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First you need to remember that not all network nodes are necessarily miners. So even if transactions stop at miners, they can still propagate through the rest of the network.
I expect that as network traffic increases and requires significant hardware and connectivity investments, propagation of transactions and blocks will be monetized. So there will be an incentive to operate honest non-mining nodes, and maybe even miners will be incentivized to propagate in spite of the possible competition.
You are probably right, some market mechanism will arise, I just can't imagine yet how the propagation of transactions could be monetized. Bitcoin does not provide a mechanism for that. My guess is that online wallet services (like instawallet etc.) or similar services will have an incentive to speed up the transaction propagation, but then again they might choose to only propagate transactions that their clients are involved in. So the generalized question is: could the incentive to leach by choosing to propagate none or only a subset of the transactions become dangerous to the bitcoin network? why should any "rational" node propagate any transaction that does not directly benefit you? |
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In the not so distant future when the miners reward consists mainly of transaction fees...
... mining will probably be a very specialized task representing a small minority of the network. The greatest part of the nodes has no incentive to discriminate between the miners because that can only slow down the processing of their transactions. It is possible that being a regular node will not be so easy when the bitcoin network has grown and a node needs to receive and forward thousands of transactions per second. So the only ones that will have the incentive to be full nodes will be the miners. And everybody else might be using a "light" client that does provide this functionality to the bitcoin network. |
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In the not so distant future when the miners reward consists mainly of transaction fees, what is the incentive of a miner to forward received transactions to other miners?
To clarify, imagine you are a big miner (maybe a pool operator) and a transaction comes in from another node with a (considerable) fee. If you do not forward this transaction to the nodes you are connected to, you will reduce, admittedly by just a tiny amount, the chance that some other miner will include this transaction in the next block and reap those rewards if they find the block before you. By keeping it to yourself you can include the transaction in the next block that you will find.
If only one miner does this, the effects will be barely noticeable given the interconnectedness of the bitcoin nework, but if many miners have this behavior, could this potentially be a problem?
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A, perhaps less elegant, alternative would be that the one that initiates a bet also gets to decide its outcome. Let the market decide which initiators (identified by their key) it trusts and which it doesn't.
Yep, I could see that happening. But if this is totally anonymous there's nothing stopping the initiator from putting in a ton of sidebets. They would trash their reputation, but for big bets, the easy money might be irresistible. Homo economicus would fix the bet if the expected return from his side betting was greater than his perceived value of his reputation. It's also possible that wouldn't be a big problem, because of the enormous value of a good reputation. The other thing that bother me a bit about this is you might see concentration of power in a few entities, whereas betcoin strives to avoid that. That might be an impossible task though. I agree, anonymity is not a goal necessarily nor is the goal to stop someone to concentrate power if (s)he deserves it. Betcoin would provide indestructibility, anonymity if desired, and the transaction ease of bitcoin. Perhaps the right approach for betcoin would be to focus on an abstract concept called "conditional transaction" where a transaction takes place only when a certain condition is met at a certain time. The condition could be set by the initiator of the bet who chooses one of the predefined validation methods that the betcoin protocol would offer. It can be the "last price" or the "initiators decision" or anything that can be reliably and indisputably decided by any miner. The validation methods could even work as plug-ins that betcoin miners and clients choose to incorporate. If enough miners incorporate it then it becomes an official validation method. |
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Very nice, this is why I still read this forum. The idea of letting the final outcome be decided in a self regulatory way by the last matched price is at least very intriguing, like all self-regulating schemes. In this case, however, it becomes almost philosophical: the sole and only thing that links a particular bet with the real world is its verbal description, the string that accompanies the bet-id. I wonder if that is enough to make this work. If it is, we would have a have a robust betting system and a proof of the power of words!
Considering the above loose connection with the real world, an issue with betcoin would be that the outcome of a bet could be determined more by the funds that one pours into it into one or the other direction rather than its description. As a thought experiment which i think would give some extra insight to if this would work or not, consider the following bet: "the outcome of this bet will be true". Or even: "this is an undefined bet". In such a case, I think, the bet outcome will lean towards where the most funds have been put. This is not what one wants when betting.
So in my opinion it is funds vs the power of words that will determine whether betcoin would work as proposed.
A, perhaps less elegant, alternative would be that the one that initiates a bet also gets to decide its outcome. Let the market decide which initiators (identified by their key) it trusts and which it doesn't.
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I am trying to figure out the size of the bitcoin economy and I have 2 questions for the bitcoin analyzers:
1) Does anybody have any idea how many bitcoins are actually used to buy products and services rather than buying other currencies? Any close approximation of that would provide a good insight of the utility of bitcoin. Perhaps this could help in understanding whether the recent peak is a bubble or not.
2) Has anybody analyzed the bitcoin transaction chain to see what percentage of the existing bitcoins are actually involved in transactions after their creation? Or, in other words, can one see how many bitcoins are actively participating in the bitcoin economy? Perhaps it is possible to see the percentage of not exchanged bitcoins in the last x months or days.
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Nice calculation. certainly it is not worth building a machine for bitcoin creation. However if you already have this computing power sitting idly then you should calculate only the costs of the extra electricity that you need to consume to generate a block. Has anybody done this?
If you want to build a bitcoin generation machine you are probably better off buying a FPGA board and designing a dedicated hash calculating hardware monster.
Interesting note: If one puts 4100000 hash/sec in the calculator then you get 10 minutes average.
10 minutes is the actual target average block production rate.
This means that currently the the total computing power working on solving hashes is 4.1 Mhash/s
or about 900 quad cores. or 3-4 thousand laptops. Pretty impressive!
This means that there are some people who think it is interesting to produce bitcoin.
Who knows why, I stopped several difficulties ago.
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I like the idea of Bitcoin, with one exception... that the resources could be used for grater good, instead of wasting them. How about making "valuable" calculations, instead of calculations, for calculations sake? What I am talking about is modifying the BOINC client ( http://boinc.berkeley.edu/) and getting Bitcoins for generated work on finding a cure for cancer or some other project. There has been a similar thread elsewhere: http://bitcointalk.org/index.php?topic=721.0;allI guess the idea of producing useful work is good if it could be implemented. But this is difficult since there must be a "proof of the work" in order to earn your bitcoins. The question is who is going to provide this proof? Proof of work bitcoins should satify (at least) two criteria: a) must be verifiable by everybody (otherwise the verifying entity could gain control of minting if it turns malicious). b) must be much easier to verify than the work itself (otherwise too much work would have to be done for verification) I dont think the algorithms which run in the the BOINC client satisfy these criteria. The "proof of work blocks" of bitcoin satisfy these criteria. But if you could find an algorithm that does something useful while at the same time satisfies these criteria then i suppose it could be included into the client. Maybe something like calculating the nth Pi digit, which is useful (for mathematicians I guess) and difficult, but i have no idea if it is satisfies the 2nd criterion. Also I don't know technically how the transactions should be included in the work. But I believe that is is theoretically possible to create other useful work except the obvious which is the creation of bitcoins. |
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I agree with nearly everything you said, but I disagree, fundamentally, with the bolded. Gold mining is not a waste of energy. It is the opposite of waste, it is the measure of value people place in the 'utility of having gold as a medium of exchange' or a store of wealth, jewelry around their body parts or connectors on their home theater system. If there was no demand for gold, the price would be zero. Hence it is not a 'waste,' by definition.
Not necessarily, digging out a little bit more gold just makes the existing gold a bit less valuable since the supply is increased. That is because its value is mainly derived from its scarcity. Its utility IS its scarcity. However, it is not a waste for the miner if the cost of mining can stay below the price of gold. I really I understood the point of this thread but I guess I didn't.
I assumed that if you could design to do the exact same thing in the same commodity quantities and at the same protection level, BUT consuming less energy and producing less BTUs of heat, then that would be less wasteful.
You can mine gold in lots of ways, some require less resources than others. If two processes produce the same amount of gold then no point in optimizing anything else?
I suppose that if anybody (as opposed to a single trusted entity) can produce bitcoins then the production costs will converge close to value of the produced bitcoin itself. If that were not true then it would make sense for someone to invest resources to produce as many bitcoin as possible. Since we dont want to let the value of bitcoin to go down then the production costs need to rise to the value of bitcoin. |
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The minting should be seen as digging for gold in a gold mine. This is similarly wasting energy and resources for actually not doing anyone any favor since you increase the supply of gold. Except for yourself of course, and that why people will always will dig for gold as long as the price of gold dug will be higher than the cost of resources needed to dig. However, this difficulty is what gives scarcity and therefore value to gold.
Similarly, if and when bitcoin becomes more mainstream and follows economic sense (rather than beeing driven by curiosity, fun and excitement for participating in something new) the cost of electricity (in dollars or equivalent bitcoins) to create a bitcoin will never exceed the value of the created bitcoin. If that would happen, many will shut down their bitcoin generation for it would make no economic sense (I already stopped mine!). Luckily, and unlike gold mining, this behavior will adjust the cost of creating bitcoin to a sensible level (below the value of the generated bitcoin)
In the long run i expect that bitcoin minting will indeed be left to the supernodes which will probably have specialized hardware that are excellent in hash calculations and can do that way better than anyone with a general purpose pc. Similarly to specialized gold digging machines.
So although you are right that it would be nice to find a system that provides scarcity without cost (I dont know whether this is possible, it seems not), the costs are certainly connected and less to the value of the created bitcoin. And it is a self regulated system that will increase the cost of creation only if the use of bitcoin actually adds value (in the form of ease of use, anonimity etc.) and therefore is worth it.
The cost of creation is therefore is no limitation of the growth but more and indication of the added value of the use of bitcoin.
fuuny note: Following this logic the cost of minting will be somewhat less than 21million bitcoins which with the current prize of bitcoin is around 1 million dollars.
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