Colored coin is contract. If the coin issuer refuses to acknowledge the stolen colored coins, those coins worth nothing
Sure... it would be obvious (to anybody who looked) that the new chain represented a double-spend attack --- but who has the incentive to care? The writer of the colored coin contract MAY care.... and whoever was scammed out of the coin certainly does. But is it a 100% certainty that a double-spend of a few satoshis would provoke a major response from anybody else? I see this as primarily a problem for those working on colored coins to worry about (if indeed it's a real problem) and perhaps it can be addressed through appropriate contract wording.... but is it not also a risk to the core bitcoin network too? i.e. the existence of colored coins would change the economic incentives acting on participants in the network - and any analysis that only looks at the underlying BTC value would miss this. For the vast majority of backing commodities the act of redeeming colored coins (i.e. destroying them and receiving their value) could easily require significant confirmations -- say 50+. After all, backed coins already require that you trust the issuer. So you can send them your coins overnight and trust them enough to get the commodity in the AM. |
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So, lets look at what it would take to ACTUALLY pull off this attack:
a) you would need to purchase crypto-Oil above market rates and hold it at opportunity cost.
b) you could drive everyone to sell their crypto-Oil for BS at a profit as the value of oil falls.
c) you would discourage / prevent new people from trading their oil for crypto-Oil.
d) you would cause eGold to issue crypto-Oil 2 which was cheaper than crypto-Oil yet also would never fall below parity.
e) everyone with crypto-Oil would trade into crypto-Oil 2 at a profit.
f) market will continue as normal with no one taking any losses except the attacker.
g) the attacker would then have to sell crytpo-Oil at a potential loss, and then start buying crypto-Oil 2 above market rates...
h) eventually the attacker will be bankrupt while everyone else is receiving higher dividends thanks to all of the transaction fees
the attacker is racking up to no real effect.
So you have failed to put eOil out of business or steal any money from anyone. You did succeed in disrupting the market, forcing it over to another crypto-Oil 2 which would cause ineffeciencies and confusion.
Your attack would only work once you had cleared out all other sellers, and thus would be very innefective in any large market like gold, usd, etc.
Does your attack work if you don't have access to dust?
That said, this was a good attack and provoked thought and rule changes so I will award you 0.25 because it was still valuable. It will be paid in a few hours.
Thanks for the award! The attack requires greater capital without dust so eliminating dust bid minting prevention is certainly a good first step. I still think I would succeed in either decoupling crypto-Oil or driving eOil out of business so I'm going to offer my final thoughts for you to consider: c) you would discourage / prevent new people from trading their oil for crypto-Oil.
Exactly! -- or anyway I would prevent new people from trading it at parity. What you may be missing (and your simulation game is certainly missing) is that a large portion of any market (and ESPECIALLY consumable markets) isn't made up of speculators -- its made up of people who NEED crypto-Oil for a definite purpose. In the case of crypto-Oil, probably so they can send it to someone somewhere who can then use it to receive physical oil from the tanker to ensure his refinery keeps running. Crypto-oil is certainly better the actually shipping the oil, and it is also better then BS or bitcoin because it theoretically tracks oil. So the refinery can hold 6 months "reserve" in crypto-oil "safely" and draw on it every day. So when eOil says they cannot fill the order because they do not have crypto-Oil to sell these people aren't going to say "oh ok I guess I'll buy banana futures". They are going to go to a competitive instrument -- like a trust backed colored-coin running over the bitcoin network. And if eOil is doing say 1 million a day in transactions that takes a lot of people. Sales people. IT, etc. And financial commitments like advertisements. You can't just turn the people off and then turn them back on when the attacker gets bored and gives up. So the attack destroys eOil because they lose customers and must pay their employees to do nothing, because eOil can't sell them crypto-oil currency if they can't get it from the market. One simple way to get it is to offer to pay more for it of course... let me put it in 2 lines: tl;dr: Minting is a key feature of your system. Therefore you must think that it has some important function. Whatever that function may be, the attacker can use blocking bit-dust bids and fills to create long periods where that function is not available. This cannot be a good thing. :-) |
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I'm not filling every order. The point is I'm partially filling the order with bit-dust quantities to block the minting. Or if that is not allowed (the rules are unclear), I am bidding bit-dust quantites just above eOil's offering so if minting happens it is MY bit-dust quantity that is minted. I can always top eOil's bid because my quantities are tiny.
Even if you only sell the smallest dust amount (similar to bitcoin's rules...so not new)... you will not be able to prevent others (not eOil) from selling to fill at a profit. Eventually you either own all crypto-Oil, sell all of your crypto-Oil, or everyone else switches to crypto-Oil 2 with no losses. If others can sell to fill at a profit then so can I. My job is done, I have caused the currency to rise in value due to scarcity. At 10 minutes a pop, if I bid or fill 1 satoshi worth of crypto-Oil I can go on essentially forever without materially changing my position. Switching is an interesting proposition. But I think technically I win our .25BTC if my attack forces everyone to abandon the crypto-Oil currency and move to another one. And I think I win in intention as well because a currency switch can't happen quickly because the backing BS is tied up. Also, you are not considering the human factor -- there is tremendous market inefficiency and cost involved to get people to switch over. No one would trust eOil or crypto-Oil again... And people would be leery with good reason, because I can block minting on EVERY crypto-Oil currency issued after its creation is announced on the blockchain. So eOil would be forced to create not just another currencies, but a whole bunch of different ones, the number depends entirely on how much eOil is able to mint during currency creation -- this is basically just how much $ it has on-hand every day due to new sales. So a new currency is created every day... and the whole system has to trade between the N crypto-oils by looking at the BS backing each one. In other words, they are trading BS in a crypto-oilN wrapper. |
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I'm not filling every order. The point is I'm partially filling the order with bit-dust quantities to block the minting. Or if that is not allowed (the rules are unclear), I am bidding bit-dust quantites just above eOil's offering so if minting happens it is MY bit-dust quantity that is minted. I can always top eOil's bid because my quantities are tiny. Yes, this attack assumes that crypto-oil is growing in popularity and therefore eOil needs currency to fill orders. Sure the general public may fill eOil's order with a sell. But eventually the people willing to sell at that price will run out. Normally at this point a "minting" event would provide the currency and increase the backing BS. But I am denying the system that option. So we have a the limited-currency resulting in massive deflation situation that bitcoin has so aptly demonstrated. Of course, periods of potential deflation (increased demand) will be easy for an attacker to determine. Either just by looking at the historical minting rate on the blockchain, or just by reading the news :-). Additionally, since the bit-dust orders are so small the attacker can essentially keep it up indefinitely (or loses almost nothing) if he happens to pick a period where crypto-oil currency demand is NOT increasing. Cheers!
I think your attack is invalid even without the new rule changes I just proposed:
If you are filling every order with your crypto-Oil, then eOil has no need to aquire any crypto-Oil to provide to the market, presumably you are able to satisfy demand and thus keeping the price pegged.
If I were eOil, I would just sit back and watch because you are keeping the price stable for them.
If you attempt to fill "just a little" that is also fine: eOil will make profit on what it fills until it runs out and you make profit on what you fill.
Once eOil runs out of crypto-Oil, they can place a bid to buy it at market price (1% below what you are selling for). They would be buying for less than they sold so this would be sustainable, of course their
bid would not be accepted by anyone until *you* satisfy all demand above parity. In the mean time other people (not the 'attacker' nor eOil) who own crypto-Oil could also sell at a profit. If there is no-one else,
then the joke is on the attacker who continues to own crypto-Oil which is paying dividends below what he could receive by accepting the highest bid and thus he maintains a constant 'opportunity cost' and thus is not seeking profit but an arbitrary increase in the value of crypto-Oil.
From the market's perspecitve, having crypto-Oil valued so high above market price will bring in other sellers until there were no more holders of crypto-Oil.
You, the attacker, will have 'cornered the market' for crypto-Oil but to maintain your control you would have to 'refuse to sell' despite bids above market value... thus you have an opportunity cost (are losing potential dividends),
that you could be making by converting your crypto-Oil to BitShares. You will continue to lose money until the market price of crypto-Oil falls to the point where eOil can now buy profitablly (at parity).
If you decide you just want to 'destroy' crypto-Oil and never sell, 'just to spite' them. Then those looking for crypto-Oil will just issue crypto-Oil2 which you will have none of and crypto-Oil2 will carry on following the price. No holders of crypto-Oil lost money by your actions and you had a ton of opportunity cost. eOil aslo did not lose money.
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Ok, suppose I am a major holder of crypto-oil. And suppose crypto-oil's demand is high because it has tremendous utility.
Normal case:
Essentially, people are giving eOil (and others) money or oil contracts and eOil is giving them crypto-oil. Eventually, eOil is going to run out of crypto-oil and will have to buy at market. If nobody is willling to sell at that price, eOil's bid is minted so crypto-oil remains pegged to oil. This makes sense because eOil's backing increased.
Attack:
So during every block I fill the minimum crypto-oil denomination, stopping the minting process. Now the only way eOil is going to get crypto-oil currency is by bidding high enough to encourage existing holders (me primarily, but other holders can of course profit from my action) to sell their shares. I have decoupled crypto-oil from oil and once eOil bids high enough I'll sell my crypto-oil to them at great profit (5 to 10% for a few days work), buying it back at a lower price when crypto-oil re-couples to oil.
If eOil refuses to buy my high sell offer, they cannot acquire crypto-oil and so must stop doing business.
I *think* this is a variation of an attack I thought of in the shower this morning (posted and fixed (without rule change) in the new bounty thread)... so let me first rephrase the attack how I understand it and then offer corrections. The seem to be of the same family (I read your posting after I thought his up). However I think (didn't look too closely) that you concluded your attack would not work. But this one is different enough so it will. The goal of the attack is to prevent eOil from issuing new crypto-Oil. The result of not being able to issue new crypto-Oil is that crypto-Oil would diverge UP from the value of oil as more and more 'demand' for crypto-Oil must be met by the same 'supply' of existing crypto-Oil.
To execute this attack all that must occur is some trade of crypto-Oil for BitShares at the highest bid price to BUY crypto-Oil.
So the attacker who has some nominal amount of BS and crypto-Gold places an offer to buy and then accepts his own offer, or he must simply sell his crypto-Gold for the highest Bid.
If all he is doing is 'selling' crypto-Gold then he will eventually run out. Because he would be selling at the highest-bid and taking them out, he would be increasingly selling below market value (at a loss).
If he is attempting to 'sell to himself' and thus never run out, then there are some other challenges he would face.
Yes he could sell to himself, or it is unclear in the rules whether a someone can mint and fill a partial bid. This would mint a bit-dust quantity of coin and block other minting. I was thinking that partial minting is possible. But if it is not possible, the other way works. How would the market participants respond:
1) the attack wouldn't be 'free' due to transaction fees (2 of them, bid + acceptance) (this isn't a rule change, it works just like bitcoin)
2) the issuer could offer a higher transaction fee to make their issuance take priority (miners would ignore the sale with 0 fee in favor of the issuer with some fee)
3) the other holders of crypto-Gold could sell into the attack and thus claim the attackers above-market bid before the attacker could.
* they could get priority by offering slightly higher fees than the attacker (made possible by above market bid)
* if the attacker compensated by increasing his fees... it would make the attack cost more and thus unsustainable.
If the attacker wasn't placing bids, just 'filling' existing bids to buy cyrpto-Oil by providing crypto-Oil, then eventually he would runout of crypto-Oil.
1. yes but transaction fees are trivial compared to blocking a (say) 100 million dollar company from doing business. 2. The attacker could counter-offer. This would raise the effective cost of the crypto-oil purchase for eOil. eOil might as well just buy at the attackers market price of +10%. Or the attacker could start using bid-blocking (that is, instead of offering small mintings, the attacker offers bit-dust bids just above that of the eOil. The attacker can go as high has he wants because he's offering small quantity. But eOil must counter-bid with non-trivial quantities because it needs non-trivial quantities. When eOil is high enough, the attacker fills the bid with a sale! 3. It does not matter, the attacker's above-market bid is very small quantity.
All of that said, there could be some clarifications / tweeks to the rules that may make this attack 'clearly' non-profitable.
1) To issue a new higher bid, it must have a value greater than the old-highest-bid by 2x the transaction fee included. I don't like this rule because 2x could be seen as 'arbitrary',
but considering the value of 'x' is decided by the market it isn't as bad as it could be. Like Bitcoin, there would have to be a min trx fee that most miners require.
- net result is that the attacker exposes themself to a loss of 2x the transaction fee
- the attacker creates a profit opportunity for someone else to make profit by accepting his above-market bid (selling him crypto-Oil) with fees up to 1.99 times the transaction fee used to create the bid.
- therefore, the attacker would require 3x the normal transaction fee to achieve this attack: 1x for creating the bid and 2x for accepting his own bid without the risk of losing to someone else.
2) I suppose the attacker does not need to issue a higher bid, they could simply match the current high bid.
- this could be mitigated by processing bids of equal price in a first-come-first-serve basis which means he would have to use his crypto-gold to fill everyone elses order first.
- presumably the highest un-accepted bid is also 'below market rates' and thus he would be selling his crypto-Gold at a loss.
3) I suppose he could 'fill' .00001 of the highest bid and thus tie up the network legitmately for a long time with only a small amount of crypto-Gold.
- this could be mitigated by requiring all fill order amounts to be some multiple of the transaction fee. It wouldn't make sence to pay a $1 trx fee to buy $1.01 of crypto-Gold unless you were
attempting to 'attack' as cheaply as possible.
- this multiple could probably be on the order of 10 x... though I hate to introduce random 'magic numbers' to the rules. But I suppose this is no different than
what bitcoin must do to prevent spam and dust in Bitcoin.
Yes, this last is very specifically the attack I am proposing -- both to bid and fill small quantities to lock minting. I think I've earned my mini-bounty ;-) As for solutions: I'm afraid if I crack my own solution later you'll think I knew the exploit a-priori, so I hesitate to offer a solution. But please take my word that right now I think these options are quite strong rules. At the same time, I haven't thought more than a half hour about them: Something that chooses the minted bid by multiplying the bid by the quantity and taking the biggest? Or best I think: If the top X% by volume of bids are not filled by sales then they can be filled by minting in the next round. But only filled at 10% per round. That is, it would take 10 rounds to completely fill the top X% of bids. |
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I am so on my edge to find bugs before Zerg that I am making up non-existant bugs!
Lol :-) seems like an effective bounty then because you are starting to think like an attacker. Reposting my attack here: Ok, suppose I am a major holder of crypto-oil. And suppose crypto-oil's demand is high because it has tremendous utility. Normal case: Essentially, people are giving eOil (and others) money or oil contracts and eOil is giving them crypto-oil. Eventually, eOil is going to run out of crypto-oil and will have to buy at market. If nobody is willling to sell at that price, eOil's bid is minted so crypto-oil remains pegged to oil. This makes sense because eOil's backing increased. Attack: So during every block I fill the minimum crypto-oil denomination, stopping the minting process. Now the only way eOil is going to get crypto-oil currency is by bidding high enough to encourage existing holders (me primarily, but other holders can of course profit from my action) to sell their shares. I have decoupled crypto-oil from oil and once eOil bids high enough I'll sell my crypto-oil to them at great profit (5 to 10% for a few days work), buying it back at a lower price when crypto-oil re-couples to oil. If eOil refuses to buy my high sell offer, they cannot acquire crypto-oil and so must stop doing business. |
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Ok, suppose I am a major holder of crypto-oil. And suppose crypto-oil's demand is high because it has tremendous utility.
Normal case:
Essentially, people are giving eOil (and others) money or oil contracts and eOil is giving them crypto-oil. Eventually, eOil is going to run out of crypto-oil and will have to buy at market. If nobody is willling to sell at that price, eOil's bid is minted so crypto-oil remains pegged to oil. This makes sense because eOil's backing increased.
Attack:
So during every block I fill the minimum crypto-oil denomination, stopping the minting process. Now the only way eOil is going to get crypto-oil currency is by bidding high enough to encourage existing holders (me primarily, but other holders can of course profit from my action) to sell their shares. I have decoupled crypto-oil from oil and once eOil bids high enough I'll sell my crypto-oil to them at great profit (5 to 10% for a few days work), buying it back at a lower price when crypto-oil re-couples to oil.
If eOil refuses to buy my high sell offer, they cannot acquire crypto-oil and so must stop doing business.
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Zerg, you haven't convinced me things are unworkable, but you have provided the most challenging and innovative attacks that cause me to put on my thinking cap. Thanks for hanging in on this discussion, send me your BTC address and I will drop you a 0.05 BTC tip for your efforts, you deserve one even though you haven't yet convinced me.
Ok .05 BTC is peanuts so here's my counter-offer. If you truly value my challenging attacks to your system (and you know they DO take a LOT more time to think up then drawing a logo) then pay for them. Every time I show an attack that illustrates any or some combination of: 1. a problem in your system that makes you change a rule or add a new one 2. a way to nearly zero the value of a crypto-currency 3. a way to force minting enough coins that gets me the lions share of the dividends. 4. a way to force crypto-Q to diverge from Q 5. a way to force the system to leave me with more BS and/or crypto-Q then I started with (aka to "make" money). You pay me .25 BTC. If I show attack A, and you modify the rules and I show attack A' which is just slightly different that's 2 attacks. Imagine you're really writing the code, updating it, and releasing it every time, but instead of pwning you, all the coins and millions of dollars, I just get .25 BTC. I post one attack at a time, and do not post another until I receive the .25BTC. If you want to stop the process you must indicate so in this thread before paying me the .25BTC for the prior attack. That way I won't post the next one when you want to quit. These payments go towards my claim on the 10BTC bounty. But if you stop the process, you essentially agree that you're abandoning the project and pay me the rest. But if I run out of ideas, I am not abandoning my claim... because of my previous discussed but not (yet) accepted by you ideas of why its broken. If you obstinately reject one of my attacks, at my option I can "shelve" it for a time when you might recognize it, or I can simply realize that you are not actually willing to pay anything and so cut-my losses and stop posting attacks. If you agree to these terms, please show your appreciation for my blockchain attack and start the games by sending .25BTC to: 1CKeoT8vBDQDEpMHz5VAswV39pZJ2GTGYd Cheers! I will accept your terms because you seem to be very competent at finding things with a few, minor, tweaks to the clauses. 1) I have discussed many rules and sometimes your attacks violate an existing rule or a rule that you did not understand. Pointing this out or clarifying an existing rule shall not count as a new rule. If any other poster on this thread will agree with me that it is not a new rule, then I win, if no one will agree that it is an old-rule that you misunderstood... then you win. 2) Working the system with only transactions between yourself (no other people) is the only way to collect on #5, otherwise you would just be playing the market spreads to make money. 3) crypto-Q and Q will vary in price as the ratio of depositors / withdrawers changes and this is expected behavior. You must show that given an honest anonymous 'backer' with a large fixed supply of Gold and a matching supply of BS and no new infusions of cash that has the intention of maintaining a peg of crypto-Gold within +/- 10% can be driven to bankruptcy provided they are intelligent about managing their spreads/margins. 4) you must zero the value of crypto-Gold backed by the anonymous 'peg'. 5) you must mint enough crypto-Gold to get the lions share of the crypto-Gold dividends from the anonymous 'peg'. 6) Your attack must assume all actors are rational profit-seekers. 7) Your attack must not be something that Bitcoin is also vulnerable to (51% etc). * edit * I want to clarify that I may choose to stop paying you without giving up on this idea. It just means I do not believe your attacks are valid. Thus not paying you does not entitle anyone to the full bounty. The purpose of the anonymous peg is simply to avoid the SIDS attack issue which is an entirely different area of discussion. Therefore, I will send you 0.25 BTC for your most recent attack. Thanks for hanging around and helping out. .25BTC incoming confirmed! GAME ON!!! :-) Now let me put on my thinking cap. ...Probably nothing until tomorrow... |
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Zerg, you haven't convinced me things are unworkable, but you have provided the most challenging and innovative attacks that cause me to put on my thinking cap. Thanks for hanging in on this discussion, send me your BTC address and I will drop you a 0.05 BTC tip for your efforts, you deserve one even though you haven't yet convinced me.
Ok .05 BTC is peanuts so here's my counter-offer. If you truly value my challenging attacks to your system (and you know they DO take a LOT more time to think up then drawing a logo) then pay for them. Every time I show an attack that illustrates any or some combination of: 1. a problem in your system that makes you change a rule or add a new one 2. a way to nearly zero the value of a crypto-currency 3. a way to force minting enough coins that gets me the lions share of the dividends. 4. a way to force crypto-Q to diverge from Q 5. a way to force the system to leave me with more BS and/or crypto-Q then I started with (aka to "make" money). You pay me .25 BTC. If I show attack A, and you modify the rules and I show attack A' which is just slightly different that's 2 attacks. Imagine you're really writing the code, updating it, and releasing it every time, but instead of pwning you, all the coins and millions of dollars, I just get .25 BTC. I post one attack at a time, and do not post another until I receive the .25BTC. If you want to stop the process you must indicate so in this thread before paying me the .25BTC for the prior attack. That way I won't post the next one when you want to quit. These payments go towards my claim on the 10BTC bounty. But if you stop the process, you essentially agree that you're abandoning the project and pay me the rest. But if I run out of ideas, I am not abandoning my claim... because of my previous discussed but not (yet) accepted by you ideas of why its broken. If you obstinately reject one of my attacks, at my option I can "shelve" it for a time when you might recognize it, or I can simply realize that you are not actually willing to pay anything and so cut-my losses and stop posting attacks. If you agree to these terms, please show your appreciation for my blockchain attack and start the games by sending .25BTC to: 1CKeoT8vBDQDEpMHz5VAswV39pZJ2GTGYd Cheers! |
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Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid". Sure I can, a mint transaction would consume the same output as a bid transaction and thus ONLY ONE could get into the block chain. If the block-chain had a rules such as: Does this block contain more than one minting transaction for crypto-Q? Reject Block. Does this block contain any trades of crypto-Q for BS in addition to the minting transaction? Reject Block. Does this minting transaction occur below the price of the highest bid from prior blocks? Reject Block This would prevent the mining attack you just proposed. You still haven't explained how the sub-currencies gain any relation to what they represent beyond more or less 'everyone is just going to work together to make it so regardless of money to be made (or losses to be avoided) by not doing so': "How does everyone come to an agreement about what a particular sub-currency is supposed to track?
How did language develop? Who decided what words would track what ideas? The answer is that anyone who doesn’t learn and adapt to the consensus would be unable to communicate. This is a very natural process and does not require any central authority or formal ‘contracts’ between people to define the meaning of words.
Likewise, people will naturally come to a consensus about what currencies track what ideas and there would be ample market pressure for all participants to find a way to reach consensus. Any individual who is wrong about the consensus opinion would end up mispricing assets. " That's not how economics or game theory work. People try to maximize their own utility (value gained from their actions). Collective action is the result of many individual actions. Bitcoin is not some project where everyone works together to make it valuable for its own sake. Everyone is trying to make money, that's why Bitcoin has value. There is no trust involved. If any asset can take on any label, there is nothing holding the value of crypto-gold to that of gold whatsoever (even recognizing your interest paying proposal). Even calling it crypto-gold, crypto-usd etc is totally baseless. Market forces as you currently have things set up work against you and would make the whole thing fail. +1 yes, someone who understands real systems instead of wishful thinking fantasies. Welcome to the forum's most frustrating thread... |
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Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid". Sure I can, a mint transaction would consume the same output as a bid transaction and thus ONLY ONE could get into the block chain. If the block-chain had a rules such as: Does this block contain more than one minting transaction for crypto-Q? Reject Block. Does this block contain any trades of crypto-Q for BS in addition to the minting transaction? Reject Block. Does this minting transaction occur below the price of the highest bid from prior blocks? Reject Block This would prevent the mining attack you just proposed. If I have 1% hash power, I have 1% * 1% (one ten thousandth of a chance to get two blocks in a row): Block 1: Buy all the bids in the block chain. Block 2: I (the miner) pick the block contents -- required in byzantine general's solution -- so: It will only contain 1 minting txn (mine) It will cointain no trades. It will contain a minting transaction of *the rest* of the currency for .0000001 BS It will be a valid block that gives me ALL THE COINZ!!!!! and therefore ALL THE BACKING DIVIDENDS!!!  And would even be legal! Its not like I'm double spending to steal from you. I can't believe I have to spell it out for you... Put your thinking cap on. You can increase chain-depth requirements... and I can increase my hash power through pools. If a bitcoin miner gets 51%, he can only double spend HIS OWN MONEY (which would become pretty obvious quickly and in fact simply means that he has liabilities against he double spent and they bring him to court if they can identify him) or block you from spending. He can't get all the coins. Its an important distinction. |
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Ok I wrote I big long rebuttal but have since deleted it. I don't give up my claim to the bounty but I give up convincing you for awhile.
I've already spent 10btc of my time, trying to couch my proof in a way you will understand. So run your simulations, and fork Bitcoin and spend your 20k. When you learn a bit you will see the exact issues I brought up. But please fork Bitcoin into Bitshares publicly so the community will have a great basis to build a multi-currency distributed crypto exchange.
Oops except for this one last try (not going to respond though):
Given the way the bitcoin solved the byzantine general's problem, you can't enforce the rule "stop a minting event if someone buys the bid".
And it was the lack of a solution to the byzantine general's problem that forced all crypto-currencies to be centralized before bitcoin's proof-of-work solution. So this is a big problem.
Google it to really find out why, but in summary, there is no proof that all bitcoin nodes "see" any particular unconfirmed txn. That's why some unconfirmed TXNs (esp. ones with no txn fee) don't make it into the blockchain right away. So an "attacking" miner could simply claim to not have seen the "fill" orders (or any buy orders) and therefore mint coins to fill a very low priced buy of infinite coins that the attacker himself issued. The likelihood of success is proportional to the miner's fraction of the total hash power.
So bid/asks must be in the blockchain. When this is the case the exchange slows down so much it is unusable and not scaleable. Today we are irritated because Gox can't keep up with 10s of txn a second. Imagine every 10 minutes. :-) And even then a finney-attack variant (premining blocks but not submitting them until certain external conditions favor yourself) could get you an "infinite" minting event if you are lucky.
Do the readers of the thread actually understand the bitcoin technical details or am I the only one?
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What drives price parity while the value of Q is rising and the value of BS is falling is the demand of depositors to receive equal value.
What drives price parity while the value of Q is falling and the value of BS is rising is shorts competing to buy BS (which is appreciating) at a discount.
As I've shown in my examples and was shown in the first round of the game, there is NO first force. Nobody will buy crypto-Q above the average BS backing of the original buyers. There is only the 2nd force which will cause crypto-Q to slowly fall to zero. Owners of crypto-Q cannot stop this fall, because of the "minting" rule. The minting rule was that if the top bid is not filled, it is "minted". Ok you just made a claim: there is no first force. You did not prove it. So there are now two ways you can respond: prove the force doesn't exist *or* prove that even if it did exist it still wouldn't work. Ok here's the proof. You say in your first line that a depositor (and by that I think you mean someone who owns Q, the crypto currency that supposedly tracks USD) won't sell because he wants to receive equal value. Yes. So instead my bid will be minted at the lower price. It will be the highest lower price but it will still be lower. Repeat until 0. Because my bid is minted, there is no force pulling Q up. Sure someone who REALLY wants Q could buy it even higher. But this will be temporary. He'll have paid more for less in dividends then I did. So he'll rapidly choose my strategy. Note that nowhere does USD actually affect the price of Q. And Q has nothing in terms of marginal utility that BS does not already have, so people won't need to use Q for the reasons they need Bitcoin. Just for the record, I am not the only one who is unconvinced by your argument. Will everyone who thinks this could still work please affirm their belief that it hasn't been proven unworkable.
Yes please! :-) But Bytemaster, I'm going to choose to believe that you will pay the bounty when you realize that the system is unworkable so great let's drop that aspect. And more importantly, I hope after you realize that your brainchild won't work you invest your 20k into a system that actually DOES allow representation of external currencies. But that system will unfortunately be one where trusted individuals and corporations keep USD, gold, etc in a vault. Or are backed like a stock by the value of a corporation still have to post annual reports. Or for mortgage offerings, an assessor still has to check out the house and digitally sign the mortgage bond contract. However, given the above "trust-based" currencies, can bytemaster's dividend or backing technique create a "combined currency" (think currency backed by what's essentially a mutual fund containing verifiable quantities of "trust-based" currencies) that mitigates risk of default. This combined currency would track whatever its constituent currencies are denominated in (i.e. USD). Cheers! thezerg |
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The sad truth of the matter is we're doing all the work, first off by refining the idea to the point where it is actually understandable to the majority from a vague set of "for instances". And second by pointing out the flaws. And we were seduced by a carrot of 20k for dev and when that wasn't enough to garner interest 10btc to prove the flaws. Which we've done time and time again.
Well, I don't care about either the $20k or the 10 BTC, I was attracted to this because it would be revolutionary if it worked, and at first it looked superficially as if it might. Honestly me too. Rather then just disappear once I realized it would not work, I stuck around and posted again and again and again after everyone but bytemaster was convinced. Beating my head against this wall. I did THAT for the 10BTC Even though his heart was in the right place we can't let people promise bounties and not pay if we want to keep this forum even vaguely a marketplace. I'm sorry that the result is not what was wanted. I would also have preferred to be implementing a FOSS system with the properties that bytemaster originally claimed. But that is unfortunately not reality.
I hope you readers will support me on this (by affirming that BitShares has been proven unworkable) when/if a determination needs to be made by theymos.
I'd caution against this. I agree bytemaster's heart is in the right place, and we never really did establish the rules of the game, put money into escrow etc. Personally, I had no reason for that, because the money wasn't the reason I participated. We might all draw another lesson from this: if you intend you collect a bounty, make sure you set up the rules first and make sure you set up an arbitrator first. I hope bytemaster will give up after trying to get it to work for a few more days. I hope he and others aren't going to learn the hard way that this won't work. If they do succeed, the more power to them, but as Elon Musk puts it: I'm not sure success is even a possible outcome. I think bytemaster has valuable contributions to make, but it seems to me this isn't one of them. His earlier idea for a Bitcoin-financed Tor-like P2P network looks a lot more valuable to me. Maybe, but that is not how this forum system works today... there are countless examples of promises without escrow made that end up getting scammer tags. And I believe in the way it works today. If it worked your way (i.e. I can post any promises and don't need to fill them unless some higher authority enforces it) it would definitely undermine the philosophy of the libertarian readers of this forum. And render subject lines like: [Bounty 10 BTC: XXXX] useless. |
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Sure, there would be a USD price for BS, and a USD price for Q. There would also be a BS price for Q, and arbitrage would make sure the three were in equilibrium. But there appears to be no convincing mechanism to make sure the USD price for Q would track the USD.
So the focus should be on disproving this point in a concise manner to convince the OP (+ other interested parties  ) to stop wasting their time on an unworkable idea Start with "Q would not track USD because ..." The proponents seem to think that it would follow USD simply because people want it to. LOL! See below So I create a '0-sum' game between BS and Q. To create crypto-Q you must give up current market value of Q in BS.
Let's stop right there. Right at "you must". Who enforces that? And in fact if your crypto-Q really worked it should be able to start at any backing (value) and be pulled towards the valuation of Q in BS. I think you want to research control algorithms. Look up "PID" proportional-integral-derivative control.
What drives price parity while the value of Q is rising and the value of BS is falling is the demand of depositors to receive equal value.
What drives price parity while the value of Q is falling and the value of BS is rising is shorts competing to buy BS (which is appreciating) at a discount.
As I've shown in my examples and was shown in the first round of the game, there is NO first force. Nobody will buy crypto-Q above the average BS backing of the original buyers. There is only the 2nd force which will cause crypto-Q to slowly fall to zero. Owners of crypto-Q cannot stop this fall, because of the "minting" rule. The minting rule was that if the top bid is not filled, it is "minted".
I think I have given many, many examples of how the price stabilizes. I would like to see one example that causes the price to not follow parity assuming:
1) No buyer accepts crypto-Q in exchange for Q unless it has equal value.
2) No one can short new crypto-Q so long as there is someone with existing crypto-Q willing to sell at that price.
3) There is a large market for crypto-Q with many competing shorts, buyers, and sellers.
4) All parties are profit seeking / maximizing.
Lets construct one trade sequence at a time... and demonstrate the instability. So far all I see is a lot of handwaving and straw-man that violate the rules of the blockchain. Lets stick to the rules. Propose a sequence of transactions that you would execute and if they conform to the rules of the blockchain and yet result in easy manipulation by a single party then it clearly will not work.
The worst-conceivable-outcome that I can contrive involves the complete disappearance of all depositors seeking crypto-Q paying interest. In this event, the value of crypto-Q gradually falls until the very last crypto-Q reaches parity with the short-issuer with the lowest basis. But this outcome is so out-there that I cannot conceive of a single reason why all of a sudden no one would care about getting a high-yield crypto-Q revenue?
How come you are the only one who does not understand this obvious strategy? It is even WORSE with lots of buyers. They just offer bids with a lot of volume but always with less backing then current owners. If the current owners sell, they are selling at a loss. If they do not sell, the currency is minted at the lower backing, so the buyer gets some of the dividends from your backing. Next iteration someone does the same thing AGAIN. The only thing stopping this process is if ALL the buyers run out of BitShares which is why it works better if there are lots of buyers. But in fact the strategy is so easy to use (now that I discovered it) that nobody would touch crypto-Q with a 10 foot pole. Because as soon as they buy some, they'd lose $ to a lower bid in the next round. Here is the biggest challenge I see so far, without something like Mt. Gox how does one establish paper-USD vs BS from which all other prices are derived. It would appear that initially the price discover of paper-USD vs BS would be OTC and thus have wide-spreads and some liquidity challenges (like early bitcoin days). But gradually the value of BS would become known my market participants even without a Mt. Gox.
Exactly, and I asked this of you 4 days ago: Questions:
1. How does information about the price of USD in THC enter the system?
But you still don't "get" it. Which is that the information must enter the system in a way that is provably honest even with dishonest participants. Or just give up and use an "Oracle" -- an exchange like Gox or 1 million of them ARE "oracles" if they simply "report" how much fiat Q was paid to buy/sell X BitShares. And I asked this: 2. When I was talking about anyone creating their own currency... you said at one point that "we" will start with just the major currencies. Who is "we" here?
And so now you've moved to a system where anyone can mint a currency. And this: 3. How does crypto-USD enter the system? I get that someone buys it for USD, but I mean technically how is it actually created?
Which has turned out to be a critical Achilles heel of the entire system (see above). 4. How does your dividend system cause crypto-USD to approach USD value?
And here's the point we are debating now. And in fact, the dividend system does NOT apply any control algorithm to drive the price of crypto-Q toward Q. As I showed above (and several other times), it simply drives the price down. Clearly this 'value' would not be in the software, it would exist outside the software on other (less efficient) decentralized exchanges or even perhaps on a (more efficient) centralized exchange.
Once this 'price' is known
That's it right there. It is NEVER known. Because anyone holding crypto-Q wants to lie and trick crypto-Q to rise relative to Q. And anyone not holding crypto-Q wants to trick crypto-Q to fall relative to Q (so they can buy it cheap). And finally, any "disinterested" party is by definition an "oracle" and additionally its impossible to prove that they are truly "disinterested" and haven't bought crypto-Q on the sly. ...
Given that information the user can trade between GLD, SLV and USD.
So all that remains is to tie the client to a public 'ticker' the user trusts. This ticker would not be used by the blockchain, but instead to allow the user to see prices in terms of $USD or EUR or any other currency instead of expressed as percentage rates of return.
Yup that's it that's "ALL" that remains, LOL! But not an "oracle" that the "user" trusts -- its got to be one the entire network trusts. You'll understand once you learn about PID control algorithms and apply them to your dividend in order to actually force the price of crypto-Q towards the price of Q. In order to do that, the network as a whole needs to agree on a particular dividend rate for every moment in time. To pick this rate, it needs to apply a PID control algorithm with the following inputs: crypto-Q per BS over time, and Q per BS over time. You cannot report Q per BS without an oracle because Q is a fiat currency that is completely external to the network. It's not a new argument, both Thezerg and I have mentioned it before. I can see the exchange system between Q and BS establishes prices, but not how it gives reliable information about USD vs BS. You started with an ingenious and superficially attractive argument about interest rate differentials, but unfortunately it appeared not to survive closer scrutiny. The rules of the system were unclear, and despite ongoing tweaks you have not persuaded me exchange rate parity is at all likely. In fact, it now seems positively unlikely to me, much as I would want it to be otherwise. Mere reputation doesn't appear to do the trick, and the exchange system doesn't give reliable data about the price of USD vs BS, it gives information between Q and BS, which unfortunately need not be the same thing.
I don't think you're ready to give up on it yet, and that's fine, but it now does look to me as if you're wasting your time. Other interesting tricks may be possible with your idea for interest rates, but crypto-USD doesn't appear to be one of them.
The sad truth of the matter is we're doing all the work, first off by refining the idea to the point where it is actually understandable to the majority from a vague set of "for instances". And second by pointing out the flaws. And we were seduced by a carrot of 20k for dev and when that wasn't enough to garner interest 10btc to prove the flaws. Which we've done time and time again. We've refined the rules to the system to the point where they succeed except for a single data point -- the value of Q in BS. Its obvious. You can't drive a car blindfolded. You can't execute a control algorithm if you don't know the target price. I'm going to give bytemaster a few days to understand these concepts and play his simulation, etc. But after that, payment or scammer tag. Even though his heart was in the right place we can't let people promise bounties and not pay if we want to keep this forum even vaguely a marketplace. I'm sorry that the result is not what was wanted. I would also have preferred to be implementing a FOSS system with the properties that bytemaster originally claimed. But that is unfortunately not reality. I hope you readers will support me on this (by affirming that BitShares has been proven unworkable) when/if a determination needs to be made by theymos. |
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Small Memorial day pull-back from the top of the recent rally does not even matter when you look at how
BTC is pwning Gold!!!
the silverbox update (comparison from the beginning of this thread, March 13th, 2012, gold=1690, nasdaq=3055, Bitcoin=5.4):
Bitcoin is 129.57. Gold is 1386.00. Nasdaq is 3488.00
Bitcoin: 2299.44%
Gold: -17.99%
Nasdaq: 14.17%
Gold Diff: 2826% advantage Bitcoin
Nasdaq Diff: 2002% advantage Bitcoin[/b][/size]
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The Zerg, I truly appreciate your efforts here, but I am not going to pay the bounty AND continue to invest time and money into this idea. If and when you can prove that I have abandoned this idea and I have not explained my reason for abandoning the idea nor awarded the bounty to anyone, then you can call me a scammer.
You have not understood my idea because what you keep saying back is not what I am actually suggesting. This is why I am offering the game. However, I do not want this discussion to turn into a back and forth debate about my integrity. If you think I am a scammer, then just sit back and watch the game play out and don't invest any more time. Otherwise, lets have some fun and discover something great!
I am putting a lot of time and effort (and money) into teaching the details of my idea. It is very hard to do in writing, so if you would like to talk over skype then I would welcome that.
Points: 1. The strategy detailed above to wipe the value of the crypto-USD is ironclad. 2. And so it the point that nobody would trust a currency where if the bottom bid got filled it would zero the currency value. 3. And the observation that paper USD price information never enters the system so therefore no currency can track it has been simply ignored by you. You know I originally started looking into this to possibly help implement it. But continued posting instead of just disappearing to save you your $20000 and earn the bounty just like you said here: 10 BTC = $1,320 at the moment.. so I am confident enough that I am willing to risk 5-8% to a stranger to save 90% of my capital. Besides, even if you convince me to drop my current idea, chances are the discussion would lead to an even better idea and thus allow me to deploy the other 95% of my investment more effectively.
This is exactly what I have done. I have shown how the system as originally formulated would fail. I have spent significant time thinking and writing about BitShares and seemingly convinced everybody but you about the faults with the BitShares system. You are clearly no longer ready to pay 20k for an implementation so you changed the title of your thread from: "Help Wanted $20,000+ Job creating Distributed Blockchain-based Exchange" to "BitShare Economic Theory and 10 BTC Bounty to prove it wrong." So I guess I have essentially "convinced you to drop your current idea". Now you have started simulations to see the failure modes I described occur and figure out some fix. But even if you find a fix, I still fulfilled the bounty. You are no spring chicken here. You should know that posting a 10BTC bounty for one thing and then transmuting that offer (after I posted a winning strategy) into paying the winner of a simulation is going to get you a scammer tag. And double-shame on you since as a 2010 registrant those 10 BTC may have cost you almost nothing. But at the same time I think your heart is in the right place. Like Mathew Wright, you just don't understand the value of other people's time. That is why, as you yourself admitted, nobody was paying attention to your idea until you offered the bounty/ implementation. So prove you value other's time and that we can take you at your word. EDIT: thread readers help me out here... did I convince you the crypto-USD could not track USD and that it is in the a person's interest to devalue it by minting millions of coins? |
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All sub currencies are fungible. All units of the same currency pay the same number of BitShares per unit of sub-currency.
If User A mints at 10:1 and User B mints at 5:1 then the resulting dividend will be 15:2.
Can someone mint for themselves? What is to stop Bob from minting 100Q with say $0.0001 worth of Bitshare collateral? Such that he has now 100Q which are worth $100 and perfectly fungible Exactly. QED. bytemaster, please send the bounty to: 1CKeoT8vBDQDEpMHz5VAswV39pZJ2GTGYd. Remember, I'm saving you 20000 bucks. Edit: But if I have to sign me up for the game. I'll take every currency anyone creates, instantly mint 100000000000000 units (or whatever the maximum currency units are) for 1 bitshare (or whatever the minimum is), therefore reducing the currency's value to essentially 0. These currencies will never track USD. And as a bonus, if I'm the only one doing the above, I'll get all the dividends. This violates the rules of the chain. While you can choose to issue shares at what ever exchange rate /quantity you like, you can only do so in response to an open bid confirmed in the prior block. I open the bid of course (I've said this several times). If you don't allow me to open the bid and mint the coin from the same account, I simply do it from 2 separate accounts that I control. So if nobody fills my bid, I do so from my other account. If someone else fills my bid even better. Either way crypto-USD is devalued to 0. Correct, you can open the bid and issue from the same account *but* there is a 1 block delay between you placing your bid and it being filled. Secondly, only the highest bid can be filled. You can *not* arbitrary decide to fill a lower bid. The highest bid can be derived from the block-chain history. You sound like you are making this up as you go along. The bandwidth limitation of 1 "minting" per block will render the currency useless for nontrivial economic activity. That would be like only one mortgage can be closed per day (or whatever) across the entire USA. Regardless, I keep my bid there until I can fill it. It costs me nothing. So people who want to keep the price of crypto-USD high have to keep issuing fake bids. If they forget to do so once, their currency is worthless. Nobody would hold money in a system that is one filled bid away from destruction like that. And even if they never forget to issue a fake bid, these actions will actually slowly mint new currency, thus devaluing it. Ergo, it STILL is not tracking USD. I truly apologize for sounding that way, but I started this thread with an inspiration that I felt could work and I had the major parts figured out. Minor details are being filled in as we go. While minting can only occur once per-currency every block, trading among existing crypto-USD holders can occur with as many transactions as will fit in a block. Furthermore, I have stated repeatedly that the blockchain trading is designed for low-frequency trading and high-frequency trading would have to occur 'off-chain'. If I need to tweak the block-chain rules to use 5 minute blocks instead of 10 minute blocks to improve this a bit, then I do not think that would change the fundamentals of the system. When matching a accept transaction to a bid transaction, the transaction that pays the highest transaction fee wins the 'race'. Yes, but now we are discussing whether I can destroy the currency. I think I have proven in my previous postings that it will not track USD which is the original issue. Additionally, to repeat myself, nobody will trust a system that if ever there are no reasonable bids, my unreasonable bid that renders the currency worthless gets minted. Every 5 minutes 24x7 I have a chance to "win". If the currency got any interest at all, what would happen is a type of ponzi scheme -- not a rising one, but an exponentially increasing death. This would happen because people might bid higher then my "infinite" bid, but lower then the original minter's backing. The highest of those would get minted if the original minter does not sell at a loss. Or if the original minter sells at a loss, the value of the currency is reduced. Rinse and repeat and you have a slowly descending currency value. But at some point all holders would realize what's going on and sell at any price, wiping all the bids from the books and then my "infinite" bid would get filled. This is why Bitcoin has a limited number of coins. If you limit the number of coins, OR limit the velocity of coin creation, you would possibly have a viable currency, but then you cannot track USD because you cannot print enough to match helicopter Ben!!! :-) And that STILL assumes you have an "oracle" that knows how much should be printed... I am sorry if you now regret placing the bounty & I do think that your idea of a dividend is quite interesting and creative. But when I examined it in depth and for many hours it turns out there are unresolvable issues. You offered to pay for a critical examination and now you have gotten one. Its time to be the man and pay up or duck and take your scammer tag. I have worked hard to understand your system. But life is not entirely over. It may be possible to add dividend payments to help "debounce" a USD tracking currency. But it is fundamentally (at a minimum) going to require a trusted source -- an "oracle" as people call it that reports USD to BitShare exchange prices, and minting/price limits based this oracle. If done properly, this would be "better" than a crypto-currency backed by $ in a vault because if the oracle is shut off, at least the currency retains its last value and simply diverges from USD. Whereas a vault backed currency means you could open the vault and see nothing inside. |
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All sub currencies are fungible. All units of the same currency pay the same number of BitShares per unit of sub-currency.
If User A mints at 10:1 and User B mints at 5:1 then the resulting dividend will be 15:2.
Can someone mint for themselves? What is to stop Bob from minting 100Q with say $0.0001 worth of Bitshare collateral? Such that he has now 100Q which are worth $100 and perfectly fungible Exactly. QED. bytemaster, please send the bounty to: 1CKeoT8vBDQDEpMHz5VAswV39pZJ2GTGYd. Remember, I'm saving you 20000 bucks. Edit: But if I have to sign me up for the game. I'll take every currency anyone creates, instantly mint 100000000000000 units (or whatever the maximum currency units are) for 1 bitshare (or whatever the minimum is), therefore reducing the currency's value to essentially 0. These currencies will never track USD. And as a bonus, if I'm the only one doing the above, I'll get all the dividends. This violates the rules of the chain. While you can choose to issue shares at what ever exchange rate /quantity you like, you can only do so in response to an open bid confirmed in the prior block. I open the bid of course (I've said this several times). If you don't allow me to open the bid and mint the coin from the same account, I simply do it from 2 separate accounts that I control. So if nobody fills my bid, I do so from my other account. If someone else fills my bid even better. Either way crypto-USD is devalued to 0. Correct, you can open the bid and issue from the same account *but* there is a 1 block delay between you placing your bid and it being filled. Secondly, only the highest bid can be filled. You can *not* arbitrary decide to fill a lower bid. The highest bid can be derived from the block-chain history. You sound like you are making this up as you go along. The bandwidth limitation of 1 "minting" per block will render the currency useless for nontrivial economic activity. That would be like only one mortgage can be closed per day (or every 10 minutes, whatever it does not scale) across the entire USA. Regardless, I keep my bid there until I can fill it. It costs me nothing. So people who want to keep the price of crypto-USD high have to keep issuing "fake" bids. "Fake" meaning they don't want the crypto-USD but have to bid for it to lock me out. If they forget to do so once, my bid is filled with minted coins so the currency becomes worthless. Nobody would hold money in a system that is one filled bid away from destruction like that. And even if they never forget to issue a fake bid, these actions will actually slowly mint new crypto-USD currency, thus devaluing it. Ergo, it STILL is not tracking USD. |
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All sub currencies are fungible. All units of the same currency pay the same number of BitShares per unit of sub-currency.
If User A mints at 10:1 and User B mints at 5:1 then the resulting dividend will be 15:2.
Can someone mint for themselves? What is to stop Bob from minting 100Q with say $0.0001 worth of Bitshare collateral? Such that he has now 100Q which are worth $100 and perfectly fungible Exactly. QED. bytemaster, please send the bounty to: 1CKeoT8vBDQDEpMHz5VAswV39pZJ2GTGYd. Remember, I'm saving you 20000 bucks. Edit: But if I have to sign me up for the game. I'll take every currency anyone creates, instantly mint 100000000000000 units (or whatever the maximum currency units are) for 1 bitshare (or whatever the minimum is), therefore reducing the currency's value to essentially 0. These currencies will never track USD. And as a bonus, if I'm the only one doing the above, I'll get all the dividends. This violates the rules of the chain. While you can choose to issue shares at what ever exchange rate /quantity you like, you can only do so in response to an open bid confirmed in the prior block. I open the bid of course (I've said this several times). If you don't allow me to open the bid and mint the coin from the same account, I simply do it from 2 separate accounts that I control. So if nobody fills my bid, I do so from my other account. If someone else fills my bid even better. Either way crypto-USD is devalued to 0. |
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