BitShares 2.0 - Just the Facts Thread

[CryptoClub]

Bitshrares 1.0 was very ambitious, but if 2.0 really pulls it off this is one of the most underpriced options out there.

I own some and it is worth doing the research on, as the price is very nice right now. (Near historic lows right about when the best potential update is coming)

[StanLarimer]

One of the challenges we face is what everyone naturally brings as their own preconceptions of what a blockchain implements.  If you are looking for a currency, you'll wonder what the heck is going on here.

By now it's pretty well understood that "Bitcoin 2.0" blockchains are exploring all kinds of interesting new functions that give value to the chain based on the demand for the services it provides rather than how much it costs to produce.

(A nuked city is fairly costly to produce, but its value is highly questionable.)  

In the case of BitShares, it trades like a coin, but it provides the services of a decentralized, counterparty free exchange.  Centralized exchanges are companies that provide the same services and try to produce a profit for their owners.  So you can see where the comparisons to a company came from.

(Actually, the idea of a Decentralized Autonomous Company (DAC) first came from Bitcoin and the Three Laws of Robotics published on LetsTalkBitcoin back in 2013.)

Anyway, that's what we set out to produce back then, but its really grown in scope and power since then.

This summer we introduced the fact that centralized exchanges could use the BitShares blockchain as a powerful public backbone network to share customers, services, and market depth while automatically keeping the profits from all the customers they each brought to the table.  So far we have six exchanges (4 announced) that have expressed interest in joining this BitShares Exchange Network.  We think this is the wave of the future because it solves many of the problems that have been plaguing the industry - namely transparency, proof of solvency, market depth, and zero counterparty risk (customer keep their own keys to their funds even while they are trading on the exchange.)

Instead of competing with traditional exchanges,
we are multiplying the markets they can enjoy by networking with each other.

You can read more about this concept in Summer Announcements 2, 3, 4, and 5:

CCEDK to Publish its Order Book on the BitShares Blockchain
Banx.io and BanxShares are Upgrading to BitShares 2.0
Peak Venture Group Adopts BitShares Network
Nuclear Bunker Data Center Joins BitShares Exchange Network

Anyway, it's not easy to describe BitShares with a single label.  It's probably not going to match any prior expectations you may have had.

You have to look at it's applications and decide whether you think there will be a demand for the growing list of useful services it provides.

[StanLarimer]

This is one of the critical flaws in existing crypto currency. If you know of an exception, please enlighten me.

I remember you having many problems with reputation systems for a variety of reasons, but the #1 problem I see with them is that the worse case scenario, government co-opting of cryptocurrency to create "surveillance coin", would be done by linking biometric data to a single wallet user address instead of having many pseudo anon addresses like Bitcoin.  The easiest way for them to accomplish this is with a reputation system derived currency.

Indeed that's a threat.  Men in Black show up at Apple or Google or whatever and ask for back doors the public doesn't know about.  Any time you get centralization due to economies of scale (e.g. mining pools and farms) it greatly reduces the number of stops the Men In Black have to make to get control of 51% of the block signers.

But BitShares 2.0 has Confidential / Stealth Transfer Support Implemented and Passing Tests


And that should make all the difference.

[StanLarimer]

I know of no exception.  In fact I believe you would need to use coercion in order to attain it.  Similar to how the dollar is maintained as a standard. 

That is one of the more interesting things about BitShares.  It doesn't pretend that math can save you if you don't have a consensus in meat space.  ie the meatspace consensus requirement is not ignored as in most other cryptos, but is actively encouraged.  I often wish that it could be based more on math, and hard results, but such is the nature of my fellow man.  I am glad to be part of a community that doesn't hide from it.  Even if I don't always agree with them.

This is a great point.  Here's an applicable snippet about In What Do We Trust from the Origin of BitShares series for newbies...

The Origin of BitShares
Part 5
POW to POS to TaPOS to DPOS!

...  edited for brevity ...

It took another six weeks to invent DPOS and even longer to test and debug it.  Four precious months in this industry is a long painful time.  It delayed the launch of BitShares from March to August.  But we all feel it was absolutely necessary -- and well worth the wait.

DPOS solved both problems.  It was totally analyzable and lightning fast.  And best of all, it gave us a new commodity as a by product:  Distilled Trust!

Aaack!  Another Heresy! 
These are supposed to be trustless systems! 
What was he doing?!?

Yes!  He had recognized that residual trust lay scattered in dark corners all around existing systems.   We trusted the coin's self-hired developers.  We trusted their wallets with our keys.  We trusted its self-appointed big miners and big forgers to sign most of the blocks.  Come to think about it, we do a lot of trusting for supposedly trustless systems!

Bytemaster's crowning innovation was to collect all that trust, bring it out into the bright light, make it explicit, subject it to a competitive Darwinian reputation distillation process, and place control over it directly into the hands of the token owners. 

If we have to trust somebody, let's make sure we know who it is and how we can fire them!

But it get's better!  Once you have such a mechanism, you have a valuable commodity to exploit.  Having decentralized hiring and firing of people with trusted reputations as part of the system gives powerful new capabilities.  We can have them publish trusted price feeds which are invaluable for bootstrapping market pegs.  We can give them control over tunable system parameters - like what fees to charge and what thresholds to set.  Hard fork upgrades are now trivial to implement - but only with the approval of elected delegates.  The system can hire developers and marketeers using the same distilled reputation mechanism.  It can have built-in multi-sig escrow functions and other services that require trustworthy human judgment.  This was especially perfect for bytemaster's long term vision of transferring many of the traditional roles of government to the incorruptible block chain.

Systems without Distilled Trust must work very hard to limit the impact of unknown powers in dark places.  This makes them very rigid and unresponsive to changes in market conditions.  This may be ok if all you aim to make is a single unchanging currency like Bitcoin.  But rigidity and unresponsiveness are not exactly what you are looking for in a competitive company!

DPOS is the key enabling factor for highly competitive,
quick responding companies that can turn on a dime.
And that is why the BitShares family of unmanned companies are all built upon it.

[TPTB_need_war]

Where is the academic peer review that Bitshare's DPOS is secure?

It is extremely complex compared to Bitcoin's proof-of-work which can be approximated by a Poisson distribution. I can't visualize how to model DPOS holistically to prove it is secure.

http://wiki.bitshares.org/index.php/DPOS_or_Delegated_Proof_of_Stake

https://bitshares.org/technology/delegated-proof-of-stake-consensus/

[StanLarimer]

Where is the academic peer review that Bitshare's DPOS is secure?

It is extremely complex compared to Bitcoin's proof-of-work which can be approximated by a Poisson distribution. I can't visualize how to model DPOS holistically to prove it is secure.

http://wiki.bitshares.org/index.php/DPOS_or_Delegated_Proof_of_Stake

https://bitshares.org/technology/delegated-proof-of-stake-consensus/

I suppose everybody has their own idea about what constitutes adequate review.  It's nice when something reduces to a closed form academic mathematical formula but even that has a complex system wrapped around it that begs questions like "how many independent people does Bitcoin need to sign 51% of the blocks?"  What difference does all that mathematical proof make if it only takes 2 or 3 Big Mining companies colluding to reach 51%?  

The risk is in the implementation, not the theory the implementation implements.

We come from an Aerospace System Engineering background.  So our mindset is to engineer systems out of simpler subsystems in such a way that they become directly analyzable and testable.  Using a few simple interlocking mechanisms rather than a one-size fits all statistical formula gives us far greater confidence.   Sure an occasional airliner or space shuttle crashes, but no amount of closed form mathematical analysis would have changed that outcome.

DPOS is engineered to ensure that the share owners themselves can decide what the maximum percent of blocks that any one (known, reputable, and fireable) account can sign.  For the past year, it takes 51 elected signers, not 2 or 3 self-appointed signers, to get to 51%.  That's an example of applied system engineering to combine simple, analyzable processes to achieve an explicitly shaped risk profile.  Going forward with version 2.0, shareholders can decide whether they want to pay for more or less than 51.  

DPOS now has a year of live testing with real money on the line and non-stop scrutiny and analysis from the highly competent BitShares forum of experts. Much better than a theoretical review by some small group of busy university professors (and remember I was one of those too).   Two papers on the subject are referenced in another snippet from the same Origin of BitShares, Part 5 article, which addresses this question below:

The Origin of BitShares
Part 5
POW to POS to TaPOS to DPOS!

...we turned our attention to eliminating mining from the security component of BitShares. Our goal was to get BitShares launched by "The Ides of March", but Bytemaster was not yet satisfied with the technology.

During his analysis of all the POSsibilities, just four weeks after the launch of ProtoShares, he made this famous statement:

Nxt looks very interesting.

He read everything he could about Proof of Stake, but was unable to convince himself that he could cover all the attack vectors that still remained in the literature.  He wasn't saying there was anything provably wrong with POS.  But he couldn't convince himself it had all bases covered.  That's when he began pondering if it was possible to do an end-run around these issues.

So he started looking at ways to make the system more deterministic.  
More analyzable.  
What if he traded mathematical generality for engineering structure?

This led to his invention of Transactions as Proof of Stake which he presented for review here on bitcointalk.  
A similar, longer thread ran in parallel on bitsharestalk:  Transactions as Proof-of-Stake & The End of Mining

These links show the discussions for historical purposes.  I won't go into them here. I just link to them to show this community that a serious attempt was made to:

• Build on top of Proof of Stake
• Involve this forum in the discussions

So with all this effort, why did Bytemaster abandon his TaPOS invention?  Suffice it to say, when I asked him today, he simply said "It wasn't fast enough.  It took too long to confirm transactions. To support a decentralized trading exchange it needed to do that much, much faster."  For Bitcoin it can take an hour.  We needed it to take seconds.  TaPOS was faster, but not fast enough.

Of course, we are now about to upgrade to DPOS 2.0 which is even faster, simpler, elegant and analyzable.  It's been passing its suite of automatic Monte Carlo test procedures for months now.  

[TPTB_need_war]

The same criticism I made in 2013 against his Transactions as Proof of Stake still remains my concern:

https://bitcointalk.org/index.php?topic=354573.msg3816897#msg3816897

Thanks for the reply. I hope someone can publish some white papers to make it all more condensable and convincing. Your informational message (definitely not worthless) refers to many things off hand (even without citations), but it isn't the same as a well organized white paper covering the issues with citations.

Note that avoiding attacks for a $17 million market cap is the not the same as Bitcoin with a $3 billion market cap. I guess Bitshares reached a maximum of $51 million mcap at one time, but I don't think DPOS was implemented at that time afair. Bitcoin reached $10 billion and there were some bugs that have been fixed since then, meaning it was stress tested.

Indeed Bitcoin has issues with centralization. I claimed that in the following post in another thread.

Is there a chance that other currencies such as Dogecoin, Guncoin, Altocin and litecoin will be more popular and more valuable that Bitcoin?

Can I change the question to say, "is it possible that a coin that solved Bitcoin's critical flaws could become more popular and valuable than Bitcoin?"?

If so, I say yes it is possible.

Those critical flaws:

• Double spending on every network fragment.
• 0-confirmation transactions require network centralization to be reliable.
• Scaling transaction volume requires network centralization to handle bandwidth (hello Bitcoin XT a.k.a. GavinCoin a.k.a. GovCoin).
• No on chain, end-to-end principle anonymity.
• Not censorship resistant long-term. Permission-less commerce not insured long-term.
• 51% attack could change the protocol in the future, by then the masses don't care. They didn't care that the dollar is debased.

Bitcoin is a highly flawed 1.0 version of crypto. Version 2.0 will definitely challenge it. Stay tuned.

I believe a contender would need to fix ALL of the above and more. Not just fix one or two of the issues.

Notice the coins you mentioned don't address those issues.

Btw, your brother Daniel will remember me as AnonyMint from 2013. I haven't followed your developments too closely. Best of luck to you.

Seriously I would like to understand these various consensus algorithms that these altcoins are proposing.

Afaics, simplified white paper proofs seem to be lacking in everything except Satoshi's. That is my opinion and you are welcome to disagree.

P.S. I was one of those who was very skeptical that BitUSD could track as originally designed. I see they apparently changed the design of it since the first way it was structured in the 2013 proposal.

[StanLarimer]

Ah yes, I remember you well.

I have enjoyed this exchange and would welcome any interest you may have in adding to the body of analysis work supporting DPOS.  Do doubt our ability and obligation to provide more rigorous proofs will increase with increasing market cap.

As to my relationship to Dan, all I can say is, "Once I was the Master."

Stan

Dan Larimer @ LinkedIn

Stan Larimer @ LinkedIn

[DecentralizeEconomics]

Moderated thread   

How "decentralized" can you be if you don't believe in freedom of speech?

[puppies]

Moderated thread   

How "decentralized" can you be if you don't believe in freedom of speech?

How libertarian can you be if you don't believe in private property?

There is a difference between civil discussion and trolling.  you are on private property.  If you are an asshat you will be asked to leave.  This has nothing to do with decentralization or freedom of speech.

[DecentralizeEconomics]

Moderated thread   

How "decentralized" can you be if you don't believe in freedom of speech?

How libertarian can you be if you don't believe in private property?

There is a difference between civil discussion and trolling.  you are on private property.  If you are an asshat you will be asked to leave.  This has nothing to do with decentralization or freedom of speech.

This isn't your private property.  This is Theymos' private property.  Give me a break... like you Bitshares wealth redistribution communists actually believe in private property anyway.

[puppies]

Moderated thread   

How "decentralized" can you be if you don't believe in freedom of speech?

How libertarian can you be if you don't believe in private property?

There is a difference between civil discussion and trolling.  you are on private property.  If you are an asshat you will be asked to leave.  This has nothing to do with decentralization or freedom of speech.

This isn't your private property.  This is Theymos' private property.  Give me a break... like you Bitshares wealth redistribution communists actually believe in private property anyway.

Your argument is invalid as Theymos has allowed his private property to be used for moderated threads.  In the future when you find yourself hurling insults you can know that you have already lost the argument.  You wont need me to tell you that.  See how much time we're saving?

Sorry everyone I am now done feeding the troll.

[DecentralizeEconomics]

Moderated thread   

How "decentralized" can you be if you don't believe in freedom of speech?

How libertarian can you be if you don't believe in private property?

There is a difference between civil discussion and trolling.  you are on private property.  If you are an asshat you will be asked to leave.  This has nothing to do with decentralization or freedom of speech.

This isn't your private property.  This is Theymos' private property.  Give me a break... like you Bitshares wealth redistribution communists actually believe in private property anyway.

Your argument is invalid as Theymos has allowed his private property to be used for moderated threads.  In the future when you find yourself hurling insults you can know that you have already lost the argument.  You wont need me to tell you that.  See how much time we're saving?

Sorry everyone I am now done feeding the troll.

Stan, you're not fooling anyone.  Everybody knows that it's you.

[Luckybit]

Where is the academic peer review that Bitshare's DPOS is secure?

It is extremely complex compared to Bitcoin's proof-of-work which can be approximated by a Poisson distribution. I can't visualize how to model DPOS holistically to prove it is secure.

http://wiki.bitshares.org/index.php/DPOS_or_Delegated_Proof_of_Stake

https://bitshares.org/technology/delegated-proof-of-stake-consensus/

Bitshares DPoS is based on a design which resembles in many ways the Raft protocol which has been through peer review in academic papers.

The Bitshares team arrived at a similar design because great minds think alike and because Bitshares developers discovered that you can do consensus through delegation of authority. Analyze and compare the Raft protocol to DPoS.

Additionally if you want to go further you can analyze LMAX architecture. When you do that you'll see that Bitshares wasn't thrown together by amateurs and that it has a rigorously academically tested (as well as tested in practice) architecture. No one has hacked DPoS 1.0, and while DPoS 2.0 is still in testing, there is no reason to believe DPoS 1.0 was ever insecure. It's security is based on the fact that in order to break consensus you have to get a critical threshold of delegates to collude without being discovered that they are colluding by the voting token holders.

Many people like to claim that Delegated Proof of Stake or Proof of Stake in general is vulnerable to theoretical black swan attacks. Bitcoin is also vulnerable to theoretical black swan attacks. The focus of our attention should be on practical attacks which have either happened in the past frequently, and which would have catastrophic consequences if pulled off. In the case of Bitshares which has been audited and which has existed for over a year, there isn't an attack which could occur frequently and which has catastrophic consequences.
 
Example1:


Example 2:

The threat level on a risk matrix is measured by the frequency of the occurrence and the amount of damage the community would suffer if it occurs. For example if a bug is found to allow hackers to remotely empty everyone's wallet this would be an example of catastrophic damage, but how often has that occurred in Proof of Stake? Double spending also would cause catastrophic damage but how often has that occurred? If it is a real treat in practice then you'll be able to provide some example cases to show that these theoretical attacks have happened.

We know in practice that centralized exchanges are extremely high risk as measured on a risk matrix. This is because these attack frequency is high, and the level of damage of the attacks are high. The risk of using centralized exchanges outweighs the risk of using Bitshares and trusting DPoS 1.0. DPoS 2.0 will be tested and audited, but DPoS 1.0 has never been successfully hacked.

Bitshares when it was first announced with through the same skepticism: https://bitcointalk.org/index.php?topic=279771.0
None of which played out.

https://raft.github.io/
http://martinfowler.com/articles/lmax.html

[monsterer]

The lack of a white paper is disappointing, especially considering the 2.0 revision completely changes the design.

[delulo]

Where is the academic peer review that Bitshare's DPOS is secure?

It is extremely complex compared to Bitcoin's proof-of-work which can be approximated by a Poisson distribution. I can't visualize how to model DPOS holistically to prove it is secure.

http://wiki.bitshares.org/index.php/DPOS_or_Delegated_Proof_of_Stake

https://bitshares.org/technology/delegated-proof-of-stake-consensus/

Bitshares DPoS is based on a design which resembles in many ways the Raft protocol which has been through peer review in academic papers.

The Bitshares team arrived at a similar design because great minds think alike and because Bitshares developers discovered that you can do consensus through delegation of authority. Analyze and compare the Raft protocol to DPoS.

Additionally if you want to go further you can analyze LMAX architecture. When you do that you'll see that Bitshares wasn't thrown together by amateurs and that it has a rigorously academically tested (as well as tested in practice) architecture. No one has hacked DPoS 1.0, and while DPoS 2.0 is still in testing, there is no reason to believe DPoS 1.0 was ever insecure. It's security is based on the fact that in order to break consensus you have to get a critical threshold of delegates to collude without being discovered that they are colluding by the voting token holders.

Many people like to claim that Delegated Proof of Stake or Proof of Stake in general is vulnerable to theoretical black swan attacks. Bitcoin is also vulnerable to theoretical black swan attacks. The focus of our attention should be on practical attacks which have either happened in the past frequently, and which would have catastrophic consequences if pulled off. In the case of Bitshares which has been audited and which has existed for over a year, there isn't an attack which could occur frequently and which has catastrophic consequences.
 
Example1:


Example 2:

The threat level on a risk matrix is measured by the frequency of the occurrence and the amount of damage the community would suffer if it occurs. For example if a bug is found to allow hackers to remotely empty everyone's wallet this would be an example of catastrophic damage, but how often has that occurred in Proof of Stake? Double spending also would cause catastrophic damage but how often has that occurred? If it is a real treat in practice then you'll be able to provide some example cases to show that these theoretical attacks have happened.

We know in practice that centralized exchanges are extremely high risk as measured on a risk matrix. This is because these attack frequency is high, and the level of damage of the attacks are high. The risk of using centralized exchanges outweighs the risk of using Bitshares and trusting DPoS 1.0. DPoS 2.0 will be tested and audited, but DPoS 1.0 has never been successfully hacked.

Bitshares when it was first announced with through the same skepticism: https://bitcointalk.org/index.php?topic=279771.0
None of which played out.

https://raft.github.io/
http://martinfowler.com/articles/lmax.html

I'm a bitshares guy too and think that DPOS is solid but the comparison the the raft protocol is just an anecdotal pseudo scientific reference. There is not much similarity there!
Raft has always ONE leader until a new one is chosen and the way the leader is chosen is also entirely different.
And what is a black swan attack?! That it would become cheaper to buy the coins if a black swan occures? There are certainly cheaper ways to attack (D)POS.  

DPOS is not that difficult to understand: A number of block producing nodes are elected consciously (by approval voting which is the only thing that is a bit tricky to understand) by shareholders / coinholders. These nodes than take turns procuding blocks and are shuffled after every round in which each node has produced a block. Can all be read here https://bitshares.org/technology/delegated-proof-of-stake-consensus/
TPTB_need_war what more are you looking for?

[monsterer]

DPOS is not that difficult to understand: A number of block producing nodes are elected consciously (by approval voting which is the only thing that is a bit tricky to understand) by shareholders / coinholders. These nodes than take turns procuding blocks and are shuffled after every round in which each node has produced a block. Can all be read here https://bitshares.org/technology/delegated-proof-of-stake-consensus/
TPTB_need_war what more are you looking for?

There is no analysis on the various different attack vectors and how DPOS copes with each one:

* Sybil attack
* Nothing at stake style attacks (long range, short range, keys from the past, etc etc)
* Voter apathy and response times to an ongoing attack

In short, everything that a decent white paper should address in order to be considered seriously.

[delulo]

DPOS is not that difficult to understand: A number of block producing nodes are elected consciously (by approval voting which is the only thing that is a bit tricky to understand) by shareholders / coinholders. These nodes than take turns procuding blocks and are shuffled after every round in which each node has produced a block. Can all be read here https://bitshares.org/technology/delegated-proof-of-stake-consensus/
TPTB_need_war what more are you looking for?

There is no analysis on the various different attack vectors and how DPOS copes with each one:

* Sybil attack
* Nothing at stake style attacks (long range, short range, keys from the past, etc etc)
* Voter apathy and response times to an ongoing attack

In short, everything that a decent white paper should address in order to be considered seriously.

Fully agree. A good whitepaper would be very valuable and would help (academics) to take DPOS more seriously.

[StanLarimer]

Bytemaster loves to publish stuff so I'm sure a whitepaper will be forthcoming and that once people have had a chance to study it for a few months we'll begin to get useful suggestions for how to strengthen the system in the next revision.

But right now there are a lot of people that can't wait all those months for the upgrade, so that must come first.

[StanLarimer]

My goal buy now, sell when 2.0 comes out if there's a spike in price after the release, good idea? bad idea?

Why would you sell right after 2.0 comes out? If it does all that is promised, it will be best blockchain available and attract lots of business and users. After a while BTS price might be way more higher than it was when 2.0 came out.

Especially since that is when everyone starts getting rewarded for every referral they make of someone new.  That gets you up to 80% of the new user's fees for life.  So there are many people waiting for 2.0 to start telling everyone.  Our expectation is a huge and accelerating increase in the rate of new user signups.

That should have a positive effect on demand and therefore on price which the speculators should notice...

With new users virally bringing in more new users, where do you want to get off of this elevator?