The Bitcoin consensus mechanism is incorrectly labeled Proof of Work

[r0ach]

Another example semi-related to topics in this thread about the state of PoW:

Smooth (Monero dev) and I were talking about decentralized exchanges and I brought up that HFT (high frequency trading) is a form of PoW itself in practice that demonstrates the end game for Bitcoin PoW.  You're fighting over a finite resource (skimming profits) where even the speed of light matters.  Parties are expending resources to position themselves to capture this supply, and eventually it's a winner take all monopoly or something extremely close to it...

[1715159041]

1715159041

[1715159041]

1715159041

[smooth]

It was predicted in the early days by Satoshi that mining would end up somewhat centralized, he specifically mentioned "specialized" which basically means centralized. This is why keeping nodes decentralized is the way to go, and this is why we need to avoid things like Bitcoin XT like the plague. Dont want to end up with both centralized mining and centralized nodes, thats the end of Bitcoin basically.

Nodes only help with redundancy not with security (against tx history reversing) so node decentralization doesntmean anything and is easy to achieve.

Nodes help with security if they are under independent control (or weak or no control at all, as unattended embedded devices) and are economically significant.

[smooth]

Another example semi-related to topics in this thread about the state of PoW:

Smooth (Monero dev) and I were talking about decentralized exchanges and I brought up that HFT (high frequency trading) is a form of PoW itself in practice that demonstrates the end game for Bitcoin PoW.  You're fighting over a finite resource (skimming profits) where even the speed of light matters.  Parties are expending resources to position themselves to capture this supply, and eventually it's a winner take all monopoly or something extremely close to it...

Yes the effect of competition over arbitrage is to eliminate the arbitrage but that is not a bad thing, nor does not imply a single surviving participant because market participants have complex multidimensional preferences. The median voter theorem (and its economic equivalents) does not apply in multiple dimensions.

[sidhujag]

Another example semi-related to topics in this thread about the state of PoW:

Smooth (Monero dev) and I were talking about decentralized exchanges and I brought up that HFT (high frequency trading) is a form of PoW itself in practice that demonstrates the end game for Bitcoin PoW.  You're fighting over a finite resource (skimming profits) where even the speed of light matters.  Parties are expending resources to position themselves to capture this supply, and eventually it's a winner take all monopoly or something extremely close to it...

Yes the effect of competition over arbitrage is to eliminate the arbitrage but that is not a bad thing, nor does not imply a single surviving participant because market participants have complex multidimensional preferences. The median voter theorem (and its economic equivalents) does not apply in multiple dimensions.

Closing the arb loop does increase efficiency for price discovery but because of the ability to place trades im high frequency many other attack vectors open up that allow people to game the system. Since people have a slower reaction time to hft you have ice berge orders that end up being front run for quick spread plays. You have people placing big orders to entice liquidity but quickly pulling it to try to get favourable prices (the flash crash dude did this and now is facing jail time).. Anyways it's too hard to regulate hft because it's happening so quick you can't place resistance on non conforming trade behaviour.. So better to not allow it in the first place and allow for arbs to happen in semi realtime.

[smooth]

Another example semi-related to topics in this thread about the state of PoW:

Smooth (Monero dev) and I were talking about decentralized exchanges and I brought up that HFT (high frequency trading) is a form of PoW itself in practice that demonstrates the end game for Bitcoin PoW.  You're fighting over a finite resource (skimming profits) where even the speed of light matters.  Parties are expending resources to position themselves to capture this supply, and eventually it's a winner take all monopoly or something extremely close to it...

Yes the effect of competition over arbitrage is to eliminate the arbitrage but that is not a bad thing, nor does not imply a single surviving participant because market participants have complex multidimensional preferences. The median voter theorem (and its economic equivalents) does not apply in multiple dimensions.

Closing the arb loop does increase efficiency for price discovery but because of the ability to place trades im high frequency many other attack vectors open up that allow people to game the system.

Of course it does, but the problem is that it is unavoidable without some sort of dictatorial control over markets. If you have an exchange with 1 second order execution time, I can open one with 1/2 second and I will get a ton of business from arbs if nothing else. Then my exchange will have tighter spreads and the retail order flow will find its way there too. Your exchange will die.

[sidhujag]

Another example semi-related to topics in this thread about the state of PoW:

Smooth (Monero dev) and I were talking about decentralized exchanges and I brought up that HFT (high frequency trading) is a form of PoW itself in practice that demonstrates the end game for Bitcoin PoW.  You're fighting over a finite resource (skimming profits) where even the speed of light matters.  Parties are expending resources to position themselves to capture this supply, and eventually it's a winner take all monopoly or something extremely close to it...

Yes the effect of competition over arbitrage is to eliminate the arbitrage but that is not a bad thing, nor does not imply a single surviving participant because market participants have complex multidimensional preferences. The median voter theorem (and its economic equivalents) does not apply in multiple dimensions.

Closing the arb loop does increase efficiency for price discovery but because of the ability to place trades im high frequency many other attack vectors open up that allow people to game the system.

Of course it does, but the problem is that it is unavoidable without some sort of dictatorial control over markets. If you have an exchange with 1 second order execution time, I can open one with 1/2 second and I will get a ton of business from arbs if nothing else. Then my exchange will have tighter spreads and the retail order flow will find its way there too. Your exchange will die.

Depends.. The interbank is really only traded amongst the banks so I'd imagine it wouldn't need to change much, they already require last looks on trades and cancel them if you are doing arbs all day on them if you trade through currenex which built it into its protocol.

If it was on blockchain you can keep hfts away from interbank and let market makers deal with them.

[smooth]

The interbank is really only traded amongst the banks

If you are going to assume a closed market with participants who follow some specified rules, then you have satisfied the dictatorial control requirement I stated. Given real world experience I doubt the sustainability of even that. They will find a loophole or just cheat.

On a public blockchain open to anyone, it won't work.

[sidhujag]

The interbank is really only traded amongst the banks

If you are going to assume a closed market with participants who follow some specified rules, then you have satisfied the dictatorial control requirement I stated. Given real world experience I doubt the sustainability of even that. They will find a loophole or just cheat.

On a public blockchain open to anyone, it won't work.

Some people believe that's where Bitcoin is best served without worrying about block size.. Replace the interbank so money transmission can be more efficient.. I guess that's just plan b in many eyes because it's assumiing banks don't collapse or give their power back to the people.

Byrne is also developing a replacement for trading exchsnges by using the blockchain thus eliminating hfts.. I mean smart people know it's s problem and are focused on fixing it.. Just a matter of time imo before it happens.

[sidhujag]

Byrne is also developing a replacement for trading exchanges by using the blockchain . Just a matter of time imo before it happens.

yea, can't wait for Byrnecoin.... he is a pretty trustworthy dude.. right?

until then, however, only public coins like BTC & BTS have:

Proof of Domination.

they've been running undeterred by hackers for years

private coins don't have "proof"

they have "trust" (in the private entity to tell you the truth about what's in their blockchain) (only they can see or view the code)

That's the part I meant its a matter of time.. I do not know what Byrne wants to do or care for that matter.

In terms of private entities on the blockchain, there need to be incentives for corporates to conduct business via Apps (scripts) on the chain which are fully open source or closed source according to requirements from businesses. Private or closed source apps made possible on a blockchain will open up a new wave of innovation. I believe there are a few projects including BTS that this is made possible on.

These private apps don't need any "proof" as they are hosted on a public chain.

[r0ach]

Another delegated proof of work vs DPoS comparison in reference to Byzantine fault tolerance and Sybil below.
|
|
\/

only POW provably solves the byzantine generals problem in the face of sybil attack

Delegated proof of work, which Bitcoin is, doesn't.  It's not more fault tolerant than DPoS either.  If 70% of the hash rate is in china owned by three pools, you have no way of knowing these pools aren't owned by the same person (sybil).  The only way is to audit them yourself, which is the purpose of the voting mechanism in DPoS, to audit the block validators for sybil.  The only difference is, the audit mechanism is built into the protocol of DPoS and excluded entirely from DPoW (delegated proof of work).

My argument here is basically:

<r0ach> you can't solve byzantine generals problem with a probabilistic model unless you've first solved sybil with a probabilistic model and Bitcoin doesn't do that
<r0ach> because there's no way of telling if all pools are owned by the same person, then it's not collusion or 51% attack, it's a sybil attack
<r0ach> since the essence of the byzantine generals problem is sybil attack, dealing with sybil comes first in the hierarchy before byzantine generals is discussed at all

[callmejack]

who cares about how a consesus algorythm is labeled as long as it works?

since proof of work can only kept decentralized as long as cheap compute resources are available to the masses it is a public secret that decentralized PoW has failed.
i think BURSTs PoC (proof of capacity) algo is worth to look closer at because it removed the PoW and PoS design flaws (long term secure affordable decentralization).

since the algo is based on precomputed data comparable to rainbow tables there is no way to develop special centralized hardware like asics for it (in terms of running costs as capacity replacement).
for the decentralization this means everyone can buy regular hdds in the next shop around the corner or use spare capacity.
compared to PoW there are almost "no" running costs.

the coin exists for over a year now and instead of having a whitepaper it has a over 1000 pages long bitcointalk thread here:
https://bitcointalk.org/index.php?topic=731923.0

[tromp]

i think BURSTs PoC (proof of capacity) algo is worth to look closer at because it removed the PoW and PoS design flaws (long term secure affordable decentralization).

since the algo is based on precomputed data comparable to rainbow tables there is no way to develop special centralized hardware like asics for it (in terms of running costs as capacity replacement).
for the decentralization this means everyone can buy regular hdds in the next shop around the corner or use spare capacity.
compared to PoW there are almost "no" running costs.

the coin exists for over a year now and instead of having a whitepaper it has a over 1000 pages long bitcointalk thread here:
https://bitcointalk.org/index.php?topic=731923.0

Quoting from https://eprint.iacr.org/2015/528.pdf

"Perhaps the most serious security issue with Burstcoin is that it allows for time-memory
trade-offs: a miner doing just a small amount of extra computation can mine at the same rate as an honest miner while using just a small fraction of the disk-space that an honest miner would."

[callmejack]

i think BURSTs PoC (proof of capacity) algo is worth to look closer at because it removed the PoW and PoS design flaws (long term secure affordable decentralization).

since the algo is based on precomputed data comparable to rainbow tables there is no way to develop special centralized hardware like asics for it (in terms of running costs as capacity replacement).
for the decentralization this means everyone can buy regular hdds in the next shop around the corner or use spare capacity.
compared to PoW there are almost "no" running costs.

the coin exists for over a year now and instead of having a whitepaper it has a over 1000 pages long bitcointalk thread here:
https://bitcointalk.org/index.php?topic=731923.0

Quoting from https://eprint.iacr.org/2015/528.pdf

"Perhaps the most serious security issue with Burstcoin is that it allows for time-memory
trade-offs: a miner doing just a small amount of extra computation can mine at the same rate as an honest miner while using just a small fraction of the disk-space that an honest miner would."

thanks for this link to the document. it is new to me.

the authors of the document assume that it is possible to only compute a specific scoop of a plot since they base their whole information on the only available flow chart which exists ("...a miner can initially compute and store only the value x4096." --- http://burstcoin.info/assets/img/flow.png )

they either intentionally or due to the simplifications in the flow chart came to the conclusion that the scoop datafile content for a account-nonce combination represents a single shabal hash.
the implementation requires to compute all 4096 scoops as a block and then these get cut into 64 byte blocks which are read during the mining.

i have done my own analysis some time back (based on the c plotter sourcecode) and came to the conclusion that even the most efficient asics result in higher running costs than mining from at this time available storage devices.

grinding is basically not possible since there is no merkle root and transactions have no influence on the generated blocks.

in future asics may support the plotting and mining process like gpus do today in large rigs.