It is a picture explaining symmetric key cryptography; that is not the type of cryptography used by bitcoin. Bitcoin uses a subset of asymmetric cryptography called digital signatures. The data must be unencrypted for a digital signature to prove anything.

Encryption is a form of cryptography, not all cryptography is encryption.

The explanations could have been done without the bitcoin bias. It only undermines what you are trying to say.

SHA2 may be (somewhat) secure against QC, ECDSA is not.

"However, since this is the same encryption used by major banks and other payment methods, if the encryption itself were ever 'cracked', those institutions could be shut down and vulnerable for weeks. Bitcoin would be secure again within only hours or days."

You are attributing favorable opinion to bitcoin and disfavorable opinion to the banking system. This is a biased statement. Banks would be able to resolve any stolen funds or whatever, bitcoin would not. Every wallet in bitcoin is public, all banking "wallets" are private. There is no indication that switching to a new hashing or signature algorithm will be an easy or quick process.

You should probably do your own research in lieu of channeling the heavily biased wiki.


edit: I did read the informative post you did link to at the bottom on the forums regarding cryptography. However, the post is in error. Addresses are hashed with RIPEMD160 which means you have 80 bits of effective protection, a hell of a lot less than 128 bits. I don't know enough about the protocol specifics to comment on how difficult it would be to get the public key from transactions and such.

Well, the last time you responded to anything about it was on revision 2 before I had really laid down the foundation.

"I won't fault you for trying, but I can't agree that artificial attempts to suppress the cost/value of coin creation are worthwhile."

That was what you responded with in a PM, I don't remember what I said originally or how I responded, but it is a statement borne on the back of bitcoin's monetary policy without understanding mine. Status quo bias, et al. I believe you are the one that politely refused to consider. Even calling it artificial, as if bitcoin's monetary policy is anything but.

The only one who has actually put any input on monetary policy has been Red, and he has done oodles and I have incorporated a lot of his ideas. Most everyone else just argues it won't work for one misguided reason or another, and I spend my time explaining how it could. Bitcoin has turned a lot of people into monday morning quarterback economists, often ignoring the fact that a lot of the good part of bitcoin's economy is lack of government intervention, not fixed supply. I go one step further and say hey, instead of having an arbitrary amount of money in the supply, how about we let people decide how much money is in the supply.

It's not as if there is no school of thought behind this: http://en.wikipedia.org/wiki/Monetarism


Note how austrian economists criticize a property that would not exist in encoin; citizens create the money based on whether or not it is profitable. Far different from the government deciding on when the money is too valuable and more must be created. No goverment spending, no liquidity traps, currency may be created more easily based on economic growth factors (this is in my most recent post in the thread), etc. It fixes a hell of a lot of the problems with a government-backed currency without having to fall back to the problems of a fixed supply.

Unlike Satoshi, I am actually trying to put thought into and get input on monetary policy.

I don't follow the analogy.


How many "exceptional circumstances" can we come up with? Investments are going to create growth, growth is going to create further demand for the money...


Commodities go up and down in price because of real world factors beyond speculation. Currency speculation is only based on what currency will outperform another. I wonder how a fixed supply of money will perform compared to an unfixed supply? Bitcoin only has very poor information by design.


Could you please restate the second sentence? It is making my brain hurt.


No, you have to do that if you want to overcome the initial problem of price ridiculousness. If the difficulty of creating money is easily quantifiable (electricity cost + time/processing cycles) and is only created when there is demand for it, then your demand will always oscillate around supply. It doesn't need to be pegged to an exact value, the value will become "sticky" over time, but the volatility will not be all that big in the mean time. Just because bitcoin did an absolutely terrible job of it does not mean that it couldn't happen much more smoothly.


And by what authority do you have to make this claim? Historical inaccuracy?


Herein lies the problem: a bitcoin as a commodity is effectively a digital trash token that used to be insanely easy to create and is now insanely difficult to create because more people are creating it. Makes it awfully hard for people to come up with a time value of money of a commodity that has no idea what its price is. A stable cost to produce would heavily alleviate that as well as fix the intentional pyramid of wealth transfer.


Are you suggesting that bitcoins are not in any way overvalued? That their value is not determined in almost the exact same way? Bitcoins won't gain any foothold because merchants will run back to fiat any time deflation starts making the risk of accepting bitcoins too great. It will effectively compromise its own utility by being a fixed quantity since fiat will always exist right alongside it. Bitcoin will be the hoarding currency, fiat will be the spending currency. A currency that has a stable cost to produce and unfixed quantity, however, would be resistant to both inflation and deflation, and would appeal to both spending and saving.

So I believe I've come up with an idea that solves several issues with the creation of new currency and would make Red happy.

At first, I did not like this because it seems like it is another transfer of wealth. Then I was able to rationalize how this was not the case.

A hard figure has to be used here, but I don't think misjudging the figure can have catastrophic consequences. The figure I propose is 4%. 4% is the yearly amount of increase, based on a daily supply, allowed in the currency before additional currency will be created "for free."

For example, there are 1 million coins in existence. At 4%/365 days, if more than 109.59 coins are created a day, any amount above that figure will be spread out to existing currency holders. So if 120 coins were created, 10.41 coins would be distributed to the rest of the economy based on their existing proportion of the total coins (like interest from tx fees that don't get refunded--I might now consider actually destroying unrefunded tx fees for more balance).

Pros:
Protection from weakened cryptography. If someone was able to pre-image SHA2 to make currency for much cheaper, they would only be able to abuse this ability to a very small degree.
Left over transaction fees could again be destroyed to help account for an economy that has contracted without effectively destroying work.

Cons:
Those with wealth in ENC would gain more wealth for doing nothing productive. An issue with inflationary and deflationary currencies that I am trying to hotly avoid.

Now... One way or another, those with wealth in ENC are going to gain in times of high demand. Nothing can be done to counteract this anyway. And nothing should be done to counteract this. However, by exchanging their wealth for fiat, they are again taking on the risks of fiat currency. In the far future, fiat risk may be even higher if ENC were becoming the replacement currency. So if they only benefited by a one-time sell off in exchanging to fiat, they lose by no longer having a stable store of wealth in ENC.

Therefore I believe this scenario is truly a win-win.

Some things I'd like to discuss:

1) Should there be an amount of coins produced before this takes effect, or should the figure be higher earlier on and gradually lower (I worry it would cause too much hoarding early on if at 4%)? Is 4% a good number?
2) Should the coins be given to all holders of ENC, or only economic producers such as merchants that secure the TradeNet? Would this be seen as unfair?
3) Should transaction fees be destroyed, or is this really just the same effect as giving unrefunded tx fees to all holders of ENC (perhaps by destroying them the psychological effect of inflation will be reduced and the currency will appear more stable)?
4) Should it always simply be based on daily creation, or should yearly factors be taken into account? (i.e. if 10 days went by with no creation then on the 11th day 120 coins were created, should we give out free money?)

I have also significantly updated the section on Economy in the wiki. Not related to this discussion topic.

Miners aren't people? LOL

So in what way is that different from my system? Anyone can join the tradenet. Anyone will eventually get a transaction block.

ok cryptography was a bit redundant...

So you don't have to trust a miner to put his transaction in his transaction block? It's amazing how much credit you are willing to give bitcoin that isn't there.

That is not the definition of misnomer. And I came up with a solution to secure transactions that doesn't rely on 3rd party trust, only the combined trust of the network. It is a similar manner as 51% in hashing, except that no electricity or hashing power is needed (except for transaction verification anyway). You sure you read my proposal?


I've heard of and used them all, and I still think bittorrent is light-years better. They fit different forms of sharing, but bittorrent is by far the easiest and most efficient.

I think you missed a big one with digital signatures preventing forgery. That + proof of work would be the only things that require cryptography in your poll, so I only voted for proof of work.

I've never knocked on bitcoin as a proof of concept; I think it is amazing that it has proven something like this is possible. I think relying on hashing power to secure the network will end up being a very large flaw though, either in wasting computing resources and electricity for as long as bitcoin exists or by the possibility of someone subverting it during a period of low faith or by finding an improvement in the hashing of SHA2 and using it against bitcoin. It is highly inefficient and inelegant. But I don't knock satoshi for that, it was the first try after all.

Because I can't, that was part of the proposal. I don't have any network programming experience. I could eventually learn, sure, but that would involve spending a lot more time than I already have before I could even begin. IF enough interest is generated, I'd probably be willing to pay to have someone help. As yet, no emails.


Drama queen again. I could program most of the complexity in a few hundred lines of pseudo-code if it wasn't a waste of time. It took satoshi what, 9 pages to describe only the block chain in his white paper. He didn't touch on anything about the network protocol, the coin distribution, potential economic effects, etc. whereas all this is included in my 20 page proposal. I could describe the transaction block chain and how it provides security in my proposal easily in 9 pages or less.


I predict that 5 years from now bitcoins will be worth pennies again. *shrug*

Do you understand what oscillate means? Honest question.


LOL @ bold. No, you haven't been helpful in pointing out how you think a currency needs to be manipulated for it to be successful. I disagree. Economists disagree, but they don't really have a better way than the status quo. Or if they do, they believe the current scheme is so entrenched in the government/bank hegemony that there is nothing to be done to wrest it back, so they wistfully talk about it like Mises.

You are apparently only willing to have faith in something that you can currently see a dollar value next to, but nothing else. It's short-sighted. Not exactly a surprise when you have people around here clamoring to give their wealth to satoshi.

Neither is NET PROFIT.


Really? What backwater math do you have to use to come to this conclusion? $0.07/kwh, let's say it's putting out 200Wh (5870 about 2.0mh/w). 144kWh/month = $10.08/month x 3 years = $362.88. $362.88 vs $350 is the lion's share? It isn't too fair to say that the value of the video card depreciates when the value of the electricity converted into bitcoins doesn't, so that is fricken moot. Assuming BTC value stays the same, your non-upgraded video card is going to be fighting for a smaller share of the payout as other people upgrade.

And you don't seem to get that by having no "upside" which you define as gaining wealth for nothing productive, there is no "downside" either. Oh yes, faith could be lost. But faith could be lost in any currency. Faith is being lost in the USD because of currency manipulation. By what manner would faith be lost in a currency that is nearly manipulation-proof? If hoarders hoard, people create more currency. Hoarders know they will do this, so it is in their best interest not to hoard. The currency can't be created except for a lot of electricity, processing power, and time. None of these things are free. A value can be put on them. This value will oscillate over time, but it is highly unlikely to oscillate in such a way that it loses 95% of its value such as the USD over the last hundred years, or gain 1 million % in value such as bitcoins then lose 1000% in value over the period of a couple years.

What is more likely to engender faith? That which oscillates mildly, or that which loses 95% of its value or oscillates between +1 million and -1000 in a matter of a few years. Is it just the fact that there is an actual dollar value on a BTC that makes you have so much faith in it?


Bitcoin may lower the barrier to trade, but it doesn't do anything that an encoin couldn't do. It still transfers wealth whether or not it helps create some in the process.