  That would mean that, if the total economy of bitcoin is, let's be large, 10 billion a year (the amount of stuff really bought with bitcoin as a currency), bitcoin's market cap should be $100 million.

So we see that no crypto currency's price, and especially not bitcoin, is driven by its "economic value as a currency".  It is PURE SPECULATION.

And that's because of bitcoin (and all crypto's) speculative emission curve and the absence of price stabilizing mechanism (on the contrary, all of them hope for "moon").  This is what makes me conclude that the currency usage of crypto is not considered by the market.

Indeed, the whole thing of soft fork versus hard fork is ridiculous: in both cases you change the protocol.  The difference resides in:
1) a way to ENFORCE it: if 51% of the hash power implements the soft fork, it is enforced upon the 49% (exactly like a 51% attack enforces the new history upon the whole system)

2) the ridiculous belief that non-mining nodes (who can be Sybiled at almost no cost) have an important role to play, and hence to "respect nodes with old software" (who cannot USE the new protocol, but don't block it).

If a cryptocurrency is centralized on a dev team, then it can hardfork in the same way it can soft fork.  This is what many crypto currencies do, of which, indeed, DASH, ethereum and monero are examples.  Monero even has a REGULAR hardforking policy: it is in the code that the running protocol remains only valid up to a certain block, so IN ANY CASE a hardfork is needed. 

If a cryptocurrency is truly decentralized, its protocol is immutable in the same way its history is immutable.

You can't have it both ways.

Yes, you are right, I confused the anonymity, and the fund security.  With coinjoin "done by hand", there is always an entity that has to construct the transaction, and of course that entity knows which output and which input go together, but you are right that there's no risk for the funds themselves, if you can check yourself that to your input you need to sign, corresponds an output you wanted with the right amount.

There's nothing that would stop the "central mixer" to propose a tree of coinjoin mixings to the users, in the same way DASH does automatically with master nodes, and monero does implicitly without need for user agreement in ring signatures.

In bitcoin, there is no way to do CoinJoin trustlessly - at least at the protocol level.  But the tree structure of doing CoinJoin trustlessly is exactly what is done in DASH.  I think each step mixes 16 at a time or something of the kind (long time ago I read their whitepaper).  The trustlessness comes from the collateral that masternodes need to provide in doing so.  DASH has deep down, the bitcoin code, because it is a bitcoin code fork.
Of course, this is trustless concerning the safety of one's funds, not concerning the anonymity: the set of masternodes knows which funds went where ; but that's always the case of the entity that makes the coinjoin transaction.

Yes, and in fact, transactions of 1 MB are ridiculous, because they could easily be replaced by a tree structure of smaller transactions, changing the N^2 into N log N.  

All the arguments against "bigger blocks" are bogus.  Non-mining nodes have nothing to do with decentralization (of power), and the N^2 time has to do with the size of individual transactions, which have been erroneously left to be much much too big from the initial design.  There is simply no point in having such big single transactions.

No, it is because it was badly designed, that's all.  Bitcoin contains several fundamental design issues.  The most important is ironically what it is touted for to be important: its emission curve, sending out a lot of coins in the beginning, and going down to zero.  That turns bitcoin not into a stable currency, but into a speculative asset.  The second one is proof of work as consensus mechanism, which industrializes and centralizes the system in an industry/customer relationship, instead of a user community.  And finally, the last one is the block chain itself, where everyone needs to know every other transaction in the world in a very specific list in full order.  I would add to that the traceability of bitcoin, which make it a dangerous way of using your money because your spendings are open to the world, graved in stone.  But on top of that, there are religious beliefs in bitcoin that kill it totally: the idea that the number of proxy servers of the unique chain is important, and that therefore, its size should be limited.

It is not the state's fault that a thing that is designed to be a speculative asset with clunky technology based on erroneous economic and game-theoretical beliefs, doesn't replace the worlds' financial system.  However, it will take a maybe big chunk out of speculative finance and at a certain point, banks will love it, especially in combination with its buddies, alt coins, to get money out of the pockets of home-traders and believers.  

But this thing was ill designed to become money, and hence it didn't become money.  Apart from those places where normal money cannot go and it doesn't undergo competition: dark markets and other such things.

In fact, the reaction of states is in many cases surprisingly positive towards including bitcoin in the legal system.  In many countries, it is not illegal to possess crypto.  If you declare them correctly, and you use legal exchanges in a transparent way, bitcoin and other crypto are in fact not stopped by the states.  Nobody stops you from using bitcoin to do payments.  But it is simply not practical, and you are obliged to speculate on bitcoin if you use it, because it has no price stabilizing mechanism (on the contrary, bitcoin has to "rise" with adoption, which is an economically crazy idea for a good currency).  There's no point in using bitcoin as a currency, it's a hassle.

I think that the idea is exactly the opposite: segwit as a toy for those kids that want to play with it, but "normal bitcoin" needs more room.  So essentially, this is, I think, mainly seen as just a 2MB upgrade, with the concession that those who want to play with segwit, get their toy, but that normal old style bitcoin transactions can continue.  Once they see that they can get 2 MB, whenever the 2 MB are full, they can do it again to go to 4 MB.  In fact, like they used to in the past: augmenting the real block chain room.  And yes, if some people want to go to segwit style transactions and addresses, this is admitted that they can do so if they want to.
This is maybe also why the short time frame is not a problem.  After all, changing the hard-coded constant to 2 MB is not a lot of work.  And whatever happens to the twits that want to use segwit is their affair.  If that code doesn't run very well doesn't matter much ; the normal bitcoin part will run OK.

If ECDSA is cracked, there are more fun things to do than to steal 100 BTC !

Freudian typo ? 

Only a few, that I bought a few years back as a reserve to buy VPN and VPS services on the internet.  Buying bitcoin being a hassle, I thought I'd buy myself some reserve for later, so that I don't have to deal with that every time.  In the mean time, that stuff took so much value that I think that for everything I'll ever buy with bitcoin, I have more and more than enough !

That said, I'm not using bitcoin any more to buy stuff, because someone told me they could go to $500 000.- a piece.  If that's a case, I buy several houses for all of my children.  So I put them apart, and will cash out whenever that moment arrives.

I'm only interested in bitcoin and crypto for mainly intellectual and political reasons.  I thought it was a great invention to build underground economies, even though it contained a lot of design flaws.  I'm now very very sceptical about this.  I even think that bitcoin, and its other crypto imitations, have spoiled the opportunity to build an underground economic system with a true cryptographic money, because of the speculative greed function that was built into it.  if ever someone invents a true crypto currency, nobody will use it because one will not be able to speculate on it and become rich quickly, and in the mean time, the powers that be have been alerted to the stuff by the crazy values to which these gambler's coins have been gone.  I was full bitcoin when Silk Road was thriving.  But in the mean time, I became very sceptical about it being anything else but a gambler's toy.

And as you see, no matter how I despise raw speculation, I'm tricked in doing it now myself with my "internet money" that I got for reasons of using a covert currency.  I won't be using bitcoin in any case any more because I also learned how it can be traced back to my buying them on an exchange.  I think open ledgers are very dangerous for monetary affairs.  I am now only in favour of obscured ledgers.  My long time favorite is monero on that level, but even though I don't like the economic model of zcash, and have other issues with it, after all, it is also quite good at hiding your actions.

That said, I'm extremely interested in the behaviour of these systems, because they learn me something of what to avoid in anarchist systems - and I even start to doubt they are possible, because the slightest design errors make it turn into centralized power games which are worse than the things one is trying to fight (states).

There is another aspect of crypto currencies that interests me.   I believe that in the not so far future, the dominant species on earth will be machines, and we will be, at best, their pets or their cattle.  But I always wondered how these machines would develop an invisible society.  I think crypto currencies and smart contracts is what was missing from the picture.  Now, they can.  Humanity is then just a transitional species in the evolution of intelligence, towards more intelligent machines.  When that step is completed, our dominance will be disposed off in ways we won't understand, the same way that dogs don't understand that they are pets.

Bitcoin's economic model is simply built on a childish conception of "money", namely a collectible.  In the mean time, people have found out the real economic functions of money, and one of those functions is "unit of account", hence a guarantee for a predictable stability of price.  Collectibles cannot do so.  Only assets which have value-regulating mechanisms can.  Moreover, bitcoin's economic model is based upon "sound money doctrine" who prefers collectibles over value-regulated currencies, for the sole reason that seigniorage is perceived to be bad.  Bitcoin has HUGE seigniorage for early adopters.

As such, bitcoin's economic model is ill conceived to be a good currency.  But it is brilliantly designed to be a highly speculative asset, of the kind that financial markets love to play with.  Don't worry, crypto will be loved by banks, but it would be even far more dangerous than the subprime toys they played with.  This is hence what it is becoming: a speculative betting token.

I visibly get offered an experiment over what has deciding power in bitcoin: full nodes or miners.  Wow !  Thanks, guys !  Could you get your timings right to try both simultaneously, just to get the correct experimental conditions ?  I propose, all full nodes go UASF, and all miners go MAHF simultaneously.  Let us see who wins

Note that if the result is two bitcoins, that is even better:
1) everybody has twice as many coins as before (or maybe three ?)
2) much more transaction room, because now you have two (or three) chains, you can run two (or three?) full nodes, the decentralization doubles (or triples ?)

 

As far as I understand the new proposition, it has two advantages that I can see.  It can avoid a huge clusterfuck because it is a hard fork, so that once it is set up, it will split cleanly and nicely in two prongs that cannot unite any more.   As such, the immense clusterfuck that could happen if a minority soft fork splits off, making two coins, and taking over (becoming majority), orphaning the original one after a month or so, erasing all transactions on one prong in a go, can be avoided.

But if I understand correctly, this new proposition has a "power amplifier" built into it, even if initially there was a 50/50 split in hash rate on the two prongs.  Indeed, in that case, both prongs (both bitcoins, the original one and the new one) will only make blocks at half rate, so every 20 minutes.   However, the new one, having standard blocks of 2 MB, can accommodate just as many transactions as the old bitcoin did before the split, while the original chain has now half transaction rate.  

If the two coins are listed on exchanges, people will curse the old chain, that is now totally asphyxiated at HALF the current transaction rate (a 1 MB every 20 minutes !), while the new chain with same block rate can continue to work like old bitcoin used to.  This will give an edge to the new chain for users.

It can also have the opposite effect, that people do not even succeed in putting their old chain coins on an exchange to sell them and are hence constrained to hold them, thus increasing the market value of the old chain.  This could be even a danger if the split is too favourable to the new chain, and the split is 20% - 80%, and exchanges list both of them.   The old chain will only have about a block every hour (imagine !!) while the new one will essentially double bitcoin's transaction capacity.   But people will not be able to sell their old coins, so maybe the few of them on exchanges will explode in price, reversing the hash rate distribution.

Normally, once both chains are active and separated, the market will determine the market cap split, and the miners will follow with their hash rate.  

If the new chain doesn't asphyxiate entirely the old chain, two bitcoin will emerge, but at least, the two coins will never mingle again, and all transactions on both chains will continue to exist.

Actually, this is not true.  I was close to one of the first digital currencies, and a predecessor of bitcoin: ecash.

https://en.wikipedia.org/wiki/Ecash

If failed miserably.

And most fiat currency is digital currency.

The big difference between crypto currencies and other digital currencies is their claimed decentralization, and their highly speculative emission curves (a lot for early adopters, and scarcity when more general adoption sets in, making early adopters profit from huge seigniorage).

This is why I won't quit until I can witness that
It would be a sad day if I missed it !

I will also quit when bitcoin is at $500 000.-
Then I buy a few houses for my kids with the few coins I bought in order to buy some VPS service a while ago

One always forgets Satoshi's understanding of this from 2008:

http://satoshi.nakamotoinstitute.org/emails/cryptography/2/


This is not to "quote authority", it is simply to show you that to its creator, this was understood, that one would separate users and miners (the "specialists with server farms of specialized hardware").

That said, Satoshi erroneously thought that there wouldn't be pools, and that there would be more of these "specialists" than the handfull right now.  But the idea that one would develop ASICS "specialized hardware", and that this would result in an industry of "specialists" was understood by him.  In other words, one cannot "discover this with horror" right now.  It was understood as part of the logical consequence of his design.  Maybe not desired, but at least logically understood.

That's what I said: a decentralized system always starts out as a centralized one.  Bitcoin was initially centralized with all power to Satoshi.  He set the rules.  And Core could live still a bit on that central authority, making the sole software.

My idea is that, with the highly speculative emission curve, giving huge seigniorage to first adopters, and making the stuff rare when it gets traction, we get the perfect constitution of a speculative asset decoupled from economic reality.  Bitcoin's value is not the value of the token on the bitcoin chain, but is the value of the abstract IOU on exchanges "backed" by tokens on a block chain somewhere (at least that's what one believes).  Bitcoin's price has nothing to do with bitcoin's practical usage, in the same way that most other crypto currencies' value has nothing to do with their block chain's usage.   Hell, there are even tokens on exchanges that get value when the block chain is dead and not running any more !

My theory is that the speculative emission curve of bitcoin, imitated by most other crypto, and has made "big fortunes from zilch in no time", has turned crypto as a whole in one of the better speculative gambling casinos seen out there.  Bitcoin's problems have most probably interested people in other crypto currencies too, who discovered that there's not just ONE token out there (on exchanges), but hundreds of them !  This is a speculator's heaven.  Bitcoin's problems have taken away the fundamental distinction between "real crypto" (bitcoin) and "crap crypto" (alt coins) ; bitcoin already being mainly a speculative vehicle, the discovery of hundreds of them as "viable alternatives" has opened pandora's speculators' box.  This induced a huge speculative wave on many crypto, one dragging the other (including bitcoin) along in a speculative bidding like no other.

So price setting is entirely the price setting of speculative IOU on exchanges, and has essentially nothing to do any more with "real economic usage", which is the defining property of a speculative asset.  Crypto (including bitcoin) is probably evolving towards a kind of universal speculation market on exchanges, which can go VERY high.

It might even be so that whenever the problems on bitcoin are solved in a way, that "common sense" returns to the market, and makes it implode entirely.  That would be funny, that finally the scaling problem finds a solution, and the whole of crypto crashes to ground, because it acted as the wake-up call to "economic reality".

Of course.  But if it works, it means that decentralisation is gone, *because* a majority could collude over a change in rule set, and hence HAD TO AGREE upon a specific collective action at a specific moment (and implicitly, had hence to have a leader that proposed that and could have a majority agree which is, in my book, what collusion is about).

If you ask me if bitcoin is decentralized, my answer is: "can they change the protocol ?  If yes, it is centralized, if not, even if many would like to, then it is decentralized".

Of course.  The idea is that we talk about 51% collusion if it is any deviation from the existing rules.


The point is the following.  If you see a decentralized system as many individual entities that do not collude (that is, do not make specific agreements on anything, to do together at a specific moment in time in a specific way) but are just running according to a given rule set (protocol), then just any small entity can join, on the condition that that entity complies with the existing rules.  So that new entity can start participating at any moment, doesn't need to "make any colluding agreement with any other entity", but can just start running using the existing rule set.  As such, many, many small entities can join, and they all joined using the SAME original rule set (protocol).

Of course, you can say, but "in the beginning, there was someone with >51% power, that determined this rule set !".  Yes.  Any such system starts out in a centralized way.  Satoshi was the central authority that set up the initial rules, and of course, when he was alone, he was 100% colluding with himself.  The system was entirely centralized on him.  For quite a while, his self-appointed/sole/natural heirs, Core, enjoyed that continuous central power, at least "morally".  Everybody used their software, so whatever they put in there, was the new rule set.

The only way new entities could join, was to accept HIS/THEIR rule set.  But ideally, after a while, we have so many new entities, that the original central authority is swamped. At that point, ideally, the only thing that new entities joining could do, was to play according to the rule set that all other entities were also obliged to use when they joined.

But once IN the system, if individual entities are small, and never collude (that is, sit together, and decide upon specific collective action at a specific moment), the only thing they can KEEP doing, is to KEEP playing according to the rules that everybody in the system had to use when joining.

That's how immutability arises from decentralisation (= the inability to decide upon specific collective action at a specific moment with majority of decision power): the impossibility to "make a collective plan of deviation" (decentralization) of the existing rule set.