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Author Topic: Free market in bitcoin is probably impossible. :-\  (Read 910 times)
Wary
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August 30, 2015, 06:01:48 AM
 #1

Jeff Garzik  says that the power to decide should be shifted from developers to the free market (And BIP100 is a step in this direction). Sound nice to me, but in bicoinland the free market
a) Doesn't exist.
b) Hard to create.
c) If created, it may not work.

What makes the free market work? Market forced do. Buyer is forced to pay for what he get and seller is forced to provide for this pay. Therefore both are forced to serve each other's needs in accordance to their's purchasing parity. Smiley

Why they are forced to it? Because they are free to say 'no pay - no deal'. The force of the market force is based on ability to exclude users. That is, on being able to throw away free-riders and therefore charge the rest. Want a ride? Pay or leave. Without it free market won't work.

Is bitcoin currently looks like it? Let's have a look at the major actors:

Users:
-bitcoin holders. Don't pay for holding. Heavily taxed instead (about 10%pa 'inflation tax'). No market force.
-bitcoin traders. Don't (have to) pay for transactions. No market force.

Providers:
-Miners. Live on 'tax', taken from bitcoin holders (fees are too small). No market forces.
-Nodes. Not paid by users. No market forces.
-Bitcoin developers. Not paid by users. No market forces.

What can we see here? Everybody is either not-paid-volunteer or not-paying-parasite. NOBODY is forced by market forces to do ANYTHING. Developers don't have to develop, nodes don't have to transmit transactions, miners don't have to include them. It's miracle that this multi-billion industry still manages to exist on such a shaky grounds. This miracle have been lasting for too long already and if we won't do something about it pretty soon, it will collapse. Or, even worse, will become supported by detailed state regulation, i.e. will turn into a regular fiat currency.

What should be done to introduce market forces into bitcoinland?
A lot. We would have to change incentives for ALL it's participants.

Technical parts (difficult).
a) Enable payments between all these 5 parties.
b) Enable enforcing of these payments (refuse services to those that won't pay).
This would require changes in bitcoin protocol, in wallet software etc etc.

Political parts (impossible).
a) Discriminate users. Impossible because it's blacklisting, it breaks fungibility.
b) Cancel the mining reward. Impossible because miners won't work for free fee Smiley and users wont pay 1.4$ per transaction (230$*25 / (7*60*10)).
c) Software developers must charge for their software. Impossible because opensource. You charge 100$, I fork, change one line and charge 10$. Making it closed source, obfuscated etc is impossible as well.

Some of these changes were possible to introduce at the times of Satoshi, when bitcoin was just a hobby, but now, when there are powerful interest groups around, the bitcoin would rather die than become a free-market-land.

tl;dr; Introducing the free market in bitcoinland is almost impossible, technically and especially politically.

EDIT:
The same, a bit more short and (hopefully) clear:

Why market works?
Because customer pays. To get customer's money you have to do what customer want.
Such system doesn't work at bitcoin, because developers, nodes and miners work for us, but they are not paid by us.

-If developers develop not what we want, they won't lose our money. Because we are not paying them anyway.
-If nodes won't verify and transmit transactions, they won't lose our money. Because we are not paying them anyway.
-If miners won't include zero-fee-transactions, they won't lose our money. Because we can't stop paying them mining reward.

All of them don't have to care about us, their customers.
In short, market in bitcoinland doesn't work.

That's why we have the current crisis: market forces are absent and are replaced by political forces. Instead of working on satisfying customer needs, people work on blackmouthing and blackmailing each other.


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August 30, 2015, 06:33:59 AM
 #2

When you apply the Free market to Bitcoinland, you effectively monetize it and there in lay the problem. Money corrupt... just look at the world and how all facets where money

came into play, got corrupted. Example : Sport & Sport betting {Before money came into play, it was a true competition... now it's all about the money}

Throwing money at the problem, will just add other new problems to the mix. The miners reward should be enough to keep the gears running and the developers should be paid

by donations from the community. If the community do not like what they do, they get little reward... if the community like what they do, they get more donations. If the

community try to bribe them with huge donations, the consensus will still decide if it will be accepted or not.  Roll Eyes  Good work needs to be rewarded .... work done for their own

benefit.... should be discarded.

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August 30, 2015, 06:53:52 AM
 #3

What makes the free market work? Market forced do. Buyer is forced to pay for what he get and seller is forced to provide for this pay. Therefore both are forced to serve each other's needs in accordance to their's purchasing parity.

You clearly have no idea what you're talking about. Free market means that people are free to trade with each other, if they choose to, or equally free not to trade. No-one is forced to do anything. If there is force involved, it is not a free market, by definition.

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August 30, 2015, 07:20:45 AM
 #4

No that is not possible and wont work because there has to be some one elite than others ...
i mean there will be still goverment of nakamoto even if bitcoin goes mainstream...rather than these govt.
and plus the transaction fees is 0.0001 x 100000  trnx. per day =0 coins per day .

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Wary
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August 30, 2015, 07:21:39 AM
 #5

Money corrupt... just look at the world and how all facets where money came into play, got corrupted.
I hate to tell it to you, but bitcoin is money. If you are opposing to money, you've probably chosen wrong forum.

Quote
The miners reward should be enough to keep the gears running
Is the current 25 BTC per block is enough? Or too much? Or too little? Who should decide? Community? How to vote? By number of socket accounts on bitcointalk? Smiley By hashpower?  Grin

Quote
the developers should be paid by donations from the community.
Sounds like the Bitcoin Foundation. How is it doing?

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Wary
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August 30, 2015, 07:26:21 AM
 #6

You clearly have no idea what you're talking about. Free market means that people are free to trade with each other, if they choose to, or equally free not to trade. No-one is forced to do anything. If there is force involved, it is not a free market, by definition.
"Market force" is a standard term. "Force" in this case means an economic incentive, rather than coercion. Currently there is no economic incentives for miners to include transactions to block or verify them, no economic incentives for nodes to run at all etc. etc.

EDIT: In absence of market forces, political forces come into play, and political ways to make decisions are much less efficient and much more dirty than free market ones.

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August 30, 2015, 10:28:31 AM
 #7

What if blocksize limit was removed altogether? Originally bitcoin was supposed to have none. (except the technical limit of 32 MB message size)

I've been wondering why such option hasn't been on the table.
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August 30, 2015, 10:42:36 AM
 #8

What if blocksize limit was removed altogether?

I've been wondering why such option hasn't been on the table.

Probably it's too risky. Scalability is a complex technical task, successfull  spam attacks will grind the bitcoin network to halt, damage it's reputation and scare all investors away. Nobody wants it.

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August 30, 2015, 10:49:03 AM
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What if blocksize limit was removed altogether?

I've been wondering why such option hasn't been on the table.

Probably it's too risky. Scalability is a complex technical task, successfull  spam attacks will grind the bitcoin network to halt, damage it's reputation and scare all investors away. Nobody wants it.

I've been under impression that spamming only works when there is a cap. Due to artificial scarcity enforced by the cap a malicious actor can force people to raise fees by spamming the block when it's near its limit. Miners can even make profit from this as if you own enough hashing power, much of those raised fees get paid to you. Closer the blocksize limit the cheaper/more profitable it is to mount such attack.

What is the incentive of spamming if there is no scarcity in blocksize?

Anyway I guess I'm getting off topic here, sorry.
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August 30, 2015, 11:51:45 AM
 #10

Currently there is no economic incentives for miners to include transactions to block or verify them, no economic incentives for nodes to run at all etc. etc.

So you think miners currently have no economic incentive to include transactions in their blocks? Why are they doing it then?

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August 30, 2015, 03:03:01 PM
 #11

You're making a sweeping generalization with too many issues in the same post to have a focused conversation.

You'll have a lot of people commenting on different aspects.  For example, the inflation built in to the money supply.  I don't see what that has to do with the free market at all. It's just a distribution model.

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August 30, 2015, 03:04:30 PM
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You clearly have no idea what you're talking about. Free market means that people are free to trade with each other, if they choose to, or equally free not to trade. No-one is forced to do anything. If there is force involved, it is not a free market, by definition.
There are always market forces.  You are a naive idealist taking a simplistic childlike view of the world.  Children grow up, and you will too Smiley

And for the record I don't dislike your idealism.  Just like little children are cute, and represent the best in us - a certain purity, so too is your idealism.  And it serves a purpose to always remind the adults where we came from, and to try harder.  But at the end of the day - reality always wins out in decisions - in the adult world.

How's that for a backhanded compliment Smiley
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August 30, 2015, 05:54:00 PM
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You clearly have no idea what you're talking about. Free market means that people are free to trade with each other, if they choose to, or equally free not to trade. No-one is forced to do anything. If there is force involved, it is not a free market, by definition.
There are always market forces.  You are a naive idealist taking a simplistic childlike view of the world.  Children grow up, and you will too Smiley

And for the record I don't dislike your idealism.  Just like little children are cute, and represent the best in us - a certain purity, so too is your idealism.  And it serves a purpose to always remind the adults where we came from, and to try harder.  But at the end of the day - reality always wins out in decisions - in the adult world.

How's that for a backhanded compliment Smiley

I sometimes think I'm going to go completely mad reading the banal responses on BCT that involve vast jump-to conclusions and assessments that can't possibly be arrived at with any base level of logic.

MadAlpha was simply making the point that Wary's use of the term "forced" was failing to comprehend one of the basic fundamentals of a free market. But, as Wary has since pointed out, he's talking about the economic incentives, not coercion. In essence though Wary's way of describing the phenomenon didn't read terribly well (maybe English as a second language?) and IMO conveyed the wrong idea.

For you to then take MadAlpha's sentence and portray an entire mindset of "simplistic childlike" views and that "Children grow up, and you will too" and "Just like little children are cute, and represent the best in us - a certain purity, so too is your idealism".....good grief! Just how exactly do you arrive at this as a result of these two sentences from MadAlpha?

Quote
You clearly have no idea what you're talking about. Free market means that people are free to trade with each other, if they choose to, or equally free not to trade. No-one is forced to do anything. If there is force involved, it is not a free market, by definition.

It's this sort of wild assumptive judgement that makes these threads so frustrating and hard to read. Do us all a favour and take a chill-pill on jumping to such outlandish and baseless conclusions about someone.

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August 30, 2015, 07:46:34 PM
 #14

You clearly have no idea what you're talking about. Free market means that people are free to trade with each other, if they choose to, or equally free not to trade. No-one is forced to do anything. If there is force involved, it is not a free market, by definition.
There are always market forces.  You are a naive idealist taking a simplistic childlike view of the world.  Children grow up, and you will too Smiley

And for the record I don't dislike your idealism.  Just like little children are cute, and represent the best in us - a certain purity, so too is your idealism.  And it serves a purpose to always remind the adults where we came from, and to try harder.  But at the end of the day - reality always wins out in decisions - in the adult world.

How's that for a backhanded compliment Smiley

You misunderstood, my comment had no idealism. I merely want to us to have clear definitions of terms. If a concept like "free market" is used, we should at least begin by having a clear definition of what that means.

I understand that the OP wants some improvements to Bitcoin. I don't understand how bitcoin is supposedly not "free market" currently.

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August 30, 2015, 08:31:26 PM
 #15

Currently there is no economic incentives for miners to include transactions to block or verify them, no economic incentives for nodes to run at all etc. etc.

So you think miners currently have no economic incentive to include transactions in their blocks? Why are they doing it then?
They do have economic incentive to include transaction with fees. (But it's not strong one, because most of their income comes not from transaction fee, but from mining reward).
But they don't have economic incentive to include transactions without fees. If they stop doing it, they won't lose any income.

They are doing it because of non-economical reasons: They (just as everybody else) like to be 'good guys'. They don't like to be hated and called parasites. Including transactions in blocks currently cost them next to nothing, so they are doing it.

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August 30, 2015, 08:58:55 PM
 #16

The free market won't work because in order to truly separate it from fiat (government), everyone down a line would need to accept/use it. That means individuals who buy things at stores, the stores (which means employees must accept it), their warehouses (and all those employees), their suppliers (and their employees), their manufacturers (their sources/employees), and so on. The likelihood of this happening are almost nonexistent.


 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




















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Wary
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August 30, 2015, 09:02:25 PM
 #17

You're making a sweeping generalization with too many issues in the same post to have a focused conversation.

You'll have a lot of people commenting on different aspects.  For example, the inflation built in to the money supply.  I don't see what that has to do with the free market at all. It's just a distribution model.
OP is about one single issue: market forces are currently absent in bitcoinland. I've just edited OP, to put it more short and clear. (And yes, RenegadeMan, English is not my first language Smiley).

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