Adapting to the release of Zerocoin

[giszmo]

Yes, but you can't turn "Zerocoin Bitcoins" back into real Bitcoin unless you find someone willing to exchange them.

I fail to see why would anyone be willing to do that? What's the idea behind of turning real anonymous cash into pseudo anonymous one?

For a Zerocoin in its current implementation you would pay for 40kB of storage and one second of computation for adding it and for one second of computation for spending it.
Imagine how long loading the blockchain will take if the millions of transactions we have so far, are monsters like that. A node could verify 1 transaction per second, not thousands. The blockchain would be 320GB, not 8GB. Imagine how nobody would mine your transaction for 1ct. We would already compete for space in the block chain and certainly the fees would be at least $1 per transaction. Maybe rather $10.

Zerocoin is a tool to launder money. To plausibly deny knowing about all the other coins in your wallet. People would move their coins to zero once they are worried about this and pull them back out one by one. They would send the reviewed coin to a new address to be able to claim they just got tipped and only then spend them.

Zerocoin is needed for bitcoin to make the coins fungible.  A money without fungibility is no money. I guess Satoshi relies on this to happen at some point. And so do those hackers that have closely watched wallets.

Mike do you know if the current protocol deals with DOS attacks? If it takes 1s to find out that my zerocoin transaction is invalid, I could bring the node to a halt. Would I have to pay a fee to make the mining node even try?

[d'aniel]

Also, shouldn't this be moved to alt-currencies?

The whole idea here was to present a way for Bitcoin to benefit from new innovations that are too controversial to integrate directly into its block chain, and to neutralize their destabilizing effect.

[Luckybit]

The Zerocoin people are going to release a library in a couple days that any Bitcoin protocol-based currency can implement.  The problem with Bitcoin implementing it directly is that it's very cumbersome - transactions are large and verifying them is CPU intensive.  The result would be that Bitcoin would have a much harder time staying decentralized while it scales up.  However, alt-coins will undoubtedly implement it, and compete with Bitcoin for market share.  In anticipation of this, I'd like to describe a way that a Zerocoin alt-chain could be implemented that would reinforce Bitcoin, rather than destabilize it, as well as the incentives that the existence of Zerocoin alt-chains creates for Bitcoin miners.

Symbiotic Zerocoin alt-chain:

Zerocoin could be implemented on an alt-chain that's merge-mined on the Bitcoin blockchain, where new currency units are allowed to be created (perhaps at a limited rate) by anyone who has provably destroyed an equivalent number of bitcoins (using OP_RETURN), and mining the Zerocoin chain is incentivized by transaction fees and the value that a strong symbiotic Zerocoin chain would add to Bitcoin.  The market would determine the amount of bitcoins that move over to the Zerocoin chain; if the value of a zerocoin rises much beyond that of a bitcoin, then people would tend to turn bitcoins into zerocoins and profit off of the difference.

By functioning symbiotically, the bitcoin unit of account would be reinforced instead of destabilized - the Zerocoin chain would act like "a rising tide that lifts all boats" instead of only its own at the expense of bitcoiners'.  Zerocoin mining revenues would go toward strengthening the combined mining network.  Users wouldn't have to speculate on how many of their bitcoins they need to trade for zerocoins, and at what price, in order to retain their purchasing power.  If Zerocoin turns out to have seriously damaging bugs or scalability issues, then conservative users that keep their long-term value parked on the Bitcoin chain won't have to worry about going down with the ship.  This would also set a nice precedent that new coins can be adopted without threatening the stability of their predecessors.

Incentives faced by Bitcoin miners:

If the demand for a Zerocoin chain is large, then Bitcoin miners collectively have an equally large incentive to provide one in order to avoid losing market share, and they are in a position to provide by far the most secure one.  They could mine an alt-chain that competes with Bitcoin, but I hope they see that the correct collective strategy (https://en.wikipedia.org/wiki/Nash_equilibrium) is to mine a symbiotic one like I described above, and only that one.  By mining a competing one, a miner might earn more immediate inflation revenues (though profitability will in any case be driven down to a minimum in the long run due to stiff mining competition), but they would do so by reducing the utility of Bitcoin as a store of value, and thus cryptocurrencies in general: if the flagship one can't preserve this functionality in the face of new innovations, then people will recognize that likely none of them will be able to.  In turn they would detract from the future value of their own hardware.

To get a sense of the incentive of a miner to preserve the store of value function, consider that a single person storing $100,000 in value for a year contributes to the overall valuation of the currency during that time as much as a thousand people that casually use it for transactions and only keep on average $100 stored in it at any given time.  It thus strikes me as potentially important enough of an issue in some cases for miners to actively discourage the merged-mining of alt-chains that detract from Bitcoin's store of value functionality, by refusing to build on blocks that do this, and by merged-mining symbiotic alternatives.

Bitcoin miners who mine the Zerocoin chain would also have to expect to face scrutiny by government agencies. I think for the most part the Bitcoin community is not an insecure community and is okay with that possibility but it should be you mine at your own risk here. If there is a situation where someone does something wrong then it's like running the Tor node.

Make both the risks and incentives known to miners. List them out. List out how the good guys and bad guys can use Zerocoin. But do not expect the media to get this right. The community must explain this to the media properly with a press kit.

[AMuppInTime]

Satoshi relies on this to happen at some point. And so do those hackers that have closely watched wallets.

look forward to shady folks pushing hard for that.

[marcus_of_augustus]

Make both the risks and incentives known to miners. List them out. List out how the good guys and bad guys can use Zerocoin. But do not expect the media to get this right. The community must explain this to the media properly with a press kit.

Lol, like the media has ever chosen facts over sensationalism ... I don't think mathematics has to justify itself to anybody, particularly not the kind of idiots that are always ready to throw mud and hypocrisy.

[becoin]

Imagine how long loading the blockchain will take if the millions of transactions we have so far, are monsters like that. A node could verify 1 transaction per second, not thousands. The blockchain would be 320GB, not 8GB. Imagine how nobody would mine your transaction for 1ct. We would already compete for space in the block chain and certainly the fees would be at least $1 per transaction. Maybe rather $10.

But this is good not bad because that is exactly what bitcoin needs. This will improve the economics of bitcoin as a monetary system. Current situation is unsustainable. Every service that is offered for free sooner or later will be abused in every imaginable way. This is exactly what is happening now and "spam" on the blockchain is increasing. Customers have to compete for space in the blockchain! You don't have a healthy economic system without competition! Only such a competition will drive most of the micro transactions off chain and incentivize  the development of different payment systems based on bitcoin tokens. This is the future of bitcoin or there will be none at all.

I'm not sure why people are so afraid when money laundering is mentioned? If you are NOT a criminal money laundering is NOT a crime!

[Killdozer]

But this is good not bad because that is exactly what bitcoin needs. This will improve the economics of bitcoin as a monetary system. Current situation is unsustainable. Every service that is offered for free sooner or later will be abused in every imaginable way. This is exactly what is happening now and "spam" on the blockchain is increasing. Customers have to compete for space in the blockchain!

Situation would get much worse if Zerocoin was implemented in it's current form. The scalability would get worse, not better. Customers would compete much more for space in blockchain, not less, because all the space would be taken by only a few zerocoin transactions.

Real zerocoin transactions just can't be used inside the blockchain in their current form.
People should either read the paper carefully or read it's analysis by others who understand it before making these comments about zerocoin being awesome and bashing on the bitcoin devs for not including it.

I'm not sure why people are so afraid when money laundering is mentioned? If you are NOT a criminal money laundering is NOT a crime!

If you are not a criminal, it's not called money laundering. If all your money sources are legit and taxed, you can't or will want to launder the money, you will just use it and nobody will have any problems with it. Earning money and not paying tax on it, while still living in the country that needs those taxes and using the services it provides for those taxes is a crime though.

[becoin]

Customers would compete much more for space in blockchain, not less

Again, more competition is better! Current situation of "almost no processing fees" is killing bitcoin.

If all your money sources are legit and taxed, you can't or will want to launder the money, you will just use it and nobody will have any problems with it.

Really?! It is the same old mantra: if you are not a criminal you don't have to be afraid of our ... PRISM.
But I have a problem with it and most people do. It is called asymmetric information!

I don't like the idea of random assholes with proper equipment and government connections to monitor my business dealings. Haven't you heard about commercial secrets? Why do you deny me the right of having commercial secrets? We all know that information is power. Absolute information is absolute power. Absolute power is absolute corruption. All those people that today put my business under surveillance tomorrow will be my competitors, or after they retire, or their sons and daughters, or their mistresses. They use my taxes to compete with me. I don't see any reason why should I agree with that. This is why I want 100% privacy for my money. It is not a question of crime or not. It is a question of unauthorized and unlimited power!

[giszmo]

If you are not a criminal, it's not called money laundering. If all your money sources are legit and taxed, you can't or will want to launder the money, you will just use it and nobody will have any problems with it. Earning money and not paying tax on it, while still living in the country that needs those taxes and using the services it provides for those taxes is a crime though.

Anonymizing the coin is to bring back fungibility which is lost in cases like high profile users (Satoshi and his $100.000.000 in bitcoins) and stolen money. I don't want my money be confiscated just because I sold my music anonymously to pirate@40. If I were Satoshi even after paying taxes on my fortune I might not want to reveal who I am. Very unlikely this info wouldn't leak even if he made efforts to secretly pay taxes.

[Killdozer]

Really?! It is the same old mantra: if you are not a criminal you don't have to be afraid of our ... PRISM.
But I have a problem with it and most people do. It is called asymmetric information!

I don't like the idea of random assholes with proper equipment and government connections to monitor my business dealings. Haven't you heard about commercial secrets? Why do you deny me the right of having commercial secrets? We all know that information is power. Absolute information is absolute power. Absolute power is absolute corruption. All those people that today put my business under surveillance tomorrow will be my competitors, or after they retire, or their sons and daughters, or their mistresses. They use my taxes to compete with me. I don't see any reason why should I agree with that. This is why I want 100% privacy for my money. It is not a question of crime or not. It is a question of unauthorized and unlimited power!

You did write this, didn't you?

I'm not sure why people are so afraid when money laundering is mentioned? If you are NOT a criminal money laundering is NOT a crime!

My post was about money laundering being a crime by definition. I am not sure where you got all that last stuff you wrote but it doesn't sound like it was an answer to my post... What does PRISM and all that crap have to do with anything here? Did I say I like PRISM or US spying on everybody?

[becoin]

Did I say I like PRISM or US spying on everybody?

Well, you may not like it but you certainly justify it:

If all your money sources are legit and taxed, you can't or will want to launder the money, you will just use it and nobody will have any problems with it.

Translated... There is no other way for us to be sure that your money sources are legit and taxed if we don't put you on 24/7/365 surveillance. But you don't have to be afraid that we know everything about your financial and business (and many other) activities because we are good people.

[Killdozer]

It seems you hear what you want to hear, translating other peoples messages etc...
Once again:

If you are NOT a criminal money laundering is NOT a crime!

Is a wrong statement. It has basic deficiencies in understanding what money laundering or crimes are. That's all my post was about.


Now, since you have now brought up that other stuff, just some notes about it: PRISM and similar programs in other countries (like it was unknown before Snowden that governments were spying on their citizens) don't really have anything to do with tax information. The tax information about your legitimate income is already known to the governments, they don't have to spy for it. In some countries this information is even public (well at least the statistcs of your taxes, not individual transactions, deals etc...) and accessible to everyone. This is how it already works and while some people may think it's pain in the ass to have their incomes public, it doesn't seem to cause any real problems.

You had allegations that since your taxes are known to the government, this could somehow leak secret information to your competitors that is essential to stay secret for your business model? Do you have any examples when this is an issue? It's very far-fetched that this is ever a problem. Your income is not "trade secrets", it's not patented technologies or business choices, or addresses of your partners, etc...

Also, by your definition, your competitors' information could be leaked to you as well (since the government has their information as well), so it should be fair play for everybody?

[marcus_of_augustus]

It seems you hear what you want to hear, translating other peoples messages etc...
Once again:

If you are NOT a criminal money laundering is NOT a crime!

Is a wrong statement. It has basic deficiencies in understanding what money laundering or crimes are. That's all my post was about.


Now, since you have now brought up that other stuff, just some notes about it: PRISM and similar programs in other countries (like it was unknown before Snowden that governments were spying on their citizens) don't really have anything to do with tax information. The tax information about your legitimate income is already known to the governments, they don't have to spy for it. In some countries this information is even public (well at least the statistcs of your taxes, not individual transactions, deals etc...) and accessible to everyone. This is how it already works and while some people may think it's pain in the ass to have their incomes public, it doesn't seem to cause any real problems.

You had allegations that since your taxes are known to the government, this could somehow leak secret information to your competitors that is essential to stay secret for your business model? Do you have any examples when this is an issue? It's very far-fetched that this is ever a problem. Your income is not "trade secrets", it's not patented technologies or business choices, or addresses of your partners, etc...

Also, by your definition, your competitors' information could be leaked to you as well (since the government has their information as well), so it should be fair play for everybody?

Says the guy posting anonymously on the Internet .... why don't you tell us your name and your income, since you think there is absolutely no problem having that sensitive social information public?

[amincd]

XCP is the first altcoin to use proof of burn in the Bitcoin blockchain as the method of initial coin distribution:

https://counterparty.co/

[3xcentricz]

Question: Is Zerocoin just a protocol or a crypto-currency as well?  If it's also an alt-coin, where is it traded and how can I acquire it?

I'm very interested..

Thanks..