Blockchain = Powerful Tool for Keynesian Monetary Policy

[Rassah]

1) Your formula is still missing the initial cost of mining hardware. You are accounting for 20% depreciation, i.e. cost to maintain/replace it, based on god knows what, while totally ignoring that in a 54.8 billion economy/total Bitcoin valuation, the total hardware that is mining all bitcoins will be worth a few billion by itself. If we assume that current Bitcoin market value is 110mil, and the total cost of all Bitcoin mining hardware currently working is $500,000, or that at any given moment the amount of mining hardware supporting Bitcoin is worth 0.5% of it's total market valuation, then should Bitcoin become a 54.8 billion economy, the amount of hardware that a government would have to buy initially to gain their 51% is over 274,000,000. To that you can add the 54.8 million of 20% depreciation plus your other costs. And, you're right, it's not much, but it does double your initial investment estimate, and it is using lowest estimates and assuming that the mining hardware will be readily available (a big assumption)

2) I have yet to hear a good explanation of how proof-of-stake (whoever owns the most money controls how much is printed and what rules apply) is any different from a central bank (who have stake by default, and simply control how much is printed and what rules apply). If a government entity is supposed to own the biggest stake, then I see no difference from our current federal reserve system (and it's crap like this that makes me think huge advocates of proof-of-stake are shortsighted idiots)

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[cunicula]

2) I have yet to hear a good explanation of how proof-of-stake (whoever owns the most money controls how much is printed and what rules apply) is any different from a central bank (who have stake by default, and simply control how much is printed and what rules apply). If a government entity is supposed to own the biggest stake, then I see no difference from our current federal reserve system (and it's crap like this that makes me think huge advocates of proof-of-stake are shortsighted idiots)

How about you explain your view. It makes absolutely no sense to me. I cannot even understand what you are thinking. If someone says, "all pigs can fly", I am not sure how to go about refuting their argument.
Clearly just saying "this pig can't fly" is not going to work. Perhaps if I knew how you came to the conclusion that "pigs can fly" it would help me to clarify things for you.

[Rassah]

OK, step-by-step then:

Proof-of-work means whoever has the most work-producing hardware, decides what kind of transactions get approved, makes the most on fees, and if they get considerably more than 51% of the network, can control the rules of the currency, such as what fee everyone should pay, and maybe even who should get the money and what limits on the total amount of currency exist.
Proof-of-stake means whoever owns the most currency (has the highest stake) has all the power the 51%+ proof-of-work person above has.

Should someone get 51%+ in a proof-of-stake system, they will be able to control what kind of transactions get approved, who gets paid and how much, what kind of fees are paid on transactions, and how much currency can be printed, inflating and deflating it at will.
A Federal Reserve bank has a defacto proof-of-stake granted to it by law, which gives it the power to control what kind of transactions get approved, who gets paid and how much, what kind of fees are paid on transactions, and how much currency can be printed, inflating and deflating it at will.

Aside from having to establish proof-of-stake control by actually acquiring the currency (or starting your own blockchain where you have most of the currency to begin with), as opposed to just taking control through legal means, I don't see a difference. Especially since in the end, both systems end up with a single entity controlling a single centralized ledger that they have complete control over.

Sorry, but that's the most I can dumb it down for you.

[Realpra]

Suppose the central bank controls 51% of hashing power and wants to achieve a stimulus equivalent to a 3% increase in inflation.

Counter 1: The central banks of the world are honestly too stupid and short sighted to compete with the worlds largest super computer - Bitcoin.
Counter 2: The bank would not be able to use their 51% computer on a new chain using a different algorithm. We could have almost identical blocks on each chain and a hundred different chains/algorithms - they would not be able to keep up.

Final counter 3: Block IPs not trusted; all central blocks would then go into thin air - ONE update.

[cunicula]

OK, step-by-step then:

Proof-of-work means whoever has the most work-producing hardware, decides what kind of transactions get approved, makes the most on fees, and if they get considerably more than 51% of the network, can control the rules of the currency, such as what fee everyone should pay, and maybe even who should get the money and what limits on the total amount of currency exist.
Proof-of-stake means whoever owns the most currency (has the highest stake) has all the power the 51%+ proof-of-work person above has.

Should someone get 51%+ in a proof-of-stake system, they will be able to control what kind of transactions get approved, who gets paid and how much, what kind of fees are paid on transactions, and how much currency can be printed, inflating and deflating it at will.
A Federal Reserve bank has a defacto proof-of-stake granted to it by law, which gives it the power to control what kind of transactions get approved, who gets paid and how much, what kind of fees are paid on transactions, and how much currency can be printed, inflating and deflating it at will.

Aside from having to establish proof-of-stake control by actually acquiring the currency (or starting your own blockchain where you have most of the currency to begin with), as opposed to just taking control through legal means, I don't see a difference. Especially since in the end, both systems end up with a single entity controlling a single centralized ledger that they have complete control over.

Sorry, but that's the most I can dumb it down for you.

I'm still confused again. Can we rewrite it this way?

Should someone get 51%+ in a proof-of-work stake system, they will be able to control what kind of transactions get approved, who gets paid and how much, what kind of fees are paid on transactions, and how much currency can be printed, inflating and deflating it at will.
A Federal Reserve bank has a defacto proof-of-work stake granted to it by law, which gives it the power to control what kind of transactions get approved, who gets paid and how much, what kind of fees are paid on transactions, and how much currency can be printed, inflating and deflating it at will.

Aside from having to establish proof-of-work stake control by actually acquiring the currency hardware (or starting your own blockchain where you have most of the the currency hardware to begin with), as opposed to just taking control through legal means, I don't see a difference. Especially since in the end, both systems end up with a single entity controlling a single centralized ledger that they have complete control over.

Sorry, but that's the most I can dumb it down for you.

Ah it makes more sense now. It is just about who controls the most resources.

[steelhouse]

Recall that the purpose of money printing is to encourage or discourage spending. When the central bank wants to encourage spending, they print money leading to inflation. Inflation encourages people to turn cash into goods and physical assets. This increases spending in the short-run and stimulates the economy.

Krugman is a clown.  The purpose of savings is to spend.  Savings encourages spending.  A rising bitcoin encourages spending and bitcoin business creation.  Deflation stimulates the economy.

[fergalish]

Counter 1: The central banks of the world are honestly too stupid and short sighted to compete with the worlds largest super computer - Bitcoin.

Be careful - don't naively underestimate your opponents' skills.

Final counter 3: Block IPs not trusted; all central blocks would then go into thin air - ONE update.

tor

[Rassah]

Ah it makes more sense now. It is just about who controls the most resources.

Not exactly. POWork control is externalized, POStake is internalized. If you have a majority of currency in POStake, no one can do anything unless you sell them some of your currency. If you have a majority in POWork, anyone can buy hardware to try to take some of your power away. It's the difference between the Federal Reserve being the only one who can coin money (POStake), and anyone with enough resources being able to buy their own money printing presses (POWork).
You know what, never mind. I doubt the subtlety is evident to you.

[Rassah]

Counter 1: The central banks of the world are honestly too stupid and short sighted to compete with the worlds largest super computer - Bitcoin.

Be careful - don't naively underestimate your opponents' skills.

How does cognitive dissonance apply to a distributed computing project? Better yet, how is a distributed computer incompetent? I think you're missapplying that favorite insult of yours to an inanimate system.

[cunicula]

Ah it makes more sense now. It is just about who controls the most resources.

Not exactly. POWork control is externalized, POStake is internalized. If you have a majority of currency in POStake, no one can do anything unless you sell them some of your currency. If you have a majority in POWork, anyone can buy hardware to try to take some of your power away. It's the difference between the Federal Reserve being the only one who can coin money (POStake), and anyone with enough resources being able to buy their own money printing presses (POWork).
You know what, never mind. I doubt the subtlety is evident to you.

The important differences are

a) PoS monopoly is an order of magnitude more difficult to obtain (perhaps two orders of magnitude if bitcoin is widely used as a store of value rather than just for payments).
b) Acquisition of PoS monopoly requires buying out a majority of the existing user base. PoS attack makes the average user better off rather than worse off. A PoS attack is best described as a lucky windfall. Have you ever had a stock you owned bought out? I'm sure you were really sad to be paid a premium for your shares.
c) PoS monopolists are very heavily invested in the existing system. Charging large fees does not make sense as a PoS monopolist. Such a monopolist cares a lot about losing market share and eroding the value of his holdings. Primarily, he cares about maximizing bitcoin's market capitalization. A PoW monopolist cares about milking bitcoin for fees during the working life of his hardware. He gives nothing to the user base and takes as much as possible.

You mention a small, insignificant difference. I admit it exists. You are saying that once someone has achieved 51% control, then it is more or less permanent with PoS. Sure. But this is completely irrelevant.

If someone has 51% of PoW, you will not be able to generate blocks. Are you really going to invest heavily in worthless hardware to try and save the blockchain? If you fail the entire investment is a loss. What is to stop your opponent from doing the same? If bitcoin is still worth something, then they will have a lot of money to fend you off. Much more than you could get from mining in the normal way (e.g. monopoly fee imposition). If bitcoin is not worth anything, then what is the point of trying to recapture it. For all intents and purposes, 51% control of PoW is also permanent.

[cunicula]

Counter 1: The central banks of the world are honestly too stupid and short sighted to compete with the worlds largest super computer - Bitcoin.

Be careful - don't naively underestimate your opponents' skills.

"Don't throw pearls in front of pigs."

Nah, knowledge is useful for pigs as well. You get to watch them ignore it all the way to the slaughterhouse and then laugh uproariously. It is my only pleasure.

[Rassah]

I wouldn't use a system that is under 51% attack regardless of whether it's PoS or PoW. As I said earlier, such a system would be no different than the current fiat system, where the Federal Reserve has the biggest stake, and most control.
I see where your issue is. You believe that holding 51% of all the currency in a PoS system will somehow incentivize the stakeholder to protect the value of that 51%. There are two issues with that belief.

First, that 51% is unspendable, since spending any of it would mean you lose your 51% control. Thus, it's worthless as actual money, and is only worth anything as a single "key" to control the currency. As such, you can't value it as "I own $11mil coins." You can only value it as "I own a single bundle that let's me control the economy." The value of that bundle is thus completely different from the value of the coins it contains, and thus may not be affected by the overall economy the way you'd expect.

The second issue stems from the first, which is that, since your controlling stake has a wholly separate value from the rest of the coins you use, a controlling entity is really not restricted to trying to grow the value of its stake the way we would hope or expect. As long as they control their 51%, they are free to manipulate the currency, and implement any rules they want, even if the result is short term profits at the expense of the value of the entire currency falling. E.g. they could increase their non-controlling portion of coin ownership from 50 coins to 100 coins, while decreasing the value of the whole economy to 75%, and still make a 50% profit (50*2*75%), since, again, their 51% controlling bundle is not spendable, and thus does not care what each coin is worth. In short, they can keep deflating the value of the currency, as long as they concentrate more and more remaining wealth in their own hands, without worrying about their 51% stake.

Those two issues are much bigger problems for PoS than PoW, because of what I said earlier: if someone gets 51% in a PoS, everyone is hosed. If someone gets 51% in a PoW, everyone can fire up their GPUs and buy more hardware, and at least have a chance of stopping the problem.

[cunicula]

First, that 51% is unspendable, since spending any of it would mean you lose your 51% control. Thus, it's worthless as actual money, and is only worth anything as a single "key" to control the currency.

Your pigs are flying again. Why does it seem unspendable to you? Surely if you offer me enough money, I would sell you back your currency. That is a lot more productive an exchange than 'firing up GPUs' to take it back.

You should realize that your knife cuts both ways. If enough honest guys hold coins and refuse to sell, then the PoS currency is unassailable.

[Rassah]

First, that 51% is unspendable, since spending any of it would mean you lose your 51% control. Thus, it's worthless as actual money, and is only worth anything as a single "key" to control the currency.

Your pigs are flying again. Why does it seem unspendable to you? Surely if you offer me enough money, I would sell you back your currency. That is a lot more productive an exchange than 'firing up GPUs' to take it back.

Would you willingly give up complete control of a currency? (Especially in exchange for currency you already control anyway) Would any rational sane person?
(I'm assuming by "enough money" you mean some other commodity, since you giving me 100PoScoins for 100 of my PoScoins is a wash)

[cunicula]

First, that 51% is unspendable, since spending any of it would mean you lose your 51% control. Thus, it's worthless as actual money, and is only worth anything as a single "key" to control the currency.

Your pigs are flying again. Why does it seem unspendable to you? Surely if you offer me enough money, I would sell you back your currency. That is a lot more productive an exchange than 'firing up GPUs' to take it back.

Would you willingly give up complete control of a currency? Would any rational sane person?

Of course, everything has a price.

Moreover, I thought the currency was worthless as long as it was under 51% control. You are always saying that. If so, why do we have this guy clinging to worthless crap that becomes valuable again if he just sells half of it. It makes no sense at all.

[Rassah]

It will not be instantly worthless. As I keep saying, it will be exactly like the centralized currency of a Federal Reserve, and thus a currency in decline. The driving incentive will be to squeeze and steal as much value out of an economy using your 51% controlling stake, until something comes along to replace you. You can make way more by controlling the currency and squeezing the remaining 49% out of the economy, than by selling 2% of it. And if you don't do it, someone else will. That's the endgame in that system.

[myrkul]

Hmmm, yep, you're still an idiot.

lol... this thread was dead at the first reply.

[Realpra]

Final counter 3: Block IPs not trusted; all central blocks would then go into thin air - ONE update.

tor

Doesn't matter: If I see a 51% attack and set my client to only trust the mtgox IP for instance then you can fake coming from all the IPs you want using TOR, but that will never get your block on my client.

It's funny I am called the pig here when other posters are displaying such immense ignorance of basic TOR/IP/internet function.

[myrkul]

Ever try to nail gelatin to a tree?

[cunicula]

Ever try to nail gelatin to a tree?

Yes, libertarian heads are made of gelatin and I am always trying to nail them to trees.