So I presume the obvious solution to MyBitcoin would be for its risk to be externalized upon taxpayers by undercapitalized federally mandated deposit insurance managed by people with no skin in the game, and blatant conflicts of interest?

Or how about this:
bitcoinjs.org (specifically, the Webcoin project being built using the bitcoinJS libraries)
http://www.youtube.com/watch?v=3yoduTFjZW4

This will allow for a web-based wallet service to never have the ability to spend or lose your coins, and the only added responsibility on your part is to keep one single, never changing, rarely used key safe (print it out, and store it safely offline!), and only dig it out when you need to enable a new device to access your wallet.

So much more is possible nowadays than was possible in the early 1900s.  Be a little more creative...

julz,

Even though settlement is not occurring immediately on the block chain, there is never any counterparty risk in these exchanges, so I don't see why anyone should ever feel rushed into "settling the balance of a BRS" (it's always "settled" in the meaningful sense).

If the USD/BTC exchange rate drops then people would just find they've maxed out the BRS faster than they expected, but then they would simply start a new one with a higher limit.  Conversely, if it increases and people find they want to use the resulting excess of value locked up in the BRS for something else, then they can just settle it on the block chain and start up a new BRS with a lower limit.

I agree.  I'd change it to: It's very hard to start a business that can fairly compete with the oligarchs in the United States without doing something illegal.

Do you mean you can't see why decentralized microtransactions are needed?  One big example is payment to route your packets and to people to send you packets would internalize all the bandwidth costs of each user's participation in the Internet.  There's lots of positive implications to this, and other separate reasons, but if this isn't enough to convince you, then you probably won't be convinced.

Well that was creative.

Could a very restrictive whitelist on the types of scripts for which this could be allowed help make these problems easier to solve?

Extreme microtransactions was one that was posted in this thread: https://bitcointalk.org/index.php?topic=25786.0

Focus as much on building trust, as on making it unnecessary.  Help the developers get scripts enabled (https://en.bitcoin.it/wiki/Script) so we can use smart contracts (https://en.bitcoin.it/wiki/Contracts) to avoid needing it so much in the first place.

Are there any cases where it might be acceptable?

Once transaction scripts (https://en.bitcoin.it/wiki/Script) are enabled in Bitcoin, then much of the trust issues can be solved, and anonymity won't be an issue because businesses will be able to operate relatively trust-free.  Here's a thread I started on some various solutions to trust problems that will be made possible: https://bitcointalk.org/index.php?topic=33892.0

If extreme microtransactions can be done as well, via this method: https://bitcointalk.org/index.php?topic=25786.msg320931#msg320931, then pay-per-packet routing, and economical distributed data storage and filesharing will be some other "killer apps".  If this requires breaking the existing protocol, then I've described a way to quickly and smoothly roll out the new one here: https://bitcointalk.org/index.php?topic=34360.0.

Another "killer app" described by that thread is backing for new digital currencies that offer features that Bitcoin doesn't - e.g. user friendly anonymity, extreme microtransactions, etc. - since there can't be any effective capital controls on the exchange between free digital currencies, like Bitcoin, to threaten the promise of convertibility.  Thus, centralization of complementary currencies becomes much less of a show stopper, especially considering the potential for distributing and eliminating trust via Bitcoin's future transaction scripts.

Say the existing developers wanted to roll out some awesome protocol upgrade they thought would greatly improve Bitcoin's worth - say they estimate by ten times - but want to avoid the delay of having to roll it out gradually, getting everyone to upgrade, and including legacy code in the new system in perpetuity in order to maintain backward compatibility.  They could use the method I've proposed here, charge a 2% conversion fee, and earn around $14M (roughly accounting for lost coins) at today's exchange rate to fund future development, if nearly everyone makes the transition.  This would pay 50 full-time developers $70,000/year for 4 years - around the time the next upgrade needs to be rolled out.

People obviously like and trust the developers, and I'm sure would be happy to pay a conversion fee, as it means further development which would likely continue to add value to their coins.

To make everybody happy, they could continue to support the legacy code for a few more years, and waive the conversion fee after say, a year, for anyone who hasn't made the transition.  That way they can avoid having this be seen as a money grab - people would only convert quickly if they were happy to pay the developers, or if the upgrade was really necessary or beneficial to them.

Mark,

I agree that this looks all too familiar.  Your elf/orc comment definitely made me think "ring of power".  But "it'll be different this time around!"

Now we have on-demand public auditability.  We have the ability to spread trust around in an cryptographically enforceable way.  And there are no laws compelling one cryptocurrency over another.

And it's exactly like you say: if you don't trust the new coins' central bank, yet they offer something really valuable that bitcoins don't, then only hang onto them as long as you need to, and keep your value stored in bitcoins.  If they break their 1-1 backing, call shenanigans, and GTFO.  If they stop redemption in violation of their constitution, dump their coins on the market ASAP.  And the short sellers would no doubt always be on the prowl.

Basically, I think it boils down to this: If the political/financial establishment decided to loosen its grip tomorrow and allow a relatively distributed group of trusted organizations to act as a central bank, creating a Bitcoin clone fully backed by, say USD, then what do you think the market would choose: Bitcoin with its wild volatility, or USDcoin that introduces no practical risks, other than the underlying backing?  Even if the goal is an unbacked, decentralized currency, piggybacking off the USD value metric and then gradually shedding the backing is likely a much better way to get it than what Bitcoin is being forced to go through.

I don't ever see this happening, but down the road I do see new cryptocurrency startups that offer tangible benefits over Bitcoin wanting to piggyback off the existing BTC value metric.  Remember, they'd otherwise have to solve the damn hard nuts to crack of 1) initial distribution, and 2) finding a stable valuation through establishment.  I don't see any other quick fix to 1 and 2.

And if something like forkcoin happens sooner than later, I'd like to see the competition happen in a synergistic way, rather than rivalrous.  We're not only trying to create a new currency here with Bitcoin, but a new value metric as well.  That seems to be the truly difficult problem!  But it's made easier by competing currencies reinforcing the same value metric.

Edit: Added thought: If a precedent for introducing new cryptocurrencies this way were set, it would give people a lot of confidence that they are a safe store of value that they don't have to babysit, and would increase overall adoption.

Yeah, my thought was that as long as people are using it, to not burn the bridge.  Further, all newly created forkcoins must come into existence through the central bank; otherwise it can't ensure the 1-1 mapping of BTC in its reserves, to forkcoins it has released into circulation.

mark,

Due to the hostility of the current political/financial establishment, I don't think Bitcoin had any other choice to be SpeculatorCoin.  Ideally it would have bootstrapped itself onto other dominant measures of value, and then possibly shed its backing after getting established, but it did not have this luxury so it made due with what it had: hype.

And up until now it's worked.  I think Bitcoin needs a kick in the ass at this point, though, in order to regain its momentum, and to elevate it above the status of a novelty among the general public, that they don't use.

Don't get scared by the prospect of "destroying coins", or at least removing them from circulation - it's necessary to create a much bigger symbiosis of many different varieties of cryptocurrencies.  I only proposed destroying them after the central bank eventually dissolved itself, but I actually don't see why it couldn't remain in existence as long as there was demand for it to - all the while collecting fees that would ideally go toward further development.  This way having a cryptocurrency-symbiosis would be completely non-disruptive, economically; peoples' value could flow frictionlessly into and out of the different ones in perpetuity.

Think of it this way: there's about 7M BTC in circulation now.  No matter how many various new symbiotic cryptocurrencies get created, this proposal ensures that there will remain 7M (and still growing at 50/10min) total coins in circulation afterward.  The value stored in each individual cryptocurrency is then directly proporitonal to the number of coins it has in circulation, and is determined completely by user preference.

Note that a symbiosis is only appropriate for currencies that create coins at the same rate that Bitcoin does (or those like it) so this could be seen more as a means to enable Bitcoin itself to develop more rapidly and with more variety, and not as a way to fork its "essence", i.e. it's ledger of who owns how many "coins", where "coins" is now meant in a more general sense than BTC.

I guess this discussion would probably be rendered moot by market forces, anyway.

Say someone developed an awesome new protocol change, and rolled out the new currency in the way that I've described.  There's no way anyone would accept if if the source was closed, so this leaves open the opportunity for a competitor to turn around and immediately release the peg-free, floating version.

I think regardless of how it went about solving the initial adopter problem in a reasonable timeframe (probably a blockchain fork), it would be a battle in the public arena between SpeculatorCoin and StableCoin.  Sure SpeculatorCoin could destabilize StableCoin just by proving to be a worthy competitor, but I hope people would see that they're being unnecessarily punished financially simply because they weren't quick enough to upgrade their damn software, and would boycott SpeculatorCoin, and vilify its adopters.    And it would surely only get one attempt before people got fed up with the unnecessary instability IMO.

StableCoin also has going for it the fact that it developed and is maintaining the damn software, and SpeculatorCoin is just a dirty thief.  

Then again, the roles could be reversed, and SpeculatorCoin developed the software that StableCoin is trying to use...

Like I said, trust in the central bank can be distributed among arbitrarily many individuals and organizations using the CHECKMULTISIG opcode.  And it only has to function securely, temporarily.

It can't destroy any bitcoins until it dissolves, since there might be an exodus from the new currency at some point.  It can eventually destroy them, and any remaining forkcoins it has, by sending them to some eater address(es) for which obviously nobody holds the key.  There was a funny one in the block explorer that I can't find now.  Something like 1BitCoinEaterAddressDontSend.

At any time it can prove its reserves by signing messages with its private keys.

Um, don't buy their overpriced shit and their prices will have to come back to reality lest they go out of business?  They might also price their goods in more stable currencies, and convert during sales so that their advertised prices don't get out of wack while exchange rate fluctuates.  There's an incentive to use it to avoid the banking system (provided you already own BTC...).  Plus, added privacy - you don't have to give your personal/credit card information out to every single website you deal with.

I feel like a salesperson now.

But really, one thing at a time.  This thread is about the trust problem.   

A successful fork will draw value away from Bitcoin, yes, but it won't diminish the value of a bitcoin at all!  It will increase it!

Don't you think that the adopters of a new crypto-currency would be disproportionately Bitcoin users?  Do you think they might feel like they now have to choose how to split their crypto-currency holdings between BTC and the new one?

There's a hell of a lot more to a crypto-currency than it's exchange rate to another one.  The protocol could be changed in all sorts of noticeable ways, that would distinguish it from the other.  For example, say you had one that could be used for extreme micro transactions, small enough to pay for each of the individual packets going over the Internet?  Do you think that would be enough to cause an exodus from Bitcoin, despite exchange rates remaining at parity?  Here's the idea of how this might be possible: https://bitcointalk.org/index.php?topic=25786.msg325839#msg325839.

Then suppose Bitcoin eventually got around to implementing this, finally got its users to upgrade their software so that it worked, and eventually wrestled most of its original users back.  Well in the meantime these users got to move seamlessly to a kickass new crypto-currency that did so much more for them than the old one, and at the same time their movements led to a ton of innovation.  And notice that the new currency issuers are incentivised to innovate by being able to turn a profit!  This allows for fierce competition and stability at the same time!

Besides, people stampeding from crypto-currency to crypto-currency fucks over those who don't want to have struggle all the time to stay on top of "the game".  It's not a fucking game to most people.  They can't reasonably be blamed for "not being sensitive enough to the winds of change".  It doesn't help confidence in the stability of crypto-currencies in general to introduce such uncertainty - unnecessarily - as I believe I've shown here.

I hope these fears aren't knee jerk reactions to my use of the words, "peg" and "central bank".  First of all, they're temporary (if you want).  Secondly, the trust in the central bank can be distributed over an arbitrary number of independent people and organizations.  And third, if you analyze this carefully, you'll see that there is never any redistribution of purchasing power until the peg is gradually lifted.

Provided this isn't all one giant brain fart, I believe this solves the problem of investment uncertainty created by the expected introduction of newer, better crypto-currencies supplanting the old ones.  Well, that is if people all agree that this is the best way to roll new ones out  

Maybe the confusing part is recognizing that arbitrage seekers would exchange their bitcoins for forkcoins via the central bank in the event that forkcoins became more valuable on the market than bitcoins.  This would bring more forkcoins into circulation, driving their value back down, and it would take bitcoins out of circulation, driving their value back up to parity.  And similarly if the forkcoin market value drops below bitcoin's.

Whoa, brain fart.  I had it right the first time.  Your sig must have shaken my confidence  

The whole idea is to have value transferring seamlessly from bitcoins to forkcoins in such a way as to not disrupt prices denominated in bitcoins.  For every bitcoin's worth of value that leaves the Bitcoin economy for Forkcoin's, a bitcoin leaves the Bitcoin economy too - via the owner of that value.  And so bitcoin denominated prices will be completely unaffected by the introduction and existence of Forkcoin!  And vice-versa.  And if Forkcoin is at all utilized, then it adds to the value of a bitcoin by providing more utility to it than it otherwise would have had.  This way you don't need to leave the forkcoin valuation, and the bitcoin revaluation up to the speculators, who would no doubt flail wildly.  And if Forkcoin is at all successful, then you don't end up screwing the people that didn't move enough of their bitcoin into forkcoins at the right times.  You draw people to use forkcoin based purely on its merit, and untainted by their fear or greed.

In the extreme case where Forkcoin completely dominates Bitcoin, you'd actually see bitcoins totally disappear from circulation forever.

If the both end up living side by side, then they do so symbiotically instead of rivalrously (at least until the central bank dissolves itself).

And notice that there is always an equal number of forkcoins in existence as there are bitcoins when you include the central bank reserves, provided the central bank gets all newly mined forkcoins while it exists, or it starts out with the current total bitcoin supply plus what will be mined while it exists.  The central bank can always make good on its promise.

I really think this proposal achieves just that.  Users are voting by deciding which one to hold on to.  And in a non-disruptive way.

If forkcoin transaction fees to be earned, miners would no doubt mine, as doing so doesn't impose much extra cost to them because mining is merged.  And if forkcoin users demand more miners to come on board, then all they have to do is up their transaction fees.

Haven't read these two links just yet, but thanks for all the ones you've been posting for me, they're always very enlightening.