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Author Topic: Early speculator's reward antidote  (Read 20304 times)
casascius
Mike Caldwell
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May 31, 2011, 02:51:25 AM
 #1

This is how I would solve the problem of the early speculators profiting disproportionately at the expense of newer comers.

1. Create a brand new Bitcoin client, and a second class of Bitcoins (I'll call them Bitcoin Plus or BCP).  This new Bitcoin client fully facilitates trade in BTC and BCP and is a hell of a whole lot more robust and user friendly than the current one.  For example, this new client displays all your COINS (transaction inputs) and allow you to maintain them separately, import them, export them, select specific coins as inputs to transactions, and a lot more things you ought to be able to do but can't with the current client.  It'll be a no-brainer to switch to this new client just for using BTC, even if you didn't care about BCP.

2. BCP is designed so mining works pretty much the same as BTC (fixed limit like 21 million, mining still brings 50 BTC...keeps things simple).  BCP addresses look like BTC addresses except they start with a 2 instead of a 1.  (however, a person running the client can receive either kind of coin, because their wallet in this new client really supports holding and transferring both kinds of coins, just like your physical wallet could hold both USD and EUR).

3. The client is designed so it allows a one way conversion of BTC to BCP, and to do this, it participates in the maintenance of BOTH block chains - the main Bitcoin one, and the BCP one.  The BCP one is merely an extension, still dependent on the BTC chain, which is never dumped.  BCP-aware clients exchange the full BTC+BCP transaction blockchain and P2P vocabulary with each other, but speak the current BTC protocol to current BTC-only clients.  Mining in either system will continue to be profitable.  Blocks in the BCP extension chain have a string identifier made of numbers with a prefix... the first BCP block is "2-1", the second is "2-2" ad infinitum, and blocks in the "2-" series can still use certain transactions from the BTC block chain as inputs, but BTC clients aren't aware of "2-" blocks.  The "2-" blockchain is only exchanged with BTC+BCP clients as the current BTC client won't understand or accept such blocks.  References which are identifiers consisting of digits only, e.g. "123661", are references to the existing block chain as we know it.

4. A conversion feature allows BTC to be permanently converted to BCP.  This feature works by DESTROYING the BTC from the BTC client's perspective - by sending them to a nonexistent BTC address that correlates to a specific BCP address, which the new client recognizes as a conversion.  But here is the rub - the amount of BCP you get in a conversion is directly correlated to the mining difficulty of the BTC you're trying to convert, as calculated by following the coins all the way back to their generation.  An algorithm deterministically decides the difficulty value of coins that were combined at any point in their history.  All of those BTC mined at difficulty 1 won't be worth squat if converted to BCP, so users may as well leave them as BTC.  (The client calculates how much your conversion would be worth and allows you the choice to convert only the coins that you think are worth converting... as the difficulty-weighted rate makes it only worth your while to transfer BTC that were generated while the difficulty was high).

5. This application would be great for both BTC and BCP, and users who thought BCP was ridiculous would still find this application a great improvement for trading good ole BTC.  BUt most importantly, the market decides the relative value of BTC versus BCP.  If and when the market values the BCP more, all difficult BTC will likely get converted to BCP, and if nothing else, users would be motivated to avoid accepting "difficulty 1" BTC from other people, the same way they'd prefer a copper penny over a zinc one given the choice.  If the majority of the Bitcoin community "gets" why it's not fair that self-entitled early adopters using the term "jonny come late" to describe their perceived entitlement to confiscate the wealth of later participants, they'd switch.  BCP would inherit the true value of the BTC, and the remaining original unconverted BTC would be dumped for what it is - easy undeserved money created by nothing for nothing - and would tank.  Problem solved!

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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stic.man
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May 31, 2011, 03:05:09 AM
 #2

there is no problem though
rezin777
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May 31, 2011, 03:09:54 AM
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there is no problem though

I'm so glad someone else said it.
casascius
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May 31, 2011, 03:10:57 AM
 #4

there is no problem though

I'm so glad someone else said it.

That's what you think.  Wait until a client like this appears, and we'll all be listening to the volumes spoken by the market as a whole.  If nothing else, we'll all have a better client for BTC that just happens to have an unwanted feature.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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May 31, 2011, 03:13:54 AM
 #5

well then i'll make my own after that new client
rezin777
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May 31, 2011, 03:20:59 AM
 #6

there is no problem though

I'm so glad someone else said it.

That's what you think.  Wait until a client like this appears, and we'll all be listening to the volumes spoken by the market as a whole.  If nothing else, we'll all have a better client for BTC that just happens to have an unwanted feature.

If you can take away the value that early investors have put into Bitcoin at the slightest whim, no one is ever going to bother with whatever currency replaces it because it will just happen again and again and again.

I agree, let the market decide. My coins would be worth much more than the early adopter's coins with your proposal, but I would never convert.
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May 31, 2011, 03:23:26 AM
 #7

the more BTC get converted to BCP, the more valuable BCT will become.  Supply and demand work that way.

insert coin here:
1Ctd7Na8qE7btyueEshAJF5C7ZqFWH11Wc

Open an exchange account at CampBX: options, lowest commissions, and best security
https://campbx.com/register.php?r=0Y7YxohTV0B
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May 31, 2011, 03:23:42 AM
 #8

well then i'll make my own after that new client

yes, and thus you see one problem with speculation or 'investment' in any particular block chain rather than in the bitcoin technology as a whole.

and to people who say there isn't a problem, what do you have to fear from alternatives? nobody's saying we can't run our present block chain and try to extract value from others with it. (i just wish that value extraction had been a bit more honest than it is in practice. i'm appalled at the way bitcoin is often presented to the public. 'get in now before it's too late', etc.)

in any event, exorbitant seigniorage is absolutely a problem for a currency, providing a barrier to adoption if adoption must (as in bitcoin's case) be voluntary. and the seigniorage here is odd because, as many have pointed out, it has nothing directly to do with services, risk, or reward. it would be like giving the designer of the $5 bill a royalty every time it's used. would you prefer to use that $5 bill or an alternative one that had all the same characteristics?

(without an intellectual-property enforcement regime, why would anyone use proprietary rather than generic drugs unless the proprietary drugs offered something the generic drugs never could? nothing stops alternative block chains from providing all the convenience and anonymity of bitcoins.)

the important feature of casascius's proposal is that it highlights that the market can allow people to decide between alternative block chains relatively easily, which is something i've emphasized before. there are any number of similar schemes that would work just as well, and i expect one or two of them to emerge eventually as mechanisms for intra-block-chain exchange.
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May 31, 2011, 03:27:23 AM
 #9

If you can take away the value that early investors have put into Bitcoin at the slightest whim, no one is ever going to bother with whatever currency replaces it because it will just happen again and again and again.

I agree, let the market decide. My coins would be worth much more than the early adopters with your proposal, but I would never convert.

this is all self-contradictory. who's the 'you' who's taking away value other than the market? what provides the 'value' in the first place other than the market?

it's like you're saying 'i won't support anything that reduces the speculative value of coins in the first block chain i encountered because i want that chain to be the unique store of value'. if you said that about gold rather than the current block chain, nobody would ever have adopted bitcoin. as i've said many times, there's a startling amount of cultural conservatism and epistemic closure in a group of people who want to see themselves as revolutionaries. it took six months for half the people on this forum to decide that the first alternative to existing currency that they encountered was perfect.
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May 31, 2011, 03:29:02 AM
 #10

this is all self-contradictory. who's the 'you' who's taking away value other than the market? what provides the 'value' in the first place other than the market?

The "you" is the market! I'm saying do it! Please just do it!
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May 31, 2011, 03:30:06 AM
 #11

and to people who say there isn't a problem, what do you have to fear from alternatives?

Nothing! Please, do it. Oh, how I wish you would act instead of talk.
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May 31, 2011, 03:33:26 AM
 #12

it took six months for half the people on this forum to decide that the first alternative to existing currency that they encountered was perfect.

Nothing is perfect. Please, for the love of humanity, provide me with a better currency.
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May 31, 2011, 03:33:44 AM
 #13

It'd probably be in the system's best interest to try and focus on making BTC viable than opening the door for a million speculative chains to develop which is what will happen

I'm also of the mindset that a lot of the early adopters are in BTC for the better currency it provides the world as opposed to the idea of being the "early adoptors ka-ching!" set.
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May 31, 2011, 03:34:45 AM
 #14

well then i'll make my own after that new client

yes, and thus you see one problem with speculation or 'investment' in any particular block chain rather than in the bitcoin technology as a whole.

and to people who say there isn't a problem, what do you have to fear from alternatives? nobody's saying we can't run our present block chain and try to extract value from others with it. (i just wish that value extraction had been a bit more honest than it is in practice. i'm appalled at the way bitcoin is often presented to the public. 'get in now before it's too late', etc.)

in any event, exorbitant seigniorage is absolutely a problem for a currency, providing a barrier to adoption if adoption must (as in bitcoin's case) be voluntary. and the seigniorage here is odd because, as many have pointed out, it has nothing directly to do with services, risk, or reward. it would be like giving the designer of the $5 bill a royalty every time it's used. would you prefer to use that $5 bill or an alternative one that had all the same characteristics?

(without an intellectual-property enforcement regime, why would anyone use proprietary rather than generic drugs unless the proprietary drugs offered something the generic drugs never could? nothing stops alternative block chains from providing all the convenience and anonymity of bitcoins.)

the important feature of casascius's proposal is that it highlights that the market can allow people to decide between alternative block chains relatively easily, which is something i've emphasized before. there are any number of similar schemes that would work just as well, and i expect one or two of them to emerge eventually as mechanisms for intra-block-chain exchange.

If you buy $100 of BTC right now, you can purchase $100 worth of goods. If you buy $100 worth of BTC 2.0, you can purchase $100 worth of goods. Except BTC 2.0 has no infrastructure, zero brand recognition, no liquidity, and little hope for appreciation. Why would anyone want BTC 2.0 when the equivalent purchasing power of BTC 1.0 has all of these benefits and more. Can someone start up this blockchain and Inflatacoin already?
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May 31, 2011, 03:43:12 AM
 #15

4. A conversion feature allows BTC to be permanently converted to BCP.  This feature works by DESTROYING the BTC from the BTC client's perspective - by sending them to a nonexistent BTC address that correlates to a specific BCP address, which the new client recognizes as a conversion.  But here is the rub - the amount of BCP you get in a conversion is directly correlated to the mining difficulty of the BTC you're trying to convert, as calculated by following the coins all the way back to their generation.  An algorithm deterministically decides the difficulty value of coins that were combined at any point in their history.  All of those BTC mined at difficulty 1 won't be worth squat if converted to BCP, so users may as well leave them as BTC.  (The client calculates how much your conversion would be worth and allows you to convert only the coins that are worth converting... the difficulty-weighted rate makes it only wortk your while to transfer recently mined BTC into BCP).

Tracing coins back to their coinbase isn't as simple as you make it sound.

Try it.  http://blockexplorer.com/address/1GD8Qh7ebmvdaB8Ampcq8qZqNPr78nzjSP

p2pcoin: a USB/CD/PXE p2pool miner - 1N8ZXx2cuMzqBYSK72X4DAy1UdDbZQNPLf - todo
I routinely ignore posters with paid advertising in their sigs.  You should too.
casascius
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May 31, 2011, 03:44:45 AM
 #16


If you buy $100 of BTC right now, you can purchase $100 worth of goods. If you buy $100 worth of BTC 2.0, you can purchase $100 worth of goods. Except BTC 2.0 has no infrastructure, zero brand recognition, no liquidity, and little hope for appreciation. Why would anyone want BTC 2.0 when the equivalent purchasing power of BTC 1.0 has all of these benefits and more. Can someone start up this blockchain and Inflatacoin already?

Because BTC 1.0 can pop on a moment's notice.  The current valuation depends entirely on the fact that only a couple percent of the BTC in existence are actually participating in the market.  Around half the coins in existence haven't even been spent out of their generation blocks, they are in the hands of early miners who acquired them easily and who make no secret of their intention to use them to confiscate massive amounts of wealth from others at a later date (simply do a forum search for "retirement fund" and you'll see exactly what I mean).

Those who understand why this is a problem and why it threatens the stability of their BTC holdings will gladly adopt a solution to it.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
casascius
Mike Caldwell
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May 31, 2011, 03:45:47 AM
 #17

4. A conversion feature allows BTC to be permanently converted to BCP.  This feature works by DESTROYING the BTC from the BTC client's perspective - by sending them to a nonexistent BTC address that correlates to a specific BCP address, which the new client recognizes as a conversion.  But here is the rub - the amount of BCP you get in a conversion is directly correlated to the mining difficulty of the BTC you're trying to convert, as calculated by following the coins all the way back to their generation.  An algorithm deterministically decides the difficulty value of coins that were combined at any point in their history.  All of those BTC mined at difficulty 1 won't be worth squat if converted to BCP, so users may as well leave them as BTC.  (The client calculates how much your conversion would be worth and allows you to convert only the coins that are worth converting... the difficulty-weighted rate makes it only wortk your while to transfer recently mined BTC into BCP).

Tracing coins back to their coinbase isn't as simple as you make it sound.

Try it.  http://blockexplorer.com/address/1GD8Qh7ebmvdaB8Ampcq8qZqNPr78nzjSP

You're right - which is why an algorithm (read above) shall deterministically decide this - This means diluting the weight across all the coins wherever the record shows they have been combined together.  Mix some old coins with some new coins, and the coins from the resulting transaction output will weigh somewhere in the middle.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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May 31, 2011, 03:55:57 AM
 #18

Around half the coins in existence haven't even been spent out of their generation blocks, they are in the hands of early miners who acquired them easily and make no secret of their intention to use them to confiscate massive amounts of wealth from others at a later date (simply do a forum search for "retirement fund" and you'll see exactly what I mean).

Confiscate? Do you understand the definitions of the words you are using?
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May 31, 2011, 03:57:43 AM
 #19


If you buy $100 of BTC right now, you can purchase $100 worth of goods. If you buy $100 worth of BTC 2.0, you can purchase $100 worth of goods. Except BTC 2.0 has no infrastructure, zero brand recognition, no liquidity, and little hope for appreciation. Why would anyone want BTC 2.0 when the equivalent purchasing power of BTC 1.0 has all of these benefits and more. Can someone start up this blockchain and Inflatacoin already?

Because BTC 1.0 can pop on a moment's notice.  The current valuation depends entirely on the fact that only a couple percent of the BTC in existence are actually participating in the market.  Around half the coins in existence haven't even been spent out of their generation blocks, they are in the hands of early miners who acquired them easily and make no secret of their intention to use them to confiscate massive amounts of wealth from others at a later date (simply do a forum search for "retirement fund" and you'll see exactly what I mean).

Those who understand why this is a problem and why it threatens the stability of their BTC holdings will gladly adopt a solution to it.


A group of massively wealthy, ideologically-driven visionaries seems like some positive externality in my view. But I also don't buy into the 'confiscation' argument when these are all voluntary trades.
casascius
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May 31, 2011, 03:59:00 AM
 #20


If you can take away the value that early investors have put into Bitcoin at the slightest whim, no one is ever going to bother with whatever currency replaces it because it will just happen again and again and again.

I agree, let the market decide. My coins would be worth much more than the early adopter's coins with your proposal, but I would never convert.


I'll bet that in spite of your non-conversion, you'll end up preferring people to pay you with coins like yours rather than difficulty-1 coins, and you'll prefer to pay others with low-difficulty coins (since you'll be able to choose), on the off chance that market forces later tell you you have no choice but to convert.  Since this new client will clearly tell you how much every BTC you receive "weighs" in light of the prospective conversion value.

Companies claiming they got hacked and lost your coins sounds like fraud so perfect it could be called fashionable.  I never believe them.  If I ever experience the misfortune of a real intrusion, I declare I have been honest about the way I have managed the keys in Casascius Coins.  I maintain no ability to recover or reproduce the keys, not even under limitless duress or total intrusion.  Remember that trusting strangers with your coins without any recourse is, as a matter of principle, not a best practice.  Don't keep coins online. Use paper wallets instead.
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