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So I've been thinking about this on and off for a while, and came back to my attention with the release of the libbitcoin-consensus library in 0.10.0 (Not that it actually has anything to with this.)
It seems to me that it should be possible to run a blockchain that is abstracted from the implementation details of any cryptocurrency that relies on it.
There would be at least two blockchains. One would be the Proof of Work blockchain and the Bitcoin blockchain.
The Proof of Work blockchain would be identical to the Bitcoin blockchain as it functions now except that it does not contain any transactional information, only a list of arbitrary hashes.
If someone wanted to provide Proof of Work for Bitcoin, they would be hashing the previous block header on the Proof of Work blockchain as well as the hash of a current block for Bitcoin (Along with any other hashes they'd want to include) + nonce. The Bitcoin block itself would also contain the hash of the block header of the Proof of Work block that included the previous Bitcoin block. It's possible that several Proof of Work blocks would not include any hashes for Bitcoin blocks.
[Proof of Work Block]
Previous Proof of Work block hash
CryptocurrencyBlockHashes[1,2,...,MAX]
nonce
[Cryptocurrency Block]
Proof of Work Block header hash that contained the previous Cryptocurrency block hash.
Transactional Information
The main advantages I see with this system is that it allows arbitrary experimentation in cryptocurrency designs while retaining PoW infrastructure, it creates a marketplace for Proof of Work hashes so that transaction costs can be computed by the actions of the market participants, and it allows centralization of cryptocurrencies while retaining decentralized consensus of their state. The Proof of Work provider could also include other services like "smart property", not just cryptocurrencies.
Transaction fees could be calculated by a cryptocurrency in any fashion they like and offered to the miner that includes it on the Proof of Work blockchain. Miners would simply reject fees that are too low to include the cryptocurrency block on the Proof of Work blockchain. I would think cryptocurrencies would employ strategies that provide increasing fees the longer it isn't included on the Proof of Work blockchain.
I think a Proof of Work miner would need to run a full node for any cryptocurrency it's providing work for. Though the miner could choose any arbitrary combination of cryptocurrencies.
Thoughts?
Update 5/13: Well I guess this was too stupid to consider, or else I didn't explain well enough how this is different from merge mining? What I described is almost the same as merge mining, the difference is that there is no need to pay miners in any particular cryptocurrency. In merge mining, bitcoins are required in order to pay fees, but in what I described the way the miner is paid can be in any form the miner wishes which could be bitcoins, or any other cryptocurrency, or even fiat if you wanted to do that for any reason. The only requirement to add to the Proof of Work blockchain is proof of work, aka; A hash meeting difficulty requirements.
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@Monsterer
Ok, you're glazing over the chasm of difference between Proof of Work and "Proof" of Stake, but whatever. What does this have to do with "optimal confirmation time"?
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I don't want to sound too harsh, but it doesn't seem like you know what hashing in Bitcoin does exactly. https://en.bitcoin.it/wiki/Proof_of_workEdit: To be more specific. You're talking about getting consensus over some abstract data while using "hashes" without a blockchain. The reason this doesn't make sense is because consensus is about the ordering of transactions over time, so when you remove the blockchain you're just talking about a piece of data you're spreading around and hashing "it" doesn't do anything for us. It's like saying, "If I send an email to 100 people, how many hashes do they need to perform before we have consensus that they received the email (or that the email is correct)?" |
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Ideally confirmation times would be instantaneous, but since finding hashes is stochastic, the internet is heterogeneous, and information can't travel faster than the speed of light, it is physically impossible to achieve this ideal.
Agencies or currencies that don't rely on global consensus need not concern themselves with any of that, for the most part. So the Bitcoin protocol itself can't compete in confirmed transaction times.
The reason the Bitcoin community has gravitated to the somewhat arbitrary 6 confirmation number is because this represents an amount of work to achieve that no agency on Earth could conceivably reverse (aliens notwithstanding). So if confirmation times were reduced, the amount of confirmations to achieve the same level of confidence would go up, netting us zero benefit.
I'm avoiding the central issue here; How short should confirmation times be where orphan blocks are minimal and the status of the internet is taken into consideration? I'm avoiding it for two reasons;
1.) I'm lazy, and I don't want to go through the calculations that have been done before and look at the graphs and see if Bitcoin's current confirmation time is reasonable. Bitcoin itself demonstrates convincingly that the 10 minute mark works fine.
2.) There is a wide range of confirmation times that are "good enough" and the benefits of reducing confirmation times are minimal while running the greater risk of damaging the consensus mechanism of the cryptocurrency.
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How do feel about the fact that production costs can actually follow demand?
Look at gold, for instance, as more people store it away arbitrarily as a store of value, they arbitrarily increase the price of the item, and as this price increases the amount of money companies are willing to spend to extract an OZ of gold increases commensurately.
This shouldn't happen, accorded to your assertion that the price of something is informed by it's production cost. If the price of a product overshoots the production cost (Because of ignorant consumers.) then the price should gravitate back down. It doesn't.
Consider also that the production cost of gold can be arbitrarily high. There's no reason we couldn't be spending $1,000,000/oz for gold. This could be accomplished through highly inefficient or efficient methods, it makes no difference.
The only conclusion one can come to is that production costs do not inform the price of a product. Price is a function of various factors, not the least of which is the subjective valuation of it's consumers.
So, getting back to the subject at hand, it's impossible to say what the price of bitcoin should be based on it's production costs alone, even if I granted that production costs have any effect on bitcoin's price whatsoever (It doesn't, since "production costs" are simply the redistribution through inflation of the currency at a fixed rate.).
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But that's a red herring. You seem like you're not willing to defend your assertion in the abstract of your paper that the value of bitcoins will likely trend toward zero as the cost of production approaches zero (Due to increased efficiency in mining methods.), so have you conceded that this idea is wrong?
If it costs next to nothing to produce on average then yes competition will drive the value down. Right now if the average efficiency suggests a price around $200 but you get extremely cheap electricity from your own hydro-plant out in the backyard, then you will earn excess returns. If everybody gets extremely cheap electricity because they also have a hydro-plant out back then each will compete with each other to drive the price down. If it costs all of us $1 and the price is $200 I will offer $199, and then my neighbor will offer $198 and so on until it approaches $1. If you don't understand the simple mechanism of competitive markets, then I can't help you understand much else. You've assumed your conclusion, also called "begging the question". "Right now if the average efficiency suggests a price around $200..." So you already know the market clearing price and therefore anything that follows can't help us understand where the price "begins". The down bidding of someone with more efficient energy production in an existing market of prices doesn't help us understand where the initial price comes from; You wrote that it either begins with supply or demand. I wrote that it begins with neither. To illustrate my point; In a chain consisting of two links, A and B, which link initiates the "Chain"? Obviously the answer is neither. The concept of the chain arises in relationship to both links at the same time. It is the same way with market prices. Prices arise in a bidding process with two or more people with perceived (Real or imagined) supply and demand. All four — demand, supply, cost, and price — are interrelated. A change in one will bring changes in the others. Emphasis mine. http://mises.org/library/how-should-prices-be-determinedhttp://www.cavemannews.com/Supplysidevsdemandsideeconomics.htm |
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Supply and demand controls price. Cost of production controls value (or call it break-even level)
As for the carts and horses, this is a huge matter of debate amongst economists - whether prices are set supply-side vs. demand-side.
Supply siders say the horse is production sets prices initially.
Demand siders say the opposite. That's an impossible debate. You can't have a price a-priori demand or supply, so they are both demonstrably wrong. If you don't have any supply of a thing then you can't have demand for it, and no market clearing price could exist. If you don't have any people that demand a thing, then the supply doesn't matter, and no market clearing price could exist. If I come up to you and want to buy your shoes, is the price determined by the supply of your shoes, or is it determined by my desire for them? The correct answer is that neither of those answers are correct. We would arrive at a price at which we both feel we have gained in the bargain, or no transaction takes place. That process is informed by objective factors, including the properties of the shoes, the general market demand for them, and so on, but it is nonetheless also based on subjective valuations of both parties (Or groups in a more macro sense.) that evades neat mathematical algorithms. But that's a red herring. You seem like you're not willing to defend your assertion in the abstract of your paper that the value of bitcoins will likely trend toward zero as the cost of production approaches zero (Due to increased efficiency in mining methods.), so have you conceded that this idea is wrong? |
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The price of ore in the world market IS the cost of production. Why? because there are many competing ore producers each trying to undercut the next guy. If your cost of production is say $1000 per pound of ore and mine is $900, I will start by selling it at $999. Somebody else that can produce for $900 will come in and offer $998. I will react with $997 and so on. The dance will go on until $1000.01 is reached (in theory of course). And what of demand? Well if there isn't enough demand then the price will drop below $900 and I will stop producing. So you're saying that the cost of production does not determine price. Price controls production. In which position is the horse in relation to the cart? You're not being very consistent. |
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This; As for your second point, ultimately you are correct: Once the block reward is tiny, the value will become very high. But if the efficiency becomes very low that will counteract that factor as well. But even after the last block is mined, there will still be electric consumption to verify transactions in order to earn tx fees. Or at least that's how it's supposed to work.
The thing is, if you look at historical price data and compare it with the model, it does a really good job-
Directly contradicts this; Looking at the market price, the average mining efficiency of the network as a whole might be estimated. As the average efficiency increases over time due to competition driving technological advancement – as inefficient capital becomes obsolete is removed while new capital replaces them – the intrinsic value of bitcoins denominated in dollars will fall. The irony is that increased efficiency, although necessary to maintain competitive advantage over other miners will ultimately drive the value of bitcoin down approaching, perhaps, zero. |
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Your understanding of economics is quite bad. Leaning on the thoroughly debunked labor theory of value to calculate the "price" of something that is literally not sold is so far gone that I'm not sure where to throw the rope so that it might be within your reach.
The most salient points;
1.) Bitcoin mining is paid completely through inflation. Nearly any fee above zero is acceptable to miners. There is no "price" for mining.
2.) "Prices" are a function of supply and demand. Labor, work, and difficulty have exactly nothing to do with the price of a product except insomuch as it inhibits supply.
3.) There is no such thing as “intrinsic value”. There are only intrinsic properties that are subjectively valued by people.
Detonating the logic bomb;
According to your paper, the price of a product gravitates towards it’s production cost. You essentially argue that as the cost of producing Bitcoins approaches zero, the price must also approach zero. This would be true if you totally ignored the supply side of the Supply and Demand graph.
Since the amount of bitcoins increases asymptotically, the cost to create more bitcoins always necessarily approaches impossible, and by your own premise, also approach infinite price, not zero. QED.
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I'm a bit frustrated because I'm having difficulty describing how this works. I think a demonstration would be necessary, though I don't think I have the time for it.
Answering the "who is paying into the PoW Exchange"; Doesn't matter. PoW providers only care that they get paid at the market clearing price in the medium that they prefer. It could be the cryptocurrency protocol itself through some algorithm, or an arbitrary group of people managing the cryptocurrency. It could even be an agency entirely separate from the cryptocurrency.
If one were to convert the current Bitcoin protocol to using a PoW Exchange, it could be strikingly similar to how it currently works. Bitcoins could still be inflated into existence and paid to the miners in the same exact amount, even 1% indefinitely or whatever, the difference is that this fee would be presented as a bid to PoW Exchange that increases the longer the hash has not been included in the PoW Exchange blockchain.
As more services use the PoW Exchange, the price of including a hash on the blockchain will increase, thereby lengthening the time between Bitcoin confirmations.
Once the bid reaches the market clearing price, a miner will accept it into the next block that they mine.
In this way, miners are not guaranteed any kind of fee for any block they mine, like they currently do in Bitcoin, and neither is there any kind of incentive to include every transaction in a block; The PoW Exchange doesn't even care about the transactions that are occurring in the Bitcoin ledger.
In the end the PoW Exchange guarantees that the cost of providing PoW on a useful chain is always the market clearing price. If a cryptocurrency has a fee model that is too low, it would be reflected by very long confirmation times on the PoW Exchange, if it is too high, then confirmation times would be excessively short.
Obviously the PoW Exchange would have to have limited resources imposed on it, or any kind of pricing mechanism would be impossible. Time between blocks and block size would still be magic numbers.
There's still a problem of how the Cryptocurrency pays for it's other costs; Bandwidth and storage of transactions, but that's comparatively easy issue compared to paying for hashpower. Calculating the appropriate cost of transactions for a given redundancy is perfectly manageable, and held in check through competition; In the same way we don't fret too much about how banks are going to pay their bills. I would imagine Cryptocurrencies would be much more centralized, but I see that as a added benefit so long as the auditing process through PoW can be accomplished by any arbitrary third party at a reasonable cost. This would allow scaling up to thousands of transactions per second without needing a copy of every single transaction on every miner.
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If I was cryptocurrency programmer, my currency could be highly centralized, but it's behavior would have to conform to the hashes that are provided to the PoW Exchange
I am not sure what problem this solves. In the current world, miners are paid via some combination of inflation and tx fees. In your system, miners on the PoW exchange are paid by the entity who wants something hashed. But why does this entity want to pay you to hash exactly? And what is the source of value this entity is using to pay you? A PoW Exchange like I described provides most of the benefits that the current PoW system does; Orders transactions, prevents double spends; ensures the present state a cryptocurrency. A PoW Exchange is valuable proportional to how much work it can provide, and how much demand there is for that work. What a cryptocurrency pays in exchange for what the PoW Exchange provides is between the miner and the cryptocurrency. Just like in Bitcoin, you could decide to mine for Bitcoins because you value them, but in an Exchange you could also choose any other form of payment. As far as I can tell, there's no reason to tie any form of payment into the PoW Exchange directly. All the Exchange cares about is which chain has the most work. Surely as a ccy creator I don't want to pay for security out of my own pocket. If I create my ccy in such a way that it somehow automatically sends its block rewards and tx fees to the PoW exchange, then it doesn't solve the fundamental problem that it's hard to ensure these block rewards and tx fees will result in an appropriate level of security. If in the future Bitcoin used this PoW exchange, the fact that block rewards were 0 could still lead to very little money being paid to the PoW exchange on behalf of Bitcoin, no? Fundamentally, I don't think it's possible to ever make any kind of algorithm that ensures the "right" amount of work. If that's true, then markets will handle it and the best that could be done is provide the right tools to allow cryptocurrencies to compete while still retaining the benefits of a strong Proof of Work backbone. It seems that the fundamental problem is that it's hard to create a decentralized source of value (like block rewards or tx fees) which matches security requirements in the far future, because decentralized rules tend to be less flexible. I don't see how a PoW exchange addresses that. I think when I wrote that the fee's could be "automatic" I was being confusing. I only meant that the fees could be automatically paid out at a later date based on some predetermined rate decided between the cryptocurrency and potential miners. That "rate" is by no means automatic. This addresses the funding problem not by trying to make some algorithm that imposes a fee or inflation, but by allowing markets to find equilibrium. I'm sure I haven't thought through all of the implications that this would have but I can think of a few advantages over the current system; 1.) Because PoW can be provided to any kind of service; colored coins, side chains, and so on are supported by default. 2.) PoW nodes could require less resources to maintain. 3.) The price of Work would could find its market clearing price; As there would no longer be any price fixing in the form of fees or inflation. 4.) Cryptocurrencies can leverage a more centralized architecture to allow greater throughput at a lower price per transaction, while not running the risk of any kind of 51% attack. I stress that this doesn't mean that I could create a cryptocurrency that just relies on a PoW Exchange to charge my currency the "right" fee to provide Proof of Work. Lets pretend that we have a PoW Exchange that exists. It has 100+ different cryptocurrencies that all use the system. They all have different security requirements; Some will pay for inclusion in every block, some might just do it every 300 blocks. Some might provide their own miners and just rely on them to include what they need in a block. How a cryptocurrency decides its fees or inflation to pay for the Work is entirely up to the developers of that cryptocurrency; Maybe a democratic vote based on stake, maybe entirely controlled by a committee, or maybe it's just a flat fee that accumulates until a miner accepts it and includes them in a block. Crucially, an informed decision can be made because they know the market clearing price of a particular form of Proof of Work. Because they are all using the same blockchain, despite having very different architectures themselves, they all help fund a robust mining environment. |
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I don't know if this is too old to post in, but I was thinking about this issue and I think I have an idea.
It was bothering me that we were trying to find a solution to intentionally break normal market behavior in order to decentralize the system and make it more inefficient. Whenever central planners get together and try to do such a thing* my instinct is to push against it and so my idea is to simply let the majority of Bitcoin centralize and separate the mechanism that actually needs to be decentralized; Hashing.
A marketplace for Proof of Work should be created with API's that allow any particular program to acquire work from, and any particular device to provide work to.
All that would be required is that this PoW exchange build a blockchain of arbitrary hashes that don't particularly matter to the system itself.
I imagine that it would work in this way;
If I was a miner, I would download this software onto my computer and search for hashes just like I would do on Bitcoin today except that I do not hash transactions, but I'd hash any hashes (within some size constraint) that are provided to me. In remuneration I am paid however I like, decided on receipt of the hashes I am to inject into the blockchain. This could be Bitcoin, USD, gold deposits, stocks, whatever, and could be automatically paid out when the block is mined (Or more likely paid when the block has confirmed a number of times).
If I was cryptocurrency programmer, my currency could be highly centralized, but it's behavior would have to conform to the hashes that are provided to the PoW Exchange. I would provide block headers to the PoW Exchange to be included with the block and provide a fee that could be my cryptocurrency, if a miner will accept it, or any other form of payment.
There are numerous advantages and disadvantages to this kind of system, but it seems to solve the problem of "funding network security" as it creates a market for it. I expect that there would be multiple PoW Exchanges that compete with each-other, as there are a variety of "magic numbers" that I don't think could be distilled to an absolutely correct form.
Would this work?
*http://mises.org/library/do-antitrust-laws-preserve-competition
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The idea and theory of cyptocurrency is sound.
It's implementation (via Bitcoin) is not.
Could you share with us the system that achieves decentralized consensus while having the capability of processing 100 billion transactions per day? |
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Are you claiming that weak subjectivity offers no more security than full subjectivity (aka, just coming to a consensus by trusting various people without any underlying rules as described in the weak subjective system)?
... Look, if I'm going to trust a handful of people that have, or once had, control of the block-chain by virtue of having a bunch of the currency units, then why not make that an explicit assumption and build the currency around it? Not sure if this is a claim you're making, but you refer to a "handful" of people controlling the PoS chain. I assume you mean this handful has over 51% of coins. One could also posit a handful of people who has control over 51% of hashpower of a PoW chain. Do you believe that it's much more likely for coin ownership to be concentrated and therefore for a PoS system to evolve into a cartel, as opposed to hash power being concentrated enough to lead to a 51% cartel? I'm having trouble picturing a universe in which Bitcoin mining doesn't downright centralize to one major mining entity, but even in that scenario PoW is preferable to PoS. I was just saying that it's preferable to give power to entities that have to work for it rather than people that have or had enormous wealth due to natural market activities. PoS tries to reach a middle ground between a trusted centralized currency and an un-trusted decentralized cryptocurrency and it ends up in a kind of no-man's land where you take all the disadvantages of both systems without any of the benefits.
I don't understand why you're saying PoS requires more trust than PoW. In PoS you only need to trust a group if they've formed some sort of 51% cartel right? Same as with PoW? I don't think I'm saying anything outrageous there. The premise of this "Weak Subjectivity" is that some trust is required in order to rebuild the chain in the event that the node is offline for more than 4 months or whatever. With a PoS system you are literally putting into the hands of the 1% the ability to reverse any transaction that they like while remaining anonymous.
You're claiming 1% of the people owns over 50% of Bitcoins? I could believe that. But this 1% is still probably 1000 people. Don't you think the top 1000 individual mining entities control more than 51% of hashpower? Wouldn't the same thing that makes you comfortable with 1000 people owning > 51% of mining power also make you comfortable with 1000 people owning > 51% of coins? What's the difference? Not Bitcoins in particular, it's common for 40%+ of wealth to be in the hands of the top 1%. The mechanism of PoW makes the coin tremendously more secure even in the event of a 51% attack. PoW means that trying to do anything in the network is costly. PoS, by contrast, can be attacked with little to no cost by around 1% of the stakeholders or any entity that can get control of that much stake at any point in the past. There's no way to algorithmically find and verify the correct blockchain, that's why "Weak Subjectivity" was proposed. It discards the idea of replacing trust with cryptography and instead explicitly states that we should go back to trusting certain figureheads when push comes to shove. Proof of Work gives us proof about the current state of the blockchain, Proof of Stake is not really proof of anything. I would go so far as to say the difference is that PoS is not a cryptocurrency, PoS doesn't replace the desirable features of PoW, and that's what makes me less comfortable with it in the event of an attack. "Everyday users" will always rely on trust. How many users fully validate the blockchain on their own? Among those that do, how many of those users are sophisticated enough to detect if the core devs maintaining the Satoshi client make some malicious code change? Almost no one would know that the software they were relying on to validate the blockchain was tampered with. These people are implicitly trusting both the core developers, and also trusting the small minority of experts who would actually notice something wrong with the Bitcoin project on github and talk about it in the media.
I run Bitcoin-QT, but I haven't read the code yet. I don't really know that Bitcoin-QT is validating things correctly and not tricking me. I'm just trusting that if it weren't, I would have heard about it. I claim that this is not meaningfully different than relying on weak subjectivity.
To be explicit:
This is why I trust the chain that Bitcoin-QT gives me: I know that anyone who wants to do the actual verification that the chain you get from Bitcoin-QT is the real chain can do so. I know that lots of people have read the code and verified everything, and I don't know of any credible people raising an alarm in the media.
This is why I'd trust the chain that I got from the 20 people I listed above, assuming Bitcoin had switched to a weak subjective system: I'd know that anyone who wanted to verify the chain objectively (by being online at least one a year) could do so if they wanted. I'd know that lots of other people had done that, and I'd know whether credible people were sounding any alarms in the media.
The level of trust required doesn't seem to change significantly for the average user. For the hardcore power user who doesn't want to trust anyone, they can simply be online at least once per year and they won't have to trust anyone.
Btw, I gave a list of 20 entities above who I would ask if I ever wanted to know whether a chain was valid. If I asked them tomorrow, what do you think the probability is that all those people would give me a fake chain? You can rationalize it all you like. The bottom line is that mathematical proofs can't be replaced by socializing. What are the odds? Greater than 0%. What are the odds that the Bitcoin code doesn't do what the Bitcoin code does? 0%. I also don't really know what you mean when you say "fake chain". If someone builds a chain following all of the rules of the protocol, can you really call it "fake"? Doesn't it bother you that it's even possible for a blockchain to have multiple valid states? By design, the safeguards breakdown when the largest stakeholders want them to.
I'm not sure what you mean here.. When the largest stakeholders want to reverse transactions they can. "Weak Subjectivity" tries to fix this by encouraging users to find trusted users that will prevent them from downloading the "wrong" chain. (Which is the "right" chain according to it's own rules.) It's kind of like if the core Bitcoin devs came forward and said, "We've decided Proof of Work doesn't actually work, even when miners have the most work that doesn't necessarily mean the chain is correct, so in order to fix this problem, we're encouraging you to make a list of 20 or so people that you trust, and then only download the blockchain from those people. Kthxbai." More than just the lack of rigorous security standards, I'm not sure what Proof of Stake accomplishes exactly. What does it offer that is better than both Bitcoin and average run-of-the-mill financial datacenter? |
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I agree that Vitalik's rephrasing of the issue isn't great. Are you claiming that weak subjectivity offers no more security than full subjectivity (aka, just coming to a consensus by trusting various people without any underlying rules as described in the weak subjective system)?
Sort of. Look, if I'm going to trust a handful of people that have, or once had, control of the block-chain by virtue of having a bunch of the currency units, then why not make that an explicit assumption and build the currency around it? PoS tries to reach a middle ground between a trusted centralized currency and an un-trusted decentralized cryptocurrency and it ends up in a kind of no-man's land where you take all the disadvantages of both systems without any of the benefits. I would much rather trust public entities in a centralized system rather than anonymous entities in a pseudo-distributed system. With a PoS system you are literally putting into the hands of the 1% the ability to reverse any transaction that they like while remaining anonymous. "Weak Subjectivity" obfuscates this problem by layering on a stewardship of "trustworthy" individuals. Everyday users are expected to accurately audit the trustworthiness of these people distributing the blockchain, but even when they find those whom they are "supposed" to trust, we have no guarantees that those people are actually trustworthy and have no way of ascertaining it. By what algorithm can you verify the intentions of people? What guarantees does a PoS currency offer when financial institutions are subject to a large theft? How about in a financial crises like the dot-com bust or innumerable other financial meltdowns? Who knows what kind of other shenanigans the clever (devious?) people in institutions like Goldman Sachs could come up with. What will the algorithm do when there is maybe a legitimate dispute that arises among the wealthy elite? By design, the safeguards breakdown when the largest stakeholders want them to. "Subjective Systems" work pretty well. Visa handles many orders of magnitude more transactions than Bitcoin or any PoS coin and yet un-resolvable thefts and hacks are relatively uncommon. As it turns out, maybe there's actually plenty of information about "Subjective Systems" in order to make pretty good decisions about whether or not you want to use them. That is despite Vitalik's insistence that they don't work because of a lack of computational ability. |
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Vitalik summarizes the problem with "Weak Subjectivity" here; This security assumption, the idea of “getting a block hash from a friend”, may seem unrigorous to many; Bitcoin developers often make the point that if the solution to long-range attacks is some alternative deciding mechanism X, then the security of the blockchain ultimately depends on X, and so the algorithm is in reality no more secure than using X directly – implying that most X, including our social-consensus-driven approach, are insecure. He then fails to rephrase the problem and addresses that incorrect rephrasing of the problem. This is called a "Straw man". However, this logic ignores why consensus algorithms exist in the first place. Consensus is a social process, and human beings are fairly good at engaging in consensus on our own without any help from algorithms; perhaps the best example is the Rai stones, where a tribe in Yap essentially maintained a blockchain recording changes to the ownership of stones (used as a Bitcoin-like zero-intrinsic-value asset) as part of its collective memory. The reason why consensus algorithms are needed is, quite simply, because humans do not have infinite computational power, and prefer to rely on software agents to maintain consensus for us. Software agents are very smart, in the sense that they can maintain consensus on extremely large states with extremely complex rulesets with perfect precision, but they are also very ignorant, in the sense that they have very little social information, and the challenge of consensus algorithms is that of creating an algorithm that requires as little input of social information as possible. He rephrases the problem as fundamentally a computational problem, that the only reason trusting X is not usually ok is because we don't have computation to help us understand X and appropriately trust X. This is not the problem with "Weak Subjectivity", this is not the reason why trusting X is a problem, and it begs the question by presuming that doing this "Weak Subjectivity" is better than simply trusting in X via any kind of system X wants to implement. Or in other words; Bitcoin developers often make the point that if the solution to long-range attacks is some alternative deciding mechanism X, then the security of the blockchain ultimately depends on X, and so the algorithm is in reality no more secure than using X directly... |
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Cunicula was most open and convincing with his criticism of the so called nothing at stake problem 10 months ago...
Unconvinced. |
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No... Fiat transactions fingerprinting
The fiat financial system is based on trust: you are trusting your central bank authority not to devalue your money and you are trusting your bank to keep your money safe and not lose it in bad investments. Coinffeine is designed to minimize or even eliminate trust wherever possible, but since the fiat financial system is based on trust, you still need to chose [sic] a trusted payment processor to handle your fiat money.
The fingerprinting attack involves the payment processor blocking the Coinffeine-related transactions. This is possible since Coinffeine transactions will have a distinct pattern (lots of small, identical transactions between two accounts). We can mitigate this attack by supporting several payment processors in the client. If one of the payment processor chooses to block Coinffeine payments, then users will be able to move to another payment processor, which will increase its revenue with the flux of new users. Emphasis added. https://github.com/Coinffeine/coinffeine/wiki/Exchange-algorithmIn other words, coinffeine decentralizes the communication between buyers and sellers and then offloads the responsibility of actually performing the transaction on normal fiat transaction avenues. |
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In my view, being a trusted, centralized, escrow (and arbitrator in the very probable case of some issue arising) does not solve anything. Or I am missing something and in that case please enlighten me...
I don't think you're missing anything. Decentralized "exchanges" can decentralize communication between buyers and sellers but when the rubber meets the road, when the actual transaction takes place, there either needs to be a centralized escrow, or the "exchange" just dumps the responsibility on the end users to take care of it themselves. |
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