Question, for CoinHunter. Who runs the trusted peers? Are they all yours?

Did you really create the next crypto-anarchist currency of the future by saying, "All everyone has to do is trust the rich!" Really?

I suspect it is different than you think. He was here last night saying it was distributed.

I think it probably does something like this.
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That's actually pretty darn clever! He has created a trivial implementation of a vector clock. Basically the "trusted nodes" are really time keepers marking what happened in what order. I'm assuming they are known in number and non-anonymous nodes.

In the case of a network partitioning (intensional or otherwise) the known trusted nodes have to be partitioned as well. In this case, since you know the total number of trusted nodes, you have an additional piece of information to use in reconciling chain forks. The number of trusted nodes marking time on each fork. This defines the center of the SolidCoin universe.

If 90% of the trusted nodes are marking time on one fork, and you are hammering a fork with 10% of trusted nodes marking time, you will probably lose when the partitioned networks recombine. But fortunately, for you, that should become apparent as you see timekeepers drop off your chain.

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I don't think it requires a common key. It does seem to require making a donation to the central fund though. Assuming anyone could participate as a trusted peer if they wanted, then you have the following dynamic.

Fork A: One hundred independent trusted peers interspersing donations between 1000 generated blocks, means 10 donations each.
Fork B: One clandestine group interspersing donations between 1000 generated blocks, means 1000 donations.

Perhaps that is the disincentive?

(Edit) The previous post was too long so I removed this boring beginning. I'm putting it here for reference incase anyone doesn't get the above bits.

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Economic Dynamics

This section is about adjusting monetary policy in the face of extrinsic inflation and deflation. By extrinsic I mean GEM pricing changes that result from a mismatch between the value of goods available to be traded and the number of GEMs available to be traded.

The hardest thing about monetary policy is the shear number of hidden variables. Nobody knows which GEMs are "available" to be traded vs those which are lost or deliberately hoarded. Nobody knows how much total goods are available to be traded. Nobody even really knows the system wide break even price for mining GEMs.

However, it is easy for humans to measure the success of the system. It's simply a matter of monitoring prices over time. To avoid arguments over terminology, I'll use the following definitions.

--Definitions---
If before prices were:
1 GEM = 1 loaf = $x

Then, if afterward prices are:
1 GEM = 1 loaf = $y
This means pricing is stable and have met our goals. The GEM supply is "Just Right" no matter what direction dollar value moved.

Else, if afterward prices are:
1/2 GEM = 1 loaf = $y
Then goods pricing, with respect to GEM, has deflated. The GEM supply is "Too Low". We should mine more GEMs and discourage GEM hoarding to increase GEM availability.

Else, if afterward prices are:
2 GEM = 1 loaf = $y 
Then goods pricing, with respect to GEM, has inflated. The GEM supply is "Too High". We should destroy GEMs and encourage GEM hoarding to decrease GEM availability.
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Second Order (Economic) Dynamics

Rather than trying to detect basket-of-goods prices, GEM leaves that to humans. Instead GEM detects the "human" consensus on the GEM supply itself (too high, just right, too low). To do this, we *require* human mining behavior to follow personal self-interest. Each miner knows their own mining costs and can determine their personal ROI on any GEM transaction. Stable monetary policy is means actively balancing the natural pressure to increase the GEM supply, with a downward counter-pressure to stop runaway increases.

Upward: Each miner is allowed to non-competitively mine GEMs whenever they see profit. When their personal ROI goes to zero, they stop mining.
Downward: GEM uses a fixed percentage transaction fee to avoid runaway GEM supply growth. The particular fixed percentage is probably important, but not for this conversation. The transaction fee is destroyed.


Primary Monetary Detection

We detect the system wide mining consensus by measuring total GEMs mined versus total transaction fees over fixed periods. (Say bitcoin like, 10 minute periods.) That gives the ratio (total mined/trans fees) that I'll use in examples below.

(total mined/trading fees) = 1
If you are mining exactly what it take to replace your fees then there is a 100% consensus that the money supply is "just right". Who should receive the newly mined GEMs is NOT really a monetary policy decision. But in GEM's case, the miners keep their spoils.

(total mined/trading fees) > 1
This ratio is unbounded, so it has no way to express 100% consensus that the GEM supply is "too low". But the farther this ration moves above one, the closer you get to that consensus. The farther this ration tends above one, the faster GEMs are being added to the economy.

(total mined/trading fees) < 1
If this ratio is zero, there is a 100% consensus that there are too many GEMs currently available for circulation. The closer this ratio gets to zero, the faster surplus GEMs are being destroyed by the transaction fee.



Dynamic Monetary Adjustment - Springs and Shocks

Note that the above primary forces tend to act linearly. However, there will be times with more dramatic economic changes. (say Walmart starts taking GEMs) In these cases we'll need for more dynamic changes in the GEM supply. In support of this, GEM provides two periodic non-linear forces. The "Deflation Spending Subsidy" and "Inflation Panic Tax".

(total mined/trading fees) = 1
If you are mining exactly  what it take to replace your fees (ratio near 1), there are no additional taxes or subsidies necessary.

(total mined/trading fees) >> 1
If this ratio tends far above 1, GEM aims to do three additional things:
1. Avoid removing GEMs from circulation by rebating fees.
2. Encourage hesitant buyers to buy NOW! (Stop hoarding GEMs)
3. Discourage sellers from panicked selling of goods. (Hoard goods)

As this ration tends above 1, the fixed transaction fee fights against our monetary policy goals. It is destroying GEMs during a period where everyone is in agreement that more GEMs need to be mined. GEM mitigates the consequences of this through a deflation spending subsidy. The goal is to redistribute the transaction fee to those it should never have been taken from.

(total mined/trading fees) << 1
If this ratio tends far below 1, GEM aims to do three things:
1. Destroy additional surplus GEMs, by taxing panicking buyers.
2. Encourage potential buyers NOT to buy. (Hoard their GEMs until prices recover)
3. Encourage potential sellers to sell NOW! (Stop hoarding goods)

Psychologically, I charge the *panic* tax ON TOP OF the price the seller is asking. As opposed to requiring the seller to hide that included tax in his price. The former tends to make clear to *panicked* buyers that prices are *already* considered too high. It also makes it clear to sellers that NOW is a great time to actually close the deal. The later tends to encourage sellers to inflate their prices (which is what we are fighting against). And if they think prices are moving higher, they are further encouraged to hoard goods.


Deflation Spending Subsidy
In times of deflation, when the money supply is too low. GEM levies an additional deflation spending subsidy in proportion to the standard ratio above. (total mined/trading fees) If mining exceeds trading fees, the mining wealth is shared with those who continue to spend in the face of deflation. The details are hand wavy now, but the concept is to rebate all transactions fees at say (2 mined/1 fee). And to rebate say double fees at (3 mined/1 fee). This encourages spenders and discourages hoarders.

Inflation Panic Tax
In times of inflation, when the money supply is too high. GEM levies an additional inflation panic tax in proportion to the inverse of the ratio above. (trading fees/total mined) As mining moves to zero, the surcharge moves to infinity. This should provide a strong disincentive to panicked sellers. The details are hand wavy now, but that is the concept.

-----

Going Rogue

Should miners choose to work against their own self-interest, GEM adjusts to make sure each rogue miner's electric company penalties become as high as necessary to end their bad behavior. If the award reduction/difficulty increase keeps everyone else aligned with Koomey's law. (for argument 1 GEM = 10 kwh) Then the run away miner is now mining at 1 GEM = 11 kwh. If he continues to do so causing a GEM glut and price inflation then he is compounding his loss because his 1 GEM buys < $1.

If enough people mine at a loss, it will temporarily trick the system into thinking the consensus is to add more money into circulation. The deflation spending subsidy will begin dumping money into the market. This will temporarily increase inflation for everyone. But inflation hurts the miner's profits, while the subsidy compensates others spenders. This further compounds the runaway miner's losses.

There is no way a runaway miner can profit. Like in Vegas, a time will come when he has to pay the piper. And that electric company piper is a real bitch!

Yes, that is correct.

Mining becomes non-competitive and based purely on the self-interest of each miner. This self-interest is held in check by very real electric bills.



I'm typing it now. Need a few more minutes.

I don't think it requires a common key. It does seem to require making a donation to the central fund though. Assuming anyone could participate as a trusted peer if they wanted, then you have the following dynamic.

Fork A: One hundred independent trusted peers interspersing donations between 1000 generated blocks, means 10 donations each.
Fork B: One clandestine group interspersing donations between 1000 generated blocks, means 1000 donations.

Perhaps that is the disincentive?

That's actually pretty darn clever! He has created a trivial implementation of a vector clock. Basically the "trusted nodes" are really time keepers marking what happened in what order. I'm assuming they are known in number and non-anonymous nodes.

In the case of a network partitioning (intensional or otherwise) the known trusted nodes have to be partitioned as well. In this case, since you know the total number of trusted nodes, you have an additional piece of information to use in reconciling chain forks. The number of trusted nodes marking time on each fork. This defines the center of the SolidCoin universe.

If 90% of the trusted nodes are marking time on one fork, and you are hammering a fork with 10% of trusted nodes marking time, you will probably lose when the partitioned networks recombine. But fortunately, for you, that should become apparent as you see timekeepers drop off your chain.

I wasn't attmpting to mock you or derail my own thread. I just thought your particular "phrasiology" seemed humorous and worthy of a shared giggle. No harm intended.

There seems to be a flaw in the difficulty logic. (At least it seems like it to me.)

If as CoinHunter said, the difficult increases slowly in response to increases in MHash/s,
and the difficulty decreases quickly in response to decreases in MHash/s.

Then you have a different kind of 51% attack that people are not used to. If one were to "strobe" massive hashing power based upon difficulty increment periods. You could effectively reduce difficulty drastically, for a given fixed hashing power.

So in period A, the attacker goes full blast driving up difficulty 2X.
Then in period B, the attacker stops hashing totally.
If difficulty falls more than the previous 2X rise,
the new current difficulty will be lower than before the attack began.

Wash, rinse, repeat.

OK, admit it. What you wrote was funny! It's not a ponzi scheme. It's multi-level marketing!

I think what you are saying is very similar to what I'm suggesting. I see two slight differences.

You are optimizing against computational speed (MHash/s), I'm optimizing against computational efficiency (MHash/ws). (One watt second = one joule) This in practicality is a very minor difference. Moore's Law and Koomey's Law are both exponential and very close cousins.

You are benchmarking against combined instantaneous hashing speed of all nodes. I am benchmarking against time. I think in both cases, we are both making the same presumption that future technology improvements follow Moore's/Koomey's exponential curve.

I wish I could tell you the differences I see. Quite frankly, I didn't have a complete grasp of what you were suggesting at the time. That was mostly because I didn't have a complete grasp of what I am suggesting at that time either!   You're curve idea might very well turn out to be better.

There is lots I don't like about what I'm suggesting. Personally, I hate the idea of burning all that electricity just to make a GEM. However, once I realized the math might lead to stability, I thought it might make a good starting place for discussion.



I'm basically benchmarking efficiency against time. Time doesn't go backwards so efficiency never gets worse. Once a mining rig is built that can mine 1 GEM for (X) joules, that rig will never mine 1 GEM at (>X) joules in the future.



I deal with that in the next section. Basically by adding a transaction fee to NULL, to exert constant downward monetary pressure. And subsidies to compensate for the fee when it would be counter productive.

Are we ready for that discussion? I'd like to have it if only to compare and contrast with your idea. I think each could help clarify the dynamics of the other, possibly leading to easier explanations of why one is better than the other.

I said "5 for a dollar" or 20 cents each. I think the week before bitcoin got slashdotted, the coins were between 500 and 50 for a dollar. There was no exchange, just people making deals in the forum. Meaning, the real "early adopters" were throwing them around like candy.

I'm not saying they'll never go up from their current prices. I just think bitcoin is well past the early adopter section of your bell curve.


I guess this answers my question and supports my premise at the same time.

It seems like few are using bitcoin as a currency, but those who are have to use it like a poor western union. (dollars in, dollars out) If people are not speculators, there seems little reason to hold BTC in your wallet just-in-case you might want to buy something.

This exchange seems to be trading
https://solidcoin24.com/p/main/market_data.msc?c=BTC&tz=-5.0&tf=m/d%20g:i:sa

Is the exchange open? I'm not seeing any new trades.

Seems like the perfect time for double spends.

If different people are seeing different difficulties and block rates, that would be a fork then wouldn't it?

I appreciate the direct answer to my question!


Clearly you are correct. GEM couldn't acquire a critical mass of users recruiting only from this forum.

But what about Silk Road bitcoin users and the like? They are not attempting to profit as early adopters. They are attempting to profit from actual business. Surely they don't like selling $100 of product and only receiving $90 by the time they get the coins to the exchange. (Exaggeration for effect)

I respect this opinion. But that was what everyone was saying when I was here more then a year ago. Bitcoins were 5 for a dollar then.

I am not trying to dog bitcoin. It is what it is, and in that regard it is awesome. Bitcoin was the first master planned scarce COMMODITY. Some people still think bitcoins should be used as money. Others still think it is a highly implausible foundation for monetary policy. 

However, you go on to make a very pragmatic argument.


This should be a clue that things are well beyond the early adopter phase. A year ago in that phase people said things like, "I have no idea if this will become anything. but its cool! Why don't we throw all our excess coins in a fountain?" Nothing pragmatic in early adopter sentiments.


Still waiting on "legitimate" uses, but I was encouraged to hear of even "illegitimate" uses like Silk Road. At least some people are trying to use bitcoins as actual money! Where do those folks get their training? I don't see a lot of chatter among them here.

I agree that value stability makes coins seem much more like traditional money to the average user. I'm just wondering if there are any "average users" actually using any of the coins.

Is there a forum anywhere that teaches people how to just use bitcoins to buy stuff? I mean how does the average Joe with a $10 bill learn the wonders of buying a cheeseburger with bitcoins?

Hey, did they release their white paper yet? What is this talk about policing peers? I was guessing to solve the problem they were going to have to add in implicitly trusted peers. It makes perfect sense really. Distasteful as it may seem.