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Author Topic: Satoshi didn't solve the Byzantine generals problem  (Read 13375 times)
ArticMine
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February 11, 2016, 02:07:34 AM
 #181

...

Your error is of course as I already stated, that transactions can grow unbounded due to market demand for more transactions, and since the Monero block size limit is bounded by the market demand as you have admitted, then it is unbounded.

Thus fees (not block reward) will trend towards 0 because no miner can enforce a bound on the block size so the miners will compete with each other to provide the lowest fees since there is no limit on the number of transactions a miner can put in a block (i.e. the payer can send a transaction with lower fees and wait some extra confirmations until the miner with lower fees wins the block).

But as I already stated, this means those miners with more hash rate will have higher income than those miners will less hashrate, yet all miners have the same verification costs. Thus mining will centralize to an oligarchy. Satoshi put a 1MB block size limit to keep verification costs much lower than the block reward, so that Bitcoin would not centralize too quickly.

I rest my case. Monero has not prevented the Tragedy of the Commons. Please don't make me explain it again.

Actually the error is on your side since you expect a rational miner to pay a penalty in order to add a transaction to a block with a minimal or zero fees which are far less than the penalty. Please do not make me explain the basics of how Cryptonote works again.

I rest my case. Monero has prevented the Tragedy of the Commons.

Concerned that blockchain bloat will lead to centralization? Storing less than 4 GB of data once required the budget of a superpower and a warehouse full of punched cards. https://upload.wikimedia.org/wikipedia/commons/8/87/IBM_card_storage.NARA.jpg https://en.wikipedia.org/wiki/Punched_card
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February 11, 2016, 02:35:14 AM
Last edit: February 11, 2016, 03:44:51 AM by TPTB_need_war
 #182

...

Your error is of course as I already stated, that transactions can grow unbounded due to market demand for more transactions, and since the Monero block size limit is bounded by the market demand as you have admitted, then it is unbounded.

Thus fees (not block reward) will trend towards 0 because no miner can enforce a bound on the block size so the miners will compete with each other to provide the lowest fees since there is no limit on the number of transactions a miner can put in a block (i.e. the payer can send a transaction with lower fees and wait some extra confirmations until the miner with lower fees wins the block).

But as I already stated, this means those miners with more hash rate will have higher income than those miners will less hashrate, yet all miners have the same verification costs. Thus mining will centralize to an oligarchy. Satoshi put a 1MB block size limit to keep verification costs much lower than the block reward, so that Bitcoin would not centralize too quickly.

I rest my case. Monero has not prevented the Tragedy of the Commons. Please don't make me explain it again.

Actually the error is on your side since you expect a rational miner to pay a penalty in order to add a transaction to a block with a minimal or zero fees which are far less than the penalty. Please do not make me explain the basics of how Cryptonote works again.

I rest my case. Monero has prevented the Tragedy of the Commons.

My logic has nothing to do with the miner paying a penalty.

Per the math I replied to, the Monero penalty is based on exceeding the median of recent N blocks. Since (as you claim, but see Edit below) that median will scale over time to match the market demand for transactions thus no penalty will be incurred for adding all the transactions, then verification costs will eventually cost more than or a significant portion of the tail emission block reward as transaction volume scales. The point is there is no bound on transaction volume.

Thus the logic I stated takes over (where lower hashrate miners are unprofitable and centralization is forced economically):

But as I already stated, this means those miners with more hash rate will have higher income than those miners will less hashrate, yet all miners have the same verification costs. Thus mining will centralize to an oligarchy. Satoshi put a 1MB block size limit to keep verification costs much lower than the block reward, so that Bitcoin would not centralize too quickly.

Please check your logic more thoroughly before responding. Because you are incorrect. So find your error before posting please.

Edit: my point about transaction fees trending towards 0 is correct but not necessary for my argument as explained above. The reason txn fees trend to 0 despite Monero's penalty for creating blocks which exceed the median of recent N blocks is that payers can send the txns with the lowest fee that any miner will accept.  Thus Monero's block size will trend to 0 if the penalty feature works as designed. Shocked

So either txn fees trend to 0 or block size trends to 0.  Roll Eyes

Sorry you can not defeat the fundamental fact that decentralization can't have a solution to the Byzantine Generals Problem. That is fundamental and inviolable. Waste years of your life, but you will still never defeat Physics and the fact that the speed-of-light isn't infinite.

Edit#2: you will probably think that payers will increase their txn fees so that their txn gets added to a block because miners aren't motivated to add too many transactions to incur the penalty (for miners that accept lower txn fees than the other miners which drive the median block size). But some of the txns will get added which have this lower txn fee, but payers can only be sure their txn is added timely if they pay the maximum txn fee that any miner requires (or some amount higher than the lowest fee), thus the miner may be able to afford to pay the penalty by including these extra transactions thus driving the median block size upwards over time and thus eventually driving the txn fees to 0 (the point is miners have no incentive to exclude txns with any level of txn fee when it doesn't cost them anything to add a transaction to block thus the trend will be ever lower and lower txn fees ... the entire point of my rebuttal to your math is what your penalty algorithm does not reach equilibrium). Which was my point that the penalty feature of Monero will not work as intended. But if it does work, it will drive the block size to 0. There are many other scenarios but they all have failure modes (analysis by case enumeration is very piss poor methodology to do academic work, rather I have started from first principles to show abstractly that no decentralized solution to the BGP can possibly exist). So choose your poison because there is no way to escape the problem that verification MUST be centralized in order to solve the Byzantine Generals Problem.

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February 11, 2016, 03:46:07 AM
Last edit: February 11, 2016, 04:07:55 AM by TPTB_need_war
 #183

... the entire point of my rebuttal to your math is what your penalty algorithm does not reach equilibrium...

And this is because there is no reference point (i.e. the lack of objective reality other than the LCR which I was referring to in this thread in general). And this is known already abstractly from the fact that the BGP can't be solved in a decentralized context.

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February 11, 2016, 07:25:09 AM
 #184

...

Your error is of course as I already stated, that transactions can grow unbounded due to market demand for more transactions, and since the Monero block size limit is bounded by the market demand as you have admitted, then it is unbounded.

Thus fees (not block reward) will trend towards 0 because no miner can enforce a bound on the block size so the miners will compete with each other to provide the lowest fees since there is no limit on the number of transactions a miner can put in a block (i.e. the payer can send a transaction with lower fees and wait some extra confirmations until the miner with lower fees wins the block).

But as I already stated, this means those miners with more hash rate will have higher income than those miners will less hashrate, yet all miners have the same verification costs. Thus mining will centralize to an oligarchy. Satoshi put a 1MB block size limit to keep verification costs much lower than the block reward, so that Bitcoin would not centralize too quickly.

I rest my case. Monero has not prevented the Tragedy of the Commons. Please don't make me explain it again.

Actually the error is on your side since you expect a rational miner to pay a penalty in order to add a transaction to a block with a minimal or zero fees which are far less than the penalty. Please do not make me explain the basics of how Cryptonote works again.

I rest my case. Monero has prevented the Tragedy of the Commons.

My logic has nothing to do with the miner paying a penalty.

Per the math I replied to, the Monero penalty is based on exceeding the median of recent N blocks. Since (as you claim, but see Edit below) that median will scale over time to match the market demand for transactions thus no penalty will be incurred for adding all the transactions, then verification costs will eventually cost more than or a significant portion of the tail emission block reward as transaction volume scales. The point is there is no bound on transaction volume.

Thus the logic I stated takes over (where lower hashrate miners are unprofitable and centralization is forced economically):

But as I already stated, this means those miners with more hash rate will have higher income than those miners will less hashrate, yet all miners have the same verification costs. Thus mining will centralize to an oligarchy. Satoshi put a 1MB block size limit to keep verification costs much lower than the block reward, so that Bitcoin would not centralize too quickly.

Please check your logic more thoroughly before responding. Because you are incorrect. So find your error before posting please.

Edit: my point about transaction fees trending towards 0 is correct but not necessary for my argument as explained above. The reason txn fees trend to 0 despite Monero's penalty for creating blocks which exceed the median of recent N blocks is that payers can send the txns with the lowest fee that any miner will accept.  Thus Monero's block size will trend to 0 if the penalty feature works as designed. Shocked

So either txn fees trend to 0 or block size trends to 0.  Roll Eyes

Sorry you can not defeat the fundamental fact that decentralization can't have a solution to the Byzantine Generals Problem. That is fundamental and inviolable. Waste years of your life, but you will still never defeat Physics and the fact that the speed-of-light isn't infinite.

Edit#2: you will probably think that payers will increase their txn fees so that their txn gets added to a block because miners aren't motivated to add too many transactions to incur the penalty (for miners that accept lower txn fees than the other miners which drive the median block size). But some of the txns will get added which have this lower txn fee, but payers can only be sure their txn is added timely if they pay the maximum txn fee that any miner requires (or some amount higher than the lowest fee), thus the miner may be able to afford to pay the penalty by including these extra transactions thus driving the median block size upwards over time and thus eventually driving the txn fees to 0 (the point is miners have no incentive to exclude txns with any level of txn fee when it doesn't cost them anything to add a transaction to block thus the trend will be ever lower and lower txn fees ... the entire point of my rebuttal to your math is what your penalty algorithm does not reach equilibrium). Which was my point that the penalty feature of Monero will not work as intended. But if it does work, it will drive the block size to 0. There are many other scenarios but they all have failure modes (analysis by case enumeration is very piss poor methodology to do academic work, rather I have started from first principles to show abstractly that no decentralized solution to the BGP can possibly exist). So choose your poison because there is no way to escape the problem that verification MUST be centralized in order to solve the Byzantine Generals Problem.

This response starts with the correct assumption that decentralization alone can't have a solution to the Byzantine Generals Problem (the failure of proof of stake), and then proceeds to make little sense on the unrelated problem of scaling the blocksize in POW coins. The latter problem Monero solves. Keep in mind that an equilibrium between fees per block, base reward and blocksize without a collapse to zero or "infinite" fees, the problem Monero solves, does not by itself speak to the miner centralization issue.

Whether proof of work introduces enough external entropy into the system to solve Byzantine Generals Problem is far from clear because there are a host of centralizing and de-centralizing factors interacting with each other the majority of which have not been taken into consideration in the previous discussion.

Concerned that blockchain bloat will lead to centralization? Storing less than 4 GB of data once required the budget of a superpower and a warehouse full of punched cards. https://upload.wikimedia.org/wikipedia/commons/8/87/IBM_card_storage.NARA.jpg https://en.wikipedia.org/wiki/Punched_card
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February 11, 2016, 01:14:38 PM
 #185

This response starts with the correct assumption that decentralization alone can't have a solution to the Byzantine Generals Problem (the failure of proof of stake), and then proceeds to make little sense on the unrelated problem of scaling the blocksize in POW coins. The latter problem Monero solves. Keep in mind that an equilibrium between fees per block, base reward and blocksize without a collapse to zero or "infinite" fees, the problem Monero solves, does not by itself speak to the miner centralization issue.

Whether proof of work introduces enough external entropy into the system to solve Byzantine Generals Problem is far from clear because there are a host of centralizing and de-centralizing factors interacting with each other the majority of which have not been taken into consideration in the previous discussion.

Your conceptualization is so egregiously incorrect on so many levels, I am mentally challenged as to how I can respond to both illuminate and untangle all your errors. When someone as you have done here twists their thinking into such a convoluted state of wrong conceptualization on top of wrong conceptualization, it becomes arduous to even continue the discussion. Sorry if that sounds like an ad hominem response, but I am really flabberghast+exasperated that you are apparently incapable of comprehending what I have tried to explain (again presuming you are supposed to be an expert on this issue given you display that you are intimately involved with Monero's penalty algorithm). I guess I just assume that extremely intelligent people are capable of comprehending, but apparently this is not true and I need to work harder to elucidate my point. But I am also trying to discipline myself to stop posting in this forum, so I can't continue to untangle the twisted thoughts of others. This has to stop at some point very soon.

Let me reflect for a while on how I can elucidate this issue to you.

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February 11, 2016, 02:53:29 PM
 #186

Could "good enough" vs. "ideal" be part of the problem?  Clearly Bitcoin is up and running good enough for now; denying undermines credibility.  If there are theoretical issues underneath it then it is good to be aware and think about how to address them; denying this is unwise.  What are the real risks of one of these underlying issues flaring up enough to wreck Bitcoin?  How urgent is the topic?  Is someone exploiting us right now?  Can we detect it?  Perhaps the bad guys aren't being as evasive as they could be?  It might be really hard to be totally evasive.  Should we encourage pools to stay under some threshold or risk the wrath of the community at large?  Should we ask the US military to drop bombs on mining sites in China?  Oh, sorry, I went too far.  Smiley
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February 11, 2016, 02:58:00 PM
 #187

I am writing a layman's post now. I will try to explain the debate between ArticMine and myself in a way that hopefully more people can understand.

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February 11, 2016, 03:27:54 PM
Last edit: February 11, 2016, 06:11:26 PM by TPTB_need_war
 #188

Let me take a stab at explaining for laymen, my debate with ArticMine.

Monero has a feature that charges a penalty deducted from the coinbase block reward (e.g. analogous to the 25 BTC per block reward in Bitcoin). The Monero penalty is calculated based on how much larger the block is relative to the median of the preceding N blocks. The intended effect of this feature is that block size will scale to market demand without any Tragedy of the Commons collapse into dysfunctional/degenerate outcomes. Note miners also earn income from transaction fees, so we have to analyze the complex interplay (i.e. game theory and any Nash equilibrium) between Monero's penalty algorithm, block size, block reward, and transaction fees, as well as any costs (see next paragraph).

Bitcoin has “scalepocalypseTragedy of the Commons collapse into dysfunctional/degenerate outcomes as transaction volumes scale up, because either:

  • There is a block size limit and thus transaction fees will rise to the level of transaction values as transaction volumes far exceed that limit, in order to prioritize which transactions don't fit in the limited sized blocks.

  • Or block size would be allowed to have no limit, in which case transaction fees will decline to the cost of verification (the cost for the miner with the most hashrate!) since in the absence of a block size limit the miners have no incentive to not include transactions which provide some more income per block (regardless how small that income per transaction is for as long as it exceeds costs). Note the bandwidth/propagation delay cost argument is moot because again the miners with most hashrate have the lowest bandwidth/propagation delay cost and they set the lowest transaction fees since they have the lowest costs[1] (readers thus note these issues are very complex and requires to have many variables in one's head at the same time to give a correct holistic analysis). The unbounded block size case leads to an oligarchy of the monopoly on hashrate so those in the mining cartel can have pricing power and also because (as I explained in the prior sentences) those who have more hashrate also have lower costs, thus they over time aggregate more hash rate than other miners (because they are more profitable).

The simplest rebuttal to ArticMine is that if the penalty feature of Monero works as intended so as to allow the block size to expand to the market demand for transaction volume, then the “scalepocalypseTragedy of the Commons collapse economics that I explained in the prior paragraph for the case of unbounded block size also applies to Monero. Monero's penalty feature only prevents a miner from bloating the blocks with fake transactions paying to themself (because the miner would have to pay the penalty for exceeding the median block size, but is receiving no transaction fees to pay for the cost of the penalty from fake transactions); and Monero's penalty feature is intended to scale block size to actual market demand.

Thus I have explained there is no Nash equilibrium in Monero's penalty feature (unlike for Satoshi's longest chain rule where there is indeed a Nash equilibrium because if miners don't converge on the longest chain then all their chains are invalid/orphans and worthless without consensus). ArticMine is probably thinking that since miners have different costs, the equilibrium point for transaction fees will be the weighted average but I have explained the holistic economics by which this weighted average is driven by the costs of the largest hashrate miners until they control all the hashrate[1].

If one instead assumed that ALL (or nearly all) payers will choose to wait for the lowest cost miner to win a block (and include their transactions, i.e. queueing up in a line that grows longer and longer) and thus set their transaction fees accordingly, then Monero's penalty feature would force the block size to trend to 0. I of course don't think payers will do this, thus I stated that either the block size trends to 0, or the block size scales to market demand. But per the prior paragraph, when the block size scales to market demand, then the transaction fees decline to the lowest cost miners over time (which is essentially trending to ~0), and thus the largest hash rate miners will be incentivized to form an alliance so they can have some pricing power over transaction fees.

Monero has solved nothing and has the same insoluble “scalepocalypseTragedy of the Commons collapse economics as Bitcoin.

Btw, I know how to solve this problem and the solution will be in my coin. Iota appears to have solved this problem as well, but my analysis concludes Iota will fail to converge without centralization of the system as well. The only distinction of what I am proposing to do in my coin is that the verification cost centralization is under the control of decentralized payers. Iota can't do this because  if the payers don't stay with the same centralization, the convergence is lost. Whereas, in my coin design the payers can move their PoW shares at any time, because my design has a longest chain rule.


[1]This is mathematically unarguable for payers willing to wait for their transaction to be confirmed until the largest hashrate miner wins a block. It is also true in that the transaction fees are set by a weighted average of frequency of block wins by miners according to hashrate. And since I explained that miners with more hashrate aggregate more hashrate over time due to having lower costs, then the long game centralization/domination of transaction fee weighted average trend is unarguable as well.



This response starts with the correct assumption that decentralization alone can't have a solution to the Byzantine Generals Problem (the failure of proof of stake), and then proceeds to make little sense on the unrelated problem of scaling the blocksize in POW coins. The latter problem Monero solves. Keep in mind that an equilibrium between fees per block, base reward and blocksize without a collapse to zero or "infinite" fees, the problem Monero solves, does not by itself speak to the miner centralization issue.

Whether proof of work introduces enough external entropy into the system to solve Byzantine Generals Problem is far from clear because there are a host of centralizing and de-centralizing factors interacting with each other the majority of which have not been taken into consideration in the previous discussion.

The underlined portion was refuted above.

Now I will address your abstract theoretical errors in the non-underlined portions quoted above...

The Nash equilibrium failures of PoS are caused by the fact that the centralization is in the stake. What I showed abstractly in this thread is that every BGP solution will have some element of centralization, because BGP can't be solved without a reference point because otherwise there is no objective reality.

The longest chain rule employing external entropy from PoW provides no reference point other than the longest chain. As I explained to smooth and monsterer, so any attributes that can't be detected from the LCR, e.g. whether the coin is under 51% attack doing double-spends or censoring transactions, thus can't be objectively known/proved so that all observers agree (i.e. these attributes are undecidable).

Thus Satoshi's LCR employing PoW does not solve BGP and can't solve it without some centralization. Period!

The key insight is to control how and where the centralization will be in the system. The error Bitcoin and Monero have made is the centralization is out-of-control of the payers. I have fixed that.

Thus the abstract BGP analysis does apply to the conclusion that Monero (and Ethereum) have deluded themselves into thinking they can avoid centralization and instead gets centralization in a way they did not want.

Sorry you were wrong on every single point you wrote.


Edit: PoW LCR is necessary to enforce the following conditions assumed by BGP that don't exist in a decentralized network otherwise (but again there is no objectivity other than the Nash equilibrium of the longest chain):

Afaics the paper has an important omission which is that when the disloyal generals (traitors) are not colluding (i.e. can't trust each other) then they have no reliable means to disrupt the loyal consensus. So my analysis will focus on the case where the disloyal generals are colluding.

[...]

(note also that the definition of oral messages assumes conditions A1, A2, and A3 which can't exist in a decentralized network where Sybil attacks are possible)

PS: By the way, classical BGP mentions somewhere that traitors collude AFAIK.

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April 19, 2016, 11:14:45 PM
Last edit: April 19, 2016, 11:35:00 PM by TPTB_need_war
 #189

This brings us back to the Cryptonote adaptive blocksize limit combined with a tail emission found in Monero where:
1) The cost of mining a block is set by the block subsidy

Correct, meaning the amount of hashrate miners spend will be equal to the block subsidy[1] (where block subsidy will ultimately be Monero's perpetual tail reward which is necessarily a fixed # of coins), because (as I pointed out in our prior discussion) transaction fees will trend to costs, due to that the median block size MN will trend upwards to match market demand and thus there is no pricing power on transaction fees.

[1] Note this means the tail reward security of Monero will be very weak and insufficient.

2) The total amount in fees per block has to rise to a number comparable to, but most of the time smaller, than the block subsidy.

You wrote that before in our prior discussion:

The reason the above two scenarios do not apply to a Cryptonote coin with a tail emission such a Monero becomes apparent when one considers the economics of the total block reward components of fees and base reward (new coin emission). If the total in fees per block significantly exceed the base reward then it becomes economically attractive for miners to burn coins to the penalty by mining larger blocks. The block size rises until the total fees per block fall below a level where it is uneconomic for the miners to pay the penalty by increasing the blocksize. This level is comparable to the base reward. It is at this point where the need for a tail emission becomes clear, since without the tail emission the total block reward (fee plus base reward) would go to zero.

And it still doesn't make any sense to me. The block size will trend upwards to match transaction demand, because the penalty is driven to 0 as the median block size increases as  miners can justify burning some of the transaction fees to the penalty. That drives the median block size upwards, which drives the penalty to 0 again. The median block size doesn't have any incentive to decrease again, thus transaction fees then fall to costs.

Sorry as I told you before, Monero does not solve the Tragedy of the Commons in Satoshi's design. It does adaptively increase the block size while preventing spam surges.

I doubt John Conner's design has achieved any better, because as I explained at our prior discussion, there is no decentralized solution to that Tragedy of the Commons in the current proof-of-work designs. I have a solution, but it is a very radical change to the proof-of-work design that relies on unprofitable mining by payers.

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April 19, 2016, 11:35:18 PM
 #190

[1] Note this means the tail reward security of Monero will be very weak and insufficient.

"Insufficient" is unclear because there is no unambiguous definition of how much is sufficient.

In large part it depends on the decentralization of mining. If mining is decentralized then you only need a small (but still nonzero) incentive because any miner can't really do anything other than follow the longest chain rule. While raw hash rate attacks are possible (i.e. temporarily centralizing mining by incurring a cost), in a larger system they will have significant cost and will only succeed as long as the ongoing cost is paid.

If mining is highly concentrated by nature then you are really only relying on the weak linear security of the block reward itself, and maybe not even that, because miners (e.g., hypothesized Chinese cartels) have all sorts of perverse incentives.

Your statement would be correct if you added ", assuming mining becomes centralized as I have claimed it will."

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April 19, 2016, 11:46:44 PM
 #191

[1] Note this means the tail reward security of Monero will be very weak and insufficient.

"Insufficient" is unclear because there is no unambiguous definition of how much is sufficient.

In large part it depends on the decentralization of mining. If mining is decentralized then you only need a small (but still nonzero) incentive because any miner can't really do anything other than follow the longest chain rule. While raw hash rate attacks are possible (i.e. temporarily centralizing mining by incurring a cost), in a larger system they will have significant cost and will only succeed as long as the ongoing cost is paid.

If mining is highly concentrated by nature then you are really only relying on the weak linear security of the block reward itself, and maybe not even that, because miners (e.g., hypothesized Chinese cartels) have all sorts of perverse incentives.

Your statement would be correct if you added ", assuming mining becomes centralized as I have claimed it will."

I will argue my statement was correct as stated, because there are other parties with significant resources and incentives who may not be mining normally but once the hashrate declines to the tail reward cost, they can then decide it is easier to attack the coin.

The better retort would be to argue that the as the adoption increases, the price will rise so the fixed size (in coins) tail reward has an adaptive valuation.

But I will retort that the value of shorting also scales up accordingly.

Rather what I do in my improved design, is to set the cost of mining to the reasonable fraction of the transaction value.

That is why I say the only way to solve the block chain Tragedy of the Commons is to require what is effectively a minimum transaction fee in the protocol. But then there is the problem of miners competing with each other to rebate the fee to the payer/payee so how to enforce a minimum transaction fee?

There is only one way to do that, which is to burn the fees. But if you burn them then the money supply declines to 0. So the only way is to burn hashrate. And that is why only my design which makes mining unprofitable will solve the problem.

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April 19, 2016, 11:52:04 PM
 #192

I have a solution, but it is a very radical change to the proof-of-work design that relies on unprofitable mining by payers.

Which I do not see as a solution due to my criticism of IOTA where abstracting block reward from the external entropy process defeats the purpose of the external entropy process from existing in the first place, giving you something that's functionally equivalent to a closed loop proof of stake system.  Or to put it more simply for people who didn't read the IOTA thread, without permanent coin turnover via either transaction fee as block reward or permanent inflation, you technically have a permissioned ledger and not a decentralized system.  Transaction fee as block reward with zero inflation being the far lesser of evils to the point where it can only be considered a work of art.  I believe unprofitable mining is therefore pointless mining.

My, to borrow a slightly overused Anonymint term, "holistic" grasp of all cryptocurrency elements was not where it is now when I originally made this thread, and Satoshi indeed did not implement any Sybil prevention due to pools acting as an unforeseen abstraction layer, but Bitcoin is otherwise a work of art that no alternative systems have been able to improve upon yet.  Even the supposed negatives the media likes to push such as being "a waste of power" aren't true, when in the future, it's entirely plausible you'll be mining Bitcoinis as a byproduct of doing things like turning on central heating in your house.

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April 19, 2016, 11:54:35 PM
 #193

I have a solution, but it is a very radical change to the proof-of-work design that relies on unprofitable mining by payers.

Which I do not see as a solution due to my criticism of IOTA where abstracting block reward from the external entropy process defeats the purpose of the external entropy process from existing in the first place, giving you something that's functionally equivalent to a closed loop proof of stake system.  Or to put it more simply for people who didn't read the IOTA thread, without permanent coin turnover via either transaction fee as block reward or permanent inflation, you technically have a permissioned ledger and not a decentralized system.  Transaction fee as block reward being the far lesser of evils to the point where it can only be considered a work of art.  I believe unprofitable mining is therefore pointless mining.

My, to borrow a slightly overused Anonymint term, "holistic" grasp of all cryptocurrency elements was not where it is now when I originally made this thread, and Satoshi indeed did not implement any Sybil prevention due to pools acting as an unforeseen abstraction layer, but Bitcoin is otherwise a work of art that no alternative systems have been able to improve upon yet.

There is a permanent tail reward turnover in my design. And it is still unprofitable.

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April 20, 2016, 12:04:40 AM
Last edit: April 20, 2016, 12:26:28 AM by r0ach
 #194

There is a permanent tail reward turnover in my design. And it is still unprofitable.

I'm honestly not ready to throw in the towel on inflation due to being a completely arbitrary number that opens an enormous slippery slope for alteration by succesors.  Inflation also just being a form of social engineering that people will always attempt to bypass by utilizing other systems.  It has further benefit due to the fact that Bitcoin mining profit trends towards zero, but with a deflationary system with no inflation involved, there is still incentive to mine it anyway due mining acting as futures market with a time opportunity cost that allows for forward profits.  Also due to the fact stated below:

Transaction fee as block reward with zero inflation being the far lesser of evils to the point where it can only be considered a work of art.

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April 20, 2016, 12:08:06 AM
 #195

There is a permanent tail reward turnover in my design. And it is still unprofitable.

I'm honestly not ready to throw in the towel on inflation due to being a completely arbitrary number that opens an enormous slippery slope for alteration by succesors.  Inflation also just being a form of social engineering that people will always attempt to bypass by utilizing other systems.  Also due to the fact stated below:

Transaction fee as block reward with zero inflation being the far lesser of evils to the point where it can only be considered a work of art.

There is no inflation with a tail reward.

Any smallish level of inflation will result in a constant spendable money supply (click the quoted link for the math):

[...]Monero's perpetual tail reward which is necessarily a fixed # of coins[...]

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April 20, 2016, 12:16:09 AM
Last edit: April 20, 2016, 12:44:43 AM by smooth
 #196

[1] Note this means the tail reward security of Monero will be very weak and insufficient.

"Insufficient" is unclear because there is no unambiguous definition of how much is sufficient.

In large part it depends on the decentralization of mining. If mining is decentralized then you only need a small (but still nonzero) incentive because any miner can't really do anything other than follow the longest chain rule. While raw hash rate attacks are possible (i.e. temporarily centralizing mining by incurring a cost), in a larger system they will have significant cost and will only succeed as long as the ongoing cost is paid.

If mining is highly concentrated by nature then you are really only relying on the weak linear security of the block reward itself, and maybe not even that, because miners (e.g., hypothesized Chinese cartels) have all sorts of perverse incentives.

Your statement would be correct if you added ", assuming mining becomes centralized as I have claimed it will."

I will argue my statement was correct as stated, because there are other parties with significant resources and incentives who may not be mining normally but once the hashrate declines to the tail reward cost, they can then decide it is easier to attack the coin.

It is still ambiguous what is "sufficient".

Quote
The better retort would be to argue that the as the adoption increases, the price will rise so the fixed size (in coins) tail reward has an adaptive valuation.

But I will retort that the value of shorting also scales up accordingly.

Shorting can't erase the cost due to PoW (burning energy). It can only erase a cost from loss of value of a holdings (PoS and other methods that claim to turn holding coins into "virtual miners").

BTW, I would suggest that Tragedy of the Commons is an ineffective analogy for explaining whatever it is you are trying to explain because obviously-intelligent people such as ArticMine don't understand it. It may be that you are entirely correct, but if you want to communicate effectively you need a differently-worded explanation.
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April 20, 2016, 12:21:43 AM
 #197

I edited one of my above posts to articulate the problem with inflation...aka "tail reward"

It (0 inflation) has further benefit due to the fact that Bitcoin mining profit trends towards zero, but with a deflationary system with no inflation involved, there is still incentive to mine it anyway due mining acting as futures market with a time opportunity cost that allows for forward profits

The amount of inflation you can slop onto a system before it compromises my above statement is far too arbitrary and unknown, to the point where it should just be a taboo subject in the first place changing it to anything but zero.  Anyone arguing for inflation should be looked upon with great suspicion (even though I've made the mistake of considering it possibly useful in the past)

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April 20, 2016, 12:47:59 AM
 #198

The better retort would be to argue that the as the adoption increases, the price will rise so the fixed size (in coins) tail reward has an adaptive valuation.

But I will retort that the value of shorting also scales up accordingly.

Shorting can't erase the cost due to PoW (burning energy). It can only erase a cost from loss of value of a holdings (PoS and other methods that claim to turn holding coins into "virtual miners").

If attacking a coin causes its price to decline, shorting can return a profit. If that profit exceeds the cost due to PoW, then that cost was erased. Cover the short, stop the attack. Repeat if the price rises again.

BTW, I would suggest that Tragedy of the Commons is an ineffective analogy for explaining whatever it is you are trying to explain because obviously-intelligent people such as ArticMine don't understand it. It may be that you are entirely correct, but if you want to communicate effectively you need a differently-worded explanation.

Agreed at the appropriate time. I deem it necessary to be vague since I am months (or moar!) away from implementing my design.

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April 20, 2016, 12:52:22 AM
 #199

The amount of inflation you can slop onto a system before it compromises my above statement is far too arbitrary and unknown

So is the unknown of China's pools controlling 67% of Bitcoin's hashrate, and the potential of the Bitcoin money supply not only inflating like crazy the past years, but inflating more than the originally promised 21 million coin limit.

Also the tail reward is usually designed to be much smaller than initial distribution, so if you are worried about inflation, you should be really worried now. If the tail reward is less than the population and economic growth rates, then it is still deflationary.

Additionally if Bitcoin has no tail reward and due to the Tragedy of the Commons (if it remains decentralized) then transaction fees decline to costs, then it becomes a permissioned block chain as you alleged with no circulating coins passing back through mining.

I'll make these points much more well explained and convincing in a future white paper.

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April 20, 2016, 12:52:28 AM
Last edit: April 20, 2016, 01:18:30 AM by smooth
 #200

The better retort would be to argue that the as the adoption increases, the price will rise so the fixed size (in coins) tail reward has an adaptive valuation.

But I will retort that the value of shorting also scales up accordingly.

Shorting can't erase the cost due to PoW (burning energy). It can only erase a cost from loss of value of a holdings (PoS and other methods that claim to turn holding coins into "virtual miners").

If attacking a coin causes its price to decline, shorting can return a profit. If that profit exceeds the cost due to PoW, then it erased it. Cover the short, stop the attack. Repeat if the price rises again.

Yes but if the attack doesn't succeed, the energy burn cost is still there (i.e. risk of failure)

If, by contrast, you try to attack a coin almost costlessly via PoS exploits and if your attack doesn't succeed then your your coins nor your short loses value. Then you can just try again, until you succeed...

I agree that "coins will go down in value" does not enhance the security of PoW; that would attempting to impute a some sort of stake-based incentive to mining, as some do, and that is flat out wrong, or at best, very weak security.
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