These numbers have not imploded gold, and there will be far far higher XMR lost per year than gold misplaced or lost per year.
Gold's block reward is adjustable. In times of low population growth and low economic activity, it is very near to zero. It can also reach upwards of 2% per year in boom times. Since antiquity, it has averaged only 0.3%, much less than is probably needed for network security alone. On the other hand, the fiat regime since 1971 shows the terrible mislocations of capital caused by the "contained" inflation averaging 6% per year. 0.7% per year => monetary base doubles in 100 years, goes up a 1000-fold in 1000 years. 1.4% per year => monetary base quadruples in 100 years, goes up a 1,000,000fold in 1000 years. 2.1% per year => monetary base goes up 700% in 100 years, a billionfold in 1000 years. 2.8% per year => monetary base goes up 16-fold in 100 years, a trillionfold in 1000 years. 3.5% per year => monetary base goes up 32-fold in 100 years, a quadrillionfold in 1000 years. Anyone who takes the time to read the above list, realizes that no astute whale is going to buy things whose inflation is more than ~1.5% per year unless they are for short term speculation only, or there is another compelling consideration except inflation. Nonsense. You are not investing for 100 years. The nominal rise is meaningless. If the population + productivity is growing at the same rate, then there is 0 (ZERO!) relative nominal growth. You are exaggerating because you don't show the relative figures. So what determines the ideal %? I suggested the long-term rate of debasement should mirror the population + productivity growth. http://www.globalchange.umich.edu/globalchange2/current/lectures/human_pop/human_pop.htmlThe factors affecting global human population are very simple. They are fertility, mortality, initial population, and time. The current growth rate of ~1.3% per year is smaller than the peak which occurred a few decades ago (~2.1% per year in 1965-1970) http://www.nber.org/papers/w15834 Its conclusion is that over the next 20 years (2007-2027) growth in real potential GDP will be 2.4 percent (the same as in 2000-07), growth in total economy labor productivity will be 1.7 percent, and growth in the more familiar concept of NFPB sector labor productivity will be 2.05 percent. So that is a range between 1.3 + 1.7 = 3% to 2.1 + 2.05 = 4.2%, i.e. 3 - 4%. |
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These numbers have not imploded gold, and there will be far far higher XMR lost per year than gold misplaced or lost per year.
Gold's block reward is adjustable. In times of low population growth and low economic activity, it is very near to zero. It can also reach upwards of 2% per year in boom times. Since antiquity, it has averaged only 0.3%, much less than is probably needed for network security alone. On the other hand, the fiat regime since 1971 shows the terrible mislocations of capital caused by the "contained" inflation averaging 6% per year. 0.7% per year => monetary base doubles in 100 years, goes up a 1000-fold in 1000 years. 1.4% per year => monetary base quadruples in 100 years, goes up a 1,000,000fold in 1000 years. 2.1% per year => monetary base goes up 700% in 100 years, a billionfold in 1000 years. 2.8% per year => monetary base goes up 16-fold in 100 years, a trillionfold in 1000 years. 3.5% per year => monetary base goes up 32-fold in 100 years, a quadrillionfold in 1000 years. Anyone who takes the time to read the above list, realizes that no astute whale is going to buy things whose inflation is more than ~1.5% per year unless they are for short term speculation only, or there is another compelling consideration except inflation. Nonsense. You are not investing for 100 years. The nominal rise is meaningless. If the population + productivity is growing at the same rate, then there is 0 (ZERO!) relative nominal growth. You are exaggerating because you don't show the relative figures. So what determines the ideal %? I suggested the long-term rate of debasement should mirror the population + productivity growth. http://www.globalchange.umich.edu/globalchange2/current/lectures/human_pop/human_pop.htmlThe factors affecting global human population are very simple. They are fertility, mortality, initial population, and time. The current growth rate of ~1.3% per year is smaller than the peak which occurred a few decades ago (~2.1% per year in 1965-1970) http://www.nber.org/papers/w15834 Its conclusion is that over the next 20 years (2007-2027) growth in real potential GDP will be 2.4 percent (the same as in 2000-07), growth in total economy labor productivity will be 1.7 percent, and growth in the more familiar concept of NFPB sector labor productivity will be 2.05 percent. So that is a range between 1.3 + 1.7 = 3% to 2.1 + 2.05 = 4.2%, i.e. 3 - 4%. |
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First you must choose the long-term debasement rate category: a) declining nominal rate of debasement, i.e. asymptotically nominally 0 a la Bitcoin b) slight demurrage, i.e. shrinking money supply if you send it to the ether (forgot how Freicoin handles demurrage) c) fixed nominal rate of debasement, i.e. asymptotically 0 %d) fixed % rate of debasement, a la Inflatacoin (which failed? Was it 10%? Did it exist?) If you choose d (which apparently quite a few of us think is correct, but we may not be the majority?), then you have to decide the %. So what determines the ideal %? I suggested the long-term rate of debasement should mirror the population + productivity growth. http://www.globalchange.umich.edu/globalchange2/current/lectures/human_pop/human_pop.htmlThe factors affecting global human population are very simple. They are fertility, mortality, initial population, and time. The current growth rate of ~1.3% per year is smaller than the peak which occurred a few decades ago (~2.1% per year in 1965-1970) http://www.nber.org/papers/w15834 Its conclusion is that over the next 20 years (2007-2027) growth in real potential GDP will be 2.4 percent (the same as in 2000-07), growth in total economy labor productivity will be 1.7 percent, and growth in the more familiar concept of NFPB sector labor productivity will be 2.05 percent. So that is a range between 1.3 + 1.7 = 3% to 2.1 + 2.05 = 4.2%, i.e. 3 - 4%.
Another way of framing this question is to consider my theory that if the mining is won by the home miner (who doesn't care about the electrical cost thus crowds out the investment miner) this increases the number of spenders, which due to Metcalf's law, increases the network effects (growth in use) by the square of the increase in spenders. Thus the ratio in network effects growth between a 0.5% and 1% rate of debasement is ≈ 1 x 1 / 0.5 x 0.5 = 400%. Thus the ratio in network effects growth between a 0.5% and 3% rate of debasement is ≈ 3 x 3 / 0.5 x 0.5 = 2700%. Thus the ratio in network effects growth between a 1% and 3% rate of debasement is ≈ 3 x 3 / 1 x 1 = 900%. The ratio in network effects growth between a 3% and 5% rate of debasement is ≈ 5 x 5 / 3 x 3 = 278%. The ratio in network effects growth between a 3% and 4% rate of debasement is ≈ 4 x 4 / 3 x 3 = 178%. The math shows that going to higher percentages diminishes the potential gain in network effects growth for the same difference, e.g. 3 - 1 = 2 and 5 - 3 = 2, but the former is 900% and the latter is 278%.
One counter argument to the benefits of getting more coin into spenders hands is they spend putting a downward pressure on the price. But this liquidity means the price seen on the exchanges is more realistically the marginal price you will pay. Whereas I had pointed out that when liquidity is low, the market price is meaningless. |
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gmaxwell said "your proposal is completely ineffective".
But whatever, keep arguing... its what you're best at.
I am not arguing, I am clarifying that you (are intellectually handicapped—which I avoided stating until you attacked me—and) don't understand what Gmaxell wrote: and where was my solution proposed before?
But it's not a solution, alas. Ignoring other issues, at best it still leaves it at a simple piece of extortion "return most of the funds to me or I will reliably destroy your payment". It that sense pretty much isomorphic to "replace by fee scorched earth". The ongoing effort has other problems— a txout can be spent again immediately in the same block. Imagine it takes months to get the fraud notice out (heck, imagine a malicious miner creating one and intentionally withholding it). By that time perhaps virtually all coins in active circulation are deprived from the conflicted coins. Now they finally get the notice out (/finally stop hiding it). What do you do? Nothing? Invalidate _everyone's_ coins? Partially invalidate everyone's coins? Each option is horrible. Do nothing makes the 'fix' ineffective in all cases: the attacker just always sends the coins to themselves in the same block, the others make the failure propagate— potentially forever, and don't just hit the unlucky merchant with the potentially unwise policy. The " makes the 'fix' ineffective in all cases" refers to " The ongoing effort has other problems", so he means there is no solution in Bitcoin (in " the ongoing effort"). And my response: But it's not a solution, alas. Ignoring other issues, at best it still leaves it at a simple piece of extortion "return most of the funds to me or I will reliably destroy your payment".
That specific threat was paramount in my mind as I was designing my proposal and I think I eliminated it. The mining nodes reject any double-spend transaction which conflicts with the block chain. The only transactions that can be unwound are those which appear in a competing fork and only when that competing fork does not have enough sustained agreement. The premise is the attacker can't maintain 50+% of the hashrate indefinitely. Essentially what I am proposing is that orphaned chains are not forgotten by the sustained majority when the longer chain temporarily double-spends the orphaned chain, so the sustained majority (eventually) unwinds the temporary attack. The attack is differentiated from the majority because it is not sustained indefinitely. Abstractly I am proposing a smoothing filter on Proof-of-work longest chain rule. The ephemeral attacker is aliasing error. And I think (perhaps) they can be unwound to eliminate the double-spend, rather than to the ether. Gmaxell asserted that if transactions can be unwound then any recipient of funds could be under threat by the payer to send a double-spend and invalidate the transaction. I rebutted by explaining that transactions are only unwound if a double-spend appeared in a block chain, but that consensus nodes were not going to accept a double-spend into the block chain. The only way to get a double-spend into the block chain is to do a 50% attack, thus payers won't be able to make such a threat. And Gmaxell admitted that for the 50% attack scenario, Bitcoin has the same weakness in that transactions can be unwound when a chain is orphaned. If I have misinterpreted his writings, he will I assume point that out. |
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...protocol created so the network can reach consensus on how much reward is created?
I hope you understand that all voting (consensus by stake) mechanisms are centralizing.  (don't tell me you are surprised that for example the Bitcoin Foundation ended up as centralized and corrupt) And so now you have my answer why I don't contribute to the development of Monero. Because design-by-commitee (or worse, design-by-the-mob consensus) is proven to be an abject failure. All great open source projects have a Benevolent Dictator (For Life), who makes these key decisions correctly after fielding all input from the community. I don't see strong enough leadership (I believe there isn't even one leader, i.e. it appears to be leaderless organization) nor do I see agreement with the concepts I want implemented in an altcoin. If you look at what works (and what the Apaches actually did) is many leaders each leading their own competing projects (families or clan). The competition is what ends up forming the overall outcome of leaderless (resilient) organization but optimally because each competing entity is not leaderless. Is it possible for consensus to be between miners and stakeholder, so it's not just stakeholders that get a vote? I mean after all it's the miners doing the work. My hypothesis is that all consensus built via stake (voting) is centralizing. Also, is it possible for any other mechanism other than stake to reach consensus?
Satoshi's longest chain rule via Proof-of-work. And we are contemplating improvements to it. P.S. on the subject of how to best run a cryptocurrency, if given the power, how exactly would you dictate your perfect cryptocurrency? What decisions are best left outside the control of the masses?
The way open source appears to work best is all discussion is open, but when it comes right down to it, the leader keeps the direction focused. Watch Linus Torvalds explain it (also explains why people get annoyed with my posts). After Satoshi left, Bitcoin was leaderless and no significant innovation was achieved after that. |
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I have an incentive to contribute in that way, because we all benefit from hashing out the ideas.
I meant those who have implored me publicly and privately to contribute actual programming effort. So now they have my answer.
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Uh, pretty sure they did say your idea won't work...more than once.
Quote them to document your assertion. You can't. |
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...protocol created so the network can reach consensus on how much reward is created?
I hope you understand that all voting (consensus by stake) mechanisms are centralizing. (don't tell me you are surprised that for example the Bitcoin Foundation ended up as centralized and corrupt) And so now you have my answer why I don't contribute to the development of Monero. Because design-by-commitee (or worse, design-by-the-mob consensus) is proven to be an abject failure. All great open source projects have a Benevolent Dictator (For Life), who makes these key decisions correctly after fielding all input from the community. I don't see strong enough leadership (I believe there isn't even one leader, i.e. it appears to be leaderless organization) nor do I see agreement with the concepts I want implemented in an altcoin. If you look at what works (and what the Apaches actually did) is many leaders each leading their own competing projects (families or clan). The competition is what ends up forming the overall outcome of leaderless (resilient) organization but optimally because each competing entity is not leaderless. |
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Currency cannot behave like currency if the value constantly trends upward.
Gresham's law is supply-side driven. If the demand side rejects your bernankebux, the law no longer holds. Hyperinflation never happens to the reserve or empire currency. It only happens to fringe and revolutionary governments. Martin Armstrong explains this in great detail on his blog. By the time BTC is big enough for the economics peculiar to it to have a significant impact on the global economy, we are very very near the singularity, and no one will accept an inflationary currency.
You can join Kurzweil in his vacuous nonsense. The human economy has always been and always will be using inflationary currencies, your selfish hardtardmoney delusion aside. Until it gets pervasive, global, it's not a problem. When it gets pervasive and global, its not a problem for a different reason.
If you hold 100 USD, and 100 mBTC, and the mBTC appreciates rapidly, while you spend all your depreciating USD, then soon you have no more USD to spend. Your reserves are dominated in mBTC, and you must spend mBTC perforce, for lack of an alternative.
You think the target market of crypto-currency are investors. No that wouldn't be a currency. The target market are spenders and users of the facilities (network effects) it brings. The key to beating Bitcoin is making a currency that is more popular TO USE, not just to invest in. Think for example social media.
My take: XMR needs to bootstrap. It can't bootstrap if no one will take it. If it is inflationary, no one will take it. The only way to get people to accept an inflationary currency is to hold a gun to their head. Crypto has no guns.
I could not agree with this statement more. It is just another way the black swan of cryptocurrency is blowing up the way we understand finance. Folks keep trying to appy the limitations of current systems to this new one. I am curious what your thresholds are for it being inflationary/deflationary/stable. I couldn't disagree more. You've got to create uses for the coin. And the best way to do that is put the coin in the hands of as many spenders as possible so as to stimulate the demand for such facilities and network effects. The whales will be buying the spent coin and the virtuous spiral (spenders mine -> spend -> investors accumulate) spirals upward. Okay. Are there other proposals that enjoy any support with the devs?
That I'm not sure. Johnny Mnemonic proposed exponential inflation, which I think was ill received as a lot of people think it'll turn Monero into the next FreiCoin. Please do fixed nominal debasement or some tiny % such as 1%. That will leave the door open for a coin to do it correctly. Thank you very much. |
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I hate to bring fiat into the argument, but despite all it's problems the U.S. dollar does a great job at supporting large-scale economies. Even with a 2.5% - 4% annual inflation (definitely not "saver friendly"), capital formation does not seem to be a problem. Go figure.
You could not be more wrong. During the unfettered fiat standard (1971-), the by-far-the-most-glorious-and-economically-strong-empire-the-world-has-ever-seen has reduced itself to a miserable leech, a cancer to the world's economy, destroyed its productive capacity, essentially producing almost nothing that the rest of the world wants, utterly dependent on extorted energy and finished goods from the rest of the world, with half of the middle class already destroyed, youth unemployment soaring etc. I could not have envisioned a better way to reduce the land of the free and home of the brave to its current wretchedly pitiable state than fiat money. You are conflating the debasement of the dollar with the artifacts of the power vacuum of democracy. The repeating cycles of failure of the collective is not due to debasement. Debasement is absolutely required because growth of the population and productivity is exponential (percentage, not fixed nominal amount)-- hard money tards would rather savings eat productivity because it means capital can grow in purchasing power merely by sitting in hole and not being productive. Even the Bible admits this when it says in numerous versus about money "it will grow wings and fly away" and the punishment given to the tard who buried his hoard in a hole (to "keep it safe") in the Parable of the Talents was all his hoard was taken from him and given to the one who put it to productive use earning a compounded interest. The centralized control over debasement is one of the levers afforded to the power vacuum, but it does not logically follow that decentralized debasement is. |
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I actually think that transaction fees will be enough to support the miners without subsidy, because the miners will only process transactions with the highest fees. This will turn transactions into bidding wars, and it will become extremely expensive to get a transaction included in a block.
No, what it means is, people abandon the coin, stop using it, and move to a coin that has a fixed, non-zero subsidy of most likely 1-2%. In other words, Bitcoin itself will either have to dwarf every other coin in market cap and liquidity, by exponential magnitude forever to avoid this, or even BTC itself will die if they refuse to fork to non-zero block reward. Finally someone gets it.  I figured that out a year ago but most everyone was looking at me cross-eyed. I am still having difficulty agreeing that human population growth + productivity has only averaged 2%. The currently low birth rates in the west are an artifact of the massive bankrupt socialism, so this will end. |
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Currency cannot behave like currency if the value constantly trends upward. An asset's value appreciation tends to be the inverse of its liquidity.
Infinite divisibility means that the floating portion is always capable of providing a transmission mechanism. Increasing value means less of the float is required to perform the transmission function. It is a self-adjusting mechanism. The demand for liquidity has presumably also increased proportionally, so I don't think your postulate is correct? How much are you willing to pay to keep the greedy fatcats out of the cookie jar?
In the long run, demurrage games have vanishingly small impact compared to the forces they would mitigate. Any distribution improvements would be a tiny marginal one. That may not be the case if the masses are mining with electricity costs that are a multiple of the income from mining. The fat cats would then have to mine at-scale at huge losses. So instead they must buy at market prices which drives the prices higher thus supporting my claim that price scales to mining demand. OTOH, even if I am correct that price will scale to mining demand and if this caused mining to always be profitable for masses (which I don't think follows, because in economics we have the very important concept of marginal vs. average price), the balance of distribution shifts towards masses due to second order effects (velocity not just position). The cost of those improvements would be destabilization and shrinkage of the in-currency economy, as capital fled to other media.
Capital will chase adoption because price yield scales to demand. Separating transmission and storage creates a friction, an inefficiency and ill-liquidity in conversion, which I expect does more damage in aggregate than any improvements in distribution would be able to offset.
All monetary history disagrees with you. Most of the social value created by a currency is created by liquidity. Any impairment of liquidity is catastrophic, if only because competing media will not suffer the same impairments, and hence will dominate.
Debunked above? |
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You're still dodging the question of why it's necessary to save in-currency! Answer it, please. Smart people store wealth in a diversity of assets outside their currency.
Not once did I say it's "impossible" to spend. I'm saying that in any given moment, spending is discouraged due to perpetually increasing value. Just because people do spend doesn't mean they're spending fast enough.
And Bitcoin has less than 50 million transactions in its entire life, so don't even pretend like you know if it's capable of supporting any economy of scale.
Astute and echos some of my throughts.  The next post by Johnny after the above quoted one was spot on. I had relevant economic discussion in the other Monero thread. |
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I request if anyone replies to my points on economics, consider posting your reply to above linked economics thread instead of here. I will reply there. |
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I will continue in the Monero economics thread.
Please provide a link to the thread, so I could move my future economics related discussions there. Mining could be the most efficient way to introduce new users to the coin, as it doesn't require AML, KYC, fraudulent exchanges, etc..
Do you want a Mt.Gox and Coinbase driving your coin's adoption, or do you want to get the coins directly to them?
Directly, of course. [snip] I could set up a miner and earn $20 per month, expending only $30 in electricity The masses don't calculate their electricity cost. And you are not discounting the value of bypassing all the hassles, regulations, KYC bullshit hoops to jump through, etc with the exchanges. The masses just want to get some of this new cool coin in the easiest way possible. , except I couldn't (I can't even delete a file). And Monero doesn't even have a GUI much less even get close to targeting the masses in other ways. Again I reiterate that my career was based around making things popular for the masses, e.g. CoolPage with ~1 million verified downloads at download.com (and 335,000 websites confirmed via altavista) when the internet was 10 - 30 times smaller. Using CoolPage was a not a wise economics decision (much better would have been to use the templates at Yahoo Geocities or hire a web designer for $200), yet 100,000s (millions at today's internet scale) of people decided it was more fun and interesting to create the website with their own creativity. People are curious and love to learn. Word-of-mouth is viral marketing. The economies of the coins need people like me so the way to purchase them with existing stored value must always to be available
You are not the masses. Your efficiencies are different. The whales such as yourself will invest in the coin with the most adoption and clear quality of development. Period. I argue that the bolded part falls apart in the equation I = N * A, (inflation = number * average), though. Which is a pity: To have a coin with manageable inflation, the product of the number of individual miners and their average reward must be contained. Therefore there is no incentive for anyone capable to become a miner, and the ones not capable.. well, they cannot. Technically and economically astute people have a high minimum transaction cost in their life. $20 per month is not enough. The ones who drool over the idea of receiving $20, are not in the position to get even that  If they were, the formula above would take it to $2. You forget the basic economics principle that demand vs. supply resolves with price. The more that mine, the higher the price.  Go for 3 - 10% instead!
Get behind me, Satan! Going for 10% means 1.1^100 = 13,781 times higher coincount after a century. Even USD has mismanaged its issuance by only 6.5% per year on average for the last century. What differentiates hard currency from soft is that inflation is kept at check. Even the idea of having double the amount of coins in 100 years is worrisome/preposterous to many. And that is only 0.7% inflation. This is a really important matter. A 1%-point fail can easily destroy the coin.
Human population + productivity grows more in the realm of 5% per annum. Iron used to be a precious metal, but productivity changed that. Satan is behind all the Malthusian bullshit resource scarcity propaganda, e.g. global warming hoax, Rockefeller's funding of environmental movements, etc. The Bible says go forth and MULTIPLY (exponentially). |
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I haven't had time to read the intervening posts, but here are a couple of followups to posts before I decided to leave this thread yesterday. Ok so im reading the mini blockchain whitepaper. It appears to be a marginal improvement in some ways but it doesnt address the fundemental difficulty in scaling blockchains. The scalability problem doesn’t have anything to do with the size of the blockchain. It comes from the fact that each actor's transactions must be verified by all other network participants. Its the same math as network effects, except its a negative network effect.
Suppose actors make 1 transaction per minute.
1 actors = 0 verifications because he doesnt need to verify his own transactions.
2 actors = 2 transactions per minute. 2 * 2 actors = 4 transactions verifications. They dont need to verify their own so 4 - 2 = 2.
3 actors = 3 transactions per minute. 3 * 3 = 9 verifications. they dont need to verify their own so 9 - 3 = 6.
4 actors = (4*4)-4=12
5 actors = (5*5)-5=20
ect...
0,2,6,12,20,30,42,56,72
This very quickly gets out of hand when you consider that there is a cost associated with verifying a transaction. even if that cost is infinitesimal.
Actors (users) are not verifying nodes, so you math is slightly incorrect in that respect. However, your point remains valid that transactions scale O(NxN) by Metcalf or Reed's law. And verifying nodes probably don't scale by N actors. However, Metcalf's law doesn't tell you the frequencies at which actors do transactions. Visa is currently at about 6000 transactions per second, so this can be verified with a single Intel CPU, so no problem for verifying nodes. Scaling up to 6 billion people and micro transactions (more frequent transactions) might present a scaling problem. I've looked at Lamport signatures schemes that can verify 100,000+ transactions per second on a single i7 cpu. Since verifying nodes tend to be pools with considerably more resources (amortized over a large amount of hashrate), then a 10 - 100 cpu farm (or a Tilera 64 core cpu) is not unfathomable without destroying decentralization of pools. Long-term the solution is simple. An ASIC for verification will scale sufficiently to 6 billion and micro transactions. In short, no problem! Mini-block chain addresses the problem of block chain size and its impact on decentralization of mining. Cryptonite does not include anonymity however. The real scaling issue. He was arguing against a constant % rate of perpetual mining rewards (a.k.a. debasement). He conflated this with the exponential growth of the value and adoption of the coin.
This is not at all what I read. I understood him to mean he favored a fixed constant block reward (ie 1 coin) as opposed to the exponential growth from a percent inflation (ie 1% total coins per x time). The "1 coin per" scenario keeps rewards flowing while effectively reducing the value of the reward via the greater total coins while the percent ends up ramping up the coin supply on an exponential curve. Was it not clear? I see now that he was referring to an exponential growth of the money supply, and not an exponential growth of the rewards relative to the money supply. I see no divergence problem with an exponential growth of the money supply if you are distributing it to yourselves (i.e. the broad usership). The money supply has been growing exponentially since the beginning of human history. For one thing exponentially growing money supply is necessary to be consistent with the issuance of debt, because otherwise there is no means of paying the aggregately accumulated exponential growth in money needed due to interest compounding. If we want to consider divergent outcomes and resilient strategies, note that any strategy might have a divergent outcome, e.g. even a feedback loop might carry with it some game theory for manipulation. Note the alternative of a fixed nominal rate of emission means asymptotically the money supply stops growing (an exponential decline) which also has pathological divergence, e.g. you have to use transaction fees to fund mining which I had pointed out has pathological failure modes. |
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...Gmaxell stated that the existing strategy has the same problem with derivative unwinds as my strategy-- that is not the same as saying my idea won't work...
The cited paper: Variants in measuring the blockchain, such as following the heaviest subtree, not the longest chain, have been proposed, and are the best hope at improving that basic piece of the protocol. https://eprint.iacr.org/2013/881.pdfPerhaps the most important question that will affect Bitcoin’s success,
is whether or not it will be able to scale to support the
high volume of transactions required from a global currency system.
We investigate the restrictions on the rate of transaction processing in Bitcoin as a
function of both the bandwidth available to nodes and the network delay, both of which
lower the efficiency of Bitcoin’s transaction processing. Summarizes Gmaxell's point as reinterpreted as quoted above, and also my orthogonal point that there is an unbounded increase in number of confirmations needed to protect against an attacker who can sustain > 50% of the network hashrate: https://eprint.iacr.org/2013/881.pdf#page=7The replacement of the current world-view with an alternative one has far reaching conse-
quences: some transactions may be removed from the current ledger. This fact can be used by
an attacker to reverse transactions. The attacker may pay some merchant and then secretly
create a blockchain that is longer than that of the network that does not include his payment.
By releasing this chain he can trigger a switch that effectively erases the transaction, or redirects
the payment elsewhere. This is a difficult undertaking, since the honest nodes usually have a
great deal of computational power, and the attacker must get very lucky if he is to replace
long chains. The longer the chain, the more difficult it becomes to generate the proof-of-work
required to replace it. Satoshi’s original security analysis defines a policy for receivers of pay-
ments: a transaction is only considered sufficiently irreversible after it was included in a block
and some n additional blocks were built on top of it. With this policy, Satoshi shows that the
probability of a successful attack can be made arbitrarily low. As a receiver of funds waits for
more blocks (larger n ), this probability goes down exponentially.
However, if an attacker has more computational power than the rest of the network combined
(i.e., it holds at least 50% of the computing power), it is always able to generate blocks faster
than the rest of the network and thus to reverse transactions at will (given enough time). This
stronger form of attack is known as the 50% attack. The paper even points out that with network propagation advantages the attacker may be able to sustain the longest chain indefinitely with < 50% of the network hashrate: In fact, the assumption that at least 50% of the computational power is required for such an
attack to succeed with high probability is inaccurate. If we assume the attacker is centralized
and does not suffer from delays, he can beat a network that does suffer from delays using fewer
resources. We formulate the exact conditions for safety from this attack, and amend Satoshi’s
analysis below. We return to the analysis of the weaker double spend attack in Sections 6 and
7. The following calculation applies to a block period of 3.5 (1/0.29) seconds and 17 (59/3.5) confirmations: https://eprint.iacr.org/2013/881.pdf#page=17in some network configurations that match the assumptions above, an attacker with just over
24% of the hash-rate can successfully execute a so-called 50% attack, i.e., to replace the main chain
at will The paper has some related insights as I did for my idea: https://eprint.iacr.org/2013/881.pdf#page=18The basic observation behind the protocol modification that we suggest, is that blocks that
are off the main chain can still contribute to a chain’s irreversibility. Consider for example
a block B, and two blocks that were created on top of it C1 and C2, i.e.,
parent(C1) = parent(C2) = B. The Bitcoin protocol, at its current form, will
eventually adopt only one of the sub-chains rooted at C1 and C2, and will discard
the other. Note however, that both blocks were created by nodes that have accepted block B and its
entire history as correct. The heaviest sub-tree protocol we suggest makes use of this fact, and adds
additional weight to block B, helping to ensure that it will be part of the main chain. However it is not trying to address the ephemeral > 50% attack that my idea does. Instead the paper's GHOST protocol mitigates the fact that otherwise network propagation delay topologies can give the attacker an advantage such that it can execute attacks with the same probability of success with less than 50% (actually less than any probability curve calculated in Meni Rosenfeld's paper as cited). GHOST aggregates the proof-of-work over n confirmations of all forks in the subtree above (i.e. after) B, i.e. it is a smoothing function: 10We are in fact interested in the sub-tree with the hardest combined proof-of-work, but for the sake of
conciseness, we write the size of the subtree instead. https://eprint.iacr.org/2013/881.pdf#page=19Thus, if we wait long enough, the honest subtree above B will be larger than the one constructed
by the attacker, with sufficiently high probability. In my idea the nodes of the network utilize an additional piece of information which is the observation that a fork above B was orphaned by a fork which double-spends transactions in B (which applies weighting to the forks of the subtree above B by the observations of the nodes). Thus I believe my idea is more powerful and able to address the ephemeral > 50% attack (as well as < 50% attacks with greater probability) because it utilizes more information. That paper and my idea are applying smoothing filters which incorporate more information, so that aliasing error is mitigated. There is a general concept in sampling theory-- don't discard information, filter it instead. The paper also says we also shouldn't discard information when retargeting the difficulty: https://eprint.iacr.org/2013/881.pdf#page=21Retargeting (difficulty adjustment).
Given potentially complex relations between the
growth rate of the main chain and the rate of created blocks, and the fact that
GHOST depends more on the total rate of block creation, we suggest a change in the way difficulty
adjustments to the proof-of-work are done. Instead of targeting a certain rate of growth for
the longest chain, i.e., Beta (which is Bitcoin’s current strategy), we suggest that the total rate of
block creation be kept constant (Lambda). As our protocol requires knowledge of off chain blocks by
all nodes, we propose that information about off chain blocks be embedded inside each block
(blocks can simply hold hashes of other blocks they consider off-chain). This can be used to
measure and re-target the difficulty level so as to keep the total block creation rate constant. |
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The only other alternative Blockchain-by-Proof-of-X method that has been proposed since Nakamoto's solution has been Blockchain-by-Proof-of-Stake...
Recent rigorous security analyses of Blockchain-by-Proof-of-Stake methods are troubling...
Proof-of-stake == centralization. |
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I found my post where I had analyzed this paper on May 14. Well I see as January 2014, others below started to expound upon what I had explained in November 2013 at the threads given by the quoted links above. On The Longest Chain Rule and Programmed
Self-Destruction of Crypto Currencies... The rest of the point of the above paper regarding tx timestampes is really a flawed ad hoc way of attempting to achieve the decentralization that the prior sentence would achieve more correctly. http://arxiv.org/pdf/1405.0534.pdf#page=29A big question is whether timestamps are needed at all, see Section 7.3. An
alternative to timestamps could be various pure consensus mechanisms without
timestamps by which numerous network nodes would certify that that they have
seen one transaction earlier than another transaction. In this paper we take the
view that they should be present by default and further con rmed by (the same)
sorts of additional mechanisms. |
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I have such a headache from trying to understand this thread so instead, I am bookmarking it for later.  A lot of Anonymint's ideas (Aliasing) are analogies and technobabble, and really have nothing to do with Bitcoin or blockchain technology. (He should really stop trying to impress everyone with big words and explain his ideas in plain English.) Hey ad hominem bullshit flows out of your mouth. I can't compensate for your intellectual handicap. Anyway, Anonymint, I don't think more devs need to see the proposal. You've already got Gmaxwell and DeathandTaxes telling you it won't work, what more do you want?
Neither Gmaxwell nor DeathandTaxes have stated that my idea won't work. D&T hasn't even addressed my idea. Gmaxell stated that the existing strategy has the same problem with derivative unwinds as my strategy-- that is not the same as saying my idea won't work. But you aren't even able to comprehend. I think I've also given some fairly clear arguments also.
And I've addressed all of your posts. I doubt you can rent half the network power anyway.
I've put that out there as an open question in my prior post and no one has credibly addressed it yet. |
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