My elevator pitch would be:

"Captcha's are broken, but they are required for the web to continue to function."

(Say something that people can agree with, the second part, and something plausible but perhaps they weren't currently thinking about, the first part.

"Bitcoin is going to be the new captcha. It can anonymously separate botnets from humans based upon tangible value."

(What makes bitcoin, different from everything out there. But not something that is philosophically polarizing.)

"Anyone who sells a captcha replacement based upon bitcoin, is going to make a boat load of dollars."

(Tell the audience why they need to follow up now.)

While everything you say is true. I'm not arguing your logic at all, here is why as an "elevator pitch" it falls flat.

It doesn't explain the actual benefit of using bitcoin for the listener in the elevator. If the listener replies, "That's nice! I hope to hear more about bitcoin as it matures!" Then your elevator pitch has FAILED.

An elevator pitch is all about opportunity. Not about the subject matter. An elevator pitch has to make the listener interested in immediate follow-up. Because if he fails to immediately follow up, he personally will lose the opportunity to gain value, and someone else will likely gain that opportunity.

This exchange is fascinating! At some sense it's just a matter of semantics, but it is very insightful semantics.

Logically I can support knightmb's statement "trust everyone collectively".
However kiba's statement "trust no one" is disprovable,
as is knightmb's statement "Trust no one node, but if enough nodes are saying the same thing, then trust that."

The way the system works is every node attempts to receive every transaction, they each try to put every received transaction into a block at the same time. And while they are doing that, they each play the hashing game individually looking for fate to bless them with a match before it does anyone else.

So at any given point in time the system is really *trust (but validate) someone arbitrarily*. This happens when someone declares a block & hash "solved". All the other nodes check the block for self consistency, but they DON'T check the block's transactions for consistency with the transactions they themselves were working on. Nor do they check against the transactions other nodes received. So I see no support for the "if enough nodes are saying the same thing, then trust that."

All nodes simply declare, "I will trust this node's work as the next increment of bitcoin truth, because fate has blessed it." So it doesn't qualify as a "trust no one" system. Node's never say, "Hey you fuck head! I have 5 known transactions you didn't bother to put in your block! You are a lying bastard." Everyone just presumes the missing transactions will be resubmitted and they'll end up in a subsequent block. This is heuristically plausible, but not absolutely deterministic. Everyone has to keep checking to make sure their transactions actually cleared the process.

So if knight's "trust everyone collectively" meant, "trust in the process" I find that insightful and a good motto. I'd probably add "...but keep doing your own validation!"

mkrogh: Yes, you are correct.

There is absolutely no requirement for there to be such latency in the bitcoin system. Nothing fundamental would change if the system were implemented with a block list that updated every 10 seconds, instead of every 10 minutes. It was just a design decision that could be changed without effecting monetary policy a bit.

In fact, there is no requirement their be a block list that updates in increments at all. The system would work fine if each transaction were validated one-by-one. In effect one transaction per block. That was a design decision to make networked consensus building easier.

However, when you say "local transaction validation" what you are grasping for is a truly distributed system, rather than a monolithic system made redundant. The current version of bitcoin is the latter. Each node does exactly the same work as every other node. Each redundantly checking every transaction. It is a system horribly wasteful of resources. And because it is so wasteful, generates latency as a waste product.

Bitcoin could be made into a truly distributed system by storing the transaction graph in a distributed hash table. This is the kind of magic that is behind most other P2P systems. In effect, each bitcoin address would be arbitrarily mapped to a smaller set of nodes that checked its transactions. In such a system, there is no need to broadcast global state to every machine. This takes huge amount of latency out without needing to change any of the desired behavior.

Hear hear!

I though I tried to explain the lack of necessity, but people seem distracted by their repetition of mantras.

A woot! To RHorning for his last post.

I'm not a fan of bad banking either. Those that are bad at their jobs should be fired. Those that scam should be tried and locked up.

I think mortgage brokers, realtors, and even some title companies should be investigated as "scam artists" for their activity during the housing price boom. All of these people convinced ordinary folk (maybe gullible ordinary folk) that obviously overpriced properties were affordable sound investments.

I also think that any bankers that gave out mortgagees during the housing boom should share more than a preponderance of the responsibility for these stupid loans. They are the people holding themselves out as experts on the subject.

Banks should never be allowed to get too big to fail. And if they practice banking they should fail.

--

PS: that should say if they practice BAD banking.

Nicely written gridecon. I completely agree.

I've been considering posting a similar critique but you've laid the issue out clearly. if you don't mind I'll add my thoughts here.

As the minting process and the transaction recording process are one, there is really no reason to separate them. I don't disagree with knightmb's points at all. But I do think that is is really important to point out that all that CPU power and electricity usage is absolutely NOT required for the task at hand.

Generating blocks serves three critical but independent functions in the bitcoin system.

1. It permanently records valid transactions in a roughly chronological order.
2. It creates *consensus* among all nodes on what transactions took place and when, WITHOUT relying on a central authority. That was a hugely clever breakthrough.
3. It trickles bitcoins into circulation at a regularly scheduled rate. (roughtly 50 BTC/10 min) Also a nice motivational trick.


However, all of these required tasks could be done in a much more efficient manner.

Generally in a P2P system, if you add more nodes then the necessary machine resources needed per node decrease. (for a given usage level of the service)
However, if we add more nodes to the bitcoin network the necessary machine resources needed per node increase. This is true of CPU usage and network bandwidth.

Satoshi already pointed out that the goal of this is not to scale to millions of pure P2P nodes. But instead to have thousands of transaction checking peers each having thousands of clients. That means the goal is to create core "central authority" of peer nodes each of which is trusted by some clients, but the core peers do not necessarily need to trust each other. This is a absolutely critical design construct if the current implementation of bitcoin is expected to scale to millions of traders.

However, there are other design possibilities that could meet each of these three critical goals without exponential growth in resources utilization.

Implementing the transaction graph using a redundant distributed hash table comes to mind. This could be done with or without a core of central peers. Another possibility would be just to store the transaction graph in a SQL database and use database replication among the core peers. Either of those satisfies goal 1 and 2 using minimal system resources.

Goal 3 is implementable by simply generating a distributed shared secret, then using that shared secret as a concensus random node to send 50 BTC to.


I agree with gridecon that such an implementation would out compete the current implementation. Even if it otherwise following exactly the same external behavior and transaction validation rules.

That is really quite clever!

Do you simply assign the transaction to two bitcoin addresses and transmit it to the network for inclusion in the block list?
Can you do more than two? Is it a one-or-more situation?

Is this feature in the GUI yet?

I obviously disagree, but it is a point that can only be proven empirically.


Your point is well made, but I want to suggest that talking about bitcoins as "stock" is risky semantically. There are lots of agencies that investigate fraud in such areas. It is common for scammers to tout their schemes as "shares" in an "investment opportunity". Metaphors show intention. It is intention that gets people locked up. I know you don't think of this as a scam. But it is wise not to share terminology with scammers.

If there was a bitcoin company and its goal was to make money by providing a service. And it sold shares that inherently increased in value based upon profit from customer's paying the company for that service. Then you could call justifiably call it stock. But you can't form a company whose business is SOLELY to sell the company's stock. And tout that if you buy the stock early, the people who come later will want to pay you more for that stock because it is a limited commodity.

Trust me. Doing that is "a bad thing." :-)


It was a brilliant decision! I've said that in another thread.

But sometimes brilliant bootstrapping decisions can lead to hamstrung growth decisions. We disagree about this, but the truth will eventually play out empirically.


I wrote on this in this post, but it got buried by a flippant comment about relative wealth. I would appreciate some comment on it.
http://bitcointalk.org/index.php?topic=75.msg7603#msg7603


I think the porn-industry could find value here. However, for that to benefit the bitcoin system as a whole, there needs to be something the porn-industry could spend their new BTC on BESIDES dollars. Maybe hosting. Maybe an associates program that pays for referrals in BTC. Then coins would be in the hands of more people in exchange for actual services rendered. More coin holders opens more possibilities for people to sell random commodities for BTC. That would create a real BTC economy of both coins and commodities/services circulating.

If the majority of people just buy BTC for dollars, then spend them anonymously on porn, and the porn industry sells the coins back for dollars; then you have "a money transfer service" which cries out for the regulators to attack.

While I doubt I would call it "the true price inflation rate", I understand what you mean. I would call it "the change in relative value between two commodities."

And as in my prior post I claim that is "a good thing". Quoting myself below: (yes this is obnoxious, I know. But it was a long previous post)


So back to your points again.


Yes, I completely agree that in this situation the fed creates more competition for HOARDERS. It can out compete you because it is in a very real sense, an endless hoard. This competition drives what you could charge for lending out BTC from your hoard.

In the same very real sense it "steals POWER" from the hoarders. (Meaning those whose BTC is not circulating and thus not affecting the production or consumption of new commodities.) And it gives that power to those who will affect production directly, or influence production through consumption.

I agree, and I make the claim that this is "a good thing".


I disagree with this because by its very nature, the Fed cannot benefit from receiving interest. As discussed above, the Fed represents an infinite hoard. It is of zero benefit if the hoard becomes "infinite+1".

Now if the fed demanded to be paid in corn, or cows then you would have reason to be suspicious. But it sees no benefit from more FRN.

Ah, I finally see where our disagreement lies! Call me slow!


I agree with your statements above! Woot!

But I'm making the claim that your checking, savings and CD accounts are the SECOND situation not the first. When you sign up for a bank account you sign a contract with the bank. It is a transaction just like any other. You SELL them your money, and you BUY their "paper" that promises that they will perform as stipulated. If the stipulation is "on-demand withdrawal" that means if they don't give you some of THEIR BTC when you demand it, they are in default on the contract and you can sue them.

I claim that, in no way, is the BTC you give the bank still yours after you make a deposit. The abstract "account" specified in the contract is yours and the contract binds the two of you to certain behaviors.

However, the bank does sell other services that match your FIRST situation. They call them "safe-deposit" boxes. You rent them from the bank fill them with YOUR property and the bank itself never has claim on your property.



OK, so we agree on the following. That was what I was saying in my previous post.


Furthermore in the previous post, I claim, if you can do this efficiently you can quickly convert  "loan properties" to BTC by quickly selling them to investors on-demand. (in this case investor money means hoarded BTC)


So loans don't need to be "backed by savings" in the sense that there is BTC in a hoarded address. I needs to be backed by an asset liquid enough to be converted back to BTC on-demand. (gold would probably qualify)

Re-read the whole thread. I found lots of wisdom in it, and this unanswered question. So I'll go first in answering it.

No. I don't think Bitcoins would become popular if the supply of bitcoins was already fixed and no more minting was occuring.

Does anyone disagree? Because bitcoin's dreaded monetary inflation is trivial to stop right now.

I'll answer this, but I think your next post was much more interesting. I'll draw from that here as well.


This is the second time I've seen the line "The people whom receive the new money first benefit the most". I don't know if it was you or bytemaster that said it previously.

Who are these people? I've really never heard of the people who receive the money first.

The BEP makes the money and delivers it to the federal reserve. The federal reserve doesn't "spend it" in the any consumer like sense of those words. They simply keep big piles of it for banks to borrow. Those banks borrow it with interest. Granted, now the interest is very low. It's almost like borrowing it without interest, but it still has to be accounted for and repaid according to the loan terms.

So those would be "the people" who get the money first. But the banks don't take the money unless they can lend it out at a profit. Otherwise, the additional money would just be a liability. Yes, they get a lower interest rate, but interest rates always consider cost & risk. The large banks are *supposed* to be low risk. And the fed is *supposed* to monitor them to make sure they are. Lending only to a few low risk customers keeps costs down for the fed. Banks compete for borrowers but lend to riskier clients than the fed. That comes with additional costs and a higher rate.

I'm still not seeing "the evil people" who get an advantage. Unless you consider all banks that deal with the fed as those people. I'm also not seeing how anyone can take advantage of lower prices in the marked. Perhaps I'm dense.

---

"Money spent into existence alters the price structure into something different than what it would be if that money had not been created."

I agree with that statement. After the money has been loaned and it is actually spent, thus entering circulation, then prices are different then if that money was hoarded out of circulation.

"By the time the money filters through the economy and raises the general level of prices due to more money chasing the same amount of goods, the non-recipients of this new money are left with less purchasing power than before."

We are not far apart on this point.

However, if the Fed does its job perfectly (according to its mandate) then the new money entering circulation, keeps the PRICES from deflating and they remain perfectly stable. If there were not ALREADY an increasing amount of goods trading, there would be no need for the fed to encourage more currency to circulate.

So with a perfect fed, existing dollar holders have exactly the same purchasing power as they had before the new money. But you are correct, they would have less purchasing power than they would have had if prices had been allowed to deflate.

And for complete clarity, in my view that is a good thing.

Money, when used in country, should not a commodity to be invested in. Specifically, you should NOT gain value by holding money in your piggybank or your mattress. That doesn't do anyone any good. You shouldn't necessarily lose value either.

I know you disagree, you consider it a benefit of delayed gratification. I read the other post.

But hoarding money OUTSIDE of circulation is fundamentally different than investing money in an interest bearing account. Saving's accounts pays interest because the money is not hoarded. Instead it circulates to people who use to create more commodity or service value. This additional created value IS "the time value" of money. It's the alternative to hoarding that is worth MORE than hoarding.

When money doesn't circulate, it is worth zero to the economy. I've heard the argument that "it's an investment in the economy" but that can't be correct.

If you and I each have $100 dollars and we both put them in our piggybanks we have both helped the economy none at all. Sure we are not competing for goods, so others might buy more with their money than if we competed with them. But "the economy" does not increase in commodity value. And if instead of putting my $100 in my piggybank I decided to burn the bills, I would still have exactly the same effect on the economy as you. Zero. There is no effect until the money starts to circulate again.

If we reward people for having no effect on the economy. Things will go badly. Hoarding money over time has no positive effect on commodity production, so it should not be rewarded by value creation.

You absolutely have more bitcoins, but less gold than the kings of old.

But seriously, four guys discover the bitcoin system they all have $10,000 they want to trade for bitcoins, but they aren't sure about the system.

The first guy says what the fuck and trades his $1,000 for 200,000 BTC
The second guy decides a month later and trades his $1,000 but gets only 20,000 BTC.
The third guy is a little slower but says WFT a month later and trades $1,000 but gets only 2,000 BTC.

The fourth guy gets on twitter and says, "Screw bitcoin, it's a pyramid scheme. I'm trading for ฿ and spending them on Thai hookers. That's the way I want to be fucked!"

No one sees that as in obvious danger?

OK so you have a point! ;-)  However, in my defense, let me explain what I was alluding to.

The initial silver Dollar was defined as the average amount of silver that is in the equivalent Spanish silver coin at the time. Those were the common trading currency of the time. The dollar needed parity if the coins were going to be interchangeable at that time.

But the common lament is "Oh, if I could take my 2010 FRNs to the Federal Reserve and demand a 1800 Silver coins I'd be rich! They've stolen all that value from me."

But even with the original silver coins, the commodity value of the silver was always less than the monetary value of the coin. That makes perfect sense if you think about it. A silver nugget has to be assayed, smelted, and pressed into coin. Part of the value of the coin is silver. The other part of the value is confidence in the "token" itself.

If the commodity value of the metal is ever more than the monetary value of the coin, it is rapidly taken out of circulation. Not by governments, but by individuals and traders. If I can pay one-dollars worth of corn for a coin, but melt it down into one-dollar and ten cents of silver, poof, they disappear. Simply sell the silver back for another dollar coin and start again. 10 times and you have a free dollar.

The point of the gold and silver standard was for trade between countries. It was less important for intra-country trade.

I just answered this here.

http://bitcointalk.org/index.php?topic=376.msg7621#msg7621


But as for the housing crisis, I didn't mention fractional reserve banking at all. I gave an coherent explanation of how it happened that didn't involve the fed printing money or even the banks making recursive loans.

You ignored that and replied, "it was fractional reserve banking", because you don't like fractional reserve banking. If you want to dispute me. At least show how what I said was not possible or even not probable.

By the way, the last paragraph is gibberish. Or is it just me?

So supposing that there exist bankers that take on-demand deposits of BTC and make sound-loans of BTC that pay interest in BTC. What I'm saying is no fraud or scamming by bankers. And no hedging on my part, these are fractional reserve banks. They lend out any 90% of depositor's BTC and keep 10% on hand as easy "cache".

What you are proposing (and I hear proposed by others as if it were a common case) is a run on all banks at the same time of all "on-demand" BTC deposits.

Now, one unacknowledged possibility is the "on-demand" deposits are paid with BTC from term deposits like CDs. But perhaps you considered those "on-demand" with penalty and the run includes those.

Now if "good banking" is going on and there is no BTC in-house, then all the BTC is out on BTC interest producing loan and is backed by collateral. That makes these loans nice low risk "BTC income producing properties". So at that point the banks can sell these nice low risk BTC income producing properties to other investors willing to pay BTC now in exchange for more BTC later. If there is a default the investor claims and sells the collateral.

If you unwound every loan this way, all the BTC would be returned to the depositors, and outside investors that used to have cash, would now hold sound low risk BTC income producing properties. In effect, they would be the new banks, but they would also be their only depositor. If they wanted their BTC back, they would have to sell their investment property to someone else.

If I've explained this coherently, can I consider the BTC fractional reserve banking myth "de-bunked". :-)

---

One of the best things about BTC is that it is a high velocity currency. We don't talk about that much. But because it is, it would be much faster to unwind this situation than with the lending of gold or paper. That is why banks deal with electronic currencies so much.

--

However, I still maintain that with planned monotonic deflation, BTC banking will not evolve. Deflation simply causes too much risk. (see the thread on negative interest)  There will likely be speculative high-risk/high-reward investments, but they will be done by "the bitcoin rich" rather than by average individuals pooling their money in on-demand banking.

Are you kidding?

In a market based society there is only relative wealth. Bill Gate is not rich because he has 40 billion dollars. He is rich because we all don't have 40 billion dollars. If we did all did the "average" house would cost 100 billion dollars and we'd all still have mortgages.

Hell, I predicted the crash.

I also listened to mortgage brokers on the phone in California. Realtors and other locals who made huge sums of money before the crash explaining why it could never happen.

"They are not making any more real estate! It is always going to go up in value! Look at the history, it's been up every year since world war 2!"

But the problems weren't caused by monetary inflation. The problems were caused by bad banking. And they weren't caused by creating money. They were caused by taking money from people's retirement accounts and "investing it" in California, Florida, Nevada, and Arizona pooled mortgage funds.

It was simple supply and demand. Investors wanted to buy pooled mortgage funds because they were safe and profitable. (Initially they were.) However, the initial well vetted mortgages got pooled first and sold to the smart guys who invented the concept.

Because of demand to buy these funds, mortgage brokers lowered all the vetting rules, so they could quickly close new mortgages to sell into the pools. A mortgage broker could loan mortgage money in the afternoon, and sell the mortgage into a pool before close of business. The buyers didn't do any checking so who cares if the brokers did any?

They loaned 9X people's annual salary with no money down. Then sold the mortgages as low risk investments. That is where the criminal fraud was. The big fund managers were irresponsible for not checking up on their suppliers. It was "bad banking" pure and simple. No money need be printed to create the inflation. It could have easily happened with a gold backed currency.

I met my first Libertarian roughly 35 years ago. But I've been hearing people advocate for going back the the gold standard for longer than that. I agree with the pragmatic nature of Libertarianism that says less government is better. However, often find distasteful many people who call themselves Libertarian but use it as an excuse to argue that police and drug laws are bad. Ones I actually know personally, do this because they use drugs irresponsibly and exhibit anti-social behavior which antagonizes the police. I prefer not to be lumped in with them, even though I have some of them as friends.

While I'm well aware of complaints about inflation and FRN, I had not heard it called Austrian economics. I disagree with the proponents of going back to the gold standard. I also find idiotic those who claim going off the gold standard was some sort of secret conspiracy. (I'm not claiming you are one of these Bitcoiner. I'm not so sure about Bytemaster though.) There were issues with gold backed money. It was publicly discussed, passed by congress and in all the papers. It was no secret. Lots of people didn't like it and many of them were rich. Poor people by definition had nothing to lose in the switch. So unless it was a conspiracy of the poor to steal value from the rich by causing inflation, it doesn't seem plausible.

It is like calling Obama-care a secret conspiracy. I disagree strongly with that, but it certainly wasn't a secret conspiracy. Yes it benefits some and disadvantages others. Yes, it institutionalizes the concept that there is a service you are entitled to but not responsible for paying for. But it wasn't a secret, and it wasn't a conspiracy of the insurance agencies, hospitals or medical professionals.


I pasted the quote because it was exactly what I was going to write about bytemaster's arguments on this site. Mainly this part:

"generally lacks scientific rigor,... theories are not formulated in formal mathematical form, but by using mainly verbal logic and what [he] claims are self-evident axioms."

also

His explanations are "contradicted by the evidence." At least by my experiences.