What if the community created a patch for Bitcoin that makes the number of coins mined and the "confirmation power" of blocks proportionally decline in relation to their concentration of mining power from a single IP?

Set an arbitrary limit under which there is no penalty (meaning that all small-time users and most medium sized miners will not ever be impacted, only someone trying to dominate the blockchain personally):

Ex:

Under 5% of the network = no penalty
5-10+% of network = 20% penalty
10-20% of network = 40% penalty
20-30% of network = 60% penalty
30-40% of network = 80% penalty
40-50% of network = up to 99% penalty

That way the network's main weakness would have a self-protection mechanism.

Blocks mined by people with too significant a share of the network would have to be mixed with those from people with a small stake of the network to be valid. That essentially gives the community at large power over malicious actors trying to acquire 51% that can't be abused but will keep them in check. Pools would shrink down and split up naturally to prevent becoming too large and incurring a penalty.

Interestingly this could also actually benefit the value of Bitcoins.

Mining and running nodes are separate things but the network needs both. Mining is essentially just the "distribution lottery" of Bitcoin.

If we think about the economics of Bitcoin it has value mainly because it has been distributed to so many people across the world. The people who have hoarded it are essentially not boosting the value of the economy right now beyond deciding not to sell them. If these coins were changing hands the BTC economy would really be roaring and expanding much faster.

Making mining even more decentralized might kick things to the next level. Penalties from having too large of a mining operation could be paid to the people who run full nodes thus giving them a reward for keeping things going as well. You could think of this as "node mining". Alternately these coins could be redistributed to everyone who is under the 10% threshold to make mining more economically viable long term.

Of course this could all be done as an alt-coin instead.

I guess the main problem is the ease of creating alternate IP addresses and proxies etc. The real problem would be setting a limit low enough to keep an attacker from just setting up a ton of small pools for their attack but high enough to still allow pools of big enough size that they can be trusted.

Dogie probably whined and cried for months about BFL being a scam.

Now that they are shipping and he decided not to order he is venting his anger at BFL itself instead of blaming himself (because that hurts too much).

Don't blame the company, blame your own stupidity Dogie.

And the award for most retarded post goes to....

Doggie!!

"BFL sucks for not delivering, let's try and fuck them over so hard they can never deliver"

Well from what I understand if you hold onto the coins for a year before selling then you only pay capital gains tax (15%). If you sell them within a year of getting them then you pay normal income tax.

If you buy them soon, you will potentially be able to turn a large profit in the next bubble and only pay capital gains. With buying mining equipment you will have to wait to get the coins over a long time(potentially never break even at current ASIC prices), and then wait to sell them as well. I would also agree that holding coins for a very long time could be risky. You'll actually have to hold onto the coins for longer though (if you care about taxes and selling at a high point) with a miner than with just buying the coins and selling when they next bubble (probably next year).

I'm not familiar with any way to write off mining equipment on taxes, care to fill me in on that?

That really leaves you with pretty limited market options for your coins. You'd have a lot more flexibility in your profit strategy if you buy them instead of mine them IMO.

Right now you're going to pay such a premium for people's ASICS in hand that it wouldn't even be worth it. Its a box that prints money. They will make you pay more than it likely will ever make considering difficulty increases when all these other ASICS that are being made start hitting the market.

If you had a box that literally printed money how much would you charge someone for it ?

You'd be better off buying Bitcoins directly with that kind of budget.

This is so stupid. Egold does not have infinite money. They can't always maintain a peg no matter what.

Just go ahead and dump all your money into logos, coding, etc, without a working system. You probably won't ever pay out your bounties anyway since you think you're just so smart (and convincing you is the required condition for payment).

I'll just report this thread and move on. Bye.

Mining definitely would have an effect on the price of BitShares because it increases the supply.
If supply increases but demand stays the same prices go down. That's the most basic economics possible.

You are basically just assuming that demand will automatically outpace supply at all times.
That's not going to happen. Bitcoin has been up and down so many times and survived it all.
Your system would collapse at the first hint of trouble. That's not going to thrive, it's going to die quickly.

So either a company screws themselves over or everyone voluntarily tries to keep the price at a certain peg even though it will make them lose money. Both are against the basics of market behavior.

These are contradictions.

If BitShares can be mined why would a company ever create a sub currency that they trade gold for based upon them? If the price of BitShares goes down, the value of their crypto-gold held goes down. They then can't buy any real gold and people who want to cash in can't get any. Everything collapses. They would basically be giving away all their gold. That's charity not business.

All BitShares would have to be mined already for a company to feel confident that trading gold for electronic currency would not be a risky investment due to inflation of BitShares.
Without a company to give away money, there is nothing to keep the price of sub-currencies corresponding to any physical currency in your proposal.

You are basically just assuming that BitShares will be valuable and always increase in value. Bitcoin has decreased in value many times and survived.  Under your current proposal if prices go down, everything collapses. That's not a stable system. The obvious instability of the system will prevent anyone from thinking it is valuable in the first place.

So can changes in BitShare value make the value of crypto-gold fluctuate or not?
You just said it was irrelevant. You have to pick one.
Otherwise we are all wasting our time. You can't just change the rules on the fly like that.

Either scenario kills sub-currencies really.

Here's a failure scenario:

Company A has 1000 ounces of gold.
Company A makes 1000 crypto-gold and pledges to honor them for 1 ounce of gold shipped to your door each.
They sell all of their crypto-gold to investors while gold is worth $1400 per ounce.
The price of gold goes up to $2000 per ounce.
Many people decide to cash in their Crypto-gold to the company because the price has risen.
The company now has a ton of crypto-gold and no real gold and they can't buy enough to cover demand.
When everyone else realizes this (shortly after they begin refusing to honor trades of crypto-gold for real gold) the price of crypto-gold collapses because the company can't maintain the peg.
Crypto-gold is now worthless. Company A declares bankruptcy. Company A goes out of business because nobody can trust them anymore.

The only thing propping the whole system up is consumer confidence that the company has a practically infinite supply of gold.
 If too many people sell too quickly the company goes under.
The only reason people wouldn't sell is if they were confident that the company had a practically infinite amount of gold to trade for crypto-gold and felt secure holding it.
Because everyone is acutely aware that no company has infinite resources and crypto-gold would only be as good as the company's trust this is pretty much impossible.
It's about as far from a trustless system as you can get.

The whole scenario you have proposed is a bit insane. Egold is not going to back BitShares (and by extension so called 'crypto-gold') with real gold because you have proposed that BitShares pay out interest.

 Interest payments increase the supply of BitShares and cause them to become less valuable over time (like the federal reserve printing money).
Whereas Bitcoin's money supply is fixed to give people confidence their coins will not be subject to infinite term inflation. This makes people interested in Bitcoin and gives it value in the first place. Scarcity and desire combine to create value. If nobody wants them or the supply continually expands forever the price will only go down.

So if Egold pays real gold for BitShares in any way they are going to be losing money. The system is not conducive to the behavior you have proposed.

You still haven't explained how the sub-currencies gain any relation to what they represent beyond more or less 'everyone is just going to work together to make it so regardless of money to be made (or losses to be avoided) by not doing so':


That's not how economics or game theory work. People try to maximize their own utility (value gained from their actions). Collective action is the result of many individual actions. Bitcoin is not some project where everyone works together to make it valuable for its own sake. Everyone is trying to make money, that's why Bitcoin has value. There is no trust involved.

If any asset can take on any label, there is nothing holding the value of crypto-gold to that of gold whatsoever (even recognizing your interest paying proposal). Even calling it crypto-gold, crypto-usd etc is totally baseless. Market forces as you currently have things set up work against you and would make the whole thing fail.

I've exchanged messages with Bytemaster and posted in his thread in the Economics sub-forum. Here's a repost of one of my posts for this thread:



Here's a few areas from the whitepaper that were especially concerning:


Bitcoin gets its value from its utility. Where would the utility for the BitShare blockchain come from? From it's ability to create sub-currencies according to the whitepaper. The big problem is that he has no way of making these sub currencies even resemble the value of those assets:


So there is no mechanism to force anyone to trade these electronic representations of assets for anything resembling their price in the physical world. This is a big problem because this is the only thing giving value to his alternative blockchain. BitShares would get their value from the sub-currencies being related to real assets, and not the other way around as he proposed. Since these sub currencies can't be forced into any particular price they will never work. This is a fatal flaw in the plan.

The logic of collective action, economics, and game theory all say that humans do whatever is in their best interest that they can get away with. Sub-currencies would quickly spiral totally out of relation to any name that is slapped on them. Without any mechanism to ensure that the represented currencies resemble the value of real currencies they do not represent anything and hence add no value.

---------
 
You can't expect the community to maintain the prices of these representative electronic sub-currencies at their own expense. People will only do what they can make money on.

Link to other thread: https://bitcointalk.org/index.php?topic=217181.0

So the creator of the project says he wants to buy them, therefore they have value? You don't see the obvious problem with that logic?

There is no circular reasoning on my side.


So if buyers of crypto-USD won't buy unless it has parity, then how does it get parity in the first place? Buying is the behavior which causes the price to rise.

That 20,000 only gives value to BitShares if you propose to give it to people in exchange for BitShares (direct monetary backing). Developing logos, writing code, etc actually doesn't necessarily give them a non-0 value.
As a currency the only thing that will give BitShares value is to either honor them in exchange for other value or if people collectively believe in the utility of them (Like Bitcoin).

 Since their main method of providing utility (sub-currencies) is flawed (no forced relation to the value of actual currencies) then BitShares are too.
Anyone who is currently saying they want them doesn't have an understanding of why things are valuable. You can't rely on people misunderstanding the system to make a system work. That's not going to give BitShares widespread adoption or value. Bitcoin became so popular because it was overwhelmingly recognized as a good idea (it provides utility above and beyond what were currently currencies).

For this proposal to work you would need some way for the prices of sub-currencies to be mathematically pegged to their actual prices (even remotely related). Otherwise the money to be made by deviating from market price for those assets will entice people to instantly deviate the prices away from any state resembling reality and cause the whole thing to collapse.

I am a firm believer that critical thought is a key component to creation. You have to brainstorm and then cull your ideas down into a nugget of truth.
Don't take my posts as any sort of personal insult. I want you to succeed because a decentralized exchange would be amazingly cool. I think you need a lot more work on your idea though.
I'd love to help you come up with a way to make it work once we can agree that there is a problem with this current implementation.

I've exchanged quite a few private messages with Bytemaster but he still isn't convinced that I have found the flaw in his plan.

Here's a few areas from the whitepaper that were especially concerning:


Bitcoin gets its value from its utility. Where would the utility for the BitShare blockchain come from? From it's ability to create sub-currencies according to the whitepaper. The big problem is that he has no way of making these sub currencies even resemble the value of those assets:


So there is no mechanism to force anyone to trade these electronic representations of assets for anything resembling their price in the physical world. This is a big problem because this is the only thing giving value to his alternative blockchain. BitShares would get their value from the sub-currencies being related to real assets, and not the other way around as he proposed. Since these sub currencies can't be forced into any particular price they will never work. This is a fatal flaw in the plan.

The logic of collective action, economics, and game theory all say that humans do whatever is in their best interest that they can get away with. Sub-currencies would quickly spiral totally out of relation to any name that is slapped on them. Without any mechanism to ensure that the represented currencies resemble the value of real currencies they do not represent anything and hence add no value.

You promised 10 BTC, but if you payed even just 1 BTC it would be fine. Please don't be someone who posts bounties without ever planning to pay them.

The flower shop could choose to charge more if customers pay in Bitcoins, sure. People could also shop there using dollars instead of Bitcoins until the owner doesn't even care about them anymore (for actual business use at least).

I think it is more likely that a steadily appreciating Bitcoin value would cause those shopowners who believe in the long term appreciation in the value of BTC to actually offer a discount instead.

Miners with BTC to spend would be more likely to use their coins making it a win/win situation.

http://www.reddit.com/r/Bitcoin/comments/1c1jqd/butterfly_labs_may_be_scamming_us_all/


Text:

"Is anyone else tired of waiting for their BFL asic's to ship? Anyone pissed off about the increased price and lowered hash rate? Anyone else wondering when the hell they're even going to ship their product? I know I am. On all accounts.

Today a buddy of mine approached me with some very interesting research he did. So let's look at what we've got.

First is this address. http://blockchain.info/address/1NLg3QJMsMQGM5KEUaEu5ADDmKQSLHwmyh

Now look at that data. Blocks solved and new coins created at 12 o'clock, 2 o'clock 4 o'clock and 8 o'clock today (4/9/13). One address solving 4 blocks in 8 hours. I mean, sure, that's obviously possible with the new hardware, but that's some serious power. Especially for one address to have. Seems a little fishy to me.

Next: Let's check that most recent block. http://blockchain.info/block-index/371485/000000000000019025d6a44dfa2af3a9b8965e277c04a2d4c50d9ae1d4711142 Solved and sent to the same address. So we've got the block. And where it's located? The Kansas/Missouri border.

Ok. Pause. How does this relate to and/or implicated BFL? So far, it doesn't really. But looking at the facts. We've got one party mining alone, solving a ton of blocks at an alarming rate. There's no problem with that. But then I check BFL's website.

Their contact page: http://www.butterflylabs.com/contact/

Awfully close to the exact same spot on the map as the IP solving those blocks, no? And BFL would certainly have the power to mine like that if they didn't sell their machines.

Now also take into account that these devices were supposed to ship months ago. Those of you who follow the forums keep getting told "soon" or "within the next month" or whatever it may be. But here we sit, sans BFL-made ASICs. They've been taking money since June, but have yet to deliver. We've seen pictures of chips on boards, and we've seen the rising price of coins. We haven't been given an update on shipment dates either, and that was supposed to be this week(again).

I hate throwing the conspiracy theory card around, but this is looking an awful lot to me like these guys saw they could make more money by mining than by selling their products which people have paid for. I don't know if that's illegal, but it's certainly immoral. Given that BFL has already been suggested a scam I think this may hold some weight. Thoughts /r/Bitcoin?

If I'm wrong here, interpreted data incorrectly, or anything else please let me know.

TL;DR - Butterfly Labs is holding onto their ASIC's and using them to mine instead of shipping them to everyone who pre-ordered."



What do you guys think?